Since passage of the 2018 Farm Bill legalizing the cultivation and sale of hemp and its derivatives, a lack of guidance governing how the cargo is transported has been a potential barrier for trucking companies looking to take advantage of this emerging business.
Kevin Schultz, co-founder and president of 357 Hemp Logistics, has used this regulatory gap to his advantage by carving out a niche as one of the few companies specializing in hemp transportation. FreightWaves decided to check in with Schultz for expert insights on how much, if at all, regulations should be adjusted for trucking to expand into this market.
FREIGHTWAVES: In 2019, the Trump administration rolled out the U.S. Domestic Hemp Production Program, a regulatory framework required by the 2018 Farm bill that attempts to clarify how industrial hemp can be legally moved from state to state. Many say it isn’t enough. What more needs to be done?
SCHULTZ: “I would like to see it taken a step further, where there’s one source of truth for the actual documents they’re asking us to collect.
“Right now the accuracy of those documents is a tremendous risk to us as a transportation company. We’re talking to a company that’s working in blockchain right now that we’re probably going to do the first load that’s moved in which all the paperwork has been uploaded to a blockchain since inception. This will allow us to go in and see the history of that paperwork, and any lab testing that’s been done on the product going in the truck from the beginning.
“The marijuana industry has a lot of track-and-tracing tools where you can follow a plant from seed to final sale. That’s what I would like to see for hemp-derived products.”
FREIGHTWAVES: Should guidelines for such a directive come from the U.S. Department of Agriculture and/or other federal agency?
SCHULTZ: “I don’t know if it should be the DEA [Drug Enforcement Administration] or an organization that has some oversight on this particular pain point on the cannabinoid side. But I don’t think there’s enough guidance and oversight on the laboratories that are testing these products [a product with a THC level over 0.3% is considered marijuana]. This would give us that one source of truth that the lab paperwork is accurate. It can make the difference between what’s considered drug trafficking and what’s not.
“Also, there are people in industry that will say as long as both farmer and hemp oil extractors are licensed, you can bring product [over 0.3% THC] to each other across state lines. We have not seen that written in stone where that’s the case. I feel that’s one of the biggest bottlenecks in the industry right now. I don’t know if that ruling comes from the DEA or not, but it would open up our supply chain big time. I probably turn away 10-15 of those types of shipments per week just because we don’t feel comfortable moving it over state lines if we got pulled over.”
FREIGHTWAVES: Some involved with hemp transportation have called on the Federal Motor Carrier Safety Administration to take a more proactive approach on issuing guidelines on hemp transport. Do you agree?
SCHULTZ: “Personally I don’t believe so. I think that at the end of day, although we don’t treat the product as just another commodity because there is some special handling on our end that goes on, I don’t believe they need to step in and specifically say how to ship it. I think they need to make the drivers aware the product is legal to ship.
“It’s a very safe product to ship. A full truckload, because of the way it’s packaged, may only hit 26,000 pounds maximum in a dry van. So you’re not talking really heavy loads, and there are already regulations governing weight restrictions.
“I also think drivers need to be aware that if they’re using hemp products, there is some risk when taking a drug test, because although our rules are below 0.3% THC, there is some THC in the product.”
Note: Following passage of the 2018 Farm Bill, the U.S. Department of Transportation in 2020 warned safety-regulated employees (such as truck drivers) to use caution when considering cannabidiol (CBD) products.
FREIGHTWAVES: There’s a case pending in federal court in which a seller of hemp products is suing both FedEx and the city of New York, claiming thousands of dollars’ worth of legal packages were unlawfully confiscated and that he was falsely arrested. How prevalent is this?
SCHULTZ: “We still see instances where police officers think they have the bust of the century when they pull over a semi full of legal hemp.
“It goes back to tracking and tracing and proving what the product is at that moment. If law enforcement had been able to scan a QR code that fed into an accredited database and saw the one source of truth that showed where that product originated from, this likely could have been avoided.”
FREIGHTWAVES: Will cargo insurance cover industrial hemp that gets lost or confiscated?
SCHULTZ: “Insurance companies are not lining up to cover hemp — it’s not in your basic policy. My understanding is regular cargo policies have to specifically define hemp as something that the carrier covers.
“It’s actually something we developed early on, and I think that gives us an advantage over the competition. Because if a truck gets in an accident and $200,000 worth of hemp biomass gets ruined, we have in our policy hemp-derived products specifically defined as something for which we can put in a claim and cover. It’s something we don’t feel most of the industry has at the moment.”
FREIGHTWAVES: Congress is working on the next reauthorization of the Farm Bill, which is due out next year. What do you want to see — or not see — in the new bill?
SCHULTZ: “There’s a lot of discussion about separating the hemp industry — having a clear line between the industrial side of this plant and the cannabinoid side, within the hemp industry.
“The hemp industry is starting to put out products such as minor cannabinoids that could get you high, and it’s starting to worry the industrial side a bit, because that’s not what that side is about at all — it’s about textiles, fibers, building supplies, animal feed — they really want to be separated out from what could be coming in further farm bills with new legislation and new rules about how the cannabinoid side is regulated.
“We really see the demand in transportation coming from the industrial side, so we’re more likely to have more freight sooner if the industrial side does not get slowed down by regulations affecting cannabinoids.”
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