On Jan. 19, 2021, the U.S. Department of Agriculture (USDA) published its final rule establishing a Domestic Hemp Production Program in the U.S. The rule went into effect Mar. 22, replacing an interim rule which had been in effect over the past two years.

The final rule contained some notable differences from the interim rule. During an online panel hosted by the American Herbal Products Association (AHPA), industry experts ranging from hemp growers to lawyers specializing in the broader nutraceuticals space discussed how alterations in the rule will create a new regulatory environment for those providing the source material for CBD and hemp-based products.

Some of the differences between the interim final rule and the new final rule issued in January include a number of key provisions.

For example, the THC threshold for which a hemp grower could be considered for a negligent violation was raised from 0.5% THC in crops to a full 1%.

Additionally, the final rule allows for alternative disposal methods for non-compliant plants; whereas in the interim rule, non-compliant plants needed to be destroyed, the crop can now be remediated for biomass, without the required use of law enforcement or the Drug Enforcement Administration (DEA).

The final rule also allows independent, third-party testing labs to apply for DEA registration, and therefore test cannabis products, which the DEA agreed to due to an overwhelming shortage of testing capacity within the agency. The 15-day window to collect samples of crops before the harvest, which was present in the interim final rule, has now been extended to 30 days; and farmers may apply to take samples from a greater part of the plant, or the entire plant, and request to sample from a smaller number of plants with the USDA.

Lastly, the final rule allows tribes to exercise primary regulatory authority over the production of hemp across all of their territory if they have a USDA-approved plan.

Fresh Perspective
The panel discussing these new developments included: Herrick Fox, CEO of Meristem Farms LLC; Brett Goldman, OCAN Group LLC;  Dylan Summers, vice president of government affairs, Lazarus Naturals; Jessica Wasserman, Esq., partner at Wasserman Rowe LLC; and Will Woodlee, Esq., Kleinfeld, Kaplan, and Becker, LLP.

“The USDA has really been a partner on this. They’ve received 6,000 written comments on this rule and read and responded to them all,” Wasserman said. “The new final rule might be covered by a regulatory hold by the Biden administration, however, it’s not clear whether the USDA will entertain a new comment period. They might leave it up to the industry to decide whether they want to provide additional input.”

“We’ve had only a few important milestones,” Goldman said. “The first is federal acceptance of hemp’s legal standing, and the start of commercialization. Now, we have the underpinnings of a regulated marketplace, but a long-term foundation needs to come from experienced hemp producers and manufacturers as they agree on a path forward. It’s going to look a lot like traditional agricultural processing.”

Negligent Violation
On the negligence threshold extension, there are certainly benefits for hemp growers who will face a significantly lesser risk. Firstly, a 1% THC threshold falls in line with a number of international standards, including those held by the E.U. “While it extends the threshold for criminal implications, it should be a non-issue for growers using compliant genetics,” Goldman said. “However, it provides more confidence to law enforcement that these farmers aren’t doing something illegal.”

Fox added that a raised negligence threshold will mitigate further risks of bad press, concerns from investors, and trouble securing insurance for farmers down the line. However, Fox and others believe that the process by which the threshold is enforced doesn’t have the due process present in any other type of agricultural processing.

“THC sampling has a fundamental problem, which we’ve seen since the beginning,” Fox said. “There’s an assumption that farmers are guilty until proven innocent. It’s not just a philosophical issue but a regulatory issue.”

Further, he discussed the matter that USDA assumes all THC molecules present in a crop will chemically convert into delta-9 THC, a version of the compound that has the substantial mind-altering effects, something which is impossible in nature.

“100% decarboxylation doesn’t exist,” Fox said. “The highest rate of conversion observed is 70%, and at least half of the time it’s as low as 30%. Assumption of 100% conversion doesn’t allow a regulator to actually prove non-compliance.”

Furthermore, there are still plenty of issues at play regarding the methodology behind proof of compliance. “The guidance shows that as little as one plant per lot can represent an entire lot’s THC content from an enforcement perspective, which defies common sense. It’s like estimating the average weight of people in your neighborhood by weighing one person,” Fox said.

Disposal & Remediation of Non-Compliant Plants
Having the ability to dispose of negligent products in a way that isn’t totally destructive has plenty of benefit, industry experts noted.

“This part of the final rule allows for remediation activities where producers can minimize losses and produce a return on investment while ensuring that non-compliant material can be used in a positive economic outcome. This helps with the normalization of hemp production, and biomass is common to all agricultural practices,” Goldman said. Still, destroying the flower of a cannabis crop and using the fiber for biomass might only make a tangible difference for large-scale farmers.

“Biomass costs far less than production does for small-scale farmers,” Fox said. “It’s a little solace, but it’s only a small fraction of a lost investment.”

Testing & Timing
The panel projected that the DEA’s allowance of independent testing labs to test cannabis products will be a huge relief, expediting backlogs of cannabis lots waiting to be tested. Many in the industry were concerned with waiting lists becoming so severe that products would expire by the time they were tested as more farming operations and CBD companies hit the marketplace.

“The DEA is working diligently with labs that are applying to become certified to test hemp, and providing adequate time for facilities to obtain DEA registration,” Goldman said. The window by which a testing lab can become DEA-registered lasts until 2022. “However, the final rule doesn’t account for whether these labs can test processed materials, and finished products which may contain hemp or hemp byproducts.”

Furthermore, the rule adjustment in which samples can now be collected 30 days ahead of harvest, rather than 15, still might not be a sufficient amount of time in practice. With backlogs at testing facilities, a 15-day pre-harvest window might be the bare minimum by which test results can be gathered in time depending on the backlogs experienced at certain labs, which could jeopardize whether a crop can be tested in time to reach the market, Fox said. “If labs miss the harvest window, they could be causing damages to a farmer or processor,” he said.

Even with a consistent regulatory environment on the federal end for hemp products, there’s still a patchwork of varied and sometimes even contradictory state regulations surrounding the production of industrial hemp, which certainly muddles the regulatory environment of those dealing with raw hemp materials.

For example, no cannabis testing labs in Oregon will be able to test hemp products if they are also testing recreational cannabis (which is legalized in the state), Summers said. Furthermore, state governments aren’t communicating with the cannabis industry at viable levels across all 50 states, he noted.

“State departments of agriculture are in constant communication with each other, and we need to hedge our bets with all 50 states. People are trying their best, but might not have the whole picture, so we need to educate them,” Summers said. “We have to take initiative with research entities which include universities.

“There’s a lot of academic interest in cannabis research, but they’re going to need constituents in each state to lobby and advocate for research funding,” he continued. “We’re straddling a line between agricultural commodities and illicit substances, and we need to make sure to establish a program that is braced for future Farm Bills.”