Business

DEA Hit with Lawsuit on Controversial Hemp Rule

By Willis Jacobson Sep 21, 2020
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Willis Jacobson is an award-winning journalist whose career has spanned both coasts. Now based on the Central Coast of California, he has covered cannabis news and issues since 2015.
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Willis Jacobson is an award-winning journalist whose career has spanned both coasts. Now based on the Central Coast of California, he has covered cannabis news and issues since 2015.
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A hemp trade group and a CBD company have filed a federal lawsuit aimed at a controversial new U.S. Drug Enforcement Administration (DEA) rule they argue could kill the U.S. hemp industry.

The suit was filed Sept. 18 in the U.S. Court of Appeals for the D.C. Circuit on behalf of the Hemp Industries Association and South Carolina-based RE Botanicals. It asks the court to review the DEA’s interim final rule on hemp, which is still open for public comment. The suit argues the rule, which went into effect Aug. 21, exceeds the DEA’s authority and violates the 2018 Farm Bill. (Read the lawsuit.)

The rule has raised concerns from many within the industry due to its position that all hemp extracts exceeding 0.3% THC are a federally illegal Schedule I controlled substance, the same as most marijuana products. The problem with this, according to many in the industry, is that several hemp derivatives temporarily exceed that 0.3% threshold during processing, but contain less than 0.3% THC when the product is ready for market.

The DEA ruling means that products could be deemed illegal before being made available for sale. This could potentially open operators up to criminal penalty during the preparation stages.

In a statement, RE Botanicals CEO Janel Ralph, said the new rule “could put us out of business overnight.” 

The lawsuit charges that acting DEA administrator Timothy Shea did not follow proper procedures when developing the ruling, and that it exceeds the DEA’s statutory jurisdiction. 

The 2018 Farm Bill effectively legalized hemp in the U.S. and ushered in the legal CBD market. The bill established the rule that legal hemp must contain no more than 0.3% THC.

The Hemp Industries Association, which counts about 1,050 hemp businesses among its membership, has successfully challenged a DEA ruling before. In 2003, the DEA amended federal regulations to include naturally occurring THC within the scope of “synthetic THC,” effectively making those plants a Schedule I substance despite their falling outside the definition of marijuana in the Controlled Substance Act.

The Hemp Industries Association was among the petitioners in a successful 2004 appeal that voided that move by the DEA.

“When Congress passed the 2018 Farm Bill, it explicitly carved hemp and its derivatives out of the Controlled Substances Act so that hemp can be regulated as an agricultural commodity,” HIA President Rick Trojan said Monday. “The DEA’s interim final rule could create substantial barriers to the legal manufacturing of hemp-derived products.”

The result could devastate the industry, he said, although the DEA states that is not its intention.

The petitioners in the suit are represented by attorneys with Vicente Sederberg LLP, Kight Law Office PC, and Hoban Law Group, along with appellate attorneys from Yetter Coleman LLP.

The DEA’s representation wasn’t immediately clear Monday.

“The DEA implemented this rule without following proper rule-making procedures, such as providing the public with notice and the opportunity to comment,” said Shawn Hauser, a partner at Vicente Sederberg LLP. “The petitioners believe legal action is necessary to protect the lawful U.S. hemp industry that Congress intended to establish when it enacted the 2018 farm bill.”

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