While the hemp industry eagerly awaits FDA’s Cannabidiol (CBD) Enforcement Policy draft guidance (1), both the United States Department of Agriculture (USDA) and Drug Enforcement Agency (DEA) have active comment periods ongoing for their interim final rules (IFR) implementing the hemp provisions of the Agricultural Improvement Act of 2018 (i.e., the 2018 Farm Bill). This alert summarizes the major issues on which USDA is seeking feedback on its hemp IFR, as well as a recent challenge to DEA’s IFR related to the processing of ingredients derived from hemp. All companies that are considering marketing products containing hemp-derived ingredients are encouraged to review USDA and DEA’s IFRs, as these rules can have far-reaching consequences in the hemp ingredient supply chain.

USDA’s Interim Final Rule on Hemp – Refining the Regulatory Framework

The United States Department of Agriculture (USDA) recently reopened the comment period on its interim final rule on hemp in order to solicit additional feedback from stakeholders. The IFR was originally published in October 2019 ², and in March 2020, USDA announced it would be delaying enforcement with respect to two of the requirements under the IFR:

1. Delaying enforcement of the requirement for hemp producers to use DEA-registered laboratories to conduct analytical testing of hemp until October 31, 2021, or publication of the final rule, whichever comes first, due to a shortage of DEA-registered laboratories; and
2. Delaying enforcement of the requirement that hemp producers use a DEA-registered reverse distributor or law enforcement to dispose of non-compliant plants if the producer disposes of the plants using one or more of the means described in USDA’s guidance and documents the disposal ³.

Since the initial publication of the IFR, USDA has approved the plans in 23 states to regulate hemp, with an additional 5 states opting for hemp growers in their state to be subject to the USDA’s Hemp Producer License (i.e., obtain licensing from USDA rather than the state). The agency reopened the comment period on the IFR so that stakeholders can provide USDA with further insight gained from the 2020 growing season. In particular, USDA is seeking comment on several specific topics, highlighted below:

1. Measurement of Uncertainty for Sampling. The IFR addresses the measurement of uncertainty (MU) in the context of laboratory testing of hemp samples. Specifically, laboratories are required to use the MU to develop a range or distribution from the reported result, and if 0.3% (the THC threshold for hemp) falls within the MU, then the hemp is deemed to have an “acceptable hemp THC level.” USDA is seeking comment on whether an MU should be provided to account for the variability that may occur prior to a sample arriving at a laboratory during cutting, bagging, sealing, transporting, handling, and other pre-laboratory activities. Although the MU principle is only applicable to hemp plants being sampled and analyzed for THC content and not further processed products containing hemp-derived ingredients, the complexity involved in determining whether a hemp plant is compliant with the THC concentration limits demonstrates the challenges facing the hemp industry with respect to variability and reliable methods to analyze cannabinoids, which can impact the entire hemp supply chain.
2. Liquid Chromatography Factor for Determining Postdecarboxylation THC Content. Under the 2018 Farm Bill, cannabis, including hemp, must be tested for THC content using “postdecarboxylation” or similar methods. USDA’s IFR explained that postdecarboxylation refers to testing method that account for the total potential THC content by adding the amount of THC and THCA together on a dry weight basis. High-performance liquid chromatograph (HPLC) methods keep THCA intact, and require a conversion calculation to determine the amount of THCA that will convert to THC. The IFR uses a conversion factor of 87.7% THCA to determine how much THCA will convert to THC; however, USDA notes that comments raised objected to this factor, as it assumes 100% of the THCA will convert to THC without any degradation or loss, which is claimed to be inaccurate and nearly impossible to achieve in the laboratory setting. Some commenters proposed using a conversion factor of 52.62%, or 60% of 87.7%, and USDA is seeking feedback on this approach.
3. Disposal and Remediation of Non-Compliant Plants. USDA is seeking additional information on disposal practices, including the potential remediation of non-compliant plants. As noted above, the IFR requires the use of a DEA-registered reverse distributor or law enforcement to dispose of violative plants, but USDA is exercising enforcement discretion from these requirements if certain disposal methods are followed and documented.
4. Negligence. Comments to the IFR suggested that USDA raise the threshold for THC content that is considered negligent from 0.5% THC to 1.0% THC, and USDA is seeking feedback on this proposal.
5. Interstate Commerce. Both the 2018 Farm Bill and USDA’s IFR provide that no State or Indian Tribe may prohibit the transportation or shipment of legally produced hemp across State or Tribal boundaries. USDA is seeking feedback on whether the IFR is sufficient, or whether additional regulatory requirements are needed to facilitate interstate commerce and transactions.
6. 15-Day Harvest Window. USDA is seeking feedback on the requirement to, within 15 days prior to the anticipated harvest of cannabis plants, having an approved Federal, State, or local law enforcement agency or other person designated by USDA to collect samples for purposes of determining the THC concentration of the plants. Some commenters on the initial IFR requested a 30-day window to request sampling, and USDA is seeking feedback on a longer harvest window.
7. Hemp Seedlings, Microgreens, and Clones. USDA is seeking additional information from stakeholders who grow cannabis plants, but not to maturity, and without mature flowers, such as seedling, seed, clone, microgreen, and other types of operations that grow hemp plants but not for harvesting mature hemp flowers. USDA is considering alternate licensing provisions for these entities to comply with different sampling and testing criteria.
8. Hemp Breeding and Research. The 2018 Farm Bill and IFR do not address the disposal of non-compliant plants produced at hemp breeding and research facilities, many of which are operated by states and land-grant research institutions. USDA requests input on how the agency might regulate these entities.
9. Sampling Methodology.
   1. Flower versus Whole Plant. The IFR requires that hemp samples or cuttings be collected from the flowers of hemp plants, but many comments to the initial IFR suggested that samples should be collected not only from the flower, but a composite sample of the entire hemp plant, including flowers, stems, stalks, and potentially seeds. USDA is seeking feedback on “whole plant” sampling methods, as well as comments suggesting alignment with AOAC’s recommended practices for sampling.
   2. Homogeneous Composition, Frequency, and Volume. The IFR requires sampling be conducted to ensure a representative sample of each lot, and provides that the number of samples collected must be sufficient so that, at a confidence level of 95%, no more than 1% of the plants in the lot would exceed the acceptable hemp THC level. USDA received a number of comments objecting to the sampling requirements as burdensome, expensive, and nearly impossible to meet by State and Tribal governments. USDA is seeking input on how to potentially develop a fixed sliding scale providing the specific number of plants to be sampled from each lot, as well as on risk-based methods for sampling differing varietals intended for fiber, grain, seed, or biomass based on the plant’s intended end use.
10. Sampling Agent. The IFR requires all hemp production to be sampled and tested for THC concentration levels by a USDA-approved sampling agent, or a Federal, State, or local law enforcement official. AMS is seeking comment on the potential need for more rigorous training or certification requirements for sampling agents, and whether States and Tribes should be able to develop and require their own specific training programs for sampling agents under their hemp programs.
11. DEA Laboratory Registration. Under the IFR, laboratories testing hemp for THC concentration must be registered with the DEA, due to the laboratory potentially handling a controlled substance if the plant is found not to have an acceptable hemp THC level. As noted above, USDA issued enforcement discretion delaying this requirement to allow time for DEA-registered laboratory capacity to build. USDA is seeking feedback on whether the DEA registration for laboratories analyzing hemp should be removed, and if so, how the lab disposal of non-compliant plants will adhere to the requirements of the federal Controlled Substances Act.

DEA’s Interim Final Rule on Hemp – Implications for Processed Ingredients Derived from Hemp

The Drug Enforcement Agency (DEA) recently issued an interim final rule implementing conforming changes to DEA’s regulations as a result of the 2018 Farm Bill ^4. The preamble to the interim final rule explains that the IFR is not intended to add any additional requirements to the regulations, but rather, confirm DEA’s regulations to the statutory amendments to the federal Controlled Substances Act as provided for in the 2018 Farm Bill ⁵. A number of hemp processors have expressed concern about the statement, below:

In addition, the definition of hemp does not automatically exempt any product derived from a hemp plant, regardless of the delta-9 THC content of the derivative. In order to meet the definition of “hemp,” and thus qualify for the exemption from schedule I, the derivative must not exceed the 0.3% delta-9 THC limit. . . . As a result, a cannabis derivative, extract, or product that exceeds the 0.3% delta-9 THC limit is a schedule I controlled substance, even if the plant from which it was derived contained 0.3% or less delta-9 THC on a dry weight basis ⁶.

A number of comments already submitted to the docket have objected to this statement in the preamble, arguing that work-in-progress ingredients derived from hemp should not be treated as a controlled substance provided the finished ingredient does not exceed the 0.3% THC content limit, and that it is challenging, if not impossible, to control the THC concentration while extracting constituents from the plant, which inherently concentrates cannabinoid content, including THC.

A challenge to the DEA’s IFR was filed in the form of a petition to review the IFR in the United States Court of Appeals for the District of Columbia Circuit by the Hemp Industries Associate and RE Botanicals ⁷. The petition asks the Court to hold DEA’s IFR unlawful and set it aside for the following reasons.

1. The DEA’s Acting Administrator promulgated the IFR without observance of procedure required by the federal Controlled Substances Act and Administrative Procedure Act;
2. The IFR is in excess of statutory jurisdiction, authority, or limitations, or short of statutory right because the Acting Administrator lacks the statutory authority to promulgate the IFR; and
3. The IFR is an agency action that is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law, including the 2018 Farm Bill.

While this petition for review remains pending, the comment period for the DEA IFR currently is open until October 20, 2020.

Next Steps

Any companies that are processing hemp into further processed ingredients, supplying hemp ingredients, or sourcing hemp-derived ingredients, are encouraged to review both the USDA and DEA IFRs and consider providing comments. The comment periods now may be one of the last opportunities to provide USDA and DEA with input the agencies must consider before issuing final rules. We will continue to monitor developments related to the regulatory framework for hemp and hemp-derived ingredients like CBD.

¹ See FDA Will Take Its Time on CBD – But Industry Does Not Have to Wait to Get Ready (Aug. 7, 2020).

² See USDA Publishes Interim Final Rule on Hemp: Key Takeaways, (Nov. 18, 2019).

³ See AMS Hemp Production Enforcement Discretion – Interim Final Rule, (Mar. 13, 2020).

⁴ See DEA Issues Interim Final Rule Implementing 2018 Farm Bill, (Aug. 20, 2020).

⁵ DEA Interim Final Rule, Implementation of the Agriculture Improvement Act of 2018, 85 Fed. Reg. 51639 (Aug. 21, 2020).

⁶ Id. at 51641.

⁷ Petition for Review, Hemp Industries Association and RE Botanicals, Inc. v. DEA, (D.C. Cir. Sept. 18, 2020).

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