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Much Ado About the DEA Interim Final Rule; What’s The Deal With Hemp?

Posted by Nicole Aaronson, Esq. | Sep 29, 2020 | 0 Comments

On August 21, 2020, the Drug Enforcement Administration (DEA) published an interim final rule (IFR) to implement hemp-related amendments to the Federal Controlled Substances Act (CSA) that were made by the Agricultural Improvement Act of 2018 (the “2018 Farm Bill”). According to the DEA, this IFR “merely confirms [the agency's] regulations to the statutory amendments to the CSA that have already taken effect, and . . . does not add additional requirements to the regulations.” Certain language in the IFR, however, has the industry questioning whether this is actually the case, and raises questions about how the DEA plans to implement and enforce the amended regulations. 

While the 60-day comment period during which the public can submit feedback on the IFR ends on October 20, 2020, a petition was filed by the Hemp Industries Association (HIA) on September 18 challenging the DEA's authority. The petition, filed in the U.S. Court of Appeals for the District of Columbia Circuit has not yet been briefed, but there are multiple items from which the HIA could take issue.

Background

The passage of the 2018 Farm Bill eliminated one of the largest legal obstacles to producing hemp and hemp-derived products in the US.  It modified the CSA's definition of “marihuana” so that it does not include hemp, and defined hemp as:

the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9-tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.[1]

In issuing the IFR, however, the DEA stated that the definition of “marihuana extract” includes all  extracts “containing greater than 0.3 percent delta-9 tetrahydrocannabinol on a dry weight basis.”[2]  This interpretation of hemp opines that the dispositive factor is the material's delta-9 THC concentration at any given time, rather than the material's source (e.g., whether it was derived from a “marijuana” or a “hemp” plant).[3]

The IFR is Inconsistent With the 2018 Farm Bill

Despite purporting to merely codify existing changes to the CSA, the IFR effectively restricts the statutory definition of hemp and subverts Congressional intent for a robust hemp industry when it enacted the 2018 Farm Bill. The 2018 Farm Bill's definition of hemp contemplated taking hemp, extracting it and deriving lawful products under it. Yet, under the IFR, hemp that exceeds 0.3 percent THC during the manufacturing process becomes an illegal schedule I controlled substance even if it tested below the legal threshold at the time of harvest and ultimately goes back down to legal THC levels in its final production. Notwithstanding Congress's explicit legalization of hemp extracts in the 2018 Farm Bill, the DEA's interpretation effectively criminalizes them before they reach their final formulation. 

The inconsistent logic of the IFR becomes more evident when analogizing to the alcoholic beverage production process.  Similar to hemp, alcohol production is heavily regulated and involves a chemical transformation of raw materials into a consumable finished product. During the process, a “mash” of yeast, water and carbohydrates is fermented, distilled and eventually transformed into a marketable and beloved spirit. By way of comparison, the DEA's promulgation of IFR, would equate to the ATF issuing a rule that criminalized the fermentation process of alcohol, despite the legality of the finished alcohol product.  Just like this would be the death knell of the alcoholic beverage industry, the IFR provision is likewise troublesome as it will put many CBD companies out of business as it stands. 

The IFR's Use of “Synthetically Derived” is Vague and Ambiguous

The IFR further states that the 2018 Farm Bill did not impact the CSA status of “synthetically derived tetrahydrocannabinols. . . because the statutory definition of ‘hemp' is limited to materials that are derived from the plant Cannabis sativa L.” In addition, “[f]or synthetically derived tetrahydrocannabinols,” the IFR continues, “the concentration of delta-9 THC is not a determining factor in whether the material is a controlled substance. All synthetically derived tetrahydrocannabinols remain schedule I controlled substances.” The IFR, however, fails to define what it means by “synthetic” or “synthetically derived.”

The UN Office of Drugs and Crime (ODC)'s description of synthetic opiates is instructive. The ODC defines synthetic opiates as “prepared exclusively by synthesis from common chemicals not related to the poppy plant.”[1] When applied to the IFR, “synthetically derived” THC would be a THC that is derived solely from common chemicals that are not related to the cannabis plant. This is the most likely interpretation in line with the DEA's promise that the IFR merely reiterates the current status of the law. So long as hemp derivatives are prepared using hemp, they are legal. Nevertheless, without much needed clarity, it is possible that “synthetic” could inadvertently include manufacturing methods commonly used in the industry such as isomerization which involves the use of a chemical reaction to transform organic plant material into a finished product.

Processors seeking to operate in a legally compliant manner are effectively handicapped by uncertainty regarding what is and is not legal when processing hemp. Thus, clarifying the ambiguity of the term “synthetically derived tetrahydrocannabinols” is critical to provide hemp industry stakeholders a level of certainty in conducting operations.

Conclusion

As it stands, the IFR could have a significant impact on the hemp industry as a whole. Hemp processors, and those ancillary businesses with whom they do business, ignoring the IFR do so at their own peril.

If the IFR goes unchanged following the 60-day public comment period, its inconsistent treatment of hemp vis a vis the 2018 Farm Bill will--and already has--inevitably invite legal challenges. 

Manzuri Law continues to monitor the DEA's IFR and the legal challenge from the HIA. You can submit comments on the IFR here. Please contact us to discuss how Manzuri Law can assist with drafting public comment and ensuring your hemp operations are legally compliant.

[1] United Nations Office on Drugs and Crime, Bulletin on Narcotics, Issue 1 - 004 (1956) (emphasis added).

[1] 7 U.S.C. 1639o.

[2] See 21 C.F.R. 1308.11(d)(58).

[3] See Implementation of the Agricultural Improvement Act of 2018, 85 Fed. Reg. 51,639 (eff. Aug. 21, 2020) (“As a result, a cannabis derivative, extract or product that exceeds the 0.3% delta-9 THC limit is a schedule I controlled substance, even if the plant from which it was derived contained 0.3% or less delta-9 THC on a dry weight basis.”).

About the Author

Nicole Aaronson, Esq.

Senior Associate

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