Interstate Transport of Hemp Remains In Legal Limbo

Interstate Transport of Hemp Remains In Legal Limbo

It is a popular misconception that the 2018 Farm Bill legalized the interstate transportation of hemp. The 2018 Farm Bill legalized the interstate transportation of hemp only for hemp produced in compliance with a state’s industrial hemp program that has been approved by the USDA. Because the USDA hasn’t approved any such programs (or issued its own stopgap interim final rule), there is no federal protection for interstate hemp shipments. As a result, states continue to seize hemp shipments and file criminal charges against the shippers.

The Agricultural Improvement Act of 2018 (which is commonly referred to “2018 Farm Bill”) essentially federally legalized hemp cultivation and gave the US Department of Agriculture (“USDA”) regulatory authority. As to the interstate transportation of hemp, section 10114 (b) of the 2018 Farm Bill provides: “TRANSPORTATION OF HEMP AND HEMP PRODUCTS.—No State or Indian Tribe shall prohibit the transportation or shipment of hemp or hemp products produced in accordance with subtitle G of the Agricultural Marketing Act of 1946 (as added by section 10113) through the State or the territory of the Indian Tribe, as applicable.” In other words, states and Tribes can’t prohibit hemp or hemp products from passing through their state or territory if the hemp or hemp products were produced in compliance with Section 10113 of the 2018 Farm Bill.

Thus, Section 10114 appears to be contingent on Section 10113 of the 2018 Farm Bill. Section 10113 essentially says that the USDA will review and approve state and tribal plans for hemp cultivation. In addition, Section 297C of the 2018 Farm Bill calls for the USDA to establish its own plan and and issue licenses to cover the cultivation of hemp in states or Tribal territories where that state or Tribe’s plan for hemp cultivation has not been approved.

As of today, the USDA has not yet approved of any state or Tribe’s plan. In fact the USDA hasn’t even issued its own rules regarding the submission of those plans for review. Nor has the USDA created its own plan under Section 297C. That means that any hemp legally cultivated in the US was done so under Section 7606 of the 2014 Farm Bill, which allows states to implement agricultural pilot programs to research the cultivation of industrial hemp. However, the 2014 Farm Bill provides no explicit protection for the interstate transportation or transfer of industrial hemp.

Returning to the 2018 Farm Bill, Section 7605 (b) of the 2018 Farm Bill extends Section 7606 of the 2014 Farm Bill for one year after the USDA establishes a plan under 297C. That provision is not contained within Section 10113. Section 10114’s prohibition on interference with the interstate transfer of hemp does not reference the 2014 Farm Bill. Therefore, Section 10114’s protection against interference with the interstate shipment of hemp or hemp products may not currently apply to hemp or hemp products currently in transit because they cannot yet be cultivated “in accordance with” Section 10113.

The long and the short of it is that, unless and until the USDA implements its plan under Section 297(c), or approves a states’ plans under Section 10113  the interstate transport of hemp is in legal limbo at the federal level. As a result, states arguably remain free to act, and several (including Kansas) have seized interstate hemp shipments and initiated criminal proceedings.

While it is possible to successfully ship hemp interstate, its important to understand not only the law but each state’s enforcement policies and priorities. This requires consultation with a regulatory lawyer and a detailed analysis of exactly who is shipping what where.

About Kennyhertz Perry’s Hemp and CBD Regulatory Practice Group

Kennyhertz Perry advises clients on a wide range of hemp and CBD compliance and regulatory matters.  Kennyhertz Perry has broad experience assisting clients with business formation and compliance in highly-regulated industries.

Kennyhertz Perry partner Braden Perry spent time as a Senior Trial Attorney with the Commodity Futures Trading Commission and is well equipped to assist with the banking and other financial issues related to the hemp and CBD industry. He has defended multiple FTC enforcement actions involving allegedly deceptive claims and asset freezes.

Kennyhertz Perry partner John Kennyhertz is former in-house counsel at a private equity firm, and has structured transactions for very small and very large clients alike. He has substantial experience in highly-regulated industries such as online lending, and industries with rapidly-evolving regulations, such as cryptocurrency. He provides hemp and CBD operational and compliance counseling, and offers advice on appropriate modifications of transaction structure and documentation. John has also defended multiple companies from FTC enforcement actions.

Kennyhertz Perry attorney Ben Tompkins is a former federal prosecutor in Los Angeles as well as serving as tax enforcement counsel for the U.S. Department of Justice. He is well equipped to provide advice regarding the rapidly-evolving tax landscape in the hemp and CBD industry. In addition, he has defended multiple FTC enforcement actions involving allegedly deceptive claims and asset freezes.

Kennyhertz Perry attorney Arthur Chaykn is a former law school professor and head of litigation at Sprint. He is an expert on intellectual property law, and devises creative solutions to protect client’s IP in the hemp and CBD industry, even when certain federal protections are unavailable.

Kennyhertz Perry attorney Jeff Donoho is an expert in small business formation and government compliance. His knowledge of the labyrinthine hemp and CBD regulatory landscape helps him provide detailed guidance to clients.

Kennyhertz Perry attorney Mit Winter is a former partner at at AmLaw 100 law firm.  An expert litigator, his skill in anticipating issues before they become serious problems is valuable to all clients, and particularly those in the hemp and CBD industry.

Kennyhertz Perry attorney Jon Dedon has advised numerous clients in Kansas and Missouri specifically on state and federal hemp and CBD regulatory compliance matters. He understands the current state of federal and state regulations, and makes it his job is to stay on top of the latest developments in this rapidly-evolving area. In addition, Jon has defended multiple FTC enforcement actions involving deceptive claims and asset freezes.

Clients also benefit from Kennyhertz Perry’s experience in related areas of law, such as litigation, banking, securities, tax, intellectual property, employment, insurance, and its regular practice before the Missouri administrative agencies and courts. hemp and CBD clients choose Kennyhertz Perry because the firm’s lawyers tailor their advice to the unique issues presented by each matter they handle.

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