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).
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.
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.
About the Author:
Minnesota CBD business attorney Nathan R. Snyder advises hemp, CBD, cannabis, and tobacco business clients on matters such as enforcement and compliance with regulations, statutes, and municipal ordinances, licensing, and before Minnesota courts and municipalities. Nate also works with businesses and executives in Minnesota’s medicinal marijuana, CBD, and hemp industries with contract drafting and review, including distribution agreements, purchase and sales of Minnesota CBD, hemp, and legal cannabis businesses, and employment agreements. Nate may be reached at 612.455.6218 or firstname.lastname@example.org. Trepanier MacGillis Battina P.A. is a Minnesota business law firm located in Minneapolis, Minnesota.