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The Ghost of CBD Past, Present, and Future: CBD Present and the Farm Bill

CBD Marijuana Business Hemp Industry Cannabidoil THC Controlled Substance Act Farm Bill

In this second post in Legally Grown’s CBD holiday series, the Ghost of CBD Present looms large.  (You can check out the first post in this series here.)  We address what is happening now in the legal regulation of CBD-related goods and services, which is all-things-Farm-Bill.  While the Farm Bill is a sweeping bill addressing a litany of US agriculture-related issues, the bill’s impact that is most interesting to our readers is that the production and interstate sale of industrial hemp and products derived from industrial hemp, like CBD products, are no longer illegal under the Controlled Substances Act (“CSA”).

On December 11, 2018, the Senate passed the Agricultural Improvement Act of 2018 (the “Farm Bill”) in an 87-to-13 vote, which among many other things removes industrial hemp from the definition of “marijuana” under the Controlled Substances Act.  The Farm Bill was passed by the House of Representatives on December 12, 2018.  President Trump signed the bill into law on December 20.

The Farm Bill’s impact on the cannabis industry is two-fold:

  1. The Farm Bill designates the states and tribal authorities as the primary regulatory authority over industrial hemp, with some oversight and enforcement by the federal government; and
  2. The Farm Bill removes industrial hemp from the CSA making the production and interstate sales of industrial hemp and CBD legal.

However, the Farm Bill does not open the floodgates for the sale of CBD per se.  While CBD is no longer a Schedule I controlled substance under the CSA, producers and sellers of CBD products must comply with the requirements of their respective state governments and the Food and Drug Administration (“FDA”).  It remains to be seen how the FDA will regulate CBD products since CBD can be an ingredient or component of foods, drugs, and cosmetics.

Federal Legalization of Industrial Hemp and CBD to Be Primarily Regulated by the States

The Farm Bill effectively gives states the primary regulatory authority over the production of industrial hemp.  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 concentration of not more than 0.3 percent on a dry weight basis.”

Each state must submit its plan for the regulation of hemp production to the US Department of Agriculture.  Each state’s plan must provide the following information as to how the state will monitor and regulate production.

While the plan can include other requirements, it must, at a minimum, provide:

  • Information for how it maintains information on where industrial hemp is being grown (i.e., the legal description of the land) for at least 3 years.
  • A procedure for testing delta-9 tetrahydrocannabinol (“THC”) concentration levels in hemp produced in the state.
  • A procedure for disposing of plants and products that contain THC levels higher than 0.3% of THC or otherwise violate the statute.
  • Enforcement procedures to handle violations of the statute.
  • A procedure for conducting random, annual inspections of hemp products to verify that THC levels are not above 0.3%.
  • A procedure for providing the federal government with information requested as a result of any audits for the state’s compliance with the statute.
  • A certification that the state has the resources and personnel to conduct the practices and procedures submitted in the plan.

If the state’s plan is not approved by the US Department of Agriculture (USDA), then the Farm Bill provides for a plan established by the USDA, which complies with the requirements noted above.  The USDA’s plan and enforcement are nearly identical to the state’s.  The Farm Bill also permits the USDA to issue licenses to hemp producers where the states are not doing so.

The Farm Bill does not preempt any state law regulating the production of hemp to the extent that the law is more stringent than the statute.  The Farm Bill does not prohibit interstate commerce of hemp or hemp products.  It also renders any persons convicted of a felony relating to a controlled substance under state or federal law ineligible to produce hemp unless the producer was growing hemp lawfully with a license under a state-run industrial hemp pilot program.

Enforcement

Hemp producers are required to follow the State’s plan in the state where they produce hemp.  The Farm Bill breaks down violations into two main categories:  negligent violations and other violations.  A hemp producer would negligently violate the plan by:

  • Failing to provide a legal description of the land on which the producer produces hemp.
  • Failing to obtain a license or other required authorization from the State Department of agriculture.
  • Producing Cannabis sativa L. with a THC concentration over 0.3% on a dry weight basis.

A hemp producer who negligently violates state regulations would be subject to a corrective action plan in which it must correct the violation periodically report its compliance with the state department of agriculture for at least 2 years.  A repeat violator with 3 violations in a 5-year period will lose the ability to produce hemp for 5 years from the date of the third violation.

If the state determines that the violation was committed with a higher culpable mental state than negligence, the state must report the hemp producer to the Attorney General and chief law enforcement officer of the State.

Conforming Changes to the Controlled Substances Act

The Farm Bill also amended the definition of marijuana in the Controlled Substances Act (21 U.S.C. § 802(16)) to exclude hemp.

The rewrite of the CSA is the following:

(16)  The   (16)(A) Subject to subparagraph (B), the term “marihuana” means all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin. Such term does not include the

(B) The term ‘marihuana’ does not include –

(i) hemp, as defined in section 297A of the Agricultural Marketing Act of 1946;

or

(ii)  mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination.

The Farm Bill also amends Schedule I of the Controlled Substances Act (21 U.S.C. § 812(c)) to exclude hemp.  While “Tetrahydrocannabinols” remain on Schedule I, the Farm Bill amends this chemical designation by adding an exclusion for hemp as follows:  “Tetrahydrocannabinols, except for tetrahydrocannabinol in hemp….”

With the Farm Bill anticipated to be signed into law by President Trump, we turn to what lies ahead in 2019 in our next blog post in this series.

For additional information regarding the Farm Bill and regulations over CBD products, please contact me at ssspangler@norris-law.com or call our offices at 212-808-0700.