What the Hemp is Going on in the Food Industry?

Posted in Regulatory Compliance

Just before Christmas, President Trump signed the 2018 Farm Bill into law.  While the law, which will remain in effect for five years, achieves important agricultural and nutritional policy goals, it is the provisions relating to hemp that have generated the most commentary.  Broadly speaking, the law ends hemp prohibition and is expected to create significant growth in the hemp industry.  To understand the law and how it has changed, it helps to have a basic understanding of hemp and its history as an agricultural commodity.

Hemp, like marijuana, is a species of cannabis.  The two plants are closely related and look similar, but there is one particularly important distinction. Whereas marijuana produces significant amounts of THC—the psychoactive compound that produces a “high” when consumed—hemp does not. Rather, hemp produces only trivial amounts of THC, which are generally regarded as insufficient to impair users.  

Hemp has nutritional properties as well as numerous industrial applications.  For instance, hemp contains Cannabidiol (CBD), a promising compound believed by many to offer benefits in treating a variety of ailments, including some seizure disorders.  Hemp seed can be ground into flour for use in baked goods. Hemp seed oil is used in the production of biofuels, paint, varnish, soap, and lubricating oil.  Hemp is also utilized for its fibers, which can be used to manufacture rope and other textiles.

For thousands of years, hemp has been among humanity’s most important agricultural commodities.  The earliest evidence of cultivation dates to 8000 B.C., in ancient Mesopotamia. Here in the U.S., George Washington famously cultivated hemp at Mount Vernon.  In fact, throughout most of U.S. history, hemp was cultivated widely, and until the end of the 1960s, U.S. law recognized the distinction between industrial hemp and marijuana.

Hemp prohibition, however, began in 1970 with the passage of the Controlled Substances Act (CSA). Under the CSA, part of President Nixon’s so-called “War on Drugs,” hemp was treated like a dangerous narcotic.  Thereafter, hemp was classified by the DEA as a Schedule I controlled substance, alongside drugs like heroin and LSD.  In recent years, there was been a significant push to amend federal laws pertaining to both hemp and marijuana.

Now, with the passage of the Farm-Bill, hemp prohibition is effectively over, although it will continue to be stringently regulated.   The bill defines hemp as an agricultural commodity and removes its status as an illegal drug, provided the THC levels are below .3%.  The law generally legalizes hemp cultivation and commerce.  Importantly, for instance, hemp may now be introduced into interstate commerce, provided it is otherwise compliant with the law.  Likewise, many of the onerous restrictions on the sale, transport, or possession of hemp-derived products have been eliminated.

Hemp will now be regulated pursuant to a cooperative framework under which state and federal authorities will work together to oversee hemp cultivation and production. The Bill directs departments of agriculture to consult with executive and law enforcement officials to devise and submit plans to the head of the USDA.  These plans will establish quality control standards for hemp production.  Each state’s plan must be approved by USDA prior to the state commencing licensure and regulation. To the extent a state opts out, USDA will implement its own regulatory regime pursuant to which cultivators may seek licenses and will be subject to oversight.  This framework has been likened to workplace safety plans under OSHA, which have federal programs for nonparticipating states.

As a practical matter, hemp will now be dealt with much like most other agricultural commodities.  In turn, the new status will confer important benefits on cultivators of hemp.  For instance, protections under the Federal Crop Insurance Program will now be available to hemp cultivators who, in the normal course of agricultural operations, experience crop losses. This will create additional incentive to cultivators considering hemp.  

While the hemp provisions in the Farm-Bill are a welcome change and certainly open doors in terms of hemp industry, there is much that remains to be determined.  One critical area in need of additional clarity involves CBD. Section 12619 of the Farm-Bill removes hemp-derived products from their Schedule I status under the Controlled Substances Act, but it does not necessarily follow that the legislation legalizes CBD.  Thus, it remains to be seen whether, in light of the new legislation, FDA will begin to loosen or refine its existing policy relating to the use of CBDs as ingredients in traditional food products.

All other cannabinoids, produced in any other setting, remain a Schedule I substance under federal law and thus remain illegal.  Thus, CBD derived from marijuana, although chemically identical to CBD derived from legal hemp, remains a prohibited schedule I drug.  These and many other idiosyncrasies will have to be worked out.  Indeed, the Farm-Bill marks only the beginning of what will be an evolving process of enacting sensible policy-based federal cannabis laws.

Nevertheless, the recent changes to the hemp laws may begin to pave the way for additional or new opportunities for food companies interested in exploring new markets.