The
2018 Farm Bill and Hemp

Congress
passed the 2018 Farm Bill on December 11, 2018, and, among other things, legalized
hemp. Previously, hemp operated in a legal gray area. The 2014 Farm Bill
permitted pilot programs to study the growth, cultivation, or marketing of
“industrial hemp” (see 7 U.S.C. § 5940), but hemp remained a controlled
substance under the Controlled Substances Act, which left farmers, distributors,
and retailers at risk of possible adverse legal action, especially in states
that did not provide for their own regulations.
The 2018 Farm Bill, however, officially removed industrial hemp from the
Drug Enforcement Agency’s controlled substances list and further supported the
2014 Farm Bill’s goal of allowing the cultivation, production, and marketing of
industrial hemp (defined as cannabis sativa containing less 0.3% THC or
less.)  As a result, the 2018 Farm Bill
makes industrial hemp legally distinct from marijuana and the federal
government now recognizes it as an agricultural crop. The 2018 Farm Bill further
frees up interstate movement of hemp, seeds, plants, and processed hemp
products.  Hemp farmers are also eligible
for crop insurance and grants through the United States Department of
Agriculture. States, however, are allowed to be more restrictive in regulating
the growth, cultivation, distribution, and sale of hemp, including industrial
hemp cannabidiol (“CBD”).

CBD Products and Section 151.72 of Minnesota Statutes

Until recently, CBD was not expressly legal in Minnesota which has caused
significant confusion for Minnesota consumers, retailers, farmers, medical
professionals, municipalities, and law enforcement. To address this ambiguity,
Minnesota enacted Minnesota Statutes, Section 151.72 (“Minnesota Hemp Act”),
which governs the sale of certain cannabinoid products, such as CBD, effective
January 1, 2020. CBD products are made with cannabidiol, a compound extracted
from cannabis and hemp plants.  CBD is a
pharmacologically active substance that affects the central nervous system,
serotonin receptors in the brain, but is chemically distinct from its
psychoactive sibling, THC. While research is ongoing, CBD is believed to be
effective in treating a host of medical issues, though the only currently
FDA-approved use of CBD is for the treatment of rare forms of epilepsy.

As a result of loosened state and federal restrictions on growing hemp,
CBD products have become increasingly abundant and more easily accessible.  Under Minnesota Statutes 151.72, subd. 3, a
product containing nonintoxicating cannabinoids may be sold for human or animal
consumption, including products derived from hemp. The Minnesota Hemp Act,
however, provides a number of requirements for the growth, processing, and sale
of hemp and hemp-derived products, such as CBD.

Individuals
and businesses in Minnesota must be licensed under the Minnesota Department of
Agriculture’s Hemp Program (“Hemp Program”) to grow and process hemp in 2020.
Under the Hemp Program, licensees are required to take reasonable measures to prevent
theft or diversion of their industrial hemp plants and seed and to cooperate
with law enforcement and the Minnesota Department of Agriculture (“MDA”).  The MDA must have unfettered access to the
hemp fields for MDA inspection and sampling.

Further,
a manufacturer of any CBD product regulated under the Minnesota Hemp Act must
submit the representative samples of the product to an independent, accredited
laboratory in order to certify that the product complies with the standards
adopted by the Minnesota Board of Pharmacy.
All hemp crops must be tested by the MDA, pass the THC Test, and have an
issued “Fit For Commerce” certificate prior to transferring ownership of the
crop. Inspections by the MDA include taking plant samples for THC testing
within thirty (30) days of harvest of the grower’s hemp plants. Pursuant to subdivision
4 of the Minnesota Hemp Act, testing must be consistent with industry standards
for herbal and botanical substances and must confirm: (1) the amount or
percentage of cannabinoids that is stated on the label of the product; (2) the
product does not contain any more than trace amounts of any pesticides,
fertilizers, or heavy metals; and (3) that the product does not contain delta-9
tetrahydrocannabinol. The license holder is responsible for notifying the MDA
of their upcoming harvest date by filing a Planting Harvest Report. Selling or
transferring ownership of hemp without the certificate is a violation. Failure
to pass the THC test  may result in
destruction of the entire crop.

Minnesota
Industrial Hemp Pilot Program Licensing and 2020 Growing Season

Any
person or business interested in growing or processing industrial hemp in
Minnesota must obtain a Hemp Program license. Applicants must fill out an
online application, register their growing and processing locations on a GIS
map, and pay the program fees.
Applicants must additionally be fingerprinted at a local law enforcement
office and complete a Hemp Program Background Check Request Form with the
Bureau of Criminal Apprehension. The deadline to apply for the 2020 growing
season is March 31, 2020 for all license types, and any license granted is
valid through December 31, 2020.

New Minnesota CBD Labeling Requirements

Additionally,
the Minnesota Hemp Act contains specific labeling requirements affecting CBD
products. Because there is not a uniform, model CBD act across the United
States with respect to labeling, states are free to determine their own
requirements and restrictions to which manufacturers, distributors, and
retailers must adhere. For this reason, Minn. Stat. §151.72, subd. 5 includes labeling
requirements affecting manufacturers, distributors, and retailers of CBD
products. All Minnesota CBD products must, at a minimum, include a prominent
and conspicuous label that denotes (i) the manufacturer’s contact information,
including the manufacturer’s name, address, telephone number, and website; (ii)
a “tested by” label, which identifies the name and address of an independent
and accredited third-party lab that tested the CBD product; (iii) an accurate
statement of the amount or percentage of cannabinoids found in each unit of the
product meant to be consumed; and (iv) a statement that the product has not
been evaluated by the FDA and that the product does not claim to be capable of
treating diseases unless those treatments have been FDA-approved. As a result,
CBD manufacturers, distributors, and retailers selling CBD products in
Minnesota must comply with these labeling requirements and be aware of the
possibility that individual state requirements may vary throughout the country
(including outright prohibitions on manufacture, distribution, or sales).

Enforcement

CBD
products must meet the new standards in Minn. Stat 151.72, or the products will
be considered to be misbranded or adulterated drugs. A product will be considered
an adulterated drug if: (1) it consists, in whole or in part, of any filthy,
putrid, or decomposed substance; (2) it was manufactured, prepared, packaged or
held in unsanitary conditions; (3) the container is made of any poisonous or
deleterious substance; (4) it contains any color additives or excipients found
unsafe by the FDA; and/or (5) it contains an amount or percentage of
cannabinoids that differ from the label on the packaging.

The
new rules specify the Minnesota Board of Pharmacy (“MBP”) has the authority to
issue cease and desist letters to prohibit businesses from selling misbranded
CBD products and can force businesses to remove the misbranded products from
their stores.  The MBP also has the authority
to embargo adulterated and misbranded drugs and to seek injunctive relief
against any party which violates the statute.

Conclusion

The
2018 Farm Bill and Minnesota Hemp Act have brought about a number of changes
and regulation to Minnesota hemp and CBD businesses. While these changes have
opened the door for hemp and CBD manufacturers, distributors, and retail stores
in Minnesota to lawfully grow, distribute, and sell hemp and CBD products,
failure to promptly comply could result in significant problems for unaware Minnesota
CBD businesses.  For example, growers run
the risk of their entire crops being destroyed if their hemp contains more than
0.3% THC.  Likewise, CBD retailers will
need to ensure that the manufacturer from whom they receive CBD products comply
with the labeling and testing requirements, or they could face adverse action
from the Minnesota Board of Pharmacy, such as a prohibition on selling their
CBD inventory.  As a result, the days of
handshake agreements between hemp and CBD manufacturers are gone; the parties
to any distribution agreement will need a written CBD distribution agreement
that includes adequate protections and guidelines so that each party
understands its rights and responsibilities.

If
you have questions about compliance, enforcement, or labeling of hemp and CBD
products, applying for a Minnesota hemp grower’s license, or need assistance
drafting a CBD distribution agreement, contact one of the Minneapolis hemp,
CBD, and cannabis business attorneys of Trepanier MacGillis Battina P.A.

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About the Author: 

Trepanier MacGillis Battina P.A. is a Minnesota business law firm located in Minneapolis, Minnesota. Their attorneys can be reached at 612.455.0500.