November court ruling deems USPS seizure unlawful
Last November, in a significant win for the CBD industry, on appeal, a federal court governing the U.S. Postal Service ordered the USPS to return a package of Farm Bill-compliant CBD isolate that it had unlawfully seized in transit.
The package, sent from a Colorado Department of Agriculture pilot program registrant, was seized by the USPS because it “emitt[ed] an odor of a controlled substance.”
Prior to this final agency decision, producers and manufacturers of Farm Bill-compliant CBD and products containing CBD had not been able to rely upon the USPS as a trusted courier, notwithstanding the federal legality of their products. But Courtney Moran, a renowned hemp attorney and founder and principal of Earth Law, LLC, successfully prosecuted the appeal on behalf of the shipper and firmly established that Farm Bill-compliant hemp products are not controlled substances and are legally mailable.
By way of background, Section 7606 of the Agricultural Act of 2014 (the Farm Bill) created an exception to the Controlled Substances Act for “industrial hemp,” defined therein as Cannabis sativa L. that contains less than 0.3% delta-9 THC on a dry weight basis and grown in compliance with a state agricultural pilot program for research purposes. According to the National Conference of State Legislatures, to date, at least 41 states have passed legislation related to industrial hemp.
Further, in 2016 (and every year thereafter), Congress has approved various funding riders to the Consolidated Appropriations Act, protecting the shipping of industrial hemp. Specifically, these riders preclude the federal government from using any federal funds “in contravention” of the Farm Bill, or “to prohibit the transportation, processing, sale or use of industrial hemp that is grown or cultivated in accordance with the [Farm Bill], within or outside the State in which the industrial hemp is grown or cultivated.” The Farm Bill, coupled with the funding riders, should have created a safe path for sending compliant hemp and hemp products through the U.S. mail without interference from the federal government.
But the DEA has repeatedly misconstrued and misapplied these legislative mandates, causing confusion among state and federal agencies — including the USPS. For instance, in December 2016, the DEA published a “final rule,” the Establishment of a New Drug Code for Marijuana Extract, which, among other things, categorized CBD extract, regardless of its source, as a Schedule I drug under the Controlled Substances Act. The final rule purported to encompass Farm Bill-compliant CBD, and the USPS relied upon it in (unsuccessfully) arguing that its seizure was lawful. Subsequently, when the Hemp Industries Association challenged the final rule, the 9th Circuit Court clarified that the language of the 2014 Farm Bill contemplates a potential conflict between it and the Controlled Substances Act — and preempts the CSA.
Moran cautioned that November’s final agency decision applied only to the particular package at issue in that case, but there is now federal judicial precedent that binds the USPS. In this connection, she stated, there remains “a protocol that needs to be followed for the shipment of hemp and hemp products, but [the door is open] for lawful agricultural pilot program hemp and lawful agricultural pilot program hemp-derived shipments via USPS.”
Shippers must recognize, however, that postal workers cannot readily distinguish between a legal and illegal shipment. Accordingly, shippers should include within each shipment, proof of licensure from the applicable state agricultural program and the corresponding certificate of analysis, clearly demonstrating that the hemp products contained therein meets the federal definition of “industrial hemp.” Shippers should also include test results of extract products, reflecting that they contain less than 0.3% THC. Some states, including New York, would consider extract products that contain more than 0.3% THC to be controlled substances, notwithstanding that the dry plant material from which the extract was processed may fall within federal parameters. Total THC concentration may increase during processing, as some forms of THC, including THCA, will form delta-9 THC during decarboxylation.
The 2018 Hemp Farming Act may eventually resolve hemp distribution and mailing woes. According to Moran, who played a key role in drafting and negotiating its language with the offices of Senator Ron Wyden (D-Oregon) and Senate Majority Leader Mitch McConnell (R-Kentucky), the Hemp Farming Act would formally remove hemp from the Controlled Substances Act and legalize hemp on both a federal and state level. Under the Hemp Farming Act, states cannot refuse to enact a hemp program and prohibit its citizens from participating in the hemp industry, as they can under the Farm Bill. This would eliminate ambiguity as to whether hemp-derived CBD is a controlled substance and subject to seizure by the USPS.
Nonetheless, the final agency decision will remain relevant even if the Hemp Farming Act passes, as current confusion is unlikely to dissipate overnight. Upon enactment, the USDA will implement standards and mechanisms to approve new state or tribal programs, which could take years. States may continue to operate under prior Farm Bill authority in the meantime.
And federal agencies, including the USPS, will need to develop mechanisms to distinguish between legal hemp and illegal marijuana.
Lauren Rudick represents investors and startup organizations in all aspects of business and intellectual property law, specializing in cannabis, media and technology. Her law firm, Hiller, PC (www.hillerpc.com), is a white-shoe boutique firm with a track record for success and handling sophisticated legal matters that include business and corporate law.