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NC CBD Companies Take Notice: NC Dept. of Agriculture Issues CBD Advisory

The Agriculture Act of 2018 legalized hemp and hemp-derived cannabidiol, or "CBD," on the Federal level by removing both substances from the definition of "marijuana" under the Controlled Substances Act of 1972.

But, that legislation left the regulation of hemp and hemp-derived CBD to state and federal agencies like the United States Department of Agriculture, the Federal Food and Drug Administration ("FDA"), and, if they so choose, applicable State-level agencies.  Thus far, there has been little to no guidance from the North Carolina and Federal regulators as to how they would ultimately regulate hemp and hemp-derived CBD.  On the day President Trump signed the Agriculture Act of 2018 into law, the FDA issued a nonbinding press release, which you can read here, which left the industry and its consumers with more questions than it answered.  Other states, like New York, have recently followed the FDA's signal and taken a hardline stance by prohibiting some production and/or sales of products containing hemp-derived CBD.  Now, it appears that North Carolina may follow suit.   

Last week, the North Carolina Department of Agriculture and Consumer Services, Food and Drug Protection Division (the "Division") disclosed its intent to issue CBD Advisory Warnings, which you can read here.  The Division takes the position that under the Federal Food, Drug and Cosmetics Act, which has been adopted and implemented in North Carolina, (i) it is illegal to sell any human food or animal feed in North Carolina that contains CBD because CBD is the active ingredient in an FDA-approved therapy, (ii) CBD cannot be considered a dietary supplement because of its inclusion in an FDA-approved drug, and (iii) any product that contains CBD and makes health-related claims must be approved by the FDA prior to sale.  Right or wrong, the Division will begin issuing warning letters to companies and retailers that it believes violated these provisions.  For now, the Division has signaled that it will take an "educate first" approach with the industry.  But, companies that do not comply with the Division's notices and demands may subject themselves to additional future action, including product embargoes and seizures.

The recent legalization of hemp and hemp-derived CBD really should be referred to as their "decriminalization".  While hemp and hemp-derived CBD are no longer Schedule I controlled substances under the Controlled Substances Act of 1972, the decriminalization of those substances has subjected them to extensive regulation by Federal and state authorities.  The legal landscape is incredibly dynamic right now, with major developments occurring at a rapid pace.  Until the industry matures and final regulations are developed and implemented, it is imperative that hemp and CBD industry participants stay abreast of these developments. 

© 2020 Ward and Smith, P.A.. All Rights Reserved.National Law Review, Volume IX, Number 46


About this Author

Tyler Russell, Bankruptcy Attorney, Creditors Rights, Raleigh, North Carolina, Ward and Smith Law Firm
Business and Creditor's Rights Attorney

Tyler's creditors' rights practice encompasses bankruptcy, collections, and lender liability issues.  He concentrates his practice on the representation of creditors in bankruptcy cases and state court litigation, including workouts, reorganizations, Uniform Commercial Code security agreement enforcement, collections cases, and other contested matters.  Tyler has represented national and community lenders, trade creditors, equipment manufacturers, agricultural companies, community associations, contractors, and leasing companies in various reorganization and litigation proceedings. His...

Allen N. Trask III, Litigation Attorney, Ward Smith, Wilmington, North Carolina, business, civil, commercial litigation
Litigation Attorney

Allen focuses his practice on assisting those who own, manage, and invest in real estate and common interest communities.  He regularly works with real estate developers and the residential and commercial community associations that they create to handle all manner of issues, including the preparation, amendment, interpretation, and enforcement of restrictive covenants and governing corporate documents, declarant control transition and disputes, community management, insurance claims and disputes, and collections.  He also frequently represents Real Estate Investment Trusts (REITs) and other commercial landlords in the management of commercial investment properties, including lease negotiation and enforcement, summary ejectment, and collections. 

Allen has been a member of the firm's Litigation Practice Section since he joined the firm.  He has experience in all aspects of civil litigation, including depositions, hearings, mediations, arbitrations, trials, and appeals.  His litigation experience allows him to offer unique insight into risk and liability assessment, insurance coverage, and cost-benefit analyses, and he enjoys working with clients to proactively address these issues to reduce risk and cost.  Allen also is a member of the firm's Land Use and Zoning Practice Group, where he helps clients pursue and challenge special use permits, ordinance changes, and condemnation actions.

As an eastern North Carolina native with family farming roots, Allen has a passion for representing those who work the land.  He is the leader of the firm's Agribusiness Practice Group, where he coordinates the firm's resources to address the specialized issues facing clients in the agribusiness community, such as industrial hemp operations, farmland leases, corporate organization, restructuring, dissolution, and succession planning, equipment financing and leasing, workouts and debt restructuring, environmental regulatory compliance and permitting, and negotiations and interactions with local, state, and federal government.