One Nation, Under Hemp: The 2018 Farm Bill

The 2018 Farm Bill was signed into law just before the turn of the new year, causing a great stir in the cannabis community. While the 2018 Farm Bill does not affect Federal laws with respect to marijuana, its passage is monumental for the hemp industry: For the first time, Congress acted to amend the Federal Controlled Substances Act of 1970 (the “CSA”) adding protections for the plant, as well as allowing hemp farmers to benefit from certain financial advantages afforded to other American agricultural commodities. However, the hemp industry is still highly regulated, and all industry participants authorized under the 2018 Farm Bill will required to be licensed in their state which must have in place a Federally approved and rigorously enforced regulatory plan.

I. What the 2018 Farm Bill Does

• Removes “hemp” defined as cannabis sativa with less than 0.3% of tetrahydrocannabinol (“THC”) content, from Schedule I of the CSA.

First and foremost, although hemp and marijuana are both types of the plant Cannabis sativa L., the 2018 Farm Bill defines “hemp” as:

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 new Controlled Substances Act, codified at 21 U.S.C. 802(16), as applicable to marijuana, therefore now reads:

(16)(A) Subject to subparagraph (B), the term “marihuana” means all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin.

(B) The term “marihuana” does not include-(i) hemp, as defined in section 1639 of title 7; or (ii) the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination.

• Removes “cannabinoids” derived from hemp from the Controlled Substances Act.

Prior to the 2018 Farm Bill, there was much disagreement – and resulting industry confusion – among various federal and state agencies regarding whether or not cannabinoids (“CBD”) derived from hemp were protected under the 2014 Farm Bill. This new law resolves any dispute regarding CBDs derived from hemp, which are now categorically NOT schedule I substances under section 16(B)(i). (See discussion regarding CBD derived from marijuana, below).

• Removes “tetrahydrocannabinols in hemp” from Schedule I of the Controlled Substances Act, amending 21 U.S.C. 812(c)), subsection (c)(17) so that it reads:

any material, compound, mixture, or preparation, which contains any quantity of the following hallucinogenic substances, or which contains any of their salts, isomers, and salts of isomers whenever the existence of such salts, isomers, and salts of isomers is possible within the [Schedule I] chemical designation: (17) Tetrahydrocannabinols, except for tetrahydrocannabinols in hemp (as defined under section 297A of the Agricultural Marketing Act of 1946)

The effect of this provision is that for any hemp products that contain THC up to .03% on a dry-weight basis, that THC is exempt from prosecution or punishment under the Controlled Substances Act.

• Transportation of hemp, including interstate transportation of hemp, is now expressly authorized throughout and across the borders of all 50 states.

Transportation of Hemp and Hemp Products.–No State or Indian Tribe shall prohibit the transportation or shipment of hemp or hemp products produced in accordance with subtitle G of the Agricultural Marketing Act of 1946 (as added by section 10113) through the State or the territory of the Indian Tribe, as applicable. (See, Section 10114.)

• Authorizes the Secretary of the USDA to conduct a study of the agricultural pilot programs and the academic research relating to the industrial hemp programs authorized under the Agricultural Act of 2014 (the “2014 Farm Bill”). The study is slated to be released in late 2019.

II. What the 2018 Farm Bill Does Not Do

Despite implementing these important changes to federal law, it is critically important to understand the limitations to the so-called permissions granted by the 2018 Farm Bill if you are planning to engage with the hemp industry in any way.

• The removal of industrial hemp from the CSA does not mean that it is federally unregulated; only that regulation now shifts from the Department of Justice to the United States Department of Agriculture (“USA”) and Food and Drug Administration.

• States are still free to enact their own laws curtailing hemp activities, possibly including outlawing it altogether.

• The 2018 Farm Bill does not in any way affect “marijuana” which is defined under the Controlled Substances Act as having a THC content of equal to or greater than 0.3%.

• CBD derived from marijuana is not affected by the 2018 Farm Bill.

However, dispute still exists with respect to whether or not all CBD derived from marijuana (remember, that is cannabis sativa with 0.3% of THC content or more) is properly characterized as a Schedule I controlled substance.

The DEA contends that cannabinoids “in their own right” are not unlawful, a position they maintained throughout the Hemp Industries Ass’n v. DEA (2018) litigation (see, An Analysis of Hemp Industries Association, et al. v. U.S. Drug Enforcement Administration (Case No. 17-70162). Only when the cannabinoids (a) are derived from an illegal source, that is, “any plant of the genus Cannabis,” and (b) do not fall into one of the exceptions set forth in subsections (B)(i) or (ii), are they illegal as Schedule I substances under the CSA.

(Subsection (B)(i) exempts hemp from the definition of “marihuana,” the Schedule-I drug. Subsection (B)(ii) exempts the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination, from the definition of “marihuana,” the Schedule-I drug.)

III. Practical Considerations

While the national legal landscape with respect to hemp and CBD laws seems to be clearing up, there are still many questions yet to be answered. While the FDA has begun releasing statements, the procedure and content of which mirrors that of the DEA prior to the passage of the 2018 Farm Bill, ultimately it will be the Federal courts who will decide whether the conduct of any particular industry participant complies with the letter and the spirit of the 2018 Farm Bill, and the applicable subsequent state-level program.

To date, only one decision has been issued by a Federal court involving the Congressional protections of the 2018 Farm Bill available to hemp industry participants. Read Cultiva Law’s blog regarding the January 17, 2019 Order from the United States District Court in West Virginia for more information regarding the effect this (so far) sole decision has on the transportation of hemp (in that case, from West Virginia to Pennsylvania for processing and sale of CBD isolate).

We at Cultiva Law are well equipped to guide you through these murky federal and state-regulations, and look forward to discussing your specific business plans and concerns.