Photo of Nathalie Bougenies

Located in Harris Bricken's Portland office, Nathalie practices corporate law, intellectual property, real estate, and litigation, enabling her to assist companies with a wide range of legal and business challenges.

industrial hemp cbdLast week, the U.S. Department of Agriculture (“USDA”) held a public meeting during which hemp stakeholders shared their opinion on the promulgation of rules to regulate the crop.

Pursuant to the 2018 Farm Bill, which legalized hemp by descheduling the crop under the Controlled Substance Act, the USDA is tasked with overseeing and regulating the production of hemp in the United States. Specifically, the federal agency is to review and approve “plans” submitted by states and Indian tribes that choose to hold primary regulatory authority over hemp. However, before the federal agency may begin reviewing these plans, the agency must formalize rules with which states and Indian tribes plans must comply. As of the date of this memo, only a handful of states and Indian tribes have submitted their plans.

Roughly 50 speakers, including state governments, Indian tribe representatives, and stakeholders in the supply chain of hemp, shared their thoughts during the three-hour long webinar. All expressed concerns regarding testing procedures, interstate transportation of the crop, access to banking, and guidance from the Food and Drug Administration (“FDA”). Here is a summary of what each group had to say:

States 

Several state Departments of Agriculture, including Pennsylvania, Kentucky, and Wisconsin, expressed great concerns regarding testing and access to banking. Ryan Quarles, Commissioner of the Kentucky Department of Agriculture, explained that hemp farmers and companies need access to capital “just like any other farmer or agri-business.” Quarles also called for guidance from the FDA regarding its position on CBD derived from industrial hemp:

If the FDA regulates too hard against CBD, it would really harm small Kentucky family farms … We’ve got to develop rules that allow our farmers an opportunity to continue supporting this crop and benefitting economically from it, especially during a period of depressed farm cash receipts.”

Indian Tribes

Although the USDA expects to release these rules by the 2020 growing season, Indian tribes urged the USDA to do so before the end of the 2019 harvest season. Because Indian tribes are not currently allowed to grow hemp pursuant to the 2014 Farm Bill, which strictly limits hemp cultivation within state borders, pushing the release of the rules until fall would further delay tribes’ access to the market and put them at a financial disadvantage.

Supply Chain Stakeholders

The primary concern shared by stakeholders involved in the supply chain pertained to the likely confusion by state enforcement officials in differentiating hemp from marijuana. Indeed, as reflected in recent events, local enforcement groups have struggled to differentiate the plants as they look and smell alike. This issue partially stems from the technologically inadequate field kits currently available, which only detect whether THC is present, regardless of its concentration. Such confusion, industry players held, will continue to lead to unnecessary delays and mistaken arrests.

This public meeting was the first step toward the USDA issuing a proposed regulation in the implementation of the 2018 Farm Bill.  Next month, the FDA will hold a similar public meeting to hear directly from stakeholders regarding the regulation of CBD-infused food and dietary supplements. We will summarize the meeting after it occurs. Stay tuned!

oregon hemp

Last week, the Oregon Department of Agriculture (“ODA”) submitted a letter of intent to the U.S. Department of Agriculture (“USDA”) in which the state agency conveyed its decision to submit a state hemp plan, pursuant to the Agriculture Improvement Act of 2018 (“2018 Farm Bill”).

In addition to legalizing the production of hemp by removing the crop from the list of controlled substances, the 2018 Farm Bill delegates to states and Indian tribes the broad authority to regulate and limit the production of hemp and hemp products within their territories. Specifically, Subtitle G of the new Farm Bill sets forth a regulatory scheme by which states and Indian tribes may seek primary regulatory authority over hemp production. To obtain primary regulatory authority, states and Indian tribes must submit a plan to the USDA Secretary for review and approval. However, before the Secretary may review and approve state plans it must promulgate rules and regulations pertaining to these plans.

As such, ODA Director Alexis Taylor expressed to the Secretary her department’s eagerness to receive direction from the USDA regarding requirements for state implementation plans. Specifically, Taylor raised the need for requirements in solving the growing confusion surrounding interstate transportation of hemp. The ODA Director explained that delays in rule making are subjecting Oregon’s hemp industry to “unnecessary transportation and commerce restrictions” and further stated that “having additional guidance to allow the flow of hemp in interstate commerce would be critical to farmers in Oregon.” Indeed, as we previously explained, the interstate transportation of hemp is lawful for hemp grown under a plan approved by the USDA, pursuant to the 2018 Farm Bill.

The ODA’s letter highlights the state’s robust regulation of the crop and the agency’s desire to remain at the forefront of hemp production. The ODA’s strong aspirations for hemp were also reflected domestically this past week. Indeed, a few days before it released its statement to the USDA, the Oregon department filed temporary hemp rules under Oregon Administrative Rules 603-048. The temporary rules, which became effective immediately, bring the ODA testing rules for industrial hemp intended for human consumption and hemp items in compliance with those of the Oregon Health Authority (“OHA”) as required by ORS 571.330. (That statute provides that industrial hemp intended for human consumption and hemp items must be tested similarly to marijuana under OHA’s rules. The OHA recently adopted new testing rules for marijuana, which forced the ODA to amend its rules.)

In addition to revising the ODA testing rules, the proposed rules clarify recordkeeping requirements. The Oregon department announced it would develop a template that registrant growers and handlers will be able to use to ensure their recordkeeping sufficiently meets ODA requirements. The template will be released on the ODA’s website as soon as it will be available. Finally, as we explained recently, the state legislature will likely pass a hemp bill this session.

For more information on Oregon hemp, please contact us.

cbd hemp cigar cigaretteIn the last few weeks, we have received a growing number of inquiries pertaining to the legality of smokable products infused with cannabidiol derived from industrial hemp (“CBD Smokables”), including vape pens and pre-rolled hemp flower joints. This post provides a brief overview of the current legal status of these products.

As we have discussed on several occasions (here and here), the U.S. Food and Drug Administration (“FDA”) has yet to promulgate clear guidelines on CBD-infused products. While we know the FDA deems the sale and use of CBD in food and dietary supplements unlawful, the agency has yet to address its sale and use in tobacco products.

Indeed, the FDA has the authority to regulate the sale, manufacture, and marketing of tobacco products under the 2009 Family Smoking Prevention and Tobacco Control Act (“TCA”). The TCA defines “tobacco product” as a “product made or derived from tobacco that is intended for human consumption, including any component, part, or accessory of a tobacco product.”

In 2016, the FDA expanded its regulatory authority to all products meeting the TCA’s statutory definition of a tobacco product, such as e-cigarettes, cigars, pipes and waterpipes.

However, the various statements published on the FDA’s website (here and here) seem to suggest that the agency currently refuses to interpret “tobacco products” so broadly as to include products free of nicotine or tobacco. Accordingly, it seems unlikely that CBD Smokables devoid of these substances would be considered “tobacco products.”

Although the federal agency is not likely to regulate most CBD Smokables as tobacco products at the moment, it could potentially regulate them as a drug under the Food, Drug and Cosmetic Act (“FDCA”).

Under the FDCA, a drug is defined as “intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease” or “intended to affect the structure or any function of the body . . . .” Accordingly, the agency’s jurisdiction is triggered by the intended use of the product. Generally, intended use is determined on the basis of claims made in labeling, advertising and other promotion of the product. Therefore, any health claim made about CBD-infused products, including CBD Smokables, will be treated by the FDA as a drug.

Drugs are tightly regulated by the FDA and are subject to pre-market approval. Yet, as of the date of this post, the FDA has only approved CBD as a pharmaceutical drug in the treatment of epilepsy (Epidiolex). Accordingly, any health claim made about any CBD Smokable would lead the FDA to treat the product as a drug, and thus, would require the distributor to submit their product to the agency for pre-market approval before they can begin selling it in interstate commerce.

Until the agency makes a final determination and issues guidelines for CBD Smokables, no distributor will technically comply with current FDA rules. However, based on the FDA’s recent statements and past enforcement actions, said distributors can mitigate the risk of FDA enforcement by avoiding medical claims all together.

For additional information on CBD Smokables, please contact our team.

cbd alcoholThe recent wave of crackdowns on cannabidiol (“CBD”)-infused alcohol beverages has further exacerbated public confusion regarding the legal status of the cannabis plant’s non-psychoactive compound.

This post provides an overview of the regulatory framework of alcoholic beverages, including pre-manufactured industrial hemp-infused drinks and “homemade” alcoholic drinks infused with CBD oil or extracts.

Pre-Manufactured Alcohol Beverages Infused with Hemp

As we previously explained, alcoholic beverages are regulated by federal and state laws. Cannabis is heavily regulated at the state level but unlike alcohol, it is—for the most part—strictly prohibited under federal law. However, one variety of cannabis, hemp, was recently legalized under the Agriculture Improvement Act of 2018 (“2018 Farm Bill”), which removed that particular crop from the definition of “Marihuana” under the Controlled Substance Act (“CSA”). Consequently, hemp is allowed in the formulation of alcohol beverages so long as the product meets specific criteria imposed by federal and state alcohol regulatory bodies.

The formulation of hemp-infused alcoholic drinks is regulated by the U.S. Alcohol and Tobacco and Trade Bureau (“TTB”) as well as by state liquor control agencies in states where the production and sale of hemp-infused drinks is allowed. Indeed, in its latest FAQ’s (which pre-dates the enactment of the 2018 Farm Bill), the TTB declared it understood the 2014 Farm Bill to only authorize the use of hemp in the production of alcoholic beverage products for sale within limited state-sanctioned pilot programs.

However, in the same FAQ’s, the TTB explained that before it approves a formulation, it consults with the Food and Drug Administration (“FDA”) to determine whether a hemp ingredient is safe for consumption and whether its use is lawful under the Food, Drug & Cosmetic Act (“FD&CA”). As we previously explained, the FDA currently deems the use of hemp-CBD-infused foods and drinks as unlawful because CBD has been approved in the treatment of epilepsy (Epidiolex); and therefore, can only be used as a drug. As such, the FDA has refused to recognize hemp-CBD as a safe food additive, which means it would treat hemp-CBD infused alcoholic beverages as unlawful under the FD&CA.

Consequently, alcoholic beverages derived from parts of the hemp plant that do not contain CBD, such as hulled hemp seeds, hemp seed protein and hemp seed oil, grown pursuant to a state pilot program that allows the commercial sale of these products, seem to be the only hemp-infused beverages eligible for TTB approval at the moment.

Drinks Infused with CBD Oil or Extracts

The alcoholic beverages recently banned from state bars and restaurants consisted of pre-manufactured alcohol beverages to which CBD oil or extract was later added. Unlike manufactured alcohol beverages, alcoholic drinks sold in bars and restaurants are directly regulated by state liquor control boards and state departments of health, which are free to defer to and adopt FDA regulations.

Although the FDA has limited its enforcement actions against CBD-infused products by sending warning letters, state agencies have begun confiscating those products, pursuant to FDA guidelines that categorize CBD as unsafe food additives. As I previously explained, food additives must receive FDA pre-market approval to be deemed safe for human consumption. However, given the FDA’s current position on CBD-infused products, such approval has yet to be granted.

Because these “homemade” CBD-infused alcoholic drinks are devoid of TTB and FDA market approval, it is understandable that they be banned from local restaurants and bars as they pose a potential threat to health and safety.

So as of now, only TTB-approved hemp-infused alcohol beverages seem to be legal and officially “safe” for human consumption. And to be honest, we don’t know of any that have been approved. That said, this is an incredibly fast-evolving area of law and policy, and we have seen a dramatic escalation of interest in this space ever the past year.

For more information on this issue, feel free to contact our team of hemp and CBD experts.

EU CBD food export

We’ve been writing a lot on this blog about the regulation and sale of cannabidiol (“CBD”) products at the state and federal levels. The United States is not the only international actor, however, that is concerned with regulating the sale of CBD products, including CBD-infused foods. The European Food Safety Authority (“EFSA”), the European equivalent of the U.S. Food and Drug Administration (“FDA”), recently changed guidance on cannabinoids, declaring that all new food products infused with the plant or its derivatives should receive a pre-market approval under the European Union “novel food” regulation.

Regulation 2015/2283, which is the latest food regulation adopted by the European Parliament and the European Union (“EU”), defines “novel food” as “food that was not used for human consumption to a significant degree within the Union before 15 May 1997, irrespective of the dates of accession of the Member States to the Union.”

The EU Novel Food Catalogue entry for CBD, which contains a non-exhaustive list of ingredients that inform member nations on whether a product will need an authorization under the Novel Food Regulation, now refers to a broader class of “cannabinoids” and provides that:

Without prejudice to the information provided in the novel food catalogue for the entry relating to Cannabis sativa L., extracts of Cannabis sativa L. and derived products containing cannabinoids are considered novel foods as a history of consumption has not been demonstrated. This applies to both the extracts themselves and any products to which they are added as an ingredient (such as hemp seed oil). This also applies to extracts of other plants containing cannabinoids. Synthetically obtained cannabinoids are considered as novel.

This new EFSA guidance drastically expands the categories of cannabinoids that would require pre-market approval–note, however, that hemp seeds, flour and seed oil remain permitted–and it suggests that CBD-infused food could be off the European market for some time. Generally, it takes 3 years for an ingredient to gain novel food status.

A handful of European countries such as Spain, Italy, and Austria have already taken enforcement actions against CBD products on the basis of being “novel foods.” As such, it seems likely that these EU member nations will adopt the new EFSA guidance and continue their efforts in regulating CBD-infused foods as “new foods.”

The EU or its affiliates are expected to provide further guidance on this issue; however, due to administrative procedures and time required for adequate data collection, such publication won’t likely be released until 2020.

This new EFSA guidance will further complicate U.S. CBD companies’ ability to export their products overseas. In addition to potential international law violations, CBD companies run the risk of FDA and Customs and Border Protection (“Customs”) enforcement actions. The FDA has yet to release guidelines on shipping CBD products to other countries; however, the main FDA inquiry for the purpose of exporting CBD would likely be whether the CBD products were adulterated or mislabeled due to the fact that they were not manufactured or labeled in compliance with the target country’s law. Another risk in exporting CBD products is that Customs agents may not have a sophisticated understanding of the difference between hemp and marijuana, as demonstrated in recent state enforcement actions. If such confusion were to occur, Customs would likely seize the CBD shipment and potentially involve the Drug and Enforcement Administration.

In light of those regulatory changes, CBD companies should remain informed on domestic and international shipping laws and consult with experienced lawyers to assess the risks of exporting their products overseas.

For more on cannabis and international law, check out the following:

Earlier this year, the Food and Drug Administration (“FDA”) began seizing various cannabidiol (“CBD”) products from store shelves. These enforcement actions reflected the implementation of the agency’s position that CBD, regardless of the source from which it is derived, cannot be lawfully sold for human consumption.

A few states, including states that have adopted industrial hemp pilot research programs under the 2014 Farm Bill, now seem to have embraced this FDA position by banning certain CBD-infused products from local stores.

Last Friday, several New York restaurants, bakeries, and bars were forced to stop selling CBD-infused foods and drinks. Officials with the New York City Department of Health confiscated those products, marking them as “embargoed.” The embargo process consists of identifying, itemizing and removing products. The Department has yet to issue a public statement or to provide further information on these actions, but it appears state health inspectors explained to the business owners that CBD cannot be used as a “food additive”.

This argument was similar to that used by the Maine Department of Health and Human Services (“DHHS”). Earlier last week, Maine health authorities notified various businesses that they needed to remove all CBD-infused foods, tinctures, and capsules from their shelves. Relying on an internal report by the state Maine Attorney General’s Office which concluded that CBD could not be used in mass-market food until Maine’s hemp pilot program receives federal approval pursuant to the 2018 Farm Bill, the Maine DHHS determined that CBD was an unapproved food additive the FDA does not recognize as safe.

Section 201(s) of the Food, Drug, and Cosmetic Act (“FD&C Act”) defines “food additive” to encompass any substance that may reasonably be expected to directly or indirectly affect or become part of a food. Until a food additive is tested and found safe for its intended use, it is deemed unsafe. A food additive is considered safe if there is a reasonable certainty that it is not harmful under its intended use and condition. If a food additive is added to a food prior to FDA approval, its presence renders the food adulterated and subject to enforcement action.

Because the FDA has yet to approve CBD as a food additive, Hemp-CBD products, particularly edibles and infused drinks are  deemed unsafe under the FD&C Act.

Though state health authorities embargoed CBD edibles and other CBD products used for human consumption, they told affected business owners they could continue selling CBD products that “could be smoked, vaped, worn as a patch or applied as lotion.” This is because cosmetics and smokable products are subject to less onerous FDA regulations than foods and dietary supplements. This all may change when the FDA soon releases its plan to regulate Hemp-CBD products.

These recent enforcement actions in New York and Maine should remind industry players that business and legal considerations surrounding Hemp-CBD products are in a constant state of flux.

In late January, Portland hosted the Cannabis Collaborative Conference (“CCC” or “Conference”), an annual forum created by cannabis industry leaders, aimed at addressing the most pressing issues facing this emerging market. This year’s conference focused on the future of the cannabis industry.

Rick Garza, Director of the Washington State Liquor and Cannabis Board (“WLCB”), was one of the key speakers at this year’s Conference. Mr. Garza discussed the possibility of Washington state allowing small cannabis farmers to sell directly to consumers. This practice would be comparable to that allowed for wineries, breweries and distilleries. If approved by the Washington State Legislature, this move would afford small growers an opportunity to increase their sales and, consequently, boost the local economy. This initiative would mirror the practice adopted by several Canadian provinces, which allow licensed producers to sell marijuana to consumers at cultivation facilities, and states like Colorado and Oregon, which authorize licensed cannabis growers to concurrently hold retailer licenses.

washington oregon cannabis marijuanaThe Washington cannabis regulator was also joined by Steve Marks, Executive Director of the Oregon Liquor Control Commission (“OLCC”). Both discussed upcoming changes to the Washington and Oregon programs, which respond to the ongoing and growing issues of oversupply. As we previously discussed, Oregon’s supply has far exceeded local demands: the state is currently sitting on approximately 1.4 million pounds of marijuana that state and federal laws prohibit from selling outside state lines. This tremendous oversupply in Oregon has caused prices to crater, putting many licensed growers on precariously thin ice. In 2018, the wholesale price of Oregon flower dropped from $3.90 per gram at the beginning of the year to $1.86 as of the end of the summer. Washington growers find themselves in an equally challenging situation.

In addressing the overproduction issue and interstate leakage, the OLCC leader said he expected more discussion about legislation capping the number of cannabis business licenses in Oregon. However, as we explained before, controlling supply by capping Oregon licenses as a fearful response to interstate leakage could also incentivize black markets, especially for Oregon sales, because a cap would increase the prices of cannabis.

Mr. Marks also shared that he has seen an infusion of capital into Oregon cannabis companies from investors who believe marijuana will become federally legal. Similarly to those investors, we believe federal legalization is merely a matter of time and that it will help put an end to unapproved interstate leakage. Indeed, the federal prohibition of cannabis is encouraging unscrupulous and desperate cannabis businesses to cut their losses and sell their surplus in the black market.

Although solving the issue of oversupply and interstate leakage will inevitably require the federal legalization of cannabis, it is encouraging to know that Washington and Oregon cannabis regulators are actively exploring ways to improve the industry and insure its sustainability. We expect to see some very important developments in both states in 2019, in addition to any federal law updates.

oregon industrial hemp cbd OLCC
Oregon hemp will see a little bit of each in 2019.

Last year was a big one for the Oregon industrial hemp program. If you recall, the state legislature enacted House Bill 4089, which provided a much needed regulatory framework for the crop and authorized its processing and sale into the Oregon Liquor Control Commission (“OLCC”) recreational market. To administer a portion of these statutory changes, OLCC drafted rule changes in September, which will soon be adopted.

However, a lot has happened since September. Indeed, the Agriculture Improvement Act of 2018, more famously known as the “2018 Farm Bill,” became law last month. Specifically, the 2018 Farm Bill legalized industrial hemp by removing the crop from the Controlled Substance Act—this means no more risk of enforcement action by the U.S. Drug and Enforcement Agency because industrial hemp, including concentrates and extracts, is no longer treated as a Schedule I substance—and delegated authority to states to regulate and limit its production.

The federal legalization of industrial hemp has triggered numerous inquiries from our Oregon clients regarding the impact, if any, of the new federal bill on the most recent set of OLCC rules. This post aims to answer this question.

Although industrial hemp is no longer illegal under federal law, states are not yet authorized to hold primary regulatory authority over the production of the crop. Before they can exercise this option, states will need to submit a regulatory plan (the “Plan”) to the U.S. Department of Agriculture (the “USDA”) for approval. However, approval won’t be given until the USDA promulgates rules and regulations regarding those Plans, a process that will most certainly take months, possibly more if the government shuts down again.

Section 7605(b) of the 2018 Farm Bill further provides that:

Effective on the date that is 1 year after the date on which the [USDA] Secretary establishes a plan under section 297C of the Agricultural Marketing Act of 1946, section 7606 of the Agricultural Act of 2014 (7 U.S.C. 5940) [the 2014 Farm Bill] is repealed.”

In other words, the 2018 Farm Bill won’t become effective until one year following the adoption of rules and regulations for the Plans by the USDA. Until then, the 2014 Farm Bill remains the legal framework under which state industrial hemp pilot programs operate.

Accordingly, states that have adopted an industrial hemp pilot program will continue to operate the way they have since before the passage of the 2018 Farm Bill into law. This means that the legal framework for interstate sales of Oregon hemp should not be affected. As far as sales into the OLCC market, growers, processors, and distributors will need to familiarize themselves with the new OLCC rules.

Under the OLCC rules, hemp handlers and growers will need to be certified by the Commission in order to place their products in the recreational market. The OLCC will then monitor and track this new input into the market via the Cannabis Tracking System (“CTS”). But hemp growers and handler certificate holders won’t be the only actors obliged to comply with these rules. Recreational licensees, processor licensees, and wholesale licensees will also be subject to a new set of guidelines.

For more information on these rules and how they might affect your business operations, don’t hesitate to contact our Portland office.

HEMP CBD FULL SPECTRUM HEMP FDA
… FULL SPECTRUM  HEMP?

In a recent post regarding the labeling requirements surrounding dietary supplements containing industrial hemp-derived CBD (“Hemp-CBD”), we alluded to a recent movement in the industry to rename Hemp-CBD products “full spectrum hemp.” We now take a closer look at the reasons behind this shift in nomenclature.

Part of the impetus behind this movement might be linked to a 2001 court decision pertaining to the status of lovastatin, a compound found in red yeast rice.

Although red yeast rice had been used for healing purposes for thousands of years, the isolated compound was approved by the FDA as a drug in the treatment of cholesterol. Despite the FDA approval, companies continued to sell and market lovastatin as a dietary supplement. One of these companies was Pharmanex. The FDA challenged the sale and marketing of Pharmanex’s product, Cholestin, and ultimately prevailed when Pharmanex challenged the FDA’s position in federal court.

The court held that the lovastatin found in Cholestin was not in its natural form (i.e., as naturally occurring in red yeast rice) because its manufacturer deliberately selected and used a method to produce specific levels of lovastatin that were greater than those naturally present in red yeast rice. In addition, the court determined that Cholestin was a drug because it was specifically marketed as the isolated lovastatin compound.

There may be some parallels between the case of red yeast rice and Hemp-CBD. Indeed, like red yeast rice, hemp and hemp extracts have been consumed for hundreds of years as food and for their medicinal value. Similar to red yeast rice, hemp contains hundreds of compounds, including CBD. And like lovastatin, CBD was recently approved by the FDA via a drug known as Epidiolex—although it is important to note that the CBD approved by the FDA as a drug is derived from the cannabis plant, not industrial hemp grown under an eligible state program, pursuant to the 2014 or 2018 Farm Bill.

Accordingly, if a Hemp-CBD product were to meet the standard laid forth by the court for red yeast rice (i.e., unadulterated full-spectrum hemp marketed as full spectrum hemp, not CBD), its manufacturer may be able to use the nomenclature “full spectrum hemp,” which might mitigate the risk of FDA enforcement action against Hemp-CBD products.

However, given the varieties of hemp strains, and the fact that each contain various levels of naturally occurring compounds, it might be challenging to specifically assess what constitutes “naturally occurring” levels of CBD. Nonetheless, “full spectrum” is generally understood to mean that all the natural constituents of the hemp plant are in product at the same percentages as they would be found in nature. Because advertising cannot be false or misleading, the nature of each product would be dispositive—i.e., whether or not the natural constituents are there in natural percentages—in determining whether those products might fall outside the scope of FDA scrutiny.

Accordingly, before manufacturers of Hemp-CBD products consider renaming their product “full spectrum hemp” they should consult with experienced attorneys to review their manufacturing process and determine whether switching from “CBD” to “full spectrum hemp” in labeling and marketing would be allowed and beneficial.

oregon cannabis interstate salesOnce again, Oregon is working on becoming a marijuana maverick. The Beaver State is on the verge of introducing a bill that would allow marijuana exports to other states by 2021.

In an attempt to tackle the oversupply crisis that has plagued Oregon the last few years, the Craft Cannabis Alliance, an Oregon-based membership association of cannabis and allied businesses, has spearheaded a campaign aimed at reintroducing the idea of exporting Oregon cannabis, a plan that was first proposed in 2017 by Senator Floyd Prozanski (D-Eugene).

The idea was memorialized in Senate Bill 1042, which would have permitted interstate transfers of cannabis products with adjacent legal states that complied with Oregon’s testing, packaging and labeling rules as well as any rules imposed by the receiving state. Although the original proposal died in the House last year, a lot has changed since then.

First, the popularity of marijuana among American adults has been on the rise. According to a 2017 Gallup survey, 64 percent of Americans favor the legalization of marijuana for recreational purposes.

Second, Oregon’s supply has far exceeded local demands: the state is currently sitting on approximately 1.4 million pounds of marijuana that state and federal laws prohibit from selling outside state lines. This tremendous oversupply in Oregon has caused prices to crater, putting many licensed growers on precariously thin ice. Indeed, in 2018, the wholesale price of Oregon flower dropped from $3.90 per gram at the beginning of the year to $1.86 as of the end of the summer.

Third, interstate exporting has seen a growing support from lawmakers and local media.

So in theory, this idea should materialize; unfortunately, federal law remains in the way as we discussed last year.

Though the use and sale of recreational cannabis is currently legal in 10 states, the plant remains a Schedule I substance under the Controlled Substance Act (“CSA”). Specifically, Section 801 of the CSA provides that the distribution of controlled substances in “interstate commerce and foreign commerce” justifies federal control of said substances. federal guidance also expressly forbid the “diversion of marijuana from states where it is legal under state law in some form to other states.” Accordingly, federal law would put Oregon and other legal states engaged in such interstate transfers at great risk of federal enforcement actions and would most certainly compromise the cannabis exchange.

However, the passage of this idea into state law could arm the Beaver State with a big advantage. Specifically, the state would be able to start exporting its cannabis products the moment federal cannabis prohibition is lifted. Such strategic advantage would position Oregon as a leading marijuana exporter (assuming it can find some buyers) and would serve as an escape valve for the chronic oversupply issue.

For now, we must sit tight and see how the proposed bill, which has yet to be drafted, will be received by the Oregon legislature. We will keep you updated on this issue.