USDA Licensing Regime for Hemp Producers

Interim Final Rule Provides Long-Awaited Details – Comments Due December 30, 2019

3 min

With the publication of this interim final rule on October 31, hemp producers can now see what the U.S. Department of Agriculture (USDA) will require as part of its program for the regulation of hemp. However, there are still a lot of open questions that will warrant close attention over the coming months.

As a threshold matter, a hemp producer cannot even know whether the newly proposed USDA regulatory regime will apply until their state1 indicates whether it intends to create its own program. Under the 2018 Farm Bill, each state has the opportunity to exercise primary jurisdiction over the regulation of hemp production. This means, for example, that the state can set the rules for (among other things) obtaining a license, maintaining records, and testing THC levels. However, a state plan cannot take effect until the USDA has approved it, in part to confirm that the state program meets certain requirements of the 2018 Farm Bill. This rule lays out the process that USDA will follow in reviewing state plans and sets forth the requirements that will apply to hemp producers in states where no USDA approved plan exists.

Because each state plan must be approved by the USDA, the rule describes what – at a minimum – will be required of a hemp producer. However, it is important to note that state plans may impose additional requirements that may be stricter than those set forth by the USDA.

In sum, the rule covers licensing, THC testing, reporting, recordkeeping, disposal of non-compliant materials, and the inspection process. For example, hemp producers will have to be licensed, and follow specific protocols for sampling and testing delta-9 tetrahydrocannabinol (THC) levels and procedures for disposal of non-compliant plants. Samples will have to be delivered to a DEA-registered laboratory for testing.

Notably, the interim final rule would not require anyone other than the producer of a hemp plant to be licensed. USDA has defined "producer" by adopting a currently used regulatory definition found at 7 C.F.R. § 718.2. This clearly limits the scope of this rule to "an owner, operator, landlord, tenant or sharecropper, who shares in the risk of producing a crop and who is entitled to share in the crop available for marketing from the farm, or would have shared had the crop been produced." This means that only entities that have a direct relationship with the land where the hemp plant is grown (or to the seed) will be subject to the licensing and other requirements of this rule. It appears that it will not apply to producers of extracts and other hemp-materials, even though the definition of "hemp" extends to forms other than the plant – including extracts and chemicals (e.g., CBD) derived from the plant.

This raises some interesting questions. For example, what happens when an extract producer receives non-compliant material. Must it follow the same procedures for disposal? Since it will not be licensed by USDA (and, perhaps, not by the state either), will it be exposed to liability under the Controlled Substances Act (the law enforced by the Drug Enforcement Administration)?

USDA will be accepting comments on the interim final rule until December 30, 2019.

If you are interested in submitting comments, or have any questions regarding the interim final rule, please contact one of the authors.

  1. The law also provides each Indian Tribe to assert jurisdiction over hemp production. For convenience, the use of "state" in this article also includes Indian Tribe.

© 2019 Venable LLP. Using, distributing, possessing, and/or selling marijuana is illegal under existing federal law. Compliance with state law does not guarantee or constitute compliance with federal law. This informational overview is not intended to provide any legal advice or any guidance or assistance in violating federal law.