New Jersey Leads Nation in Federal Hemp Program Approval

Jersey got there first!

Leapfrogging over 16 other states with more established hemp programs, on December 27, 2019, the U.S. Department of Agriculture (“USDA”) approved New Jersey’s proposed hemp growing, processing and selling regulations, including Cannabidol (“CBD”) starting in 2020.

NJ Hemp Program’s Creation

Following Congress’ December 2018 passage of the Agriculture Improvement Act of 2018 (“2018 Farm Bill”), in August 2019 New Jersey enacted the Hemp Farming Act
repealing and replacing its Industrial Hemp Pilot Program and authorizing hemp producers to grow and sell hemp for commercial purposes.

Following the USDA’s October 31, 2019 publishing of interim final rules for domestic hemp production (“Interim Final Rules”) requiring states obtain proposed hemp production plan approval (including sampling and testing, noncompliant hemp disposal, enforcement, and reporting and information sharing procedures), New Jersey Department of Agriculture (“NJDA”) promulgated Hemp Farming Act Rules, N.J.A.C. 2:25-1 et seq.

The Hemp Farming Act Rules establishes New Jersey’s Hemp Program (“Program”) which will be administered by the NJDA’s Division of Plant Industry and provide hemp growing, processing, and handling licenses pursuant to the Hemp Farming Act, Farm Bill and its implementing regulations Interim Final Rules at 7 CFR 990 et seq.

The federal requirements include ensuring that grown and processed hemp maintains 0.3 percent delta-9 tetra hydro cannabinol (“THC”) concentration limit of on a dry weight basis, report specified information to the USDA and comply with the 2018 Farm Bill enforcement provisions. Hemp with a THC concentration exceeding 0.3% on a dry weight basis will be considered marijuana, subject to the Controlled Substances Act and DEA regulations, and destroyed in accordance with reverse distributor regulations at 21 CFR 1317.15.

The Program establishes reporting requirements throughout the growing season in which the NJDA is required to provide the USDA with including: pre-planting, planting, pre-harvest, and one annual production report providing hemp crop acreage; monthly reports updating hemp producer’s license status and providing noncompliant hemp violation information; and annual reports regarding total grown and disposed hemp acreage ensuring that accurate legal land descriptions and hemp quantities are maintained.

New Jersey’s Fee Schedule and Hemp Program Rules

The Program’s fee schedule is based upon whether producer is growing, processing, or handling hemp: growers pay annual $300 fee plus $15 per acre fee; handlers pay a $450 per year; and processors’ annual fee stems for type of hemp component being processed (ex., $1450/year for those processing grain ($450) and CBD extract ($1,000)). Although permitted to process and handle own hemp without paying additional fees, once processing or handling hemp from a separate hemp producer, the grower must pay applicable processor and handler fees.

The Program also establishes hemp sampling and testing procedures in which fifteen (15) days prior to anticipated harvest date, an NJDA inspector or a DEA-registered third-party lab will collect hemp samples to test for compliance with the federally defined THC level. THC testing procedures must use postdecarboxylation or other similarly reliable methods and must measure total THC and test results must show the measurement of uncertainty being utilized and state if a given sample meets the 0.3 percent threshold based on the distribution range established by the measurement of uncertainty.

Hemp producers must agree to grant entry to the NJDA onto premises where hemp is grown, processed, or handled for inspection and, in addition to individual sampling and testing requirements, the NJDA will also conduct annual inspections of a random sample of hemp producers.

Criminal Conviction Prohibition and “Negligent Violations

Unless already participating in an industrial hemp pilot program prior to the 2018 Farm Bill’s passage, anyone with a criminal conviction relating to controlled substances may not participate in the hemp program for a period of ten years following the conviction date and all key hemp production operation participants must undergo and pass a New Jersey State Police criminal background check.

Further, although not subject to adverse criminal law enforcement actions for negligent violations and, instead, must comply with a Corrective Action Plan tailored to prevent future violations, hemp farmers committing three (3) negligent violations within a five (5) year period are disqualified from working in the Program for a five (5) year period. All hemp with a delta-9 THC concentration of more than 0.3% must be destroyed, but it will only be considered a negligent violation pursuant to these rules if the hemp has a delta-9 THC concentration of more than 0.5% on a dry weight basis

No CBD Prohibition

Louisiana, and Ohio (and 3 American Indian tribes) effective upon through June of 2021.

USDA’s Interim Final Rule

On October 31, 2019, the United States Department of Agriculture (USDA) published an interim final rule (IFR) on domestic hemp production establishing a regulatory framework for USDA
oversight of domestic hemp production in accordance with the 2018 Farm Bill.

While many questions remain about how the federal government, including the U.S. Food and Drug Administration (FDA), will regulate hemp-derived products, including cannabidiol (CBD) cosmetics, dietary supplements, and food products, we’ve addressed below the most important takeaways from the IFR with regard to the provisions that would apply to the farmers who are growing hemp.

Scope of Interim Final Rule

The IFR’s scope is limited to hemp production, sampling, testing and disposal applying to “hemp producers” defined as farmers that grow (or cultivate) hemp plants for market. 7 CFR 990.1 Thus, the USDA is not regulating hemp-derived products (including CBD products) processing, manufacture, testing, or marketing of through the IFR. Instead, the FDA retains
authority over the manufacturing and marketing of CBD (the advertising of which the Federal Trade Commission also retains authority) and other cannabinoid-containing pharmaceuticals, foods, dietary supplements, and cosmetics, and the federal Drug Enforcement
Administration (DEA) retains jurisdiction over any plants or products that contain greater than 0.3% THC on a dry weight basis. USDA also reiterates that states may not prohibit the transportation or shipment of hemp produced in accordance with the IFR (and the 2018 Farm Bill) or the 2014 Farm Bill.

State Plans May Now Be Submitted and Federal License Applications Will Soon Follow

Under the IFR, a state or Indian tribe may submit a plan to regulate hemp cultivation within that state or Indian tribe to USDA for approval. If a state or Indian tribe does not have an approved plan, hemp cultivation in that jurisdiction is subject to USDA’s own plan to regulate hemp, as set forth in the IFR.
With the IFR’s publication, the USDA began reviewing state plans to regulate hemp
production.. USDA is accepting comments on the interim final rule until December 30, 2019, and intends to publish a final rule within two years.

Testing

The IFR establishes testing standards that must be met under both the federal and state plans. The regulations impose a pre-harvest sampling requirement on hemp growers.5/ The samples must be collected by federal, state, local, or tribal law enforcement agency or other federal, state, local, or tribal designated person and be sent to a DEA registered laboratory for testing to ensure that the plants fall below the 0.3% THC limit and, thus, are considered industrial hemp and not marijuana.
The regulations allow for a “measurement of uncertainty” to be used in testing plants against this
standard.6/ Provided that 0.3% falls within that measurement of uncertainty, the plant would be
deemed to have an “acceptable hemp THC level” and be considered hemp in compliance with the federal (or state) plan. Importantly, USDA emphasizes that the definition of “acceptable hemp THC level” and the application of the measurement of uncertainty does not alter the federal definitions of marijuana or hemp.

The IFR does not include provisions to regulate products containing hemp derived ingredients. Importantly, USDA emphasizes that the definition of “acceptable hemp THC level” and the application of the measurement of uncertainty does not alter the federal definitions of marijuana or hemp. Thus, there should be no assumption that a measurement of uncertainty is applicable in the testing of a product to establish that the THC level falls below the threshold for DEA control.

5/ In conjunction with the final rule, USDA has also made available on the Agricultural Marketing Service website guidelines on sampling and testing. See Sampling guidelines for hemp growing facilities, available at https://www.ams.usda.gov/sites/default/files/media/SamplingGuidelinesforHemp.pdf and Testing guidelines for
identifying delta-9 tetrahydrocannabinol (THC) concentration in hemp, available at
https://www.ams.usda.gov/sites/default/files/media/TestingGuidelinesforHemp.pdf.

6/ Specifically, the measurement of uncertainty is used to develop a range, and if 0.3% falls within the range, the sample is considered to have an “acceptable hemp THC level.” The definition of “acceptable hemp THC level” contains the following example to illustrate the concept: a hemp sample is tested and reported to have a THC concentration level of 0.35%, and the measurement of uncertainty is 0.06%. The measurement of uncertainty is used to create a range or distribution based on the reported test result – in this case, 0.29% – 0.41%. Because 0.3% falls within the range created by applying the measurement of uncertainty, the sample is considered to have an acceptable THC hemp level. On the other hand, if the measurement of uncertainty for the 0.35% reported test result was 0.02%, the range would be 0.33% – 0.37%, and the sample would not be considered to have an acceptable
hemp THC level because 0.3% falls outside of the range.

No Seed Certification Requirements

Although IFR makes clear that USDA is not establishing any seed certification requirements;
many state hemp programs impose these requirements.

No Additional Requirements Related to Importation or Exportation of Hemp Seed

Except noting the oversight of which is already regulated by USDA’s Animal and Plant Health Inspection Service (“APHIS”), the IFR does not address hemp seed importation,
APHIS also has jurisdiction over the import of hemp plant material for any pest-related issues that may arise. The rule does not address the export of hemp plants, but USDA stated that it would work with industry to facilitate this process if there is interest in hemp exports.

“2014 Farm Bill” and “’Marketing Research’ Exception” Still in Effect

Unresolved by the IFR is the scope of permissible activity under the 2014 Farm Bill. USDA states that for the 2020 planting season, states and institutions of higher education can continue operating under the authority of the 2014 Farm Bill, and that the 2018 Farm Bill extension of the 2014 Farm Bill expires 1 year from the effective date of the IFR (i.e., October 31, 2020). USDA explains that the 2014 Farm Bill authorized institutions of higher education and state departments of agriculture to allow for the cultivation of hemp as part of a pilot program authorized by state law for research, including market research. In the IFR, USDA acknowledges that under the authority of the 2014 Farm Bill, as a part of “market research,” hemp was cultivated and sold as inputs into various consumer products, and that USDA expects that such cultivation would have continued and even expanded in the absence of the 2018 Farm Bill. The IFR does not provide any insight into the line between bona fide market research and general commercial activity, but permits hemp cultivation and production to continue under the authority of the 2014 Farm Bill until USDA approves a state plan or begins approving licenses under USDA’s program.

The IFR Makes Clear It Does Not Preempt More Stringent State Laws on Hemp Production

USDA’s interim final rule makes clear that the 2018 Farm Bill does not preempt or limit any state or tribal law governing hemp production that is more stringent than the 2018 Farm Bill, meaning that states and tribes are free to establish requirements beyond those provided in the 2018 Farm Bill or USDA’s plan to regulate hemp, including to ban the cultivation and production of hemp.