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Hemp Industry Files Lawsuits Against DEA Over Release of Rule Regarding Hemp

On August 21, 2020, the Drug Enforcement Administration (DEA) published an interim final rule (IFR) pertaining to hemp that acknowledged the

On August 21, 2020, the Drug Enforcement Administration (DEA) published an interim final rule (IFR) pertaining to hemp that acknowledged the changes to the definition of marijuana caused by the 2018 Farm Bill that was effective on January 1, 2019. 

Under the 2014 Farm Bill, hemp was still considered marijuana under the Controlled Substances Act (CSA), and hemp was only allowed to be grown in limited circumstances in states with an industrial or pilot program—but the hemp was not supposed to leave those states’ borders—because it was still marijuana.  Hemp CBD did cross state lines though, flying across state borders on Amazon and everywhere else.

The exponentially growing hemp CBD industry grabbed the attention of Sen. Mitch McConnell, who propelled the passage of the Hemp Farming Act inside of the 2018 Farm Bill.  Among other things, the 2018 Farm Bill made hemp a federally legal agricultural commodity, allowed its interstate commerce, and directed the United States Department of Agriculture (USDA) to oversee how each of the states regulate hemp within their borders in conformity with the 2018 Farm Bill. 

The 2018 Farm Bill excepted hemp from the definition of marijuana and created a definition of hemp that is cannabis less than .3% delta-9 THC on a dry weight basis, including all of its derivatives, extracts, and isomers and so on.  Thus, the DEA reiterated in the IFR what has always been true, that cannabis exceeding 0.3% delta-9 THC is marijuana, a schedule I controlled substance.  Therefore, cannabis derivatives or extracts, regardless of source, are also marijuana if they are over 0.3% THC.  Although the IFR was not stating anything new about the CSA or the definition of marijuana, the IFR immediately set off concerns for the chilling consequences it could have on the hemp and CBD industry.

As many processors and extractors in the industry know, hemp extract that is not in its final form almost invariably exceeds 0.3% delta-9 THC concentration at some point during the extraction process before that percentage is brought back into legal compliance for the final product.  The reminder of where this activity falls for CSA purposes has alarmed those whose businesses center on extraction and processing—no one wants to be prosecuted for the manufacture or distribution of a Schedule I substance.  

Hemp Industry Files Lawsuits Against DEA Over Release of Rule Regarding Hemp

The DEA explains its reasoning as follows:
The definition of hemp does not automatically exempt any product derived from a hemp plant, regardless of the D9-THC content of the derivative. In order to meet the definition of ‘hemp,’ and thus qualify for the exemption from schedule I, the derivative must not exceed the 0.3% D9-THC limit. The definition of ‘marihuana’ continues to state that ‘all parts of the plant Cannabis sativa L.,’ and ‘every compound, manufacture, salt, derivative, mixture, or preparation of such plant,’ are schedule I controlled substances unless they meet the definition of ‘hemp’ (by falling below the 0.3% D9-THC limit on a dry weight basis) or are from exempt parts of the plant (such as mature stalks or nongerminating seeds). See 21 U.S.C. 802(16) (emphasis added). As a result, a cannabis derivative, extract, or product that exceeds the 0.3% D9-THC limit is a schedule I controlled substance, even if the plant from which it was derived contained 0.3% or less D9-THC on a dry weight basis. 

In relevant part, the Farm Bill’s definition of legal hemp extract includes “the plant Cannabis sativa L. and any part of that plant, including … extracts …, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3% on a dry weight basis.”  Based on a clear reading of the Farm Bill, however, it is doubtful Congress intended to make illegal any CBD products derived from legal hemp and containing less than 0.3% delta-9 THC concentration in final form.  

Congress may not have been aware of the temporary increase in delta-9 THC during processing—after all, the focus was to simply get hemp separated from marijuana and made federally legal first.  Since the IFR groups all extracts over .3% delta-9 THC as marijuana, regardless of source, it could be argued the DEA’s interpretation of the interplay between the definition of hemp extract in the 2018 Farm Bill and marijuana extract in the CSA appears inconsistent with the express intent of Congress to exempt hemp and hemp-derived products – including extracts – that contain less than 0.3% delta-9 THC concentration on a dry weight basis, from the CSA.  

However, the 2018 Hemp Farming Act made no express protections for hemp extract in process until it reaches final form for human consumption, putting processors in a bind to decide whether to risk it and carry on, or, to close up shop and forget the whole thing.   To assuage this doubt, two lawsuits were recently filed against the DEA, contending that the DEA overstepped its authority in the IFR in several respects.  The hemp industry took the IFR as a direct warning from the DEA that attacks were on the way to put hemp processors out of business, despite the fact that the hemp industry is governed by the USDA, which delegates the regulation of the programs to the states, and despite the lack of any prior DEA enforcement on hemp, even during the 2014 Farm Bill time period while all of hemp was still marijuana under the CSA, some in the hemp industry thought they should make some noise about the IFR.

Hemp Industry Files Lawsuits Against DEA Over Release of Rule Regarding Hemp

The lawsuits allege the DEA is unlawfully attempting to criminalize hemp production and to regulate hemp products, and the second lawsuit seeks an injunction preventing the DEA from enforcing its laws against hemp producers.  The Hemp Industries Association, a leading trade organization with a history of suing the DEA, and a South Carolina-based hemp company, RE Botanicals, filed a petition for review of the DEA’s August 21 Rule in the U.S. Court of Appeals for the D.C. Circuit, asking the Court to intervene and block implementation of the IFR.  The same plaintiffs filed a stronger lawsuit weeks later, a declaratory action to clarify the scope of the 2018 Farm Bill in the U.S. Court of Appeals for the D.C. Circuit.

The complaint for declaratory and injunctive relief alleges the DEA is unlawfully attempting to regulate certain products derived from lawful hemp by misinterpreting 2018 Farm Bill by classifying hemp in progress and waste hemp material, two necessary and inevitable byproducts of hemp processing (the elements that rise above .3% THC), as Schedule I controlled substances. The hemp industry plaintiffs argue that Congress deliberately removed all commercial hemp activity from the DEA’s jurisdiction when it legalized hemp production, including hemp processing, via the 2018 Farm Bill.

The second lawsuit alleges the DEA’s interpretation of the 2018 Farm Bill “has serious, immediate, and irreparable consequences.” Further, “[A]ll hemp processors and manufacturers who work with and/or store hemp in process and/or waste must now choose between ceasing to process, manufacture and/or store hemp; obtaining a Schedule I license from DEA; or risking criminal prosecution under the [Controlled Substances Act]. Given the centrality of hemp processing to the hemp industry’s supply chain, forcing processors to choose between the foregoing options would effectively destroy the entire hemp industry.” The hemp industry plaintiffs asked the court for a judicial determination that (1) the definitions of hemp and THC in hemp in the 2018 Farm Bill includes hemp in progress and waste, and that such materials are therefore not controlled substances; and (2) the DEA lacks any independent authority to regulate any aspect of hemp production, including hemp in progress and waste. 

The hemp industry plaintiffs are also seeking an injunction (1) preventing the DEA from enforcing the CSA as to hemp in progress and waste, and from classifying such materials as Schedule I substances, and (2) preventing the DEA from promulgating any rules relating to the production of hemp.It is unclear why the DEA would be involved in promulgating any rules relating to the production of hemp—that is the USDA’s purview.  The DEA is not involved in policing the hemp agricultural commodity program, and the few ways in which it is implicated in the USDA’s interim rule is being walked back.  Hemp is an incredibly low priority for the DEA, considering the mass influx of deadly drugs, violence, and cartel activity the DEA is charged with pursuing—and as to marijuana—the DEA only pursues large scale illegal trafficking and cartel activity.  The DEA was recently quoted as saying COVID caused an interruption in the illicit drug supply chain such that pent up demand is engulfing the floodwaters that have since been re-opened, and people are dying at alarming rates.  The DEA is focused on these activities.

Hemp Industry Files Lawsuits Against DEA Over Release of Rule Regarding Hemp

The hemp programs are policed locally by the states. The idea that the DEA is going to come busting down the door of an unsuspecting compliant hemp processor, who must register and report to one or more agencies in his state, over a few hundredths of a percentage of THC, is nothing short of ridiculous.  However, it is understandable that businesses want to eliminate all risks possible, and the temporary veering into Schedule I territory can cause problems for insurance companies, banks, and conservative investors.  But, until Congress changes the definitions of hemp and marijuana to create a special allowance for hemp extract in progress, cannabis extracts over .3% THC simply are marijuana under the CSA, both before and after the publication of the IFR.Another issue from the IFR is the mention of synthetic cannabinoids being Schedule I substances, which they are.  Think spice, K2, those types of lab-manufactured drugs intended to mimic marijuana—these definitions of “synthetics” have been defined by case law and are listed on the CSA.  But, the hemp sector is concerned that the use of the word “synthetics” could portend an outlaw of “delta-8 THC,” another hemp derived cannabinoid present in trace amounts in the cannabis plant, but that typically requires synthetic processes to convert it to a consumable form. If the hemp industry’s concerns here were founded, then all CBD products would be synthetic because they all need a synthetic process for human consumption.  

Again, like with hemp extract in process, it is highly unlikely that Congress imagined delta-8 THC when getting the Hemp Farming Act passed, so, it is unlikely the IFR is any kind of signal that suddenly the DEA is onto this and going to chase down hemp peddlers, again, over a very minute variation in THC type/amount.  Synthetic cannabinoids are already on the CSA as controlled substances, so again, the IFR was stating nothing new.  And because delta-8 THC is not a synthetic cannabinoid as that term is used, it has not been suddenly made illegal by the IFR.  Note, however, that marijuana-derived delta-8 THC is on the CSA, and, some states have individually outlawed hemp delta-8 THC.  No other activity has occurred since these lawsuits were initially filed.  While I believe the lawsuits were premature,  filed before the conclusion of a comment period opened by the DEA on the matter, we will see if the lawsuits have any effect of causing the DEA to issue any clarifications on these issues. The best-case scenario would be for later iterations of the Hemp Farming Act to address and improve these concerns for the hemp program overall for all participants.  

There is little doubt many submitted comments about hemp in progress to the USDA in its extensive public commenting process which could lead to some protections with conditions there.  The real news will be what the USDA unveils after its consideration of all the comments.

Lisa L. Pittman, Esq., Coats Rose, P.C.

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