The USDA’s eagerly anticipated rule on the production of hemp is here, and it needs greater clarity and would benefit from more industry input

Eversheds Sutherland (US) LLP

Eversheds Sutherland (US) LLP

[co-author: Andrew Weiner]

On October 31, 2019, the US Department of Agriculture (USDA) published a long-anticipated interim final rule on the production of hemp—defined as cannabis plant with a delta-9 tetrahydrocannabinol (THC) concentration of not more than 0.3% on a dry weight basis. The USDA was mandated to issue a rule for the cultivation of hemp when the crop was formally removed from the schedule of controlled substances under the Controlled Substance Act (CSA) by the Agriculture Improvement Act of 2018 (the Farm Bill). The rule is generally consistent with the rules governing existing state industrial hemp pilot programs operating under the 2014 Farm Bill; however, there are critical provisions that conflict with the rules of several pilot programs and there is uncertainty surrounding some of the more important provisions of the interim rule.

The rule establishes federal oversight and regulation of the production of hemp. It gives States and Indian tribes the opportunity to submit their own plans for USDA approval and establishes a USDA plan for States and Tribes that choose not to develop their own. However, states and tribes remain free to prohibit the growing of hemp in their territories if they choose to do so.1 State plans can be more, but not less, stringent than the provisions in the Farm Bill that underlie the USDA’s hemp production rulemaking. Importantly, the rule does not affect hemp that was or is currently being cultivated under 2014 Farm Bill programs.

Effective October 31, the interim rule will remain effective for two years, at which time it will be replaced by a final rule. The USDA is accepting comments for a 60-day period (beginning October 31) that will be considered before issuance of the final rule.

The rule is subject to challenge on administrative procedure grounds

USDA’s issuance of the interim rule is an important milestone for the US hemp industry; however, there are questions about whether the rule is too conservative in its treatment of THC and places too many burdens on states and producers. In addition, the USDA’s decision to issue an interim final rule and forgo a notice and comment period potentially leaves the rule open to attack on Administrative Procedure Act grounds. A market participant that believes the rule is detrimental to its business could challenge the USDA’s determination that it had “good cause” to proceed without a notice and comment process. In doing so, the party challenging the rule could argue that the USDA cannot adequately establish under the law that the notice and comment procedures were: (1) impracticable; (2) unnecessary; and (3) contrary to the public interest. As courts have said in the past, delay may well create costs for the beneficiaries of the rule but “such occasional impairments are the price we pay to preserve the integrity of the Administrative Procedure Act.” N.J. Dep’t of Envtl. Prot. v. U.S. EPA, 626 F.2d 1038, 1048 (D.C. Cir. 1980).

What the rule addresses

State plans to regulate the production of hemp submitted to the USDA for approval must include certain requirements in the areas of:

  • Sampling and testing for THC;
  • Collection and maintenance of land use information;
  • Licensing procedures;
  • Disposal of non-compliant plants;
  • Compliance procedures including inspection of hemp producers; and
  • Information sharing.

The rule also establishes a “USDA plan” to license and regulate producers in states that do not have approved plans. The USDA plan is largely consistent with the requirements for state plans. It is clear that all plans have provisions intended to keep bad actors out of hemp production. Persons convicted of felonies related to controlled substances are prohibited from producing hemp for 10 years following the date of conviction. Key participants in hemp businesses subject to this ineligibility restriction are not eligible to participate in the regulated cultivation market until after the passing of the 10-year period. Key participants are persons having a direct or indirect financial interest in the hemp producing entity. This includes owners, partners in a partnership and corporate executives.

The agency has specifically identified areas in the rule for which it is requesting comments and information from the public. These areas include:

  • The adequacy of the 15-day sampling to harvest timeline;
  • Whether to incorporate a Lab Approval Process in the final rule;
  • A requirement that all laboratories testing hemp have ISO 17025 accreditation;
  • Identifying “reasonable efforts” when evaluating whether conduct was negligent;
  • Whether the August 1 to October 31 license and renewal applications time period (beginning after the first year of decisions on applications) is sufficient; and
  • Whether the market will experience significant positive or negative shifts as a result of the rule.

Comments are not limited to these topics and can be submitted regarding any provision of the interim final rule.

What the rule does not address

Importantly, the rule does not address certain key regulatory areas; these limitations are critical in understanding the regulatory landscape for the hemp industry. For example, the rule does not affect the exportation of hemp; include a seed certification program; allow for the transferability of producer licenses;2 prohibit the interstate commerce of hemp; or impact the regulation of the cannabinoid cannabidiol (CBD).

Key questions regarding the USDA’s conservative approach as reflected in the rule

The USDA’s conservative approach to regulating hemp production is evident in the efforts set forth in various provisions of the rule to closely manage the THC content of hemp crops. Market participants and others supporting the industry have noted the potential burdens and tensions around testing and sampling of THC raised by the rule. These areas are likely to be the subject of robust comment through the comment period as tates, Indian tribes and market participants grapple with how and whether they can satisfy the economic, resource and personnel requirements set forth in the rule. Some potential key concerns for producers are set forth below:

Is the conversion of THCA to THC for determining total THC too high or even required?

The 2018 Farm Bill’s references to THC in the hemp plant are stated in terms of “delta-9 THC” and make no mention of THCA other than referencing “acids” as being included in the definition of “hemp.” Nevertheless, the rule requires total THC concentration levels to be determined by adding THC with 87.7% of the THCA content. The conversion of THCA to THC, based on the fact that THC is 87.7% of the molecular weight of THCA, may not be contemplated in the 2018 Farm Bill. However, some scientists have noted that THCA does not fully convert to THC when heated. The rule’s methodology used to determine total THC may result in the THC content of the sample tested being overstated.3

Is sampling just the flower for THC content improperly ignoring the whole plant?

The interim rule directs that samples for testing purposes be collected from the flowering material of the plant instead of taking samples from the whole plant. Hemp is defined by the 2018 Farm Bill as “the plant species Cannabis sativa L. and any part of the plant, including . . . all derivatives, extracts [and] cannabinoids . . . .” Cannabinoids, including THC, are found in higher concentrations in the flowering part of the plant.4 However, other parts of the plant, particularly the leaves, are said to contain lower concentrations of cannabinoids, but are often included in the biomass used for processing and cannabinoid extraction. By sampling just from the flowering material in the top one-third of the plant, the resulting total THC content will be higher than it would have been if other parts of the plant were included. Therefore, testing for total THC under the methods described in the rule could result in a THC content that does not take into account dilution of THC content that would occur if other parts of the plant were included in the sample.

Does the margin of error for testing THC content adequately measure uncertainty?

The rule introduces the concept of “measurement of uncertainty” as “the parameter, associated with the result of a measurement, that characterizes the dispersion of the values that could reasonably be attributed to the particular quantity subject to measurement.” Consideration of the measurement of uncertainty is required when determining the acceptable hemp THC level, which requires that the 0.3% be within the distribution or range of the test results. As the rule notes, “knowing the measurement of uncertainty is necessary to evaluate the accuracy of the test results.” What is unclear from the rule is what type of uncertainty is being measured—random or systematic uncertainty. Both can be measured, but they measure different things. Random error results from difficulty or unpredictability in taking measurements, which leads to fluctuations around the true value. Sampling many hemp plants subject to slight differences in weather, drainage, wind and light introduces uncertainty in testing those samples. Systematic error measures predictable and consistent deviations from the true value related to the functionality of the equipment being used to test samples. The important question remains: What type of error is the USDA seeking to account for? Producers and the industry will likely inure greater benefit from measuring for the uncertainty inherent in farming and atmospheric conditions than from uncertainty related to machine calibration. Measuring, and accounting for, both random and systematic uncertainty may not be contemplated by the rule.

Is the 0.5% total THC threshold for negligence too low?

The rule specifies that producers will not commit negligent violations if they use “reasonable efforts to grow hemp and the plant does not have a THC concentration of more than 0.5 percent” (emphasis added). A producer that commits three negligent acts in a five-year period will be ineligible to produce hemp for five years from the date of the third violation. Given the earlier-stated concerns about the methodology for testing total THC and sampling of flower resulting in higher THC levels, the 0.5% threshold for negligence is likely too low. This may be particularly challenging for producers in states, like Vermont, that set the negligence standard for production of hemp with a THC concentration at greater than 0.3% but no greater than 1% and/or sets an acceptable potency level at 0.3% THC or total THC concentration (equivalent to total THC in the rule) of 1% or less.5 The standard in the USDA’s rule will have a profound effect on producers in states with less restrictive standards, could lead to the planting of crops with poorer cannabinoid profiles, and will impact the economics of smaller growers who do not benefit from economies of scale.

Is the 15-day sampling to harvest timeline too restrictive?

The rule requires that officials must collect samples from the plants for testing at a DEA-registered lab within 15 days before anticipated harvest. According to the USDA, if harvest is delayed beyond 15 days, THC levels will likely be higher than those identified in the sample tested. The 15-day post-sample harvest window is supposed to allow a reasonable amount of time for a farmer to harvest “an entire field” and is designed to allow for “rain and equipment delays.” Producers cannot begin harvesting until samples are taken. If the harvest is not completed within 15 days, additional sampling and testing is required. Costs for testing are borne by the producer. For a variety of reasons, producers may encounter scenarios that prevent them from harvesting within 15 days of testing. This may be a particular challenge for smaller, less well-capitalized farmers and those operating in states that currently allow for longer harvest periods under state pilot programs. For example, Oregon requires sampling 28 days before harvest. To meet the 15-day deadline, significant investments in equipment and labor may be necessary.

In addition, bottlenecks are possible since outdoor harvests occur within a certain window of time in the fall. There will need to be enough authorized sampling agents, as required under the rule, available to test when producers are nearing harvest time and DEA-registered labs available to timely process samples taken. Without adequate testing resources available, it is conceivable that producers could have to make decisions regarding harvesting without having received test results for the samples taken.

What is the allowable moisture level for dry weight measurements?

Under the rule, total THC is reported on a dry weight basis. Dry weight basis is defined as:

[t]he ratio of the amount of moisture in a sample to the amount of dry solid in the sample. A basis for expressing the percentage of a chemical in a substance after removing the moisture from the substance. Percentage of THC on a dry weight basis means the percentage of THC, by weight, in a cannabis item (plant, extract, or other derivative), after excluding moisture from the item.

This definition may suggest that all moisture is removed from the sample, and the rule does not provide clarification. Along with publishing the rule, the USDA released separate guidelines for testing THC concentration in hemp. The guidelines clarify that “[s]amples are to be dried to a consistent loss (typically 5-12% moisture content) so that the test can be performed on a dry weight basis . . . .” However, guidelines are subject to change without a formal process and do not carry the same force of law as agency promulgated rules.

Is the guidance regarding the standard for finding negligence sufficient for producers to avoid liability?

Producers are held to a negligence standard defined as “a failure to exercise the level of care that a reasonably prudent person would exercise in complying with the regulations set forth” in the rule. If producers grow plants exceeding the acceptable level of THC, they are not negligent if they used reasonable efforts to grow hemp and the total THC level did not exceed 0.5%. The reasonable person standard has been developed in the law over many years, and the lack of precedent or clarity about what conduct a reasonable hemp producer might exhibit makes this requirement challenging. The reasonable person standard will evolve as the industry matures, and it is not clear what level of skill and experience the reasonable person has that producers will be measured against.

The rule does provide that using certified seed, using other seed “that has reliably grown compliant plants in other parts of the country” and using “best practices” are considered reasonable efforts should total THC content exceed acceptable THC level but be below 0.5%. Unfortunately, “best practices” are not defined (though the USDA has explicitly sought comment on this standard). Moreover, the reference to reliably grown seed is contradicted in the rule by the USDA acknowledgement that it did not include a certified seed program, in part, because “the same seed grown in different locations and growing conditions can react differently.” Given the posture of the reasonableness standard and the USDA’s request for comment, States and tribes can work with the industry to define reasonableness.

* * *

The industry needed clarity in the form of a rule from the USDA to realize its full potential, and the interim final rule satisfies many of these needs. There remain a number of issues with the rule that require clarification or modification, strongly suggesting that the rule would have benefited from a notice and comment period. The USDA’s efforts to carefully limit THC in hemp crops may hurt the quality of the overall cannabinoid profile of hemp produced under USDA or State plans. This could result in a competitive disadvantage for US producers and hinder the development of markets for minor cannabinoids like cannabinol (CBN), cannabigerol (CBG) and others. Market participants should carefully read the rule and take advantage of the post-issuance 60-day comment period (which ends December 30, 2019) in an effort to improve upon the interim final rule and get a final rule that better addresses the needs of the industry.


1 See

2 The rule does contemplate license modifications for sales of businesses to new owners for example.

3 See

4 Congressional Research Service, Defining Hemp: A Fact Sheet, 10 (updated March 22, 2019)

5 Vermont Hemp Rules, Section 14(a)(iii)-(iv).

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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