Earlier this week, I wrote about how hemp businesses should not yet rely on the 2018 Farm Bill to protect them from their products being seized. This is because although Section 10114 of the 2018 Farm Bill prohibits states from interfering with the interstate transport of hemp and hemp products, that protection is limited to hemp that was cultivated in accordance with Section 10113 of the 2018 Farm Bill. At this time, full compliance with Section 10113 is not possible because the US Department of Agriculture (“USDA”) has yet to approve of any state or tribal plans covering the cultivation of hemp or issue its own plan allowing for the cultivation of hemp in states that do not have an approved plan.
As such, the cultivation of hemp is still governed by the 2014 Farm Bill, which allows state departments of agriculture to license the cultivation of industrial hemp. States have taken a widely different approach to regulating industrial hemp and not all states recognize any difference between industrial hemp and marijuana, regardless of the amount of THC present.
Back in September 2018, I wrote about how varying state laws made it challenging to ship hemp products, including hemp-derived CBD (“Hemp-CBD”) across the country. I used the following example to illustrate the risks:
[B]usinesses must carefully consider how their products reach consumers. For example, imagine that Hemp Co. is planning to distribute Hemp-CBD. Hemp Co. sources its industrial hemp from a farm in Medford, a small town in Southern Oregon. Hemp Co. has a large order to fill for a natural food store in Billings, Montana. Hemp Co. decides that the fastest and cheapest method of delivery is ground shipping through Idaho. However, according to a 2015 informal opinion from the Idaho Attorney General, the state makes no distinction between industrial hemp and marijuana. Therefore, Hemp-CBD, even without the presence of THC, is not permitted in Idaho. Even though Hemp Co.’s products come from a farmer who cultivates in-line with Oregon’s industrial hemp program (and relevant federal law), that does not insulate Hemp Co. from liability if the shipment is inspected by Idaho State Police.
Unfortunately, this hypothetical now appears to be playing out in real life as the Idaho State Police recently seized a shipment of industrial hemp traveling from Oregon to Aurora, Colorado.
Big Sky is a Colorado company that processes hemp into CBD powder which it then sells to manufacturers who add CBD to a number of different consumer products. Big Sky purchased 13,000 pounds of hemp from a permitted hemp cultivator in Oregon. Big Sky contracted with a third party logistics company to have the hemp shipped from Oregon to Aurora, Colorado.
On January 24, 2019, a truck carrying the hemp was stopped in Ada County, Idaho. The driver did not conceal the fact that he was shipping hemp and a bill of lading that accompanied the shipment indicated that the cargo was hemp. The Driver was arrested and charged with marijuana trafficking in Idaho state court. The Idaho State Police seized the contents of the truck: 7,000 pounds of industrial hemp.
Big Sky’s attorneys filed suit in US District Court in Idaho. Big Sky is seeking a declaratory judgment stating that Idaho Police improperly seized Big Sky’s properly and are improperly holding the property in light of the 2018 Farm Bill’s prohibition on the interstate shipment of hemp and general principles under the Commerce Clause which prohibit states from interfering with the interstate shipment of lawful goods. Big Sky also filed a motion for a temporary restraining order (TRO) and preliminary injunction to force the Idaho State Police to immediately return the seized hemp.
In order to get emergency relief in the form of an injunction or TRO, a party must show that they are likely to succeed on the merits of the underlying case. The Court determined that Big Sky had not met this burden because it is unclear whether Section 10144 of the 2018 Farm Bill covers the seized hemp at issue. The Order denying Big Sky’s claims states the following;
The takeaway from an examination of the respective arguments of Big Sky and the [Idaho State Police] is that a reasonable argument can be made that even though Big Sky may, at some point in time, be able to purchase industrial hemp that has been “produced in accordance with Subtitle G,” the hemp that was seized in Idaho could not possibly meet that standard because no “plans” to regulate the production of industrial hemp under the 2018 Farm Act have either been approved (by the federal government as to Oregon, as pertinent here) or created and promulgated by the United States Department of Agriculture for the federal government (to apply in the absence of an approved state or tribal plan).
To clarify, the Court is not ruling on the question of whether Big Sky was afforded protection under Section 10114 of the 2018 Farm Bill. Instead, it is saying that Big Sky has not yet shown a high likelihood that it prevail on the merits and therefore it is not entitled to have the seized hemp returned now. The Court has, however, identified that it is not clear that the 2018 Farm Bill prevents states from interfering with the interstate transport of hemp grown under the 2014 Farm Bill.
Big Sky will no doubt argue that the 2018 Farm Bill does prevent Idaho from interfering with this shipment. Though it is true that the Section 10114 does not explicitly cover hemp grown under the 2014 Farm Bill, it seems fair to say that the intent of Congress is to have hemp treated like an agricultural commodity, not a controlled substance. Additionally, Big Sky’s attorneys can expand their arguments that Idaho is interfering with interstate commerce, an area that is traditionally only to be regulated by Congress under the Commerce Clause of the US Constitution.
We’ll continue to monitor Big Sky’s case against the Idaho State Police. In the meantime, be very careful about how you ship hemp products.
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