USDA Unveils Final Hemp Rule – Key Takeaways for the Cannabis Industry

The U.S. Department of Agriculture (USDA) published its Final Rule on Establishment of a Domestic Hemp Production Program

On January 15, 2020, the U.S. Department of Agriculture (USDA) published its Final Rule on Establishment of a Domestic Hemp Production Program. According to the USDA, the Final Rule incorporates modifications to its Interim Final Rule based on public comments and lessons learned during the 2020 growing season. The Final Rule will take effect on March 22, 2021.

“With the publication of this final rule, USDA brings to a close a full and transparent rule-making process that started with a hemp listening session in March 2019,” USDA Marketing and Regulatory Programs Under Secretary Greg Ibach said in a press statement. “USDA staff have taken the information you have provided through three comment periods and from your experiences over a growing season to develop regulations that meet Congressional intent while providing a fair, consistent, science-based process for states, tribes and individual producers. USDA staff will continue to conduct education and outreach to help the industry achieve compliance with the requirements.”

2018 Farm Bill Legalized Hemp

As we have discussed in several prior articles, the 2018 Farm Bill fundamentally changed the way hemp is regulated in the United States by removing “hemp” from the Controlled Substances Act’s (CSA) definition of marijuana. Accordingly, cannabis plants and derivatives that contain no more than 0.3% THC on a dry-weight basis are no longer controlled substances under the CSA.

To create a regulatory framework for legal hemp, the 2018 Farm Bill required the USDA to promulgate regulations and guidelines to establish and administer a program for the production of hemp in the United States. Under this new authority, a State or Indian Tribe that wants to have primary regulatory authority over the production of hemp in that State or territory of that Indian Tribe may submit, for the approval of the Secretary, a plan concerning the monitoring and regulation of such hemp production. For States or Indian Tribes without an approved plan, the Secretary was directed to establish a Departmental plan to monitor and regulate hemp production in those areas.

The 2018 Farm Bill outlines requirements that all hemp producers must meet. These include licensing requirements; recordkeeping requirements for maintaining information about the land where hemp is produced; procedures for testing the THC concentration levels for hemp; procedures for disposing of non-compliant plants; compliance provisions; and procedures for handling violations. On October 29, 2019, the USDA published its interim final rule for the domestic production of hemp.  After twice extending the public comment period, the agency received about 5,900 public comments.

USDA Final Rule

Under the USDA Final Rule, 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. 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.

If a State or Indian Tribe wants to regulate the production of hemp within its borders, they may submit a plan to the USDA for approval. The Final Rule includes requirements for the hemp production plans developed by states and Indian tribes, including licensing requirements, procedures for testing THC levels, and disposing of non-compliant plants. The USDA also establishes a federal plan for hemp producers in states or territories of Indian tribes that do not have their own approved hemp production plan. The requirements of the USDA plan are similar to those under State and Tribal plans. The Final Rule also includes provisions addressing compliance with the plans, violations of the plans, and recordkeeping requirements.

As outlined by the USDA, below are several of the most significant revisions between the interim rule and the Final Rule:

• Negligent violation: Producers must dispose of plants that exceed the acceptable hemp THC level. However, if the plant tests at or below the negligent threshold stated in the rule, the producer will not have committed a negligent violation. The Final Rule raises the negligence threshold from .5 percent to 1 percent and limits the maximum number of negligent violations that a producer can receive in a growing season (calendar year) to one.
• Disposal and remediation of non-compliant plants: The Final Rule allows for alternative disposal methods for non-compliant plants that do not require using a DEA reverse distributor or law enforcement and expands the disposal and remediation measures available to producers. AMS will provide acceptable remediation techniques in a separate guidance document.
• Testing using DEA-registered laboratories: There is an insufficient number of DEA-registered laboratories to test all the anticipated hemp that will be produced in 2020 and possibly 2021. DEA has agreed to extend the enforcement flexibility allowing non-DEA registered labs to test hemp until January 1, 2022, and is processing lab registration applications quickly to get more labs testing hemp DEA-registered.
• Timing of sample collection: The IFR stated a 15-day window to collect samples before harvest. The Final Rule extends this requirement to 30 days before harvest.
• Sampling method: Stakeholders requested that samples may be taken from a greater part of the plant or the entire plant. They also requested sampling from a smaller number of plants. The Final Rule allows states and tribes to adopt a performance-based approach to sampling in their plans. The plan must be submitted to USDA for approval. It may take into consideration state seed certification programs, history of producer compliance and other factors determined by the State or Tribe.
• Extent of Tribal Regulatory Authority over the Territory of the Indian Tribe: The IFR did not specifically address whether a tribe with an approved USDA plan could exercise primary regulatory authority over the production of hemp across all its territory or only lands over which it has inherent jurisdiction. The Final Rule provides that a tribe may exercise jurisdiction and therefore regulatory authority over the production of hemp throughout its territory regardless of the extent of its inherent regulatory authority.

Key Takeaways

Overall, the Final Rule is good news for the legal hemp industry because it brings greater legal certainty. With regard to the USDA’s response to public comments from the industry, the Final Rule is a mixed bag. While many were hoping that the USDA would adopt more industry-friendly approach in its Final Rule, the higher negligence threshold, the greater flexibility in disposing of non-compliant plants, and the harvesting window extension are certainly good news.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Dan McKillop, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.

This article is a part of a series pertaining to cannabis legalization in New Jersey and the United States at large. Prior articles in this series are below:

• New York Publishes Comprehensive Hemp Regulations
• New Jersey’s Proposed Recreational Cannabis Licensing Framework
• NJ Voters Approve Adult-Use Cannabis: The Path Forward

Disclaimer: Possession, use, distribution, and/or sale of cannabis is a Federal crime and is subject to related Federal policy. Legal advice provided by Scarinci Hollenbeck, LLC is designed to counsel clients regarding the validity, scope, meaning, and application of existing and/or proposed cannabis law. Scarinci Hollenbeck, LLC will not provide assistance in circumventing Federal or state cannabis law or policy, and advice provided by our office should not be construed as such.