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New DEA rule on extracts, CBD causes commotion in cannabis industry

A little three-page document published this week in the U.S. Federal Register sent some fairly big shock waves through the cannabis industry.

The U.S. Drug Enforcement Administration filed a final rule notice to establish a Controlled Substances Code Number for “marihuana extract,” and subsequently maintaining marijuana, hemp and their derivatives as Schedule I substances. According to the notice:

“This code number will allow DEA and DEA-registered entities to track quantities of this material separately from quantities of marihuana. This, in turn, will aid in complying with relevant treaty provisions.”

The filing published Wednesday goes on to state that a new code number is needed because the United Nations Conventions on international drug control treats cannabis plant extracts differently than marijuana or tetrahydrocannabinols (THC). The rule is expected to take effect Jan. 13.

Following some initial reports Wednesday on the rule and potential effects, the speculation and confusion swelled among cannabis businesses and advocates about just what actions the government was taking on cannabinoids, cannabidiol (CBD) and hemp. Some posts included erroneous reports that a scheduling action took place.

The Cannabist spoke with the DEA in addition to compliance and industry experts about concerns for the budding legal cannabis and hemp industries.

In an email to The Cannabist on Thursday morning, DEA spokesman Russ Baer stated that the final rule notice — the result of a proposed rulemaking measure put into motion in 2011 — is primarily an administrative move and does not reflect a change in any control status:

“The gist of the issue is that DEA established a new drug code for marihuana extracts as a means to more accurately reflect the activities of scientific research and provide more consistent adherence to the requirements of the Single Convention. We have not changed any control status with this Federal Register Notice. Everything remains schedule I, so no other provisions of the law (registration, security requirements, research protocols, etc.) change. Companies will simple [sic] use a new code for extracts.”

In a follow-up phone interview, Baer said the code would allow the DEA’s internal accounting mechanisms to be more accurate to track elements such as scientific and medical research. Researchers use the codes to identify which substance is subject to the project.

“(The rule change) recognizes that there is a potential medical benefit to some of the cannabinoids,” he said.

Baer added that there was no broader conspiracy at play and no connection to the presidential transition taking place.

“It’s not intended to be speculative (and) doesn’t read into anything that we’re looking at in the future,” he said. “It’s just a final order on a rulemaking proposal that was initiated back in 2011.”

Although those who ship CBD oil would be in violation of federal law, Baer said the federal register note does not change the DEA’s enforcement priorities, which Baer spoke to in August when discussing the DEA’s decision to maintain marijuana as a Schedule I substance:

The nation is in the throes of an opioid epidemic, and it is there — not cracking down on offenses such as a mother transporting CBD oil for her daughter across state lines to Nebraska — where the DEA needs to allocate its resources, Baer said, adding that the DEA is “focusing on heroin, fentanyl, meth, cocaine.”

“People should not get hung up on this idea that the DEA somehow is still a big, bad wolf,” he said. “We are not. We are engaged with the medical community. We have new strategies.

“We realize that we can’t arrest ourselves out of this problem.”

Attorney Bob Hoban, who heads the cannabis business law firm Hoban Law Group, cautioned that the “marihuana extract” notice could trigger consequences for the cannabis industry.

“The sky is not falling; however, this is a very concerning move by the DEA,” Hoban said. “What it purports to do is give the DEA control of all cannabinoids as a controlled substance.”

Even if this new code may be rooted in an administrative action to better track research and imports and exports, Hoban said the danger lies in when other federal and state agencies use the drug codes as defining factors of what’s legal and illegal.

Hoban noted specifically U.S. Customs and Border Protection, which could seize products that appear to be illegal substances, he said.

“At a minimum, it interferes with commerce,” he said. “At a maximum, it exposes people potentially to criminal action.”

Hoban said his firm is reviewing the rule, the 2011 proposed rulemaking measure and applicable laws and regulations to determine whether to file procedural or legal challenges prior to Jan. 13.

“It worries me because the definition of any marijuana-derived products, such as cannabinoids, are not unlawful substances, per se,” he said. “It seems like they’re trying to extend their authority over all cannabinoids.”

The Hemp Industries Association, an international trade group, also is reviewing the matter, said Eric Steenstra, the organization’s executive director.

“Where we are concerned is that the DEA is attempting to create new administrative codes that do have real impacts on companies working in this space,” Steenstra said. “Other agencies might interpret the new code to mean that somehow products produced from hemp (are illegal).”

Steenstra said he could not speak to why the DEA may have taken this approach, but noted the timing of the original proposal may provide some additional context. In 2011, that was prior to the passage of the Farm Bill, which includes a section addressing industrial hemp, as well as the passage of numerous statewide marijuana measures, notably adult-use measures in Colorado and elsewhere.

“The idea that this was somehow targeting CBD is incorrect,” he said. “The reality is that extracts, dabs, shatter, wax, are a far bigger thing than hemp CBD in 2011 and still bigger today.”

As of Nov. 8, a majority of the United States has laws in place legalizing some forms of medical marijuana, including more than a dozen with low-THC or CBD-only laws for specific medical purposes.

Those laws and other state-initiated marijuana measures still conflict with federal law, Vice noted in its report about the DEA Thursday:

Despite the apparent benefits of CBD and the fact that it doesn’t get users high, the DEA will continue to list it as a Schedule I controlled substance, a category reserved for drugs with “a high potential for abuse” and “no currently accepted medical use.” The rule change announced on Wednesday won’t affect this classification.

“The whole policy around this plant is just so illogical,” said Robert J. Capecchi, director of federal policies at the Marijuana Policy Project, an organization that campaigns for legalization. “Even when you look at the criteria you’re supposed to be looking at under the law, they’re just not following it. It’s just a stupid policy for lack of a better term.”

Congress could still decide to reschedule CBD and other extracts, a move that would eliminate some of the red tape faced by researchers who wish to study the compounds. Legislation was introduced last year in the Senate to ease restrictions on CBD research, but it stalled despite receiving bipartisan support.

This story first appeared on TheCannabist.co.