On May 28, 2019, the United States Department of Agriculture (“USDA”) issued a legal opinion addressing and clarifying a number of hemp-related provisions passed in the 2018 Farm Bill. The USDA Office of General Counsel also issued an executive summary of the legal opinion summarizing its key conclusions. The opinion offered guidance regarding (1) the removal of hemp from schedule I of the Controlled Substances Act; (2) the transportation of lawfully produced hemp across state lines under the 2018 Farm Bill and the 2014 Farm Bill; and (3) ineligibility restrictions for those growers with felony convictions relating to controlled substances.

Removal of Hemp From Schedule I of CSA

As readers of this blog know, with the passing of the 2018 Farm Bill, Congress took steps to eliminate legal barriers to hemp production. First and foremost, the bill removed hemp from Schedule I of the Controlled Substances Act (“CSA”). By changing the definition of “marijuana” to exclude hemp and by excluding THC in hemp from the definition of “tetrahydrocannabinols,” Congress made hemp no longer a controlled substance. These changes were effective upon passage of the bill and did not require any additional rulemaking to come into force.

While there are reports floating around that this USDA action effectively legalizes THC, this is not true given the text of the memorandum. Every mention of THC throughout the memo qualifies it as THC in hemp, which—by definition—limits THC content to less than or equal to 0.3 percent delta-9 on a dry-weight basis. Some argue that this means that THC extractions from hemp would be permitted under the legal opinion. The opinion does address extractions in a footnote, noting that the USDA believes “that the revised statutory definition of “marihuana” has effectively removed hemp extract from schedule I...” and that excluding hemp extract from the regulatory definition of marihuana extract would be in line with the 2018 Farm Bill and the USDA’s legal interpretation. While this would permit the processing and selling of hemp extract, there has been no guidance allowing levels of THC content higher than the current 0.3 percent cap.

New Transportation Guidance

Using its power to legislate interstate commerce, with the 2018 Farm Bill Congress opened the door to allow growers and processors to transport their legally cultivated hemp products across state lines. Before the 2014 Farm Bill, the production of hemp was prohibited unless authorized by a registration or waiver under the Controlled Substances Act. The USDA legal opinion harmonizes the 2014 and 2018 Farm Bills with existing language in Agricultural Marketing Act (“AMA”) governing hemp production. This new guidance opens up interstate transportation for a number of producers once implementing regulations are published. These classes of lawful hemp producers include:

  • Those growers operating under a USDA approved State or Tribal plan authorized by the 2018 Farm Bill.
  • Those growers operating under a USDA issued license authorized by the 2018 Farm Bill.
  • Those growers operating under a 2014 Farm Bill pilot program.

This guidance comes in response to two major decisions on the transportation of hemp across state borders, and—while the opinion does not overturn either case—it implies that future decisions should follow the guidance the USDA has provided. In United States v. Mallory, Case No. 18-CV-1289 (S.D. W. Va.), the court reached a conclusion in line with the interpretation provided in USDA opinion: that the “other federal laws” language in the AMA permits the hemp grown legally under the 2014 Farm Bill to be transported across state lines. On the other hand, the USDA disagreed with the reasoning of the magistrate in Big Sky Scientific LLC v. Idaho State Police, Case No. 19-CV-00040 (D. Idaho), noting that the magistrate did not consider the “other federal laws” language that the USDA found conclusive in reaching its own interpretation.

However, growers and transporters should keep in mind that this federal guidance represents a regulatory floor: it is the regulatory minimum that all states must follow. States are still permitted to introduce more stringent regulations that limit or prohibit the production of hemp in the first place. So, while states and tribal areas may no longer block the transportation of lawfully grown hemp through their jurisdictions, they may continue to ban the cultivation of hemp within that jurisdiction.

New Eligibility Guidance for Felons with Controlled Substance Convictions

The 2018 Farm Bill placed eligibility restrictions on the ability of convicted felons to participate in the growth and production of hemp. Under the law, “any person convicted of a felony relating to a controlled substance under State or Federal law” is ineligible to participate in any legally authorized hemp production programs for a 10-year period following the date of the conviction. The USDA legal opinion clarifies an exception to this prohibition for “a person who was lawfully producing hemp under the 2014 Farm Bill before December 20, 2018, and who had been convicted of a felony relating to a controlled substance before that date.” Such persons should be aware, however, that there may be additional state- or municipal-level prohibitions barring participation in hemp production, and that this USDA guidance does not preempt those restrictions.

These changes represent new opportunities for growth for hemp producers, and will undoubtedly allow growers and producers to reach new markets. The USDA guidance does not modify the ability of the Department of Health and Human Services or the Food and Drug Administration to issue additional regulations related to hemp, and hemp businesses should keep an eye out for further regulation in this area.