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 the legal 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 would allow farmers to cultivate cannabis containing no more than 0.3% of THC, provided that they meet the 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 hemp cultivation allowed in the 2018 Farm Bill is much broader. The 2018 Farm Bill allows states to expand 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. It also does not restrict 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 continuing to surround hemp cultivation.
On October 31, 2019, the USDA published an interim final rule (IFR) entitled “Establishment of a Domestic Hemp Production Program.” This IFR became effective immediately upon publication and expired on November 1, 2021. The IFR set forth explicit procedures for State and Tribal governments to obtain USDA-approval for hemp production plans. Procedures required included: tracking the land where the hemp is grown; testing for THC levels; disposing of non-compliant plants; and sharing information. 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 the 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, to name a few. On January 19, 2021, the USDA published the final rule that established the Domestic Hemp Production Program, which superseded the previous IFR. This final rule became effective on March 22, 2021.
Despite the provisions of the 2018 Farm Bill and the 2021 Final Rule, transportation of hemp and hemp-derived products remains an ongoing issue. For example, some states are content to allow hemp to cross their borders but do not allow strains of cannabis with a THC level higher than 0.3% to do so. The challenge for these states is that there is currently no roadside test available to determine the THC levels of transported cannabis, which makes the job of law enforcement officials who are trying to allow hemp to cross state lines while continuing to prohibit other types of cannabis very difficult. 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 will 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 soon. Industry stakeholders anticipate a push to raise the allowed THC limit from 0.3% to 1%. Also up for discussion is promulgating a sub-definition for industrial hemp that would set regulations for grain and fiber hemp and regulations for cannabinoid and floral hemp. These regulations would allow for more lenient inspections of hemp grown for grain and fiber to make banking and transportation processes more efficient and easier for those in the industry who deal with these only. The USDA itself published a report following the 2018 Farm Bill passage to delineate the difference between these types of hemp. Industry members also hope for more attention placed on the manufacturing process. Oftentimes during the dilution process to obtain compliant CBD levels, THC levels can spike which would, technically, make the products a controlled substance at that point in time. Manufacturers hope for some guidance or additional regulations in this area to assure they remain in compliance. DEA-certified lab testing is in the spotlight as well. The USDA’s October 2019 IFR required all hemp testing laboratories to be certified by the DEA. The DEA has 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. Since the 2018 Farm Bill, many hemp-derived cannabinoids have entered the marketplace such as delta-8 THC, delta-10, and THC-O acetate. While these products remain within the THC level 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.