Maine’s Hemp Policies Remain Turbulent as the Legislature Reconvenes

The legislature is reconvening on hemp issues this coming Thursday, January 9. The Committee on Agriculture, Conservation and Forestry is considering a simple resolve "Directing the Department of Agriculture, Conservation and Forestry to Submit to the United States Secretary of Agriculture a Plan for Continued Implementation of the Maine Industrial Hemp Program." This resolve is self-explanatory; it will direct the Department to submit a plan to the USDA for hemp production which would finally bring Maine’s program in line with federal law. 

What this resolve doesn’t do is address a more pressing issue with Maine’s hemp policies at the moment: the continued crackdown on CBD products manufactured out-of-state. We’ve heard multiple reports of state inspectors telling retailers to sell whatever is on their shelves, but not to buy any more CBD products from outside Maine. The policy formally took effect on January 1 (though the original guidance issued by the State said December 1), and it remains to be seen how aggressive the crackdown will be, especially since a large portion of current CBD ingestible products on the shelves in Maine are from elsewhere.

Feds Take Steps to Increase Hemp Producers’ Access to Capital

The Department of Treasury released new guidance yesterday that makes it much easier for banks to serve hemp producers. This comes on the heels of the USDA interim rules governing hemp nationwide. 

Basically, the new guidance says that banks no longer need to file ‘suspicious activity reports’ with Treasury for hemp producers since the crop is now largely legal under federal law. Suspicious Activity Reports (or SARs) are a fairly burdensome regulatory requirement for banks that require a great deal of diligence. This new guidance not only reduces the regulatory burden; it also reduces legal exposure banks may face by working with clients in the hemp industry. This should mean a greater willingness on the part of federally chartered banks to work with hemp producers, which, in turn, will result in greater access to capital.

This is also important because of likely trickle down effects. Insurers, for example, will likely become more eager to work with the hemp industry as access to capital increases.

Of course, banks will still need to ensure that their clients are complying with state and federal laws governing hemp, and will need to conduct necessary diligence to avoid banking illegal marijuana operations with products containing THC in excess of 0.3%. In addition, banks will need to remain cautious about clients who work with CBD in food products given the FDA’s hostility to that practice.

All in all, I see this as another positive step in the long game toward broader legalization.

State Adopts New Restrictive Policy on CBD Sales That Is, at Least in Effect, Quite Similar to the Old Policy

The Maine Department of Agriculture has begun its next phase restricting sales of CBD in the state. Readers will recall that, over the summer, the State took the position that CBD sold in Maine had to be derived from hemp grown in Maine. The reality, of course, is that only a small portion of CBD sold in Maine has its origins in Maine and that policy expired in September.

Now, the State is handing out notifications to retailers and others in the CBD business that ingestible CBD products sold at retail in Maine must be produced in Maine. Here is a copy of that notification received by one retailer in the state:

This sounds different in substance than the State’s policy over the summer. Now, CBD sold in Maine doesn’t have to be derived in Maine. But the reality is that this policy will have largely the same effects since a huge portion of the CBD that is imported into Maine has already been incorporated into food products and is shelf-ready.

Trying to understand the State’s motivations for this latest policy shift, it appears to be related to the federal ban on CBD sold in edible products. The nuance of the State’s position isn’t entirely clear, but as we hear more we will post it here.

Do the Proposed USDA Hemp Rules Threaten Our CBD Industry?

We’re hearing concerns from some farmers and CBD manufacturers that the proposed USDA hemp rules, released earlier this week, could make it much more difficult to provide high-quality CBD products in the U.S. The concern, as I can best articulate it since I’m not a farmer, is that full-spectrum CBD is largely available in plants that have a longer growth cycle, but these plants may also have THC levels above 0.3 percent by virtue of being in the ground for longer. Under current regulations, some farmers and producers have found ways to reduce the THC content following harvest, which allows them to sell full-spectrum CBD products with compliant THC levels. The new USDA regulations, though, require that the crop be tested for THC content 15 days prior to harvest. Any crops with an excess of THC will need to be discarded. This eliminates the possibility of growing for longer and eliminating excess THC after the fact.

I can’t speak personally to whether this perceived threat is real or overblown, but its one interesting example of the many consequences (intended or otherwise) the new federal regime will have on the industry.

One other, related, strain: Though hemp must have THC levels below 0.3 percent, these new rules create a couple of safe harbors. First, they recognize that testing labs have margins of error, and so if your crop tests at 0.34 percent THC, but the lab results have a 0.05 percent margin of error, then the crop is legal and you’re good to go. Second, if your crop is above 0.3 percent but below 0.5 percent THC, you can’t sell it, but you also won’t be prosecuted. These rules basically recognize the inherent uncertainty involved with growing hemp.

USDA Hemp Rules Nearly Finalized

We haven’t seen a draft of the rules yet, but the latest news is that the White House has signed off on the proposed rules and they’ll be released any week now. Once the rules are released, a public comment period will begin. The USDA is still claiming that final rules will take effect before the end of 2019. 

The Maine Department of Agriculture, Conservation and Forestry (which houses our hemp program) is likely to respond by drafting and proposing new rules of its own. These rules will likely parallel the federal rules including any THC potency testing guidelines, quality control standards, and broader cannabinoid testing requirements. 

Maine will also seek USDA approval of a state regulatory plan governing hemp. Once this approval is obtained, Maine hemp will finally be legal.