Yesterday was the last day for comments on the the USDA's Agricultural Marketing Service's "Establishment of a Domestic Hemp Production Program" Final Rule. As this is a final rule issued in time for the 2020 growing season, comments are mostly helpful in identifying the challenges the USDA will have in implementing the program as the federal government's bad case of policy schzephrenia on cannabis persists. With little time before planting, major changes are going to be tough to accomplish but likely could be considered for the 2021 season.
As a reminder, the 2018 Farm Bill removed "Industrial Hemp" from the controlled substance list. Industrial Hemp is defined as having THC levels of less than 0.30% by dry weight. Industrial Hemp can be produced under an approved plan submitted to state agriculture departments and tribal authorities.
The Good: Most of the 3,500 commenters welcomed the the final rules as at least one step in the long journey toward a mature and regulated industry. There remain a number of unknowns for this young industry and the regulation reflects a flexible approach where each state develops a program. That might prove frustrating for those market participants who have thus far operated with little to no oversight but overall, regulation should be a positive.
The Not So Good:
Licenses. The banking industry expressed concern that the licenses issued under the USDA rule would be valid for just three years, complicating longer term loans for equipment. The industry has requested a mechanism for automatic renewal. Another issue presented by the licensure process is the absence of a central database of license holders that can be used to verify claims in a loan application.
Testing. Testing standards and timelines remain the most contentious issue. The law requires industrial hemp to test below 0.30% for THC. However, there is no USDA approved standard for testing. Senator Wyden (D-OR) advocated for using Oregon's standard of testing the top 8" of the plant, among other things. As the USDA has thus far eschewed any national standard, it is unlike they will change that position. Instead, they are probably going to see if a standard emerges from a state, tribal authority or the industry itself.
The USDA regulations call for testing conducted at DEA labs. The US Hemp Roundtable and others have good reason to be skeptical the DEA will provide speedy service. They are institutionally biased against broad use of cannabis and have for many years dragged their feet on certifying alternative research facilities for THC. In fairness to the DEA, they have a limited number of labs responsible for a lot of analysis for a variety of purposes. They have the expertise, however, and the USDA must rely on them. As the industry evolves, this issue will likely get addressed by the private sector.
Finally, as it relates to testing, the cannabis industry expressed concern that the testing window is a narrow 15 days prior to harvest. They have requested it be expanded.
Confiscation. The rules require that cannabis plants testing above 0.30% for THC be destroyed. Vote Hemp and others are concerned about the economic losses that would result. Since a cannabis plant can go from being legal under certain circumstances to a controlled substance based on the THC levels, I am not sure the USDA can get around this part of the rule to satisfy Vote Hemp.
Enforcement. The National Narcotics Officers' Association Coalition expressed concerns about how enforcement agencies will be able to distinguish an illegal marijuana crop from legal industrial hemp without time and labor consuming testing. This is not a new concern and one made frequently by law enforcement before the 2018 Farm Bill passed. For now, anyway, regulators and Congress seem inclined to ignore them. The NNOAC also expressed concerns about diversion of resources to handle destruction of non-compliant crops and testing for THC levels.
Meanwhile, we await FDAs regulatory framework on CBD and Cannabis-related products. Promised in the Fall of 2018, FDA regulators have been stymied by the lack of data to support decision making. Turnover at the top of the organization has not helped either.
This inconsistent regulatory approach means, for now, industrial help production has a much more certain regulatory regime. However, to the extent industrial hemp is produced for CBD and other cannabis related products (for higher dollar value yield) and those products carry with them certain health claims or are added to the food supply, the FDA's current prohibitions apply. GWPH's Epidoloex remains the only legal (assuming anyone cares) source of purified CBD.
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Emily Evans
Managing Director – Health Policy
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