Politics
USDA Advises Hemp Industry That China Is Tightening CBD Rules, But Says It Could ‘Benefit’ Businesses
The U.S. Department of Agriculture (USDA) is advising stakeholders about a policy change in China that will impose tighter regulations on hemp-derived CBD, though it says the new rules are expected to benefit the industry.
Last week, USDA published a translation of an advisory from the the People’s Republic of China (PRC) that says cannabidiol, as well as six other non-cannabis compounds, will be classified as a precursor chemicals starting September 1.
That designation generally means there will be enhanced regulations affecting licensing, reporting requirements and exports. It’s not clear what prompted the change, but it’s possible that CBD’s classification as a precursor chemical is responsive to the increased manufacturing of intoxicating cannabinoids such as delta-8 THC that are synthesized from CBD.
China currently allows for the cultivation of industrial hemp and international marketing of CBD, but it’s domestically prohibited for use or sale. While the new classification will add certain regulatory restrictions, USDA said “industry analysts still see trade and commercial benefit from the measure.”
That’s because being designated as a precursor chemical means “CBD now has a clear harmonized tariff system” that could simplify international exports for companies that meet the necessary standards.
Also, as it currently stands, hemp and CBD can only be produced in two regions of China: Yunnan and Heilongjiang. With the policy change, “CBD can be legally produced and marketed nationwide” by licensed businesses, USDA said.
CBD will be “managed in accordance with the second category of precursor chemicals in the Schedule of the Regulations, and its production, operation, purchase, transportation, import and export activities comply with the relevant regulations on non-pharmaceutical precursor chemicals,” PRC said in its initial notice, according to a USDA translation.
Two years after hemp and its derivatives were federally legalized in the U.S. under the 2018 Farm Bill, China agreed to a trade deal that required it to buy significantly more of the non-intoxicating cannabis crop from U.S. sources. That agreement expired in 2022, however.
USDA, for its part, has been working to bolster the hemp industry, including by appointing a number of industry stakeholders to a federal trade advisory committee that’s meant to support efforts to promote U.S.-grown cannabis around the world.
Earlier this month, for example, USDA and the U.S. Trade Representative (USTR) announced that Dylan Summers, vice president of government affairs for the CBD company Lazarus Naturals, was being appointed to the Agricultural Technical Advisory Committee (ATAC) for Trade in Tobacco, Cotton, Peanuts and Hemp.
In recognition of hemp’s growing role in the agriculture sector, USDA and USTR formally renamed the ATAC to include last year to include the name of the crop. Previously, the first hemp appointees served on what was then called the ATAC for Trade in Tobacco, Cotton and Peanuts.
The latest appointment came about a month after USDA awarded $745,000 to the National Industrial Hemp Council (NIHC) to support efforts to promote the industry internationally in emerging markets across the world. In 2020, USDA awarded NIHC $200,000 as part of a different grant program.
The new grant round is being distributed during a precarious time for the hemp industry. While a USDA report found that the market started to rebound in 2023 after suffering significant losses the prior year, it’s now facing uncertainties as congressional lawmakers on the House side advance bills that would effectively ban most consumable hemp-based cannabinoid products—a major sector of the cannabis economy.
The Congressional Research Service (CRS) said in a report in June that hemp provisions included in one spending bill that’s moved through committee could also “create confusion” for the industry due to a lack of clarity around the type of allowable products.
Meanwhile, the latest Farm Bill that advanced through the House Agriculture Committee in May also contains provisions that would reduce regulatory barriers for certain hemp farmers and scale-back a ban on industry participation by people with prior drug felony convictions.
Specifically, it would make it so USDA, states and tribal entities could choose to eliminate a policy that prevents people with felony drug convictions in the past 10 years from being licensed to produce industrial hemp.
Lawmakers and stakeholders have also been eyeing a number of other proposals that could be incorporated into the Farm Bill—and which could come up as proposed amendments as the proposal moves through the legislative process—including measures to free up hemp businesses to legally market products like CBD as dietary supplements or in the food supply.
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Recent USDA data showed a slight rebound in the hemp economy in 2023—the result of a survey that the department mailed to thousands of farmers across the U.S. in January. The first version of the department’s hemp report was released in early 2022, setting a “benchmark” to compare to as the industry matures.
Bipartisan lawmakers and industry stakeholders have sharply criticized FDA for declining to enact regulations for hemp-derived CBD, which they say is largely responsible for the economic stagnation.
To that end, FDA Commissioner Robert Califf testified before the House Oversight and Accountability Committee in April, where he faced questions about the agency’s position that it needed additional congressional authorization to regulate the non-intoxicating cannabinoid.
USDA is also reportedly revoking hemp licenses for farmers who are simultaneously growing marijuana under state-approved programs, underscoring yet another policy conflict stemming from the ongoing federal prohibition of some forms of the cannabis plant.
For the time being, the hemp industry continues to face unique regulatory hurdles that stakeholders blame for the crop’s value plummeting in the short years since its legalization. Despite the economic conditions, however, a recent report found that the hemp market in 2022 was larger than all state marijuana markets, and it roughly equaled sales for craft beer nationally.
Meanwhile, internally at USDA, food safety workers are being encouraged to exercise caution and avoid cannabis products, including federally legal CBD, as the agency observes an “uptick” in positive THC tests amid “confusion” as more states enact legalization.
FDA Proposal To Allow Hemp Seed Meal As Food For Egg-Laying Hens Is Approved
Photo courtesy of Brendan Cleak.
