Episode 59: USDA Final Rule on Hemp



Joe: On this episode of the "CBD University Podcast," regulatory action in the CBD industry only took until mid-January. We break down the latest news from the U.S. Department of Agriculture and their final rule on hemp production coming effective in March. This is the "CBD University Podcast" and it starts right now.

I'm Joe Agostinelli, host of the "CBD University Podcast." If you're a returning listener, I welcome you back to our podcast. If you are a new listener, we are glad you found us on your podcast platform of choice. And just a reminder, full video episodes of our podcast available on the Global Widget YouTube channel and the YouTube channels of our brands, Hemp Bombs and Nature's Script.

Speaking of full video episodes, we are joined via Zoom on this episode by industry advocate and attorney Rod Kight. And if you recall, just a few episodes ago, Episode 56 to be exact if you want to go back and take a listen to it just to verify that Rod had the predictions and here we go already coming true. We went through the 2020 regulatory...the 2021, excuse me, regulatory predictions for the year ahead. And what do you know we have our first regulatory action of the year and it only took about a week and a half after that episode was published and about a couple of weeks ago since this episode has been published. Rod, welcome back to the podcast.

Rod: Thank you. It's always good to be here, Joe. Yeah, just the USDA coming right out of the gates early in the year. It's gonna be a big year for hemp and CBD, that's for sure.

Joe: And let's get right into it. You told us to expect federal action this year. We discussed the different organizations back on episode 56. USDA was the first to act with their final rule on hemp production that was issued, I believe it was right around January 15. Any surprise they were the first?

Rod: No surprises. I mean, I will say that generally speaking, myself and my colleagues were not aware that the USDA was about to issue a rule. I knew that it was going to come likely sometime this year, but certainly, no surprise that the USDA is first right out of the gate.

The hemp industry is regulated by a number of government bodies, whether it be the FDA or state regulatory agencies, but arguably the agency when it comes to the entire hemp industry, whether you're in CBD, whether you're producing hemp, whether you're manufacturing products, is the USDA. And the USDA, as you might recall, issued an interim final rule, which was a final rule, but it was interim. It wasn't quite the final version. It solicited comments from the public and this final rule is the final, final rule. And it takes into account a lot of those comments. And the DEA did make some changes, and we have our rule. We have our final rule governing the hemp industry from the USDA's perspective.

Joe: So let's break down the final rule in the news. Tell us a little bit about that, the key points, and what are the next steps? And you alluded to that, the previous one was the interim, and now this is the final rule. So when does it go to effect?

Rod: Yeah, so it was filed just a few days ago and we're recording this in January and I think this is going to come out in February. But by the time this comes out, it will not be in effect yet. The rule goes into effect on March 22 of 2021. And it's a pretty long...it's several 100 pages of pretty detailed analysis, which frankly is helpful. A lot of people decry regulations and say, "Oh, we're over-regulated in this industry or that industry," but in the hemp and CBD industry, it really helps to have some guidance. And so I appreciate the USDA taking the time to really articulate what it means with its rule.

That doesn't mean that I agree with all the rules, you know, all the provisions in the rule, but I do appreciate the USDA really seems to have made a good faith effort to get in and help the industry out. So with respect to some of the highlights from those several 100 pages, a lot of the provisions go to hemp production, which simply means hemp growing and cultivation. And that impacts the CBD industry because that's where CBD comes from. But I know a lot of the listeners may not be on the production side so I want to kind of focus in on a couple of the provisions that I think do impact the CBD industry a little more directly.

The first is what they call the acceptable THC level. And unfortunately, the USDA has maintained what's become known as the total THC requirement. It says that the total THC derived from the sum of the THC and the THCA, the acid form of the molecule, shall be determined and reported on a dry weight basis. And so the total of those sums cannot exceed 0.3% on a dry weight basis. And that's disappointing because that really limits the genetics that can be grown. That really puts a lot of farmers in a tough spot because it's frankly very difficult to grow hemp crops that are compliant with the total THC requirement.

As a little bit of an aside, I don't want to veer too far off course, but there was a bill that was introduced by Rand Paul of Kentucky last session with Congress, that would raise the total THC from 0.3% to 1%, which would be incredibly helpful to the industry. That bill, I believe is off the table now. I think it was more of just sort of a gesture of goodwill to the hemp industry, and we certainly hope that that will come back around.

And I think it actually may get some traction, but to be clear, the USDA doesn't have the power to change the 0.3% THC requirement. The statute itself, Congress said that it's 0.3. USDA has rulemaking authority, but it can't override Congress. In this situation, what USDA did though, was arguably, in my view, go outside the statute and require total THC, rather than just the Delta-9-THC to be no more than 0.3%.

So that's one big highlight. Another highlight, Joe, is the analytical laboratory registration. So pre-harvest hemp has to be tested for this THC threshold or limit. And the USDA has said, and we disagree with this, but it is what it is, that hemp testing labs must be registered with the DEA. That's the bad news. The good news, at least for right now, is that requirement is delayed for almost two years. It's going to be September 31 of 2022 before that requirement is actually enforced or is a requirement that labs have to meet.

So right now, labs, you know, across the country that are still testing that don't have their DEA registration, can continue testing, but by December 31, 2022, all these analytical labs have to be registered with the DEA. So a lot of other pieces and provisions, but I think those are the two that are primary for the CBD industry.

Joe: And although that provision doesn't go until the end of 2022, you mentioned the final rule on hemp production that goes into effect in a little bit, correct? About a month and a half or so sometime in March?

Rod: Yep. March 22, 2021, is when this final rule takes effect. And I will say that there's gonna be a little bit of confusion in 2021. So this final rule is in effect, and of course, the 2018 Farm Bill is in effect. But what this rule does is it tries to sort of square the circle by way of the fact that the 2014 Farm Bill, industrial hemp pilot programs that states have enacted over the last several years is still in effect and will remain in effect until January 1 of 2022. So almost another year.

Additionally, we're gonna have states that are approaching the USDA with plans for hemp production in their states to be approved. Some states that have had plans are gonna be amending those plans, so we're gonna have a whole lot of different regulations and laws that are kind of concurrently acting in 2021. So it'll be a little bit of a bumpy ride, but at least we have some real guidance from the USDA and some leadership in that respect.

Joe: Talking about laws and regulation, now that the USDA has issued their final rule on hemp production, and we've talked about the different organizations in past episodes, does that at all hint on what the FDA may do in their federal guidance, or are they going to be completely unrelated?

Rod: Who knows what the FDA is gonna do and when it's gonna do it? The FDA just released a statement recently, but it was, kind of, to my view and a lot of my colleagues' views, just kind of a bunch of nothing. It was sort of a wrapping up the end of the Trump administration, kind of, get a little paperwork and I think they're just going to pass the baton on to this next administration.

And certainly, we hope that the FDA will step in and provide some guidance sooner than later because, arguably, the biggest piece or the biggest obstacle to the CBD industry just being explosively huge, and I use those, 'explosively' and 'large,' two adjectives that I think are appropriate here, it's just the FDA failing to step up with leadership here and provide some guidance for the industry. But, you know, I don't know if it's more of a prediction or a hope, but I like to think in 2021, the FDA will step up and provide some guidance.

Joe: And you talked about...so 100 pages, the final rule was, but you've done a great job in breaking it down and highlighting all the points, some more additional points in addition to what we've talked to on this podcast episode. Where can listeners go for more information on your blog and then a link to the hemp program website?

Rod: Yeah, sure. Absolutely. So it's actually 301 pages. I just looked it up as we were talking. So it's a big...it's a juicy thick rule. But listeners can go to my website, cannabusiness.law. They can read the blog from that website or go directly to the blog, it's kightoncannabis.com. And I have an article on the USDA rule there. And embedded within the article are some links to the USDA website and also to the rule itself, with my analysis kind of fleshing out some of the things that we've talked about in a little more detail as it relates to hemp producers and cultivators as well.

Joe: Well, Rod, anything we didn't discuss on the final rule for hemp production on this episode?

Rod: Well, lots of things that I think we could probably talk about as the year sort of rolls out, but I think we hit the highlights, certainly the ones that are important to the CBD industry today, and I really appreciate you having me on to talk about them. These are important things and sometimes the law can be a little bit stale and boring, but you know, for the hemp industry I've found, and maybe it's just because I'm a lawyer, that I think it's always exciting. There's always something new. It's crazy sometimes.

Joe: And I gotta tell you what I appreciated. I remember when the rule came down that Friday afternoon. It was actually your blog I had been...I saw on LinkedIn as a matter of fact, and I emailed you I said, "Hey, can we get a recording on this topic?" And turning it around so quickly. So thank you for taking time out of...I know your extremely busy schedule to join us on our podcast. Once again, I look forward to many more conversations on these topics as 2021 goes along.

Rod: Sounds good. Always happy to be here. Thanks, Joe.

Joe: Industry advocate and attorney, Rod Kight. My guest on this episode of the "CBD University Podcast," as we discuss the final rule on hemp production which was recently issued by the USDA. And for more information, you can check out the description of this podcast. We'll have all the links that Rod talked about right in the description.

If you have not yet done so, I invite you to subscribe to our podcast wherever you get your podcasts whether the audio version or the video version that you can find on the YouTube channel at Global Widget and of our brands, Hemp Bombs and Nature's Script. No matter where do you hit that subscribe button, audio or video, you'll get notifications each week when new episodes are published. I'm Joe Agostinelli, the host of the "CBD University Podcast." Thanks for tuning in.

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