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On October 31, 2019, the US Department of Agriculture (“USDA”) issued interim rules  (the “Interim Rules”) to implement the 2018 Farm Bill[1] regulating hemp production in the United States.  Under the Interim Rules, States and Indian Tribes that intend to oversee hemp production within their borders must submit their regulatory plans to USDA for pre-approval.  If a State or Indian Tribe elects not to regulate hemp production, then a hemp producer in that jurisdiction can apply directly to USDA for a hemp production license and USDA will be responsible for licensing and regulating the producer.[2] Hemp producers currently operating may continue to cultivate hemp under the 2014 Farm Bill research pilot program; however, on October 31, 2020, the 2014 Farm Bill hemp provisions will expire and state programs must comply with the new regulations.

Applications

If you operate in a State or Indian Tribe that regulates hemp production, then you will apply to your State or Indian Tribe for a license.  Otherwise you will apply to USDA for a hemp production license.  If you operate in more than one State or Indian Tribe territory, you will be required to obtain more than one license.

How do you know if your State or Indian Tribe regulates hemp or is requesting USDA approval to do so?  You can start by checking with your State’s department of agriculture, governor’s office or attorney general – these agencies are responsible for developing and submitting hemp regulation plans to USDA for approval.  Once a State or Indian Tribe hemp regulation plan is approved it will be posted on the USDA website.[3]  

USDA does not want to review applications from hemp producers if the States or Indian Tribes in which they operate will self-regulate hemp.  As a result, USDA will not accept license applications from hemp producers until December 2, 2019 in order to allow States and Indian Tribes to first submit their plans to USDA for approval.

When applying for a hemp production license, you should expect to provide the following information (whether you apply to your State, Indian Tribe or the USDA): 

• Legal description of the land on which you plan to grow hemp (including geospatial location);
• Acreage dedicated to the production of hemp;
• For individuals: Full name, residential address, telephone and email;
• For business entities: Legal business name and location, full name and title of key participants, EIN; and
• Criminal history report: Criminal history report for all key participants dated within 60 days prior to submission date. Key participants covered by the license may not have a felony conviction in the past 10 years. 

Testing Requirements

                You will be required to submit crop samples for testing within fifteen (15) days of your anticipated harvest and are prohibited from harvesting your crop before the sampling is complete.  In order to qualify as hemp (and not marijuana), a cannabis plant must have less than 0.3% THC.  The sampling methodology must demonstrate with 95% confidence that no more than 1% of the hemp plants in the lot would exceed the 0.3% threshold (the “THC Threshold”).  This testing will occur whether the State or the USDA regulates your hemp production.  During the testing, you or your authorized representative must be present and the sampling agency must have complete and unrestricted access to your facilities and inventory. The Interim Rules also include detailed provisions for the licensing of laboratory testing facilities. 

Disposal Requirements, Audits and Non-Compliance

In the event your crop tests above the THC Threshold, you will be required to dispose of the crop in accordance with regulations promulgated under the Controlled Substances Act and regulations of the Drug Enforcement Administration.  In addition, USDA must be notified of instances where crops test above the THC Threshold. 

Hemp producers will also be subject to random audits and a failure to comply with the applicable rules will subject a hemp producer to enforcement action.  A hemp producer that negligently[4] violates the rules can also be saddled with a corrective action plan administered by their State, Indian Tribe or USDA and will need to provide periodic reports on its progress in correcting violations. 

The Interim Rules indicate that any of the following actions will constitute negligent violations of the rules:

• Failure to provide legal description of land where hemp is farmed;
• Failure to obtain necessary licenses; or
• Producing cannabis with THC above the THC Threshold – note, however, that a producer will not be subject to criminal consequences if the producer makes reasonable efforts to ensure the THC level is no more than 0.5%.

Next Steps

Hemp producers that have invested heavily in their operations should get a head start on understanding the Interim Rules.  As with any interim rules, there will be questions that remain unanswered and issues that have not been appropriately addressed by USDA.  The comment period for submitting clarifications and comments to USDA is currently open and runs through December 31, 2019 and we anticipate a large volume of comments from our clients.

[1] Formally referred to as the Agricultural Improvement Act of 2018.

[2] States and Indian Tribes may also prohibit hemp production in which case hemp producers will not be allowed to apply for a license from USDA.

[3] States and Indian Tribes can submit plans to USDA for approval after October 31, 2019 and USDA must approve or reject a plan within 60 days.

[4] The Interim Rules define “negligence” as the failure to exercise the standard of care that a reasonably prudent person would have exercised in a similar situation.

MORE INFORMATION

The contents of this Alert are for informational purposes only and do not constitute legal advice. If you have any questions about this Alert, please contact the Shulman Rogers attorney with whom you regularly work or a member of the Shulman Rogers Cannabis Group.