Recap on the State of the Hemp Industry

Miller & Martin PLLC Blog | October 25, 2019

THE FARM BILL

What is the Farm Bill? There are two:

The 2014 Farm Bill established the Industrial Hemp Agricultural Pilot Program permitting hemp to be grown through approved state industrial hemp pilot programs for the purpose of research. Tennessee began growing under its pilot program in 2015.

The 2018 Farm Bill accomplished 4 things:

  1. Deregulated hemp and its extracts from Schedule I of the Controlled Substances Act;
  2. Directed the United States Department of Agriculture (the “USDA”) to enact regulations for the legal production of hemp through a valid USDA license or state or tribe approved plan;
  3. Provided for an interstate commerce exception – which prohibits states from interfering with the transportation of lawfully produced hemp across state lines; and
  4. Deferred authority and regulation of hemp-derived products to the respective regulatory agencies such as the Food & Drug Administration (“FDA”).

What is Hemp? The 2018 Farm Bill defines hemp as the plant Cannabis Sativa L. and any part of such plant, whether growing or not, containing not more than 0.3% delta-9 tetrahydrocannabinol (“THC”) concentration on a dry weight basis. Both hemp and marijuana are derived from the plant Cannabis Sativa L. However, hemp contains not more than .3% THC, while marijuana, under Federal Law, is any THC concentration greater than .3% THC.

What is the USDA’s role? The 2018 Farm Bill directed the USDA to develop regulations for the production of hemp. USDA initially intented to have regulations in effect by the Fall of 2019, but we are still waiting. Tennessee was the 3rd state to submit a plan to the USDA after the enactment of the 2018 Farm Bill, but will likely need to re-submit following the release of the USDA’s regulations.

HEMP IN TENNESSEE

Who regulates hemp in Tennessee? The Tennessee Department of Agriculture (“TDA”) regulates the production of hemp in Tennessee.

What licenses are required in Tennessee? Tennessee requires the following activities to be licensed:

  1. Growing. Growing hemp in any quantity (even that plant on your windowsill) requires a Grower License;
  2. Processing. Processing hemp for human consumption requires a Food Manufacturing License;
  3. Movement. Transporting rooted or harvested hemp requires a Movement Permit; and
  4. Seed Seller License. Selling seed requires a Seed Seller License.

FOOD & DRUG ADMINISTRATION

What about the FDA? The FDA has not approved the introduction of cannabis or cannabis-derived compounds containing cannabidiol (“CBD”) into any human food or animal feed. The FDA requires that any cannabis product marketed with a claim of therapeutic benefit be approved by the FDA for its intended use before it may be introduced into interstate commerce. The FDA, has however, approved three hemp seed-derived food ingredients as Generally Recognized as Safe (“GRAS”). These are: hulled hemp seed, hemp seed protein powder, and hemp seed oil.

BANKING

  1. SAFE Banking Act. The proposed SAFE Banking Act would create a safe harbor for federally insured depository institutions (e.g. banks that are members of the FDIC) to provide banking and other financial services to cannabis businesses and service providers of cannabis businesses.
  2. Credit Unions. In August, the National Credit Union Administration released guidance permitting federally insured credit unions to provide certain financial services to hemp businesses engaged in lawful operation under a state’s 2014 Farm Bill Pilot Program, or under a USDA license or approved state hemp program after the USDA release regulations pursuant to the 2018 Farm Bill.

TAKEAWAYS

  1. Get it in writing. The hemp industry is booming and there are lots of opportunity for relationships and integration with other businesses and entrepreneurs at all levels of the supply chain and service providers. It is not enough to rely on a handshake deal. In an emerging industry with legal ambiguity and developing regulations, “short and sweet,” “standard,” or “form” agreements will not suffice. You must document your agreements in writing and carefully articulate their terms.
  2. Enforcement actions. The FDA and FTC are watching and using their enforcement discretion. The FDA is highly concerned with egregious and unfounded health claims, and those related to vulnerable populations such as children, pregnant or breastfeeding women, and the elderly. The FDA and FTC have issued several warning letters to businesses since the enactment of the 2018 Farm Bill and may take further actions for violators such as issuing fines, injunctions, and seizure. State attorney generals may also taken enforcement action.
  3. Law suits are coming. Consumer and competitor suits for mislabeling, deceptive marketing practices, false advertising, and unfair competition are on the rise. Businesses must pay close attention to the laws and regulations on a state-by-state basis and all their consumer-facing information (i.e. product labels, product information, websites, linked websites, social media, hashtags, reviews, testimonials, etc.).
  4. Don’t make promises you can’t keep. If you make a claim about your product, you must be able to substantiate it in accordance with law and understand what is required to substantiate your claims. For the industry, education is important, but businesses should carefully review all consumer information with an attorney prior to publication.

For more information about the latest guidance in this emerging hemp industry, contact Miller & Martin attorney Stephanie Savage or any other member of our Cannabis & Hemp team. For product labeling and advertising claims inquiries, contact a member of our Life Sciences team.

Tags: Hemp, Cannabis, Farm Bill

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