On October 29, the USDA released the much-anticipated draft rules for hemp manufacturing (the “Proposed Rules”). As we have previously written about HERE, the 2018 Farm Bill removed hemp from the Controlled Substances Act and ordered the USDA to establish a Domestic Hemp Production Program and implementing regulations. The Proposed Rules cover the requirements for where hemp can be grown, THC testing standards, the disposal process for “hot hemp” (hemp with THC content in excess of the permitted limit) and licensing protocols.
USDA-Approved State and Tribal Plans; USDA Plan
Under the Proposed Rules, a State or Indian Tribe that wants to have primary regulatory authority over the production of hemp in that State or Indian Tribe territory may submit a plan for monitoring and regulating hemp to the USDA for approval. States and Indian Tribes may begin submitting production plans once the Proposed Rules are published in the Federal Register (which we expect to happen yet this week). USDA will have 60 days following receipt to review and rule on the submitted plan.
The Proposed Rules also establish a USDA production plan to regulate production in states or territories where hemp production is legal but not covered by a USDA-approved State or Tribal plan. USDA will begin accepting applications 30 days after the Proposed Rules are published in the Federal Register; however, USDA will not issue licenses to producers located in a State or Indian Tribe territory that has a draft hemp production plan pending for USDA approval.
Regardless of whether a producer is operating under a State, Tribal or USDA Plan, operating under a USDA-approved plan is significant because hemp producers will be eligible for USDA programs, such as loans and crop insurance coverage.
There are requirements that all producers must meet, regardless of whether the USDA, State or Indian Tribe is overseeing production, including:
- Licensing requirements
- Maintaining information on the land on which hemp is produced
- Procedures for testing the THC concentration levels for hemp
- Procedures for disposing of non-compliant plants
- Compliance provisions, including annual inspections of a random sample of hemp producers to verify compliant hemp is being produced
- Procedures for handling violations
THC Testing and Violations
All hemp must be sampled and tested for THC levels by a USDA-approved sampling agent or authorized federal, state or local law enforcement within 15 days prior to anticipated harvest. Because of the potential for labs to handle product testing above the approved 0.3% THC level (which, under the Controlled Substance Act, would be marijuana and a Schedule I controlled substance), testing can only occur in DEA-registered labs.
The Proposed Rules also establish an acceptable hemp THC level distribution range that takes into account uncertainty in cultivation and provides some flexibility for producers. The Proposed Rules provide the following example: “if a laboratory reports a result as 0.35% with a measurement of uncertainty of +/- 0.06, the distribution or range is 0.29% to 0.41%. Because 0.3% is within that distribution or range, the sample, and the lot it represents, is considered hemp for the purpose of compliance with the requirements of State, Tribal, or USDA hemp plans.”
If the THC content is found to exceed the permitted THC limit (known as a “hot hemp”), it must be reported by the laboratory to the producer and USDA, and destroyed by someone authorized under the Controlled Substance Act and DEA to handle marijuana, such as a DEA-registered reverse distributor or federal, state or local law enforcement.
In cases where a negligent violation has occurred, a corrective action plan will be established and the producer must periodically report on compliance with the plan for at least 2 years following such violation. A producer who negligently violates the Rules three times in a 5-year period will be ineligible to produce hemp for a period of five years from the date of the third violation. Note that negligent violations are not subject to criminal enforcement by federal, state or local law authorities. In addition, the Proposed Rules provide that a producer would not negligently violate the Proposed Rules if the plants test between 0.3%-0.5% THC and the producer used “reasonable efforts” to grow compliant hemp.
In cases where an intentional, knowing or reckless violation has occurred, the producer will be reported to the Attorney General, USDA and the chief law enforcement officer of the State or Tribe.
The Proposed Rules are an important step in creating a consistent regulatory framework for growing hemp and testing its THC content. Of note, the Proposed Rules do not address what happens to processed hemp products, such as CBD (which we have written about HERE). In a footnote, the Proposed Rules reiterate the provision in the 2018 Farm Bill preserving FDA’s authority to regulate these products.
The public has 60 days to comment on the Proposed Rules once formally published in the Federal Register. Thereafter, if USDA makes no changes based on the public comments, USDA will publish a Final Rule. Then implementing regulations still need to be drafted and published. Those regulations will be focused on the nuts and bolts of implementing the Final Rule. We are continuing to monitor developments in this area and will provide further updates as necessary. If you have any questions about this Alert, please contact Rachel Meyer or Sandra Morar.