Canadian Law Group

HEMP IN THE USA AND CANADA

by: Manjit S. Gill and Veronique Malka

Hemp is growing in popularity on a global scale.  There are 47 countries so far that grow hemp for commerce or research.  The EU has production in most member countries, and lists France and the Netherlands as centers of production.  The global hemp industry is showing no signs of slowing down.  It is expected to reach $5.7 billion by 2020.  What is the status of hemp in North America?  Read on if you are interested in Cannabis to know more about how the USA and Canada are looking at Cannabis, and particularly at hemp, at the present time.

What is hemp?

Hemp is derived from the cannabis plant.  It is also called “Industrial hemp.”  It grows very fast and over 10,000 years ago, it was one of the first plants to be spun into fibers.  Today, we are seeing hemp used in commercial and industrial products including rope, food, clothing biofuel and animal feed.  Many car makers are now using hemp in manufacturing cars, including GM and Mitsubishi, no name just a few.  Many believe that cars will eventually run on hemp, instead of gas. Hemp has a biodegradable quality which makes it environmentally conscious.

Although cannabis and hemp come from the same plant (cannabis “sativa”), their content is different.  Hemp has a much lower level of THC (the “psychedelic effect of the marijiuana drug that makes a person “high”) and higher levels of CBD (the cannabidiols), than cannabis.  The two are cultivated differently, which also affects the concentrations of THC and CBD.  States and countries regulate the concentrations of THC in hemp products, which determines the product’s legality.

Hemp in the USA

The U.S. imports tens of millions worth of hemp products each year, mostly driven by growth in the demand for hemp seed and hemp oil for use as ingredients in foods such as granola.  Some U.S. homes are also using hemp based construction building materials.

A note of caution for our readers: The U.S. seems to differentiate hemp from cannabis.  Cannabis in the USA is still illegal at the federal level, and is not likely to become legal in the near future, leaving the states to do as they wish as long as they avoid interstate commerce.

In the U.S., with hemp, the story is more welcoming at the federal level, with some limitations still.  With the 2018 Farm Bill, industrial hemp cultivation is now legal as a matter of federal law, and there are many farms in the U.S. now focused on industrial hemp production.  Interestingly, one area where this cultivation is slowly taking root (no pun intended) is with Native Americans.

However, according to Manjit Gill, a Partner at CKR Law LLP’s Miami office who handles many Cannabis clients in the USA, the area that remains murky relating to hemp in the U.S. relates to cannabidiol (CBD) products.  While there is a proliferation of CBD products in the U.S., at the federal level, the FDA is still not endorsing the use of CBD in diet supplements and food products, unless you can show that what is being introduced into the food product is derived from hemp seeds or seed oil.  As a result, as with marijuana, CBD food products are technically not legal at the federal level, but may be still legal on a state by state basis where the relevant states have enacted legislation legalizing CBD products.

Hemp in Canada

Thanks to generous and easy hemp regulations under the Cannabis Act, Canada is already dominating the hemp world production market. Only second in line after China, Canada grows over 140,000 acres of hemp per year.  This is 10 times the amount of hemp cultivated in the United States (note that the U.S. remains the largest importer of hemp, with most of the seed arriving from Canada!).

Canadians, according to StatsCan, spend about $5.7 billion on cannabis alone and the hemp industry in Canada is expected to reach $1 Billion by 2023.  According to Veronique Malka, Chair of the Canadian Law Group of CKR Law LLP, now is the time for foreign investors to make their money grow in Canada.  Her Group is seeing a surge of inquiries from US investors and manufacturers who are tired of waiting for the US to adopt more uniform and lenient regulations.  Malka states: “your money can grow substantially in Canada in two years, without any concerns that you are doing something illegal since Canada fully supports the industry.” About 2000 licenses for hemp cultivation are granted each year, with a fast processing time of about 60 business days (or three months).  Malka adds” For U.S. investors, this is a win-win situation.  Not only are you going to benefit from your money converting at a favorable rate into Canadian dollars, but you will definitely develop business in Canada if you staff your company there wisely.  Bring your top folks in from the US to set up the operations – just make sure they don’t carry cannabis across the border!”

While the U.S. will take 2 years or more to change its federal stance on Cannabis legality, investment in hemp in Canada makes a lot of sense.  Plus, growers literally next door to the USA, to keep their fingers on the pulse of what is happening south of the border.  As soon as things change in the USA, Canadian companies will be able to expand back and reach a North American triad of growth.

Clearly, from a legalization perspective vis-a-vis cannabis, Canada, as a country, definitely has a decided edge in this space.

For more information regarding the new policy dismantling the DCO list, please contact our global mobility expert: vmalka@ckrlaw.com