The below article is the Special Focus section of the November 2019 Compliance Journal. The full issue may be viewed by clicking here.
The United States Department of Agriculture (USDA) published an interim final rule on October 31, 2019 specifying regulations to produce hemp. The rule is effective October 31, 2019 through November 1, 2021.
The rule establishes a Federal program for producers in States that do not have their own USDA-approved plan. The program includes provisions for maintaining information on the land where hemp is produced, testing of THC levels, disposing of plants not meeting certain requirements, and licensing requirements. USDA has also outlined provisions under which States may submit their own plans for approval.
It is WBA’s understanding that the Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP) will submit a Hemp Program Plan to USDA. However, DATCP will continue under the 2014 Farm Bill provisions, and existing Wisconsin regulation at time of this article’s publication, in 2020. As of November 1, 2019, DATCP has begun its hemp licensing for the 2020 hemp season. At this time, DATCP is is preparing to write rules to align Wisconsin law with the 2018 Farm Bill, and expects to begin the new program under the 2018 Farm Bill, and USDA’s rule, in 2021.
This article discusses the procedural aspects for submission of a State plan to USDA under its interim final rule. It also discusses the Federal program requirements placed upon hemp producers. While these procedures and the program requirements do not directly apply to banks, they will affect how hemp businesses operate in Wisconsin, and thus, bank customers seeking to engage in hemp-related activity. This article presents selected aspects of the interim final rule for banks to better understand what to expect in the coming years and the requirements that may apply to their customers.
From a procedural standpoint, WBA reminds readers that as of publication of this article, much remains to be decided. November 26, 2019 Governor Tony Evers signed 2019 Senate Bill 188 establishing a new hemp program. It requires DATCP to write and submit a plan to USDA for approval. After USDA receives the plan, it will either approve or disapprove the plan no later than 60 calendar days after receipt.
If DATCP proposes a plan and it is rejected by USDA, the interim final rule provides for amended plan procedures. Under those procedures, hemp production continues under the existing plan. For example, production in Wisconsin would continue under current rules while DATCP and USDA work out amendments to the proposed plan. However, if an amended plan is not submitted within one year from the effective date of the rejected new law or regulation, the existing plan is revoked.
Note that as of publication of this article, the current DATCP program under ATCP 22 and 2017 Wisconsin Act 100 is still in effect. As discussed above, DATCP is currently issuing licenses for the 2020 season. If DATCP writes new rules under the new law, WBA will report on what banks need to know about the process.
USDA Plan Requirements
Because hemp production at the time of this article’s publication continues under existing Wisconsin law, and the future rule governing production is unknown, a full discussion of USDA’s rule and the Wisconsin bill would be premature. As such, this article will not discuss the Wisconsin bill which has yet to be signed by the governor. It will discuss USDA’s rule below, but from a conceptual standpoint rather than a full discussion. Note that the requirements as presented below have been edited to help banks understand their broader implications. As such, most technical requirements have been removed. For a full reading of the rule, please refer to the link at the end of this article.
A State plan must meet information collection requirements, to be reported to The Secretary of Agriculture of the United States regarding:
- Contact information for licensed producers;
- A legal description of the land on which the producer will produce hemp including its geospatial location; and
- The status and number of the producer’s license or authorization.
- A State plan must include a procedure for accurate and effective sampling of all hemp produced, requiring the following:
- Samples must be collected within 15 days prior to the anticipated harvest.
- The method used for sampling must be within a level of 95% accuracy, that no more than 1% of the plants in the lot would exceed the acceptable hemp THC level.
- During a scheduled sample collection, the producer or an authorized representative of the producer shall be present at the growing site.
- Representatives of the sampling agency shall be provided with complete and unrestricted access during business hours to all hemp and other cannabis plants, whether growing or harvested, and all land, buildings, and other structures used for the cultivation, handling, and storage of all hemp and other cannabis plants, and all locations listed in the producer license.
- A producer shall not harvest the cannabis crop prior to samples being taken.
- The State plan must include procedures for testing that can accurately identify delta-9 tetrahydrocannabinol content concentration levels to specified levels and meet a specific methodology.
- Any test resulting in higher than acceptable THC levels is considered conclusive evidence that the lot represented by the sample is not in compliance. Lots tested and not certified may not be further handled, processed or enter the stream of commerce and the producer shall ensure the lot is disposed of.
- Samples of hemp plant material from one lot shall not be commingled with hemp plant material from other lots.
- Analytical testing for purposes of detecting the concentration levels of THC shall meet standards that are not presented in this summary.
- The State shall promptly notify USDA by certified mail or electronically of any occurrence of cannabis plants or plant material that do not meet the definition of hemp in this part and attach the records demonstrating the appropriate disposal of all of those plants and materials in the lot from which the representative samples were taken.
- A State plan must include a procedure to comply with certain enforcement procedures.
- A State plan must include a procedure for conducting annual inspections of, at a minimum, a random sample of producers to verify that hemp is not produced in violation of this part.
- A State plan must include a procedure for submitting a monthly report to USDA. All such information must be submitted to the USDA in a format that is compatible with USDA’s information sharing system.
- The State must certify that it has the resources and personnel to carry out the practices and procedures necessary to comply.
- The State plan must include a procedure to share information with USDA.
- The State plan shall require producers to report their hemp crop acreage to the Farm Service Agency.
- The State government shall assign each producer with a license or authorization identifier in a format prescribed by USDA.
- The State government shall require producers to report the total acreage of hemp planted, harvested, and, if applicable, disposed. The State government shall collect this information and report it to USDA.
As expected, the rule requires testing, reporting, and monitoring to accurately identify whether hemp samples contain a delta-9 tetrahydrocannabinol (THC) content concentration level that does not exceed the acceptable level. To that extent, hemp is defined as the plant species 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 THC concentration of not more than 0.3 percent on a dry weight basis.
Another aspect to note is the rule’s use of the word “producer.” A producer is someone who is licensed or authorized to produce hemp, meaning to grow hemp plants for market, or for cultivation for market, in the United States. The rule does not distinguish between grower, producer, retailer, or any other type of hemp-related business. As such, it will remain important to see what DATCP proposes for categories of regulation in its rule.
While hemp businesses in Wisconsin still operate under DATCP’s current rule at time of this article’s publication, it is important to understand the track Wisconsin is currently on, and what possibilities the future holds, in order to prepare accordingly. WBA will continue to monitor and report on future hemp regulation as it continues to develop.
Click here to view USDA’s interim final rule.
By, Ally Bates