Cutting Through the Frustrating Maze of the New Farm Bill

The Farm Bill of 2018 was a profound positive action in federal US legislation and one leap ahead for the cannabis industry with the national legalization of hemp production. Now, with the introduction of the US Department of Agriculture’s 2019 up-grade of the Farm Bill entitled the, “Domestic Hemp Production Program” federal legislation has made the Farm Bill of 2018 even better!

The trouble is however, that it is an unwieldy, excruciatingly long, complex document that was definitely never designed for casual reading. But if you’re considering hemp production as a brand new and potentially lucrative enterprise, or if you’re already an established farming operation and are excited with the prospect of diversifying your current crop production with hemp, the USDA’s up-grade is something you need to thoroughly understand to be both successful and profitable in your first year of hemp production.

Many people who’ve already tried to get through it have become bogged down with frustration at its convoluted structure that seems like an endless maze of confusion with convoluted rules and regulations for every step of the growing/production process. For the intrepid inquiring minds that have already made it through to the end, it has proved to be well worth the struggle.

Ironically, one of the USDA’s primary objectives in creating this document was to clarify all the “hemp things” you need to know to grow the raw material used for CBD products, food, fuel, clothing, and plastics.

The USDA has even invited readers to comment or make suggestions for improvement several times throughout the document…

Although the entire document is a “must read” to thoroughly understand the details of formal federal guidelines for large scale hemp cultivation, harvesting, testing, processing, transportation and sales, we’ve high-lighted the details into 6 key regulatory concepts so that new hemp farmers can get, “the big picture” to stay compliant with the USDA’s new guidelines in the Domestic Hemp Production Program designed to regulate the cannabis plant.

In the first part of this report you will quickly recognize the new hemp regulatory essentials and how compliance to USDA hemp production regulations and profitability go hand in hand.

In the second portion of our report we’ve provided a timely case study of a new hemp business recently in the news so that you can get an accurate foretaste of what you need to look out for and how it is a perfect fit for independent cannabis specialty insurance protection. 

“The Domestic Hemp Production Program”—The 2019 Revised Farm Bill

Many established farmers never thought they’d see the day when once again in US history, the versatile hemp plant would be released from prohibition and legalized nation-wide. Hopefully this time, once and for all.

Cannabis as hemp and marijuana was free for the taking in the US for hundreds of years as the plant grew wild in many regions and was used by indigenous native peoples for many applications. After colonization by Europeans, settlers collected cannabis flowers to make their own medicinal tinctures. Later, leading British settlers who became national founders like George Washington and Thomas Jefferson, imported hemp seeds by the ton and grew hundreds of acres of hemp as a major cash crop to be harvested for rope, fabrics and paper. The Declaration of Independence was written by Thomas Jefferson on hemp paper.

By the time the US had entered into the 20^th century in 1900, cannabis was still unregulated. But by 1937, it was suddenly targeted as a threat to public safety and turned into an illegal substance and a Schedule I drug because it included the psycho-active cannabinoid, THC. As the US entered WWII in 1941, the federal government abruptly re-legalized hemp and encouraged farmers to grow it again to support the war effort. Then in 1946 after the war was over, the federal government turned hemp back into a Schedule I substance and outlawed it along with its cousin, marijuana, in the Agricultural Marketing Act.

It wasn’t until the US Farm Bill of 2018 that hemp was finally declared an official cash crop, legal to be grown from coast to coast. Yet, the way the 2018 Farm Bill was laid out, each state still had the right to separately determine whether to legalize hemp production or not, or even allow it to pass through their state. This created a confusing sense of uncertainty that left many people wondering what states in particular was it actually legal to grow in. The hang up was THC.

Many high-level officials in US government, both at the federal and state levels have had moralistic hang up with THC ever since it was discovered as a natural psycho-active component of hemp and its close relative, marijuana. In 1937, both strains were banned outright but legislators over nearly a century later, still haven’t been able to get over it.

Now, in 2019 with the amended Farm Bill of 2018, called the, “Domestic Hemp Production Program” it is this lingering scientifically unfounded, (the US government made it illegal until recently for scientists to even study the plant!) pre-emptive moralistic hang up with the cannabis cannabinoid THC, that makes the “new improved” legislative document so difficult to understand. 

Otherwise, conventional farmers are well acquainted with the mountain of government regulations in regular agriculture and will be familiar with the majority of the detailed regulations of the Domestic Hemp Production Program. The regulatory highlights of the program that will stream-line hemp production with new clarified guidelines that now make it a truly legal cash crop—are all concentrated around the presence of THC.

As With All Licensed Cannabis Businesses, Compliance Is Key

The USDA 2019 Domestic Hemp Production Program is a vast improvement to the 2018 Farm Bill on several levels:

* USDA opens up legal shipment of compliant hemp across all state lines.

* USDA helps farmers achieve and maintain THC compliance with specific instruction.

* USDA allows farmers to experiment with hemp crops with separate hemp crop licensing.

* USDA provides more leeway in acceptable legal hemp THC level range of 0.03 to 0.05%.

* USDA offers 3 chances to hemp farmers who exceed maximum THC ceiling limits of 0.05%.

* USDA keeps non-compliant farmers out of jail with license suspensions instead of hard time.

The USDA’s new program will not force legalization of hemp production in any area. Instead, states and Native American tribes will have to submit for approval of their own hemp production plans that meet or exceed the USDA’s standards. For those states and tribes that don’t submit a plan, the new federal guidelines will apply.

These 6 key features will lower the costs of operation and compliance for hemp businesses and farmers alike…even if it means simply keeping them out of jail! As well, the uniformity of nationwide hemp legalization will help thaw the ice for people with lingering negative THC perceptions who have either steered away from working with hemp businesses or tried to ban hemp products.

It is important to remember that at this point in November of 2019 that these regulatory guidelines are USDA proposals. The American public will have until December 30, 2019 to make comments and suggestions on how they can be changed or improved. That’s about as democratic as a government authority can get!

By January 2020 these proposals will turn into federal law. But for now, hemp farmers and businesses considering a new hemp farm, can be safe to assume that as long as they and the specific “hemp friendly” state they are in will be protected under the new proposed regulations before the new year as though they’ve been already written into law.

On the other hand, licensed hemp growers will be vulnerable to suspicious police who may suspect they are breaking the law. Later we’ll be taking a close-up look at a hemp company that was perceived as running afoul of the law, even though they were completely within their rights and innocent of any wrong doing.

USDA opens up shipment of compliant hemp across all state lines.

“The Agriculture Improvement Act of 2018, known as the 2018 Farm Bill, removed hemp from the list of controlled substances, decontrolling hemp production in all U.S. States, and in territories of Indian Tribes, unless prohibited by State or Tribal Law. This action eliminates the uncertain legal status at the Federal level of hemp production and…The statute also prohibits interference in the interstate transport of hemp by States, including those States which prohibit hemp production and sales. As a result, hemp producers will have access to nationwide markets. The rule is necessary to facilitate this market by creating a set of minimum standards to ensure that hemp being produced under this program meets all statutory requirements. Moreover, both the declassification of hemp, and the prohibition on interference with interstate transportation apply to hemp that is grown under an approved State or Tribal plan, or under a Federal license.” 

The USDA 2019 Domestic Hemp Production Program

Licensed hemp that has been certified as compliantly grown and processed by the USDA and DEA as to contain no more than 0.05% THC can now be legally shipped (interstate) anywhere within the continental US—even through states that haven’t legalized hemp yet. The USDA’s new rules satisfy concerns involving interstate transport, which means states can’t prohibit it as long as the acceptable levels of THC in hemp fall either below or within the 0.03 to 0.05% range. This will help lower the costs of operation and compliance for hemp businesses and farmers alike.

Attorney Anita Sabine, who represents hemp, cannabis and CBD firms at the Manatt, Phelps & Phillips law firm in Los Angeles clarified that, “We have this hemp CBD industry that’s exploded. Products can be cultivated in State A, extracted in State B, added to a product in State C, finished in State D, and moved across state lines.”

USDA helps farmers achieve and maintain compliance with specific instruction.

“This rule specifies that hemp producers do not commit a negligent violation if they produce plants that exceed the acceptable hemp THC level and use reasonable efforts to grow hemp and the plant does not have a THC concentration of more than 0.5 percent on a dry weight basis. USDA recognizes that hemp producers may take the necessary steps and precautions to produce hemp, such as using certified seed, using other seed that has reliably grown compliant plants in other parts of the country, or engaging in other best practices, yet still produce plants that exceed the acceptable hemp THC level.

In cases where a State or Tribe determines a negligent violation has occurred, a corrective action plan shall be established. The corrective action plan must include a reasonable date by which the producer will correct the negligent violation. Producers operating under a corrective action plan must also periodically report to the State or Tribal government, as applicable, on their compliance with the plan for a period of not less than two calendar years following the violation.”

The USDA 2019 Domestic Hemp Production Program

Because new hemp farmers may not be aware that hemp can grow, “hot” and produce THC percentage counts higher than acceptable levels, the USDA is ready to help new hemp farmers avoid the real possibility that their crops could be confiscated and destroyed by DEA officers. Anything from extreme temperature and rainfall variations can produce more THC than is acceptable and while no one can change the weather, the USDA will help farmers learn how to use these mitigating factors of climate to their favor so they can always avoid a “hot” crop and its destruction by the DEA.

USDA provides more leeway in acceptable legal hemp THC level range of 0.03 to 0.05%.

With the original Farm Bill of 2018, hemp had to come in at or under 0.03% THC or be destroyed. Now farmers can breath easier knowing that if their hemp produce is tested at one or two points higher than the original 0.03% level, it will still be good for market.

Many hemp activists and pro government overseers don’t realize this positive change because they have not read the USDA document closely. Instead, they criticize the program and claim it sounds as if it were written by police agencies.

Cary Giguere, an official with the Vermont Agency of Agriculture, Food and Markets who oversees the state’s hemp program, estimates that under the proposed federal rule, 70% of the crop in the state would not be in compliance and says, “It sounds as if the bill was written less with farmers and more with law enforcement in mind.”

USDA allows farmers to experiment in hemp crops with separate hemp crop licensing.

Another positive aspect of the new document is that the USDA is allowing regular cash crop farmers to ease into the hemp market. It has not, or does not plan in the future to regulate that farmers grow only hemp when their main crop has always been corn for example. This will allow more diversification within the agricultural industry as a whole and thus free up the hemp market in particular with more opportunities to profit.

“This is separate from the requirement to report hemp crop acreage with FDA as discussed above. The information required here includes contact information for each hemp producer covered under the plan including name, address, telephone number, and email address (if available). If the producer is a business entity, the information must include the full name of the business, address of the principal business location, full name and title of the key participants, an email address if available, and EIN number of the business entity. Producers must report the legal description and geospatial location for each hemp production area, including each field, greenhouse, or other site, used by them, as stated in section A of this preamble. The report also shall include the status of the license or other required authorization from the State or Tribal government, as applicable, for each producer under a hemp production plan.”

The USDA 2019 Domestic Hemp Production Program

USDA offers 3 chances to hemp farmers who exceed maximum THC ceiling limits of 0.05%.

Because the USDA recognizes the difficulties of growing industrial hemp outdoors so that it comes in at or below acceptable levels, it will allow new hemp farmers 3 seasons to make adjustments in their growing plans to come in below 0.05% THC levels and assist them to make those adjustments with each attempt.

“State and Tribal plans must include compliance procedures to ensure hemp is being produced in accordance with the requirements of this part. This includes requirements to conduct annual inspections of, at a minimum, a random sample of hemp producers to verify hemp is not being produced in violation of this part. These plans also must include a procedure for handling violations. In accordance with the 2018 Farm Bill, States and Tribes with their own hemp production plans have certain flexibilities in determining whether hemp producers have violated their approved plans.”

The USDA 2019 Domestic Hemp Production Program

USDA keeps non-compliant farmers out of jail with license suspensions instead of hard time.

Before when growers were “caught” growing marijuana under the guise of legal hemp, they would be arrested, charged and if proven after lab testing to have hemp plants over THC limits and thus qualifying as a Schedule I narcotic, these growers would go straight to jail.

Now however, the USDA provides a “buffer zone” of license suspensions over criminal charges. Criminal charges are only made after 3 failed attempts when it can also be proved the grower was criminally intentionally reckless.

 “A producer who negligently violates a State or Tribal plan three times in a five-year period will be ineligible to produce hemp for a period of five years from the date of the third violation. Negligent violations are not subject to criminal enforcement action by local, Tribal, State, or Federal government authorities.

 State and Tribal plans also must contain provisions relating to producer violations made with a culpable mental state greater than negligence, meaning, acts made intentionally, knowingly, or with recklessness. This definition is derived from the definition of negligence in Black’s Law Dictionary. See BLACK’S LAW DICTIONARY (10th ed. 2014) (giving as a definition of negligence “[t]he failure to exercise the standard of care that a reasonably prudent person would have exercised in a similar situation”). If it is determined a violation was committed with a culpable mental state greater than negligence, the State department of agriculture or tribal government, as applicable, shall immediately report the producer to the Attorney General, USDA, and the chief law enforcement officer of the State or Tribe. State and Tribal plans also must prohibit any person convicted of a felony related to a controlled substance under State or Federal law before, on, or after the enactment of the 2018 Farm Bill from participating in the State or Tribal plan and from producing hemp for 10-years following the date of conviction. An exception applies to a person who was lawfully growing hemp under the 2014 Farm Bill before December 20, 2018, and whose conviction also occurred before that date.”

The USDA 2019 Domestic Hemp Production Program

You can play by the rules and still get busted!

Forhemp farmers a “bust” can come from Mother Nature or the police. Another great feature of the new revised Farm Bill is that once you become a licensed hemp producer recognized in  your state, your cash hemp crop is protected from natural disasters such as droughts, floods, tornadoes and wild hail storms by the USDA with its own crop insurance programs:

“The U.S. Department of Agriculture (USDA) provides hemp producers with crop insurance programs, potentially reducing risk to producers and providing easier access to capital.”

The USDA 2019 Domestic Hemp Production Program

But when it comes down to law enforcement and the “letter of the law”, licensed, fully compliant hemp producers are still vulnerable. Wide open to losing thousands of dollars of their product when they’re involved in an unexpected “drug bust” and the police confiscate their product as, “evidence”—even though it comes with complete official documents proving it is legal—they’re facing a “man-made” disaster of the worst kind.

Not only are they facing legal expenses no matter whether they win in court or not…as their product sits in jail, the delicate CBD in raw hemp flowers can deteriorate in a matter of days. Will the police reimburse them for the damage of turning a valuable cash crop product into waste? Not likely…

So what happens when you are a fully compliant hemp producer, but still manage to run into overzealous cops who charge you with shipping marijuana—not hemp, over state lines? This scenario sounds too ridiculous to be true, but it happened just one day after the USDA posted its new Domestic Hemp Production Program…

On November 5, 2019 Gabrielle Fonrouge and Priscilla DeGregory reported in the New York Post that,

“The NYPD crowed that it confiscated a 106-pound marijuana shipment, but the owner of the company the flora was bound for, says the greenery was no more than hemp containing legal CBD for use by cancer sufferers — and he’s got the papers to prove it.

Oren Levy, who sells hemp wholesale through his company Green Angel CBD, claims that a “gung-ho” Fedex driver took it upon himself to report the shipment to the 75th Precinct when it arrived in Brooklyn — despite the fact that the cargo had all the necessary documentation to prove it was legal.”

Oren Levy even explained to reporters that his product was significantly below federal limits for THC. After checking out Levy’s claims, the Post reviewed the paperwork prepared by a third-party that was shipped along with the hemp. Everything was in order and papers certified that THC levels of his product were well below the federal legal limit of.3 percent THC by volume.

Adding insult to injury, the police resorted to underhanded tactics to lure a member of Levy’s staff in for arrest. The report in the Post went on to say that, “Cops called Green Angel CBD telling them to come pick up their greenery — but when Levy’s brother Ronen arrived at the station house, cops instead slapped cuffs on him. A day later, the 75th Precinct tweeted a photo of dozens of large bags of what looks like marijuana with the caption, ‘Great job by Day Tour Sector E yesterday…’”

This case is likely to be the first of many where legitimate hemp producers and, or distributors shipping licensed, compliant authentic raw hemp are charged shipping illicit marijuana across state lines. The USDA will not be there to protect them from police interference and the confiscation of their valuable, time-sensitive hemp flowers.

If you are a licensed, compliant hemp producer or distributor who intends to ship large quantities of raw hemp interstate across our nation, Cover Cannabis is a specialty cannabis insurance agency with over 13 years of specialty cannabis insurance serving the cannabis industry across the US. Cover Cannabis can design insurance policies tailor-made to protect your unique cannabis enterprise whether it’s a licensed, compliant hemp or marijuana sourced business.

Talk to one of our expert agents today to inquire about how we can insure your valuable product while it is in transit. With our first-in-industry, “Cargo Insurance For Cannabis Operations” policy, you can sleep good at night no matter where your product is being shipped across the continental US as well as our off-shore states and territories.

Cargo coverage refers to the protection of items transported by your business or for your business. A cargo policy can cover you in the event your cannabis product is lost, damaged, stolen, or confiscated by law enforcement officers, or while being loaded, transported, and unloaded.

With a cargo policy you can get coverage for cannabis products transported by your operation, or as extra coverage for items transported by a hired company in case their insurance fails to cover the loss.

Some of the benefits of having cargo insurance:

• Replacement of cargo in the event of loss.
• Income loss replacement for lost non-replaceable cargo (i.e. harvested crop)
• Peace of mind

The type of cargo coverage that will work best for you will depend on your specific cannabis operation and how involved you are in the transportation of your cannabis product. It is important when purchasing cargo insurance, that you disclose that you will be transporting cannabis and the type of product. Here at Cover Cannabis, we can advise you on the type of coverage you will need and any possible limitations to the coverage. This way you will be able to ensure that your cannabis cargo is fully protected or at least fully protected up to the limitations on the coverage.