On February 15, 2018, the 9th Circuit Court of Appeals in San Francisco heard oral arguments regarding the Hemp Industry Association’s petition challenging the US Drug Enforcement Administration’s rule, effective January 13, 2017, that designates “marihuana extracts,” including those with cannabidiol (CBDs), as Schedule I controlled drug substances. Schedule I controlled drug substances “have no currently accepted medical use in the United States, a lack of accepted safety for use under medical supervision, and a high potential for abuse.”

During oral argument, the three-judge panel asked the Hemp Industry why the new administrative code classifying “marihuana extracts” as a Schedule I controlled drug substance raised concern. The Hemp Industry responded that the new code has been used “week after week against lawful operators.” When asked for examples, however, it seemed that the panel thought the Hemp Industry was attempting to expand the record. The rule is “unfair to sister agencies at the DEA level and state authorities,” the Hemp Industry explained, because the Farm Bill said if a hemp-derived product contains less than 0.3% tetrahydrocannabinols (“THC”, the cannabinoid in cannabis associated with hallucinatory effects), then the products are “lawful.”

Exactly what is “lawful” cannabis, however, is up for debate based other statutory provisions and definitions, hinging on a state’s ability to develop a public-private partnership under an “agricultural pilot program” for the growth, cultivation, or marketing of “industrial hemp,” which is defined in 7606 of the Farm Bill as:

[M]eans the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.

According the DEA’s Final Rule, the new code was needed to comply with the United Nations Conventions on international drug control, because it treats extracts from cannabis differently than marijuana or THC. The Final Rule’s definition of “marihuana extracts” reads “Meaning an extract containing one or more cannabinoids that has been derived from any plant of the genus Cannabis, other than separated resin (whether crude or purified) obtained from the plant.”

Subsequent to the Final Rule, the DEA issued a “Clarification of the New Drug Code (7350) for Marihuana Extract,” stating:

  • The new drug code (7350) established in the Final Rule does not include materials or products that are excluded from the definition of marijuana set forth in the Controlled Substances Act (CSA).[1]
  • The new drug code includes only those extracts that fall within the CSA definition of marijuana.
  • If a product consisted solely of parts of the cannabis plant excluded from the CSA definition of marijuana, such product would not be included in the new drug code (7350) or in the drug code for marijuana (7360).

The Hemp Industry’s main argument appears to focus on the procedural process to add “marihuana extract” to the list of Schedule I products, which they believe circumvented the normal scheduling process. One of the judges inquired whether the issue was that mature stalks of cannabis may contain cannaboids, even if THC levels are below 0.3%. The Hemp Industry indicated that “the Final Rule itself is the problem,” which they believe is not entitled to Chevron (agency-type) deference, because proper rule making procedures were not followed and must be followed, they argued, even if scheduling was suggested or required by a US treaty.

In response, the DEA argued that the new code was just a tracking code for administrative purposes, and that proper rule-making procedures were followed for the enactment of this code, which the petitioner (Hemp Industry) failed to participate in (yet other parties did participate). The DEA argued that the new code only applied to the cannabis parts that are controlled under the CSA, which it explained in its Clarification, and enforcement officers can rely on.

Finally, in rebuttal, the Hemp Industry argued that the “stem of the problem is the Final Rule,” because the Rule creates confusion for law enforcers, despite the Clarification. Admitting to going off the submitted records again to provide “color” to the issue, the Hemp Industry added that new products like hemp plastics and fuels have been placed into question by the Final Rule, which should never have occurred and would not have occurred if proper rule-making procedures had been followed.