The Road Ahead for Cannabis-Derived Goods

HIGHLIGHTS:

• By defining hemp broadly – to include seeds, derivatives, cannabinoids, extracts and other parts of the Cannabis sativa L. plant – and giving states the authority to establish and regulate their own industrial hemp production programs under guidance from the U.S. Department of Agriculture (USDA), the 2018 Farm Bill has generated excitement and uncertainty since its passage by Congress in December 2018.
• The Farm Bill allows states and tribes to submit plans for hemp production to the U.S. Secretary of Agriculture. These plans would need to include testing, disposal and enforcement provisions, among other requirements, but the bill is written so as to encourage significantly more production in the U.S.
• How USDA will exercise its new authority on hemp remains to be seen. Although the Farm Bill does not require a formal rulemaking, it is expected that USDA will publish guidance on what constitutes an acceptable state plan for industrial hemp production.

In one of its final acts, the 115th Congress passed the 2018 Farm Bill into law. Buried among provisions affecting the Commodity Credit Corporation and the Federal Crop Insurance Program was a section devoted to the legalization of industrial hemp production. By defining hemp broadly – to include seeds, derivatives, cannabinoids, extracts and other parts of the Cannabis sativa L. plant – and giving states the authority to establish and regulate their own hemp production programs under guidance from the U.S. Department of Agriculture (USDA), the Farm Bill's passage has generated equal amounts of excitement and uncertainty. This Holland & Knight alert aims to answer some questions about where we are now and what happens next with USDA, including what the 2018 Farm Bill means for cannabidiol (CBD) goods vs. ingestible and supplements. (For more information on implications for cannabis-derived products at the U.S. Food and Drug Administration (FDA), see Holland & Knight's Healthcare Blog, "Hemp Is Now Legal, But What Does That Actually Mean?", Jan. 4, 2019).

Hemp in the 2018 Farm Bill

The broad language defining "industrial hemp" to include cannabinoids leads many to believe that any hemp-derived product will be legal as long as it contains no more than 0.3 percent delta-9 tetrahydrocannabinol (THC) on a dry weight basis; in other words, cannabinoids such as Cannabidiol (CBD) will receive the same status and protections (e.g., exemption from U.S. Drug Enforcement Administration actions) as other industrial hemp-derived products. However, while the Farm Bill is clear in its treatment of hemp as just another agricultural product – kind of – Congress provided little direction on how products containing THC or CBD should be treated.

USDA Authority

The Farm Bill allows states and tribes to submit plans for hemp production to the U.S. Secretary of Agriculture. These plans would need to include testing, disposal and enforcement provisions, among other requirements, but the bill is written so as to encourage significantly more production in the U.S. For example, if the Secretary of Agriculture deems that the state or tribal plan complies with the requirements established in the bill, he or she must approve the plan within 60 days and establish a procedure for issuing licenses to hemp producers. And if the state or tribal plan is not in compliance, USDA must impose its own plan to monitor and regulate hemp production, similar to the backstop role the federal government plays under the Affordable Care Act and the Clean Air Act.

Preventing a state or tribe from moving forward with hemp production is simply not an option available to USDA, and the statutory language strongly suggests that USDA does not have the authority to restrict the production of any hemp-derived product so long as it is below the 0.3 percent THC threshold. However, USDA is one of the agencies impacted by the ongoing partial government shutdown, and given the number of steps that require agency approval and provisions that are left to agency discretion (more on that below), companies should be patient.

FDA vs. USDA

While the 2018 Farm Bill removes industrial hemp, as defined above, from the auspices of the Controlled Substances Act, it does not make any changes to the Federal Food, Drug, and Cosmetic Act, which gives the FDA the authority to regulate products intended for human consumption. Therefore, while production of industrial hemp-derived CBD would be legal under the provisions of the 2018 Farm Bill, FDA would still have the authority to regulate hemp-derived products when used as an additive to products such as edibles or nutritional supplements.

It also is important to note that the Farm Bill legalizes the production of CBD only when it is derived from hemp that is grown in accordance with the restrictions outlined in the Farm Bill and in accordance with forthcoming regulations.

Next Steps

As of this writing, there are many things we can say with certainty about the road ahead for cannabis-derived goods, as well as some open questions. For example, as discussed above, if products containing CBD are used as an additive in products intended for human consumption or if they make any claims of therapeutic benefits, they must be approved by FDA before being introduced into interstate commerce.

How USDA will exercise its new authority on hemp also remains to be seen. Although the Farm Bill does not require a formal rulemaking, it is expected that USDA will publish guidance on what constitutes an acceptable state plan for industrial hemp production, including baseline requirements and verification procedures for testing THC content. USDA also needs to establish procedures for issuing licenses to hemp producers. Depending on how long the government shutdown lasts, it may be several months or more until we can confidently predict a timeline for expanded hemp production in the states.

In summary, there are still many questions that need to be answered, and both the USDA and FDA processes must be sorted out before the regulatory landscape surrounding cannabis-derived products will be clear. 

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.