USDA Regulations Increase Transparency and Enforcement In Hemp Market

The USDA released the interim final rule that implements the 2018 Farm Bill. The interim rules create a national regulatory framework for the hemp market. The national regulatory framework will impact hemp producers by (1) creating national transparency, (2) enhancing testing and disposal requirements, and (3) developing an audit and enforcement regime.

Starting in 2020, hemp producers can obtain a license from a state with a USDA approved hemp plan. The USDA is reviewing hemp plans submitted by twenty (20) state and tribal nations. Persons who want to grow hemp in a state that has not submitted a plan can apply for a USDA hemp license after November 30, 2019.

The USDA estimates that there will be roughly 6,500 hemp licensees in 2020. It is yet to be seen what impact the new rules will have on the overall cost structure in the market. Increased compliance and testing costs are to be expected as enhanced protocols must be used. The USDA’s one strike and you are out methodology for hemp testing will place tremendous pressure on producers to grow THC compliant products.

Increased Transparency

The USDA regulation will increase transparency about national hemp production by gathering information about the total amount of acreage planted with hemp, the resulting harvest, and the disposal of non-compliant harvests. The Farm Service Agency will collect information about the national hemp program for USDA licensees.

The USDA regulation also requires states to serve as real-time data collectors for the hemp industry. States and Indian tribes must also provide the USDA with information about hemp producers including contact information and land descriptions.

Testing and Disposal

USDA licensed producers must use DEA registered testing labs to perform pre-harvest compliance testing. State’s must also establish procedures to ensure that pre-harvested hemp is tested for compliance with the .3% THC threshold. The DEA registered labs must inform the USDA of the lab results including information about non-compliant harvests.

The USDA may develop a laboratory approval program that will require labs to be ISO accredited by the Laboratory Approval Service. The ISO accreditation provides the USDA with oversight of the testing process. The USDA currently has four laboratory approval programs with over 70 labs that test other agricultural products. The USDA is seeking input on whether the testing labs should be in the laboratory approval program or whether they should be required to obtain ISO 17025 accreditation.

The DEA and USDA released sampling and testing protocols for use in compliance testing. Hemp that fails the THC threshold test must be disposed of by a DEA registered reverse distributor or a law enforcement agency. The DEA is expected to publish specific disposal requirements

Enforcement

The USDA will also perform audits of hemp licensees to ensure compliance with the regulations. The audits will occur over a three year period. Hemp that is produced on a property that is not disclosed or without a license must be destroyed.

A hemp producer that fails a THC test due to negligence (ie., not using certified seeds) will receive a corrective action plan. Under the corrective action plan, hemp producers must submit certain reports for two years. A hemp producer that fails THC test three (3) times within a five (5) year period will lose their license.

States must inform the USDA, the US Attorney General and state law enforcement agencies of hemp producers that willfully or knowingly violate the hemp regulations. This could include knowingly planting crops that are not THC compliant. The US Attorney General can bring criminal charges in this instant as marijuana is illegal at the federal level. This provision provides a stick for the government to use against persons who mask marijuana as hemp for sale on the black market.

2020 Growing Season

Hemp producers that are interested in growing in the 2020 season should contact the department of agriculture in the state where the hemp will be cultivated. Most states require hemp producers to obtain a local license. A hemp producer may also be required to obtain a license from the USDA if the state currently does not have a state plan for hemp production. By obtaining a USDA license, hemp producers will become subject to federal oversight and enforcement. This increases the stakes in the hemp markets and ultimately the entire cannabis landscape.