Iowa Hemp Act Would Pave Way for Future Hemp Production

April 26, 2019 | Kristine A. Tidgren

May 13, 2019 Update: The Governor has signed the Iowa Hemp Act.

The Iowa Legislature has now sent SF 599, the Iowa Hemp Act, to the Governor. Passed by an overwhelming majority, the bill, once signed, would pave the way for future legal production of hemp within the state. This passage, however, is just one in a series of hurdles that must be crossed before growers can legally plant and market industrial hemp within the State of Iowa.

Federal Law

The Agricultural Improvement Act of 2018 (2018 Farm Bill), signed into law December 20, 2018, exempted hemp from the federal list of Schedule l controlled substances and added it to the list of agricultural commodities eligible for crop insurance. The 2018 Farm Bill also established a regulatory system involving both states and the federal government. Specifically, the 2018 Farm Bill allows states to regulate hemp production based on a state or tribal plan that must be submitted to the United States Department of Agriculture (USDA).  USDA must approve or deny these plans within 60 days of submission. The plan must include information on locations of hemp production, testing for THC concentration, disposal of plants that are out of compliance, and negligence or other violations of the state or tribal plan. If a state chooses not to adopt its own plan to monitor and regulate hemp production, the law provides that USDA must establish a plan, in consultation with the U.S. Attorney General, for those states. The 2018 Farm Bill also provides that states may not prohibit the transportation or shipment of hemp or hemp products produced in accordance with the law.

These provisions apply only to “hemp,” and not to other varieties of the cannabis sativa L. species. Hemp is defined under the 2018 Farm Bill as it was under section 297A of the Agricultural Marketing Act of 1946:

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.

No Longer a Schedule I Controlled Substance

As a result of the 2018 Farm Bill, hemp (as defined under the law) is no longer a Schedule I controlled substance under federal law. This change is not dependent upon regulations becoming effective. However, if cannabis or a cannabis product has more than .3 percent THC (even by mistake), it is considered marijuana and it remains a Schedule I controlled substance. The new exemption from Schedule I applies only to hemp and tetrahydrocannabinols in hemp. Only low-TCH, hemp-derived cannabinoids (CBDs) and derivatives are included in this exemption. It is thus very important that growers ensure that any product they ultimately raise has THC content of .3 percent or less.

On April 18, USDA issued a statement clarifying that the Drug Enforcement Administration (DEA) no longer has authority over hemp products and cannot require hemp seed permits for import purposes. USDA stated in its notice that it has provided an alternative way for the safe importation of hemp seeds into the United States.

Under this guidance, hemp seeds can be imported into the United States from Canada if accompanied by either: 1) a phytosanitary certification from Canada’s national plant protection organization to verify the origin of the seed and confirm that no plant pests are detected; or 2) a Federal Seed Analysis Certificate for hemp seeds grown in Canada. Hemp seeds may be imported from countries other than Canada if accompanied by a phytosanitary certificate from the exporting country’s national plant protection organization to verify the origin of the seed and confirm that no plant pests are detected.  Customs and Border Protection agents may inspect hemp seed shipments upon arrival at the first port of entry.

Not Authorized by Regulation in 2019 unless part of a 2014 Farm Bill Pilot Program

Although the 2018 Farm Bill seeks to legalize the production of hemp, it has imposed a significant regulatory framework within which this production must occur. Growers must be licensed under a federally approved state program or (if the state chooses not to act) under the backstop USDA program. Until USDA finalizes its regulations for reviewing state plans and for issuing its own licenses, it remains “unlawful” to plant hemp in the U.S. The law states, “In  the  case  of  a  State  or  Indian  tribe  for  which  a  State  or  Tribal  plan  is  not  approved  under  section  297B,  it  shall  be  unlawful  to  produce  hemp  in  that  State  or  the  territory  of  that  Indian  tribe  without  a  license  issued  by  the  Secretary under subsection (b).” Growers of hemp acting without licensed authority—although not guilty of a drug offense—will be liable for violations.

USDA stated on February 27, 2019, that it will not review state plans until it has issued its own regulations. At that time, USDA will approve or reject plans, and growers will be able to apply for the proper state or federal license. USDA also said that it intends to issue regulations in the Fall of 2019 to accommodate the 2020 planting season. The rulemaking will provide for the publishing of a proposed rule, comment period, and a final rule.

Until then, hemp production can lawfully occur only under a pilot program authorized under the 2014 Farm Bill. For the 2019 planting season, the 2018 Farm Bill provides that States, Tribes, and institutions of higher education may continue their 2014 Farm Bill hemp research pilot programs. This extension, however, expires 12 months after USDA issues regulations required by the 2018 Farm Bill. Because Iowa did not establish a 2014 Farm Bill hemp research pilot program, Iowa growers are not eligible to operate under such a program.

Hemp will be Eligible for Federal Crop Insurance

The 2018 Farm Bill also made hemp an “agricultural commodity” for purposes of the Federal Crop Insurance Act. Regulations for this too must be written to fully implement the law.

2018 Farm Bill Does not alter FDA Authority over Hemp-Derived Products

The 2018 Farm Bill specifically states that nothing in its provisions modifies or affects the authority granted to the Food and Drug Administration (FDA) and the Secretary of Health and Human Services under the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. 301 et seq. or section 351 of the Public Health Service Act, 42 U.S.C. 262, including for hemp-derived products.

This means that even if a CBD-product meets the definition of “hemp” under the 2018 Farm Bill, it must comply with all FDA regulations. Hemp products, for example, may not be sold as dietary supplements or added to food, including animal food. On May 1, 2019, the Association of American Feed Control Officials (AAFCO) restated this position in updated guidelines.  On December 18, 2018, FDA did conclude that certain seed-derived food ingredients (hulled hemp seed, hemp seed protein powder, and hemp seed oil) were safe as described in three generally recognized as safe (GRAS) notices submitted by a company called Fresh Hemp Foods, Ltd. Consequently, FDA has stated that these ingredients, if used in a way that is consistent with the notices, can be used by other companies as well. This conclusion, however, does not apply to CBD or THC, even if hemp derived.

FDA has also stated that any products intended to affect the structure or function of the body, or to diagnose, cure, mitigate, treat or prevent disease are considered drugs and must be approved by the FDA as a drug. This applies to any hemp-derived products for which health claims are made.

FDA is holding a public hearing on May 31, 2019, for stakeholders to share their experiences and challenges with products containing cannabis and cannabis-derived compounds. So far, FDA has not approved a marketing application for cannabis for the treatment of any disease or condition. It has approved one cannabis-derived and three cannabis-related drug products, all of which are only available with a prescription.

Iowa Law

Once signed by the Governor, SF 599 will pave the way for Iowa to participate in 2018 Farm Bill-authorized hemp production. The Iowa Hemp Act removes federally-defined hemp and hemp products from the Iowa definition of “controlled substance.” It then authorizes the production and marketing of industrial hemp in Iowa in compliance with federal law. The Act tasks the Iowa Department of Agriculture and Land Stewardship (IDALS) with creating administrative rules to implement the Act, which will include submitting a state plan to USDA and implementing application, licensing, fee, and inspection and testing requirements.

The Act requires IDALS to collect a licensing and inspection fee from any hemp grower. The fee will be based on the number of acres planted. The Act restricts each producer’s hemp production to 40 acres. It also allows IDALS to reject an application for a license filed by anyone with a drug conviction and to ban any licensee convicted of a drug offense from raising hemp for 10 years. The license fee structure is as follows:

  • $500 plus $5 per acre for growing five acres or less
  • $750 plus $5 per acre for growing more than five acres but less than 10 acres
  • $1,000 plus $5 per acre for growing more than 10 acres

In addition, IDALS will charge an annual inspection fee of not more than $1,000.

The Act authorizes a new Hemp Fund, which includes the fees collected and is to be used for administering the new hemp program. It also authorizes inspectors to enter the crop site of any hemp grower during reasonable hours to ensure that the licensee is complying with the law. If a crop does not comply with the legal definition of hemp (after official testing), IDALS, in consultation with the Department of Public Safety, shall order for the destruction of the crop. The licensee will be responsible for the costs. Civil penalties and injunctive relief may also be imposed. Growers will be subject to criminal penalties if they falsify a certificate of crop inspection

Once the law is passed, Iowans must still wait for regulations to issue before they can lawfully grow hemp. As with the federal law, these will likely be in place for the 2020 growing season. Until then, producers interested in growing hemp should spend some time researching potential markets and other challenges that may be associated with growing this emerging commodity.