On Oct. 31, the U.S. Department of Agriculture (USDA) established the U.S. Domestic Hemp Production Program through an interim final rule that will dictate how hemp farmers carry out business for the next two years. The 161-page document provides guidance on applying for licenses, sampling, tetrahydrocannabinol (THC) testing and interstate transport.
The rule is based on the 2018 Farm Bill, which passed on Dec. 20, 2018, but makes key clarifications to some of the bill’s provisions.
USDA says it will use the 2020 growing season as a chance to “test drive the interim rule to help guide any adjustments that are made in the final rule.” The interim final rule will expire Nov. 1, 2021, and the USDA will then deliver a final rule.
Several law firms and advocacy groups recently held webinars outlining the basics of the new rule, including Daniel Shortt and Nathalie Bougenies, two cannabis-focused attorneys with the firm Harris Bricken, and Vicente Sederberg LLP Hemp & Cannabinoids Practice Group along with Eric Steenstra, the president of Washington-based advocacy group Vote Hemp.
The first step to following the new rule: make a business plan and stick to it.
Forming a Plan
States and tribes can opt to develop their own plans, which may be stricter than the USDA’s regulations but must remain in compliance with them. States and tribes can use the USDA plan initially and submit their own plan to USDA for approval at a later date.
As of Nov. 7 (the most recent date available), 22 states and tribes submitted a plan for approval. All were under review as of Nov. 26.
State and tribal plans must include the following in the plans they submit to the USDA:
- procedures for tracking the land where hemp is grown, including its geospatial location and legal description;
- contact information for the farmers participating in the program;
- procedures for testing using post-decarboxylation (or other similarly reliable methods) for tetrahydrocannabinol (THC) concentration levels;
- procedures for disposing of non-compliant or “hot” plants;
- compliance provisions outlining how to handle violations and requirements for inspection of farms on an annual basis at a minimum;
- procedures to share information;
- certification that the state or tribe has available resources to manage their plans.
A detailed list of state and tribal requirements is available online, as is a rundown on the three forms these programs need to submit regularly. Draft plans may be submitted to firstname.lastname@example.org.
The 2018 Farm Bill extended the 2014 Farm Bill provisions through Oct. 31, 2020. States and tribes that participated in the 2014 Farm Bill pilot program may alternatively choose to continue operating under that program while formulating their new plans to submit to the USDA.
“While the 2018 Farm Bill is now fully in effect … the states can continue to operate under the 2014 provisions for another year,” Steenstra says. “If states need a little more time to get this figured out, they have an option to operate under the older provisions.”
Getting a License
The USDA’s interim rule establishes three different licensing programs: those under state and tribal plans submitted to the USDA; USDA licenses for individual farmers and businesses not covered by state or tribal plans; and licenses issued under the 2014 Farm Bill.
Regardless of which license a farmer gets, the licenses are not sellable or transferable, and they must be renewed every three years. Farmers can begin applying for USDA licenses Nov. 30, and for 2020, they will be able to do so all year. After that, the application window will be from Aug. 1 to Oct. 31.
Here are key regulations potential license applicants need to know:
- Contact your local state department of agriculture or tribal government to see if they have submitted a hemp production plan that is either approved or pending. If so, you must apply to be licensed under your local program. (Contact info for each state is available here, or see the full list at the bottom of this page.)
- If your local government does not have a pending or approved plan, or if its plan has been rejected, you may apply for a hemp production license with the USDA. Applications to obtain a license are available on the USDA hemp program web page. When applying to the USDA hemp program, you must also include a copy of your FBI criminal history investigation report. Instructions on how to obtain the FBI criminal history report is available here. (States have some flexibility in how they require applicants to report their criminal history.)
- If you state prohibits hemp production, you may not apply for a license unless you will be growing within the territory of a tribal government that does allow hemp production.
- After you have planted hemp, visit your local USDA Farm Service Agency (FSA) office and provide the office with your license or authorization identifier, as well as the geospatial locations where you are growing hemp.
- The FSA office will give you a lot number(s).
- Once it comes time for sampling the lot for THC content, request an authorized agent to come sample the lot. Follow proper sampling and testing procedures (more on that below) and submit all required information to your state or tribal government.
Notably, applicants who have been convicted of a felony related to a controlled substance within the last 10 years are not eligible to receive a license. This is effective regardless of whether the offense took place before or after the bill took effect, with the exception of those who were growing hemp under the 2014 Farm Bill and had a conviction that occurred before the new Farm Bill’s Dec. 20, 2018 enactment date.
This criminal prohibition only applies to key participants of the company, however, meaning that farm, field and shift managers are not subject to the regulation.
“I think there will still be some ambiguities in this that may end up disputed in administrative procedures with the USDA or may even go to the courts, but for now, I think it's important for anyone hoping to obtain a license under the 2018 Farm Bill to really consider who individually is running the company,” Shortt says.
The interim rules have also laid out hemp sampling procedures to determine whether the crop meets the regulated 0.3% THC threshold (more on testing procedures below).
Sample collection requirements include:
- States and tribes must ensure a representative sample of every lot they plan to harvest is collected.
- Sampling must be conducted within 15 days prior to the anticipated harvest.
- A USDA-approved sampling agent or a federal, state or law enforcement agent must collect samples from the top one-third flower portion of the plant. Licensees are required to pay any sampling fees.
(A detailed document, including how to collect a statistically representative sample, is available on the AMS website.)
For some, the rules establish a rigid sampling procedure that states have kept more lax in past programs. For instance, some current state programs have approved of random testing as opposed to testing every lot, Steenstra says.
“The flower material from the top third of the plant [is now sampled], but we think that could be improved, and should be as well, because the definition of the plant says it’s the THC levels of the plant by weight, not just of the flowers,” Steenstra says.
Steenstra also says he is planning to advocate for a 45-day harvest window, as the current 15-day requirement puts unnecessary pressure on farmers. “Often sampling testing can take a minimum of five days, and we’ve heard quite longer in a number of states, so the fact that you have to complete the harvest in 15 days is unreasonable.”
Perhaps the most controversial of the USDA’s regulations is its testing requirements, which Steenstra says are “very onerous.”
The USDA’s basic testing provisions include:
- Testing must be completed by a Drug Enforcement Administration (DEA)-registered laboratory.
- Labs must use post-decarboxylation (or other similarly reliable methods, USDA says) to test THC levels.
- The test must include the total amount of THC in the plant, which the rules define as the sum of the delta-9 THC and tetrahydrocannabinolic acid (THCA) content.
- A measurement of uncertainty (MU), or standard deviation, must be estimated and reported to ensure test uncertainty is taken into account. If the actual THC level is within the range of MU, the results will be considered acceptable.
- Licensees can request a retest if they believe the original test produced an error.
- If THC levels exceed the acceptable level, the lab will notify the producer and USDA. It must be treated like marijuana, and licensed producers must arrange for its disposal according to DEA regulations. They must also document its disposal by either providing USDA with a copy of the documentation of disposal or by using the reporting requirements established by USDA.
(A document detailing the testing protocol is available here.)
Hemp activists and attorneys have several concerns with the USDA’s testing requirements, one of which includes the requirement that all hemp be tested by a DEA-registered lab.
“This is challenging in that if you look at the current guidelines that are published by the DEA for anyone that’s trying to apply for a registration … it says in there that a lab will be eligible to be registered with the DEA so long as they’re located in a jurisdiction that has actually legalized marijuana,” Bougenies says. “That creates another question in our minds, which is, well, does this mean that producers who find themselves in jurisdictions where their hemp cannot be tested within their borders will need to ship their hemp to be tested in other jurisdictions where there are DEA-certified labs? And if their hemp fails to meet the tested requirements … then will these producers open themselves to potential prosecutions for transporting marijuana across state lines? Those are, in my opinion, very important rules that need to be clarified.”
Bougenies and Shortt share other concerns with the DEA lab requirement as well, including its potential to create a sort of monopoly among labs, which they add could lead to conflict of interest between the labs and producers.
“If labs are private entities, then they have a financial interest in working with licensees, and that may cause some perverse incentives in terms of test reporting,” Shortt says. “I think these challenges are sort of inevitable, but ... I was hoping USDA rules would address this with a little more certainty.”
Another major concern from the industry revolves around the USDA’s requirement to test for the total THC level as opposed to only delta-9 THC. THCA on its own does not produce psychoactive effects like delta-9 THC, but it can be converted to THC through decarboxylation, which is the process required for testing.
“To the disappointment of people in the industry, it seems that the USDA has interpreted the language of the 2018 Farm Bill to mean that total THC must be tested,” Bougenies says. “The use of the total THC testing protocol will create some additional hurdles for farmers because the method tends to increase the THC concentration, which is already a challenging one to meet under a delta-9 THC requirement, but in addition to that, this total THC requirement will also limit the type of strains that farmers will be able to use.”
Along the same vein, USDA also established rules on compliance, which encompass violations regarding both testing and overall operations. The rules break violations down into two categories: negligent and culpable.
Negligent violations include:
- Failure to provide a legal description of the land where the hemp is produced.
- Not obtaining a license before planting.
- Producing plants exceeding the acceptable hemp THC level. If a test shows the crops contain more than 0.3% THC but up to or less than 0.5%, it will not be considered a negligent violation, but the crops must still be destroyed.
Those who receive a negligent violation will receive a Notice of Violation from the USDA, which will include a corrective action plan that producers are required to follow by a certain date and report progress on to the USDA. Producers with more than three negligent violations within a five-year period will be ineligible to participate in the program for the next five years.
Culpable violations, which are those that are interpreted as being carried out intentionally, mainly revolve around crops that test higher than 0.5% THC. The current rules do not specify THC levels that would fall into this category beyond the 0.5% threshold. Culpable violations may also include conviction of a felony related to controlled substances, and they can lead to license revocation and potential criminal charges.
“Essentially, anyone who’s found to be growing a crop that was over a half a percent could potentially be viewed as not just negligent, but criminally liable,” Steenstra says. “This is clearly too low, and it’s a major concern we’re going to be sharing with the USDA.”
The interim rules also clarify interstate transport, dictating that states and tribes cannot prohibit the transportation or shipment of hemp that has been lawfully produced by a licensee.
Trucks with hemp cargo have, however, been stopped by law enforcement since the rules have come into play, signaling that it may take time for some municipalities to catch up with the new legislation. While the interim rules don’t require any type of document to be accompanied by the shipment, Shortt and Bougenies recommend taking extra precaution to avoid unwarranted conflict.
“For the time being, I think that the wise thing to do would be to always have the relevant documentation to prove that the hemp or the hemp product was lawfully produced. That would be attaching a copy of a grower’s license, the processor’s license if it’s applicable, and of course, a copy of the certificate of analysis that would show that the hemp or the hemp product meets the testing requirements that are currently imposed within the jurisdiction that the product and the hemp was produced,” Bougenies says. “I think another thing that is wise would be to contact the state to which the hemp or the hemp product is shipped to see if they have specific requirements so that when the shipment is crossing that border, then you at least know if there is specific documentation that should be provided to try to mitigate the risk of a seizure.”
The USDA is accepting comments on the interim rule until Dec. 30. As of late November, more than 800 comments had been submitted by advocacy organizations, individual farmers and other industry players.
Many of the comments reflect the concerns of advocacy groups and attorneys. Popular requests for changes include increasing the THC threshold from 0.3% THC to 1%; increasing the 0.5% THC threshold that dictates negligence violations; and removing the DEA lab testing requirement, among others.
Despite concerns, many see the interim rule as an undeniable step forward in the march toward a thriving hemp industry in the U.S.
“New USDA hemp regulations mean the beginning of a new era and provide much needed certainty to producers. We feel that USDA mostly followed the roadmap that Congress laid out, which was fairly clear and limited. However, there are some areas of concern, and meddling by the DEA and Drug Czar’s office is evident,” Steenstra says in a prepared statement. “The industry will need to work with USDA and Congress to ensure the regulations are amended to allow the U.S. industry to operate successfully, grow the us market and maintain its competitive position in the world market.”