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In this E-Letter we will explore the new and expanding area of industrial hemp. Along with the growth of medical and recreational marihuana products, there has been a rekindling of interest in new and traditional uses for hemp plants, in large part due to the popularity of CBD products. We will cover the different state laws that provide the structure and regulation of industrial hemp, how it is treated at the federal level, and how hemp is different from marihuana. Finally, we will consider how the hemp acts address local control and what local leaders should keep in mind regarding hemp products and developments.

WHAT IS HEMP?

Industrial hemp is a cannabis plant that does not contain the psychotropic compounds found in marihuana. Tetrahydrocannabinol—more commonly known by its initials THC—is the chemical compound responsible for the psychoactive effects of marihuana. Industrial hemp has 0.3% or less THC. Stated another way, that is 3 parts per 1,000 on a dry weight basis. Both marihuana and hemp have been traditionally defined as the plant Cannabis sativa L but in Michigan are simply and more broadly defined as plants of the genus Cannabis.

The difference is THC. Marihuana includes the seeds, plant, or part of the plant “of the genus Cannabis.” MCL 333.27953(e). Industrial Hemp is also a plant of the genus Cannabis, but “with a THC concentration of 0.3% or less on a dry-weight basis.” MCL 333.27953(c). Some other parts of the Cannabis plant are not considered marihuana, including the “mature stalks,” a “fiber produced” from those mature stalks, and certain uses of the seeds of the plant Cannabis. But industrial hemp is not marihuana, most importantly because of THC content. MCL 333.27953(f)(v).

HOW IS HEMP REGULATED?

Hemp has had a traditional following for its durable fibers used in clothing and rope. However, with the rise of legalized marihuana by several different states (including Michigan) there was also a renewed interest in hemp. There is the Industrial Hemp Research and Development Act, MCL 286.841 et seq., passed in 2014. Advocates of hemp then won a major victory when hemp was included in the 2018 federal Farm Bill and hemp was removed from the federal controlled substance definition of “marihuana.” 21 U.S. Code § 802(16)(B)(i). Cannabis with less than 0.3% THC was no longer illegal under federal law. Federal regulations also followed. See 7 CFR 990.1 et seq. Michigan also passed the Industrial Hemp Growers Act (Public Act 220 of 2020) which updated the statutory scheme consistent with the federal program. See MCL 333.29101 et seq.

Individuals could now register as growers to grow industrial hemp. MCL 333.29201. Among other things, an applicant for a grower permit must indicate the total acreage or square footage where the hemp will be grown, the address and GPS coordinates of each field, greenhouse, or building, and maps of the area. MCL 333.29201(2)(b), (c), (d). The state grants a registration document to the grower and they must comply with several duties under the Act, including reporting information to the USDA. Michigan law and federal regulations require that any hemp grower shall report the total acreage of hemp production. MCL 333.29301(1)(a); 7 CFR 990.23. Additionally, a grower must “post signage in a conspicuous location” wherever they are growing hemp and it must contain specific information. MCL 333.29305. Signage requirements include: the grower’s name, registration number, and must be constructed of a weather-resistant material. MCL 333.29305(1), (2).

There are also limitations in the state acts themselves. Industrial hemp may not be grown within a dwelling. MCL 333.29303(d). A grower may not sell or transport industrial hemp plants or seed. MCL 333.29303(f). A grower may not sell raw industrial hemp to anyone other than a processor-handler or a medical marihuana facilities processor. MCL 333.29303(h).

A “processor-handler” means a person licensed “to process, handle, broker, or market industrial hemp.” MCL 286.842(q). Growing of hemp and marketing or brokering hemp are separated. Processor-handler’s must similarly submit applications including the location and GPS coordinates where industrial hemp will be processed. MCL 286.847(1)(b). Like grower applications, they are exempt from FOIA. MCL 286.847(5).

The licensure and regulation of hemp growers is administered by the Michigan Department of Agriculture & Rural Development. However, handler-processors are now overseen differently. Those handler-processor licenses are overseen by the Cannabis Regulatory Agency (“CRA”). On February 11, 2022, the Governor issued Executive Order 2022-01 which, among other things, transferred the authority and responsibility to regulate industrial hemp processor-handlers to the CRA.

WHAT PRODUCTS ARE MADE WITH HEMP?

The legality of hemp is only half the battle. The other issues are economic. There are some traditional and well-known uses of hemp including clothing and rope. They can be coarse textiles (such as carpet or upholstery) or fine textiles (for cloth, etc). Oil extracted from the seeds may also be used. It can also be used as a grain or animal bedding.  Additional uses are being studied, including as a substitute for plastic in recreational items like frisbees and consumer goods such as water bottles. But in 2020, only six percent of hemp growers grew industrial hemp for fiber or seed. By far the most popular use for cultivated hemp is processing into cannabidiol (“CBD”) oil, representing 70% of Michigan hemp growers in 2020.

Although growers are regulated in the agriculture departments, they are not traditional agricultural commodities. Only three hemp-derived products are approved for human consumption: hulled hemp seed; hemp seed protein powder; and hemp seed oil. Notably, each approved use is only from hemp seed and not from the hemp plant.

CBD oil cannot be added to human or animal food. The United States Food and Drug Administration (“FDA”) retains regulatory authority over the production, distribution, and sale of hemp. For any hemp or CBD product to be legally utilized in food, it must be FDA approved. In fact, the FDA has not approved CBD for use in food, drink, dietary supplements, or animal feed. The FDA regularly issues warning letters to suppliers of products containing CBD advising them of their violations of federal law.

Hemp and CBD are also not approved for animal feed. Only a narrow range of hemp seeds have been approved for human consumption and hemp and CBD are not approved animal feed materials. MDARD specifically notes that “safe levels of hemp and hemp-derived products in animal feed have not yet been established, these products, including CBD, are not approved feed ingredients, and cannot lawfully be added to or incorporated into a commercial feed product.” See MDARD, Hemp in Animal and Pet Feed, August 26, 2020.

Rather, CBD can be more flexibly utilized as “medicine.” Trade associations and MDARD both recognize that CBD is not a food but rather medicine. The Michigan Farmers Market Association advises its members that most industrial hemp and CBD products may not be sold for retail. Topical treatments—an external use—could potentially be sold at a farmers’ market but not CBD “farm products” for consumption. This external use is often promoted as a treatment and this medical categorization is indirectly confirmed by MDARD as well. In their 2020 annual report, MDARD identifies CBD as “medical compounds” and that “medical compound” leads the commercial market.

Similar to the marihuana market, the hemp market is also facing headwinds. Nationwide in 2021 the value of hemp production was $824 million, according to the USDA National Hemp Report. But profitability is challenging. Looking at a self-report from the industry itself in Michigan, hemp continues to be a challenging endeavor. As part of its 2020 survey, MDARD collected responses on grower challenges. The number one challenge cited by growers of industrial hemp was “market challenges including instability, saturation, and lack of buyers.” Licensing fees as well as high costs with a “lack of profitability” took the next two spots. Seven percent of respondents cited the broad category of “supply chain challenges” which covers everything from infrastructure for drying hemp to “contractual failures leading to general distrust toward supply chain personnel.” One goal of the various endeavors in hemp is to build a supply chain for the various uses of the product. Therefore, research, development, growing, and processing is likely to continue.

HOW YOUR TOWNSHIP CAN REMAIN INVOLVED

Unfortunately, most of the regulation of industrial hemp is at the state level. There has been some success securing zoning regulation for processing operations; but at the time of writing, we are not aware of a statewide ruling upholding zoning against industrial hemp growers. Essentially, hemp growers take the position that they should be treated the same as any other legal crop and have the ability to grow hemp in an agriculture district outdoors or in a greenhouse.

The Industrial Hemp Research and Development Act has a specific preemption section. It provides that a “political subdivision of this state shall not adopt any rule, regulation, code, or ordinance to restrict or limit any requirements under this act relating to industrial hemp. This act supersedes and preempts any rule, regulation, code, or ordinance of any political subdivision of this state relating to industrial hemp.” MCL 268.859. This language is broad but has not been challenged in any reported cases as of yet. Still there is nothing in that act which regulates zoning and location.

The Industrial Hemp Growers Act has a different provision. For growers, the statute provides that a “political subdivision of this state shall not adopt a rule, regulation, code, or ordinance that restricts the requirements under this act.” MCL 333.29513. This language is similarly broad but also has not been tested in any reported cases. Interestingly, the language here states that local ordinances shall not “restrict[] the requirements under this act.” Id. Although the scop is unclear, this may be narrower than the language in the Research and Development Act. Local zoning may still be available even for growing industrial hemp as long as such a regulation does not “restrict” the Act.

The Township can keep an eye out on any growing or processing activity that does not conform to the minimum requirements of the Act and report any illicit behavior. Additionally, the Township may be able to enforce some zoning control. There has been some success throughout the state requiring special land use permits for processor-handler operations due to their inherent industrial nature.

Industrial hemp is a new and evolving area of recent cannabis developments with an expanding supply chain for traditional and new uses. Although there is much less local control granted to Townships in the state and federal acts surrounding industrial hemp, local governments remain relevant. If your Township is experiencing a growth in hemp cultivation, reach out to your township attorney for a discussion of what regulations may be possible and how local leaders can ensure proper compliance with the existing rules.

By Attorney Matthew Kuschel

This publication is intended for educational purposes only. This communication highlights specific areas of law and is not legal advice. The reader should consult an attorney to determine how the information applies to any specific situation.