How to prepare for new hemp production rules coming next month

With one month left before the U.S. Department of Agriculture (USDA) releases much-anticipated federal hemp production rules, the industry needs to start planning and preparing now for the 2020 season, hemp business experts say.

With the USDA saying it expects to have regulations ready by August, Hemp Industry Daily reached out to legal experts to find out what steps hemp farmers and businesses should be taking now to be in compliance with the rules for the 2020 hemp farming season.

A national set of rules is needed for “addressing key areas of regulation – such as testing and transportation – where uniformity is critical for businesses, regulators and (law) enforcement, who continue to be challenged and put at legal risk with a state-by-state patchwork,” said attorney Shawn Hauser of the Denver-based cannabis law firm Vincente Sederberg.

Attorney Garrett Graff of Hoban Law Group in Denver said he looks forward to the hemp industry cultivating a strong partnership with the USDA and other federal agencies.

“Our hope is the regulations are produced on Aug. 1 (and) that they’re forward-looking; that they’re straightforward; and that they’re workable for the 2020 season,” Graff said, adding he hopes the agency will listen to industry feedback if changes are needed.

Initial federal rules are temporary

The rules the USDA will release in August are interim, which means they will be subject to change before the agency adopts its final regulations for 2020.

“These will be the rules in place for 2020 and once (the USDA) sees, by trial and error, how these rules work, it will then re-evaluate whether they need to be further tweaked down the road,” Graff said.

“Once those rules are published, I think any lingering questions will hopefully be answered … and states will have the information they need to …. get a state plan implemented and in effect heading into 2020,” he continued.

State plans will likely change

Under the 2018 Farm Bill, states and tribes that want to oversee hemp themselves must submit their plans to the USDA, which has up to 60 days to approve or reject them.

“The implementation of USDA rules also means the initiation of the phase-out period for the 2014 Farm Bill, which governs for one year until USDA adopts regulations governing states who do not elect to have primary regulatory authority,” Hauser said.

“Many states are already working to reform their 2014 Farm Bill research programs into a more robust regulatory framework under the 2018 Farm Bill,” she added.

Although states and tribes began submitting their plans to the USDA for review starting the day after the 2018 Farm Bill was signed in December, the USDA delayed its review until the federal rulemaking process was complete.

State plans are going to ramp up as soon as the USDA releases its framework, Graff said.

“I expect to see a flurry of rulemaking at the state level … and then the creation or retooling of registration processes by the state departments of agriculture between August of 2019 and spring 2020,” he said.

Pay attention to state-level rules

Since state plans could change in accordance with the USDA’s federal rules, farmers and businesses should pay close attention to their state’s hemp regulation plans.

“Ensure a clear understanding of the state laws in states of operation and their timeline for transition from research pilot programs to full 2018 Farm bill regulatory plans,” Hauser said.

“Particularly in the next year, there will undoubtedly be a lot of movement in local, state and federal laws, and extra time and resources are needed to ensure compliance,” she added.

Know the differences between state laws

It’s important to understand the nuances of different state laws, as the rules will vary from – especially for multistate operators or those transporting hemp across state lines.

Sampling and testing protocols are one example of this, Graff said.

“When you’re transporting a material that is lawful by the most permissive standard possible, that may not pass muster in a state with a more restrictive standard,” he said.

“You need to be careful in terms of shipping that hemp material across state lines and how other jurisdictions may or may not receive that.”

Stay in touch with state and federal lawmakers

As federal and state laws evolve, it’s important that hemp entrepreneurs champion their own businesses and the broader industry and also stay involved in the rulemaking process, Hauser said.

“This is an important opportunity to engage,” she said. “Businesses should communicate with state and local regulators and policymakers to inform good policy as states develop and implement regulations.”

Be a good businessperson

In addition to understanding and incorporating state requirements in states of operation and staying informed on which hemp-related business activities are appropriate from state to state, Hauser advises hemp farmers and businesses to look at broader national and international supply-chain considerations.

Hauser said other steps hemp businesses should consider in preparing for the 2020 season include:

• Ensuring the ability to secure compliant seeds for the 2020 planting season as determined by the USDA and state law.
• Developing standard operating procedures (SOP) to ensure compliance with federal and state laws.
• Making plans to ensure banking, payment processing and insurance for all activities.
• Confirming which licenses and registrations are required under state and local regulations.
• Developing or updating SOP to ensure compliance with federal and state laws and assessing operational infrastructure to ensure compliance with federal rules and state plans.
• Understanding potential opportunities for research grants.

Laura Drotleff can be reached at [email protected]