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The Balkanization of Hemp in America

By: Raymond Mazzie

Hemp regulation in the United States has been promulgated in a piecemeal fashion since the passage of the 2014 Farm Bill.[1] The resulting fractured legal landscape has led to litigation and confusion throughout the industry. Unfortunately, the disjointed approach has only been exacerbated by the passage of the 2018 Farm Bill[2] and the issuance of the USDA’s Interim Final Rule (“IFR”).[3] To top it all off, the IFR is conveniently set to expire in November 2021, which further complicates the regulatory forecast for hemp in the United States.

There are two easily identifiable driving forces behind the balkanization of hemp in America. One, the USDA. Two, the FDA. Both administrations have been slow to act, and when they do act, they are far too strict. The lack of guidance from the USDA and FDA and their hard stances have led some states to draft creative programs of their own; other states outright ignore the USDA’s IFR and the FDA’s hardline approach to regulating cannabidiol (“CBD”).

As much as I wish the USDA would have been proactive, I can also appreciate a laissez faire approach to regulation. Unfortunately, the seemingly hands-off approach the USDA originally made was quickly replaced by an aggressive authoritarian approach formally known as the Interim Final Rule. This spawn of the Administrative State is an oxymoron for the ages. An Interim Final Rule is a creative way to circumvent a true Notice and Comment period. A period that is absolutely critical to the rulemaking process in American government. The Notice and Comment period is vital to our democracy as it acts as a check on the power of unelected bureaucrats. It provides the American taxpayer an opportunity to be heard prior to having a broken bureaucratic regulatory regime thrust upon them. The conscious choice by the USDA to implement the IFR effectively makes Notice and Comment optional.

So you might be asking yourself, “why do IFRs exist?” According to the Federal Government, “When an agency finds that it has good cause to issue a final rule without first publishing a proposed rule… This type of rule becomes effective immediately upon publication. In most cases, the agency stipulates that it will alter the interim rule if warranted by public comments. If the agency decides not to make changes to the interim rule, it generally will publish a brief final rule in the Federal Register confirming that decision.”[4] In short, IFRs were created by the Government, for the Government, in the event the Government deems a situation calls for immediate action. It is difficult to imagine immediate action was necessary, considering hemp derivatives have been a growing part of the US economy since 2014. Maybe one day the USDA will tell us what the “good cause” was that compelled it to trample over the right of the people to be heard by their government. I’m not holding my breath, but the hemp industry deserves an explanation.

The IFR is strict. In fact, the USDA has acknowledged such by way of their recent delay in implementing disposal and testing protocols required by the IFR.[5] These delayed measures are not only austere, but are essentially impossible to implement . The current infrastructure in place to handle the disposal and testing as required by the IFR, simply lacks the capacity to get the job done. Not to mention, the IFR is unnecessarily restrictive in regard to its definition of “Total THC”. However, I will leave that argument to the true legal eagles like Rod Kight.[6]

The states rushed into action after discovering the IFR’s alarmingly overbearing regulation. Unfortunately, the states have not taken a unified approach to the situation and have instead decided to exercise their rights as states to do what they believe is best for their respective citizens. This resulted in at least 20 states electing to follow the 2014 Farm Bill, while the remainder are drafting programs for USDA approval. The current US hemp regulatory scheme has made a legal checkerboard out of the country, causing confusion and inefficiencies in the market. This can be made worse or can be fixed, but that depends on the degree of variance between the IFR and the to be determined Final Rule. The hemp industry cannot afford to be caught flat footed…again. Come November 2021, we need to be prepared to speak loud and clear to the USDA throughout the final Rule’s Notice and Comment period.

The FDA has been a thorn in the side of the US hemp industry since its reincarnation. The Administration has been sitting on its hands since the passage of the 2014 Farm Bill. For years, the research required to determine if hemp derivatives are safe for human consumption has been available to the FDA. And at this point, even if the research or data is insufficient, the FDA has certainly had enough time to engage research universities as well as the private sector to obtain the data necessary for them to opine informatively on CBD. The necessary research and essential data have been pushed to the backburner for no apparent reason.

Why won’t the FDA simply provide a timeline or some sort of explanation regarding the serious delay in the creation of a regulatory framework for CBD? Why won’t the FDA fully opine on GRAS certification applications from CBD companies? Why won’t the HHS Secretary remove the onerous restriction on CBD caused by its status and use as a drug in Epidiolex? Action is always preferred, but explanations regarding the FDA’s inaction should be demanded.

The FDA Commissioner, Stephen Hahn, M.D., has admitted that the Administration’s approach is unsustainable and stated: “We’re not going to be able to say you can’t use these products. It’s a fool’s errand to even approach that. We have to be open to the fact that there might be some value to these products and certainly Americans think that’s the case. But we want to get them information to make the right decisions.”[7] So, the real question at this point is: what has the FDA been doing to gather the necessary information and what are they going to do differently to improve that process going forward?

Unfortunately, when dealing with Big Brother we are forced to be patient. As I mentioned, the USDA will not be making changes until November of 2021 and the FDA is clearly on its own timeline not privy to the public eye. Nevertheless, I have a few suggestions for the FDA and USDA to ponder during this period of “extended patience.” One, the USDA and FDA need to collaborate around this topic. Both administrations should come together in a joint press release that acknowledges their respective past mistakes, provides an explanation of how those mistakes are being addressed, provides the objectives of the respective administrations, and it contains an associated timeline. Transparency is key to good government. Two, the administrations must engage with industry professionals and Congress in a meaningful way. Open discourse is the only way to verify the intent of the 2018 Farm Bill and adequately predict the practical implications of the regulations to be implemented by the USDA and FDA.

One final note. The recent pandemic has made it apparent to the United States population that our supply chain is far too dependent on our neighbors to the West, especially in regard to essential goods like textile fiber. Furthermore, hemp has been unduly ostracized in the US, leaving the industry handcuffed for years. This is why the infrastructure is not in place to take advantage of this once vital crop to America’s society. Now seems like the most opportune time to not only strengthen our supply chain as a nation, but to help right the wrongs of our past. The USDA and FDA need to request economic development dollars to facilitate the build out of the industrial hemp supply chain. These are massive projects that will ultimately serve the greater good of the American people. We shouldn’t wait for another “Hemp For Victory” moment that leaves the US scrambling to entice the production of much needed supplies provided by the hemp plant.

[1] 7 U.S.C. §5490 et. seq, (2014), available at: https://www.govinfo.gov/content/pkg/BILLS-113hr2642enr/pdf/BILLS-113hr2642enr.pdf [2] Sec. 10113 297B of the Agricultural Improvement Act of 2018, amending 7 U.S.C. §1621 et. seq., available at https://www.agriculture.senate.gov/imo/media/doc/Agriculture%20Improvement%20Act%20of%202018.pdf [3] 7 CFR 990 et. seq., available at: https://www.federalregister.gov/documents/2019/10/31/2019-23749/establishment-of-a-domestic-hemp-production-program [4] Office of the Federal Register, A Guide to the Rulemaking Process, https://www.federalregister.gov/uploads/2011/01/the_rulemaking_process.pdf [5] United States Department of Agriculture, Enforcement Discretion – Interim Final Rule, https://www.ams.usda.gov/rules-regulations/hemp/enforcement [6]Rod Kight, Total THC and the USDA Rule- A Data Driven Analysis, Kight on Cannabis Blog (Dec. 3, 2019), https://cannabusiness.law/total-thc-and-the-usda-rule-a-data-driven-analysis/ [7] Laura Drotleff, USDA Drops DEA Testing Requirement for 2020, While FDA Acknowledges Demand for CBD, Hemp Industry Daily (Feb. 26, 2020), https://hempindustrydaily.com/usda-drops-dea-testing-requirement-while-fda-acknowledges-demand-for-cbd/

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