Hemp CBD Across State Lines: North Carolina

02 Feb Hemp CBD Across State Lines: North Carolina

The Agriculture Improvement Act of 2018 (“2018 Farm Bill”) legalized hemp by removing the crop and its derivatives from the definition of marijuana under the Controlled Substances Act (“CSA”) and by providing a detailed framework for the cultivation of hemp. The 2018 Farm Bill gives the US Department of Agriculture (“USDA”) regulatory authority over hemp cultivation at the federal level. In turn, states have the option to maintain primary regulatory authority over the crop cultivated within their borders by submitting a plan to the USDA.

This federal and state interplay has resulted in many legislative and regulatory changes at the state level. Indeed, most states have introduced (and adopted) bills that would authorize the commercial production of hemp within their borders. A smaller but growing number of states also regulate the sale of products derived from hemp.

In light of these legislative changes, we are presenting a 50-state series analyzing how each jurisdiction treats hemp-derived cannabidiol (“Hemp CBD”). Today we turn to North Carolina.

The North Carolina Department of Agriculture (“NCDA”) provides a useful summary of the state’s law regarding hemp cultivation:

Hemp production has been legalized in North Carolina, but only as part of the state’s pilot program as allowed under federal law. The N.C. General Assembly passed Senate Bill 313 in 2015, allowing the Industrial Hemp Commission to develop the rules and licensing structure necessary to stay within federal laws. The law was modified in 2016 in House Bill 992. The Industrial Hemp Commission adopted temporary rules for review in February 2017; these were approved by the Rules Review Commission of the Office of Administrative Hearings.

Currently, NCDA is operating under the 2014 Farm Bill, not the 2018 Farm Bill. Apparently, that’s how the state wants to continue to operate.

On December 19, 2019 the North Carolina Industrial Hemp Commission (the “Commission”) sent a letter USDA Secretary Sonny Perdue. The Commission is a group of individuals, appointed by the Governor and representing agricultural and law enforcement interests, who have the authority to oversee the hemp cultivation in North Carolina.

The Commission’s letter is worth reading. In short, the letter basically opts out of the USDA’s hemp cultivation program meaning that North Carolina will continue to operate under the 2014 Farm Bill until its hemp provisions expire on October 31, 2020 or “until a viable pathway forward is available to satisfy federal and state requirements.” This is in large part due to the USDA’s interim hemp rules, which the Commission believes “do not provide a framework flexible enough to ‘help expand production and sales of domestic hemp, benefiting both U.S. producers and consumers.’”

The Commission goes on to outline “significant concerns” with the interim hemp rules:

• The interim hemp rules provide that hemp that tests above 0.5% THC will result in a negligent violation. Under the 2018 Farm Bill, if a grower receives three negligent violations in five-year window that grower is prohibited from cultivating hemp for five years. The Commission believes that negligence standard should be set at 1% because a number of factors such as weather conditions and sampling protocols can lead to test results at or above 0.5% THC. The Commission is concerned that growers will be harshly penalized and suffer massive economic loss based on “an arbitrary number.”
• North Carolina also raised concerns about the interim rules requiring testing for all hemp. The Commission has some numbers to back this up: ” This past fall, [NCDA] tested 55% of the thousands of hemp fields planted across our state, with employees working up to 70 hours a week. It is impossible to ask this staff to do more and we are not aware of any state that has been able to physically sample each field.” The Commission suggests that states be allowed to perform random and risk-based sampling of hemp grown in their state.
• The interim hemp rules require that hemp be tested 15-days prior to harvest. The Commission believes this “narrow timeframe” is an “unnecessary obstacle for compliance.” Factors such as weather could require that growers harvest hemp earlier than expected, without knowing whether hemp material is compliant. The Commission is also concerned about “inevitable delays in laboratory results because of high sample volumes” which are exacerbated by the interim hemp rules’ requirement that labs testing hemp to obtain DEA registration.

On January 31, 2020, NCDA sent a letter to hemp licensees stating that the future of the state’s hemp program was uncertain due to the decision not to submit a plan to the USDA. Attorney Rod Kight provides a copy of this recent letter on his blog, Kight on Cannabis.

North  Carolina issues licenses for hemp cultivation and requires that hemp processors be registered with the state and report to NCDA. When it comes to Hemp CBD products, North Carolina lacks robust regulation. For now, we just have guidance documents. According to a February 8, 2019, NCDA press release. Hemp CBD “cannot be legally added to any human food or animal feed that is for sale.” The press release also indicates that the state will seize or embargo products marketed as drugs. The sale of Hemp CBD cosmetic products are not explicitly mentioned in the press release.

Last year North Carolina lawmakers considered Senate Bill 315 (” SB 315“) which would amend state law on hemp in accordance with the 2018 Farm Bill and would also govern Hemp CBD products. SB 315 may have another chance this year but has come with some controversy.

SB 315 would grant NCDA the ability to “regulate cannabinoid related compounds” which would not include smokable hemp. NCDA would oversee good manufacturing practices for manufacturing, packaging, labeling, or holding operations for Hemp CBD. Manufacturing Hemp CBD products would require a valid NCDA license. A license would also be required for out-of-state and online retailers.

Much of the controversy surrounding SB 315 stems from the bill’s prohibition of smokable hemp, which is defined as “[h]arvested raw or dried hemp plant material, including hemp buds or hemp flowers, hemp cigars, and hemp cigarettes.” If passed, SB 315 would impose the following penalties related to smokable hemp on June 1, 2020:

• A civil penalty for knowingly or intentionally manufacturing, delivering, selling, or possessing smokable hemp
• A Class 1 misdemeanor for knowingly or intentionally manufacturing, delivering, selling, or possessing smokable hemp

SB 315 would also require that NCDA and other state agencies submit a report on smokable hemp to the legislature.

North Carolina has a lot going on with regards to Hemp CBD. Many pieces are still in flux as the state has essentially rebuked the USDA’s interim hemp rules and is grappling with Hemp CBD products including smokable hemp. We’ll continue to watch as things develop in North Carolina.

For previous coverage in this series, check out the links below: