hemp

Last month, Nathalie Bougenies and I put on a webinar on the US Department of Agriculture’s (“USDA”) new interim hemp rules. We got some great questions from our viewers but were unable to answer all of them in real-time. In this two-part series, Nathalie and I will respond to a number of those questions. This first part will focus on licensing and transportation questions. In tomorrow’s post, Nathalie will respond to questions relating to THC testing.

LICENSING

If a state, like Tennessee, operates under the 2014 Farm Bill, but the state applies for a USDA state plan and that is approved, does that then void the 2014 pilot rules and regulations for existing farms in Tennessee operating under 2014 Farm Bill?

Each state is handling the transition from the 2014 Farm Bill to the 2018 Farm Bill a little differently so if you are a hemp producer operating under a 2014 Farm Bill program, you’ll need to check with your state’s department of agriculture. Also, the 2018 Farm Bill extended the 2014 Farm Bill for one year after the USDA  published its interim rules on hemp (October 31, 2020) meaning that states who submit 2018 Farm Bill plans can continue to regulate under the 2014 Farm Bill. It’s also likely that most states will implement procedures to allow current licensed producers to transition to the 2018 Farm Bill.

Because this question addresses Tennessee specifically, the following passage from the Tennessee Department of Agriculture is helpful:

The U.S. Department of Agriculture (USDA) has released a draft of the rule outlining federal provisions for the domestic production of hemp. A preview of the rule is posted on USDA’s website, along with answers to frequently asked questions.

Leaders at the Tennessee Department of Agriculture (TDA) are reviewing this draft to determine potential impact on Tennessee’s hemp program.

No immediate changes are expected. Licensed hemp growers in Tennessee will continue to operate under current state regulations at this time.

As of Nov. 1, we have 3,800 producers licensed to grow as much as 51,000 acres of hemp statewide.

TDA looks forward to continue working with farmers and industry partners to support the production of hemp in Tennessee.

Since USDA has not regulated processing, is an entity that grows not allowed to process? Must a separate entity be formed?

Nothing in the 2018 Farm Bill or the USDA’s interim hemp rules explicitly allow or prohibit a hemp producer from processing hemp. The USDA doesn’t really touch on processing at all. Some states issue licenses to process hemp and may continue to do so under the 2018 Farm Bill. State law must be analyzed to determine what is required for processing.

TRANSPORTATION

Can you legally transport extracted Hemp CBD across state lines lab tested which shows less than 0.3% THC?

The 2018 Farm Bill prevents a state from interfering with the transport of hemp that was legally cultivated. Hemp is defined under federal law to encompass hemp derivatives, which includes Hemp-CBD. Strictly speaking, you can legally transport Hemp-CBD across state lines. However, states are free to prohibit the sale or distribution of Hemp-CBD within their borders.

The tides have been rapidly changing for hemp companies to gain access to banking, which has not traditionally been available to hemp companies due to the fact that hemp was (sort of) federally illegal until about a year ago. As we previously explained:

Commercial marijuana activity remains a federal crime,  and the Bank Secrecy Act (“BSA”) generally prohibits financial institutions from accepting marijuana-generated dollars. Financial institutions that work with marijuana businesses must conduct due diligence to ensure that marijuana businesses are complying with state law. That includes regularly submitting Suspicious Activity Reports (“SARs”) to the Financial Crimes Enforcement Network (“FinCEN”). Regulated commercial hemp activity is not a federal crime, but hemp’s close proximity to marijuana makes it a generally high-risk endeavor for financial institutions who generally don’t have a high risk tolerance to begin with. That has made it very difficult for many hemp and hemp-derived CBD (“Hemp-CBD”) businesses to access bank accounts.

Since the 2018 Farm Bill was signed and hemp was removed from the Controlled Substances Act, our hemp attorneys have seen more and more banks and credit unions take on various kinds of hemp clients (including hemp cultivators, processors, and even Hemp-CBD sellers). But still, many financial institutions have been hestitant when it comes to servicing hemp clients. As of the last few months, that has been changing.

As we reported over the summer, in August, the National Credit Union Administration (“NCUA”) released Interim Guidance on Serving Hemp Businesses. This guidance, though short, is fairly robust and provides ways for credit unions to verify that hemp clients are engaged in lawful business.

This week, on December 3, 2019, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network (“FinCEN”), and the Office of the Comptroller of the Currency in consultation with the Conference of State Bank Supervisors released joint guidance entitled, “Providing Financial Services to Customers Engaged in Hemp-Related Businesses”. The guidance was intended to “provide clarity regarding the legal status of commercial growth and production of hemp and relevant requirements for banks under the Bank Secrecy Act (BSA) and its implementing regulations.”

There are a few key points from the joint guidance:

  1. The quoted language (and other language in the joint guidance) refers just to commercial growth and production of hemp and even notes that the FDA retains jurisdiction over foods, drugs, and cosmetics. The 2018 Farm Bill only regulates hemp production, and does not really discuss hemp processing or the sale of Hemp-CBD goods. It’s not totally clear from the text of the joint guidance whether it was intended to cover only cultivation, and it certainly can be read that way. Therefore, it’s not yet clear whether banks will service clients engaged in those activities.
  2. The joint guidance makes clear that banks won’t need to file SARs for clients based solely on the fact that they are engaged in cultivation of hemp. Banks will still need to follow standard SAR procedures and file SARs if there are indicia of suspicious activities.
  3. The joint guidance makes clear that banks have discretion about what services to offer, but that bank clients must comply with applicable law. This puts the onus on banks to vet their customers to ensure compliance with hemp laws and regulations. Some things that the joint guidance expressly requires banks to do are to have BSA and anti-money laundering (“AML”) compliance programs commensurate with the level of complexity and
    risks involved, comply with applicable regulatory requirements for customer identification, SARs, currency transaction reporting, and risk-based customer due diligence (including collecting beneficial ownership information for legal entity customers).
  4. Though the joint guidance does cover marijuana businesses, it makes clear that banks servicing those businesses should follow the FinCEN guidance FIN-2014-G001 – BSA Expectations Regarding Marijuana-Related Businesses.

The joint guidance also states that additional FinCen guidance will be released in the future. Hopefully by then, banks will have more comprehensive guidance for servicing hemp clients. But for now, this joint guidance is certainly a step in the right direction.

hemp cbd usda rules comment

The hemp industry is up in arms over the USDA’s interim rules establishing a domestic hemp program.  As of this writing you can find some 900 comments published on regulations.gov. The din of complaints about the deleterious effect of several rules caused Senator Chuck Shumer to send a letter on December 3 to U.S. Agriculture Secretary Sonny Purdue urging the Secretary to extend the public commend period by 60 days.  Presently, the public comment period ends on December 30, 2019 and it is unclear whether the comment period will be extended.

Most of us in the hemp industry are well-aware of the major issues in the interim rules: 15-day pre-harvest testing requirements, total THC, DEA laboratories, and crop insurance to name a few.  This post is to urge everyone working in hemp to comment on how the interim hemp rules will affect the hemp industry and how the rules ought to be amended.

Crop Insurance: No coverage for hemp crops above .3% Total THC

A major achievement of the 2018 Farm Bill was that it cleared the way for the Federal Crop Insurance Corporation to offer policies to hemp farmers. Producers can obtain coverage under the Whole-Farm Revenue Protection (WFRP) program for 2020 if they are now part of a Section 7606 state or university pilot program authorized by the 2014 Farm Bill or once a USDA-approved plan is in place. WFRP allows coverage of all revenue for commodities produced on a farm up to a total insured revenue of $8.5 million. WFRP coverage is often used for specialty and non-traditional crops.

However, hemp with a THC level above the compliance level will not constitute an insurance cause of loss and hemp will not qualify for replant payments under the WFRP. And the interim rules include fairly strict provisions requiring the destruction of hemp that contains more that .3% Total THC.

But THC levels can fluctuate because of numerous factors beyond the control of any farmer. The USDA recognized this when it decided against a seed certification program in the interim rules because “the same seed used in one State to produce hemp plants with THC concentrations less than 0.3%, can produce hemp plants with THC concentrations of more than 0.3% when planted in a different State.”  THC levels can also fluctuate because of weather and other factors and often vary throughout the preharvest life of a hemp plant.

Here is what one farmer from North Carolina had to say:

The genetics of current hemp crops are such that THC levels vary by cultivar, growing condition, etc. They are not always consistent across regions or seasons, even with the best planning, care, and genetic selection. This rule should NOT require farmers to destroy their crops if above .3% THC. In this industry, farmers are at greatest risk of losing their shirts financially, especially if you destroy their entire crop. The regulation should instead allow the farmer to process the crop through extraction, distillation, and isolation, the output of which are cannabinoids separated out in individual containers (CBD, CBG, THC, etc).

The lack of crop insurance coverage for hemp that fails testing when combined with the rules about crop destruction, creates enormous risk for hemp farmers.  A farmer may try to do everything right only to end up with an uninsurable crop that must be destroyed and a complete loss of their investment into hemp farming.  And, as the farmer from North Carolina notes, the interim rules do not provide for post-harvest remediation of hemp with total THC levels greater than .3%.

Total THC: Delta-9 + THCA

Nathalie Bougenies has written on this topic extensively, so I will just give you an excerpt and a few links:

To the disappointment of many in the hemp industry, the USDA adopted a total THC testing requirement. As we previously explained, total THC is the molar sum of delta-9 THC (“THC”) and delta-9 tetrahydrocannabinolic acid (“THCA”). Using a total THC testing protocol will create additional hurdles for hemp farmers who are already engaged in a precarious industry. Not only does this testing method tend to increase the THC concentration in the hemp sample, and thus, pushes it over the 0.3 percent limit, it also limits the type of strains farmers can work with. This is because few hemp genetics currently on the market would comply with a total THC testing method. Consequently, this rule will force hemp farmers to carefully select the types of seeds they buy.

Most everyone agrees that the Total THC requirement is terrible. Here is what one small family farmer commented to the USDA:

To require a 0.3 percent TOTAL THC limit would devastate the CBD and flower industry.  Moving forward into 2020 many crops would have to be destroyed that have otherwise been able to be used for extraction for the last several years.  Most farmers do not understand what this TOTAL THC methodology means for them.

For more background on this issue, see here, here, and here. For a detailed scientific analysis, Rod Kight recently posted a modified version of a comment written by Marion Snyder, PhD, Chief Scientific Officer of Clearwater Biotech. Dr. Snyder’s findings should alarm everyone in the hemp industry.

15-day preharvest testing by a DEA registered laboratory

The USDA rules require that hemp be sampled and tested for total THC within 15 days of anticipated harvest. And the rules further require that the testing labs be registered with the Drug and Enforcement Administration (DEA). But current DEA rules limit registration to jurisdictions in which medical or  recreational marijuana is legal.  Although the number of such jurisdictions is growing, no one in the industry believes that the number of DEA registered laboratories can handle the quantities of hemp being produced by American farmers. This is an area where Congress may need to place pressure on the USDA and DEA to avoid causing a significant bottleneck in the hemp supply chain.

Your Comments Matter

Everyone in the hemp industry should take a few minutes to submit a comment on the interim rules.  Because the USDA was directed to devise and implement new rules without delay, the USDA did not follow the ordinary “notice and comment” process with which federal agencies generally must comply in the rulemaking process. The USDA’s decision not to follow this process is explained thoroughly in the interim rules themselves and was reviewed by the U.S. Government Accountability Office (GAO). You can read the GAOs report on that here. I am not saying the USDA did anything wrong in foregoing a two-year notice and comment period given the need to move swiftly to establish a hemp production program. But the rush to issue rules does mean that comments submitted on the interim rules matter as the USDA works toward issuing final rules.

In sum: Everyone in the hemp industry ought to submit a comment. Submitting a comment is easy: just click here.  Note that you can also upload documents, such as prepared statements or other relevant materials. If you’d like assistance with crafting a comment, please  reach out to one of our Hemp-CBD regulatory attorneys.

medical marijuana export import international

Over the past few years, our international trade team has advised a rapidly expanding suite of clients on import/export issues related to cannabis. We regularly advise clients on manufacturing overseashemp import/export issues, and customs. Currently we are also working on heady questions surrounding international treaties and cannabis. One thing no one has hired us for yet, though–and which I would love to work on–is shipping medical cannabis internationally.

How do you ship medical cannabis internationally? Here are the steps:

  1. Start in a country with federal laws allowing medical cannabis production (there are quite a few);
  2. Start in a country with a progressive national health department and exporting authority (any of Canada, the Netherlands, Uruguay, Colombia, Israel, Jamaica, South Africa, Lesotho or Australia would probably suffice);
  3. Find a country that allows medical cannabis imports (there are quite a few, especially in the E.U.);
  4. Strike a deal and acquire import and export permits; and
  5. Report all imports and exports to the International Narcotics Control Board (INCB) as required.

That last step is worth a paragraph. The INCB is the United Nations’ independent control body for international drug conventions. In the context of cannabis, the 1961 Single Convention allows cannabis to be produced and administered for medical and research purposes under certain conditions. The required controls include that a government agency designates the area where cannabis can be cultivated, licenses producers, and has the exclusive right to import, export, trade at wholesale, and maintain supply. Each of the export countries listed above has taken steps along these lines.

Of course, exports will always be driven by demand. And demand is not solely a matter of quantity; product categories are also dispositive. To date we have seen medical cannabis import/export in categories including whole flower, oil, topicals and capsules. Some of this cannabis has been exported for research purposes, but the majority seems to have shipped for medical application. This is generally because the importing countries allow medical marijuana or cannabis consumption, but do not license production and do not tolerate home grow.

The medical cannabis import/export market is very new. This means that aside from the legal complexities, there are practical matters to work through. Foremost among these are quality standards. Although good manufacturing practice (GMP) adherence is required to ship medical cannabis to the E.U., for example, there are no standardized regulations between and among countries for medical cannabis quality control— including for content, composition, adulterants, potency and even levels of toxic residues. (Think about that… for a “medicine”!) Another critical issue is supply chain integrity. Finally, a thicket of political and policy considerations must be navigated, extending to social responsibility and end-user frameworks.

Firms pressing into the medical cannabis export space typically describe their efforts as long-term investments rather than one-off projects. This makes sense given the capital requirements for entry and the political wherewithal needed to gain international footing. Indeed, the quantities of cannabis shipped will be sizable and spaced at irregular intervals: this is not an area for dabblers.

Ultimately, exporting medical cannabis from places where it grows best, like Columbia, to places it might not, like England, seems natural – just as it does for Columbia to grow and send coffee overseas. Today, Canada has a big head start on export; however, one wonders whether it makes sense for cannabis to be grown north of the 42nd parallel long-term. At some point, the legal regime will settle out and market efficiencies may follow.

In all, legal and political factors that once made medical marijuana export unthinkable are changing, and changing very fast. The international distribution channels being built today will one day serve as conduits for the recreational cannabis trade as well. Until then, we will continue to monitor and report on developments in this fascinating space.

For more on the international cannabis trade, check out the following:

 

 

bcc cannabis home delivery

It’s no secret that California’s cannabis operators are currently in a regulatory and business environment where red tape, the illegal market, and significant taxes make life hard. At the same time, the state is trying to protect, promote, and grow the industry in a variety of ways, one of which is fighting off cities and counties to ensure that retail cannabis home delivery is allowed in every city and/or county no matter what.

As a brief history primer, California is a very strong local control state when it comes to cannabis. Pursuant to the Medicinal and Adult-Use Cannabis Regulatory and Safety Act (“MAUCRSA”), before you can secure a state license for your cannabis business you must first obtain local approval from the city or county in which you plan to operate. And the majority of cities and counties still ban commercial cannabis activity; the ones that do allow it tend to lean towards medical-only sales and/or there can be some serious barriers to entry depending on the city or county. Further, Proposition 64 (which co-exists with MAUCRSA) has clear promises and directives to maintain local control and a city’s or county’s ability to ban any kind of commercial cannabis activity outright (with the exception of the transport of cannabis between licensees via public roads).

Currently, according to MAUCRSA:

  1. “[MAUCRSA shall] not be interpreted to supersede or limit the authority of a local jurisdiction to adopt and enforce local ordinances to regulate businesses licensed under this division, including, but not limited to, local zoning and land use requirements, business license requirements, and requirements related to reducing exposure to secondhand smoke, or to completely prohibit the establishment or operation of one or more types of businesses licensed under this division within the local jurisdiction.”;
  2. “A local jurisdiction shall not prevent delivery of cannabis or cannabis products on public roads by a licensee acting in compliance with [MAUCRSA] and local law. . . .”; and
  3. “Licensing authorities shall not approve an application for a state license under this division if approval of the state license will violate the provisions of any local ordinance or regulation [. . .] The licensing authority shall deny an application for a license under this division for a commercial cannabis activity that the local jurisdiction has notified the [Bureau of Cannabis Control (“BCC”)] is prohibited [. . .].”

In January of this year, pursuant to the final MAUCRSA regulations, and despite the foregoing, the BCC determined–seemingly based on the “use of public roads” language above–that home delivery does not require any city or county local approval under MAUCRSA. Therefore, BCC explained that retailer licensees can undertake home delivery in any jurisdiction in the state– even in those that completely ban delivery. Specifically, the BCC adopted Rule 5416(d), which says that “A delivery employee may deliver to any jurisdiction within the State of California provided that such delivery is conducted in compliance with all delivery provisions of this division.”

As a result of BCC’s action,  24 cities sued the BCC in Fresno County court earlier this year to overturn the new delivery rule. Here’s the complaint for your viewing pleasure. The crux of the fight is whether the new delivery rule is consistent with Proposition 64 and MAUCRSA and whether the BCC has the authority to adopt and implement the rule. The cities argue the new delivery rule is completely inconsistent with both, and that the BCC has gone beyond its rulemaking authority under MAUCRSA. The cities also allege that if the BCC wants statewide delivery without any kind of local control the California Assembly is the body to lawfully make that call via a change to the statute.

While the cities and the BCC duke it out over interpretations of MAUCRSA and the BCC’s regulatory authority (with a calendared trial date of April 20 next year), a new litigation matter has developed where a cannabis operator (East of Eden) is suing Santa Cruz County to enforce its rights under the new delivery rule. Earlier this month, the BCC (via the State Attorney General) filed a motion to join the local lawsuit to protect the new delivery rule. The BCC is otherwise staying mum for any other strategic reasons it has for joining the local beef. We’ll know by January 2 whether or not the BCC will get to be a party in the Santa Cruz lawsuit. And we fully anticipate that this may not be the last local fight over the new delivery rule.

The bottom line is that in the wake of the BCC and the cities fighting it out over the new delivery rule, cannabis operators hang in the balance yet again. Risk tolerant businesses will no doubt try to take advantage of the new delivery rule, but they do so at significant risk where cities and counties are still taking the position that the rule is invalid anyway. In turn, unless and until we have a final decision from a court on the matter, cannabis retailers would be wise to pump the brakes on delivery into cities and counties that explicitly ban it.

The Agriculture Improvement Act of 2018 (“2018 Farm Bill”) legalized hemp by removing the crop and its derivatives from the definition of marijuana under the Controlled Substances Act (“CSA”) and by providing a detailed framework for the cultivation of hemp. The 2018 Farm Bill gives the US Department of Agriculture (“USDA”) regulatory authority over hemp cultivation at the federal level. In turn, states have the option to maintain primary regulatory authority over the crop cultivated within their borders by submitting a plan to the USDA.

This federal and state interplay has resulted in many legislative and regulatory changes at the state level. Indeed, most states have introduced (and adopted) bills that would authorize the commercial production of hemp within their borders. A smaller but growing number of states also regulate the sale of products derived from hemp.

In light of these legislative changes, we are presenting a 50-state series analyzing how each jurisdiction treats hemp-derived cannabidiol (“Hemp CBD”). Each Sunday, we summarize a new state in alphabetical order. Today we turn to Mississippi.

Mississippi is one of the few states that did not allow hemp cultivation under the 2014 Farm Bill. As of this writing, Mississippi still doesn’t allow for hemp cultivation. But don’t fret, there is a task force!

Last year, Mississippi enacted House Bill 1547 which established the Mississippi Hemp Cultivation Task Force. The Task Force will study hemp cultivation, market potential, and job creation. The Mississippi Department of Agriculture has more information on the task force here.

Because Mississippi law doesn’t distinguish between marijuana and hemp, the sale of hemp-based products, including Hemp-CBD, is risky at best and illegal at worst. Mississippi has a very limited medical marijuana program, which allows the limited sale of CBD products. Most over-the-counter Hemp-CBD sales would not fall within the boundaries of this program. In addition, the Mississippi Department of Public Health and Safety recently issued a statement warning the public about the dangers of Hemp-CBD.

Mississippi’s hemp program is really non-existent at this point. Mississippi hasn’t exhibited a strong aversion to hemp like some other states (looking at you Idaho) but it also is in a small minority of states with no hemp cultivation regulations. This may change in light of the 2018 Farm Bill, but as it currently stands, Mississippi is not a great place for hemp-related activities.

For previous coverage in this series, check out the links below:

hemp cbd california

Dozens of times per month, I am asked by clients and potential clients whether hemp-derived cannabidiol (“Hemp CBD”) products are legal in California. With almost any other product, I can give an easy “yes” or “no” answer. But with Hemp CBD, my answer usually takes five to ten minutes to explain and ultimately ends with “there is no clear answer, all of this could change dramatically in the next few months, and all of this will change in the next year”. Given the perplexing state of Hemp CBD laws in this state, I thought it might help to try to answer this all-too-common question here as well.

To really understand the legal status of Hemp CBD in California, one should understand the state’s stance on “cannabis”. The term “cannabis” is a legally defined term that means the Cannabis sativa L. plant with more than .3% delta-9 THC and excludes hemp, which is legally defined as the Cannabis sativa L. plant with .3% or less delta-9 THC. Cannabidiol can be derived from either cannabis (in which case it is generally legal and may be sold through the licensed cannabis chain), or hemp (in which case the law is completely unclear in many cases). If this all seems a bit confusing, it is. I won’t even try to get into the different terminology that the federal government uses.

The state cannabis agencies, ironically, prohibit licensed commercial cannabis businesses from using Hemp CBD in manufactured cannabis products or selling Hemp CBD products in licensed cannabis retail stores. Beyond that, the state has not adopted a single law that expressly outlaws Hemp CBD processing, sale, or consumption (though some cities or counties in the state may actually have laws prohibiting such activities). Instead, about a year and a half ago, the California Department of Public Health’s Food and Drug Branch (“CDPH”) released an FAQ document which stated that in spite of the fact that cannabis derivatives may be lawfully added to edibles, Hemp CBD could not legally be added to foods (including beverages and animal foods) or dietary supplements. The FAQ says nothing about many other products, such as cosmetics, smokeable hemp, or Hemp CBD vapes.

These FAQs, notably, are based expressly on federal law, and do not explicitly cite California law to support CDPH’s attempted ban on Hemp CBD foods. There are really two main arguments in the FAQs for why Hemp CBD foods are unlawful:

  1. Hemp was a Schedule I (illegal) drug under the Controlled Substances Act. This argument is no longer valid, since the Controlled Substances Act (“CSA”) was amended by the 2018 Farm Bill to carve hemp out from the CSA. But either way, it is a bit odd that the CDPH was attempting to ban a substance based on its placement in the CSA, when the CDPH is also responsible for licensing cannabis manufacturers, where cannabis is a Schedule I narcotic.
  2. The FDA did not allow Hemp CBD to be added to foods. This is still the case, as the FDA recently made clear. But again, it is interesting that the CDPH is relying on a federal agency’s position when it comes to Hemp CBD, but not when it comes to cannabis.

While the FAQs really only cite federal law, the CDPH has apparently been threatening enforcement actions and even pulling products under a California law that most people in the state probably aren’t aware of: the California Sherman Food, Drug, & Cosmetic Law. The Sherman Law is in many respects similar to the federal Food, Drug and Cosmetic Act (which is the basis for the FDA’s power over Hemp CBD). Notably, the Sherman Law prohibits selling “adulterated” food. There are numerous different definitions for when food is “adulterated”, but generally it means that it is poisonous, harmful, or unsafe. Though CDPH has made no public fining that Hemp CBD is actually “adulterated”, it has apparently been using this provision as the basis for its enforcement actions. In fact, the Los Angeles Department of Public Health, which to some extent acts as a local enforcement arm for CDPH policies, issued guidance stating that Hemp CBD was an adulterant.

In response to the claim that Hemp CBD was an adulterant, California Assembly Member Aguiar-Curry introduced AB-228 in early 2019, which would have expressly found that Hemp CBD was not an adulterant. In fact, when I started writing about AB-228 back in January, that’s basically all the bill did, though subsequent amendments would have created a much more robust regulatory framework for Hemp CBD. Unfortunately, the bill stalled out in committee a few months ago, so for now there will be no progress on that front. But we are basically guaranteed to see a revival of the bill in some form or another in the 2020 legislative session.

Also interestingly, there appears to have been no public challenge in the courts over whether Hemp CBD actually even qualifies as an “adulterant”. It is certainly possible that over the next few months, we could see a company that was subject to CDPH or local department of health enforcement sue and claim that Hemp CBD is not an “adulterant”. It’s possible that the CDPH would cite the FDA’s assertions that Hemp CBD could have some toxicity issues, but whether those assertions are sufficient for a state to take enforcement actions under state law is not so clear.

Ultimately, there is no great answer to the question “is Hemp CBD really unlawful in California?”, but there are some good pieces of information to consider:

  • While there is no state law that bans Hemp CBD processing, sale, or consumption outside of the licensed cannabis chain, the CDPH or local departments of health may initiate enforcement actions for foods, beverages, animal products, or dietary supplements under federal authority or the Sherman Law.
  • There are a number of products that the CDPH has not publicly identified as unlawful, such as cosmetics. The CDPH has jurisdiction over cosmetics under the Sherman Law, and could take the same position that they are not lawful. But they did not do so in the FAQ. It’s also possible that they could take a similar position to the FDA, which has been much less aggressive when it comes to cosmetics unless they make medical claims.
  • The law is subject to change quickly. As we live in a state where a couple-page-long FAQ document, rather than a law or regulation, can support enforcement actions against an entire industry, it’s entirely possible that the CDPH or another agency could reverse course or take an entirely new position at the drop of a dime.
  • We are pretty much certain that the law will change dramatically in the longer term. The FDA will issue regulations for Hemp CBD (though that may take time), and it’s highly likely that the California legislature will work on new Hemp CBD legislation in 2020.

So stay tuned to the Canna Law Blog as we continue to cover developments on the Hemp CBD front in California.

fda hemp cbd

The Food and Drug Administration (“FDA”) had a busy Monday this week. On November 25, the agency issued warning letters to 15 businesses selling hemp-derived CBD (“Hemp-CBD”) products as unapproved drugs. The FDA also released updated consumer guidance on Hemp-CBD.

Warning Letters

The recent batch of warning letters appear to turn on the marketing of Hemp-CBD products as unapproved drugs. The FDA has approved CBD as a drug: Epidiolex. Epidiolex is used to treat epilepsy and requires a prescription. That’s the only approved use of CBD as a drug. The FDA determines whether something is a drug based on how the product is marketed. Any marketing material that includes a health claim will cause the FDA to classify a product as a drug.

These letters warn Hemp-CBD companies that are making health claims about Hemp-CBD products. In addition, the FDA reiterates its view that Hemp-CBD cannot be added to food or dietary supplements and states that it “cannot conclude that CBD is generally recognized as safe (GRAS) among qualified experts for its use in human or animal food” based on the available data.

Consumer Update

The FDA’s update to consumers makes it appear that Hemp-CBD is a dangerous and unknown substance. Here is the FDA’s own summary of its latest updates:

  1. CBD has the potential to harm you, and harm can happen even before you become aware of it.
    • CBD can cause liver injury.
    • CBD can affect the metabolism of other drugs, causing serious side effects.
    • Use of CBD with alcohol or other Central Nervous System depressants increases the risk of sedation and drowsiness, which can lead to injuries.
  2. CBD can cause side effects that you might notice. These side effects should improve when CBD is stopped or when the amount ingested is reduced.
    • Changes in alertness, most commonly experienced as somnolence (drowsiness or sleepiness).
    • Gastrointestinal distress, most commonly experienced as diarrhea and/or decreased appetite.
    • Changes in mood, most commonly experienced as irritability and agitation.
  3. There are many important aspects about CBD that we just don’t know, such as:
    • What happens if you take CBD daily for sustained periods of time?
    • What is the effect of CBD on the developing brain (such as children who take CBD)?
    • What are the effects of CBD on the developing fetus or breastfed newborn?
    • How does CBD interact with herbs and botanicals?
    • Does CBD cause male reproductive toxicity in humans, as has been reported in studies of animals?

Let’s start with the FDA’s first point, that Hemp-CBD may hurt you and you may not realize it. During the investigation of Epidiolex, there was some evidence that CBD could cause liver injury. The FDA is therefore concerned that the widespread use of Hemp-CBD without doctor supervision, could result in liver damage. That’s an understandable concern. But the consumer update doesn’t stop there.

The FDA goes onto warn about Hemp-CBD interactions with alcohol and other drugs. I don’t want to diminish these interactions as a legitimate concern, but I do want to point out that concerns over drug and alcohol interactions are not limited to Hemp-CBD. Pretty much all drugs can interact with other substances in a negative way. The FDA didn’t frame the issue of Hemp-CBD interactions as something to be aware of or something to watch out for; it was presented as a way that Hemp-CBD can hurt consumers.

Last year, the World Health Organization (“WHO”) issued a report on CBD, concluding that “there is no evidence of recreational use of CBD or any public health related problems associated with the use of pure CBD.” WHO also raised the issue of CBD’s interactions with other drugs, but still reached the conclusion that CBD, as a compound, was generally low-risk to public health.

Let’s move onto the second point about Hemp-CBD side effects. Here is another passage from the FDA’s  Hemp-CBD consumer update:

In addition, CBD can be the cause of side effects that you might notice. These side effects should improve when CBD is stopped or when the amount ingested is reduced. This could include changes in alertness, most commonly experienced as somnolence (sleepiness), but this could also include insomnia; gastrointestinal distress, most commonly experienced as diarrhea and/or decreased appetite, but could also include abdominal pain or upset stomach; and changes in mood, most commonly experienced as irritability and agitation.

This passage raises some serious questions about side effects. It does not provide citations to the studies that lead the FDA to determine that these side-effects were serious enough to warrant inclusion on the FDA’s website. Also, how did the FDA make the determination that the most common change alertness is somnolence or the most common change in mood is experienced as irritability and agitation? Also, the FDA’s recommendation that side effects will improve if the use of CBD is stopped or the amount ingested is reduced has to based on clincial information, right? The FDA wouldn’t make an unsubstantiated medical claim online, especially when there is so much misinformation out there regarding Hemp-CBD, would it?

I don’t doubt that the FDA based its above conclusions regarding Hemp-CBD on some set of studies or other data set, but it’s hard to justify the FDA making these claims without any reference to how the FDA reached these conclusions. I’ve written before about how the FDA has a credibility problem with the American public. I don’t think this latest consumer update does the FDA’s credibility any favors.

The third point focuses on questions that remain about the safety of Hemp-CBD. These are important questions and should be considered. The fact is that the interest in CBD has eclipsed the scientific data we have available. The FDA’s questions are important and should be studied carefully. The problem is that the FDA appears to have already made a number of determinations about the dangers of Hemp-CBD without showing its work or refuting the data provided by the WHO.

Conclusion

The FDA’s approach to Hemp-CBD has been one of regulatory inaction and even obfuscation. Rather than providing guidance to or issuing regulations concerning manufacturers of Hemp-CBD products, the FDA has focused on telling consumers and Hemp-CBD businesses that most Hemp-CBD products are not legal and not safe. This latest round of warning letters and the consumer update are a continuation of this approach, but with greater intensity. The consumer update strikes a more urgent and alarming tone and the sheer number of warning letters sent out on one day is a departure from the FDA’s norm.  Hopefully, the FDA has also been working behind the scenes to also establish a regulatory framework for the safe manufacture and distribution of Hemp-CBD products. The FDA’s current approach to Hemp-CBD does not seem tenable for much longer.

On December 4, 2019, at 12:30 PM, Harris Bricken attorney Daniel Shortt and Cascadia Intellectual Property attorney Krista Wittman will be presenting at a seminar put on by the Washington State Bar Association’s International Practice Section titled “U.S. and International Aspects of Cannabis Laws and Legal Practice.” Additional information on the event is available below and on the International Practice Section page.

The presentation will cover the following:

The passage of the 2018 Farm Bill opened the door to importing and exporting hemp in the United States, at least in theory. Cannabis remains illegal under federal law and states that have legalized cannabis sales do not even allow cannabis to cross state lines, let alone international borders. Daniel Shortt will discuss how U.S. cannabis policy impacts the growing international cannabis market.

National laws can also greatly affect whether and how intellectual property rights for cannabis-related businesses can be obtained.  Patent attorney Krista Wittman will discuss her experience prosecuting cannabis-related patent and trademark applications in the United States as well as in select foreign jurisdictions.

The international cannabis market is quickly becoming a reality as countries change their laws and policies on cannabis. Attorneys from both our international and cannabis practice groups are fielding an up-tick in questions on cannabis trade. For more information on the international cannabis market, check out these recent posts:

We hope you can join Daniel and Krista on December 4th! Register here.

Details

Date: Wednesday, December 4, 2019
Time: 12:30 P.M. – 2:30 P.M. (registration begins at 12:00 PM)
Credits:  2.0 Law and Legal Procedure
Tuition: $35 Standard, $0 International Practice Section Member, $18.75 Law Student
In-Person Location:
Foster Garvey PC
1111 Third Avenue, Suite 3000, Seattle, WA 98101