Key Takeaways from USDA Final Interim Rules for Domestic Hemp Production

Introduction

On Oct. 31, 2019, the United States Department of Agriculture (USDA) published its highly anticipated interim final rules, establishing the USDA Domestic Hemp Production Program to be administered by the Agricultural Marketing Service (AMS).

Primarily, the rules serve to establish standards for plans submitted by states or tribal governments for USDA approval and a separate federal hemp plan under which producers in states or tribal lands that do not establish their own plan may be licensed. These interim rules will expire in 2021, to be followed by final rules. The 60-day public comment period, ending on Dec. 30, 2019, began upon publication. To ensure meaningful participation, industry stakeholders should pay close attention to the following key takeaways.

The 2018 Farm Bill established a system wherein farmers/individuals/entities could grow, process, and sell hemp if certain conditions were met.  First, either the Department of Agriculture from a state or tribal government could promulgate a plan for approval by the USDA, or the USDA could establish a program under which individuals/entities in states without a plan could operate. Second, if an individual/entity is legally operating under either the state/tribal plan or the plan of the USDA, that individual or entity may engage in the hemp industry. The state/tribal plans may be more rigorous than the USDA interim rules but not less. States and tribes are allowed to submit plans for USDA approval immediately and will obtain approval or denial within 60 days. States and tribes are encouraged to seek technical assistance from the USDA as they develop their plans. Producers in states or tribes that do not submit a plan or whose plan is denied may apply for a USDA license beginning on Nov. 30, 2019.

State and Tribal Plans

Data Collection
State and tribal plans must require each producer to provide the relevant agency (state Department of Agriculture or Tribal Agency) and Farm Service Agency (FSA) with both a legal description and geospatial location for their production facilities.

Sampling and Testing
All state or tribal plans must provide the testing and sampling procedures the state or tribe intends to use to confirm the amount of delta-9 tetrahydrocannabinol (THC) in a given sample does not exceed the 0.3 percent legal limit. The requirements of the procedures are as follows:

1. Sampling and testing procedures must ensure a representative sample is taken by a USDA-approved agent and completed by a Drug Enforcement Administration (DEA) laboratory approved through the AMS Lab Approval Service (LAS);
2. Samples must be taken within 15 days of anticipated harvests;
3. Testing must use the decarboxylated method to determine the combined THC and THCa content;
4. The test results must provide the “measurement[s] of uncertainty” in evaluating the accuracy of testing. Measurements of uncertainty are scientific calculations that make allowances for variation in sampling and testing.

A test result that exceeds the legal limit of 0.3 percent, but not more than 0.5 percent, will result in a violation under the relevant plan. Destruction of the non-compliant or “hot” plants will be required, but the violation will not give rise to either a negligent violation or a criminal charge where it is determined the producer used reasonable efforts to comply with relevant rules and regulations. However, if a producer has three such violations within a five-year period, the producer will lose eligibility to participate in the hemp program altogether.

Where violations are the result of negligence or a culpable mindset, the plan must require the state or tribal authorities to report a violation to the attorney general, USDA, and chief law enforcement officer for the state or tribal government.

According to the USDA, negligent violations are those that result from the following:

1. Failing to disclose the legal description of land on which hemp is produced;
2. Failing to obtain a license;
3. Producing plants with THC content exceeding 0.5 percent.

Where negligent violations are discovered, the USDA will require states and tribal agencies to impose a corrective action plan. Such plans must require producers to comply with specific reporting requirements for at least two years. 

Disposal of Non-Compliant Plants
The USDA rules require states and tribes to submit plans that mandate the destruction of the hemp plants if sampling and testing reveal the hemp plants are “hot”(see above). The plans must require producers to coordinate with law enforcement in the destruction and documentation of the same. The procedure will also require the state Department of Agriculture or tribal equivalent to submit a report to the USDA once disposal is complete.

Considering the definition of hemp in the 2018 Farm Bill (see below), the sensitive nature of THC testing procedures, the impact of unpredictable weather patterns on this crop, and the significant financial and potentially criminal implications of a “hot” test result, industry leaders should be prepared to propose alternatives.

Alternative Testing Procedures
Hemp is defined in the 2018 Farm Bill 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 [THC] concentration of not more than 0.3 percent on a dry weight basis.” Despite this definition, the USDA and many states have opted to use a testing method that includes a combined THC and THCa content in a plant to determine whether a plant qualifies. The question is whether determining a plant is hemp by its THC (or THC and THCa) content is scientifically sound. According to two studies reported by the Congressional Research Service (CRS) in March of 2019, “Hemp and marijuana are genetically distinct forms of cannabis that are distinguished by their use and chemical composition.” The studies go on to suggest that while low THC content correlates with the genetic makeup of hemp, there is proof a single, conspicuous gene distinguishes the hemp and marijuana plant varieties. Therefore, the question is whether hemp should be defined by its genetics rather than its THC content. Nevertheless, the USDA has opted for testing solely based on THC content, a less reliable indicator.

It is likely the USDA has opted for a definition of hemp and subsequent testing procedures that only address THC content, not genetic makeup, due to public concern and social stigma surrounding the intoxicating effects of THC. However, the CRS study supports valid objections to rejecting genetic approaches to determining whether a plant is truly hemp. Industry stakeholders would be well-served by proposing Congress and the USDA embrace a more robust definition of hemp that encompasses genetic makeup and analogous testing. In doing so, they will assist in promoting a more sustainable industry unburdened by the prospect of excessive non-compliance and crop destruction.

Federal Plan

The interim rules also provide the framework for a potential federal plan, allowing producers to apply for a license directly with the USDA in states or tribes that do not establish their own programs. Echoing the 2018 Farm Bill, only individuals who have not been convicted of a felony related to a controlled substance in the past 10 years or were legally growing under the 2014 Farm Bill and whose conviction occurred before December of 2018 will be eligible for licensing. USDA licensees will be subject to random audits not to exceed one every three years, in light of available resources. In the event of alleged violations, growers will be offered corrective action plans and can even pay to have samples retested using the same testing standards and auditing procedures. However, the federal plan lacks any specificity or protections for processors or sellers of hemp products. This omission from the plan leaves processors and sellers subject to law enforcement actions without an administrative remedy.

Conclusion

Whether grown pursuant to a state or tribal plan approved by the USDA or a USDA-issued license, as soon as the state plans are approved and/or entities are licensed under the USDA program, legally grown domestic hemp may be transported and shipped freely through interstate commerce. In the wake of decisions by federal courts to abstain from forcing states to return otherwise legally grown hemp seized on account of conflicting state laws, this is great news. The other provisions of the USDA’s interim rules on hemp production outlined above similarly signal a major step toward the creation of a fully functioning and highly profitable domestic hemp industry.  The public comment period presents an opportunity for stakeholders to have their voices heard and influence the industry through strategic and ongoing communication.

Consult your Dinsmore attorney for more information on what the USDA’s interim rules on domestic hemp production mean for you or your company, how you can participate in the public comment period, or to discuss how to develop an audit and compliance plan in preparation for a USDA inspection and/or FDA or State compliance.

To learn more, watch the 12-minute USDA webinar on the Domestic Hemp Production Program.