USDA Says States Should Not Interfere With Hemp Transportation

On May 28th, 2018, the United States Department of Agriculture (“USDA”) issued a non-binding opinion letter regarding hemp production (“USDA Letter“). The USDA’s Office of General Counsel (a.k.a., the USDA’s lawyer) made four conclusions in the letter, which I’ll explore in this post.

1. As of the enactment of the 2018 Farm Bill on December 20, 2018, hemp has been removed from schedule I of the Controlled Substances Act and is no longer a controlled substance.

Much of the 2018 Farm Bill is contingent on the USDA implementing a program to oversee the cultivation of hemp on the federal level. Section 10113 of the 2018 Farm Bill covers hemp production (which you can read about here) in great detail and gives the USDA the authority to oversee hemp production at the federal level and to approve of State and Tribal plans covering the cultivation of hemp. In February, the USDA stated that it will not start approving plans until it issues its own regulations in Fall of 2020. This clarification from USDA indicates that in the agency’s opinion, the CSA removed hemp as a schedule I substance as soon as it was signed into law by Donald Trump.

2. After USDA publishes regulations implementing the new hemp production provisions of the 2018 Farm Bill, States and Indian tribes may not prohibit the interstate transportation or shipment of hemp lawfully produced under a State or Tribal plan or under a license issued under the USDA plan.

This is an affirmation of Section 10114 (b) of the 2018 Farm Bill, which states the following:

TRANSPORTATION OF HEMP AND HEMP PRODUCTS.—No State or Indian Tribe shall prohibit the transportation or shipment of hemp or hemp products produced in accordance with subtitle G of the Agricultural Marketing Act of 1946 (as added by section 10113) through the State or the territory of the Indian Tribe, as applicable.

In plain English, this means that states and Tribes can’t prohibit hemp or hemp products from passing through their state or territory if the hemp or hemp products were produced in compliance with Section 10113 of the 2018 Farm Bill.

3. States and Indian tribes also may not prohibit the interstate transportation or shipment of hemp lawfully produced under the 2014 Farm Bill.

This is where things get interesting. The 2018 Farm Bill did not repeal Section 7606 of the 2014 Farm Bill. The 2014 Farm Bill authorized colleges and state departments of agriculture to cultivate industrial hemp for research purposes. The hemp industry that we know and love has “grown up” under the 2014 Farm Bill because the USDA has not yet approved any 2018 Farm Bill state plans. That means that all the hemp grown in this country is done so under the 2014 Farm Bill. The 2018 Farm Bill will repeal Section 7606 of the 2014 Farm Bill one year after the USDA issues hemp regulations.

The USDA Letter’s third conclusion says that Section 10114 of the 2018 Farm Bill, which prohibits states and Indian tribes from interfering with the interstate transport of hemp, protects hemp cultivated pursuant to the 2014 Farm Bill. The USDA’s reasoning turns on a subsection of Section 10113, which states that “[n]othing in this sections prohibits the production of hemp in a State or the territory of an Indian tribe, for which a state or Tribal plan is not approved under this section, if the production of hemp is in accordance with [. . .] other Federal laws[.]” According to the USDA Letter, the 2014 Farm Bill qualifies as “other Federal laws” and therefore states and Indian tribes cannot interfere with the transport of 2014 Farm Bill grown industrial hemp or products derived from industrial hemp.

It’s worth pointing out that the USDA Letter is a non-binding interpretive statement and a judge may disagree with the USDA’s conclusions. However, this gives strong support to the argument that states should not interfere with legally grown hemp shipments.

4. A person with a State or Federal felony conviction relating to a controlled substance is subject to a 10-year ineligibility restriction on producing hemp under the Agricultural Marketing Act of 1946. An exception applies to a person who was lawfully growing hemp under the 2014 Farm Bill before December 20, 2018, and whose conviction also occurred before that date.

This last conclusion, though unfortunate, is a pretty straight forward interpretation of the 2018 Farm Bill’s prohibition on felons producing hemp. If anything, it clears up the date when felons are “grandfathered” in: 12/20/18.

This guidance from the USDA is helpful and mostly positive for the industry, especially when in comes to the uncertainty around interstate shipments. It’s also worth noting that the USDA released this guidance a few days before the FDA is scheduled to hold a public hearing on May 31. This all but assures that it will be a big week for hemp.