The passage of the 2018 Farm Bill signaled a bright future for the U.S. hemp industry, authorizing individual states and the U.S. Secretary of Agriculture to formulate regulatory plans permitting commercial hemp production. Secretary of Agriculture, Sonny Perdue, recently testified that the U.S. Department of Agriculture (“USDA”) is working to finalize regulations in time for the 2020 growing season, with plans to consider proposed state regulations shortly thereafter. The USDA’s timeline creates a big, unanswered question — what protections, if any, does the 2018 Farm Bill provide for hemp produced under existing state programs created under the 2014 Farm Bill?
This is not an insignificant question. As the dispute over a truckload of hemp seized by Idaho authorities hurtles towards the Ninth Circuit Court of Appeals this week, one of the key issues is whether the interstate commerce protections in the 2018 Farm Bill apply to 2014 Farm Bill hemp. In this post, we outline a favorable industry position: that hemp produced in compliance with a state pilot program under the 2014 Farm Bill has interstate commerce protections provided in the 2018 Farm Bill.
The dispute in Idaho centers on the scope of Section 10114 of the 2018 Farm Bill. Section 10114 states, in part, “No State…shall prohibit the transportation or shipment of hemp or hemp products produced in accordance with subtitle G of the Agricultural Marketing Act of 1946 (as added by section 10113) through the State.” Subtitle G added Sections 297A through 297E to the Agricultural Marketing Act of 1946. 297C directs the USDA to establish a federal regulatory plan for hemp, under which hemp can be produced in states without their own regulatory framework. 297B describes the method by which states “desiring to have primary regulatory authority over the production of hemp” may do so, by having a regulatory plan approved by the USDA. 297B also allows the production of hemp in states without an approved plan “if the production of hemp is in accordance with Section 297C of this title or other Federal laws” (emphasis added).
Therefore, hemp may be produced “in accordance with subtitle G” in one of three pathways: 1) under a federal regulatory plan promulgated by the USDA, 2) under a plan created by a state and approved by the USDA, and 3) “in accordance with…other Federal law.” In denying a request for a preliminary injunction to release the Idaho hemp, the U.S. District Court of Idaho reasoned that no plan under 297B or 297C has been issued or approved under the 2018 Farm Bill. This holding recognizes only the first two regulatory pathways, and disregarded the third. The two recognized pathways are not the exclusive legal paths for hemp production in accordance with subtitle G.
Subtitle G, added to the Agricultural Marketing Act of 1946 by Section 10113 of the 2018 Farm Bill, expressly allows the production of hemp in states without an approved plan “if the production of hemp is in accordance with…other Federal laws.” One such federal law is 7 U.S.C. § 5940, enacted in 2014 as part of the 2014 Farm Bill. 7 U.S.C. § 5940 authorizes the production of hemp in states that have a “pilot program to study the growth, cultivation, or marketing of industrial hemp.” Oregon has such a program, authorized by ORS 571.300 et seq. The Oregon Department of Agriculture has made rules governing the production of hemp in Oregon (see OAR 603-048-0010 et seq.). Therefore, hemp produced by an ODA-licensed hemp grower, who is issued a license pursuant to the authority granted to the ODA by 7 U.S.C. § 5940 and ORS 571, is produced “in accordance…with Federal law,” and thus “in accordance with subtitle G,” and is protected in interstate commerce under Section 10114.
Finally, the 2018 Farm Bill specifically incorporates existing Federal law governing the production of hemp under 7 U.S.C. § 5940. Section 7605(b) of the 2018 Farm Bill repeals 7 U.S.C. § 5940 “1 year after the date on which the Secretary establishes a plan under section 297C.” In other words, existing state pilot programs are incorporated into the new Federal hemp regulatory regime, and function as the method by which states can legally produce hemp “in accordance with…Federal law” until one year after the USDA approves plans under 297B and 297C.
Encouragingly, recent case law offers some support for interstate commercial sales of 2014 Farm Bill hemp. Relying on the 2014 Farm Bill and subsequent language in Consolidated Appropriations Act of 2018, an administrative law judge ruled that hemp-derived CBD was mailable and that Congress had “clarified its intention to allow interstate transportation” of hemp grown in accordance with the 2014 Farm Bill.
We are watching closely for developments in the Ninth Circuit as the Big Sky case is appealed and will provide updates here. In the meantime, If you have questions about the production and transportation of 2014 Farm Bill hemp, our cannabis team can assist.