Hemp processing

Hemp processingOne of the most profitable parts of the hemp supply-chain is processing hemp for CBD. Setting up a hemp processing facility requires significant capital, significant time, and significant expertise. It also requires running trial batches to ensure that your production is running properly. So, you can imagine that companies planning to process hemp for CBD in Florida are anxious for the Florida Department of Agriculture and Consumer Services (“FDACS”) to finalize Florida’s hemp rules so that such companies can obtain permits to legally run their trial batches as well as sell the hemp extract. But does a processor in Florida really need to wait for the Florida hemp rules to be finalized in order to start processing hemp in Florida? Possibly not!

Cultivation of Hemp in Florida is Not Legal Unless Done Pursuant to Florida’s Pilot Program.

The 2018 Farm Bill, as clarified by the USDA in a memo published on May 28, 2019, provides that hemp may be grown only (1) with a valid USDA-issued license, (2) under a USDA-approved State or Tribal Plan, or (3) under the 2014 Farm Bill industrial hemp pilot authority. Florida Statute Section 581.217(5)(a) provides that it is “unlawful for a person to cultivate hemp in this state without a license issued by the department.” As of the date of writing this blog, Florida has not submitted its plan to the USDA; and Florida has not issued any hemp cultivation licenses. Thus, cultivation of hemp in Florida is illegal both federally and from a state perspective assuming it is not done pursuant to Florida’s Pilot Program. Currently, UF and FAMU are the only authorized growers under Florida’s Pilot Program; and both UF and FAMU are not currently selling their biomass to private businesses to process. So, any hemp to be processed in Florida today would need to be cultivated in another state and transported into Florida.

Transporting Hemp Biomass into Florida is Most Likely Legal.

The 2018 Farm Bill, as clarified by the USDA in a memo published on May 28, 2019, preempts states from prohibiting interstate transportation of hemp lawfully produced under the 2014 Farm Bill or the 2018 Farm Bill. Consistent with such preemption, the Florida Statutes do not put any restrictions on transporting hemp biomass into Florida that was lawfully produced under the 2014 Farm Bill or the 2018 Farm Bill. Thus, transporting hemp into Florida is most likely legal from a federal and state perspective as long as such hemp was lawfully produced under the 2014 Farm Bill or the 2018 Farm Bill. Of course, you should certainly consult an attorney prior to transporting hemp into the state of Florida as there is certain documentation required as well as other compliance matters related to interstate transportation of hemp.

Cultivation of Hemp in Some Other States is Legal.

As of the date of writing this blog, the USDA has not approved any state hemp plans pursuant to the 2018 Farm Bill. Thus, technically there are no farmers lawfully cultivating hemp under the 2018 Farm Bill. There are, however, thousands of farmers in other states lawfully growing hemp under their respective state’s 2014 Farm Bill pilot program. Thus, it is legal for a Florida processor to transport hemp from another state as long as such hemp has been lawfully cultivated pursuant to such state’s 2014 Farm Bill pilot program. Of course, you should certainly consult an attorney to ensure that such supplier has all the necessary licenses and is in full compliance with its state’s pilot program.

Processing Hemp Today in Florida is Most Likely Legal as Long as (1) the Hemp Being Processed was Lawfully Produced in Another State; and (2) it Complies with All Other Federal, State, and Local Laws.

The 2018 Farm Bill and the Florida Statutes are silent as to whether a permit or license is required to process hemp. While FDACS has published Revised Draft Rules requiring certain permits for hemp processors (ie Hemp Food Establishment Permit), such rules have not been finalized and are therefore not binding. Thus, processing hemp in Florida today is most likely not illegal from a federal and state perspective as long as (1) the hemp being processed was lawfully produced under the 2014 Farm Bill or the 2018 Farm Bill; and (2) it complies with all other federal, state, and local laws.

You Must Still Make Sure You Comply with other Federal, State, and Local Laws.

The 2018 Farm Bill preserved the FDA’s authority to regulate products containing cannabis or cannabis-derived compounds (ie CBD) under the FD&C Act and Section 351 of the Public Health Service Act. Also, the 2018 Farm Bill did not preempt states and local governments from regulating issues generally reserved to states and municipalities, such as, food permitting, health concerns, zoning issues, safety issues, and many other issues. For example, if you plan to process hemp to be used in foods, you should still comply with food regulations. Similarly, you will need to make sure your processing facility is zoned in an area that allows such use. A hemp processor in Florida should also make sure they are compliant with Florida Statute Section 581.217, including the labeling requirements for any Hemp Extract Distributor or Retailer. Make sure you consult with an attorney to ensure you are complying with all federal, state, and local laws.

Conclusion

The consumer demand for CBD products is far beyond the current supply for CBD products, which is driving pricing super high. While the capacity of hemp grown in 2020 is going to increase tremendously, it is questionable whether there will be sufficient investment in processing capacity to keep up with the growers. A lack of processing capacity would cause farmers to be stuck with a glut of biomass; pricing for biomass to decrease; and potentially put farmers out of business. In order to avoid this in Florida, we need government intervention to ensure sufficient processing capacity. There are already cities and counties working with their economic development departments to incentivize hemp processing; but, ideally, Florida hemp processors can use some further economic incentives through the State of Florida. To learn more about some of these supply-chain issues, make sure you attend my presentation at the Florida Industrial Hemp Conference titled “Supply Chain Infrastructure: What Needs to Happen for Florida’s Hemp Industry to Flourish.” One thing is for sure: allowing (and even incentivizing) hemp processors to get started NOW will certainly help the Florida supply chain in the future.

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