DEA Just Dropped a Bomb on the Hemp Industry. Part 1: Hemp Extract

Editor’s Note: This article is the first of two companion articles about the interim final rule issued by the DEA. It addresses the issue of hemp extract. The second article addresses delta-8 THC. You can read it by clicking here.

In a long-anticipated action, the US Drug Enforcement Administration (DEA) issued an interim final rule (IFR) today on the implementation of the hemp provisions of the Agricultural Improvement Act of 2018 (Farm Bill) as it relates to marijuana and tetrahydrocannabinols (THC) under the Controlled Substances Act (CSA). You can read the IFR by clicking here.

As I will discuss, the IFR threatens to destroy the hemp/CBD industry. Fortunately, it is not set in stone. You can submit comments on it through October 20, 2020 by clicking here and following the online instructions at that site for submitting comments. To ensure proper handling of comments, you should reference “RIN 1117- AB53/ Docket No. DEA-500” on all correspondence.

I. INTRODUCTION

As most readers of this blog know, the DEA is the US federal agency charged with enforcing the CSA. Far from being even-handed, the DEA is the primary player and policy shaper in the notorious and failed “War on Drugs”, particularly with respect to cannabis. It has aggressively and persistently asserted itself into the hemp industry, despite the Farm Bill’s express removal of hemp, a lawful form of cannabis, from the CSA. The issuance of today’s IFR, which will be published in the Federal Register tomorrow (August 21, 2020) and is effective immediately, continues the DEA’s pattern of unwanted and aggressive interference with a lawful industry.

The IFR starts off by deceptively downplaying its intent: “This interim final rule merely conforms DEA’s regulations to the statutory amendments to the CSA that have already taken effect, and it does not add additional requirements to the regulations.” In fact, a careful reading of the IFR reveals its intent to be much different. It is not an overstatement to assert that adoption and enforcement of the IFR will severely disrupt, and potentially destroy, the hemp industry.

In this article, I discuss what could potentially be a fatal blow to the entire hemp/CBD industry, namely, the IFR’s criminalization of work in progress hemp extract, a fundamental component of any consumer hemp/CBD product.

II. WORK IN PROGRESS HEMP EXTRACT- A NECESSARY COMPONENT OF HEMP AND CBD PRODUCTS IS DEEMED TO BE ILLEGAL

This article is about the legal status of work in progress hemp extract (WIPHE) that contains delta-9 tetrahydrocannabinol (THC) concentrations in excess of three tenths of one percent (0.3%). For purposes of this article WIPHE means extract of hemp in a partially processed state that is not intended for consumer use or consumption. The IFR has deemed WIPHE to be an illegal schedule 1 controlled substance (the most restrictive) under the CSA:

“[T]he definition of hemp does not automatically exempt any product derived from a hemp plant, regardless of the D9 -THC content of the derivative. In order to meet the definition of “hemp,” and thus qualify for the exemption from schedule I, the derivative must not exceed the 0.3% D9 -THC limit. The definition of “marihuana” continues to state that “all parts of the plant Cannabis sativa L.,” and “every compound, manufacture, salt, derivative, mixture, or preparation of such plant,” are schedule I controlled substances unless they meet the definition of “hemp” (by falling below the 0.3% D9 -THC limit on a dry weight basis) or are from exempt parts of the plant (such as mature stalks or non-germinating seeds). See 21 U.S.C. 802(16) (emphasis added). As a result, a cannabis derivative, extract, or product that exceeds the 0.3% D9 -THC limit is a schedule I controlled substance, even if the plant from which it was derived contained 0.3% or less D9 -THC on a dry weight basis.” (emphasis added)

While this position may appear to make sense on the first reading, it is actually a radical and unsupported interpretation of the Farm Bill for the reasons I will explain below. (Note: I have previously addressed this issue in another context in an article you can read by clicking here.) If allowed to stand, this provision could literally destroy the entire hemp/CBD industry. This is because WIPHE is a necessary component of all consumer hemp/CBD products. By taking the position that it is an illegal controlled substance, the DEA is pulling the proverbial rug out from under the entire industry. For this reason, I am publishing my legal theory on the legal status of WIPHE, which I encourage you to use in your comments to the IFR.

III. THE FARM BILL CONTEMPLATED AND LEGALIZED WIPHE

a. Hemp and Its Extracts Are Not Controlled Substances

Hemp is expressly lawful under federal law. The Farm Bill defines it as:

“the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.” (emphasis added)

b. Dry Hemp, Including Partially Processed Dry Hemp, Is Lawful

It is clear that a hemp plant (or part of a plant) with THC levels that do not exceed the statutory 0.3% concentration limit on a dry weight basis is lawful. That plant (or part of the plant) can be chopped, ground, plucked, and otherwise processed dry and remain lawful. This is because the statutory definition directly addresses hemp on a dry weight basis. The issue addressed in this letter arises when hemp is processed for its oil, which necessarily renders the hemp plant and its parts “wet”. The statute does not contemplate measuring THC levels of a wet extract. For this reason, in determining whether it is lawful to transport WIPHE we must focus both on both the language and Farm Bill’s apparent intent.

c. The Statute Contemplates WIPHE

With respect to the Farm Bill’s language, it clearly contemplates that hemp extracts will be created, and that they will be lawful. Otherwise, the term “extract” would not have been included in the definition of hemp. Under almost any normal hemp extraction and manufacturing process it is impossible to avoid a stage in which the extract is both “wet” and within the 0.3% THC limitation. For example, take the most basic processing method of trimming and separating a hemp plant’s stalks, stems, and seeds (SSS) from its leaves and flowers. Processing the plant in this way, which occurs on some level for most hemp cultivated in the US, increases the concentrations of THC despite not increasing the actual amount of THC. This is because the plant parts consisting of the SSS are weighty and do not have meaningful quantities of trichomes from which THC and other cannabinoids are produced. Separating the trichome-rich portions of the plant from the other parts will always increase the THC levels in the resulting non-SSS product, which is typically biomass or flower. This problem is compounded with contemporary extraction techniques, which use highly technical methods to separate and refine desired hemp “parts” (i.e., cannabinoids, terpenes, sesquiterpenes, etc.) from the less valuable parts (i.e., fibers, waxes, chlorophyll, etc.) into the extracts, oils, distillates, and isolates used in almost all consumer hemp products on the market.

For these reasons, it is reasonable to assume that Congress intended for extracts to be produced and that such production will necessarily result in a stage during the processing phase when the extract contains THC concentrations in excess of 0.3%. In other words, it is reasonable to conclude that Congress contemplated the existence of WIPHE.   

d. The Farm Bill’s Intent Is to Distinguish Hemp from Marijuana

Under federal law, the legal status of cannabis sativa l (cannabis) is based on its THC concentrations. If it contains THC concentrations that exceed 0.3% it is marijuana (or so-called “hot” hemp). On the other hand, if it contains THC concentrations that do not exceed 0.3% it is lawful hemp. In distinguishing hemp from marijuana, Congress created a “bright line” test based on THC levels. For this reason, it is reasonable to assume that Congress did not intend to legalize for sale or use hemp extracts that contain THC levels in excess of 0.3%, even when the extract is derived from a lawful hemp plant. If not, this would neuter the statute’s clear intent to distinguish between lawful (hemp) and unlawful (marijuana) forms of cannabis.

However, as discussed above, it is also clear that Congress contemplated WIPHE. The most logical and coherent reconciliation of these two premises (ie, (a) that Congress did not intend to legalize “hot” hemp extract, and (b) that Congress contemplated WIPHE) is that Congress contemplated, and impliedly authorized, WIPHE, provided that it was not sold or consumed. In other words, “hot” hemp extract is lawful only when it is in a dynamic state between the lawful hemp plant itself and the lawful resulting extract during a legitimate manufacturing process and not sold or made available to end use consumers while in that dynamic state. This is to say that hemp extract it is lawful when it is WIPHE.

IV. CONCLUSION

The issue of WIPHE has been around, albeit “underground”, for several years. I routinely discuss it with my clients that process and manufacture hemp and CBD products. Without any official position on the matter by the USDA or the FDA, nor any enforcement attempts by the DEA, the WIPHE issue remained an “elephant in the room”, a massive issue that no one wanted to discuss. The general idea was that if no one addressed it publicly then it would never come to light. Unfortunately, it has finally come to light in the form of an official DEA rule. As usual, the DEA has taken the wrong position. This time, its position is an existential threat to the hemp/CBD industry. I encourage you to comment on the link provided above and to reach out to your elected officials. Hemp is a popular issue with both Democrats and Republicans, and our leadership needs to understand that the DEA is threatening to wipe it out.

Disclaimer: The legal positions expressed in this article are not intended to be, and should not be construed as, legal advice. The issues presented and legal theories asserted are novel. You should consult with an attorney before taking any action regarding these matters.

August 20, 2020

Rod Kight is an international hemp lawyer. He represents businesses throughout the hemp industry. Additionally, Rod speaks at cannabis conferences, drafts and presents cannabis legislation to foreign governments, is regularly quoted on cannabis matters in the media, and is the editor of the Kight on Cannabis legal blog, which discusses legal issues affecting the cannabis industry. You can contact him by clicking here.