Farmers “Set Up to Fail:” Group Calls for Hemp Biz Reform

By Willis Jacobson
Oct 15, 2020

A branch of the U.S. Small Business Administration has asked the U.S. Department of Agriculture (USDA) to adjust its policies related to hemp production, arguing that the agency’s current guidelines have “stifled” the industry and will damage it further.

The SBA’s Office of Advocacy, which was established to represent the views of small organizations before federal agencies, submitted a nine-page letter (read it here) to USDA Secretary Sonny Perdue on Oct. 8, the final day for public comment regarding the USDA’s interim final rule on hemp. The Office of Advocacy, which is an independent arm of the SBA, consulted with hemp operators in preparing the letter. By law, the USDA must give “appropriate consideration” to comments provided by the office.

The USDA’s interim rule, first published on Oct. 31, 2019, is in effect and set to run through Nov. 1, 2021, or until the USDA publishes a final rule.

The recommendations from the Office of Advocacy are aimed at lessening regulatory and financial burdens on hemp farmers. The organization specifically calls on the USDA to: allow for remediation and on-farm disposal of non-compliant crops, and other measures to make regulations simpler and less onerous.

The USDA’s interim rule on hemp is distinct from the DEA’s interim rule, which went into effect in August and has faced strong objections from the hemp industry, including a lawsuit filed this week that aims to remove the DEA from any involvement in hemp regulation. 

The letter from the SBA’s Office of Advocacy stated that some hemp cultivators feel “as though they are being set up to fail” with the USDA’s current interim final rule, and that only large-scale, high-capital businesses will be able to survive and comply with the requirements.

“Small businesses remain deeply concerned about the impact this rule will have on their ability to legally grow hemp should the rule be finalized without any modifications,” the letter states. “The rule has already stifled the industry as many farmers have chosen not to grow hemp this year until they are certain about what the requirements are, and whether they can produce compliant crops without the risk of a total loss of their investment due to mandatory destruction of hot crops.” 

“Hot” hemp refers to plants containing more than the legal limit of 0.3% THC.

The letter states that destruction of a hot hemp crop, as the USDA interim rule calls for, results in a total loss of market value, which devastates smaller operators.

For small farmers, “the risk of having to destroy their crop if it is non-compliant may be too high to justify growing hemp at all, especially without any alternatives to destruction of non-compliant crops,” the letter reads.

It encourages the USDA to allow farmers to attempt remediation with the condition that non-compliant plants will not leave the farm and enter the marketplace. This would allow farmers to attempt to bring plants back into compliance, or to simply dispose of crops in more efficient methods of their choice.

If a crop continues to test hot, for example, the USDA should allow farmers to bury it or use the materials for mulch, soil fertilizer or livestock bedding, the letter recommends.

Currently, the USDA’s rule requires that hemp samples be tested 15 days prior to harvest. The Office of Advocacy points out that the rule doesn’t specify whether that’s calendar days or business days, but says that either is too narrow a window.

It notes that weather and natural disasters can severely impact harvest periods, and that smaller operators face extreme risk of losing their entire crop if they can’t complete harvest within the 15-day window. The letter recommends that window be increased to 30 days.

The letter further calls for testing to include more than the currently mandated top one-third of the plant, which contains most of the THC. By including more of the plant, the testing will be more reflective of the plant’s market uses and also cut down on the number of inaccurate “hot” tests.

The Office of Advocacy also calls on the USDA to allow labs to use their own pre-sampling measurement of uncertainty formula or for the USDA to develop one based on industry input. The formula would address potential variables in pre-sample collection, such as substances that are introduced in bagging and transporting samples. Currently, the USDA’s rule does not address this.

The letter’s final request takes issue with the USDA’s requirement that hemp testing be performed at labs registered with the DEA. There are few DEA-registered labs nationwide, which could create a backlog for results that “will force farmers to risk having their crop go hot while waiting for a result, or otherwise harvest their crop before receiving a determination, thereby expending financial resources on a potentially non-compliant crop.”

The letter says that requiring labs to register with the DEA “creates an unnecessary air of suspicion and another layer of regulatory hurdles to an already stifled industry.” 

The recommendations from the Office of Advocacy were submitted as part of a second public comment period for the USDA interim rule. The USDA initially stopped accepting comments in late January, but then reopened the comment period last month after receiving more than 4,600 submissions in the first round. The agency encouraged additional input on several topics.

Jesse Mondry, an attorney with Harris Bricken who has written extensively about the USDA’s interim hemp rule on his firm’s Canna Law Blog, expressed similar concerns as the Office of Advocacy. He wrote this month that the USDA’s current regime “is set up for farmers to fail testing.”

“This should not be the case as we develop this promising industry,” he wrote.

It’s unclear when the USDA will issue its final rule. An unpublished notice posted Thursday on the Federal Register suggests the agency plans to soon survey around 18,000 hemp producers nationwide to learn more about production trends. The University of Kentucky is partnering in the survey, according to the notice, which is set to formally publish on Friday.

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