In November 2019, we reported that the United States Department of Agriculture (USDA) issued an interim final rule establishing a domestic hemp production program that was intended to go into effect for two years before being replaced by a final rule. On January 19, 2021, USDA published that final rule after considering nearly 5,900 public comments and incorporating lessons learned from the 2020 growing season. While the final rule focuses on industrial hemp production, not processed hemp products (such as CBD derived from hemp), it may be particularly important to those who wish to exercise due diligence on their agricultural supply chains. It will be effective March 22, 2021, unless the new Administration changes the timeline.

In general, the final rule builds on the interim final rule by further establishing a regulatory framework for domestic hemp production regulatory. It includes licensure requirements, requirements to keep records related to the land on which hemp is produced, testing procedures for THC concentration levels in hemp, disposal procedures for non-compliant plants (i.e., “hot” hemp), other compliance provisions, and procedures for handling violations.

The final rule also continues to allow any State or Indian Tribe (Tribe) that wants to have primary regulatory authority over the production of hemp in their State or territory to submit a plan concerning the monitoring and regulation of hemp production to USDA. For those States or Tribes without an approved plan, USDA must establish a plan to monitor and regulate hemp production in those areas.

Despite many similarities with the interim final rule, the final rule implements several key changes. A high level summary of the key changes is outlined below.

Licensing

Unlike what was proposed in the interim final rule, the final rule does not limit the application window each year. Rather, the final rule allows applicants to apply for a license on rolling basis throughout the year.

THC Sampling

The final rule modifies the sampling (i.e., the process of collecting cuttings from hemp plants to test for compliance) provisions in the interim final rule to allow States and Tribes to develop more flexible, performance-based sampling procedures. Rather than prescribing a specific sampling process, a performance based approach allows States and Tribes to set a performance objective (e.g., reliability of 95 percent) and provides them with the flexibility to achieve that reliability objective with their sampling methodology. Any performance-based sampling procedures must, however, have the potential to provide assurance at a 95% confidence level that plants will not test above the acceptable hemp THC level.

Testing Laboratories

The interim final rule introduced requirements for laboratories testing hemp for compliance purposes and USDA issued guidance to explain best practices for hemp testing laboratories. USDA is changing certain parts of these regulations and updating the testing guideline by allowing States, Tribes, and licensees to use different test procedures as long as they meet the final rule’s standards.

Laboratory Accreditation

In the interim final rule, USDA asked the public for input on establishing a fee-for-service hemp laboratory approval process or a requirement for laboratories to obtain ISO 17025 accreditation for labs offering THC testing services. USDA decided not to impose these requirements because of insufficient laboratory capacity and the cost of adding these requirements.

Disposal “Hot” Hemp

The interim final rule required producers to dispose of cannabis, or hemp exceeding the 0.3 % THC level, in accordance with the Controlled Substances Act and DEA regulations. The final rule allows additional options for disposal of the “hot” hemp, including, but not limited to:

• plowing under non-compliant plants;
• composting them into “green manure” for use on the same land; or
• tilling, disking, burial, or burning.

Remediation of “Hot” Hemp

Unlike the interim final rule, the final rule provides options for transforming “hot” hemp into compliant plant material. For example, the final rule allows growers to dispose of flower materials and salvage the remainder of the plant or blend the entire plant into a biomass plant material. Electing a remediation option may allow growers to recoup some of their investment, but it also triggers additional sampling and testing requirements for the remediated material.

Negligence Threshold

The final rule changes how “negligence” is determined for compliance purposes by increasing the negligence threshold from 0.5 to 1.0 percent THC. In other words, licensees do not commit a negligent violation if they produce plants that exceed the acceptable hemp THC level, using reasonable efforts to grow hemp, so long as the plant does not have a THC concentration of more than 1.0 percent on a dry weight.

In addition, while the interim final rule allowed for multiple negligent violations during each growing season, the final rule prohibits producers from incurring more than one negligent violation per growing season.