USDA Issues Long-Awaited Hemp Production Rule, Some Questions Answered, Many Remain

USDA Issues Long-Awaited Hemp Production Rule, Some Questions Answered, Many Remain

Cannabis, CBD, USDA
October 29, 2019

On October 29, 2019, the U.S. Department of Agriculture (USDA) issued a pre-publication version of its long awaited hemp production interim final rule. Public comments are due 60 days after USDA publishes the rule in the Federal Register.

While we are still digesting the 161-page rule, below are our initial observations regarding the rule.

USDA State and Tribal Plan Review, Producer Compliance

Per the rule, a State or Indian Tribe that wants to have primary regulatory authority over the production of hemp in that State or territory of that Indian Tribe may submit, for USDA’s approval, a plan concerning the monitoring and regulation of such hemp production.  Regardless of which State or Tribe is overseeing hemp production, there are similar requirements that all hemp producers must meet. These include: licensing requirements; maintaining information on the land on which hemp is produced; procedures for testing the delta-9 tetrahydrocannabinol (THC) concentration levels for hemp; procedures for disposing of non-compliant plants; compliance provisions; and procedures for handling violations. Such elements would need to be addressed in a State’s or Tribe’s plan submission to USDA.

One note with regard to enforcement procedures: State and Tribal plans must include compliance procedures to ensure hemp is being produced in accordance with applicable requirements. This includes requirements to conduct annual inspections of, at a minimum, a random sample of hemp producers to verify hemp is not being produced in violation of the rule.

Once USDA formally receives a plan, USDA would have 60 days under the rule to review the submitted plan. When plans are rejected, USDA will provide a letter of notification outlining the deficiencies identified.

For the 2020 planting season, the 2018 Farm Bill provides that States and institutions of higher education can continue operating under the authorities of the 2014 Farm Bill. The 2018 Farm Bill’s extension of the 2014 Farm Bill authority expires 12 months after the effective date of USDA’s rule.

Interestingly, USDA is contemplating a “three strikes” program for hemp producers, whereby a producer that negligently violates a USDA-approved State or Tribal plan three times in a five-year period would be ineligible to produce hemp for a period of five years beginning on the date of the third violation. This is a reasonable approach that is somewhat surprising, but likely welcomed by industry.

USDA Plan

The rule would also establish a USDA plan to regulate hemp production by producers in areas where hemp production is legal but is not covered by an approved State or Tribal plan. All hemp produced outside of States and Tribes with approved plans would need to meet the requirements of the USDA plan. The requirements of the USDA plan are similar to those under State and Tribal plans, discussed above.

Interstate Shipment

USDA does address in the rule Congress’s express preemption in the 2018 Farm Bill of State law with regard to the interstate transportation of hemp. The agency’s interpretation of this preemption provision is that States and Indian Tribes may not prevent the movement of hemp through their States or territories even if they prohibit its production. This position is at odds with some States (e.g., Idaho and South Dakota) whose law enforcement officials have arrested drivers transporting hemp and its derivatives through those States. Now that USDA has finally issued its rule, it will be interesting to see if State law enforcement officials continue to pursue hemp and its derivatives within their borders. Anticipating a response from State officials, USDA notes in the rule that it will “assist law enforcement in identifying lawfully-produced hemp versus other forms of cannabis that may not be lawfully transported in interstate commerce.” Only time, and potentially litigation, will tell if States acquiesce on this point.

THC Testing

Per the rule, all hemp production would need to be sampled and tested for THC levels by a USDA-approved sampling agent or authorized federal, state, or local law enforcement agent within 15 days prior to anticipated harvest. USDA plans to publish specific guidance on sampling procedures at a later date, but for now, the agency has identified that post-decarboxylation or other similarly reliable methods (including gas or liquid chromatography with detection) are appropriate. Test results would need to be reported on a dry weight basis.

Notably, testing can only occur in laboratories registered with the U.S. Drug Enforcement Administration (DEA) to handle controlled substances under the Controlled Substances Act (CSA) because of the potential for laboratories to handle cannabis products testing above 0.3% THC (which, under the CSA, would then be marijuana and a Schedule I controlled substance). However, the rule would create some flexibility in the “acceptable hemp THC level” for laboratory testing purposes, permitting state, tribal, and USDA hemp plans to account for a small percentage of uncertainty by establishing a distribution range for the appropriate THC percentage. The rule provides the following example: “if a laboratory reports a result as 0.35% with a measurement of uncertainty of +/- 0.06, the distribution or range is 0.29% to 0.41%.  Because 0.3% is within that distribution or range, the sample, and the lot it represents, is considered hemp for the purpose of compliance with the requirements of State, Tribal, or USDA hemp plans.”

USDA is also considering requiring THC testing to be conducted in USDA-approved laboratories for agency plan licensees. If this requirement is implemented, such laboratories would need to comply with Laboratory Approval Program (LAP) requirements, including ISO 17025 accreditation. LAP would develop an individual program for hemp, including specific regulatory, legal, quality assurance and quality control, and analytical testing elements. USDA is contemplating this method because it would, according to the agency, ensure a standard level of quality and would extend USDA oversight over the laboratories conducting testing. In the alternative, USDA is considering a requirement that all laboratories have ISO 17025 accreditation, rather than be subject to the full LAP requirements.

Licensed producers would need to select the DEA-registered laboratory to perform testing and pay the associated fees. The laboratory would need to promptly report any samples that exceed the acceptable THC level to the producer and USDA. Producers would not negligently violate the rule if hemp plants test between 0.3 – 0.5% THC, so long as producers use “reasonable efforts” to grow compliant hemp. Those samples, however, would need to be collected by a DEA-registered person authorized to handle marijuana or an authorized federal, state, or local law enforcement agent. Producers would need to document all samples that exceed the acceptable THC level.

Disposal of Non-Conforming Plants

The rule would require that cannabis plants that have a THC concentration level of greater than 0.3% on a dry weight basis be disposed of in accordance with the CSA and DEA regulations because such material constitutes marijuana, a schedule I controlled substance under the CSA. The material would need to be collected for destruction by a person authorized under the CSA to handle marijuana, such as a DEA-registered reverse distributor, or a duly authorized Federal, State, or local law enforcement officer. Producers would need to document the disposal of all marijuana. This could be accomplished by either providing USDA with a copy of the documentation of disposal provided by the reverse distributor or by using the reporting requirements established by USDA. These reports would need to be submitted to USDA following the completion of the disposal process.

Production Location and Facility Information

Under the rule, hemp producers would need to provide relevant data on land used for hemp production to the USDA Farm Service Agency (FSA), including street address, legal description and geospatial location. Farmers would also need to report the hemp crop acreage or greenhouse or indoor facility square footage to the FSA and must use a State, Tribe or USDA issued authorization number when reporting.

Unanswered Questions

As expected, USDA does not address in the rule what happens to processed material (e.g., CBD added to foods or dietary supplements). In fact, the agency reiterated the provision in the 2018 Farm Bill whereby Congress explicitly preserved FDA’s authority to regulate hemp products under the Federal Food, Drug, and Cosmetic Act (FD&C Act) and section 351 of the Public Health Service Act (PHS Act). Accordingly, products containing cannabis and cannabis-derived compounds are still subject to the same authorities and requirements as FDA-regulated products containing any other substance. As we have discussed previously (here, here, here, and here), FDA continues to evaluate whether to depart from its position that CBD is not permissible in foods and supplements.

We are continuing to monitor developments in this area, and will issue further updates, as appropriate.

In the meantime, if you are interested in submitting comments to USDA, or if you have questions regarding an issue raised in this post, please contact the author or the attorney at the firm with whom you are regularly in contact.

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