Recently, some clients have asked that I advise them on the status of regulations on the manufacture, production and sale of Cannabidiol (CBD), which is a substance discovered in 1940 and derived from hemp. Some clinical research has been done on CBD, including studies related to anxiety and pain. CBD most often comes in the form of oil without the more controversial components of hemp.
This short note encapsulates for the reader the results of my review of current law on CBD.
Before 2018, CBD was a “Schedule 1” substance under the Controlled Substances Act of 1970 (CSA), which made it strictly illegal.
The Agricultural Improvement Act of 2018 (the “2018 Farm Bill”), which became law in December of 2018, removed hemp and hemp-derived components from the CSA. The bill defines hemp as “the plant Cannabis sativa L. and any part of that plant, including the seeds of it and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not over 0.3% on a dry weight basis.” Thus, all compounds derived from hemp, including CBD, are no longer generally considered illegal, although their use is regulated.
he 2018 Farm Bill gave the U.S. Department of Agriculture (USDA) authority to regulate CBD but allowed the U.S. Food and Drug Administration (FDA) to retain its authority to regulate products containing CBD under the federal Food, Drug and Cosmetic Act (FDCA).
The 2018 Farm Bill requires the USDA to encourage production of hemp. The USDA issued its final rule for hemp production on January 15, 2021, becoming effective on March 22, 2021. The rule allows states and Indian tribes to either submit to the USDA a plan for hemp regulation for approval or agree to submit to the USDA’s general requirements. The USDA has approved the plans of 23 states, 2 U.S. territories, and 41 tribes. According to the USDA final rule, all plans submitted to the USDA must include:
The USDA rule prohibits states from interfering with the interstate transportation of hemp grown under a USDA-approved production plan. But the rule does not govern the marketing, sale, and production of products containing CBD derived from hemp, which authority remains with the FDA.
Although the 2018 Farm Bill gave the USDA oversight of hemp production, it left intact the FDA’s authority over cosmetics, dietary supplements, food, and drugs containing CBD. This means that products containing CBD must comply with FDCA regulations.
Under the FDCA, cosmetics containing CBD may be legally marketed and sold if they comply with FDA regulations.
The FDCA defines cosmetics as “articles intended to be rubbed, poured, sprinkled, or sprayed on or introduced into, or otherwise applied to the human body or any part thereof for cleansing, beautifying, promoting attractiveness, or altering the appearance.” Under the FDCA, the main requirements for cosmetics containing CBC are that they not be “adulterated” or “misbranded.”
Under the FDCA, a cosmetic is adulterated if “it contains any poisonous or deleterious substance which may render it injurious to users”; and a cosmetic is misbranded “if its labeling is false or misleading”.
The FDA has issued several warning letters to companies manufacturing products with CBD that the FDA deems misbranded or adulterated. For example, the FDA has questioned the following health claims:
Unlike cosmetics, the FDA does not allow CBD to be added to food and dietary supplements. This is because, under the FDCA, a food or dietary supplement may not contain ingredients used in an FDA-approved drug product, and CBD has been so approved. In 2018, the FDA-approved CBD as the active ingredient in Epidiolex, a seizure medication for children.
Because of its authority over advertising, the Federal Trade Commission (FTC) monitors and regulates marketing of products containing CBD. Advertisements that a product can prevent, treat, or cure human disease are unlawful unless backed up with competent scientific evidence. According to FTC press releases, the agency has fined CBD manufacturers and marketers who have made “unsupported claims that their oils, balms, gummies, coffee, and other goods could treat serious diseases such as cancer and diabetes.”
Although the USDA regulates some aspects of hemp production and the FDA regulates cosmetics, food and dietary supplements containing CBD, there is no complete set of federal regulations for products containing CBD. Perhaps as a result, some states, including Utah, have begun to regulate the sale and marketing of CBD products, including rules for testing and labeling.
Under Utah labeling and testing requirements, a company must ensure that its CBD products comply with these requirements:
Although the FDA prohibits adding CBD to food products that become a part of interstate commerce, Utah has legalized the sale and marketing of some food products containing CBD.
Until this conflict is resolved, to avoid the risk of federal enforcement actions, companies manufacturing, producing or selling food products in Utah containing CBD should manufacture, produce, and sell only within Utah and not outside its borders. But always understand: the federal government may find an interstate commerce link – and therefore a basis to override Utah law – based upon a company’s use of the Internet, federal mail service, or product components it receives in interstate commerce, and therefore enforce federal law against a company despite conflicting Utah law.
CBD regulations on both the state and federal levels are evolving; it’s therefore difficult for a company producing, manufacturing or selling CBD to ensure that its products comply with all regulations.
Companies can lower the risk of state and federal prosecutions by taking these steps:
Until the FDA issues comprehensive regulations, companies producing, selling, or marketing products containing CBD must deal with a hodgepodge of state and federal regulations, which often conflict with each other. Companies can help avoid the pitfalls of these evolving regulations by carefully staying abreast of all new developments.
I hope this short summary helps you better understand the current employer landscape regarding contractors vs. employees.
–Robert A. Youngberg
