Hoosier Banker 35 season.10 The USDA has advised it will not review any state/tribal plans until its own rulemaking is completed.11 In the meantime until state plans are approved, Section 7606 of the Agricultural Act of 201412 (2014 Farm Bill) and state pilot hemp programs adopted under it will remain in force for one year after the USDA adopts its rules.13 In SEA 516, Indiana recently established the Hemp Advisory Committee which is to advise the state seed commissioner on the state’s approach and plan to regulate the cultivation and production of any hemp products to be submitted for USDA approval.14 This legislation contemplates that financial institutions will finance the manufacture and distribution by customers of hemp and hemp products and provides an important exemption for financial institutions from criminal charges linked to the inadvertent financing of “smokable hemp,” which is an illegal form of hemp.15 The objective was to help ensure banks would not be hindered from lending to legal hemp growers and producers and would not become an unwitting arm of law enforcement.16 Until state plans start receiving USDA approval, even though hemp and hemp products are no longer Schedule I controlled substances, the only sources for legal hemp and hemp products are: (1) state pilot programs under the 2014 Farm Bill, and (2) legally sourced and lawfully imported hemp and hemp products.17 While 41 states have adopted pilot programs,18 to date hemp has been grown on a limited scale, and under these programs cultivation is restricted to “research,” which generally does not include consumer sales. Some states – like neighboring Michigan – are not waiting for the USDA, but are expanding their 2014 Farm Bill state pilot programs in time for the 2019 growing season. Even so, at present there is a very limited supply of legal domestically grown hemp, which should increase after harvest of the expanded 2019 crops grown in compliance with the 2014 Farm Bill and the 2020 crops grown in compliance with the 2018 Farm Bill. As for legal imports of hemp and hemp products, while these can be imported provided that they are derived from portions of cannabis plants excepted from the CSA’s definition of marijuana (i.e., “mature stalks and seeds” or “oil and cake made from seed”),19 it has only been within the last year that the federal Drug Enforcement Agency finally acknowledged that its enforcement power has limits.20 With the 2018 Farm Bill expressly exempting hemp from the definition of marijuana, this should help provide certainty regarding the legality of imports of hemp and hemp products, including CBD. Thus, while CBD is everywhere, whether it is legal depends on its source, its THC levels and whether its cultivation, production and sale comply with existing and as-yet-to-be formulated federal and state regulations. Further, the 2018 Farm Bill expressly preserved the U.S. Food and Drug Administration’s authority to regulate products containing cannabis or cannabis-derived compounds under the Food, Drug and Cosmetics Act21 and under section 351 of the Public Health Service Act.22 Managing the web of complex issues and regulatory constraints that surround banking today has never been more challenging. So the deep expertise of our banking team has never been more vital. Make life easier. Call us today. New Albany 812.945.2311 Louisville 502.423.0311 monroeshine.com CERTIFIED PUBLIC ACCOUNTANTS Audit & Assurance BSA & ACH Compliance Outsourced Internal Audit SEC & SOX Compliance Loan Review IT Risk Management Consulting Services Merger & Acquisition 10 See www.ams.usda.gov/content/hemp-production-program (Feb.27, 2019). 11 Id.; USDA, Hemp Production Program Questions and Answers, www.ams.usda.gov/publications/content/ hemp-production-program-questions-and-answers (visited April 9, 2019). 12 USC § 5940 (2018). 13 Agriculture Improvement Act of 2018 (H.R. 2), Pub. L. No. 115-334, §7605, 132 Stat. 4490, 4829 (2018). 14 See Regulation of Hemp, Pub. L. No. 190-2019 (1st Reg. Sess. of the 121st Ind. Gen. Assembly, 2019). 15 See Regulation of Hemp, Pub. L. No. 190-2019 (1st Reg. Sess. of the 121st Ind. Gen. Assembly, 2019). 16 See IBA Insighter, “Indiana General Assembly Adjourns Sine Die for 2019” 1 (Apr. 29, 2019). 17 See Hemp Indus. Ass’n v. DEA, 357 F.3d 1012 (9th Cir. 2004) (enjoining enforcement of 21 CFR § 1308.11(d) (31) which independently lists THC as a Schedule I substance, with respect to products derived from plant material that is excluded from the definition of marijuana in the Controlled Substances Act); U.S. Dep’t. of Justice, “DEA Internal Directive Regarding the Presence of Cannabinoids in Products and Materials Made from the Cannabis Plant,” www.deadiversion.usdoj.gov/ schedules/marijuana/dea_internal_directive_cannabinoids_05222018.html. 18 National Conference of State Legislatures, State Industrial Hemp Statutes (Feb. 1, 2019), www.ncsl.org/ research/agriculture-and-rural-development/state-industrial-hemp-statutes.aspx (visited April 9, 2019). 19 See Hemp Indus. Ass’n v. DEA, 357 F.3d 1012 (9th Cir. 2004) (enjoining enforcement of 21 CFR § 1308.11(d) (31) which independently lists THC as a Schedule I substance, with respect to products derived from plant material that is excluded from the definition of marijuana in the Controlled Substances Act). 20 See U.S. Dep’t. of Justice, “DEA Internal Directive Regarding the Presence of Cannabinoids in Products and Materials Made from the Cannabis Plant,” www. deadiversion.usdoj.gov/schedules/marijuana/dea_internal_directive_cannabinoids_05222018.html. 21 21 U.S.C. §§301 et seq. (2018). 22 42 U.S.C. §262 (2017).counsel, regulatory compliance, American Bankers Association (Apr. 23, 2019). Continued on page 36.
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