Is North Carolina’s Hemp and CBD Industry Coming to an Abrupt End?

As things stand, the hemp and CBD industry as we know it in North Carolina (NC) may be about to end. This is due to a combination of factors, which include (a) the removal of the hemp exemption from the state’s definition of “marijuana” as of June 30, 2022, (b) the expiration of all current hemp laws and regulations in the state as of June 30, 2022, and (c) the NC General Assembly’s (NCGA) failure to enact updated legislation to protect the state’s hemp industry. This turn of evens could be catastrophic for the hundreds (thousands?) of hemp industry participants and the thousands (millions?) of consumers of hemp products in NC.

PART 1- THE ISSUE

Under current NC law, “industrial hemp” is carved out as an exception to the definition of “marijuana”; however, as of June 30, 2022, the exemption is removed, at which point all forms of cannabis will be considered illegal marijuana with no apparent exception for hemp. Here is the relevant statutory language:

CURRENT LAW: NCGS § 90-87(16) (Effective until June 30, 2022) “Marijuana” means all parts of the plant of the genus Cannabis, whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin, but shall not include the mature stalks of such plant, fiber produced from such stalks, oil, or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination. The term does not include industrial hemp as defined in G.S. 106-568.51, when the industrial hemp is produced and used in compliance with rules issued by the North Carolina Industrial Hemp Commission. 

LAW AS OF JUNE 30, 2022: NCGS § 90-87(16) (Effective June 30, 2022) “Marijuana” means all parts of the plant of the genus Cannabis, whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin, but shall not include the mature stalks of such plant, fiber produced from such stalks, oil, or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination.

As you can see, the language effective on June 30 removes any discussion of or exemption for hemp.

Additionally, the NC Industrial Hemp laws– all of them- expire on June 30, 2022, and the state’s hemp commission will disband. As discussed in an August 5, 2021 Industrial Hemp Commission meeting, “[T]he NC Industrial Hemp Research Pilot Program will no longer be valid due to the 2018 Federal Farm Bill establishing a Domestic Hemp Production Program. This action will be effective as of June 30, 2022…” As of June 30 there will be no hemp laws or regulations on the books in NC, nor will there be any NC governmental agency overseeing or regulating hemp.

PART 2- THE CONSEQUENCES

What does this all mean for the hemp industry in NC? One thing is clear, NC hemp producers who are licensed by the USDA to grow hemp will be acting within the law. This is because NC does not have a USDA-approved hemp plan. Under the hemp provisions of the Agricultural Improvement Act of 2018 (2018 Farm Bill) hemp and hemp producers in states such as NC that do not have USDA approved hemp plans will be regulated by the USDA. On its website, the USDA points out that the 2018 Farm Bill “establishes a federal plan for producers in States or territories of Indian tribes that do not have their own USDA-approved plan and the production of hemp is legal.” In other words, USDA-licensed hemp producers in NC are okay.

What about everyone else? The answer to this question is currently unknown. At a minimum the statutory expiration of all hemp provisions will create confusion regarding what products and activities are lawful in NC. At worst, it will provide an opening for law enforcement to prosecute hemp processors, manufacturers, distributors, and individuals who possess hemp products.

PART 3- HOW DID THIS HAPPEN?

The short answer is that we do not know. I like to think this was merely an oversight by the NCGA, which assumed that by not acting to replace the state’s hemp laws all hemp would be regulated by the federal government. This may be the case, things may work out, and NC may end up maintaining an uneasy status-quo.

That being said, it is important to note that there is a controversial GOP-sponsored medical marijuana bill (SB711) in NC that is opposed by most of the state’s hemp industry due to, among other things, the nearly insurmountable barriers to entry for any organization other than large marijuana multi-state operators (MSOs) and other corporate interests, such as Big Tobacco. (There are numerous other problems with the bill, including a complete lack of any social equity provisions, a mandatory vertical integration model, a limit of only 10 licenses for the entire state, improper makeup of the Advisory Board, limited qualifying conditions, etc., but that is a blog post for another day.) Most educated NC hemp industry participants assume that enactment of SB711 will significantly harm their businesses and their customers.

It appears that lobbying for SB711 has primarily been undertaken by large vested interests, including MSOs and Big Tobacco.  Moreover, I have heard from reliable sources that the NC Senate is set to pass the bill in mid-May. The Speaker of the House has said that the House will not take up SB711 this year, though this could be posturing on his part. It is really anyone’s guess as to the Bill’s timeline.

If we assume that SB711 is likely to pass the NC Senate in May and go to the House in June, and we combine that with the June 30 expiration of all of NC’s hemp laws, it is hard not to wonder if hemp’s expiration in NC is intentional. This scenario would give the 10 medical marijuana licensees an almost total monopoly on all cannabis- hemp and marijuana- in the state. While it is clear that hemp production will remain lawful in NC after June 30 for USDA licensed farmers, it is unclear what the legal status of post-production hemp, including CBD products, will be. One possible interpretation is that they will only be available through the 10 medical marijuana licensees in the state, an outcome that would decimate the state’s hemp industry.

The Kight on Cannabis law blog does not entertain conspiracy theories. To be clear, all of the above regarding whether this set of circumstances is intentional or not is an educated speculation. The important thing to keep in mind is that it does not matter whether this turn of events was unintentional or is the result of aggressive lobbying by MSOs and Big Tobacco. Either way, the result is a potential catastrophe for the NC hemp, CBD, and hemp-derived cannabinoid industry.

PART 4- THE SOLUTION

Unfortunately, there is no obvious solution to this situation other than a legislative fix. The NCGA needs to pass a bill immediately, even a short one, confirming that hemp in all its forms- from crop to finished product- remains lawful in NC. To do this, we need to get the NCGA’s attention. Unfortunately, the state legislature has mostly been disinterested in hemp, which is one of the reasons NC does not have a USDA-approved hemp plan. NC did not even submit one.

We strongly recommend that all NC hemp industry participants contact their NC state representatives in both the NC Senate and NC House and demand immediate action to address this problem. While you’re at it, you may want to voice your objections to SB711, which will do much more harm than good for North Carolinians. (Note- You can locate your representatives and their contact information by clicking on the prior two hyperlinks.) 

Special thanks to my colleagues MB and JM, with whom I have communicated about this issue. I am keeping their names confidential at this time given the controversial nature of the matters discussed in this article.

April 1, 2022 [Note- This is NOT an April Fool’s joke.]

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