USDA Issues Rules for Domestic Hemp Production Program

On October 29, 2019, USDA issued an interim final rule for the establishment of a Domestic Hemp Production Program. The rule implements provisions within the 2018 Farm Bill[i]  authorizing the production and transportation of hemp. The rule is effective from October 31, 2019, through November 1, 2021. USDA is accepting comments through December 30, 2019.

The 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. It also authorizes producers to grow hemp pursuant to a state, tribal, or federal plan. Under the new Domestic Hemp Production Program (Program), states or tribes may choose to regulate hemp production within their jurisdictions by submitting a plan for approval to the USDA. If a state or tribe chooses not to adopt its own plan, producers may grow hemp in those jurisdictions (if it is otherwise legal to grow) pursuant to a federal plan developed by the USDA. The interim final rule establishes the technical requirements for the Program, specifically setting forth the details for:

• Licensing
• Maintaining information on the land on which hemp is produced
• Testing the THC concentration levels for hemp
• Disposing of non-compliant plants
• Compliance provisions
• Handling violations

Definition of Hemp

The Program allows for the production of hemp, but not marijuana. The USDA clarifies the distinction:

The term ‘‘hemp’’ means the plant species 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. Delta-9 tetrahydrocannabinol, or THC, is the primary intoxicating component of cannabis. Cannabis with a THC level exceeding 0.3 percent is considered marijuana, which remains classified as a schedule I controlled substance regulated by the Drug Enforcement Administration (DEA) under the CSA.

State or Tribal Plans

States or tribes that wish to have primary regulatory authority over the production of hemp within their jurisdictions must submit a plan to the USDA. These plans, which may include stricter provisions than those required by federal law, must be approved by USDA before they can be implemented.

All state or tribal plans must include a number of provisions, detailed below.

Land Used for Production

USDA requires states and tribes to collect from producers and maintain information regarding land used for hemp production. This includes a legal description of the land and geospatial location for each field, greenhouse, or other site where hemp is produced. States and tribes must retain this information for three years. Additionally, licensed producers must report their hemp crop acreage to the FSA, along with their state or tribe-issued license or authorization number. FSA has provided a fact sheet for this reporting requirement. This reporting also applies to FSA farm records for leases, sub-leases, or ownership of land.

Sampling and Testing for Delta-9 Tetrahydrocannabinol

The plans submitted by states and tribes must include procedures for sampling and testing hemp to ensure that the THC level of the plant does not exceed .3 percent. A representative sample of the plant must be collected and delivered to a DEA-registered laboratory for testing. The samples must be collected from the flower material of the plant within 15 days[ii] prior to the anticipated harvest. A Federal, State, local, or Tribal law enforcement agency or other Federal, State or Tribal designated person must collect the samples.

The THC concentration of all hemp must meet the acceptable hemp THC level.  Testing must be completed by a DEA-registered laboratory using a reliable methodology for testing. The interim rule requires that the laboratories must use a “post- decarboxylation or similarly reliable analytical method where the total THC concentration level reported accounts for the conversion of delta-9- tetrahydrocannabinolic acid into THC.” THC content must be determined and reported on a dry weight basis. USDA will consider alternative sampling and testing protocols if they are comparable and similarly reliable to methods specified in the rule.

Because crops that fail the test must be destroyed, the rule states that there must be a high degree of certainty that the THC concentration level is accurately measured. Laboratories must include the measure of uncertainty when they report THC test results. An ‘‘acceptable hemp THC level’’ is used to account for the degree of uncertainty in the test results. If the range of the test result, when the measure of uncertainty is factored in, includes 0.3% or less THC, then the sample will be considered hemp.

Example from the Rule

If a laboratory reports a result as 0.35% with a measurement of uncertainty of +/¥0.06, the distribution or range is 0.29% to 0.41%. Because 0.3% is within that distribution or range, the sample is considered hemp, and the crop will be in compliance with a state, tribal or federal plan. However, if the measurement of uncertainty for that sample was 0.02%, the distribution or range is 0.33% to 0.37%. Because 0.3% or less is not within that distribution or range, the sample is not considered hemp for the purpose of plan compliance, and the lot it represents will be subject to disposal.

Laboratories testing hemp must be registered by the DEA to conduct chemical analysis of controlled substances. USDA has posted instructions for laboratories on its website.

Disposal of Non-Compliant Plants

State and tribal plans must include procedures for disposing of cannabis exceeding the acceptable hemp THC level. The disposal must be in accordance with the Controlled Substances Act and DEA regulations because these plants are marijuana, a schedule I controlled substance. The material must be collected for destruction by a person authorized to handle marijuana, such as a DEA-registered reverse distributor or a duly authorized Federal, State, or local law enforcement officer.

Compliance with Enforcement Procedures, Including Annual Inspection of Hemp Producers

State and tribal plans must include requirements to conduct annual inspections of a random sample of hemp producers to verify hemp is not being produced in violation of the approved plan. The plans must include a procedure for handling violations.

The plans must include procedures to identify and attempt to correct negligent acts, such as failing to provide a legal description of the land on which the hemp is produced, not obtaining a license or other required authorizations from the state or tribe, or producing plants exceeding the acceptable THC level. Under the rule, producers do not commit a negligence violation if they produce plants that exceed the acceptable hemp THC level, but have used reasonable efforts to grow hemp, and the THC level of the plant does not exceed 0.5 percent on a dry weight basis.

Rule Caution

USDA recognizes that hemp producers may take the necessary steps and precautions to produce hemp, such as using certified seed, using other seed that has reliably grown compliant plants in other parts of the country, or engaging in other best practices, yet still produce plants that exceed the acceptable hemp THC level. Although these plants must still be destroyed, such producers will not be responsible for a negligence violation.

Where a State or tribe determines that a negligence violation has occurred, the state or tribe must initiate a corrective action plan. This must include a reasonable date by which the producer will correct the negligent violation and reporting requirements for the producer. Negligent violations are not subject to criminal enforcement action by local, tribal, state, or federal authorities.

Plans must provide, however, that if a violation was committed with a culpable mental state greater than negligence, the state or tribe must immediately report the producer to the Attorney General, USDA, and the chief law enforcement.

State and tribal plans must include procedures for preventing any person convicted of a felony related to a controlled substance from producing hemp for 10-years following the date of conviction.[iii] To meet this requirement, the state or tribe must conduct a criminal history check. If the producer is a business, the criminal history check must be conducted for each participant in the business.

Information Sharing

State and tribal plans must contain procedures for reporting information to USDA. This required information includes:

• Contact information for each hemp producer covered under the plan including name, address, telephone number, and email address (if available).
• If the producer is a business entity, the full name of the business, address of the principal business location, full name and title of the key participants, an email address if available, and EIN number of the business entity.
• The status of the license of each producer under a hemp production plan.

States and tribes must submit this information to USDA no later than 30 days after it is received using USDA reporting requirements. States and tribes must also submit, by the first of each month, a report notifying USDA of any occurrence of non-conforming plants and providing a disposal record of those plants and materials. This report must include the name and contact information for each producer subject to a disposal during the reporting period, and date disposal was completed.

Certification of Resources

State and tribal plans submitted for USDA approval must certify that the state or tribe has the resources and personnel necessary to carry out the practices and procedures described in their plan.

Plan Approval, Technical Assistance and USDA Oversight

During the plan development process, states and tribes may contact USDA for technical assistance in developing plan specifics. Once USDA formally receives a plan, it will have 60 days to review the it. The agency will issue an approval letter for plans that meet all criteria and reject those plans that do not. Approved state and tribal plans will be posted on USDA’s hemp program website.

USDA Plan

The interim final rule also creates a USDA plan to regulate hemp production by producers in areas where hemp production is legal, but is not covered by a state or tribal plan. All hemp produced outside of states or tribes with approved plans must meet the requirements of the USDA plan. The requirements of the USDA plan are similar to those under state and tribal plans.

Additional Provisions

For the 2020 planting season, States and institutions of higher education can continue operating under the authorities of the 2014 Farm Bill. The 2018 Farm Bill extension of the 2014 Farm Bill authority expires 12 months after the effective date of the interim rule.

No state or tribe may prohibit the transportation or shipment of hemp produced in accordance with the interim final rule or the 2014 Farm Bill, but the interim rule does not affect the exportation of hemp. If there is sufficient interest in exporting hemp in the future, USDA says that it will work with industry and other Federal agencies to help facilitate this process.

USDA did not include a seed certification program in the interim final rule because the same seeds grown in different locations and growing conditions can react differently. The agency states that the technology necessary to determine seed planting results in different locations is not yet advanced enough to make a seed-certification scheme feasible.

Market Considerations

In the preamble to the interim final rule, USDA notes that hemp production in the U.S. has seen a resurgence in the last five years; however, it remains unclear whether consumer demand will meet the supply. The agency notes that the high prices for hemp have been driven primarily by demand for use in producing CBD. USDA states that if FDA does not provide clarity about their plans for future regulation of CBD, there will continue to be uncertainty and downward pressure on the CBD portion of the hemp market.

Iowa Status

The Iowa Department of Agriculture and Land Stewardship will soon be submitting a plan for USDA approval in accordance with the Iowa Hemp Act, signed into law last May. Hemp will be a legal crop in Iowa once USDA approves the plan and IDALS publishes a notice of the acceptance in the Iowa Administrative Bulletin.

We will keep you posted!