The Industry Calculates Its Bearings After USDA, FDA Set Hemp Rules

In October 2018, the USDA activated their official hemp rules in the form of the "Establishment of a Domestic Hemp Production Program". With those rules came additional guideline documents for sampling and testing, through a set of agricultural practices to ensure production of compliant plant biomass.

The FDA started releasing information in the summer of 2019, though there was little announcement of it. The FDA policy documents are as thought-provoking as the USDA documents, given the FDA's position that CBD is a "new drug", and thus cannot serve as a legal driving force for large-scale cultivation in the United States, again forcing reconsideration of business models and cultivation strategies. When the documents are combined (i.e., no hemp exports for the time being, as per the USDA, and curtailed or prohibited advertisement of CBD for formulations or non-FDA-approved products), the implications raise important questions about the future of regulated cannabis in the U.S.

Below are some specifically relevant passages from the USDA and FDA releases. Each document includes several which New Frontier Data will examine throughout this CannaScience blog series, including important information about each agency's regulatory boundaries and their respective do's and don'ts as proscribed.

"The program includes provisions for maintaining information on the land where hemp is produced, testing the levels of delta-9 tetrahydrocannabinol, disposing of plants not meeting necessary requirements, licensing requirements, and ensuring compliance with the requirements of the new part."

A straightforward summary, the document outlines USDA oversight on hemp seed imports, phytosanitary certifications, interstate transport, how regulations apply to tribal lands, and the accepted definition of what classifies as hemp (i.e., any cannabis plant producing less than 0.3% delta9 THC). It is not until paragraph 28 that mention comes of testing being mandated through only DEA-licensed or USDA-certified testing labs – of which there are fewer than four dozen for more than 1,600 farms nationwide.

That requirement and ratio mean that for hemp to be transported out of state from where it was produced, it must be DEA-testing compliant. That rule will create logistical bottlenecks throughout the supply chain, but once effectively deployed could drive new commercial growth opportunities in the industry.

Also, nowhere in the USDA's rules is it specified that only the top third (1/3) of the plant is eligible for testing, or that (now) only the inflorescence (i.e., flower or bud) can be tested – a requirement at odds with some states' allowance of leaf and stem material into the testing samples. Instead, that information is shared separately in This information must be found in a separate document, "Sampling Guidelines for Hemp". The de facto hide-and-seek means that significantly more hemp is likely doomed for failure to fulfill the new sampling and testing regulations.

Comments regarding the current ban on hemp exports can be found in paragraph 15 of the USDA Federal Register Hemp Program. Additional limitations and restrictions are scattered throughout the document, including the disqualification of any persons with previous criminal records engaged as "key participants" in any business entity seeking a USDA license to produce hemp. License and criminal record reviews will be repeated every 3 years in order to maintain one's USDA hemp production license (see:paragraph 63 of reference 1).

As of July 25, 2019, taken from "Hemp Production and the 2018 Farm Bill":

"The 2018 Farm Bill explicitly preserved FDA's authorities over hemp products. Therefore, hemp products must meet any applicable FDA requirements and standards, just like any other FDA-regulated product. For example, FDA's existing authorities over foods, dietary supplements, human and veterinary drugs, and cosmetics apply to hemp products to the extent such hemp products fall within those categories."

"The current regulatory state of play is more complex when it comes to hemp products that contain CBD. It is unlawful under the Federal Food, Drug, and Cosmetic (FD&C) Act to introduce into interstate commerce a food (including any animal food or feed) to which has been added a substance that is an active ingredient in an approved drug product or a substance for which substantial clinical investigations have been instituted, and the existence of such investigations has been made public."

"In June 2018, FDA approved the drug Epidiolex4 for treatment of seizures associated with two very rare and severe pediatric diseases. The approval of this medicine was a significant milestone for these patients and their families. The active ingredient in this drug is CBD. Based on both the approval of this drug, as well as previous substantial clinical investigations of CBD, CBD cannot be marketed as a dietary supplement, and foods to which CBD has been added cannot be introduced into interstate commerce under the FD&C Act. The FD&C Act provisions that prohibit adding an active drug ingredient to foods or marketing an active drug ingredient as a dietary supplement contain an exception if the drug was marketed in foods or dietary supplements before the drug was approved and before it was subject to substantial clinical investigations. The Agency is not aware of any evidence that CBD was marketed in foods or dietary supplements prior to it being subject to substantial clinical investigation. Therefore, FDA has concluded this exception does not apply to CBD."

"The passage of the 2018 Farm Bill has led to the misperception that all products made from or containing hemp, including those made with CBD, are now legal to sell in interstate commerce. The result has been that storefronts and online retailers have flooded the market with these products, many with unsubstantiated therapeutic claims. FDA has seen CBD appear in a wide variety of products including foods, dietary supplements, veterinary products, and cosmetics....At present, any CBD food or purported dietary supplement products in interstate commerce is in violation of the FD&C Act due to the statutory provisions discussed above."

Many of the same statements were reiterated in the address to the National Industrial Hemp Council at the Hemp Business Summit in August 2019, though a few clarifications merit notice. As taken from "FDA remarks at NIHC 2019 Hemp Business Summit":

"So, what did the Farm Bill change at FDA? In a certain sense, the answer is not much. In the Farm Bill, Congress explicitly preserved FDA's authorities to regulate products containing cannabis or cannabis-derived compounds, regardless of whether they are classified as marijuana or hemp. These authorities include our responsibilities under the federal Food, Drug, and Cosmetic Act and the Public Health Service Act. "

"Unlike drugs, foods, dietary supplements, and cosmetics generally don't need to be approved by FDA before they can be marketed in interstate commerce. One exception is food additives, which FDA must determine to be safe for specified conditions before they can be added to foods, unless the use of the substance is generally recognized as safe (or GRAS) by qualified experts. For dietary supplements, if the product contains a new dietary ingredient – meaning a dietary ingredient that wasn't marketed in the United States before October 1994 – the manufacturer generally must notify FDA before coming to market."

"Under current law, it's unlawful to sell a food or dietary supplement with CBD in interstate commerce. I'll repeat that: Under current law, it's unlawful to sell a food or a dietary supplement with CBD in interstate commerce."

Later, in December 2019, the FDA shared some remarks from a Q&A as included in "FDA Regulation of Cannabis and Cannabis-Derived Products, Including Cannabidiol (CBD)":

"9: Can THC or CBD products be sold as dietary supplements?

A: No. Based on available evidence, FDA has concluded that THC and CBD products are excluded from the dietary supplement definition under section 201(ff)(3)(B) of the FD&C Act [21 U.S.C. § 321(ff)(3)(B)]. Under that provision, if a substance (such as THC or CBD) is an active ingredient in a drug product that has been approved under section 505 of the FD&C Act [21 U.S.C. § 355] or has been authorized for investigation as a new drug."

"10: Is it legal, in interstate commerce, to sell a food (including any animal food or feed) to which THC or CBD has been added?

A: No. Under section 301(ll) of the FD&C Act [21 U.S.C. § 331(ll)], it is prohibited to introduce or deliver for introduction into interstate commerce any food (including any animal food or feed) to which has been added a substance which is an active ingredient in a drug product that has been approved under section 505 of the FD&C Act [21 U.S.C. § 355], or a drug for which substantial clinical investigations have been instituted and for which the existence of such investigations has been made public."

Combined, the previous pronouncements would certainly seem to tamp down any excitement within the cannabis industry. However, amid any sense of doom and gloom, the USDA foreshadows what's to come for the industry and where stakeholders should be looking:

"Hemp is a commodity that can be used for numerous industrial and horticultural purposes including fabric, paper, construction materials, food products, cosmetics, production of cannabinoids (such as cannabidiol or CBD), and other products. While hemp was produced previously in the U.S. for hundreds of years, its usage diminished in favor of alternatives. Hemp fiber, for instance, which had been used to make rope and clothing, was replaced by less expensive jute and abaca imported from Asia. Ropes made from these materials were lighter and more buoyant, and more resistant to saltwater than hemp rope, which required tarring. Improvements in technology further contributed to the decline in hemp usage."

The USDA neglected to mention a few important industry sectors in which cannabis biomass can also be used — production of other phytocannabinoids/phytochemicals, high-tech applications, and energy production, among them (with others to be detailed in future blogs). Furthermore, while the USDA noted that saltwater corrosion led to the need for alternative fibers, still more sources indicate how hemp was actually a preferred choice as a fiber due to its resistance to salt corrosion and the virtue of the fact that hemp fibers get stronger after getting wet. Thus, there clearly remain many uses for cannabis biomass after THC and CBD are removed from the game; by some estimates more than 25,000 product applications exist. There are clearly areas where agtech companies could improve some areas through targeted research and breeding/innovative cultivation programs.