South Carolina’s burgeoning hemp industry has created a growing area of law practice that didn’t even exist until a couple of years ago, and the field is poised to expand now that the state has enacted a new law removing the previous cap on the number of farmers that can cultivate the plant.
Unlike its cousin marijuana, there’s no buzz to be had with hemp, which contains just .03 percent THC (which is to say, not enough to get you high). But until last year, it was nevertheless under tight federal government control.
“Hemp and marijuana are not the same thing,” said Rod Kight, an attorney in Asheville, North Carolina, who represents hemp farmers throughout South Carolina. “But the law is only now catching up with that fact.”
Also unlike marijuana, hemp can be used to make items such as fabric and even homes. The first home made out of “hempcrete” was built in Asheville in 2010.
The state has issued permits to farmers who want to grow hemp since 2017, but until now, it set a limit to 40 permits per year.
“It is a very hemp-friendly state with very progressive laws and long history of hemp cultivation,” Kight said. “South Carolina was easily one of the most progressive states. Its initial hemp bill was so liberal that many were concerned that it did not pass federal muster.”
But the new bill, signed by Gov. Henry McMaster on March 28, was modified so that it is now unquestionably compliant, Kight said. That’s created a lot of buzz.
“Interest in hemp continues to grow each day, and this expansion will help South Carolina become competitive throughout the entire country,” said Hugh Weathers, South Carolian’s Commissioner of Agriculture. “Our farmers are very passionate about what they do and we stand ready to assist in growing the state’s hemp industry.”
Hemp! I need somebody
In December, Congress passed the 2018 Farm Bill, which legalized hemp on the federal level, with the U.S. Department of Agriculture regulating sales and distribution. But Kight said that there are many unanswered questions, and rapidly evolving laws and regulations, regarding the industry on the federal level. The federal government hasn’t laid out all of the regulations, and while hemp is now legal under federal law, some states treat it like marijuana, raising unanswered issues of federalism and pre-emption.
“These were very important and transformational changes for the hemp industry,” said Tyler Russell, an attorney with Ward and Smith in Raleigh. “But the 2018 Farm Bill did not cure or resolve all legal uncertainties surrounding hemp. It also ushered in a new era of federal and state regulations.”
While the developments are a big step for hemp in general, statutory authorization is limited, and implementing rules and regulations has been slow, There are several remaining unresolved issues affecting the industry, such as the legality of some types of commercial hemp activities and of hemp-derived cannabidiol (CBD), which, like THC, has certain therapeutic properties.
“Those legal ambiguities have largely prevented industry participants from accessing traditional banking services, some insurance programs like crop insurance for farmers, and other commonplace business activities,” Russell said.
Not just anybody
Many hemp farmers are already growing other types of crops, and see an opportunity to expand or supplement their crops with hemp, said Mike Wells, an attorney with Coastal Law in Myrtle Beach. The plant has many uses, including livestock feed, biofuel, paper, textiles, building materials, and food products made from hemp seeds or oil.
“The biggest thing that makes hemp farming attractive right now is the production of CBD (cannabidiol) oil,” Wells said. “CBD oil contains no THC or low levels of THC and is legal is all 50 states. We have also been contacted by entrepreneurs who were not previously farmers, but who are interested in growing hemp, extracting CBD oil from the plants, and selling the CBD oil and other CBD products.”
Indeed, Kight said CBD products are driving the hemp market right now, Kight said. They are now ubiquitous at convenience stores and retailers such as CVS are selling therapeutic CBD lotions and creams.
“It is lawful,” Kight said. “However, the FDA has indicated that it cannot be marketed as a dietary supplement or used as a food ingredient and no medical claims can be made about it. This has created a host of issues, obstacles, and grey areas regarding the marketing of hemp-derived products.”
One thing is certain, Russell said: the hemp businesses isn’t a “get rich quick” industry, and it carries significant risk for farmers.
“It is important that we, as counselors and advisors, help our clients to understand the risks they are undertaking,” Russell said. “There are certainly profits to be made and financial incentives for farmers and growers to undertake those risks, but people need to enter the market with their eyes wide open. As attorneys, we cannot effectively counsel our clients if we ourselves do not have a strong understanding of the laws, regulations and rules impacting our clients, and the norms of the industry within which they are operating.”
Ward and Smith tells its hemp-cultivating clients to avoid investing more money into the crop than they can afford to lose. The firm also recommends that farmers contract with reputable processors and buyers before they plant so they have a source for the sale of their crop once they harvest it, Russell said.
And then there’s the matter of the police. “Law enforcement officials who do not understand the differences between hemp and marijuana may still present a challenge going forward – hemp farmers in South Carolina should be prepared to demonstrate that their crop is industrial hemp and not marijuana,” Wells said. “There have been reports nationwide of law enforcement seizing entire hemp shipments because they were unable to confirm that a truckload of hemp plants was, in fact, not the largest marijuana bust of their career.”
Follow Bill Cresenzo on Twitter @bcresenzosclw