As many know, hemp was a critical crop in Colonial times and some states, including Virginia, actually required farmers to grow it. Hemp was used particularly to make rope, thread, canvas and sailing cloth. Washington’s primary crop actually was hemp. Thomas Jefferson grew hemp as well.
The Mount Vernon farmers intend to use the hemp they grow to give fiber-making demonstrations at the site, which is owned by the Mount Vernon Ladies Association of the Union. They bought the site from Washington’s descendants in 1858 for $200,000 and now about a million visitors each year tour the facility. Many do not realize that Mount Vernon is not owned by the Federal government and is not a national park.
Hemp, while derived from the cannabis plant, contains no THC and has no psychoactive effects. In June, the Senate passed a farm bill that included language effectively legalizing industrial hemp. However, the House version of the bill is silent on hemp, and a conference to deal with the differences is being arranged. Senate Majority Leader Mitch McConnell (R-KY) is a strong supporter of legalizing hemp, which many believe will help sway some skeptical House Republicans to support those provisions.
The US Senate, by an overwhelming 86-11 vote, last week approved the sweeping Farm Bill containing language which fully legalizes industrial hemp. As we know, hemp, which is derived from cannabis plants, is used to make products from rope to clothing and does not contain THC, the psychoactive part of the plant. In colonial days hemp was so crucial that farmers, like George Washington, were legally required to grow it.
Most believe the House will follow suit. Hemp has not been legal on a federal level since federal criminalization of cannabis in the 1930s. Many believe that occurred in part because of fears of hemp competing with powerful timber interests and DuPont’s then new patent on nylon. After the 1930s bill was declared unconstitutional in 1968, the Nixon Administration helped orchestrate passing the Controlled Substances Act. That law, still in force, declared all parts of the cannabis plant as Schedule I drugs, as dangerous as heroin and LSD. A top Nixon aide later admitted, “Did we know we were lying about the drugs? Of course we did.” Constitutional challenges thus far have been unsuccessful.
Legalization of hemp could yield a variety of products that previously could only be produced with imported hemp. These could include food, building materials, paper products and many others. Currently, it it believed that China is the largest producer of hemp, since it is legal to do so in a number of Chinese provinces. They started farming it during the Vietnam War to make more breathable uniforms for their soldiers in the intense heat. This Senate vote is indeed a significant step towards relaxation of federal cannabis regulation.
The New York State Department of Financial Services (DFS) issued guidance, at Governor Cuomo’s urging, to New York state – chartered banks and credit unions to offer banking services to medical marijuana businesses licensed under the New York State medical marijuana program (Registered Organizations) and to industrial hemp businesses participating in the New York State industrial hemp research program (Research Partners).
The DFS guidance identifies several requirements for banks to consider in providing services to Registered Organizations (ROs), including the following:
customer due diligence in accordance with established principles and procedures;
transaction monitoring in accordance with established principles and procedures;
compliance with New York Compassionate Care Act;
compliance with applicable regulations and requirement of New York State Department of Health (NYSDOH);
Cole Memo guidance and priorities (including, among other things, preventing diversion of marijuana to minors and to other states, and the flow of revenue to criminal enterprises);
FinCEN guidance clarifying Bank Secrecy Act expectations (including, among other things, verifying the business is a licensed RO, reviewing the RO’s application for a license, obtaining information from the NYSDOH on the RO, understanding the ROS’s activities and customers, monitoring public information on the RO, monitoring for red flags based on assessment of revenue, movement of funds, location of ROs, among other indicia); and
Fling Suspicious Activity Reports (SARs), such as a Marijuana Limited SAR, Marijuana Priority SAR, or a SAR for Termination, depending on the RO’s compliance with NYS law and regulations and Cole Memo, and the bank’s need to maintain effective anti-money laundering compliance program.
Senate Majority Leader Mitch McConnell (R-KY) announced a plan on Monday to introduce federal legislation to remove industrial hemp as a Schedule I drug under the Controlled Substances Act (CSA). Citing hemp as important to Kentucky’s farming history, he voiced his most positive support to date for this action. McConnell remains opposed to other legalization of cannabis.
Hemp is used to make clothing, paper and other products, is not ingested and contains virtually no THC, which is the psychoactive part of the cannabis plant. In colonial days, hemp was grown throughout the US, and in fact was required to be grown in states like Virginia where it was needed to make rope for boats. George Washington and Thomas Jefferson both grew hemp on their farms. China is now reported to be the largest producer of hemp, having geared up in the 1970s to make more breathable uniforms for their soldiers in steamy Vietnam.
In the 1930s, timber and nylon scions like DuPont and William Randolph Hearst saw hemp as a potential competitor and reportedly worked with the federal government to make all cannabis byproducts illegal in the US. Nixon doubled down in 1970 with the CSA simply continuing the prior prohibition on everything coming from the plant.
While it’s not clear when a bill will actually be presented to Congress, the AP says McConnell said about hemp, “It’s now time to take the final step and make this a legal crop.” Many think the next move could be to legalize CBD (cannabidiol), which contains many of the medical benefits of cannabis with negligible amounts of THC.
As part of Governor Cuomo’s FY 2019 budget for New York, the Governor intends to not only continue the investment that the state has made into the hemp industry, but for New York to become a leader in the hemp industry.
In 2015, New York launched its Industrial Hemp Agricultural Research Pilot Program after Congress had passed the Agricultural Act of 2014 (aka 2014 U.S. Farm Bill), which permits universities and state agriculture departments to grow industrial hemp as part of their state’s agricultural pilot program. In 2017, New York expanded its pilot program to authorize farmers and businesses to grow and research hemp as a research partner in the state’s program. In addition, the Governor made up to $5 million available in grants for research and production, and another $5 million in grants to eligible businesses for capital costs related to processing industrial hemp.
Now the FY 2019 budget provides $650,000 for an industrial hemp processing facility in the greater Binghamton area, and another $2 million for a program to certify and breed seeds, so that New York can start to produce unique seeds. In addition, the state intends to import thousands of pounds of industrial hemp seed to alleviate some of the burdens faced by farmers.
Given that industrial hemp can be used in the manufacture of over 25,000 products, including foods and beverages, cosmetics and personal care products, nutritional supplements, fabrics and textiles, yarns, paper, construction and insulation materials, fuel and other products, businesses are increasingly capitalizing on the hemp market. With the New York State’s budget support for its industrial hemp program and the state’s population being estimated at 20 million, businesses may be enticed to consider New York in their hemp related business plans.
Although a member of the family of cannabis sativa that includes marijuana, hemp does not contain levels of THC that produce psychoactive effects, so it is regulated differently than marijuana. Whereas growing, processing, distributing and consuming marijuana are still federally prohibited under the Controlled Substances Act, industrial hemp has seen a revival around the U.S. because its growth, processing and distribution for research purposes is permitted under the 2014 Federal Farm Bill.
Importantly, the expansion of Pennsylvania’s industrial hemp program, and the industrial hemp programs in other states that traditionally raised large tobacco crops, may be helpful to local economies that have been impacted by declines in tobacco growth.
There are more than 25,000 products and/or uses derived from industrial hemp. Research under the PA program includes, among other things, planting methods, such as seed variety trials, fiber or seed yields, optimum fertility levels, pest management; harvesting techniques or product marketing options; or conservation, remediation or biofuel.