California’s New Hemp CBD Bill- Boon or Bane for the State’s Hemp Industry?

INTRODUCTION

Many hemp industry participants, stakeholders, and readers of this blog know that there has been a recent and significant development in California’s proposed regulation of cannabidiol (CBD) products, particularly hemp-derived CBD, in food, beverages, dietary supplements, pet products, and cosmetics. This proposed law, known as Assembly Bill 45 (AB-45), was enrolled on September 13, 2021. This means it has been passed in identical form by both the California Senate and Assembly and is on the governor’s desk for signature. Although AB-45 has not been signed into law as of the date of this article, the Governor is expected to sign it.

On the assumption that AB-45 will soon be law, this article addresses the ways in which AB-45 could impact your business and its major points of interest. 

MANUFACTURING HEMP PRODUCTS

On the surface level, AB-45 seeks to “legalize” different forms of hemp-derived CBD product. It also has some other (possibly (un)intended) consequences. To begin, let’s start with some of AB-45’s main provisions:

AB-45 mandates that manufacturers and manufacturing facilities that produce, package, label, or hold a hemp food, beverage, cosmetic, or a raw hemp extract, register with the California Department of Public Health (CDPH).

Pursuant to AB-45, “Hemp manufacturers” are defined as:

1. A processor extracting cannabinoids from hemp biomass;
2. A processor purchasing industrial hemp extract for the purposes of manufacturing a final form product.

In addition to these requirements, AB-45 requires all out-of-state manufacturers that import raw hemp extract into California to register with the CDPH Food and Drug Branch.

Further, in addition to registering with the CDPH, hemp manufacturers are required to “obtain an industrial hemp enrollment and oversight authorization” from CDPH. This authorization must be renewed annually.

Companies that manufacture pet products containing industrial hemp, as well as wholesale food manufacturing facilities that manufacture products containing industrial hemp must register with the CDPH and must adhere to good manufacturing practices.

AB-45 restricts the use of industrial hemp in dietary supplements unless the product demonstrates both of the following:

1. All parts of the hemp plant used in dietary supplements or food products come from a state or country that has an established and approved industrial hemp program that inspects or regulates hemp under a food safety program or equivalent criteria to ensure safety for human or animal consumption; and
2. The industrial hemp cultivator or grower is in good standing and in compliance with the governing laws of the state or country of origin.

INDUSTRIAL HEMP AND THC REDEFINED

Notably, AB-45 redefines industrial hemp such that it may “not include cannabinoids produced through chemical synthesis.” It also states that industrial hemp products cannot contain tetrahydrocannabinol (THC) isolate as an ingredient.

It continues by defining “THC” as:

1. Tetrahydrocannabinolic acid;
2. Any tetrahydrocannabinol, including, but not limited to, Delta-8-tetrahydrocannabinol, Delta-9-tetrahydrocnnabinol, and Delta-10-tetrahydrocannabinol, however derived, except that the department may exclude one or more isomers of tetrahydrocannabinol from this definition under subdivision (a) of Section 111921.7; and
3. Any other cannabinoid, except cannabidiol, that the department determines, under subdivision (b) of Section 111921.7, to cause intoxication.

Additionally, AB-45 states that an

“industrial hemp product shall not be distributed or sold in the state except in conformity with all applicable state laws and regulations, including this chapter and any regulations promulgated thereunder, and with documentation that includes both of the following:

a. A certificate of analysis from an independent testing laboratory that confirms both of the following:

1. The industrial hemp raw extract, in its final form, does not exceed THC concentration of an amount determined allowable by the department in regulation, or the mass of the industrial hemp extract used in the final form product does not exceed a THC concentration of 0.3 percent; and
2. The industrial hemp product was tested for any hemp derivatives identified on the product label or in associated advertising.

 b. The industrial hemp product was produced from industrial hemp grown in compliance with Division 24 of the Food and Agricultural Code if sourced from within California, or licensed in accordance with the United States Department of Agriculture (USDA) requirements if sourced from outside the state.

Taken together, this requirement all but ensures the strict regulation of hemp-derived products. It also significantly restricts hemp distributors from selling products with otherwise compliant levels of Delta-9 THC and increased levels of Delta-8 and/or Delta-10 THC.

SOME HEMP PRODUCTS ARE NOT ALLOWED

Additionally, AB-45 mandates that industrial hemp cannot be included in products in any of the following categories: medical devices, prescription drugs, products containing nicotine or tobacco, and alcoholic beverages.

AB-45 regulates the type of information that can be included on the product label, which states: “A manufacturer, distributor, or seller of an industrial hemp product shall not include on the label of the product, or publish or disseminate in advertising or marketing, any health-related statement that is untrue in any particular manner as to the health effects of consuming products containing industrial hemp or cannabinoids, extracts, or derivatives from industrial hemp.”

For clarity, AB-45 defines “health-related statement” as “a statement related to health, and includes a statement of a curative or therapeutic nature that, expressly or impliedly, suggests a relationship between the consumption of industrial hemp or industrial hemp products and health benefits or effects on health. However, “health-related statement” does not include statements required to be made pursuant to federal Food and Drug Administration regulations for active ingredients in prescription drugs, nonprescription over-the-counter drugs containing inactive ingredients, or structure-function claims allowed for dietary supplements made in accordance with the Federal Food, Drug, and Cosmetic Act (21 U.S.C. Sec. 343(r)(6)).

LABELING, TESTING, AND ADVERTISING

In addition to the regulations regarding the types of products that can be sold, including their cannabinoid content and what can be said on a product label, there are a number of state-specific labeling requirements for industrial hemp-derived products such as cosmetics, dietary supplements, foods, and beverages.

AB-45 provides guidance regarding the type of testing that will be required for hemp manufacturers. It mandates that raw extract in its final form shall be tested for compliance prior to it being incorporated into a product; that testing be done by an independent testing laboratory; and that the manufacturer of the hemp extract in its final form or the final form industrial hemp product be able to prove total THC concentration does not exceed 0.3 percent.

AB-45 also restricts advertising for hemp products, requiring that hemp manufacturers not “directly target advertising or marketing to children or to persons who are pregnant or breastfeeding,” and “advertising or marketing placed in broadcast, cable, radio, print, or digital communications shall only be displayed where at least 70 percent of the audience is reasonably expected to be 18 years of age or older, as determined by reliable, up-to-date audience composition data.”

SMOKABLE HEMP PROHIBITED… FOR NOW

Notably, the “manufacture or sale of inhalable products is prohibited” under AB-45; however, the “manufacture or inhalable products for the sole purpose of sale in other states is not prohibited.” This prohibition may end up derailing AB-45 altogether, as some CA hemp farmers intend to sue to enjoin AB-45. Interestingly, the prohibition against inhalable products shall “become inoperative and is repealed on the effective date of a measure passed by the Legislature that establishes a tax on inhalable products and states the intent of the Legislature to fulfill the requirement of this Section.”

Essentially, this states the production and sale of inhalable hemp-derived products is prohibited in California until the authorities can figure out how, and at what rate, they should be taxed. At this time, no one knows how long that process will take. Again, this prohibition does not apply to the manufacture of inhalable hemp-derived products for sale out of state.

CONCLUSION

AB-45 goes a long way in providing much needed regulation of the hemp-derived product industry in California, particularly for CBD products. For this reason, many see it as a step forward. On the other hand, it contains provisions that will cause severe difficulties for hemp farmers and companies operating and distributing products in the state. This is particularly true regarding smokable hemp and hemp products that contain sufficient THC concentrations to cause intoxication.  

The lawyers at Kight Law stay abreast of legal and other changes impacting the hemp industry.

September 21, 2021

This article was written by Kight Law attorney Philip Snow. Kight Law represents hemp businesses in the US and throughout the world. To schedule a consultation with Philip, please click here and mention this article.