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May 11, 2022 Feature

Navigating Hemp’s Legal Headwinds in 2022

By Christopher Strunk
After a sea change in public opinion on cannabis, and for the first time in many decades, hemp has been removed from the Controlled Substances Act.

After a sea change in public opinion on cannabis, and for the first time in many decades, hemp has been removed from the Controlled Substances Act.

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Hemp has been cultivated and used for thousands of years. It was in widespread use in ancient China and Mesopotamia. Taking advantage of its sturdy fibers, ancient peoples made clothing, shoes, rope, and sailcloth. It was a key economic engine for pre and post-revolutionary America, and has even served key roles for the US military: on the deck of the USS Constitution, the oldest still-commissioned warship in the Navy, and during the “Hemp for Victory” campaign in World War II.

However, as part of the cannabis sativa family, hemp fell under the definition of “Marihuana” under the Marihuana Tax Act of 1937, 50 Stat. 551, making its cultivation and sale an economically problematic affair. When the Controlled Substances Act (CSA) made hemp a Schedule I controlled substance in 1970, there appeared to be no hope for the industry.

But after a sea change in public opinion on cannabis, and for the first time in many decades, hemp was removed from the Controlled Substances Act, 21 USC 802(16)(B)(ii), by the 2018 Farm Bill. A new statute, 7 USC 1639o, provided a detailed definition:

The term “hemp” means 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.

The excitement of a “new” American cash crop, however, very quickly met harsh reality. Rulemaking at the federal level proceeded at a glacial pace, and the regulations that were promulgated (such as the testing regulations) were loudly criticized in public comments. And just when the industry felt it was starting to make some sense of the new regulations, the COVID-19 pandemic demolished fledgling businesses, disrupted business conditions, and de-prioritized hemp regulation as governments focused squarely on the public health emergency.

Hemp industry participants still face many unanswered questions in 2022: navigating changing state and international tetrahydrocannabinol (THC) standards, use of cannabidiol (CBD) in food products and supplements, and the means of getting one’s products to market are just some of them. Further, states like California have moved forward with their own laws on hemp, in response to Federal paralysis on CBD, setting up conflicts with the Federal government even as Federal legislation moves forward. 2022 could see some pivotal developments for the industry.

THC Standards & Testing

Perhaps the most daunting task faced by the hemp business owner is ensuring that their hemp products meet the federal standards for THC content. Although it is often said that the 2018 Farm Bill “legalized” hemp, such a conclusion is a misconception. Any “hemp” with a greater than .3% delta-9 THC concentration by dry weight is “Marihuana,” and federally illegal under the CSA—as are any products derived from those plants.

While the .3% THC standard is “old news,” the testing requirements to make that determination still generate confusion. For example, the United States Department of Agriculture’s (USDA’s) regulations technically require the use of Drug Enforcement Administration (DEA) approved laboratories to complete such testing, but due to the small number of labs currently in the program, delayed implementation of this requirement until January 1, 2023. Additionally, in promulgating their final rule, the time at which a grower must test was increased from 15 to 30 days before harvest, but many growers note that such timing still creates an undue hardship. Lastly, 7 CFR § 990.6 requires sampling of the flowering tops of the plants when those flowing tops are present. Growers, however, have expressed concern that USDA targets the most THC-rich part of the plant, and mandating testing of flowers thus artificially inflates “whole-plant” THC. To address this concern, the final regulations allow growers to request alternative testing methods—but growers must obtain pre-approval of such methods.

THC Standards and International Trade

Moreover, legal THC standards themselves differ internationally, even as they continue to change and evolve. While the United States has embraced a .3% delta-9 THC standard in the Farm Bill, the European Union had previously authorized only a .2%. A recent vote by the European Parliament increased the authorized THC level from .2 to .3% total THC in the Common Agricultural Policy (CAP), bringing it largely in line with the United States. But as some hemp business owners noted in 2018 Farm Bill regulatory comments published on January 19, 2021, in the Federal Register, the EU’s use of total THC standards differs from computations using American delta-9 THC standards. Moreover, other hemp-producing countries (such as Uruguay in South America) have defined hemp more liberally, legalizing dry weight THC percentages as high as 1%. American hemp producers have argued that their hemp and hemp products—limited to the .3% standard—are less attractive on the international market. Lastly, the patchwork of international standards makes the import or export of hemp and hemp-derived products confusing at best and at worst could subject even the most diligent hemp business owner to a drug trafficking charge.

CBD, Food, and Supplements

Much to the chagrin of the hemp industry, the FDA has moved at a snail’s pace to approve any meaningful use of CBD in food products or supplements in interstate commerce. More than two years after the passage of the 2018 Farm Bill, only hulled hemp seed, hemp seed protein powder, and hemp seed oil have been generally recognized as safe (GRAS) by FDA, which issued GRAS notices GRN 765m 771 and 778 as to each of these products. Critically, only trace amounts of naturally occurring CBD and THC are contained in these products.

The industry, along with several US states, has been getting impatient, setting up potential conflicts between the states and the federal government as states step in to fill the void. For example, on October 6, 2021, California Governor Gavin Newsom signed Assembly Bill 45 into law, which expressly recognized and regulated the use of CBD in beverages, supplements, and food products in the state. It did so by modifying California’s Health & Safety Code (§§ 111920 et seq.) and Business and Professions Code (§ 26013.2). California’s new laws do not consider products “adulterated” if they incorporate CBD and instead impose requirements on CBD-containing products such as registration with the state, rules on advertising and labeling, and taxation. California Health & Safety Code § 111921.5 also prohibits the use of industrial hemp in medical devices, prescription drugs, “processed smokable products,” and alcoholic beverages. Notably, California’s law appears to be in direct conflict with FDA’s prohibition on CBD in food products and supplements.

A Federal Fix?

At the federal level, multiple bills have been introduced that could potentially remedy the issues facing the industry. Among the most significant is a bill from Senator Rand Paul (R-KY), S.1005, the HEMP act of 2021, which would change the legal definition of hemp from .3% THC by dry weight and increase it to 1% THC by dry weight. Others are aimed directly at the FDA’s inaction on CBD. HR 6134, the CBD Product Safety & Standardization Act of 2021 was introduced by a bipartisan group of representatives including Kathleen Rice (D-NY), Angie Craig (D-MN), Morgan Griffith (R-VA), and Dan Crenshaw (R-TX). That bill would require the FDA to regulate CBD as a food additive. A similar Senate bill, the Hemp Access and Consumer Safety Act, seeks to do the same thing. But as in past years, whether there is sufficient momentum to carry these bills over the finish line in 2022 is an open question.

Conclusion

Hemp is a multi-billion dollar industry after just three years, notwithstanding regulatory and legal uncertainty and a devastating global pandemic. The only certainty about the industry is that the regulations will continue to change and develop. Having a grasp of these evolving issues will enable the industrial hemp business owner to remain flexible and quickly adapt to the changing legal landscape.

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Christopher Strunk

Partner

Christopher Strunk is a partner in Gordon Rees Scully Mansukhani LLP’s Oakland office, where he is co-chair of its Cannabis, Hemp & CBD National Practice Group. He serves on ABA’s TIPS Cannabis Committee and has served as its past Vice Chair of Programming.