Congress supports interstate hemp commerce in new funding act.

As many of you know, the entire domestic hemp industry is precariously underpinned by only a handful of statutes, legal cases, agency rulings, and state laws. It’s as if a Volkswagen was carefully balanced on a small table. If one leg of the table were to crack the whole thing would come tumbling down and crash onto the floor. That almost happened this month.

One of the most important “legs” of the industrial hemp “table” has to do with restrictions on the use of Federal funds to interfere with lawful industrial hemp programs, particularly importation of seeds and interstate commerce in industrial hemp and its products (such as cannabidiol (CBD), fibers, foods, etc.) Section 7606 of The Agricultural Act of 2014 (“the Farm Bill”) (codified as 7 USC § 5940 – Legitimacy of industrial hemp research) authorizes individual States to enact pilot research programs for industrial hemp. Problematically, the Farm Bill did not legalize industrial hemp across the board for all States. Rather, it simply allowed States, within certain parameters, to enact their own laws. Hemp is lawful in those States, but not necessarily in other States. This prevents interstate hemp commerce. Additionally, the DEA has placed significant obstacles in the way of States’ hemp programs, such as blocking or delaying seeds from being shipped to State authorized cultivators. It has promulgated a Rule stating that “marihuana extract” (which includes hemp extract) containing one or more cannabinoids is illegal, even if the extract does not contain any tetrahydrocannabinol (THC), the only cannabinoid that is scheduled in the Controlled Substances Act (CSA). In other words, despite a Federal law authorizing States to enact hemp laws and a number of State hemp laws that were enacted pursuant to that law, difficulties abound.

Enter Section 763 of The Omnibus Appropriations Act of 2016 (P.L. 114-113) (“the 2016 Funding Act”), passed on December 18, 2015, which says:

“None of the funds made available by this act or any other act may be used… to prohibit the transportation, processing, sale or use of industrial hemp that is grown or cultivated in accordance with section 7606 of the Agricultural Act of 2014, within or outside the State in which the industrial hemp is grown or cultivated.”

This language was crucial to the domestic hemp industry and resulted in an economic boon. Based on this short provision, domestic hemp producers could engage in interstate commerce. Importantly, no Federal agency, including the DEA, could interfere with State-legal hemp. In practice the provision even applied to States. State agencies that received Federal funding could not interfere with hemp, even if it had not been legalized in their State. I don’t want to make too much of this here. I’ve discussed it before here and here.

The point I want to make is that that this critical “leg” of the table was in serious jeopardy. The 2016 Funding Act was set to expire on April 28, 2017. You may recall that a government shutdown loomed in late April based on Congress’s disagreement about a replacement Funding Bill. Mind you, these “Omnibus” Funding Bills are hundreds of pages long and cover all aspects of funding the Federal Government. The hemp provision literally consists of one tiny clause- a mere grain of sand on a beach- in the 2016 Funding Act. There are lots of things to disagree about in these bills and hemp was set to become a casualty of a much larger budget war. I posted about this concern here.

Congress finally did its duty and enacted a new funding bill on May 4, 2017, which was signed into law on May 5, the Consolidated Appropriations Act, 2017, which runs through September 30, 2017 (“the 2017 Funding Act”). Fortunately for the hemp industry, it contains not one, but two separate funding clauses that prevent the use of Federal funds to interfere with the hemp industry. (Note: I’d like to give special thanks to my friend Garrett Davey, who read my original post on this subject and correctly pointed out that there was more than one provision in the 2017 Funding Act that pertained to hemp. As I stated above, these spending bills are long and tedious and can thus hide little legal nuggets. The original post has been updated based on our communications.) Interestingly, the new provisions are different from the one in the 2016 Funding Act.

Here’s the first one:

TITLE V—GENERAL PROVISIONS. SEC. 538. None of the funds made available by this Act may be used in contravention of section 7606 (“Legitimacy of Industrial Hemp Research”) of the Agricultural Act of 2014 (Public Law 113–79) by the Department of Justice or the Drug Enforcement Administration.

I’m not sure why the language was changed but, combined with the second clause that I’m about to discuss, I like it. Let’s talk about the differences:

First of all, the phrase “used in contravention of” replaced the phrase “used… to prohibit the transportation, processing, sale or use.” This is arguably a good thing. The prior clause named four specific activities from which Federal funds were prohibited to interfere. Replacing it with “used in contravention of” is both broader and stronger. The funds simply cannot be used to prohibit any legitimate hemp activities, not just the four previously delineated acts.

Secondly, the 2017 Funding Act singled out the Justice Department and the DEA. This is odd because the DEA is a sub-agency of the Justice Department. There was no need to name them both. To prohibit the Justice Department is, by implication, to prohibit any of its sub-agencies, including the DEA, from using funds to interfere with legitimate hemp. My best guess as to the reason for this redundancy is the difficulties that the DEA has caused for the hemp industry. It’s as if Congress wanted to make a point and so said, “Yes, that means you, DEA.”

Here’s the second one:

TITLE VII. GENERAL PROVISIONS. SEC. 773. None of the funds made available by this Act or any other Act may be used— (1) in contravention of section 7606 of the Agricultural Act of 2014 (7 U.S.C. 5940); or (2) to prohibit the transportation, processing, sale, or use of industrial hemp that is grown or cultivated in accordance with section 7606 of the Agricultural Act of 2014, within or outside the State in which the industrial hemp is grown or cultivated.

This clause reiterates the first one, but makes it applicable across the board to any and all Federal or State agencies that receive Federal funds, not just to the Justice Department and the DEA. Most importantly, the 2017 Funding Act bestows its blessings on interstate hemp commerce. The 2016 Funding Act contained very specific language in this respect and I’m glad to see that the 2017 Funding Act keeps this language. Both Acts state that Federal funds cannot be used to interfere with legitimate hemp “within or outside the State in which the industrial hemp is grown or cultivated.” In legal terms, it doesn’t get much clearer than that Congress intended interstate commerce in industrial hemp.

We can all exhale. Hemp is safe(ish) for the moment. However, if you step back it’s easy to see that we need real reform. Hemp is too big of an industry and offers too much promise for it to be battered around like a butterfly in a storm every time Congress engages in a budget battle or a Federal agency (ahem, DEA) issues a statement on hemp products. An entire industry shouldn’t take a blow when a few sentences in an Appropriations Act are tweaked or not renewed. I don’t typically address legislation that hasn’t been passed because for every cannabis bill that has become law there are dozens that have died in some legislative committee or didn’t get the votes needed to become law. It seems like a waste of time to address them when most won’t pass or affect us. However, there is a good bipartisan hemp bill floating around Congress right now to remove industrial hemp from the CSA. I recommend reading it and letting your Senators and Representatives know that you support it. Better yet, you could put your vocal support behind the current bipartisan bill to remove cannabis from the Controlled Substances Act altogether and let the States regulate it.

Postscript: I think that this is the best place to clear up some confusion. The two sections that I’ve discussed above (sections 538 and 773) are often confused with section 537, sometimes called the “Rohrabacher–Farr amendment” which deals with medical marijuana. Although similar in that they all restrict Federal funds from being used to interfere with cannabis (medical marijuana programs (section 537) and hemp programs (sections 538 and 773)), they are wholly different and apply to two completely separate things. We are indebted to Representatives Maurice Hinchey, Dana Rohrabacher, and Sam Farr for sponsoring and pushing through the Rohrabacher-Farr amendment. But, don’t confuse their work regarding medical marijuana with the spending provisions regarding hemp.

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 directly here.

Posted: 5-15-2017