On Dec 20, 2018, Agricultural Improvement Act of 2018 was signed by President Donald Trump, more commonly called the 2018 Farm Bill, into law. The bill legalized commercial production of hemp at the federal level, effective from January 1, 2019. This will have significant repercussions not just for the hemp business in the US, but also for business, including cannabidiol (CBD).
Changes in Federal Related to Hemp and CBD
Indeed, even before the 2018 Farm Bill became effective, the business potential in hemp and CBD farming was always evident in the United States. Hemp is a fast-growing variety of the Cannabis sativa L. plant, which can be easily cultivated. It has many commercial uses, such as textiles and food. Marijuana is another different variety of the Cannabis sativa L. plant that contains high concentrations of tetrahydrocannabinol (THC). THC is responsible for the psychoactive effects in humans. Conversely, hemp, by definition, contains negligible concentrations of THC. CBD is an alternate product derived from the Cannabis sativa L. plant (marijuana or varieties of hemp) that offers various benefits for putative health and general wellbeing.
In spite of the fact that hemp or hemp-derived CBD doesn’t contain significant concentrations of THC, until December 2018, hemp was classified into a Schedule I substance under the Controlled Substances Act. It is the main federal criminal law related to the prohibited drugs and narcotics, such as LCD and heroin. Due to this, it was considered illegal at the federal level to grow, own or distribute the hemp or CBD, derived from hemp. However, certain inert parts of the Cannabis sativa L. plant (marijuana or hemp) like the non-germinating seeds or stalks, could be traded.
Furthermore, federal regulations of the Drug Enforcement Agency (DEA) (the major agency responsible for federal criminal drug enforcement) prohibited such products. DEA specifically banned products meant for consumption for humans, containing any part of the cannabis plant, including the inert portions excused otherwise from the Controlled Substances Act. This meant that effectually CBD products, irrespective of how derived, were unlawful at the federal level.
Nonetheless, hemp and CBD industries have flourished in several state jurisdictions, where growing, dealing, and using such products is legal. These businesses have functioned in a quasi-legal status as part of the US Department of Justice policy. This policy has effectively allowed; otherwise, legitimate business dealing in cannabis to function in state jurisdictions where doing such business is lawful.
The Food and Drug Administration (FDA) regulations bring additional, non-criminal legal worries for the trading of CBD products derived from hemp. Many of the manufacturers and sellers of CBD-infused products, such as food, beverages, creams, and dietary supplements, swear by its benefits. They claim that these products are useful for treating and preventing various diseases.
The FDA is firm on its position that such claims mean these products are under the same regulations as drugs. Under these regulations, prior approval is required from the Food and Drug Administration, based on the clinical trials, for establishing the safety and the efficacy of the product. The Food and Drug Administration (FDA) has issued a number of warning letters over the past three years to stop the sale of such products, although the FDA hasn’t taken any follow-up action.
There are two different concerns emerging from FDA guidelines. To begin with, in June 2018, the Food and Drug Administration approved a prescription drug with CBD as an active ingredient for the treatment of seizure disorders. Federal law states that a food product may not contain an approved drug, such as cannabidiol, without further approval from the FDA. Secondly, as a new food ingredient, it is imperative to establish the safety of CBD products for human consumption before a food product containing CBD is made available for sale.
The 2018 Farm Bill
Congress passed the 2018 Farm Bill on December 12, 2018, which was then signed into law by President Trump subsequently. Significantly, the bill incorporates key content concerning hemp that was advocated by Senate Majority Leader Senator Mitch McConnell (R-KY) with solid bi-partisan backing:
According to the 2018 Farm Bill, hemp can be defined as the plant Cannabis sativa L. and/or any part of the plant that contains delta-9 THC concentration of not more than 0.3% by dry weight. This definition of hemp is compatible with the definition of “industrial hemp” as made in the 2014 bill. Under the 2014 bill, a limited agricultural pilot program was created for research on the industrial hemp.
In the 2018 Farm Bill, hemp is removed from the Controlled Substances Act. This has paved the way for completely lawful cultivation, possession, marketing, and sale of the hemp plant.
The 2018 Farm Bill grants the states and the Indian tribes the authority to regulate and manage the production, sale, and supply of hemp and its products within its borders. However, it doesn’t allow the states and Indian tribes to restrict the shipment or transportation of hemp and its products via respective jurisdictions.
Consequences of 2018 Farm Bill to the Hemp and CBD Businesses
US sales for the products containing hemp, including beverage and food products, personal care products, household products, and nutritional supplements, touched $820 million in 2017. Based on these figures and the current demand, it is predicted that the hemp and CBD industry will be worth $1 billion by 2020. The 2018 Farm Bill is going to work wonders for the production and sales of hemp and CBD products.
The passage of the 2018 Farm Bill means that hemp manufacturers and businesses involved in hemp and/or products derived from hemp can now freely pursue their businesses legally. They can do it aggressively without having a fear of enforcement regulations that earlier prevented them from flourishing. The 2018 Farm Bill will provide the producers of CBD or its products, a larger incentive to use hemp as a primary source for CBD (instead of marijuana).
It is still imperative for the businesses involved in the hemp industry to comply with the state as well as federal regulations regarding legalized hemp. It is also important for businesses dealing with CBD (including food and beverages) to steer clear of the aggressive marketing strategies that they generally adopt to sell health-related products. This will help them avoid any kind of unwanted attention from the Food and Drug Administration (FDA) and handle the other health and food FDA regulations carefully.
The Growth of Hemp in the US — an Ever-Changing Regulatory Environment
A confusing and a befuddling regulatory environment at the state, as well as federal levels, have hampered the rise of the hemp plant and its related business in the markets of the US. The United States Department of Agriculture, on its part, tried to clarify the regulations by releasing interim final rules in the last quarter of the year 2019. The highly awaited rules address a host of problems, including licensing, regional transportation, testing, and sampling of THC.
However, the most important thing to come out of the rollout of the federal program is that now states, the main regulators of cultivation of hemp can submit and get the approval of individual state plans from the USDA. The USDA recently gave its approval to the state plans of New Jersey, Louisiana, and Ohio, along with certain tribal plans. Many other states, including Pennsylvania, have submitted their plans, which USDA is considering. And, as USDA goes on approving state plans, existing and future businesses dealing with hemp will have more certainty related to its business operations.
