Mere weeks after the passage of the 2018 Farm Bill legalized industrial hemp across the country, Michigan legislature passed a series of bills to create a framework for the industrial hemp industry within the state.

As we discussed in our post on The 2018 Farm Bill’s Impact on Industrial Hemp and CBD Products  all forms of cannabis, including industrial hemp, have effectively been illegal since 1937 under the Marihuana Tax Act and the 1970 Controlled Substances Act. In 2014, the federal government provided for limited cultivation of industrial hemp for research purposes in the 2014 Farm Bill, however all cultivation was limited to state departments of agriculture or educational institutions, and the hemp product was further limited by the Controlled Substances Act. Given that the Controlled Substances Act did not distinguish between industrial hemp and marijuana, these limitations prevented industrial hemp from expanding into a federally approved commercial industry.

The 2018 Farm Bill had three big wins for the hemp industry – the bill specifically defines industrial hemp, it distinguishes industrial hemp from marijuana, and it creates an exception for hemp such that it is no longer considered a Schedule I substance under the Controlled Substances Act.  Because the federal government has opened the door for this new commercial industry, the states are starting to take action.

At the end of its 2018 regular session, the Michigan legislature passed three bills – House Bill 6330, House Bill 6331, and House Bill 6380 – which amended various laws to allow for the entry of industrial hemp in the Michigan market.

House Bill 6330

House Bill 6330 amended the Industrial Hemp Research Act to allow for the regulated cultivation and processing of industrial hemp.  The bill, signed into law by outgoing Governor Rick Snyder on December 31, 2018, is now known as the Industrial Hemp Research and Development Act (IHRDA) and will become effective on January 15, 2019.

The IHRDA requires industrial hemp growers and processor-handlers to apply and be approved by the Michigan Department of Agriculture and Rural Development before they begin cultivation and processing functions, unless the processor is a college or university conducting research or if the processor holds a license under the Medical Marihuana Facilities Licensing Act (MMFLA).  The statute lists rather straightforward requirements for applicants, such as disclosure of names for all corporate members/officers/directors or individuals holding 10% or more equity in the business, the location of the grow (including GPS coordinates), maps and description of the grow locations, storage facilities, and processing buildings.  The statute also limits application fees to $100.00 for a grower registration fee and $1,350.00 for a processor-handler license application fee.

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The IHRDA does list a number of statutory bases for denial of an application, such as if the applicant is under the age of 18, the grow or process sites are not within state lines, the applicant hasn’t complied with state regulatory agencies, the applicant has unpaid fines, or if the applicant has had a grower or processor-handler license revoked within the last 5 years.  If the state does deny an application, Section 9 does allow for an appeal hearing to determine if the denial was proper.

The law does allow for random inspections for both growers and processor-handlers, as well as for mandatory destruction of hemp that exceeds the delta-9-THC content limit of 0.3% on a dry weight basis.  Every harvest must be tested by a state licensed testing facility no less than 15 days prior to the intended harvest.  If an individual allows a falsified sample of an industrial hemp crop to be taken by a testing facility, that individual can be charged with a felony which carries a penalty of imprisonment for 1-2 years and a fine of $5,000.

An additional item of note is that growers may not inter-plant their industrial hemp plants with a crop that is not industrial hemp on a single plot of land, unless expressly authorized by the regulatory agency.  If an individual violates the IHRDA, they can be fined between $100.00 to $500.00 for a first offense, plus the costs of any investigation and double the cost of any economic benefit associated with the violation.  Subsequent violations increase the statutory fines.

Interestingly, this bill creates a direct conflict with the Michigan Regulation and Taxation of Marihuana Act.  The MRTMA allows for the cultivation and processing of industrial hemp, and refers to the Department of Licensing and Regulatory Affairs to draft administrative rules and review processes.  The IHRDA similarly allows for the cultivation and processing of industrial hemp and refers the matter to the Department of Agriculture and Rural Development.  A glaring issue with the IHRDA, however, is the failure to address the MRTMA’s preemption provisions.  Without an additional amendment to either law, there is a conflict as to which one trumps the other.

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House Bills 6331 and 6380

House Bill 6331 amends the Public Health Code to revise definitions of “industrial hemp” and “marihuana” to reflect the new changes in the IHRDA.  House Bill 6380 likewise revises the definitions of “industrial hemp” in the Medical Marihuana Facilities Licensing Act, and further directs LARA to establish standards, procedures and requirements for the sale of industrial hemp from a provisioning center to a registered qualifying patient by March 1, 2019.  HB 6380 also allows MMFLA-licensed processors and safety compliance facilities to handle industrial hemp without adverse consequences from LARA or the Marihuana Licensing Board.

These three bills have made significant strides in creating a regulatory framework for this industry.  While we can certainly expect new administrative rules to be issued from the MDARD and LARA pursuant to their separate mandates, we should also look to the legislature to rectify this looming issue of preemption regarding whether the MRTMA or the IHRDA control over these issues. Regardless of how the conflict is resolved, industrial hemp is going to be a rapidly changing legal landscape for the foreseeable future.

Jennifer Domingue (6 Posts)

Jennifer Domingue is an associate attorney with the Cannabis Legal Group. Jennifer has significant experience working with cannabis businesses in a variety of matters, ranging from entity formation and licensing, to corporate governance, business relationship contracts and dispute resolution. Jennifer also advises cannabis business employers on maintaining regulatory compliance and works with employers to prevent and resolve labor and employment claims. In addition her cannabis business practice, Jennifer is also an experienced litigation attorney, successfully representing clients in the courtroom across the State of Michigan.


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