NC Hemp Letter Underlines National Uncertainty for Hemp Producers

Hemp farmers face uncertainty about their licenses as states phase out their 2014 pilot programs.

Several of my clients in North Carolina (NC) reached out to me today about a letter they received from the NC Department of Agriculture and Consumer Services (NCDA), which regulates hemp production in the state. The letter raises an issue that farmers and processors (which I’ll refer to collectively as “producers”) are experiencing in many states, namely, the uncertainty regarding what rules will govern them later this year. In this article I am going to address NC specifically, and then use it as jumping off point to discuss the issue in the country at large.

Here is a copy of the letter:

It is clear that the letter was written to provide notice to hemp producers about upcoming changes that may impact their licenses. The letter also took a stab at explaining the nature of the possible changes that farmers could experience and the fact that the agency is uncertain about what the changes will be and how they will impact producers in the state. Unfortunately, the takeaway that many of my clients received was, “Your licensure status is unclear.” In other words, the letter’s attempt to clarify a confusing issue has caused further confusion and concern for many producers.

A VERY, VERY BRIEF HISTORY OF HEMP REGULATION

Along with most states, NC enacted an industrial hemp pilot program as allowed under the 2014 federal Farm Bill. The NC General Assembly passed Senate Bill 313 in 2015, which created the Industrial Hemp Commission (IHC). It charged the IHC with developing the rules and licensing structure necessary for the pilot program to comply with federal laws. The law was modified in 2016 by House Bill 992. In 2017, the IHC adopted temporary rules for review which were later adopted. These “temporary” rules continue to govern the NC hemp program.

The 2018 Farm Bill radically changed and expanded hemp production throughout the US. Among its most important provisions is one that allows states and Indian tribes to regulate hemp production, provided that they submit a plan that is approved by the USDA.

The USDA issued its Interim Final Rule (IFR) on October 29, 2019. The comment period ended earlier this week on January 30, 2020. There are many issues arising from the IFR. For our present purposes, the IFR did two important things. First, it kicked off the USDA’s review of state and tribal plans. Second, it began the countdown to elimination of 2014 state industrial hemp pilot programs.

THE NCDA LETTER HERALDS UNCERTAINTY FOR HEMP PRODUCERS

This brings us to the NCDA letter, which addresses the uncertainty facing hemp producers in NC. This same uncertainty exists for hemp producers in many states throughout the USA.

2014 Farm Bill pilot programs in states such as NC will “sunset” (ie, end) on October 30, 2020. This is because the 2018 Farm Bill and the IFR allow states one full year after issuance of the IFR to wrap them up. A state or Indian tribe with an industrial hemp pilot program has three options:

  1. It may terminate its pilot program and submit a plan to the USDA for approval and, if the plan is approved, regulate hemp production according to the plan; or
  2. It may terminate its pilot program and allow the USDA to regulate hemp production within its borders; or
  3. It may allow the pilot program to regulate hemp production through October 2020 and then choose option number 1 or 2, above.

Clear as mud? Hang on, because it gets trickier. Generally speaking, in order for a state to submit a plan it must be authorized to do so. This authority generally comes from the state legislature, which enacts one or more laws authorizing and directing a plan to be submitted. This can take many forms. Before issuance of the IFR NC had pending hemp legislation under consideration as part of a farm bill, SB315, that was filed in March, 2019. SB315 has not been enacted, mostly due to a conflict over provisions that would criminalize the sale or possession of “smokable hemp” without a proper license. You can read about that debate here, here, here, and here.

SB315 was drafted and filed over six months prior to issuance of the IFR. If it is finally enacted later this year, SB315 will supplant the state’s current pilot program. This may include a new structure for licensing hemp producers. It may also render current licenses invalid, thus requiring current licensees to re-apply, even if the licenses were issued for a period of years and would otherwise be valid. (For instance, a 3 year license issued last year could be rendered invalid well before the expiration of the 3 year period if SB315 does not authorize it to be transferable.)

Crucially, if SB315 is enacted it is not enforceable unless and until the USDA approves a hemp production plan. Presumably, such a plan would be based on the provisions of SB315. To its credit the NCDA has asserted that it considers the IFR provisions to be “excessive” and forecasts the possibility that a NC plan may not pass muster with the USDA and thus not be approved. If not, then hemp production in NC will be regulated by the USDA, notwithstanding SB315. Of course, this assumes that SB315 will be enacted this year. While this is a strong possibility, it is not certain. The NC hemp industry is not behind it, particularly the smokable hemp provisions. Some NC legislators may decide that it is not in their best interests in an election year to vote in favor of a bill that their constituents actively oppose. If SB315 does not become law then there may be no mechanism to propose a plan to the USDA and hemp production will be regulated by the USDA next year.

Make sense? All of this is to reiterate what the NCDA asserted in its letter: there is much uncertainty regarding who will regulate hemp in NC and what those regulations will look like.

THE OUTLOOK FOR HEMP PRODUCERS IN MANY STATES IS SIMILARLY UNCERTAIN

In this respect, NC is a study in what is occurring in various states throughout the US. Many are in NC’s situation. Others have already submitted plans to the USDA. Some have been approved. Others have been rejected with suggestions for edits. Additionally, some states recently enacted hemp programs that are outside the purview of the 2014 Farm Bill, but have not submitted plans to the USDA. Are these statutes enforceable now? Will they be enforceable in the future absent a USDA plan? The answer to these questions is “probably not”, in which case the USDA will regulate hemp in these states. That puts hemp producers in the uncomfortable and uncertain position of applying to the USDA for a license and following regulations that may conflict with their state hemp laws.

My friend and colleague, Mark Yurachek, recently wrote an excellent article about this issue with respect to Georgia entitled, Say What? Georgia’s Rejected Hemp Plan And What It Means For Growers In 2020. You can read his article by clicking here.

Here is an infographic by Cristina Rivero for POLITICO Pro Datapoint, that puts things into perspective visually:

CONCLUSION

Currently, there are no clear answers for many producers about who and what will regulate them in the near future. Eventually, most states will regulate hemp by virtue of USDA approved plans. However, some will default to the USDA for regulation. Either way, in the imminent transition hemp producers in many states will be operating in an uncertain regulatory environment that may require quick action to stay compliant. The hemp lawyers at Kight Law Office are committed to helping hemp farmers and hemp processors navigate this rapidly changing legal landscape.

January 31, 2020. Updated February 10, 2020 to include a link to Mark Yuracheck’s article on Georgia law. 

Rod Kight is an international cannabis and hemp attorney. He speaks at cannabis conferences across the country, drafts and presents cannabis legislation to foreign governments, is regularly quoted on cannabis matters in the media, and maintains the Kight on Cannabis legal blog, where he discusses legal issues affecting the cannabis industry. You can contact him here.

1 comment on “NC Hemp Letter Underlines National Uncertainty for Hemp ProducersAdd yours →

  1. I will be moving back to Florida where I lived for 35 years, Cannabis every where
    Can’t wait.
    Keep sending email’s.

    It will be a long time before North Carolina has Cannabis. I feel sorry for the people in pain.

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