Commercial Hemp in the Southeast

On December 20, 2018 the Agricultural Improvement Act of 2018 (the “2018 Farm Bill”) became effective and legalized hemp production nationwide, subject to stringent federal and state licensing and regulation.

The following is a brief overview of the status of hemp (also called “commercial hemp” or “industrial hemp”) farming and regulation in the Southeastern United States following the 2018 Farm Bill and previous legislation.

Background

The terms “hemp” (which has non-drug connotations and uses) and “marijuana” (no further explanation necessary) describe the same plant genus: cannabis. The difference between the two is generally based on the relative amount of tetrahydrocannabinol (THC) contained in the plant. Hemp plants are cultivated to produce fiber and seeds and very little if any THC. Marijuana plants, on the other hand, are cultivated to produce more THC. THC, of course, is the main psychoactive part of the plant.

Historically, U.S. federal and state law has recognized no distinction between hemp and marijuana. Beginning with the Marihuana Tax Act of 1937, and then under the terms of the 1970 Controlled Substances Act, all “cannabis” has been considered to be illegal. More particularly, cannabis is designated by the Drug Enforcement Administration (DEA) as a “Schedule 1” drug.

Of course, cannabis’ status as an illegal drug prevented farmers from growing it as a crop. As a result, interested parties also missed out on the significant benefits that the creators of agricultural commodities enjoy, such as farm subsidies, nutritional assistance, and crop insurance.

The 2014 Farm Bill and Hemp Pilot and Research Programs

The Agricultural Act of 2014 (the “2014 Farm Bill”) created a little daylight between hemp and marijuana, recognizing that some cannabis is not in fact a psychoactive drug. The 2014 Farm Bill encouraged research into hemp, and authorized states to pass laws establishing hemp pilot and research programs. These pilot programs allowed a limited number of hemp “cultivators” to operate under the auspices of state departments of agriculture, and often in coordination with institutions of higher learning.

In particular, the 2014 Farm Bill limited these programs to cannabis containing no more than 0.3% of THC, and put numerous limitations and conditions on the number of program licensees, the allowable acreage for hemp cultivation, and the uses for which cultivated hemp could be employed.

Several Southeastern states enacted state laws implementing the 2014 Farm Bill and establishing research/pilot programs, including Alabama, Florida, North Carolina, South Carolina, and Tennessee.

The 2018 Farm Bill

The 2018 Farm Bill continued the “THC-content” difference between hemp and marijuana established in the 2014 Farm Bill. The 2018 Farm Bill facilitates the interstate commerce of hemp by making clear that no state (or tribal government) can prohibit the transportation of hemp through its territory.

Significantly, the 2018 Farm Bill treats hemp like other agricultural crops, adding hemp to various crop and agricultural materials programs administered by the United States Department of Agriculture (“USDA”).

However, while hemp production is now legal, that production (cultivation, handling, and processing) is subject to a very strict licensing and regulatory regime. Notably (and understandably), licensed persons must ensure that hemp does not become marijuana (very much still a Schedule 1 drug) by virtue of its THC content. For more on the 2018 Farm Bill hemp provisions, click here.

Of note, the 2018 Farm Bill did not as a general matter legalize Cannabidiol or “CBD” — a compound found in cannabis. Any cannabinoid (that may include some types of CBD) derived from hemp produced in a way consistent with the Farm Bill and other applicable law is legal. However, with limited exceptions all other cannabinoids remain Schedule I substances.

The 2018 Farm Bill gives states the ability to 1) enact their own laws implementing its provisions, and then 2) submit a state hemp plan to the USDA for approval.

In the Southeast, Florida, Georgia, Louisiana, South Carolina, Tennessee, and Texas enacted state laws implementing the 2018 Farm Bill, and as set out below all these states have submitted plans to the USDA for approval.

The Interim Final Rule

On October 28, 2019, the Agricultural Marketing Service of the USDA issued an Interim Final Rule for the Establishment of a Domestic Hemp Production Program as required by the 2018 Farm Bill.

The Interim Final Rule went into effect October 31, 2019 and is effective through November 1, 2021. The USDA accepted comments on the Interim Final Rule until January 29, 2020. For more on the Interim Final Rule, click here.

The Interim Final Rule requires the USDA to approve or disapprove a plan submitted by a state no later than 60 days after its submission.

Commercial Hemp Status in Southeastern States

Below is the current status of state plans according to the USDA website:

• Alabama- Will continue to operate under its 2014 pilot program.
• Florida- Drafting a plan for USDA review
• Georgia- Under review by the USDA
• Louisiana- Approved Plan
• Mississippi- Did not operate under the 2014 Pilot Program. Has not adopted any state law following the 2018 Farm Bill.
• North Carolina- Will continue to operate under its 2014 pilot program
• South Carolina- Under review by the USDA
• Tennessee- Pending re-submission to the USDA.
• Texas- Approved Plan

Conclusion

While hemp production is now legal, it is regulated much more heavily than typical crops. As a result, any person who touches hemp at any point during its production (cultivation, handling, processing) must ensure, through appropriate contractual and other due diligence actions, that all licenses have been obtained and that all applicable requirements are followed.