According to a press release published last week, the U.S. Hemp Authority (USHA) announced that FoodChain ID, a global leader in food safety, testing and sustainability, is now the exclusive certifying body for the USHA certification seal.
FoodChain ID’s claim to fame is their widely-recognized Non-GMO Project Verification labeling standard, but they also offer services in the food, beverage and ingredient industries, including the entire food supply chain, as well as being a leader in USDA Organic certifications.
The effort to provide quality standards and guidance for best practices in the hemp and CBD markets is led by a coalition of organizations with the same goal: to legitimize the industry and gain consumer trust. The effort is funded by the U.S. Hemp Roundtable and joined by the Hemp Industries Association, the U.S. Hemp Authority, testing laboratories, agronomists, quality assessors and other industry-leading firms.
In order for a hemp company to get the certified seal, they must prove that they can meet strict standards, pass an independent third-party audit as well as enter a licensing agreement. The certification seal is an attempt to provide some legitimacy to the ever-changing hemp and CBD markets in the United States.
Marielle Weintraub, president of the U.S. Hemp Authority, says that through the program’s independent, third-party lab testing, the certification seal provides consumers with truth in labeling and transparency. “The U.S. Hemp Authority Certification Program is our industry’s initiative to provide high standards, best practices, and self-regulation, giving consumers an easy way to identify hemp-derived products that can be trusted,” says Weintraub. “We are striving for ingredient transparency and truth in labeling.”
According to Weintraub, the standards and best practices for the program are routinely updated and improved. There will be a public session where they discuss those standards and update industry stakeholders on their progress at the Natural Products Expo West on March 2nd.
Mark Dabroski, senior vice president, commercial services at FoodChain ID, says that hemp products are becoming increasingly common in the food, beverage and health and wellness markets. “Hemp seed oil and protein markets have been increasing exponentially over the last decade,” says Dabroski. “With the category’s expected growth at a 46% CAGR to reach $2.8B by 2023, the need for self-regulation and transparency are critical.”
“As consumers increasingly demand to know what is in the foods and products they buy, our suite of testing and verification services helps meet this demand,” says Dabroski.
According to a press release published earlier this month, the U.S. Department of Agriculture (USDA) announced two new programs available for hemp growers to mitigate their risk.
The first is called Multi-Peril Crop Insurance (MPCI), which is a pilot hemp insurance program designed to cover against “loss of yield because of insurable causes of loss for hemp grown for fiber, grain or Cannabidiol (CBD) oil.” The second plan is Noninsured Crop Disaster Assistance Program, which protects against losses from lower-than-normal yields, destroyed crops or “prevented planting” where permanent crop insurance is not available.
Both of the programs are now accepting applications and the deadline to apply is March 16, 2020. “We are pleased to offer these coverages to hemp producers. Hemp offers new economic opportunities for our farmers, and they are anxious for a way to protect their product in the event of a natural disaster,” says Bill Northey, Farm Production and Conservation Undersecretary.
The MCPI program is available for hemp producers in 21 states, according to the press release. Th program is available in certain counties in Alabama, California, Colorado, Illinois, Indiana, Kansas, Kentucky, Maine, Michigan, Minnesota, Montana, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, Tennessee, Virginia and Wisconsin.
There are a handful of requirements to be eligible for that program, such as having one year of growing under their belt and have contracts in place for the sale of their crops. Hemp growers producing CBD must have at least 5 acres and hemp growers producing fiber must have at least 20 acres cultivated.
In 2021, the press release states, “hemp will be insurable under the Nursery crop insurance program and the Nursery Value Select pilot crop insurance program.” With those programs, hemp crops can be insured if grown in containers and in accordance with federal law.
To apply for any of these programs, hemp growers must have a license and must be totally compliant with state, tribal or federal regulations, or be operating under a state or university research plot from the 2014 Farm Bill. Growers need to report their hemp acreage to the Farm Service Agency, a division of the USDA.
The press release also mentions that if the crops have above 0.3% THC, the crop becomes uninsurable and ineligible for any of the programs.
By Aaron L. Hammer, David S. Ruskin, Nathan E. Delman No Comments
Two thirds of all states and the District of Columbia have, to varying degrees, legalized cannabis. With the recent addition of Illinois, eleven states now allow adult recreational use. But cannabis entrepreneurs’ rush of excitement and dreams of cashing in is met with fierce competition and economic risks that makes the dreams, which look so dank at first, end up going dark, or in other words, out of business.
This article discusses the available options for a cannabis business that finds itself on hard times and in need of reorganizing its debts or liquidating altogether. With the federal status of cannabis remaining illegal, cannabis businesses must clear significant hurdles to achieve success. Among the many other pitfalls traditional business owners experience, a cannabis business must navigate limited access to financial institutions and its related security concerns of keeping large amounts of cash on location. Also, they cannot deduct ordinary and necessary business expenses for federal income tax purposes. Turning a profit in legal cannabis can be a big challenge.
The first thought for a business facing insolvency is bankruptcy. However, bankruptcy courts have not been welcoming to cannabis businesses. Bankruptcy courts are courts of federal jurisdiction, and the federal government is represented by the United States Trustee Program (UST), which is the division of the Department of Justice responsible for oversight of Bankruptcy Courts. Since cannabis remains illegal under the Controlled Substances Act of 1970 (CSA) as a Schedule I controlled substance, it is unsurprising that the UST creates roadblocks for those seeking relief. In fact, the UST currently and steadfastly seeks dismissal of cases against cannabis businesses, cannabis employees and landlords of cannabis businesses.
But all hope is not lost. First, a change at the head of the DOJ could have a significant effect on how these cases are handled, even without a reclassification of cannabis. Second, recent caselaw shows a willingness by the courts to forge a path allowing cannabis cases to survive. Finally, if federal bankruptcy protection is not an option, other state remedies may be available to unsuccessful cannabis ventures.
The UST’s prosecutorial discretion has a strong influence in how a bankruptcy case can develop. While still very difficult to predict, a compelling analogy for cannabis cases can be seen in how the UST dealt with same-sex marriages in 2011. Nine years ago, the Defense of Marriage Act (DOMA) governed, and Section 3 of DOMA1 defined marriage as “a legal union between one man and one woman as husband and wife.” In In re Gene Douglas Balas and Carlos A. Morales, a same sex couple filed a Chapter 13 petition in California, and the UST filed a motion to have the case dismissed. The UST sought dismissal of the joint bankruptcy case, arguing the couple did not qualify for a joint petition under 11 USC § 302(a) because they were in a same-sex marriage. The bankruptcy court denied the UST’s motion. The bankruptcy court in Balas based its opinion partially on a letter from then United States Attorney General Eric Holder, with President Obama’s support, reasoning that Section 3 was unconstitutional as it applied to legally married same-sex couples. The UST appealed the case to the Ninth Circuit Court of Appeals, however, the UST did an abrupt about-face and dismissed its appeal. In fact, the UST took a further step by publicly stating it would not seek dismissal of any joint bankruptcy filed by a legally married same-sex couple. Similarly, if today’s executive branch decides not to enforce the CSA in bankruptcy court, cannabis businesses in compliance with state law would have access to bankruptcy courts.
Many businesses have pushed the bankruptcy courts to use a similar public policy approach to allowing cannabis businesses to seek debt relief, but it is proving to be a far stickier issue. Bankruptcy Courts have routinely dismissed cases with both direct and indirect relationships to the cannabis industry. The UST has taken a stance firmly against affording relief with any type of connection to cannabis. In an April 2017 letter to Chapter 7 and Chapter 13 trustees, the Director of the UST put it bluntly: “[i]t is the policy of the United States Trustee Program that United States Trustees shall move to dismiss or object in all cases involving marijuana assets on grounds that such assets may not be administered under the Bankruptcy Code even if trustees or other parties object on the same or different grounds.”
Indeed, one can fairly point out a significant difference between allowing a same-sex couple to file a joint bankruptcy. The practical significance of allowing same-sex couples to file jointly is the loss of a filing fee to the bankruptcy court, whereas a cannabis company’s liquidation creates a situation where a Chapter 7 trustee would have a fiduciary duty to liquidate a controlled substance, effectively violating federal law.
However, the UST shows equal hostility to cases involving downstream cannabis businesses such as landlords and even certain gardening suppliers, where there is no risk of cannabis itself becoming property of a bankruptcy estate. A Colorado District Court affirmed a bankruptcy court’s dismissal of a holding company for purported CSA violations.2 The Court reasoned that since the company owned stock for a large hydroponic gardening company, it willfully aided and abetted criminal activities.
While the federal executive branch is decidedly opposed to the cannabis debtor, one hope for reform lies with the judicial branch. To this end, the Ninth Circuit handed the biggest victory to date to a downstream cannabis business in Garvin v. Cook. Based on a microscopically close reading of the Bankruptcy Code, the Ninth Circuit held that a reorganization plan which relies partially on money from cannabis does not equate to a plan being “proposed by means forbidden by law” because the statutory text of one section cannot mean “all applicable law” or else the language in a closely related section that “the plan complies with the applicable provisions of this title” would be surplusage.
But this victory has not created much daylight for cannabis ventures seeking to utilize bankruptcy courts. Notably, Garvin could have gone a different direction if the UST had revived a motion to dismiss for gross mismanagement of the estate, which is how most Chapter 11 cannabis cases are dismissed. Indeed, in the weeks following the Garvin decision, two lower courts declined to blaze a new trail, and instead distinguished its cases from Garvin, dismissing debtors with equally indirect ties to cannabis.
Bankruptcy courts have shown significantly more latitude for legal hemp companies. In a promising decision, In re Royalty Properties, LLC, a Northern District of Illinois Bankruptcy Court took no issue with the legality of a debtor growing hemp seeds. The court took pains to distinguish hemp from its psychoactive relative marijuana and based its ruling on the 2018 Farm Bill which effectively legalized hemp. The court even denied as unnecessary an order to approve contracts to grow hemp, stating its approval was not necessary. Ultimately, the reorganization failed for reasons unrelated to growing hemp. Nevertheless, the case does show a step toward tolerance. Now that CBD giant GenCanna Global has filed a Chapter 11 in Kentucky, the UST’s tolerance will be put on full display.
Also, it is worth noting that the unwillingness of bankruptcy courts to take on cannabis cases cuts both ways. Creditors of cannabis businesses, already taking on a certain amount of risk for dealing with borrowers who cannot use depository institutions in a traditional way, also have been prevented from banding together and filing an involuntary bankruptcy against cannabis businesses.
Fortunately, legal cannabis businesses facing insolvency have options aside from federal bankruptcy to deal with debt issues.
An assignment for the benefit of creditors proceeding (ABC) presents one very workable option. In an ABC, a distressed company selects an “assignee” to liquidate the debtor’s assets via state law and distribute the proceeds to the creditor’s benefit. Depending on whether the assets include cannabis, the assignee will likely have to comply with applicable state law to be able to legally liquidate the asset. Nevertheless, an ABC might be the best solution currently available for cannabis companies seeking debt relief.
Another option is a corporate receivership where a disinterested third party, typically an attorney, is appointed to take control of an ailing business. The receiver takes over management of the company and can liquidate the company’s assets. Receiverships present certain advantages over bankruptcy proceedings. They allow for greater flexibility in decision making because the receiver is not bound by the confines of the Bankruptcy Code. Receiverships can be more cost effective, due to less court involvement and administrative expenses. For creditors, there is the advantage of potentially deciding on the receiver. Also, the receiver, unlike a Chapter 7 trustee, does not bear the imprimatur of any government, and is not a public officer within the meaning of a constitutional or statutory provision relating to public officers. Oregon and Washington have both amended their receivership statutes to ensure that cannabis businesses can effectively manage debt without receivers running the risk of violating the law. Ideally, other legal states will follow suit to ensure this remedy is available to cannabis businesses.
Finally, another bankruptcy alternative would be a friendly foreclosure under Article 9 of the Uniform Commercial Code (UCC). Unlike the Bankruptcy Code, the UCC is not federal law, but is adopted individually by each state. Again, considering the secured lender is required to comply with state law, this is another instance where amending state statutes could provide great assistance to a struggling cannabis business and its secured creditors.
Legal options for insolvent cannabis businesses is a new challenge. Society is trending in the direction of a more permissive attitude toward cannabis, so it should follow that the legislatures and courts accept this shift and afford distressed cannabis businesses the same opportunities to reorganize or orderly liquidate just like other legal business entities.
DOMA was ruled unconstitutional in 2013 US v. Windsor, 133 S. Ct. 2675 (2013).
See In re Way to Grow, Civil Action No. 18-cv-3245-WJM, 2019 U.S. Dist. LEXIS 207846 (D. Colo. Sep. 18, 2019)
Texting consumers is a very effective means to drive engagement and ultimately sales. Text messages have outpaced emails when looking at conversion and click-thru rates. In fact, 95% of texts are read in ninety seconds or less! While text messages can be a great way to engage with prospects and customers, the FCC’s Telephone Consumer Protection Act (TCPA) is a regulation you need to be mindful of. In fact, the average cost of a TCPA settlement is over $6m dollars, which doesn’t include legal fees or reputational damage.
Over the past few years, there have been about 4,000 TCPA cases filed annually. Take a look at the growth:
Companies are being targeted for various reasons, but there are a few that I’ll cover below along with some advice on how to avoid TCPA suits.
See if you can spot the trend in these cases:
Papa Johns: $16.5m settlement due to texting pizza specials to consumers without their consent.
Abercrombie & Fitch: $10m settlement due to texting store promotions to consumers without their consent.
Rack Room Shoes: $26m settlement for texting their reward program members with various sales without their consent.
Do any of these campaigns sound like something your company is engaged in?
So, you’ve got someone who has signed up for a rewards program, wants to receive deals, or has provided their number to your company for other purposes, but you are concerned about the TCPA (hopefully). Based on my experience working with hundreds of clients at CompliancePoint, here’s where I think you should start. But first…
Quick assumption: Your company is using an automated system to send both informational and promotional texts. Examples include “blast campaigns” (upcoming sale) or “triggered campaigns” (signed up for rewards).
Quick point: Just because the text message says your store is having a sale but doesn’t ask the consumer to buy anything on the message, you may think it’s not considered “telemarketing”. This is wrong. Any plan to sell now or in the future through direct marketing is telemarketing and subject to the TCPA.
Here are my top 5 things to consider:
Obtain consent. This is not achieved by simply having a number provided by the consumer. Instead, the consumer must affirmatively agree to receive promotional calls/texts by automated means. This is done through a clear disclosure and often accompanied by an unchecked checkbox.
Honor opt-outs. This seems obvious right? Provide instructions on how to opt-out and look for other phrases like “stop/quit/cancel”. Opt-outs should occur immediately with most common texting platforms.
Keep records. If you receive a complaint, you want to be able to respond confidently and records help you do that. The key records to maintain are your texting records (the phone numbers you texted, the date/time of the text, and the content of the text), your consent opt-in forms, and opt-out requests from consumers with dates. Ask yourself: what records do you need to prove you had consent, and what records prove you didn’t text a consumer after they opted out.
Only text consumers between the hours of 8AM and 9PM according to their time zone. I always recommend going off address and not phone number due to cellphone mobility. If you text a California number at 8PM, but the phone owner lives in New York, you might get a few complaints.
Monitor compliance with these items. Another one that seems obvious, yet most companies fail to do so, and you see above what happens. I guarantee you’ll find issues with most audits.
Bonus – here is a more comprehensive checklist on how to achieve a Safe-Harbor defense.
This article is not intended to be a scare tactic. The TCPA legal landscape is rampant and consumers are more aware now than ever of their rights. A quick Google search of “Cannabis TCPA” helps to illustrate the fact that this industry, like most, is not immune. However, with proper compliance parameters in place, your company can enjoy the benefits of texting with consumers with peace of mind.
Cannabis businesses have a lot to look forward to in 2020. After a bipartisan push through the House, the Safe Banking Act currently awaits passage in the Senate and then the president’s signature. If all goes well, the bill will allow the financial sector to finally service cannabis businesses – from banking to investments and insurance.
What else can cannabis business look forward to this year? Check out HUB’s Top 5 cannabis industry predictions for 2020.
Hemp/CBD products go to market in droves. The passage of the Farm Bill and the ease of shipping hemp across state lines has led to a production boom for the crop. With little federal regulation around manufacturing and distribution, hemp/CBD products from edible oils to clothing and anti-inflammatory lotions are extremely profitable. Expect final federal Domestic Hemp Production Program rules on acceptable levels of THC in hemp/CBD products to be published sometime in 2020. These will be based on the current rule draft. There’s a strong push to move industrial hemp into the federal crop insurance program, which is also likely to happen in 2020.
Product liability insurance is no longer a luxury. Thanks to significant vaporizer, battery and contamination claims currently in the courts, cannabis business can expect higher product liability premium rates in 2020. Expect rates to jump as much as 30 to 40%, depending on the resolution of these cases. For this reason, carriers will be more diligent about underwriting and may even ask for certification of insurance from vendors, and additional insureds on third-party policies. Exercising more caution and oversight when selecting vendors is a must for cannabis businesses operating in 2020 under this premise. It’s critical for all organizations to take a hard look at business practices before entering partnerships moving forward.
Phase II industry growing pains surface. Now that the cannabis gold rush is dying down, businesses are poised to enter Phase II of their growth.Those who failed to institute proper hiring processes, including background checks, as well as protocols to promote security and prevent theft are currently facing challenges. Significant industry consolidation is making way for cannabis conglomerates to become multi-state operators. Directors and officers that made poor investments or acquisitions are facing scrutiny at the hands of the SEC or business investors. Without D&O insurance, or adequate limits, directors and officers could find their personal finances drained. Insisting on adequate D&O protection going forward is a best practice for cannabis executives.
Product and state regulatory testing expands. High-profile manufacturers and distributors of cannabis are standardizing their cannabis, hemp and CBD ingredient labeling. However, many others are taking advantage of the lack of rules currently surrounding cannabis production by falsifying labels and misrepresenting THC content in products. This has led to recent lawsuits and claims. As a result, states will begin to administer product testing and license regulations and enforce carrying time limits, track and trace and bag and tag rules. Get ready for fines, penalties and increased non-compliance liabilities in 2020.
Increased availability of policies and limits. Both the cannabis industry and the number of insurance carriers entering the market continue to grow steadily. Businesses are enjoying higher liability limits as a result – to the tune of $15M on product liability and $60M on property. Coverage for outdoor cannabis crop is now a possibility, and workers’ compensation coverage can function as a blanket policy for businesses across state lines as well. Should the Safe Banking Act pass soon, stay tuned for additional insurance opportunities as well.
2020 Growth and Beyond
The 2020 presidential election will bring the federal legalization of cannabis to the forefront of public discourse. While the law may not change yet, passage of the Safe Banking Act and increased regulatory action at the state level will highlight the successes and failures of the 33 states and the District of Columbia that have legalized cannabis in some capacity. These will serve as a guiding light for federal legalization down the road.
Now that cannabis edibles have been legalized nationally in Canada, many existing and aspiring license holders have been surprised to discover that they must comply with food safety regulations. This became crystal clear when Health Canada published their Good Production Practices Guide For Cannabis in August 2019.
With this development, it should be obvious to everyone that Good Manufacturing Practices (GMP) certifications are simply not enough.
HACCP is a methodology that is all about identifying biological, chemical and physical hazards and determining how they will be controlled to mitigate the risk of injury to humans. Recently, bio-terrorism and food fraud hazards have been added to the list and it is a good idea to address quality hazards as well.
The process of developing a HACCP program involves identifying these hazards with respect to ingredients, materials, packaging, processes and cross-contamination points (explicitly required in Canada only). However, it is a specific ingredient hazard that I’d like to talk about here.
As this market has emerged, I’ve met with many cannabis companies as the onerous levels of knowledge and effort required to build and maintain an effective HACCP program manually has dawned upon the industry. Many are looking for technological solutions to quickly solve this problem. During these discussions, a curious fact has emerged that set off the food safety alarm klaxons around here.
Most people alive today are too young to remember this but, with few exceptions, the standardization of ingredients is a relatively modern phenomenon. It used to be that the fat content of your milk varied from season to season and cow to cow. Over time, the food industry standardized so that, amazingly, you can now choose between milks with either 1% or 2% fat, a level of precision that would border on miraculous to someone born in the early 20th century.
The standardization of ingredients is important in terms of both quality and safety. Take alcohol for example. We know that a shot of spirits generally contains 40% alcohol. Different products may vary from this standard but, if I pour a shot of my favourite Bowmore No.1 single malt in Canada or Tasmania, this year or 10 years from now, I can expect a consistent effect from the 40% alcohol content of the quantity I’ve imbibed.
Imagine a world in which this was not the case, where one shot would be 40% but the next might be 80%. Things could get out of control quite easily at the 80% level so, to avoid this, distillers monitor and blend their product to ensure they achieve the 40% target, which is called the “standardization marker”.
With respect to cannabis, the obvious standardization marker is THC. During the manufacturing process, edibles manufacturers do not normally add cannabis flower directly into their products but instead add a THC concentrate produced during previous production steps. However, we’ve found that the wisdom of standardizing these concentrates has not yet dawned upon many in the industry, which is alarming at best and dangerous at worst.
The reason for this is that, since cannabis is inherently a heterogeneous plant, one cannot precisely achieve a particular marker value so the outcome of the concentration process is variable. The food industry long ago overcame this problem by blending or diluting to achieve a consistent marker concentration, but the cannabis industry has not yet adopted this advance.
The cannabis edibles industry is still immature and it will take time to bring all the necessary risk mitigation processes into place but one excellent place to start is to seriously consider standardizing concentrates to a THC marker.Instead, manufacturers simply keep track of the strength of each batch of concentrate and then adjust the quantity added to their recipes to achieve the desired THC content. This seems logical on the surface but presents a serious risk from the HACCP perspective, namely a chemical hazard, “Excessive psychoactive compound concentrations due to human error at levels that may be injurious to human health”.
The reality is that workers make mistakes, which is why it is imperative to mitigate the risk of human error insomuch as possible. One of the best ways to do this is to standardize to avoid the scenario where a worker, faced with a row of identical containers that are differentiated only by a tiny bit of text, accidentally grabs the wrong bottle. The error isn’t caught until the product has been shipped, consumed, and reports of hospital visits start coming in after the authorities trace the problem back to you. You must bear the costs of the recall, your reputation has been decimated and your company is floundering on the financial rocks.
US-based Drip More, LP recently found this out the hard way after consumers complained that their product tasted bad, bitter and/or harsh. An investigation determined that excessive nicotine content was the source of the problem and a voluntary recall was initiated. Affected product that had already been sold in 26 states. The costs of this recall have not been tallied but they will be staggering.
The cannabis edibles industry is still immature and it will take time to bring all the necessary risk mitigation processes into place but one excellent place to start is to seriously consider standardizing concentrates to a THC marker. This strategy is cheap, easy and you’ll never be sorry.
According to a press release published earlier this week, the Massachusetts Cannabis Control Commission approved Cannabis Trainers as one of the state’s first vendor training providers. The training program, Sell-SMaRT™ is the world’s first state-approved cannabis vendor training.
Regulations in Massachusetts require all licensed growers, managers and employees that handle cannabis to take a responsible vendor training class through a certified provider by January 1, 2020.
The Sell-SMaRT™ program was originally developed for licensees handling cannabis in Colorado. In 2015, Colorado regulators granted the program the first ever certification for its Responsible Vendor Program in cannabis. Since then, almost 4,000 people have taken the Cannabis Trainers class, which has been customized for six states, including Massachusetts.
Maureen McNamara, founder of Cannabis Trainers, built on two decades of experience in alcohol vendor training before she started the training program for cannabis. “Massachusetts is really setting a new standard with its training requirements,” says McNamara. “We’ve worked hard to customize the Sell-SMaRT™ program for the state’s needs, and we appreciate the Cannabis Control Commission’s recognition of that. We’re excited to help inspire a cannabis workforce in the state that is responsible, compliant and committed to excellence.”
Meg Sanders, CEO of Canna Provisions, a Massachusetts cannabis company, says the program helps her employees learn the rules thoroughly. “Cannabis Trainers trained all of my Colorado employees, and my entire team in Massachusetts as well,” says Sanders. “I know every time Cannabis Trainers meets with my staff, we walk away smarter and better prepared to help our customers.”
With recent changes in federal and state law, and growing consumer awareness, the long-dormant hemp industry may finally be able to take heed of George Washington’s advice, “Make the most you can of [India Hemp] … The Hemp may be sown anywhere.”1
Hemp has a long and varied history in the United States. Throughout his lifetime, George Washington cultivated hemp at his Mount Vernon Estate, and, for a time, Washington even considered replacing tobacco with hemp as the Estate’s primary cash crop.2 Like Washington, Thomas Jefferson grew hemp at Monticello and his lesser-known Poplar Forest plantation.3 Both Founding Fathers primarily used the hemp cultivated on their property for making household items like clothing, rope, and fishing nets.
From the colonial era until 1970, hemp was routinely cultivated across the United States for industrial use. But, with the passage of the Controlled Substances Act (“CSA”) in 1970, U.S. hemp production ceased.4 The CSA banned cannabis of any kind, eliminating any distinction between hemp and other types of cannabis. As a result, hemp production became illegal in the United States.
More recently, the U.S. government finally began to ease restrictions on hemp cultivation and production. The 2014 Farm Bill introduced the USDA Hemp Production Program.5 Under the Program, universities and state departments of agriculture are allowed to cultivate hemp if:
The industrial hemp is grown or cultivated for purposes of research conducted under an agricultural pilot program or other agricultural or academic research; and
The growing or cultivating of industrial hemp is allowed under the laws of the state in which such institution of higher education or state department of agriculture is located and such research occurs.
The 2014 Farm Bill did not remove hemp from the auspices of the CSA, nor did it address the continuing application of federal drug control statutes to the growth, cultivation, manufacture, and distribution of hemp products.
The 2018 Farm Bill built upon the deregulation that began in 2014.6 Although both the 2014 and 2018 bills define hemp as the plant Cannabis sativa L. and any part of that plant that has a delta-9 THC concentration of 0.3% or less by dry weight,7 the 2018 Farm Bill took the additional step of removing hemp from the federal list of controlled substances and categorized it as an agricultural product. As a result, the production of hemp is now subject to USDA licensure and regulation. However, until the USDA completes its rulemaking process for implementing hemp regulation, hemp production remains illegal unless done in compliance with the terms of the earlier 2014 bill.8 For the time being, legal cultivation of hemp still must occur in a state that has authorized hemp research9 and the researcher must be either an institute of higher education or a state department of agriculture (or its designee).
With the increasingly favorable changes to federal and state law allowing for the expanded cultivation and production of hemp in the United States, the market is expected to grow significantly in the coming years. In 2014, the U.S. industrial hemp market was estimated at approximately $504 million.10 In only one year after the passage of the 2014 Farm Bill, the industrial hemp market was estimated to have increased by over $95 million to almost $600 million. By 2017, the worldwide market for industrial hemp was estimated to be $3.9 billion and growing at a compound annual growth rate (CAGR) of 14%.
In addition to favorable changes in U.S. law, the hemp market is benefiting from growing consumer awareness and demand for hemp-based food products.11 High in omega-3 and omega-6, amino acids and protein, hemp is growing in popularity as a cooking oil, dairy substitute, flour source and bakery ingredient. Among other things, hemp is considered by some to provide positive health effects for those seeking help with insulin balance, cardiac function, mood stability, and skin and joint health.
Although hemp cultivation is now allowed in the U.S.—at least for research purposes—and the market is forecasted to rise steadily under growing demand for hemp-based products, broad access to viable, legal seeds continues to present a challenge for researchers and commercial growers. In order to legally implement authorized cultivation programs and take economic advantage of a swiftly growing market, farmers must have access to seeds that can be guaranteed to consistently produce plants that fall under the legal definition of hemp. In an attempt to alleviate the problem, several states, including California, Indiana, Maine and Oregon, have implemented programs to license or certify compliant seed distributors and producers.
The importance of hemp seed availability and development has also been recognized on the federal level. On April 24, 2019, the USDA Agricultural Marketing Service published a Notice to Trade announcing that the USDA’s Plant Variety Protection Office (“PVPO”) is now accepting applications of seed-propagated hemp for protection under the Plant Variety Protection Act (“PVPA”). Among other things, the PVPA provides intellectual property protection to breeders who have developed new varieties of seed-propagated plants. Under the new guidance, breeders of new hemp varieties can now secure protection pursuant to the PVPA. Those holding a certificate of protection from the PVPO can exclude others from marketing or selling a registered hemp variety and manage how other breeders and growers use their protected variety.
The process for requesting protection under the PVPA is fairly straightforward. Breeders, or their attorneys, must complete all application forms, pay the required fees,12 submit a distinct plant variety name, and provide a deposit of at least 3,000 viable and untreated seeds of the variety (or 3,000 seeds of each parent variety for a hybrid). One required form for a completed PVPA application is the Objective Description of Variety form.13 This form provides a series of questions that identify the distinct aspects of the variety in question, including, among other things, plant and leaf characteristics, seed properties and anticipated uses. Upon receipt of the completed application and fees, the PVPO examines the application to determine whether the listed plant variety is new, distinct, uniform, and stable. If the PVPO determines that the requirements are satisfied, it will issue a certificate of protection granting the owner exclusive rights to the registered variety for a period of 20 years.Now is the time for farmers, researchers, and hobbyists alike to take advantage of the expanded opportunities available for protecting intellectual property for proprietary hemp varieties.
Although hemp has traditionally been used in the textile and fiber industries, the estimated 17.1% CAGR in the hemp seed segment is being driven by the increase in demand for hemp oil, seedcakes, and other food and nutraceutical products. These products are primarily derived from the hemp seed as opposed to its fibers. Presently, hemp seeds contain approximately 30-35% oil, of which approximately 80% is essential fatty acids, and 25% crude protein.14 Under the new PVPA guidelines, if a breeder is able to cultivate a sustainable plant that increases the plant’s production of the desirable compounds, he or she could achieve a significant position in the growing market.
The protection provided by the newly expanded PVPA builds upon other avenues of intellectual property protection now available to hemp breeders and growers. In addition to the PVPA, plants meeting certain criteria may also be protectable under a plant patent or a utility patent, both of which are administered by the U.S. Patent and Trademark office. Generally speaking, PVPA protection may be available for seeds and tubers, plant patent protection applies to asexually propagated plants, and utility patent protection may be available for genes, traits, methods, plant parts and varieties.15
With a market that is expected to grow substantially in the near future, and with the passing of increasingly friendly federal and state legislation, the hemp industry is on the cusp of significant expansion. Now is the time for farmers, researchers, and hobbyists alike to take advantage of the expanded opportunities available for protecting intellectual property for proprietary hemp varieties.
George Washington to William Pearce, 24 February 1794.
To date, at least 41 states have passed legislation authorizing hemp cultivation and production programs consistent with federal law. As of the date of this article, those states that have not enacted legislation allowing the cultivation of hemp for commercial, research, or pilot purposes include: Connecticut, Georgia, Idaho, Iowa, Louisiana, Mississippi, Ohio, South Dakota, Texas, and the District of Columbia.
Currently, the Food and Drug Administration prohibits hemp-based CBD in food and beverages. However, the FDA has set a public hearing to discussing the legalization of CBD in food and beverages for May 31, 2019.
The PVPA application fee is currently $4,382 with an additional fee of $768 due upon issuance of a certificate of registration.
Hemp Seed (Cannabis sativa L.) Proteins: Composition, Structure, Enzymatic Modification, and Functional or Bioactive Properties,Sustainable Protein Sources (Ch. 7), R.E. Aluko (2017).
Regulations are currently under consideration that could expand or otherwise modify the scope of protection available under each of the enumerated intellectual property protection schemes. Consult a licensed attorney for questions regarding the specific program that may apply to a particular set of circumstances.
To reinforce the ideas in the article, Sanitation Starting Points: More Than Sweeping the Floors and Wiping Down the Table, the main goal of sanitation is to produce safe food and to keep consumers healthy and safe from foodborne illness. With the cannabis industry growing rapidly, cannabis reaches a larger, wider audience. This population includes consumers most vulnerable to foodborne illness such as people with immunocompromised systems, the elderly, the pregnant, or the young. These consumers, and all consumers, need and deserve safe cannabis products every experience.
Sanitation is not an innate characteristic; rather, sanitation is a trained skill. To carry out proper sanitation, training on proper sanitation practices needs to be provided. Every cannabis food manufacturing facility should require and value a written sanitation program. However, a written program naturally needs to be carried out by people. Hiring experienced experts may be one solution and developing non-specialists into an effective team is an alternative solution. Note that it takes every member of the team, even those without “sanitation” in their title, to carry out an effective sanitation program.
Sanitation is a part of the Food and Drug Administration’s Code of Federal Regulations on current Good Manufacturing Practices (GMPs) in manufacturing, packing or holding human food (21 CFR 110). Sanitation starts at the beginning of a food manufacturing process; even before we are ready to work, there are microorganisms, or microbes, present on the work surfaces. What are microbes? At a very basic level, the effects of microbes can be categorized into the good, the bad, and the ugly. The beneficial effects are when microbes are used to produce cheese, beer or yogurt. On the other hand, microbes can have undesirable effects that spoil food, altering the quality aspects such as taste or visual appeal. The last category are microbes that have consequences such as illness, organ failure and even death.In a food manufacturing facility, minimizing microbes at the beginning of the process increases the chance of producing safe food.
Proper sanitation training allows cannabis food manufacturing facilities to maintain a clean environment to prevent foodborne illness from affecting human health. Sanitation training can be as basic or as complex as the company and its processes; as such, sanitation training must evolve alongside the company’s growth. Here are five key talking points to cover in a basic sanitation training program for any facility.
Provide the “why” of sanitation. While Simon Sinek’s TEDx talk “Start with why” is geared more towards leadership, the essential message that “Whether individuals or organizations, we follow those who lead not because we have to, but because we want to.” Merely paying someone to complete a task will not always yield the same results as inspiring someone to care about their work. Providing examples of the importance of sanitation in keeping people healthy and safe will impart a deeper motivation for all to practice proper sanitation. An entertaining illustration for the “why” is to share that scientists at the University of Arizona found that cellphones can carry ten times more bacteria than toilet seats!
Define cleaning and sanitizing. Cleaning does not equal sanitizing. Cleaning merely removes visible soil from a surface while sanitizing reduces the number of microorganisms on the clean surface to safe levels. For an effective sanitation system, first clean then sanitize all utensils and food-contact surfaces of equipment before use (FDA Food Code 2017 4-7).
Explain from the ground up. Instead of jumping into the training of cleaning a specific piece of equipment, start training with the foundational aspects of food safety. For example, a basic instruction on microbiology and microorganisms will lay down the foundation for all future training. Understanding that FATTOM (the acronym for food, acidity, temperature, time, oxygen and moisture) are the variables that any microorganism needs to grow supplies people with the tools to understand how to prevent microorganisms from growing. Furthermore, explaining the basics such as the common foodborne illnesses can reinforce the “why” of sanitation.
Inform about the principles of chemistry and chemicals. A basic introduction to chemicals and the pH scale can go a long way in having the knowledge to prevent mixing incompatible chemicals, prevent damaging surfaces, or prevent hurting people. Additionally, proper concentration (i.e. dilution) is key in the effectiveness of the cleaning chemicals.
Ensure the training is relevant and applicable to your company. Direct proper sanitation practices with a strong master sanitation schedule and ensure accountability with daily, weekly, monthly and annual logs. Develop sanitation standard operating procedures (SSOPs), maintain safety data sheets (SDS’s) and dispense proper protective equipment (PPE).
Overall, sanitation is everyone’s job. All employees at all levels will benefit from learning about proper sanitation practices. As such, it is beneficial to incorporate sanitation practices into cannabis food manufacturing processes from the beginning. Protect your brand from product rework or recalls and, most importantly, protect your consumers from foodborne illness, by practicing proper sanitation.
Within two days of announcing the opening of license applications for growing hemp, the Illinois Department of Agriculture received roughly 350 applications. According to the Lincoln Courier, that number has since grown to 575 applications in the past couple weeks. The Illinois Department of Agriculture has already issued 341 licenses for growing and 79 for processing, as of last Friday.
According to Jeff Cox, Chief of the Bureau of Medicinal Plants at the Illinois Department of Agriculture, a lot of this excitement comes from farmers wanting to branch out from the state’s traditional crops, such as corn and soybeans. “Corn and soybean prices have not been the best over the past few years, and so I think they see this as an opportunity to have a different source of income on their farm,” Cox told the Lincoln Courier.
Morgan Booth, spokeswoman for the Illinois Department of Agriculture told the Chicago Tribune that they were expecting this kind of enthusiasm among farmers. “We knew there was a lot of interest in it,” says Booth. “We were very pleasantly surprised.”
Back in late December of 2018, after the Farm Bill was signed into law, the Illinois Department of Agriculture was quick to jump on the hemp train. They announced their intentions to submit plans for a program to the federal Department of Agriculture, opened a 90-day public comment period, and finalized the rules in April. The state’s regulators hoped to expedite the process and have farmers growing hemp by June 1, which appears to be successful. Dozens of hemp farmers throughout the state are anticipating their first crops will be in the soil by the end of the month.
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