Tag: USDA

Will Hemp Save the World, Before the Government Kills It?

There is a great line in the wonderful film Charlie Wilson’s War, where Charlie Wilson (played remarkably by the inimitable Tom Hanks) describes the successful, if relatively covert, involvement of the United States government in the Soviet-Afghan War: “These things happened. They were glorious and they changed the world… and then we f***d up the endgame.”

With the next Farm Bill somewhere on the horizon, I believe we are approaching a similar moment for the future of hemp. I believe the future of hemp is glorious and that it can change the world. What will we do to the endgame?

This is an analysis about the current state of hemp and whether that industry will revolutionize the world before the government relegates it back to the ash heap of history. It just so happens to dovetail with my personal experience representing clients in connection with the hemp business.

In the Beginning…

Back in the “stone age” (circa 2017) when I decided I wanted to be a cannabis lawyer, I began with a focus on hemp. [As a brief aside, telling people in Alabama you practice cannabis law in 2017 must have been what Noah felt like when he was telling people it was about to start raining.]

The 2014 Farm Bill, which for the first time legalized “industrial hemp” as distinct from marijuana under the Controlled Substances Act and allowed state agricultural departments and universities to license the production of hemp, cracked the door for a nascent and limited hemp market, and it was a remarkable time to advise new hemp operators and investors about how to maximize this opportunity within the contours of the law.

At the same time, I was regularly receiving calls from existing clients, colleagues within the firm, and strangers about how their non-cannabis companies should conduct themselves when approached by hemp companies who wanted to do business with them. The latter category included banks, insurance companies, real estate companies, and myriad companies who had questions about how their employees’ use of hemp interplayed with the companies’ existing drug testing policies. Most of the time the companies were reluctant to have anything to do with hemp, but the conversations were interesting, and it was clear that most companies realized the landscape was changing. It was the Wild West, and I was having a ball.

Rocket Fuel

Enter the 2018 Farm Bill and the explosion of the hemp industry. The 2018 Farm Bill dropped the word “industrial” and defined “hemp” as:

the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.

In addition to removing the limitations from the 2014 Farm Bill licensing, the 2018 Farm Bill also moved oversight authority from the Department of Justice and DEA to the USDA and FDA.

The 2018 Farm Bill was a tectonic shift, and we recognized the new regime’s potential almost immediately, predicting the following:

  • Increased “smart” money and research. Because hemp has been a Schedule I substance along with marijuana for decades, many sophisticated sources of funding have abstained from financing the industry. This placed hemp at a competitive disadvantage to other commodities and prevented hemp from reaching its full potential. Now that hemp can be manufactured and sold without substantial legal risks, look for the money to flow toward this underserved sector. Publicly traded companies, private equity firms, venture capitalists and other investment groups will all take significant stakes in both the manufacturing and selling of hemp and hemp-derived products. In addition to traditional commercial development efforts, much of this cash is likely to be spent to hire top researchers to develop proprietary strands of hemp to meet a range of product applications and to take steps to protect the resulting intellectual property.
  • Explosion of hemp and hemp-derived products. Fueled in large part by this injection of financing from sophisticated investors, there is likely to be an explosion in the ways that hemp is used. Hemp already has hundreds — if not thousands — of known uses, and that number should grow substantially once the industry is exposed to the market forces that come with smart money and increased research. The biggest winner may be the hemp-derived CBD business. Hemp-derived CBD is a compound believed to have significant therapeutic benefits without an appreciable psychoactive component. The Washington Post has reported that “dozens of studies have found evidence that [CBD] can treat epilepsy as well as a range of other illnesses, including anxiety, schizophrenia, heart disease, and cancer.” One industry analysis predicts that the hemp-CBD market alone could hit $22 billion by 2022. The health and wellness sector should see particular hemp-related activity and growth in the coming years.
  • Increased ancillary services provided to hemp-related businesses. Because hemp has been included within the definition of marijuana under federal law for decades, most banks, law firms and other service providers have avoided providing services to hemp businesses to avoid the risk of charges of money laundering or conspiring to violate state and federal drug laws. The absence of such service providers has fostered a great deal of uncertainty in an area where certainty and clarity have been sorely needed. With hemp’s new legal status, look for professional service providers to enter the market in 2019 and beyond. Of course, entities looking to provide services to hemp-related businesses should take adequate precautions to ensure those businesses are only producing federally legal hemp.
  • Consolidation and integration. An interesting phenomenon in “legal” marijuana states has been the rapid consolidation and integration of marijuana growers, processors and dispensaries. Some states have mandated vertical integration (e.g., the growers are the sellers) through regulation. And a number of large cannabis companies have acquired grow operations or multi-unit dispensaries rather than establish a cannabis presence in a state from scratch. The hemp industry is likely to follow a similar path, both through government regulation and because larger companies are likely to seek to obtain sufficient quantities of hemp through consolidation and vertical integration. Accordingly, attorneys and investors should anticipate significant merger and acquisition activity in the coming years.
  • Federal regulations and state regimes. The 2018 Farm Bill does not create an entirely unregulated playing field for hemp. Over the coming months, the U.S. Department of Agriculture and Food and Drug Administration will issue regulations implementing the 2018 Farm Bill. State governments will also unveil plans governing the testing, labeling and marketing of hemp-related products, as well as the licensing and monitoring of hemp-related businesses.

I’m proud to say that we were pretty much on the money with these projections, and countless studies and data confirm that hemp can be a viable product with countless form factors that help shape the global economy.

That is when I realized that I might be able to make a career as a cannabis lawyer.

The Good with the Bad

Of course, the development of the hemp industry has not been without controversy – in fact it may be the controversy that has spurred much of the development.

I would be lying to you if I told you that every hemp or hemp-derived product was designed with the best of intentions or contained appropriate mechanisms to ensure consumer safety. There are certainly hemp-derived products on the market that have not been subjected to sufficient product development and testing, and that are being marketed in ways that rightfully should concern policymakers and the public. Novel, psychoactive cannabinoids that fall within the bounds of the terms, if perhaps not the spirit, of the Farm Bill fill the shelves of stores around the country with little to no mechanisms for enforcement. That should change, and Americans should have confidence that the products made available to them are safe and effective.

In response to this proliferation, a number of states have enacted rules and regulations restricting the production and sale of certain hemp-derived cannabinoids. A number of those rules – for example, age and purity restrictions for psychoactive cannabinoids – seem well-intentioned, and we expect to see more of those unless and until the federal government takes further action.

On occasion, however, it appears that the motivations of policymakers may be less pure. It is no secret amongst those in the cannabis industry that marijuana licensees in states that have legalized marijuana are no fans of the unregulated hemp-derived psychoactive industry. After all, marijuana companies are subject to astronomical taxes and endure regulatory costs that make turning a profit far more difficult than if they were able to offer a product that offered a somewhat similar “high” without the institutional overhead and headwinds. Florida may be the clearest and most recent example. With adult-use marijuana widely expected to become law in Florida soon, the state legislature recently passed a law largely prohibiting delta-8 and delta-10.

On the other hand, it would be wrong, even lazy, to suggest that the development of hemp-based products has been without substantial benefits to society as a whole. Entrepreneurs are developing hemp-based substitutes for any number of the most common products used around the globe, meaning that the addressable market for hemp is everyone on earth and beyond.

A younger version of me once wrote, in comparing the addressable market for marijuana to that of hemp:

Hemp, on the other hand, has the potential to dwarf marijuana in the global market. Unlike its sister plant, hemp has the capacity to replace products we use every day without us even realizing it. For example, hemp can provide a substitute for concrete, plastic, fuel, automotive parts, clothes, etc. These are products nearly all consumers need but they neither realize nor care what the products are made of, as long as they work. In that way, while the market for marijuana is limited to consumers looking to purchase marijuana, the market for hemp includes anyone who purchases products that can be manufactured by hemp. In part for these reasons, experts predict four to five times growth in the industrial hemp market in the next five years.

I stand by those words. I am convinced that hemp can change the world.

But I am equally convinced that local, state, and federal governments can, without the appropriate consideration for hemp’s benefits, relegate the plant back to its prohibition era status and deny the world its many benefits. The policy choices made by state governments, and perhaps most importantly by the federal government during the next Farm Bill, could fundamentally alter the future of hemp. Will it be a soon-forgotten shooting star that dazzled the world for a decade and then burned out, or will we look back at the past decade as the renaissance of one of civilization’s oldest and most versatile plants?

Conclusion

I’ll end where I began because Philip Seymour Hoffman’s work is revered by the Budding Trends community (and anyone with taste), and because the film’s ominous conclusion is a message for anyone who wants to see the hemp industry thrive in the years ahead.

As Hanks’ character celebrates the Afghan defeat of the Soviets, the hardened CIA analyst played by Hoffman offers this parable:

On his sixteenth birthday the boy gets a horse as a present. All of the people in the village say, “Oh, how wonderful!”

The Zen master says, “We’ll see.”

One day, the boy is riding and gets thrown off the horse and hurts his leg. He’s no longer able to walk, so all of the villagers say, “How terrible!”

The Zen master says, “We’ll see.”

Some time passes and the village goes to war. All of the other young men get sent off to fight, but this boy can’t fight because his leg is messed up. All of the villagers say, “How wonderful!”

The Zen master says, “We’ll see.”

The message behind this story is pretty clear. We’re prone to jump to conclusions about whether something is “good” or “bad.” We are especially quick to label something as “bad.” The reality is that things can be either good or bad, both good and bad, or neither. When it comes to whether Congress and the states will recognize hemp’s great potential, I guess we’ll see.

© 2024 Bradley Arant Boult Cummings LLP
For more on Hemp, visit the NLR Biotech, Food, Drug section.

USDA Releases Reports on Economic Impact Analysis of the U.S. Biobased Products Industry and on Hemp Research and Innovation

On March 8, 2024, the U.S. Department of Agriculture honored the second annual National Biobased Products Day, “a celebration to raise public awareness of biobased products, their benefits and their contributions to the U.S. economy and rural communities.” USDA states that as part of its activities to honor National Biobased Products Day, it released two reports:

Economic Impact Analysis of the U.S. Biobased Products Industry

USDA states that its commissioned report “An Economic Impact Analysis of the U.S. Biobased Products Industry: 2023 Update,” shows that, based on data from 2021, the biobased products industry has grown nationwide despite the impacts of the global COVID-19 pandemic. According to USDA, key report findings include:

  • Biobased products, a segment of the bioeconomy, contributed $489 billion to the U.S. economy in 2021, up from $464 billion in 2020. This is an increase of $25 billion — a 5.1 percent increase;
  • The biobased products sector, and the jobs it supports, are shown to impact every state in the nation, not just the states where agriculture is the main industry; and
  • The use of biobased products reduces the consumption of petroleum equivalents. In 2017, oil displacement was estimated to be as much as 9.4 million barrels of oil equivalents. In 2021, the displacement grew to 10.7 million barrels of oil equivalents.

USDA notes that the findings span seven major sectors representing the bioeconomy: Agriculture and Forestry; Biobased Chemicals; Biobased Plastic Bottles and Packaging; Biorefining; Enzymes; Forest Products; and Textiles. The 2023 Update is the sixth volume in a series of reports tracking the impact of the biobased product industry on the U.S. economy.

Hemp Research and Innovation

USDA also released its “Hemp Research Needs Roadmap,” which reflects stakeholder input in identifying the hemp industry’s greatest research needs: breeding and genetics, best practices for production, biomanufacturing for end uses, and transparency and consistency. According to USDA, these priority research areas “cut across the entire hemp supply chain and are vital to bolstering hemp industry research.” USDA notes that growing demand for biobased products, like those from hemp, “creates potential for added-value use in food, feed, fiber and other industrial products that can improve the livelihoods of U.S. producers and offer consumers alternative biobased products.”

USDA also announced a $10 million National Institute of Food and Agriculture investment to Oregon State University’s Global Hemp Innovation Center. USDA states that the Center will work with 13 Native American Tribes to spur economic development in the western United States by developing manufacturing capabilities for materials and products made from hemp.

©2024 Bergeson & Campbell, P.C.
For more news on Hemp Research and Innovation, visit the NLR Biotech, Food, Drug section.

USDA Requesting Comments on New AFIDA Regulations that Could Impact Renewable Energy Developers

On December 18, 2023, the Farm Service Agency of the United States Department of Agriculture published Notice in the Federal Register that it is considering changes to its FSA-153 Form required to report foreign interests in agricultural land pursuant to the Agricultural Foreign Investment Disclosure Act (“AFIDA”), 7 U.S.C.A.§ 3501 et seq.

Interested stakeholders are invited to provide comments regarding the proposed changes no later than February 16, 2024. The Federal Register Notice is available in its entirety via the following link: https://www.federalregister.gov/documents/2023/12/18/2023-27683/request-for-information-on-agricultural-foreign-investment-disclosure-act-afida-fsa-153-form.

Many renewable developers are subject to AFIDA and regularly report long-term wind and solar leasehold interests to the USDA. The changes proposed by the USDA may directly impact the data required to be reported by renewable developers. In additional to comments requested on other AFIDA reporting matters, the USDA requests public input on the following:

(1) Are long-term leasehold filings—particularly those in the wind turbine and solar panel industries—“different enough” from land ownership purchase or sale filings that a separate version of the FSA–153 form should be created? Should a different “logic path” of questions be developed for long-term leasehold filings?

(2) Many foreign wind energy companies have long-term leaseholds on U.S. agricultural land farmed by U.S. producers that trigger the AFIDA reporting requirement. Currently, the entire acreage of the parcel is captured; this is because the number of wind turbines that will be established on the land (if any) is often an unknown at the time of AFIDA reporting. In addition, the existence of the leasehold generally precludes other energy company involvement on the acreage. Does this approach overstate foreign energy company activity on U.S. agricultural land? If so, how should the acreage associated with these leaseholds be captured?

(3) How should solar panels or photovoltaics—which are situated above the agricultural land—be treated for AFIDA reporting given that AFIDA uses an acreage basis for reporting?

(4) Some foreign owners are providing a very low estimate of the value of the lease (as the flat payment is low) on the FSA–153 form while others are providing the estimated value of the entire parcel. How should “interest in the value of the agricultural land” be defined for leases?

(5) In addition to the legal description of each leasehold parcel already required to be reported on Form FSA-153, is it an undue burden on foreign owners or their representatives to require one or more of the following: (a) the longitude and latitude for each parcel; (b) the property tax ID number assigned by the county; and (c) the FSA tract number and the FSA farm number?

As many renewable developers are aware, AFIDA imposes reporting requirements with respect to the acquisition or disposition of interests in agricultural property by a foreign-owned entity or an entity in which a “significant interest or substantial control” is held by a non-U.S. parent.

Sales and acquisitions in particular may be highly scrutinized by the USDA to ensure that a disposition is filed by the selling entity and an acquisition form is filed by the acquiring entity. If, for example, an entity sells a portfolio of wind or solar leases, that entity should file FSA-153 dispositions, and the purchaser should file FSA-153 acquisitions for the same property. In addition to acquisitions and dispositions, reporting of an amended FSA–153 is triggered when the land use changes, the tiers of ownership change, or the name of the foreign person changes.

Although AFIDA’s requirements have been in existence for many years, the USDA’s recent imposition of significant fines and penalties (up to 25% of the FMV of the property) to developers who fail to file (or are late to file) FSA-153 reports has engendered a new interest in AFIDA and made it more crucial to consider these reporting requirements in any diligence analysis.

Significant interest or substantial control is defined by Federal regulations as an ownership interest of ten percent or more. “Foreign owners” also includes long-term leaseholders in the wind and solar industries.

AFIDA generally defines “agricultural land” as ten acres or more of land that has been used for agricultural purposes (e.g. farming, cropland, ranching, grazing, timber production) within the last five years. These definitions apply even if the land has been planned and plotted or re-zoned for nonagricultural purposes.

Agricultural land is categorized as cropland, forestland, pastureland, other agriculture, and non-agricultural land (homesteads, farm roads).

7 C.F.R. §781.2(c) defines “any interest in real property” as all interest acquired, transferred or held in agricultural lands, except:
(1) Security interests;
(2) Leasehold interests of less than ten (10) years;
(3) Contingent future interests;
(4) Noncontingent future interests which do not become possessory upon the termination of the present possessory estate;
(5) Surface or subsurface easements and rights of way used for a purpose unrelated to agricultural production, and;
(6) An interest solely in mineral rights.

© Polsinelli PC, Polsinelli LLP in California
For more news on Agricultural Land and Renewable Energy Developers, visit the NLR Environmental, Energy & Resources section.

USDA Finalizes the Strengthening Organic Enforcement Rule

  • USDA’s Agricultural Marketing Service (AMS) administers the National Organic Program (NOP) as authorized by the Organic Foods Production Act of 1990 (OFPA).  The USDA organic regulations, which were published on December 21, 2000, and became effective on October 21, 2002, govern the production, handling, labeling, and sale of organically produced agricultural products.  On August 5, 2020, in response to mandates in the Agriculture Improvement Act of 2018, as well as pressure from the industry and recommendations from the National Organic Standards Board (NOSB), USDA published a proposed rule called Strengthening Organic Enforcement (SOE) that is aimed at preventing loss of organic integrity—through unintentional mishandling of organic products and intentional fraud meant to deceive—and strengthening trust in the USDA organic label.
  • On January 19, 2023, USDA published the SOE final rule.  The final rule includes clarifications and additional examples in response to comments received on the SOE proposed rule.  Key updates include:
    • Requiring certification of more businesses, like brokers and traders, at critical links in organic supply chains;
    • Requiring NOP Import Certificates for all organic imports;
    • Requiring organic identification on nonretail containers;
    • Increasing authority for more rigorous on-site inspections of certified operations;
    • Requiring uniform qualification and training standards for organic inspectors and certifying agent personnel;
    • Requiring standardized certificates of organic operation;
    • Requiring additional and more frequent reporting of data on certified operations;
    • Creating authority for more robust recordkeeping, traceability practices, and fraud prevention procedures; and
    • Specifying certification requirements for producer groups.
  • The compliance date for the SOE final rule is March 19, 2024, or 12 months after the effective date of March 19, 2023.

Article By Food and Drug Law Practice Group at Keller and Heckman

For more biotech, food, and drug legal news, click here to visit the National Law Review.

© 2023 Keller and Heckman LLP

Supply Chain Shortages in the Meat and Poultry Industries

With Thanksgiving fast approaching, you have probably heard that there is a turkey shortage1 – brought about by a combination of rising costs for feed and fuel, continued labor shortages, and – if that were not enough –a virulent strain of avian flu decimating turkey flocks across the U.S.

Although industries across the board have felt the effects of supply chain disruptions brought on by the COVID-19 pandemic, the meat and poultry industry has been particularly hard-hit. So much so that the Biden Administration, in concert with the United States Department of Agriculture (USDA), has moved forward with regulatory actions aimed at easing the supply bottleneck. Whether they will have the intended effect remains to be seen.

In July 2021, President Biden signed an Executive Order on Promoting Competition in the American Economy (the Executive Order).2 The Executive Order directs 72 different actions across the federal government, including several rulemaking directives to the USDA aimed at increasing competition within the meat and poultry industry. Among other things, the Executive Order directs the USDA to issue new rules defining when meat can bear “Product of USA” labels, to address perceived loopholes in the current rules, and to issue new rules under the Packers and Stockyards Act. Following the Executive Order, the USDA has made progress on these new rules, and recently announced new initiatives to ramp up antitrust enforcement in the meat industry.

(For more on this Executive Order and its implications across industries, see a prior article from our Foley colleagues, President Biden’s Executive Order on Competition Could Mean Broad Changes Across a Range of Industries.)

Modernizing the Packers and Stockyards Act

The Packers and Stockyards Act (PSA), enacted in 1921, is a federal law designed to combat labor abuses by meatpackers and processors. Specifically, the PSA makes it illegal for livestock and poultry producers to engage in any unfair, unjustly discriminatory, or deceptive practice,3 or to give any undue or unreasonable preference or advantage to any person or locality.4 Congress explicitly intended the protections in the PSA to be broader than those found in other federal statutes, such as the Sherman Antitrust Act.5 However, the USDA believes the force of the PSA has been reduced by a combination of regulatory narrowing, budget and administrative cuts, and under-enforcement in previous decades. For that reason, the USDA announced three rulemaking actions designed to address livestock and poultry markets as they exist today so the PSA fulfills Congress’s goal to protect livestock producers and poultry growers.

The first proposed rule, released in draft form on June 7, 2022,6 is intended to promote transparency in poultry production contracting by revising the list of disclosures and information live poultry dealers must furnish to poultry growers and sellers with whom the dealers contract. The proposed rule establishes additional disclosure requirements in connection with the use of poultry grower ranking systems by live poultry dealers to determine settlement payments for poultry growers.

The second proposed rule, released in draft form on October 3, 2022,7 identifies retaliatory practices taken by regulated entities – which the PSA defines as swine contractors, live poultry dealers, or packers – that interfere with lawful communications, assertions of rights, and participation in associations (among other protected activities), as “unjust discrimination.” The proposed rule also identifies unlawfully deceptive practices with respect to contract formation, performance, termination, and refusal. Specifically, USDA proposes to:

  • Prohibit, as “undue prejudices,” disadvantages and other adverse actions against “market vulnerable” individuals who are deemed to be at heightened risk of adversely differential treatment in relevant markets;

  • Prohibit, as “unjust discrimination,” retaliatory and adverse actions that interfere with lawful communications, assertions of rights, associational participation, and other protected activities;

  • Prohibit, as deceptive practices, regulated entities employing pretexts, false or misleading statements, or omissions of material facts, in contract formation, performance, termination, and refusal; and

  • Require recordkeeping to support USDA monitoring, evaluation, and enforcement of compliance with aspects of the rule.

The USDA is presently seeking comments on this proposed rule, with the rulemaking docket open for comment until December 2, 2022. Following the comment period, the third potential rule, which has not yet been released, will focus on certain unfair practices and undue preferences. In addition, the third rule will explain whether and when a showing of harm to competition is—or is not—required under sections 202(a) and (b) of the PSA.

Increased Focus on Antitrust Enforcement

A recurring theme underlying the USDA’s recent rulemaking efforts is a perception that existing federal laws aimed at protecting farmers, ranchers, and other agricultural producers have been under-enforced. Earlier in 2022, the USDA and the U.S. Department of Justice (DOJ) jointly expressed a shared commitment to enforcing “federal competition laws that protect farmers, ranchers, and other agricultural producers and growers from unfair and anticompetitive practices.”8 One notable component of this agency cooperation is a new USDA website, www.farmerfairness.gov, which allows anyone to report complaints of potential violations of antitrust laws and the PSA. In addition, the website incorporates existing PSA confidentiality and whistleblower protections against retaliation for those who report criminal antitrust concerns.

In September 2022, the USDA also announced the availability of $15 million in funding to encourage state Attorneys General (AGs) to partner with the USDA on competition issues in the food and agricultural space. The USDA expects to engage state AGs through a combination of renewable cooperation agreements and memoranda of understanding aimed at improving state AGs’ ability to conduct on-the-ground investigations of competition issues. The USDA says it will work directly with state AG offices to solicit applications for funding.

These recent agency efforts come on the heels of multiple civil lawsuits alleging price-fixing and other anticompetitive practices by producers across the beef, pork, and poultry industries.

Conclusion: Will the Turkey Shortage Affect Your Thanksgiving?

It is too early to say whether the USDA’s recent efforts to address competition in the meat and poultry industry will result in lower prices – in part because the effects of the COVID-19 pandemic (e.g., labor shortages, shipping disruptions, and higher prices for inputs like fuel and animal feed) still linger. However, as national and global supply chains begin to return to pre-pandemic operations, consumers can hope for a less expensive turkey on the dinner table by next Thanksgiving.

For more Biotech, Food & Drug Law news, click here to visit the National Law Review

© 2022 Foley & Lardner LLP

FOOTNOTES

1 https://www.nytimes.com/2022/10/21/dining/thanksgiving-turkeys-cost-infl…

2 Executive Order 14036, Promoting Competition in America’s Economy, 86 Fed Reg. 36987, July 9, 2021.

3 7 U.S.C. § 192(a).

4 7 U.S.C. § 192(b).

5 See, e.g., Wilson & Co. v. Benson, 286 F.2d 891, 895 (7th Cir. 1961).

6 Docket No. AMS-FTPP-21-0044.

7 Docket No. AMS-FTPP-21-0045.

8 https://www.usda.gov/media/press-releases/2022/01/03/agriculture-department-and-justice-department-issue-shared

Federal Agencies Announce Investments and Resources to Advance National Biotechnology and Biomanufacturing Initiative

As reported in our September 13, 2022, blog item, on September 12, 2022, President Joseph Biden signed an Executive Order (EO) creating a National Biotechnology and Biomanufacturing Initiative “that will ensure we can make in the United States all that we invent in the United States.” The White House hosted a Summit on Biotechnology and Biomanufacturing on September 14, 2022. According to the White House fact sheet on the summit, federal departments and agencies, with funding of more than $2 billion, will take the following actions:

  • Leverage biotechnology for strengthened supply chains: The Department of Health and Human Services (DHHS) will invest $40 million to expand the role of biomanufacturing for active pharmaceutical ingredients (API), antibiotics, and the key starting materials needed to produce essential medications and respond to pandemics. The Department of Defense (DOD) is launching the Tri-Service Biotechnology for a Resilient Supply Chain program with a more than $270 million investment over five years to turn research into products more quickly and to support the advanced development of biobased materials for defense supply chains, such as fuels, fire-resistant composites, polymers and resins, and protective materials. Through the Sustainable Aviation Fuel Grand Challenge, the Department of Energy (DOE) will work with the Department of Transportation and the U.S. Department of Agriculture (USDA) to leverage the estimated one billion tons of sustainable biomass and waste resources in the United States to provide domestic supply chains for fuels, chemicals, and materials.
  • Expand domestic biomanufacturing: DOD will invest $1 billion in bioindustrial domestic manufacturing infrastructure over five years to catalyze the establishment of the domestic bioindustrial manufacturing base that is accessible to U.S. innovators. According to the fact sheet, this support will provide incentives for private- and public-sector partners to expand manufacturing capacity for products important to both commercial and defense supply chains, such as critical chemicals.
  • Foster innovation across the United States: The National Science Foundation (NSF) recently announced a competition to fund Regional Innovation Engines that will support key areas of national interest and economic promise, including biotechnology and biomanufacturing topics such as manufacturing life-saving medicines, reducing waste, and mitigating climate change. In May 2022, USDA announced $32 million for wood innovation and community wood grants, leveraging an additional $93 million in partner funds to develop new wood products and enable effective use of U.S. forest resources. DOE also plans to announce new awards of approximately $178 million to advance innovative research efforts in biotechnology, bioproducts, and biomaterials. In addition, the U.S. Economic Development Administration’s $1 billion Build Back Better Regional Challenge will invest more than $200 million to strengthen America’s bioeconomy by advancing regional biotechnology and biomanufacturing programs.
  • Bring bioproducts to market: DOE will provide up to $100 million for research and development (R&D) for conversion of biomass to fuels and chemicals, including R&D for improved production and recycling of biobased plastics. DOE will also double efforts, adding an additional $60 million, to de-risk the scale-up of biotechnology and biomanufacturing that will lead to commercialization of biorefineries that produce renewable chemicals and fuels that significantly reduce greenhouse gas emissions from transportation, industry, and agriculture. The new $10 million Bioproduct Pilot Program will support scale-up activities and studies on the benefits of biobased products. Manufacturing USA institutes BioFabUSA and BioMADE (launched by DOD) and the National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL) (launched by the Department of Commerce (DOC)) will expand their industry partnerships to enable commercialization across regenerative medicine, industrial biomanufacturing, and biopharmaceuticals.
  • Train the next generation of biotechnologists: The National Institutes of Health (NIH) is expanding the Innovation Corps (I-Corps™), a biotech entrepreneurship bootcamp. NIIMBL will continue to offer a summer immersion program, the NIIMBL eXperience, in partnership with the National Society for Black Engineers, which connects underrepresented students with biopharmaceutical companies, and support pathways to careers in biotechnology. In March 2022, USDA announced $68 million through the Agriculture and Food Research Initiative to train the next generation of research and education professionals.
  • Drive regulatory innovation to increase access to products of biotechnology: The Food and Drug Administration (FDA) is spearheading efforts to support advanced manufacturing through regulatory science, technical guidance, and increased engagement with industry seeking to leverage these emerging technologies. For agricultural biotechnologies, USDA is building new regulatory processes to promote safe innovation in agriculture and alternative foods, allowing USDA to review more diverse products.
  • Advance measurements and standards for the bioeconomy: DOC plans to invest an additional $14 million next year at the National Institute of Standards and Technology for biotechnology research programs to develop measurement technologies, standards, and data for the U.S. bioeconomy.
  • Reduce risk through investing in biosecurity innovations: DOE’s National Nuclear Security Administration plans to initiate a new $20 million bioassurance program that will advance U.S. capabilities to anticipate, assess, detect, and mitigate biotechnology and biomanufacturing risks, and will integrate biosecurity into biotechnology development.
  • Facilitate data sharing to advance the bioeconomy: Through the Cancer Moonshot, NIH is expanding the Cancer Research Data Ecosystem, a national data infrastructure that encourages data sharing to support cancer care for individual patients and enables discovery of new treatments. USDA is working with NIH to ensure that data on persistent poverty can be integrated with cancer surveillance. NSF recently announced a competition for a new $20 million biosciences data center to increase our understanding of living systems at small scales, which will produce new biotechnology designs to make products in agriculture, medicine and health, and materials.

A recording of the White House summit is available online.

Article By Lynn L. Bergeson and Carla N. Hutton of Bergeson & Campbell, P.C.

For more environmental, energy, and resources legal news, click here to visit the National Law Review.

©2022 Bergeson & Campbell, P.C.

USDA Focused on Accurate “Made in the USA” Beef Labeling

  • In response to industry concerns for mislabeled beef products, U.S. Agriculture Secretary Tom Vilack recently said that the “Product of the USA” label on meat products should undergo a full-scale review. Vilack maintains that he is “committed to ensuring that the ‘Product of USA’ label reflects what a plain understanding of those terms means to U.S. consumers.” In March, we reported that the Tenth Circuit dismissed lawsuits based on meat producer’s use of allegedly deceptive and misleading “Product of the USA”  labels on their beef products that did not originate from cattle born and raised in the United States.
  • The issue of country-of-origin beef labeling (“COOL”) continues to be a source of debate. Earlier this week, the FTC finalized a rule that is intended to tighten the use of the Made in the USA standard. The FTC said that this update would benefit small businesses who lack the resources to defend their products from foreign imitators. However, the FTC rule does not require USDA action. In response, the beef industry is demanding Congress to act swiftly.
  • R-CALF, a group of USA-based cattle ranchers, has been pushing hard for reforms on COOL. On September 22, R-CALF released a poll that shows staggering support for mandatory COOL legislation by the American public. R-CALF reports that 86 percent of American voters support the American Beef Labeling Act that reinstates mandatory country of origin labeling for beef, and 90 percent of voters are concerned that foreign importers of beef can legally put a “Product of USA” sticker on a package containing beef that was born, raised, and harvested outside the United States.
  • Currently, Congress is working through prospective beef labeling legislation that would require USDA oversight of COOL. The American Beef Labeling Act (S.2716) is a bipartisan bill that was introduced in the Senate in 2021; however, the bill has languished without action in the U.S. Senate Agriculture Committee. In March 2022, a bipartisan companion bill was introduced in the U.S. House (H.R.7291), which has also seen little to no progress in the House Agriculture Committee. Keller and Heckman will continue to monitor these legislative developments and USDA action.

For more Food and Drug Law news, click here to visit the National Law Review.

© 2022 Keller and Heckman LLP

USDA To Declare Salmonella An Adulterant in Some Raw Poultry

  • On August 1, the USDA’s FSIS announced that it will declare Salmonella an adulterant in breaded and stuffed raw chicken products. Breaded and stuffed raw chicken products will be considered adulterated when they exceed 1 colony forming unit (CFU) of Salmonella per gram. Products that exceed the limit would be subject to regulatory action. FSIS believes the limit of 1 CFU/gram will significantly reduce the risk of illness from consuming such products.
  • Breaded and stuffed raw chicken products have been associated with up to 14 food safety outbreaks and approximately 200 illnesses since 1998. The products at issue are those found in the freezer section and that appear to be cooked, but are only heat-treated to set the batter or breading; the products contain raw poultry. FSIS has found that continual efforts to improve product labeling have not reduced consumer illnesses.
  • FSIS is expected to publish a notice in the Federal Register in the fall and will be seeking public comments on whether a different standard for adulteration (i.e., zero tolerance or one based on specific serotypes) would be more appropriate, an implementation plan, and a verification testing program.
  • This announcement is part of FSIS’ effort to reduce Salmonella illnesses associated with poultry. In October 2021, USDA announced that it was reevaluating its Salmonella control strategy. USDA plans to present a proposed framework for a new comprehensive strategy to reduce Salmonella illnesses attributable to poultry in October and convene a public meeting to discuss in November.

Article By The Food and Drug Law Practice Group at Keller and Heckman LLP

For more biotech, food, and drug legal news, click here to visit the National Law Review.

© 2022 Keller and Heckman LLP

Intellectual Property Consolidation in the Agriculture Industry

Ever since agencies around the world such as the USPTO, USDA, and Union for the Protection of New Varieties of Plants (UPOV) have started recognizing and enforcing intellectual property rights relating to plants, there has been a slow yet massive consolidation in global seed markets.  This article discusses a brief history of how intellectual property rights and lax antitrust enforcement in the seed industry created one of the largest industry consolidations and how the current Administration seems to be taking steps in the right direction.

Intellectual Property in the Agriculture Industry

In 1930, the United States began granting plant patents and the USPTO issued the first plant patent in 1931 for a rose.  The UPOV is an international organization that was founded in 1961 to acknowledge and make available exclusive property rights for breeders of new plant varieties in all member states to the UPOV Convention. The U.S. Plant Variety Protection Act (PVPA) was enacted by Congress in 1970 to encourage the development of new varieties and to make them available to the public.  The Plant Variety Protection Act established in the Department of Agriculture an office to be known as the Plant Variety Protection Office.  These regulations are all very important for the protection and continued innovation of certain varieties of crops and plants.  However, when genetically modified seeds were introduced in 1996, seed companies began to take advantage of these protections and began to invest heavily in amassing as many seed-related IP rights as they could.  As these companies have merged and acquired smaller businesses, they remove competition from the industry, harming farmers, families, and consumers.

There are many ways that companies protect intellectual property in the agricultural industry.  For example, companies file for utility patents to protect a wide variety of plant-related inventions, such as breeding methods, plant-based chemicals, plant parts, and plant products. Plant patents are unique to the United States and provide protection to any distinct and new variety of plant that has been asexually reproduced, other than a tuber-propagated plant or a plant found in an uncultivated state.  Plant Variety Protection certificates, which are similar to plant patents, provide certain exclusive rights to breeders of any new, distinct, uniform, and stable sexually or asexually reproduced or tuber-propagated plant varieties.  Other rights, known as Breeders’ Rights, exist in other countries outside the United States and are very similar to the Plant Variety Protection regulations.  These protections generally last for 20 years from the date of filing and, according to the World Intellectual Property Organization, the patent owner has the right to decide who may – or may not – use the patented invention for the period in which the invention is protected.

The Key Players in the Agriculture Industry

Monsanto was a multinational agricultural biotechnology corporation founded in 1901 and based in the United States.  In 1970, Monsanto scientist John Franz discovered that glyphosate was an herbicide and quickly patented it as such.  In 1974, Monsanto brought the patented glyphosate herbicide to the market using the tradename “Roundup.”  In 1996, Monsanto created the first genetically engineered (GE), glyphosate-resistant crop, causing Roundup-resistant soybeans to be planted commercially throughout the United States.  By 1998, glyphosate-resistant corn was available on the market, and Monsanto became the largest supplier of these new GE, “Roundup-Ready” seeds.  This was such a breakthrough in the agriculture industry that in 2003, Roundup-Ready seeds accounted for about 90% of the genetically modified seeds planted around the globe.

As with many industries, the agriculture industry has those companies that are at the top and those that are not.  The agriculture industry’s “Big Six” companies—Monsanto, DuPont, Syngenta, Dow, Bayer, and BASF—turned into the “Big Four”—ChemChina, Corteva, Bayer, and BASF— after a series of mergers and acquisitions that took place in the last decade with very little oversight from some of the antitrust authorities in the United States and around the world.  As a result of these mergers, the “Big Four” companies now control around 60% of the proprietary seed in the world market.

The Consolidation of the Seed Industry

Dr. Phil Howard from Michigan State University discussed the tremendous consolidation of the commercial seed industry in one of his first publications, 2009’s Visualizing Consolidation in the Global Seed Industry: 1996-2008.  Dr. Howard describes how the hybrid-seed corn industry of 1930, the enforcement of patent-like protections, and especially the commercialization of fully patent-protected transgenic, genetically engineered seeds in the mid-late 1990s triggered a wave of consolidation in the agricultural industry.  To make matters worse, when these companies consolidated and amassed massive intellectual property portfolios, it was not uncommon for seed rights to be bundled with other inputs to protect profits in other, agrochemical divisions.  For example, as Dr. Howard details in Visualizing Consolidation, in order to use Monsanto’s herbicide-tolerant transgenic seed, farmers are required to also use Monsanto’s proprietary glyphosate herbicide, rather than a generic herbicide.  Essentially, if you were buying Roundup-Ready seed, you were buying Roundup herbicide, and if you were using Roundup herbicide, it was probably a good idea to buy Roundup-Ready seed.  This type of competitive business practice is one that eventually creates a multitude of problems for smaller, independent businesses, breeders, and farmers.

Antitrust and Anti-Competition in America

Antitrust laws are not a new concept in American society.  Antitrust laws are statutes and regulations that are designed to promote the overall competition in the market by promoting free, open, and competitive markets.  Congress passed the first antitrust law in 1890 when it wrote the Sherman Act, which made it illegal for companies to enter into agreements to compete with one another, resulting in price fixing and monopoly power.  Several years later, in 1914, Congress passed the Clayton Act and Federal Trade Commission Act to protect American consumers by giving the Federal Trade Commission (FTC) and the Department of Justice (DOJ) the authority to oversee and review mergers and acquisitions that are likely to stifle competition.  Under the Hart-Scott-Rodino Act, the FTC and DOJ review most of the proposed transactions that affect commerce in the United States and either agency can take legal action to block deals that it believes would “substantially lessen competition.”

While these laws are all beneficial in theory, their implementation in the agricultural industry has been lacking to say the least.  According to a study in 2018, Bayer alone is estimated to control 35% of corn seed, 28% of soybean seed, and 70% of cottonseed in the global market!  Even more alarming may be the USDA’s 2014 report citing concerns that glyphosate-resistant crops have become ubiquitous with American agriculture with 93% of soybeans, 85% of corn, and 82% of cotton planted being genetically modified to be glyphosate-resistant.  The herbicides that are used to combat the weeds surrounding the crops, in many cases, are supplied by the same company that provides the seeds.

Promoting Competition in the Agriculture Industry

It has been almost a century since the first antitrust laws were enacted, and yet the problem of corporate consolidations remains in many industries across America.  On July 9, 2021, the Biden Administration signed an executive order aimed to promote competition within various industries in the United States.  The order includes 72 initiatives by more than a dozen federal agencies to promptly tackle some of the most pressing competition problems across our economy.  According to the Administration, this order is a “whole-of-government” approach to drive down prices for consumers, increase wages for workers, and facilitate innovation. This was a major step in the right direction to weaken the power that major businesses have obtained as a result of corporate consolidation in industries like healthcare, technology, transportation, and especially agriculture.

This Executive Order also established the White House Competition Council to drive forward the Administration’s whole-of-government effort to promote competition.  On September 10, 2021, the Competition Council held its inaugural meeting to discuss promoting pro-competitive policies and new ways of delivering concrete benefits to America’s consumers, workers, farmers, and small businesses.  During the meeting, the heads of the Department of Health and Human Services, the Department of Transportation, the Department of Justice, the United States Department of Agriculture, and the Federal Trade Commission briefed the council members on their efforts to implement the directives of the Executive Order.

The Challenge of Facing the Consolidated Agriculture Industry

According to an October 20, 2021 report by Thomson Reuters, Tom Vilsack, the U.S. Secretary of Agriculture, said that the Biden Administration plans to take a hard look at the consolidation of the seed industry and figure out “why it’s structured the way it’s structured” and “whether these long patents make sense.”  The White House Competition Council is certainly faced with a difficult challenge to parse through both anti-competition law and intellectual property law.  For centuries these bodies of law have caused great debate.  One body of law restricts monopolization wherein the later grants monopolistic opportunities.

There is no doubt that any changes to the current seed industry scene would shake things up.  But what exactly would that look like?  Are we going to see the “Big-4” morph into another, new identity?  Are changes to the patent law system likely?  Whatever happens, the agriculture industry will likely pay close attention to the actions of the White House Competition Council over the next couple months.

Article By Reinier R. Smit of Summa PLLC

Copyright 2021 Summa PLLC All Rights Reserved

USDA Certified Organic Ciders: One of a Kind?

Anheuser-Busch introduced its Michelob Ultra Organic Seltzer last month, advertising the beverage as the “First-of-its-kind organic option to the hard seltzer category,” “First USDA-certified organic seltzer,” “First National USDA Certified Organic Hard Seltzer,” and “First-ever national USDA certified organic hard seltzer.” Anheuser-Busch even aired commercials during the nationally televised, highly viewed NFL Division Championship games, along with the Super Bowl that took place on Sunday, February 7. But now the question before an Oregon Court is whether these advertisements imply that it is the first and only kind in the country.

USDA Certified Organic Ciders

Suzie’s Brewery Company brews and packages Organic Hard Seltzer in Pendleton, Oregon. Suzie’s Brewery first launched its product line in July 2020 after obtaining its national organic certification from the USDA’s National Organic Program in June 2020. This program grants businesses the right to display the “USDA Organic” seal on their products should the business meet specific national standards. It also allows certified businesses to represent in advertising that their products have received national USDA organic certification. While most alcoholic beverages are regulated by the Federal Tax and Trade Bureau (“TTB”), and sugar fermented seltzers by the Food and Drug Administration (“FDA”), the USDA governs any food or beverage products that bear the “organic” label.

On February 2, 2021, Suzie’s Brewery sued Anheuser-Busch for false advertising and filed a motion for a temporary restraining order that would keep it from airing ads that Suzie’s Brewery claims are false. “Suzie’s Seltzer also has a national USDA organic certification, and was available on the market well before ULTRA Seltzer,” argued the attorney for Suzie’s Brewery, “In addition, there are several other hard seltzer brands on the market that have USDA organic certification.” Suzie’s Brewery further claims multiple consumers and product distributors contacted them regarding the Michelob Ultra Organic Seltzer advertisements, confused about it being the “first” or “only” USDA Organic certified seltzer. Others questioned the veracity of Suzie’s Brewery and their seltzers being USDA Certified organic, since Anheuser-Busch had claimed to be the “only” one on the market.

One of a Kind?

“Using the bully-pulpit its massive national advertising budget allows, Anheuser-Busch has premiered a new false and misleading advertising campaign aimed at convincing health-conscious drinkers that its new organic hard seltzer is a unique, one-of-a-kind product. To be clear, it is not,” Suzie’s Brewery stated, “and Anheuser-Busch will continue to pursue its strategy of unfairly squeezing out its smaller competitors in the organic hard seltzer market (like Suzie’s Brewery) unless this court puts a stop to its misconduct.”

On February 9, 2021, Judge Michael H. Simon of the United States District Court for the District of Oregon granted the temporary restraining order requiring Anheuser-Busch to immediately stop falsely claiming that its product – Michelob ULTRA Organic Hard Seltzer – is the only or first national USDA certified organic hard seltzer on the market. “It is false for Anheuser-Busch to say this,” the judge said, “because Suzie’s Organic Hard Seltzer is certified organic under the USDA’s National Organic Program and was certified under the national program before Michelob Ultra was.” This temporary restraining order will remain in effect until June 2, 2021, when Judge Simon is scheduled to rule on a motion for preliminary injunction filed by Suzie’s Brewery.

©2020 Norris McLaughlin P.A., All Rights Reserved
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