A conference report with the final text of the 2018 Farm Bill was released on Monday, clarifying the proposed legalization of industrial hemp and providing insight into the regulatory framework. With forecasts projecting that Congress plans to pass this version by the end of the week, companies involved in the hemp and cannabidiol ("CBD") industries should take note of the proposed changes analyzed below.
The draft bill amends the Agricultural Marketing Act of 1946 to define 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 [THC] concentration of not more than 0.3 percent on a dry weight basis" (emphasis added). The draft bill also revises the definition of "marihuana" in the Controlled Substances Act to remove hemp, including extracts and derivatives. These definitions effectively transfer authority over the cultivation, production, and sale of products that contain hemp or constituents of hemp from the U.S. Drug Enforcement Agency ("DEA") to the U.S. Department of Agriculture ("USDA").
The plain language of the proposed 2018 Farm Bill would permit the cultivation and production of hemp extracts with a THC content of no more than 0.3 percent. Importantly, the use of "hemp producer" in the proposed Bill rather than "hemp grower" indicates that the THC cap in the definition of hemp extends beyond cultivation to manufacturers of hemp extracts and derivatives. Further, the inclusion of "growing or not" is a clear indication that an ingredient supplier cannot ship a hemp extract with a THC level above 0.3 percent. Products with a THC content greater than 0.3 percent would be subject to both penalties as non-conforming goods under the amended Agricultural Marketing Act and regulation as a controlled substance under the definition of "marihuana."
Manufacturers of hemp products should take note of how the new definition of hemp will affect their business models. Extraction processes must limit the THC content in the finished extract before shipping to the finished product manufacturer for further processing. Additionally, processes will need to be in place to ensure the proper disposal of THC in the extract if the THC itself cannot be destroyed in the extraction process.
The proposed 2018 Farm Bill also creates requirements for States and Indian Tribes to create programs to regulate hemp production within their jurisdictions. Hemp producers operating in states that choose not to submit a plan for review will be subject to the federal program. Manufacturers of hemp and CBD products should take note that both the state and federal programs will require licensing, and some state-specific programs may have more stringent requirements beyond those in the proposed Bill.
The state and tribal plan approval process and the licensing requirements will increase the length of time until the new hemp regulatory framework takes effect on manufacturers. USDA and state regulators may exercise enforcement discretion while the regulations and licensing framework is put in place. During the interim period, manufacturers should ensure that all extracts and hemp-related products conform to the existing exemption under the 2014 Farm Bill.
The proposed 2018 Farm Bill also explicitly recognizes that nothing in the Act is intended affect or modify the Food and Drug Administration's ("FDA") authority under the Federal Food, Drug, and Cosmetic Act. Thus, manufacturers should keep in mind that any food, dietary supplement, or cosmetic containing hemp extracts or derivatives must comply with FDA's current position on the regulation of non-standardized hemp.