Definitions
Section 10113 of the 2018 Farm Bill is the key provision establishing comprehensive regulation of hemp. It amends the Agricultural Marketing Act of 1946 (7 U.S.C. 1621 et seq.) and 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.” H.R. 2 (emphasis added).
Cannabis is the scientific name for the plant, and the 2018 Farm Bill defines hemp as a specific subset of cannabis—cannabis plants that contain 0.3 percent or less delta-9 tetrahydrocannabinol (THC) and products derived from such plants. This is essentially a functional definition. THC is the primary psychoactive chemical in cannabis, and 0.3 percent is a very low amount—the most potent strains of medical and retail marijuana flower sold in outlets licensed by the Colorado Department of Revenue Marijuana Enforcement Division can contain 30 percent or more THC—so hemp is effectively defined as cannabis with quantities of THC that are too low to get people high.
The definition of hemp in the 2018 Farm Bill tracks the definition of industrial hemp in section 7606 of the 2014 Farm Bill, which authorized state departments of agriculture and research universities to cultivate industrial hemp under pilot programs. But the 2018 Farm Bill contains an important addition, providing that cannabinoids contained in or derived from hemp are not illegal. This addition is a boon to companies selling products that contain CBD derived from hemp. CBD is one of over 100 distinct cannabinoids, i.e., molecules found in various strains of the cannabis plant. CBD shows early promise as an anti-inflammatory agent, and it is the active ingredient in Epidiolex, a pharmaceutical drug that the FDA recently approved to treat certain seizure disorders. The express inclusion of cannabinoids under the definition of hemp should promote research and commercialization of a range of products containing CBD and other cannabinoids.
The definition of hemp in the 2018 Farm Bill should be read in contrast to the definition of marihuana (federal law still uses the archaic spelling) found in the Controlled Substances Act (CSA). The CSA defines marihuana as
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 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.
21 U.S.C. § 802(16) (emphasis added). Thus, the CSA historically defined all cannabis as illegal marijuana, with a limited carveout for products derived from nonpsychoactive parts of the cannabis plant like fiber and sterilized seeds. The 2018 Farm Bill places nonpsychoactive cannabis and derivative products containing less than 0.3 percent THC outside of the CSA’s purview by defining hemp as a statutorily distinct—and legal—category of cannabis.
Permission for Broad Participation in the Hemp Industry
The 2018 Farm Bill puts to rest a long-running debate regarding the scope of protections that the 2014 Farm Bill afforded. The U.S. Drug Enforcement Administration read section 7606 of the 2014 Farm Bill narrowly, arguing that it only provided protection to state departments of agriculture and research universities but not to private parties. Industry participants, and many members of Congress who voted for the 2014 Farm Bill, argued that it was always intended to protect the activities of private parties that were licensed by states with legal hemp regimes. In passing the 2018 Farm Bill, Congress clearly and unequivocally clarified its intent to permit nonstate actors to participate in the hemp industry and drive economic growth in this area.
Delegation of Authority to Regulate Hemp
Importantly, the 2018 Farm Bill permits U.S. states and Indian tribes “desiring to have primary regulatory authority over the production of hemp” to submit a regulatory plan to the U.S. secretary of agriculture that shall only be required to include the following:
(i) a practice to maintain relevant information regarding land on which hemp is produced in the State or territory of the Indian tribe, including a legal description of the land, for a period of not less than 3 calendar years;
(ii) a procedure for testing, using post-decarboxylation or other similarly reliable methods, delta-9 tetrahydrocannabinol concentration levels of hemp produced in the State or territory of the Indian tribe;
(iii) a procedure for the effective disposal of— (I) plants, whether growing or not, that are produced in violation of this subtitle; and (II) products derived from those plants;
(iv) a procedure to comply with the enforcement procedures under subsection (e);
(v) a procedure for conducting annual inspections of, at a minimum, a random sample of hemp producers to verify that hemp is not produced in violation of this subtitle;
(vi) a procedure for submitting the information described in section 297C(d)(2), as applicable, to the Secretary not more than 30 days after the date on which the information is received; and
(vii) a certification that the State or Indian tribe has the resources and personnel to carry out the practices and procedures described in clauses (i) through (vi).
H.R. 2.
Section 10113 requires the U.S. secretary of agriculture to approve a compliant state plan within 60 days of submission. The USDA has already approved several state and tribal regulatory plans.
Lawyers should be careful to make sure that they understand each state’s unique regulatory regime because the 2018 Farm Bill permits individual states and Indian tribes to include more stringent regulations.
The U.S. secretary of agriculture will be required to develop hemp plans for states and tribes that decline to submit their own regulatory plan.
Intent to Promote Expansion of the U.S. Hemp Industry
The overall intent of the 2018 Farm Bill is to create a legal environment that will promote the rapid expansion of the U.S. hemp industry and to remove the chilling effect that the specter of criminal prosecution has had on innovation and investment.
For instance, under section 10113, a licensee that negligently violates a state or tribal regulatory scheme “shall not as a result of that violation be subject to any criminal enforcement.” Instead, licensees who negligently violate regulatory requirements three or more times within a five-year period are subject to a five-year bar from further hemp production. The 2018 Farm Bill does require hemp producers to be duly licensed by a state or tribe to enjoy its protection. And licensees who violate a state or tribal plan “with a culpable mental state greater than negligence” will still be subject to criminal penalties. H.R. 2.
Another example of the 2018 Farm Bill’s intent to promote expansion of the U.S. hemp industry is found in section 10114. This section expressly permits interstate commerce of hemp and hemp products and bars states and tribes from prohibiting transportation of hemp and related products within their jurisdictions.
Hemp Research
Section 7605 of the 2018 Farm Bill extends the hemp research provisions set forth in section 7606 of the 2014 Farm Bill. It also requires the secretary of the USDA to conduct a survey of existing state pilot programs and “any other agricultural or academic research related to industrial hemp” that have been conducted under the purview of the 2014 Farm Bill and to issue a report to Congress describing the results of the study. H.R. 2.
Section 7501 of the 2018 Farm Bill also includes hemp under the Critical Agricultural Materials Act. This provision recognizes both the economic potential of hemp and hemp derivatives and the need for additional research.
Access to Financial Services and Stock Exchanges
Prior to passage of the 2018 Farm Bill, many larger financial institutions were reluctant to service hemp and CBD companies, which left these businesses reliant on smaller regional banks and specialty credit card processors. The 2018 Farm Bill’s clear expression of congressional intent to promote interstate commerce in hemp and products derived from hemp, including cannabinoids, should give larger financial institutions the level of comfort they require to service hemp businesses.
The 2018 Farm Bill also paves the way for shares of hemp companies to trade on major U.S. stock exchanges now that hemp and derivative products are legal.
Conclusion
The 2018 Farm Bill directly benefited hemp farmers, processers, and companies that make and sell a wide range of hemp products ranging from CBD to paper, fabric, and building materials. Existing industry participants have enjoyed expanded opportunities tempered by intense competition as businesses rush to capitalize on hemp.