A Legal Analysis of the DEA Directive Regarding Cannabinoids

To say that the DEA is is slow in responding to matters regarding cannabis (other than raids and arrests) is like saying that Rip Van Winkle took a long nap. It’s a complete understatement. As reported by Lisa Rough in Leafly, “the first petition to reschedule cannabis from Schedule I to Schedule II was filed in 1972 by the National Organization for the Reform of Marijuana Laws (NORML), but the petition was not given a hearing for fourteen years.” In the article, Rough goes on to discuss another petition filed by Americans for Safe Access and the Coalition for Rescheduling Cannabis in 2002, which was ultimately denied in 2011, nine years later.

The DEA has almost outdone itself in the fourteen year time lag between the February 6, 2004 Ninth Circuit Court of Appeals’ ruling in Hemp Industries Ass’n v. DEA, 357 F.3d 1012 (9th Cir. 2004) (Hemp Indus I), which struck down the DEA’s rule prohibiting the importation of hemp, and the Internal Directive Regarding the Presence of Cannabinoids in Products and Materials Made from the Cannabis Plant (Directive) it issued on May 22, 2018 in response to the ruling.

In pertinent part, the Directive states:

“Products and materials that are made from the cannabis plant and which fall outside the CSA definition of marijuana (such as sterilized seeds, oil or cake made from the seeds, and mature stalks) are not controlled under the CSA. Such products may accordingly be sold and otherwise distributed throughout the United States without restriction under the CSA or its implementing regulations. The mere presence of cannabinoids is not itself dispositive as to whether a substance is within the scope of the CSA; the dispositive question is whether the substance falls within the CSA definition of marijuana.” (emphasis added)

Although the Directive is making a big splash in cannabis news this week, it is not the first time that the DEA has publicly acknowledged (though not by name) the Source Rule, which states that cannabinoids (other than THC, which is separately scheduled) are not unlawful in and of themselves. Rather, their legal status is dictated by the source from which they are derived. If cannabinoids are derived from an unlawful source they are illegal. On the other hand, if they are derived from a lawful source then they are legal. This is the cornerstone of the law governing CBD.

In fact, this is the third time that the DEA has publicly clarified its position regarding cannabinoids since issuing the Final Rule Establishing a New Drug Code for Marihuana Extract (“Marijuana Extract Rule” or “MER”) on December 14, 2016. The first time was in a “Clarification”, published on March 14, 2017 in which it stated, “If a product consisted solely of parts of the cannabis plant excluded from the [Controlled Substances Act (CSA)] definition of marijuana, such product would not be [illegal].”

The second time was in the DEA’s legal brief to the 9th Circuit in a case filed against it by the Hemp Industries Association and other plaintiffs regarding the MER, Hemp Indus. Ass’n v. United States DEA, 2018 U.S. App. LEXIS 11005 (Hemp Indus II). Here are some quotes from its brief:

“To the extent that a product consisting solely of exempt parts of the cannabis plant contained trace amounts of cannabinoids, such product would not be included in the new drug code.” (P.27)

and,

“DEA’s Rule does not control cannabinoids in their own right.” (P.25)

and,

“DEA is not seeking to schedule cannabinoids.” (P.29)

In light of the above, the Directive issued last week is old news. So, why is it important? I believe that it is important for several reasons, most of which are positive. First, given the DEA’s difficult and confusing stance regarding cannabinoids any acknowledgement of circumstances under which they are lawful is positive. I still regularly communicate with law enforcement officials who support their position that CBD is a controlled substance by pointing to the MER. They have no idea that the DEA clarified its position a mere three months after issuing the MER.

Second, the DEA also clarifies in the Directive that it is legal to import and export cannabis and its products (read “CBD” and “hemp extracts”) that fall outside the definition of marijuana in the CSA: “[A]ny product that the U.S. Customs and Border Protection determines to be made from the cannabis plant but which falls outside the CSA definition of marijuana may be imported into the United States without restriction under the Controlled Substances Import and Export Act. The same considerations apply to exports of such products from the United States, provided further that it is lawful to import such products under the laws of the country of destination.” As many of my clients can attest, importing and, to a lesser degree, exporting, lawful cannabis products can be a risky proposition. Hopefully, the Directive will clear that up.

Third, as I discussed above, the Directive is responsive to the 9th Circuit’s ruling issued fourteen years ago. This is no small matter. The DEA should have followed through on the Court’s ruling immediately. This creates some necessary finality on that litigation, albeit well over a decade late.

Finally, the Directive is further evidence that the laws regarding hemp need to be updated. The DEA did not mention industrial hemp, arguably the single largest source of cannabinoids in the country. This was no accident and, in its way, continues a trend of the DEA issuing statements which serve to confuse, rather than clarify, the legal status of CBD derived from industrial hemp. Fortunately, in Hemp Indus II the 9th Circuit ruled that the industrial hemp provisions of the Agricultural Act of 2014 (Farm Act) preempt the CSA. Also, Congress has prohibited the use of federal funds to interfere with the “transportation, sale, or use” of industrial hemp in two separate provisions in the FY18 Agriculture, Food and Drug Administration, Rural Development, and Related Agencies Appropriations Act, which extend to September 2018. However, the DEA’s pointed refusal to address cannabinoids from industrial hemp leaves a certain pall over the matter that can only be remedied by a revision of the law, such as the 2018 Hemp Farming Act, which explicitly states that hemp and cannabinoids derived from it are lawful.

Until then, supporters of cannabinoids can chalk up another small victory in their ongoing battle for clarity in the law.

A version of this article was originally published in the Cannabis Law Report, May 30, 2018. Thanks to Sean Hocking, John Taylor, and the entire CLR group for their excellent journalism about the cannabis industry.

Rod Kight is a lawyer based in Asheville, NC. He is licensed in North Carolina and Oregon and represents legal cannabis businesses. You can contact him by clicking here.