The Government Shutdown Is Stifling the Legal Hemp Industry

Last month, the 2018 Farm Bill was signed into law, officially legalizing industrial hemp in the United States. Days later, America became mired in the longest government shutdown in US history. So, what does this mean for the enactment of bill? Are potential growers just sitting around, twiddling their thumbs waiting for the federal go-ahead?

Not exactly, says Shawn Hauser, a partner and chair of the hemp and cannabinoids group at Vicente Sederberg LLC, a national Cannabis law firm. 

"There is already a growing US hemp market and hemp economy in the country," she told Civilized - albeit one stifled by inconsistent regulation. 

For several years now, a total of 35 states have been growing hemp under the 2014 Farm Bill, which stipulates that it is legal to grow in states that have agricultural pilot programs for research purposes. Of these, 17 states have allowed for commercialization within their borders, despite it being federally illegal to do so. 

The 2018 Farm Bill was introduced to solve this problem by completely removing hemp from the Controlled Substances Act. This means that the substance is no longer illegal, and can be commercially produced, shifting it from the purview of the Drug Enforcement Administration, to regulation under the United States Department of Agriculture. Hauser notes that the approach will be similar to healthcare, with the responsibilities of the program being shared between the state and federal governments.

"States will be able to have the primary regulatory authority, if they want to," she said, explaining that states will be able to exercise that option by submitting their regulatory plans to the USDA. If it meets their minimum standards for approval, the state can then legally enact their own regulatory framework. Otherwise, they will default to a baseline of federal regulations, which have yet to be laid out. 

All of these processes, however, are contingent on the government being operational. However, as of right now, it is not. Because of the shutdown, Hauser says that the approval process under the 2018 Bill "hasn’t even started yet."

"The USDA is not approving plans. Rule-making is delayed, and while Kentucky already submitted its plans, but under the shutdown, I don’t expect them to approve it any time soon."

What happens now?

In the meantime, farmers are still restricted to the non-commercial growing operations regulated under the 2014 bill, while states that do not currently have an infrastructure for growing hemp cannot begin cultivation. Hauser says that these setbacks are only serving to hold the US back as it attempts to catch up with other hemp-producing countries.

"We’re already so far behind other countries in terms of hemp production, so this delay is an added frustration," she said. "We still import over 90 per cent of our hemp, and countries like China and Canada are far ahead of us, having large-scale manufacturing capabilities, and we still need to build a hemp economy to that scale."

"As other countries are advancing in their research surrounding the cannabis plant in general, we’re getting more and more behind with each day of the shutdown."

The shutdown is also impacting farmers on a more personal level. Many who are eager to get a jump on the industry will have difficulty securing the same insurance or federal grant money that producers in other commercial industries rely on.

"If farmers want to have the access to these benefits that most other farms have, they will just have to wait," she said.

It will also be difficult for these states to navigate the early regulatory framework, as the USDA has given themselves a 60-day period for approving state plans, meaning that—especially in states that aren’t currently growing hemp—there will be no federally approved regulations for months to come.

Added to that is the fact that the Food and Drug Administration is also impacted by the shutdown, limiting its ability to approve products and enforce standards on the emerging industry.

"With some products, they don’t necessarily require pre-approval if ingredients are already considered safe. So, hemp seed, or hemp seed oil or hemp protein products—or others that have been recognized as safe or produced lawfully, they likely wouldn’t need approval,” she said. “For companies looking to get FDA approval for dietary or food ingredients along with their hemp-derived substances, we can certainly expect a delay."

In the meantime, the shutdown has also caused the FDA to scale back its ability to enforce regulations. But Hauser said it's unlikely that we’ll see businesses trying to rush their merchandise to the market during the shutdown.

"It would be a very risky approach. The government shutdown is not permanent. The FDA is going to come back, and once you have misbranded or adulterated product on the market, they can enforce," she said, adding that "most of the businesses in the industry really do care about quality and integrity of their products."

Future forecast

While the hemp industry will likely continue to grow in the meantime, quietly self-regulating as it waits for federal approval, Hauser says the long-term impact of the shutdown could still be "significant."

"It is certainly delaying resolutions on issues that are certainly critical to the industry," she said. "It also retains a lot of the traditional problems—like not being able to access banking that I think will delay the business for a great number of farmers."

So, although the industry will likely still be stifled by the shutdown in its early days, Hauser says she is relatively confident that the hemp issue will be swiftly addressed once the government returns to work.

"I expect that the Farm Bill will get picked up again fairly quickly, as it is a passion issue of Mitch McConnell," she said, noting that the Senate Majority Leader’s state, Kentucky, was the first to submit their plans to the USDA.

"I’m cautiously optimistic that things will go back to normal…whatever that means, and that the issue of the Farm Bill is one that will move forward fairly quickly after they return."

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