Hashish Administration and Alternative Act: What Proposed Federal Hashish Legal guidelines Would Means for Hemp | Vicente Sederberg LLP

[co-author: Jace Pohlman]

On July 14, 2021, Senators Chuck Schumer (D-NY), Ron Wyden (D-OR) and Cory Booker (D-NJ) published the draft discussion of the historic federal cannabis legalization act, the Cannabis Administration and Opportunity Act (CAOA. ). ). The CAOA would not only end the cannabis ban, it would also create a regulatory framework for cannabis under the U.S. Food and Drug Administration (FDA) and the Alcohol and Tobacco Tax and Trade Bureau (TTB). It also contains comprehensive provisions on restorative justice, including grants, loans, and other funding programs for disadvantaged and minority businesses, record deletions, criminal filings, and other measures aimed at repairing the decades-old damage caused by the drug war.

While this Congress is unlikely to pass, the significant legislation gives us a roadmap for how the US will ultimately regulate cannabis and is an important step forward in establishing the appropriate federal framework.

With hemp already legal nationwide, a primary political question is how to differentiate marijuana and hemp – two varieties of the cannabis plant – under a federal regulatory system. In this article, we outline the CAOA’s key provisions on hemp, related regulation of cannabis products, and areas where lawmakers have specifically asked for industry feedback to determine the best policy approach.

Industry stakeholders have until September 1, 2021 to provide feedback. We strongly encourage participation in this important opportunity to shape federal cannabis policy.

Differentiation between cannabis and hemp according to CAOA

Cannabis with a THC content of over 0.3% would be regulated as “cannabis”, unlike hemp with a low THC content. The term “cannabis” is defined in the CAOA in such a way that it excludes hemp. Hemp continues to be subject to a separate regulatory framework, primarily governed by the U.S. Department of Agriculture (USDA) and the FDA. The federal hemp framework was established through the passage of the Agricultural Improvement Act of 2018 (Farm Bill 2018).
Under the CAOA, marijuana and marijuana-derived THCs would be removed from the Controlled Substances Act (CSA). Hemp, hemp-derived THC and hemp derivatives were removed from the CSA as part of the 2018 Farm Bill. This means that historically the CAOA would legalize all cannabis and remove it from CSA control.
Most of the CAOA regulations for cannabis would not apply to hemp and hemp products.
The CAOA’s federal approach gives states the power to control cannabis regulations within their borders (including possession, production and distribution). States still have the option of being the primary regulatory agency for hemp under the 2018 Farm Bill. The CAOA does not allow states to prohibit the interstate transfer of legal cannabis or cannabis products through its borders for legal delivery to another state.

Regulatory oversight of hemp and cannabis

The FDA already has the primary regulatory authority for all hemp and hemp derivatives. The FDA is currently in an ongoing process of evaluating the science and safety of CBD and hemp derivatives to determine potential regulatory pathways for hemp. The FDA claims that CBD cannot legally be included as an ingredient in foods or supplements under current law, but CAOA would provide a legal avenue for CBD in supplements (described in the next section).
The CAOA transfers the regulation of cannabis from the Drug Enforcement Agency (DEA) to the FDA, the TTB and the Bureau of Alcohol, Tobacco, Firearms & Explosives (ATF) within the Department of Justice, giving the authorities similar regulatory and enforcement agencies as they do Have alcohol and tobacco. The CAOA sets a minimum age of 21 years for the purchase of cannabis products.
- The TTB would enter into a letter of intent with the FDA outlining their responsibilities for cannabis and cannabis product regulations. Both authorities would be responsible for the labeling of certain cannabis products, marketing and consumer information.
The FDA would assume primary regulatory responsibility for the manufacture and marketing of cannabis products in the newly established “Center for Cannabis Products”. The Federal Food, Drugs, and Cosmetics Act (FDCA) would regulate all cannabis products with the exception of cannabis-based drugs. Hemp products are still subject to the standard FDCA regulations for food, drugs, dietary supplements and devices. The Center for Cannabis Products under the FDA would regulate cannabis and possibly hemp products. Although the FDA currently has the power to regulate hemp products, these regulations have yet to be published. Under the CAOA, they can decide to issue product regulations that cover all aspects of the facility instead of two separate regulatory systems. The CAOA’s regulations for the manufacture and marketing of cannabis products include:
Cannabis products cannot be marketed as dietary supplements, but hemp and CBD products can. However, cannabis product manufacturers could make structural / functional claims (a claim describing how a product affects the normal structure or function of the body – that is, this product supports the immune system) about the benefits of their products as they do with dietary supplements. As with dietary supplements, these types of claims would be acceptable as long as they are reasonably substantiated so that they are not false and misleading.
All products that are intended or marketed for use in the treatment or prevention of disease in humans or animals, whether cannabis or hemp, remain regulated as medicinal products.

Providing a Legal Route for CBD in Diet Supplements

Hemp products remain under the supervision of the FDA. The CAOA would amend the FDCA’s definition of “dietary supplement” to lift the ban on CBD made from hemp as an ingredient in a dietary supplement. The FDCA prohibits the inclusion of an ingredient in food and dietary supplements if the ingredient was an active ingredient in an approved drug or has been publicly investigated for use in a drug. The FDA applies this provision to CBD because CBD was the active ingredient in an approved drug (Epidiolex). CAOA would exempt CBD made from hemp from this ban so that it can be legally regulated as a dietary supplement as long as other requirements are met.
- In particular, the bill does not remove the ban on the inclusion of CBD as an ingredient in food.
- Since this provision is limited to hemp-derived CBD, other hemp-derived cannabinoids that have been publicly investigated or approved as pharmaceuticals prior to being marketed would still be banned from regulation as food or dietary supplement ingredients.
Legislation subjects hemp-derived CBD to the existing new dietary ingredient standards that require notification to the FDA prior to new dietary ingredient (NDIN) being placed on the market that the ingredient is reasonably safe for use based on history of use or other safety evidence expect is expected of the ingredient as stated in the product label or recommended use.
calls on the FDA secretary to set recommended daily intake limits for CBD dietary supplements through a tentative final rule. Any product containing CBD above this limit would be deemed adulterated and illegal, and NDINs would not be accepted for products that exceed the serving size limit.
The FDA is tasked with developing packaging and labeling requirements for CBD dietary supplements through preliminary final regulation.
Overall, the FDA will have more control over product safety, including labeling and packaging requirements, as well as more enforcement tools to help enforce non-compliant CBD products (including synthetics).
In particular, the CAOA does not open the way for CBD in food, nor does it deal with the federal regulation of inhalable hemp products. Both types of products are currently under the jurisdiction of the FDA, but are not currently recognized as legitimate products.

Addressing the “work-in-progress” problem: Hemp with more than 0.3% Delta-9 THC

urges the Minister of Finance, along with other authorities, to put in place a procedure and regulations for lawful supply of hemp that accidentally exceeds the 0.3% legal limit of THC (Work in Progress Hemp) to licensed cannabis companies for the proper processing of these products .
Proper regulation of such hemp in the works is an unresolved and problematic issue for the hemp industry right now.

Taxation of cannabis and hemp

The CAOA introduces a substantial tax on cannabis producers, an excise tax that starts at 10% the first year and increases by 5% annually for the next five years until it eventually reaches 25% when switched to one ounce (flower) will. or per milligram (extract) rate. Tax breaks would apply to companies with sales of less than $ 20 million. State and local governments would also retain the power to set their taxes. Manufacturers of hemp and hemp products are not subject to the new tax regime.
Complies with the rules for the tax-free use of non-beverage alcohol that also apply to the manufacture of cannabis and hemp products. This means that industrial non-beverage alcohol used in the manufacture of hemp products is not taxed like beverage-like alcohol.
Establishes a cannabis tax disadvantage for products that have been processed to remove THC, including those that would qualify as hemp after processing (products 0.3% THC or less). These drawbacks act as a tax refund for companies that receive and handle products that are tested as “cannabis” (> 0.3% THC) under the CAOA but process the cannabis to remove the concentration of THC to make it into a To make goods that are classified as “hemp”. ”