Industrial Hemp – An Overview

The cultivation of hemp along with the production of hemp-based products has had a long, tumultuous legal history in the United States. Hemp—a variety of the Cannabis sativa plant species—is typically grown for its industrial uses. Although industrial hemp is derived from the same Cannabis sativa species as the marijuana plant, industrial hemp has lower concentrations of the psychoactive component tetrahydrocannabinol (THC) and higher concentrations of cannabidiol (CBD) which decreases the psychoactive effects. Hemp is used to produce a variety of things, including fiber, paper, biodegradable plastics, biofuel, food products, and animal feed.

In the early days of the United States, hemp was freely grown for its industrial uses. By the mid-1930s, all cannabis was regulated as a drug in every state. The first national regulation of cannabis was the Marihuana Tax Act of 1937, which effectively made the possession and transportation of cannabis illegal throughout the United States. This law remained in effect until 1969, when the Supreme Court found the Act unconstitutional in Leary v. United States. In response to the Supreme Court’s decision, Congress passed the Controlled Substances Act of 1970 (CSA), which once again prohibited the use of cannabis for all purposes.

Despite various states drastically changing their own cannabis policies, the CSA has been the reigning federal law on cannabis since it was enacted. This remained true until the passage of the Agricultural Act of 2014. The Agricultural Act of 2014, also referred to as the 2014 Farm Bill, created a framework for cultivation of industrial hemp without the need for a permit from the Drug Enforcement Administration (DEA). Under the 2014 Farm Bill, states were permitted to implement hemp research pilot programs that allowed farmers to cultivate cannabis that contained no more than 0.3% of THC, provided that they met any other requirements imposed by each state.

The Agricultural Improvement Act of 2018, also known as the 2018 Farm Bill, took the hemp provisions of the 2014 Farm Bill several steps further. While the hemp cultivation allowed in the 2014 Farm Bill was relatively narrow, the 2018 Farm Bill provided for much broader allowances. The 2018 Farm Bill allows states to expand their allowed hemp cultivation beyond small pilot programs. Additionally, the 2018 Farm Bill explicitly allows the transfer of hemp and hemp-derived products across state lines for commercial and other purposes. There are no restrictions on the sale of hemp-derived products, provided that those products are produced consistent with all applicable laws.

However, many legal aspects of hemp cultivation remain murky. In a webinar conducted by the United States Department of Agriculture (USDA) on March 13, 2019, legislators and members of the hemp industry had an opportunity to identify issues that continued to surround hemp cultivation. Public comments were solicited, and many individuals shared their perspective with USDA officials.

On October 31, 2019, the USDA published an interim final rule (IFR) entitled “Establishment of a Domestic Hemp Production Program.” This IFR was effective immediately upon publication, with an expiration of November 1, 2021. The IFR set forth explicit procedures for State and Tribal governments to obtain USDA-approval for hemp production plans. The required procedures included: tracking the land where the hemp is grown; testing for THC levels; disposing of non-compliant plants; and collecting and sharing information with USDA. The comment period for the IFR was open from October 31, 2019, through January 29, 2020, and again from September 8, 2020, through October 8, 2020. During all comment periods, a total of 5,900 comments were received from various stakeholders, including Indian Tribes, industry and agricultural organizations, private citizens, and executive agencies. On January 19, 2021, the USDA published the final rule that established the Domestic Hemp Production Program, superseding the 2019 IFR. The final rule became effective on March 22, 2021, developing a regulatory program for the oversight of hemp.

Despite the 2018 Farm Bill provisions and the 2021 Final Rule, transportation of hemp and hemp-derived products continues to be an ongoing issue. For example, some states are content in allowing hemp to cross their borders but place restrictions on certain strains of cannabis with a THC level higher than 0.3%. Challenges lie with the fact that there is currently no roadside test available to determine THC levels of transported cannabis, making the job of law enforcement officials difficult when they have to balance allowing hemp to cross state lines while continuing to prohibit other types of cannabis. Despite the fact that all fifty states have legalized industrial hemp as of April 2021, the hemp industry continues to face problems. These problems involve the development of reliable and effective tests for THC levels, the importation of hemp seeds into the United States, and the role that banks have in an industry with uncertain legality.

With the 2023 Farm Bill on the horizon, there may be some new developments within the hemp industry in the near future. Industry stakeholders anticipate a push to raise the allowed THC limit from 0.3% to 1%. Also up for discussion is the promulgation of a sub-definition for industrial hemp that would set regulations for grain and fiber hemp apart from regulations for cannabinoid and floral hemp. Such a distinction would allow for more lenient inspections of hemp grown for grain and fiber, making the banking and transportation processes more efficient and easier for those dealing with only this part of the industry. The USDA itself published a report following the passage of the 2018 Farm Bill, defining the difference between these types of hemp. In addition, industry members also hope that more attention is placed on the manufacturing process. Oftentimes during the dilution process used to obtain compliant CBD levels, THC levels can spike, technically turning a once lawful product into a controlled substance in that very moment. Manufacturers hope for some guidance or additional regulations in this area to ensure they remain in compliance. Furthermore, DEA-certified lab testing is in the spotlight as well. The USDA’s 2019 IFR required all hemp testing laboratories to be certified by the DEA; however, the DEA has since delayed enforcement of this due to an insufficient number of approved facilities. Given this prolonged issue and the fact that it has never been fully implemented, many have called for the lab requirement to be removed in the upcoming 2023 Farm Bill. Lastly, since the 2018 Farm Bill, many hemp-derived cannabinoids have entered the marketplace, including delta-8 THC, delta-10, and THC-O acetate. While these products remain within the legal THC threshold, many consider them to be “intoxicating.” Further review of and guidance on these new, intermediate products is anticipated with the 2023 Farm Bill as well.