CBD advocates warn new federal rule could cripple industry
Cannabis law experts and industry advocates are raising alarms that a new rule issued by the Drug Enforcement Administration could cripple the burgeoning CBD industry by essentially criminalizing the manufacturing process.
“To take something like this literally would mean that the industry just doesn’t exist,” said Rod Kight, a cannabis law expert, who has written detailed concerns about the regulations. “The DEA keeps refusing to release its grip on this plant, regardless of what Congress says.”
What exactly is the DEA proposing? Last week, the agency released an interim final rule, which takes effect immediately, addressing the legalization of hemp under the 2018 farm bill. It portrayed the regulations as a benign piece of housekeeping.
“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,” the summary states.
But industry experts say that the actual details could have far-reaching implications. The biggest issue is related to the THC level of hemp extract that is used to create CBD products. Under the 2018 farm bill, legal hemp plants and products must have a THC potency level below 0.3 percent. But the DEA’s new rule states that hemp derivatives also can’t exceed 0.3 percent. Otherwise, they are deemed a Schedule I controlled substance and subject to federal criminal penalties.
That’s problematic because the CBD manufacturing process almost always involves some stage in which the THC potency level rises above 0.3 percent. That potentially means that producers are violating federal law even if the plants they use and their finished products have THC levels below the legal federal threshold.
“It’s almost impossible, if not downright impossible, to produce any cannabinoid products without at some stage the THC levels exceeding the 0.3 percent,” Kight said.
What are the immediate effects? That remains difficult to parse. Hemp advocates are inclined to take a dark view of the DEA’s intentions.
“The DEA for decades has been a four-letter word for our industry. There is a lot of skepticism,” said Jonathan Miller, general counsel for the U.S. Hemp Roundtable. “The reaction from a large part of the industry is that, ‘Oh, this is the DEA trying to get back in and start threatening legal businesses.’”
But even if the DEA has no intention of raiding businesses and charging CBD producers with crimes, industry advocates say the legal cloud could further hinder a fledgling market that’s already hamstrung by regulatory uncertainty.
“Is it going to make it harder in terms of business banking, investment and insurance?” asked Michael Bronstein, president of the American Trade Association for Cannabis and Hemp. “If the rule is applied or interpreted in certain ways, it could become problematic for the way other businesses do business with the industry.”
What does the DEA say? Spokesman Sean Mitchell said the interim final rule was issued to make sure that the agency’s regulations comply with the 2018 farm bill. He reiterated that any substance with a THC level above 0.3 percent is considered marijuana and classified as a Schedule I narcotic.
“DEA is aware of the concerns of the CBD industry and is currently in the process of evaluating policy options,” Mitchell said.
He further suggested that raiding CBD manufactures isn’t among the agency’s priorities.
“We’re in the midst of an opioid epidemic. There is a very, very strong resurgence of methamphetamines,” he said. “DEA is focusing its resources and attention on the Mexican cartels that are bringing those and other deadly substances into our country.”
What happens next? Even though the interim final rule takes effect immediately, there is a 60-day comment period, and industry advocates intend to raise their concerns with the DEA through that process.
But they also hope to spur action by lawmakers, who are likely to be concerned that the agency’s actions could stifle an industry that they’ve sought to bolster. Some key lawmakers — most notably Senate Majority Leader Mitch McConnell and Senate Minority Leader Chuck Schumer — have been champions of the hemp industry, arguing that it will be a financial boon for struggling farmers.
But industry advocates also are considering litigation. They think there could be both procedural and substantive grounds for challenging implementation of the interim final rule.
“At this stage of the game, I can’t really say much,” Kight said. “But there’s rapidly gathering momentum.”
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