Farm Bill Creates Legal Framework for Hemp, But Challenges Remain

In a rare display of bipartisanship in Washington, Congress has passed, and the President has signed, the Agricultural Improvement Act of 2018.  The agricultural legislation is far-ranging, but its most significant aspect from a controlled substance perspective is that it removes “hemp” as defined in the legislation from control under the federal Controlled Substances Act (“CSA”).  The Farm Bill also establishes general requirements of U.S. Department of Agriculture (“USDA”) and state and Indian tribal regulatory plans for oversight of hemp producers.  If recent inquiries about the Farm Bill and the Agricultural Act of 2014 are a gauge, there is rampant misinformation about what effect the new legislation will have on hemp, marijuana and cannabidiol (“CBD”).  We thought it valuable to explain what the Farm Bill does, and does not, authorize.

The Farm Bill removes “hemp” from the CSA definition of “marijuana,” and expressly excludes THC in “hemp” from scheduling under the CSA.  Consistent with the definition of “industrial hemp” under the Agricultural Act of 2014, the Farm Bill defines “hemp” as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol [“THC”] concentration of not more than 0.3 percent on a dry weight basis.”  Consequently, any Cannabis plant and plant part with a THC concentration of 0.3 percent or less is no longer a controlled substance, and any product derived from the plant or parts of the plant is also not controlled.  By the same token, a Cannabis plant and any part of a Cannabis plant that contains a THC concentration above 0.3 percent on a dry weight basis is not “hemp,” and remains a schedule I controlled substance unless otherwise excluded from the CSA definition of marijuana.  THC not “in  hemp” also remains controlled under the CSA as a schedule I controlled substance.

Hemp, like marijuana, derives from the Cannabis sativa plant.  Unlike marijuana, hemp lacks significant THC, the cannabinoid that produces psychoactive effects in humans.  And unlike marijuana, hemp is an agricultural commodity used in the production of a wide array of products including paper, rope, clothing, personal care products like lotions and shampoos, industrial solvents, and even conventional foods and dietary supplements.  By removing hemp and THC in hemp from control, the Farm Bill fosters hemp manufacturing and commerce.

Turning specifically to CBD, the effect of the Farm Bill is that CBD and other cannabinoids derived from hemp are not controlled.  CBD derived from a Cannabis plant or part of Cannabis plant that is not hemp, remains a schedule I controlled substance under the CSA unless it is excluded from the definition of marijuana.

By default, the USDA will exercise primary regulatory authority over hemp production in the U.S. under the Agricultural Marketing Act of 1946 (“AMA”), as amended by the Farm Bill.  However, the AMA authorizes the states and Indian tribes wishing to exercise primary regulatory authority over hemp production within their boundaries to submit regulatory plans to the USDA.  The state or tribal regulatory plans must include:

• Maintenance of relevant information about the land on which hemp is produced, including a legal description of the land, for at least three years;
• A procedure for testing hemp THC concentration levels;
• A procedure for disposal of plants that exceed hemp THC levels, and products from those plants;
• A procedure to comply with enforcement provisions specified in the AMA;
• A procedure for conducting random, annual inspections of hemp producers;
• A procedure for submitting hemp production information to USDA; and
• Certification that the state or tribe has adequate resources and personnel to implement required hemp production procedures.

The AMA gives USDA 60 days to review a state or tribal plan, provides for auditing of such plans, and dictates how to address a state or tribe’s non-compliance with its plan.

In the absence of a state or tribal plan, USDA will regulate hemp production under a federal regulatory framework that includes components similar to those summarized above, and that must be established in consultation with the Attorney General.  The AMA stipulates that hemp producers not subject to state and tribal plans must obtain a license issued by USDA.

Although enactment of the Farm Bill obviously eliminates a major obstacle for production and marketing of hemp and its derivatives (including CBD), it’s not clear how production and marketing of such products can proceed pending USDA’s issuance of implementing regulations and the approval of state or tribal plans.  The AMA directs USDA to issue regulations and guidance “as expeditiously as practicable,” but some delay seems inevitable.  In the interim, the AMA states that production of hemp in a state or tribal territory that does not have a USDA-approved plan is unlawful unless the producer has a license from USDA.  Further, USDA must report production of hemp without a license to the Attorney General.

Also worth bearing in mind is that, while hemp and products derived from hemp are no longer federally-controlled substances, they remain subject to Food and Drug Administration requirements and restrictions – a point driven home in this statement by Commissioner Gottlieb.  As noted in the statement, FDA’s current view is that “it’s unlawful under the FD&C Act to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, regardless of whether the substances are hemp-derived.”  It remains to be seen whether FDA will initiate rulemaking to resolve that issue.

An additional potential obstacle lies in the fact that the use of any ingredient derived from hemp in food is subject to the premarket approval requirement applicable to food additives, unless that use is generally recognized as safe (“GRAS”).  There is hope on that front, as FDA took the opportunity to concurrently announce the issuance of letters of no objection to three GRAS notices for ingredients derived from hemp seed that “contain only trace amounts of THC and CBD, which the seeds may pick up during harvesting and processing when they are in contact with other parts of the plant.”

Finally, although a number of states authorize the cultivation, processing and sale of hemp and hemp products, those substances may remain controlled substances in other states.  The AMA expressly disclaims any intent to preempt or limit “any law of a State of Indian tribe that…regulates the production of hemp… and is more stringent” than the AMA.