The Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA), an initiative measure approved as Proposition 64 at the November 8, 2016, statewide general election, authorizes a person who obtains a state license under AUMA to engage in commercial adult-use cannabis activity pursuant to that license and applicable local ordinances. The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities and requires the Department of Cannabis Control to administer its provisions.

Existing law governs the cultivation of industrial hemp in this state and establishes a registration program administered by county agricultural commissioners and the Department of Food and Agriculture for growers of industrial hemp, hemp breeders, and established agricultural research institutions, as defined.

The Sherman Food, Drug, and Cosmetic Law, among other things, regulates the labeling of food, beverages, and cosmetics and makes it a crime to distribute in commerce any food, drug, device, or cosmetic if its packaging or labeling does not conform to these provisions. Existing law establishes a process for the embargo, condemnation, and destruction of a food, drug, device, or cosmetic that is adulterated, misbranded, or falsely advertised, gives the authority to place items under embargo to authorized agents of the State Department of Public Health, and requires the department to take specified actions. Violation of the Sherman Food, Drug, and Cosmetic Law is a misdemeanor. Existing law also requires hemp manufacturers who produce specified products that include industrial hemp or who produce raw hemp extract, as defined, to complete a registration process, under the State Department of Public Health, and to meet various requirements for testing and labeling on products. Existing law, as part of the registration process, requires the department to assess specified fees, including an oversight and authorization enrollment fee, to cover the actual reasonable costs of implementing the regulatory program.

Existing law exempts industrial hemp, as defined, from the definition of cannabis and from MAUCRSA, but requires the Department of Cannabis Control to prepare a report, on or before July 1, 2022, to the Governor and the Legislature outlining the steps necessary to allow for the incorporation of hemp cannabinoids into the cannabis supply chain.

This bill would state that MAUCRSA does not prohibit a licensee from manufacturing, processing, distributing, or selling products that contain industrial hemp or cannabinoids, extracts, or derivatives from industrial hemp if the product complies with all applicable state laws and regulations. The bill would authorize a licensed manufacturer or microbusiness to obtain industrial hemp from a person registered with the State Department of Public Health, as specified, and would require industrial hemp purchased by a licensee to be tracked as a separate batch through the manufacturing process. The bill would require a licensee that manufactures, distributes, or sells products that contain industrial hemp to record all transactions and specified data in the state track and trace system. The bill would prohibit a licensed manufacturer from incorporating delta-9 tetrahydrocannabinol THC or comparable cannabinoid, as defined, that has been converted from a hemp-derived cannabinoid and would also prohibit licensed retailers and distributors from selling or distributing cannabis or hemp products that contain converted delta-9 tetrahydrocannabinol. THC or comparable cannabinoid. The bill would require the department to implement a process by which any licensee that is also a registered hemp manufacturer may use the same premises.

This bill would revise and recast the provisions of the Sherman Food, Drug, and Cosmetic Law regulating industrial hemp to redefine certain terms, expand the prohibition that raw hemp extract not exceed 0.3% of a tetrahydrocannabinol or comparable cannabinoid, limit the level of total THC that can be in an industrial hemp final form product, and prohibit the manufacture, distribution, or sale of an industrial hemp product that contains a synthetically derived cannabinoid, as defined, unless authorized by the department in regulation. The bill would prohibit an industrial hemp food and beverage product from being labeled, marketed, or advertised as a product intended to create an intoxicating effect. The bill would require that industrial hemp human food and beverage final form products meet specified guidelines and would specify that violations of the act are grounds for revocation of an industrial hemp enrollment and oversight authorization. The bill would require an out-of-state hemp manufacturer who produces certain products such as industrial hemp food, beverages, or cosmetics for importation or sale in this state to register with the department. The bill would establish a separate process for the embargo, condemnation, and destruction of industrial hemp products and would give authority to seize or embargo those products to a peace officer or a state official who possesses seizure authority in specified circumstances and would require the peace officer or state official who began the embargo to seek voluntary condemnation from the owner or commence proceedings for condemnation. The bill would make a violation of provisions regarding the retail sale of industrial hemp a misdemeanor and would impose a civil penalty. By creating a new crime, this bill would impose a state-mandated local program.

Existing law authorizes the California Department of Tax and Fee Administration (CDTFA) or a law enforcement agency to seize cannabis or cannabis products not contained in secure packaging to seize cannabis or cannabis products possessed, stored, owned, or sold by an unlicensed person or that were not reported in the track and trace system, as specified, and provides that seized cannabis or cannabis products are deemed forfeited, as specified.

This bill would, in certain circumstances, establish a presumption that any product containing or purporting to contain any cannabinoid is a cannabis product, unless there is reasonable cause to believe that the product is authorized to be distributed or sold as an industrial hemp product.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

The Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA), an initiative measure approved as Proposition 64 at the November 8, 2016, statewide general election, authorizes a person who obtains a state license under AUMA to engage in commercial adult-use cannabis activity pursuant to that license and applicable local ordinances. The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities and requires the Department of Cannabis Control to administer its provisions.

Existing law governs the cultivation of industrial hemp in this state and establishes a registration program administered by county agricultural commissioners and the Department of Food and Agriculture for growers of industrial hemp, hemp breeders, and established agricultural research institutions, as defined.

The Sherman Food, Drug, and Cosmetic Law, among other things, regulates the labeling of food, beverages, and cosmetics and makes it a crime to distribute in commerce any food, drug, device, or cosmetic if its packaging or labeling does not conform to these provisions. Existing law establishes a process for the embargo, condemnation, and destruction of a food, drug, device, or cosmetic that is adulterated, misbranded, or falsely advertised, gives the authority to place items under embargo to authorized agents of the State Department of Public Health, and requires the department to take specified actions. Violation of the Sherman Food, Drug, and Cosmetic Law is a misdemeanor. Existing law also requires hemp manufacturers who produce specified products that include industrial hemp or who produce raw hemp extract, as defined, to complete a registration process, under the State Department of Public Health, and to meet various requirements for testing and labeling on products. Existing law, as part of the registration process, requires the department to assess specified fees, including an oversight and authorization enrollment fee, to cover the actual reasonable costs of implementing the regulatory program.

Existing law exempts industrial hemp, as defined, from the definition of cannabis and from MAUCRSA, but requires the Department of Cannabis Control to prepare a report, on or before July 1, 2022, to the Governor and the Legislature outlining the steps necessary to allow for the incorporation of hemp cannabinoids into the cannabis supply chain.

This bill would state that MAUCRSA does not prohibit a licensee from manufacturing, processing, distributing, or selling products that contain industrial hemp or cannabinoids, extracts, or derivatives from industrial hemp if the product complies with all applicable state laws and regulations. The bill would authorize a licensed manufacturer or microbusiness to obtain industrial hemp from a person registered with the State Department of Public Health, as specified, and would require industrial hemp purchased by a licensee to be tracked as a separate batch through the manufacturing process. The bill would require a licensee that manufactures, distributes, or sells products that contain industrial hemp to record all transactions and specified data in the state track and trace system. The bill would prohibit a licensed manufacturer from incorporating delta-9 tetrahydrocannabinol that has been converted from a hemp-derived cannabinoid and would also prohibit licensed retailers and distributors from selling or distributing cannabis or hemp products that contain converted delta-9 tetrahydrocannabinol. The bill would require the department to implement a process by which any licensee that is also a registered hemp manufacturer may use the same premises.

This bill would revise and recast the provisions of the Sherman Food, Drug, and Cosmetic Law regulating industrial hemp to redefine certain terms, expand the prohibition that raw hemp extract not exceed 0.3% of a tetrahydrocannabinol or comparable cannabinoid, limit the level of total THC that can be in an industrial hemp final form product, and prohibit the manufacture, distribution, or sale of an industrial hemp product that contains a synthetically derived cannabinoid, as defined, unless authorized by the department in regulation. The bill would prohibit an industrial hemp food and beverage product from being labeled, marketed, or advertised as a product intended to create an intoxicating effect. The bill would require that industrial hemp human food and beverage final form products meet specified guidelines and would specify that violations of the act are grounds for revocation of an industrial hemp enrollment and oversight authorization. The bill would require an out-of-state hemp manufacturer who produces certain products such as industrial hemp food, beverages, or cosmetics for importation or sale in this state to register with the department. The bill would establish a separate process for the embargo, condemnation, and destruction of industrial hemp products and would give authority to seize or embargo those products to a peace officer or a state official who possesses seizure authority in specified circumstances and would require the peace officer or state official who began the embargo to seek voluntary condemnation from the owner or commence proceedings for condemnation. The bill would make a violation of provisions regarding the retail sale of industrial hemp a misdemeanor and would impose a civil penalty. By creating a new crime, this bill would impose a state-mandated local program.

Existing law authorizes the California Department of Tax and Fee Administration (CDTFA) or a law enforcement agency to seize cannabis or cannabis products not contained in secure packaging to seize cannabis or cannabis products possessed, stored, owned, or sold by an unlicensed person or that were not reported in the track and trace system, as specified, and provides that seized cannabis or cannabis products are deemed forfeited, as specified.

This bill would, in certain circumstances, establish a presumption that any product containing or purporting to contain any cannabinoid is a cannabis product, unless there is reasonable cause to believe that the product is authorized to be distributed or sold as an industrial hemp product.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

The Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA), an initiative measure approved as Proposition 64 at the November 8, 2016, statewide general election, authorizes a person who obtains a state license under AUMA to engage in commercial adult-use cannabis activity pursuant to that license and applicable local ordinances. The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities and requires the Department of Cannabis Control to administer its provisions.

Existing law governs the cultivation of industrial hemp in this state and establishes a registration program administered by county agricultural commissioners and the Department of Food and Agriculture for growers of industrial hemp, hemp breeders, and established agricultural research institutions, as defined.

The Sherman Food, Drug, and Cosmetic Law, among other things, regulates the labeling of food, beverages, and cosmetics and makes it a crime to distribute in commerce any food, drug, device, or cosmetic if its packaging or labeling does not conform to these provisions. Existing law establishes a process for the embargo, condemnation, and destruction of a food, drug, device, or cosmetic that is adulterated, misbranded, or falsely advertised, gives the authority to place items under embargo to authorized agents of the State Department of Public Health, and requires the department to take specified actions. Violation of the Sherman Food, Drug, and Cosmetic Law is a misdemeanor. Existing law also requires hemp manufacturers who produce specified products that include industrial hemp or who produce raw hemp extract, as defined, to complete a registration process, under the State Department of Public Health, and to meet various requirements for testing and labeling on products. Existing law, as part of the registration process, requires the department to assess specified fees, including an oversight and authorization enrollment fee, to cover the actual reasonable costs of implementing the regulatory program.

Existing law exempts industrial hemp, as defined, from the definition of cannabis and from MAUCRSA, but requires the Department of Cannabis Control to prepare a report, on or before July 1, 2022, to the Governor and the Legislature outlining the steps necessary to allow for the incorporation of hemp cannabinoids into the cannabis supply chain.

This bill would state that MAUCRSA does not prohibit a licensee from manufacturing, processing, distributing, or selling products that contain industrial hemp or cannabinoids, extracts, or derivatives from industrial hemp if the product complies with all applicable state laws and regulations. The bill would authorize a licensed manufacturer or microbusiness to obtain industrial hemp from a person registered with the State Department of Public Health, as specified, and would require industrial hemp purchased by a licensee to be tracked as a separate batch through the manufacturing process. The bill would require a licensee that manufactures, distributes, or sells products that contain industrial hemp to record all transactions and specified data in the state track and trace system. The bill would prohibit a licensed manufacturer from incorporating delta-9 tetrahydrocannabinol that has been converted from a hemp-derived cannabinoid and would also prohibit licensed retailers and distributors from selling or distributing cannabis or hemp products that contain converted delta-9 tetrahydrocannabinol. The bill would require the department to implement a process by which any licensee that is also a registered hemp manufacturer may use the same premises.

This bill would revise and recast the provisions of the Sherman Food, Drug, and Cosmetic Law regulating industrial hemp to redefine certain terms, expand the prohibition that raw hemp extract not exceed 0.3% of a tetrahydrocannabinol or comparable cannabinoid, limit the level of total THC that can be in an industrial hemp final form product, and prohibit the manufacture, distribution, or sale of an industrial hemp product that contains a synthetically derived cannabinoid, as defined, unless authorized by the department in regulation. The bill would require that industrial hemp human food and beverage final form products meet specified guidelines and would specify that violations of the act are grounds for revocation of an industrial hemp enrollment and oversight authorization. The bill would require an out-of-state hemp manufacturer who produces certain products such as industrial hemp food, beverages, or cosmetics for importation or sale in this state to register with the department. The bill would establish a separate process for the embargo, condemnation, and destruction of industrial hemp products and would give authority to seize or embargo those products to a peace officer or a state official who possesses seizure authority in specified circumstances and would require the peace officer or state official who began the embargo to seek voluntary condemnation from the owner or commence proceedings for condemnation. The bill would make a violation of provisions regarding the retail sale of industrial hemp a misdemeanor and would impose a civil penalty. By creating a new crime, this bill would impose a state-mandated local program.

Existing law authorizes the California Department of Tax and Fee Administration (CDTFA) or a law enforcement agency to seize cannabis or cannabis products not contained in secure packaging to seize cannabis or cannabis products possessed, stored, owned, or sold by an unlicensed person or that were not reported in the track and trace system, as specified, and provides that seized cannabis or cannabis products are deemed forfeited, as specified.

This bill would, in certain circumstances, establish a presumption that any product containing or purporting to contain any cannabinoid is a cannabis product, unless there is reasonable cause to believe that the product is authorized to be distributed or sold as an industrial hemp product.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anna Caballero, Chair

2023 - 2024 Regular Session

AB 2223 (Aguiar-Curry) - Cannabis: industrial hemp

Bill Summary:

AB 2223 integrates the manufacturing, distributing, and selling of hemp and hemp products into the regulatory structure of cannabis and makes changes related to the regulation of industrial hemp, as specified.

Fiscal Impact:

• Unknown, significant one-time and ongoing fiscal impact, ranging in the millions of dollars, to the Department of Cannabis Control (DCC) to modify regulations, reconfigure its track-and-trace system, and for other administrative and enforcement workload related to the expanded scope of permissible products as authorized under this bill (General Fund and Cannabis Control Fund).
• Unknown impact to the California Department of Public Health (CDPH). To the extent that workload related to revising regulations for industrial hemp and for any additional administrative and enforcement activity is not absorbable within CDPH’s current regulatory workload, the department will require additional resources, which may range into the hundreds of thousands to low millions of dollars (General Fund and Industrial Hemp Enrollment and Oversight Fund).
• Unknown, potentially significant workload cost pressures to the courts to adjudicate alleged violations of this measure (Trial Court Trust Fund, General Fund).
• Unknown, potentially significant reimbursable annual costs (General Fund, local funds) to counties in the hundreds of thousands of dollars to low millions of dollars to counties for increased incarceration costs. The average annual cost to incarcerate a defendant in county jail is approximately $29,000. If 10 defendants statewide are sentenced annually to an average of six months in county jail for solicitation, the total cost to counties would be $145,000. California county jails are increasingly overcrowded – particularly since the enactment of the Realignment Act in 2011. (See Staff Comments.)

Background:

No part of hemp regulation in California is conducted by the DCC, however, testing laboratories issued a licensed by the DCC are also authorized to test hemp products, as specified. Hemp products are specifically prohibited under the provisions of the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). Supply chains and regulations for industrial hemp and cannabis are kept principally separate in California. DCC presently mandates that licensed cannabis retailers are prohibited from selling any non-cannabis goods besides cannabis accessories and branded merchandise, and industrial hemp falls under the category of a “non-cannabis good”. In addition, California law stipulates that industrial hemp may not be cultivated on premises licensed by DCC to cultivate or process cannabis. Finally, cannabidiol (CBD) and CBD products derived from cannabis are regulated quite differently from the same CBD products containing hemp-derived CBD, despite being essentially the same. Many cannabis retailers may wish to also sell products derived from hemp, as the costs may be lower given the taxation and regulatory differences.

By federal and California law, industrial hemp is defined as cannabis sativa (c. sativa). C. sativa plants, which have low levels of tetrahydrocannabinol (THC) (under 0.3 percent), the primary psychoactive component of medicinal and recreational cannabis, which commonly contains levels ranging from 15-40 percent THC. C. sativa plants grown for commercial purposes found to have THC levels over this limit are required to be destroyed.

Proposed Law:

• States legislative intent to authorize cannabis licensees to manufacture, distribute, and sell hemp and CBD products and enhance the viability of cannabis licensees in the marketplace.

Provisions related to the integration of the manufacturing, processing, distributing, and selling of hemp, hemp products, and industrial hemp derivatives into MAUCRSA.

• Provides that MAUCRSA does not prohibit a cannabis licensee from manufacturing, processing, distributing, or selling products containing industrial hemp or cannabinoids, extracts, or derivatives from industrial hemp if the product complies with all applicable laws and regulations, as specified.
• Authorizes a licensed manufacturer or microbusiness to obtain industrial hemp from a person registered with CDPH.
• Requires a cannabis licensee to track all industrial hemp purchased as a separated batch throughout the manufacturing process and to record all transactions and relevant data in the state track and trace system.
• Requires a manufactured cannabis product that incorporates industrial hemp to comply with all requirements for cannabis under MAUCRSA and any regulations adopted by DCC.
• Prohibits licensed cannabis manufacturers from incorporating THC or comparable cannabinoid that has been converted from a hemp-derived cannabinoid into cannabis, a cannabis product, or an industrial hemp product.
• Prohibits a licensed retailer or distributor from selling or distributing cannabis, a cannabis product, or an industrial hemp product that contains THC or comparable cannabinoid that have been converted from a hemp-derived cannabinoid.
• Requires DCC to implement a process by which a cannabis licensee that is also a registered hemp manufacturer to use the same premises.
• Requires DCC to adopt and readopt emergency regulations by July 1, 2025.

Provisions related to the regulation of industrial hemp under the Sherman Food, Drug, and Cosmetic Laws (Sherman Laws) administered and enforced by CDPH.

• Extends the timeframe by which CDPH’s emergency regulations related to hemp may remain in effect for, from 180 to 360 days.
• Repeals restrictions related to using initial regulations to establish an age limit for purchasing industrial hemp and determining maximum serving sizes.
• Revises and adds definitions, as specified.
• Revises industrial hemp product certificate of analysis requirements by instead requiring the analysis to confirm that the industrial hemp raw extract used in the industrial hemp product does not exceed a total THC concentration of 0.3% or a lower amount determined allowable by CDPH in regulation, rather than requiring that the mass of the industrial hemp extract used in the final form product does not exceed a THC concentration of 0.3%.
• Prohibits a person from manufacturing, distributing, or selling any of the following:
  • An industrial hemp product that contains synthetically derived cannabinoid unless approved by CDPH.
  • Industrial hemp raw extract derived from industrial hemp that was not produced or sourced in California, or licensed with USDA requirements if sourced from out of California.
  • Industrial hemp raw extract with a total THC concentration exceeding 0.3 percent, or a lower amount determined by CDPH.
  • An industrial hemp product containing a total THC concentration exceeding 0.3 percent, or a lower amount determined by CDPH.
• Repeals a requirement that an initial determination by CDPH to exclude or include one or more isomers of THC or other cannabinoids from the definition of THC or comparable cannabinoid be confirmed through regulations no later than 18 months following the date of the initial determination.
• Requires industrial hemp human food and beverage final form products, in addition to being prepackaged and shelf stable, meet all of the following requirements:
  • A single serving of a product be based on the amount of food or beverage customarily consumed in one eating occasion for that food or beverage.
  • A single serving of a dietary supplement in pill, tablet, or capsule form be one unit.
  • A product not exceed five servings per package.
• Prohibits an industrial hemp final form product from exceeding one milligram of THC, and each serving per package from exceeding 0.25 milligrams of THC.
• Authorizes CDPH to promulgate regulations related to requirements around industrial hemp human food and beverages and final form products, as specified.
• Specifies that a violation of any of the laws or regulations governing industrial hemp to be grounds for denying, suspending, forfeiting, revoking, or surrendering of an industrial hemp enrollment and oversight authorization.
• Authorizes CDPH to deny, suspend, forfeit, revoke, or order to surrender an industrial hemp enrollment and oversight authorization when a peace officer, state official, or local official has notified CDPH that a manufacturer within its jurisdiction is in violation of state law and regulations relating to industrial hemp, and CDPH, through an investigation, has determined the violation is grounds for the action.
  • Requires an investigation to include reasonable notice for the manufacturer to defend any allegations of a violation.
• Prohibits an industrial hemp human food and beverage product from being labeled, marketed, or advertised as a product intended to produce an intoxicating effect.

Provisions related to industrial hemp seizure and embargo, and civil penalties.

• Authorizes a peace officer or state official to seize or embargo an industrial hemp product if that officer or official has probable cause to believe the product is unlawful and if the product is subject to recall, quarantine, embargo, condemnation and destruction, or seized in relation to an investigation or disciplinary action, as specified.
  • Authorizes the officer or official to affix a tag or other appropriate marking to the industrial hemp product. Requires the officer or official to remove the tag upon finding the seized or embargoed product is lawful.
  • Requires the officer or official to give notice that the product is or is suspected of being unlawful, as specified.
• Provides that it is unlawful for a person to remove, sell, or dispose of an industrial hemp product seized, detained, or embargoes without permission of the officer or official responsible for the seizure, detention, or embargo, or a court.
• Establishes requirements for a peace officer or state official who takes action to seize or embargo an industrial hemp product, as specified.
• Requires seized or embargoes industrial hemp products found to be unlawful to be destroyed at the expense of the claimant, retailer, owner, or manufacturer. Provides that fees and costs be assigned to the retailer unless the retailer proves that fees and costs should be assigned to the claimant, owner, or manufacturer.
• Provides a pathway for seized or embargoes industrial hemp products to enter to come into compliance and enter the legal market, as specified.
• Provides that all fees and costs associated with the investigation, condemnation, and destruction of illegal industrial hemp product be incurred by the claimant, retailer, owner, or manufacturer of the industrial hemp.
• Provides for civil penalties of up to $2,500 per violation for violations of the laws governing the retail sale of industrial hemp. Permits an action for civil penalties to be brought by the Attorney General on behalf of the people or on behalf of the department or another state agency, by a county counsel or district attorney, or by a city attorney or city prosecutor. Requires the penalty to first be used to reimburse the Attorney General, county counsel or district attorney, or city attorney or city prosecutor that brought the civil action. Establishes a statute of limitation for civil penalties of three years from the date of violation.
• Provides that a violation of the provisions of law governing industrial hemp is a misdemeanor or punishable by a penalty fine not to exceed $1,000 for each violation or by imprisonment in the county jail for a period not exceeding one year, or both. Specifies that each day a violation continues is considered a separate violation.
• Permits CDPH, by regulation, to provide for additional administrative penalties for any violation of the industrial hemp laws. Specifies that the remedies under this bill are in addition to, and do not supersede or limit, any and all other remedies, civil or criminal, nor does this bill limit any authority conferred on CDPH to administer and enforce the law.
• Includes a non-preemption clause, by specifying that the laws governing industrial hemp do not preempt or otherwise prohibit the adoption or enforcement of any local ordinance or regulation that imposes greater restrictions on the retail sale of industrial hemp products, and to the extent there is an inconsistency between state law and a local ordinance or regulation, the greater restriction on the retail sale of industrial hemp product shall be enforced.
• Establishes a rebuttable presumption that a product containing or purporting to contain a cannabinoid is a cannabis product if there is reasonable cause to believe that the product is not an authorized industrial hemp product.

Prior Legislation:

AB 45 (Aguiar-Curry, Chapter 576, Statutes of 2021) established a regulatory structure in CDPH for food, beverage and cosmetic products containing industrial hemp, and limiting these products to containing no more than 0.3% concentration of THC.

Staff Comments:

As discussed above, this bill may increase incarceration costs to county jails. Under existing law, violations of the Sherman Laws is a misdemeanor, and as such, no costs were provided to local agencies under 2011 Realignment Legislation for this crime. Pursuant to Proposition 30 (2012), legislation enacted after September 30, 2012, that has an overall effect of increasing the costs already borne by a local agency for programs or levels of service mandated by the 2011 Realignment Legislation apply to local agencies only to the extent that the state provides annual funding for the cost increase. Although Proposition 30 specifies that legislation defining a new crime or changing the definition of an existing crime is not subject to this provision, changing the penalty for a crime is not specifically exempted and could potentially require a subvention of funds from the state. In addition, overcrowding in county jails creates cost pressure on the General Fund because the state has historically granted new funding to counties to offset overcrowding caused by the Realignment Act.

Additionally, the fiscal impact of this bill to the courts will depend on many unknown factors, including the numbers of violations alleged to have occurred, if parties are able to settle the matter before the filing of an action, and the factors unique to each case. It generally costs about $1,000 to operate a courtroom for one hour. Therefore, if actions are filed as a result of this bill that take 50 or more hours of court involvement, the cost pressures of this measure to the courts would surpass this committee’s Suspense File threshold. Although courts are not funded on the basis of workload, increased staff time and resources may create a need for increased funding for courts from the General Fund (GF) to perform existing duties. Numerous trial court operations are funded through the imposition and collection of criminal fines and fees. However, the Legislature has reduced and eliminated criminal fines and fees over the past decade.

-- END --

SENATE COMMITTEE ON HEALTH

Senator Richard Roth, Chair

BILL NO: AB 2223

SUBJECT: Cannabis: industrial hemp

SUMMARY:

Revises the requirements governing industrial hemp products to clarify and expand the prohibition on synthetic forms of THC, limits hemp products to no more than one milligram of THC per product, including no more than 0.25 milligrams per serving, establishes a seizure and embargo process for unlawful hemp products, and provides for the integration of hemp products into the marketplace for cannabis regulated by the Department of Cannabis Control.

Existing law:

1. Enacts the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to establish a comprehensive system to control and regulate the cultivation, distribution, transport, storage, manufacturing, processing, and sale of both medicinal cannabis and cannabis products, and adult-use cannabis and cannabis products for adults 21 years of age and over, regulated by the Department of Cannabis Control (DCC). [BPC §26000, et seq.]
2. Defines “cannabis,” for purposes of MAUCRSA, as all parts of the plant Cannabis sativa Linnaeus, Cannabis indica, or Cannabis ruderalis, the seeds thereof, the resin, and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds, or resin. Excludes “industrial hemp,” as defined in the California Uniform Controlled Substances Act (UCS Act), from the definition of cannabis for purposes of MAUCRSA. [BPC §26001(f)]
3. Defines industrial hemp, under the UCS Act, as an agricultural product, whether growing or not, that is limited to types of the plant Cannabis sativa L. and any part of that plant, including the seeds of the plant and all derivatives, extracts, the resin extracted from any part of the plant, cannabinoids, isomers, acids, salts, and salts of isomers, with a delta-9 tetrahydrocannabinol (THC) concentration of no more than 0.3% on a dry weight basis. Excludes industrial hemp from the UCS Act, and from MAUCRSA, and instead requires industrial hemp to be regulated by the California Department of Food and Agriculture (DFA), as specified. [HSC §11018.5]
4. Establishes a regulatory structure for the cultivation of industrial hemp, and an Industrial Hemp Advisory Board, under the DFA. Requires a grower of industrial hemp for commercial purposes to register with the county agricultural commissioner. [FAC §81000, et seq.]
5. Establishes a regulatory structure in the Sherman Food, Drug, and Cosmetic Law (Sherman Law) under the jurisdiction of the California Department of Public Health (CDPH) for food, beverage and cosmetic products containing industrial hemp, and limits these products to containing no more than 0.3% concentration of THC. [HSC §111920, et seq.]
6. Defines “industrial hemp,” for purposes of food, beverage, and cosmetic products under the Sherman Law, as having the same definition as in the UCS Act above, and additionally specifically prohibits industrial hemp from including cannabinoids produced through chemical synthesis. [HSC §111920(f)]
7. Defines “THC or comparable cannabinoid,” for purposes of the regulatory structure for industrial hemp products, as including, in part, any THC, including Delta-8, Delta-9, and Delta-10, and any other cannabinoid, except cannabidiol (CBD), that CDPH determines causes intoxication. [HSC §111920(l)]
8. Restricts a licensed cannabis retailer, in addition to cannabis goods, to selling only cannabis accessories and the branded merchandise of any licensee. However, permits a licensed retailer who operates a consumption area on the premises to also sell prepackaged, non-cannabis-infused, non-alcoholic food and beverages if the applicable local jurisdiction permits such sales. [4 CCR §15407]

This bill:

Provisions incorporating industrial hemp into MAUCRSA:

1. Specifies that MAUCRSA does not prohibit a DCC licensee from manufacturing, processing, distributing, or selling products that contain industrial hemp, or cannabinoids, extracts, or derivatives from industrial hemp, if the product complies with all applicable state laws and regulations, including provisions governing the cultivation of industrial hemp under the DFA, and provisions in the Sherman Law governing the manufacture and sale of industrial hemp products.
2. Permits a DCC licensed manufacturer or microbusiness to obtain industrial hemp from a person registered with CDPH under the provisions of the Sherman Law governing industrial hemp.
3. Requires industrial hemp that is purchased by a DCC licensee to be tracked as a separate batch throughout the manufacturing process in order to document the disposition of that hemp or hemp product. Requires a DCC licensee that manufactures, distributes, or sells products that contain industrial hemp to record all transactions and relevant data, as prescribed by DCC, in the state track and trace system.
4. Requires a manufactured cannabis product that incorporates industrial hemp to comply with all of the requirements for cannabis contained in MAUCRSA, and any regulations adopted by DCC.
5. Prohibits a DCC licensed manufacturer from incorporating THC or comparable cannabinoids that have been converted from a hemp-derived cannabinoid into cannabis, a cannabis product, or an industrial hemp product. Prohibits a DCC licensed retailer or distributor from selling or distributing cannabis, a cannabis product, or an industrial hemp product that contains THC or a comparable cannabinoid that has been converted from a hemp-derived cannabinoid.
6. Requires DCC to implement a process by which a licensee that is also a registered hemp manufacturer under the Sherman Law to use the same premises.
7. Requires DCC, notwithstanding any other law, to adopt and readopt emergency regulations to implement the provisions in 1) through 6) above on or before July 1, 2025. Requires provisions of existing law governing the adoption of emergency regulations by DCC to apply to this requirement. Exempts these emergency regulations from the Administrative Procedures Act, except DCC is required to post any proposed emergency regulations for public comment for 30 days, and to consider these comments in developing its regulations.

Provisions revising the regulation of industrial hemp under the Sherman Law:

1. Revises provisions of existing law permitting CDPH to adopt emergency regulations to implement provisions of law governing industrial hemp, by extending the length of time the emergency regulations can remain in effect before final regulations are adopted from 180 days to 360 days, and by repealing the restriction on using emergency regulations to establish an age limit for purchasing industrial hemp or determining maximum serving sizes.
2. Adds the following definitions to the provisions of law governing industrial hemp:
   1. “Limit of detection” means the lowest quantity of a substance or analyte that can be distinguished from the absence of that substance within a state confidence limit; and,
   2. “Synthetically derived cannabinoid” means a substance that is derived from a chemical reaction that changes the molecular structure of any substance separated or extracted from the plant Cannabis sativa L. Specifies that a synthetically derived cannabinoid does not include: a naturally occurring chemical substance that is separated or extracted from the plant by a chemical or mechanical extraction process, as long as that naturally occurring chemical substance does not undergo a change in molecular structure; cannabinoids that are produced by decarboxylation from a naturally occurring cannabinoid acid; or, any other chemical substance approved by CDPH in regulation.
3. Revises the requirement that an industrial hemp product include a certificate of analysis from an independent testing laboratory by requiring the analysis to confirm that the industrial hemp raw extract used in the industrial hemp product does not exceed a total THC concentration of 0.3% or a lower amount determined allowable by CDPH in regulation, rather than requiring that the mass of the industrial hemp extract used in the final form product does not exceed a THC concentration of 0.3%. Additionally requires the analysis to confirm the hemp product is in conformity with all other applicable requirements for final form products.
4. Prohibits the manufacture, distribution, or sale of an industrial hemp product that contains synthetically derived cannabinoids unless explicitly approved by CDPH in regulation.
5. Prohibits the manufacture, distribution, or sale of any of the following:
   1. Industrial hemp raw extract derived from, or an industrial hemp product containing, industrial hemp that was not produced from industrial hemp grown in accordance with provisions governing the cultivation of industrial hemp under the DFA if it was sourced from within California, or licensed in accordance with USDA requirements if sourced from outside the state;
   2. Industrial hemp raw extract with a total THC concentration that exceeds 0.3%, or a lower amount determined allowable by CDPH in regulation; or,
   3. An industrial hemp product containing industrial hemp raw extract with a total THC concentration that exceeds 0.3% or a lower amount determined allowable by CDPH in regulation.
6. Repeals a requirement that an initial determination by CDPH to exclude or include one or more isomers of THC or other cannabinoids from the definition of THC or comparable cannabinoid be confirmed through regulations no later than 18 months following the date of the initial determination.
7. Requires industrial hemp human food and beverage final form products to meet all of the following requirements:
   1. Requires a single serving of an industrial hemp product to be based on the amount of food or beverage customarily consumed in one eating occasion for that food or beverage;
   2. Requires a single serving of an industrial hemp dietary supplement in pill, tablet, or capsule form to be one unit; and,
   3. Prohibits a product from exceeding five servings per package.
8. Prohibits an industrial hemp final form product from exceeding 0.25 milligrams of THC per serving, or from having a total THC of more than one milligram per product. Requires a qualified testing laboratory to establish a limit of detection of one milligram or lower for total THC and requires a sample to pass if total THC does not exceed the limit of detection.
9. Permits CDPH to adopt regulations to implement 14) and 15) above, and permits the use of emergency regulations if filed within one year of the effective date of this bill.
10. Clarifies that the requirement for hemp manufacturers to register with CDPH applies to both California manufacturers and out-of-state manufacturers.
11. Specifies that a violation of any of the laws or regulations governing industrial hemp to be grounds for denying, suspending, forfeiting, revoking, or surrendering of an industrial hemp enrollment and oversight authorization.
12. Permits CDPH to deny, suspend, forfeit, revoke, or order to surrender an industrial hemp enrollment and oversight authorization when a peace officer, state official, or local official has notified CDPH that a manufacturer within its jurisdiction is in violation of state law and regulations relating to industrial hemp, and CDPH, through an investigation, has determined the violation is grounds for the action. Requires an investigation to include reasonable notice for the manufacturer to defend any allegations of a violation.
13. Prohibits an industrial hemp human food and beverage product from being labeled, marketed, or advertised as a product intended to produce an intoxicating effect.
14. Makes various technical, clarifying, and conforming changes.

Provisions related to seizure and embargo, and civil penalties:

1. Permits a peace officer or state official who possesses seizure authority to seize or embargo an industrial hemp product in any of the following circumstances: the product is subject to recall, quarantine, or embargo by CDPH; the product is subject to condemnation and destruction by CDPH or a court of law; or, the product is seized related to an investigation or disciplinary action by CDPH.
2. Permits a peace officer or state official, whenever the officer or official has probable cause to believe that any industrial hemp product is unlawful, or that the sale of that product would be in violation of the laws governing industrial hemp, to seize or embargo the product.
3. Permits the peace officer or state official to affix a tag or other appropriate marking to the industrial hemp product, and to give notice that the product is, or is suspected of being, unlawful and that it has been seized or embargoed.
4. Requires, when the peace officer or state official has found that the seized or embargoed product is lawful, to remove any tag or other marking previously affixed to the product.
5. Permits a peace officer or state official, when there is reasonable cause to believe that the embargo will be violated, to remove the embargoed product to a place of safekeeping.
6. Requires a peace officer or state official who seizes or embargoes an industrial hemp product to do the following:
   1. Request voluntary condemnation and destruction of the product by the retailer or other owner;
   2. Commence proceedings in the superior court for condemnation and destruction of the product against the retailer or other owner; and,
   3. Release the embargo or otherwise return the product if compliance has been established.
7. Permits the product to be destroyed pursuant to the written consent of the retailer or other owner in the absence of a court order.
8. Requires the seized or embargoed hemp product, if a court finds it is unlawful, to be destroyed at the expense of the claimant, retailer, owner, or manufacturer. Requires fees and costs to be assigned to the retailer unless the retailer proves that fees and costs should be assigned to another claimant, owner, or manufacturer.
9. Permits a court to order the industrial hemp product, if it finds that a product’s unlawful condition can be corrected and all provisions governing industrial hemp can be complied with, after costs, fees, and expenses have been paid, to be delivered to the claimant, retailer, owner, or manufacturer to be brought into compliance. Requires the claimant or retailer to provide a sufficient bond that is conditioned upon the product being brought into compliance, and requires the bond to be discharged when the court finds the product has been brought into compliance and all expenses of supervision have been paid.
10. Requires all fees and costs associated with the investigation, condemnation, and destruction of an illegal hemp product, including the costs of storage and testing, to be incurred by the claimant, retailer, owner, or manufacturer of the industrial hemp, and requires fees and costs to be assigned to the retailer unless the retailer proves that fees and costs should be assigned to a claimant, owner, or manufacturer.
11. Provides for civil penalties of up to $2,500 per violation for violations of the laws governing the retail sale of industrial hemp. Permits an action for civil penalties to be brought by the Attorney General on behalf of the people or on behalf of the department or another state agency, by a county counsel or district attorney, or by a city attorney or city prosecutor. Requires the penalty to first be used to reimburse the Attorney General, county counsel or district attorney, or city attorney or city prosecutor that brought the civil action. Establishes a statute of limitation for civil penalties of three years from the date of violation.
12. Provides that a violation of the provisions of law governing industrial hemp is a misdemeanor or punishable by a penalty fine not to exceed $1,000 for each violation or by imprisonment in the county jail for a period not exceeding one year, or both. Specifies that each day a violation continues is considered a separate violation.
13. Permits CDPH, by regulation, to provide for additional administrative penalties for any violation of the industrial hemp laws. Specifies that the remedies under this bill are in addition to, and do not supersede or limit, any and all other remedies, civil or criminal, nor does this bill limit any authority conferred on CDPH to administer and enforce the law.
14. Includes a non-preemption clause, by specifying that the laws governing industrial hemp do not preempt or otherwise prohibit the adoption or enforcement of any local ordinance or regulation that imposes greater restrictions on the retail sale of industrial hemp products, and to the extent there is an inconsistency between state law and a local ordinance or regulation, the greater restriction on the retail sale of industrial hemp product shall be enforced.
15. Establishes a rebuttable presumption that a product containing or purporting to contain a cannabinoid is a cannabis product if there is reasonable cause to believe that the product is not an authorized industrial hemp product.

FISCAL EFFECT:

According to the Assembly Committee on Appropriations, one-time and ongoing costs in the millions of dollars to DCC and costs of approximately $500,000 to CDPH.

PRIOR VOTES:

COMMENTS:

1. Author’s statement. According to the author, since the federal “Farm Bill” legalized industrial hemp in 2018, hemp-derived products containing cannabidiol (CBD) and other cannabinoids have been widely produced and sold to consumers at grocery stores, fitness centers, and other retail locations. In 2021, I authored AB 45 (Aguiar-Curry, Chapter 457, Statutes of 2021) to create the most protective testing standards and regulations for the hemp industry in the nation while maintaining access to CBD, a non-intoxicating product that is used to treat epilepsy, anxiety, chronic pain and other health concerns. However, a lack of enforcement and evolving industry practices have led to a proliferation of intoxicating hemp products that are easily accessible in our communities, including to youth, threaten public health, and undercut the legal hemp and cannabis markets. This bill aims to protect public health by eliminating access to intoxicating cannabinoids outside permitted dispensaries, while providing a pathway for well-regulated hemp and cannabis industries to participate in the federally- and state-legal hemp market. Specifically, this bill: 1) increases enforcement against illegal hemp products, including further empowering state and local public health agencies; 2) ensures that all intoxicating products are treated, regulated and taxed as cannabis; and, 3) allows California to join 17 other states to integrate hemp into the cannabis supply chain.
2. What is CBD used for and is it safe? Hemp-derived CBD has been touted for a wide variety of health issues, but the strongest scientific evidence is for its effectiveness in treating some types of epilepsy, which led to FDA approving the first ever cannabis-derived medicine for these conditions, Epidiolex, which contains CBD. CBD is commonly used to address anxiety, insomnia, different types of chronic pain, and various other ailments, although it is important to note that none of these medical uses have been sanctioned by the FDA. According to the Mayo Clinic, while CBD is being studied as a treatment for a wide range of conditions, research supporting the drug’s benefits is still limited. Though it is often well tolerated, CBD can cause side effects such as dry mouth, diarrhea, reduced appetite, drowsiness and fatigue, and can also interact with other medications such as blood thinners. The Mayo Clinic states that another cause for concern is the unreliability of the purity and dosage of CBD products. A study of 84 CBD products bought online showed that more than a quarter of the products contained less CBD than labeled, and in addition, THC was found in 18 products. On the other hand, according to a report published in November of 2017 by the World Health Organization (WHO), CBD exhibits no effects indicative of any abuse or dependence potential. The WHO stated that CBD is generally well tolerated with a good safety profile.
3. Federal status of the use of CBD from industrial hemp. After initially being legalized for cultivation for research purposes only in the 2014 Farm Bill, Congress removed industrial hemp from the definition of marijuana in the Controlled Substances Act in the 2018 Farm Bill. This meant that cannabis plants and derivatives that contain no more than 0.3% Delta-9 THC on a dry weight basis are no longer controlled substances, which legalized the cultivation of industrial hemp. However, the 2018 Farm Bill did not eliminate the authority of the FDA to regulate cannabis compounds. The FDA approved Epidiolex, a drug that is 98% CBD isolate, to provide treatment for epileptic seizures. Based on this and other drug applications, the FDA has taken the position that CBD is a drug ingredient, and cannot be marketed as a dietary supplement or added to foods without its approval. However, FDA’s enforcement of this position, until recently, had been limited to cease and desist letters to companies that are making health claims. For example, on December 22, 2020, the FDA issued five warning letters to companies for selling products containing CBD in ways that violate the Food, Drug, and Cosmetic Act, with all five warning letters addressing the illegal marketing of unapproved CBD products claiming to treat medical conditions. In addition, the warning letters addressed violations relating to the addition of CBD to food, and the impermissible marketing of CBD products as dietary supplements. More recently, the FDA has sent warning letters related to products containing Delta-8 THC, described in 4) below.
   
   In May of 2019, the FDA held its first hearing on CBD products, as it evaluated the regulation of CBD. According to an article in the Washington Post published on May 31, 2019, during ten hours of testimony, hemp growers, start-up businesses, academic researchers and consumer advocates argued about how FDA should regulate the already booming CBD industry, with some demanding strict oversight, while others lobbied for looser regulation. At the hearing, scientists and consumer advocates warned that for the thousands of CBD products being sold, there is little data to guide dosage levels, expiration dates, and manufacturing protocols to make sure they don’t also contain other elements like THC. The FDA held another stakeholder meeting in July of 2020, and held a multidisciplinary scientific conference in November of 2020. After convening a high-level, internal working group to explore potential pathways for CBD products, the FDA announced on January 26, 2023, that it had concluded that a new regulatory pathway for CBD is needed that balances individuals’ desire for access to CBD products with the regulatory oversight needed to manage risk, and stated it was prepared to work with Congress on this matter. As part of this statement, it also denied three citizen petitions that had asked FDA to conduct rulemaking to allow the marketing of CBD products as dietary supplements. According to the FDA: “Given the available evidence, it is not apparent how CBD products could meet safety standards for dietary supplements or food additives. For example, we have not found adequate evidence to determine how much CBD can be consumed, and for how long, before causing harm. Therefore, we do not intend to pursue rulemaking allowing the use of CBD in dietary supplements or conventional foods.”
   
4. Concern over Delta-8 THC and other artificially derived forms of intoxicating hemp. On February 27, 2021, the New York Times published an article, “This Drug Gets You High, and Is Legal (Maybe) Across the Country.” The article suggested that a form of THC that is permissible in industrial hemp is being touted as an alternative to the psychoactive ingredient in cannabis. Under federal law, psychoactive Delta-9 THC is explicitly prohibited, but the law is silent on Delta-8 THC. The FDA states that Delta-8 THC is one of over 100 cannabinoids produced in the Cannabis sativa L. plant (which is the plant used for industrial hemp), but is not found naturally in significant amounts. Concentrated amounts of Delta-8 THC are typically manufactured from hemp-derived CBD and have psychoactive and intoxicating effects. According to the New York Times article, with Delta-8, entrepreneurs believe they have found a way to take advantage of the country’s fractured and convoluted laws on recreational marijuana use, and have begun extracting and packaging it as a legal edible alternative. The article states that it’s not quite that simple, and that federal agencies, including the Drug Enforcement Administration, are still considering their options for enforcement and regulation. According to the article, “Precisely what kind of high Delta-8 produces depends on whom you ask. Some think it as ‘marijuana light,’ while others are pitching it as pain relief with less psychoactivity.” The article quotes an editor of Leafly.com, a popular source of information about cannabis, as saying that Delta-8 has become “extremely ascendant” and reflects “prohibition downfall interregnum,” where consumer demand and entrepreneurial activity are exploiting the holes in rapidly evolving and fractured law. In May of 2022, the FDA issued warning letters to five companies for selling products labeled as containing Delta-8 THC in ways that violate the Food Drug and Cosmetic Act. The warning letters address the illegal marketing of unapproved Delta-8 THC products as unapproved treatments for various medical conditions or for other therapeutic uses.
   
   Beyond Delta-8, businesses are using chemistry to make other artificially derived cannabinoids, including Delta-10 THC (or THCO), hexahydrocannabinol (HHC), and tetrahydrocannabiphorol (THC-P). According to the Public Health Institute (PHI), THC-P is more than 30 times the potency of traditional Delta-9 THC, making it particularly hazardous. Even more than hemp-derived products containing traditional Delta-9 THC, artificially derived cannabinoid products are often packaged in high doses, including packages that containing hundreds or even thousands of milligrams. PHI states that a single gummy may contain 100mg or more of these artificially derived cannabinoids, easily capable of knocking out a child or adult.
5. Letter from the Cannabis Regulators Association urging federal action on hemp-derived cannabinoid products. On April 17, 2023, the Cannabis Regulators Association (CANNRA), which represents cannabis and hemp regulatory agencies from more than 40 member states and U.S. territories, sent a letter to congressional leaders urging federal action to provide a regulatory framework for hemp-derived cannabinoid products. CANNRA states that these products lack federal manufacturing, testing, and labeling requirements, and they pose consumer safety and public health risks. According to CANNRA, while the 2018 Farm Bill was drafted with a focus on agricultural commodities and non-intoxicating hemp products, its language created a thriving market for intoxicating cannabinoid products that fit within the definition of “hemp.” State regulators have observed several loopholes that businesses are using to justify the manufacture or sale of intoxicating hemp derived products, including the “0.3% loophole.” CANNRA states that while the threshold of 0.3% Delta-9 THC by weight is a small amount of THC in a hemp plant, when applied to hemp-derived products like chocolate bars or beverages that weigh significantly more, 0.3% by weight can amount to hundreds of milligrams of THC. For example, a 50-gram chocolate bar at 0.3% THC would have around 150mg of THC (30 times the standard 5mg THC dose established by the National Institute on Drug Abuse). Another loophole identified by CANNRA is the “derivatives loophole,” because the definition of hemp also includes “all derivatives” of the plant. As a result, many hemp businesses are taking CBD derived from hemp and chemically converting it into intoxicating cannabinoid derivatives like Delta-8 THC, THCO acetates, and HHC. This loophole is resulting in chemically derived compounds that have not been well studied for human safety. CANNRA stated that federal engagement is urgently needed to support states in the regulation of these products and to protect public health and consumer safety.
6. State regulation of cannabis. In 1996, California first legalized cannabis for medical consumption via Proposition 215, also known as the Compassionate Use Act. Prop 215 protected qualified patients and primary caregivers from prosecution related to the possession and cultivation of cannabis for medicinal purposes. In 2015, the Legislature passed the Medical Cannabis Regulation and Safety Act (MCRSA), which established a comprehensive, statewide licensing and regulatory framework for the cultivation, manufacture, transportation, testing, distribution, and sale of medicinal cannabis. Shortly following the passage of MCRSA in November 2016, California voters passed Proposition 64, the "Control, Regulate and Tax Adult Use of Marijuana Act,” which legalized adult-use cannabis. Less than a year later in June 2017, the Legislature passed a budget trailer bill, SB 94 (Committee on Budget and Fiscal Review, Chapter 27, Statutes of 2017), that integrated MCRSA with Prop 64 to create MAUCRSA, the current regulatory structure for both medicinal and adult-use cannabis. Beginning in 2018, Prop 64 permitted adults 21 years of age or older to legally grow, possess, and use cannabis for nonmedical purposes, with certain restrictions. In 2020, Governor Newsom proposed consolidation of the three licensing and regulatory programs within separate state agencies to form a single department with a goal of streamlining and simplifying access to licensing and regulatory oversight of cannabis. In 2021, DCC was formally established with licensing, regulatory and enforcement authority. DCC was designed to centralize and align critical licensing, compliance, and enforcement responsibilities to help build a sustainable and successful legal cannabis market by creating a single point of contact for cannabis applicant, licensees, and local governments.
7. The legal separation of industrial hemp and cannabis. Supply chains and regulations for industrial hemp and cannabis are kept principally separate in California. DCC, through regulations, prohibits cannabis retailers from selling any non-cannabis goods besides cannabis accessories and branded merchandise, and industrial hemp falls under the category of a “non-cannabis good.” In addition, California law stipulates that industrial hemp may not be cultivated on premises licensed by DCC to cultivate or process cannabis. Finally, CBD products derived from cannabis are regulated quite differently from the same CBD products containing hemp-derived CBD, despite being essentially the same. Many cannabis retailers may wish to also sell products derived from hemp, as the costs may be lower given the taxation and regulatory differences.
8. The Hemp Report. AB 45 (Aguiar-Curry, Chapter 576, Statutes of 2021), which established a regulatory structure in CDPH for food, beverage and cosmetic products containing industrial hemp, also required DCC to prepare a report for the Governor and the Legislature outlining the steps necessary to allow for the incorporation of hemp cannabinoids into the cannabis supply chain by July 1, 2022. The Hemp Report was released in January of 2023. The report did not provide a specific framework for including hemp into the cannabis marketplace and instead provided guidance into the areas of contrast in cannabis and hemp regulations and the particular areas that would need to be addressed or reconciled in order to safely and appropriately integrate hemp into MAUCRSA while maintaining alignment with Prop 64, which specifically excluded hemp from the commercial cannabis regulatory framework. The report identified several issues that need to be resolved, including transportation requirements, as all cannabis or cannabis-regulated products may only be transported by a licensed distributor which is not the same for hemp products. Additionally, packaging and labeling requirements for cannabis products are very specific, and do not apply to hemp products. The report also raised issues related to compliance with track and trace; the inclusion of hemp that is sourced outside of California, as cannabis or cannabis products are only to include California-sourced product; market impacts and tax implication; and, necessary time for regulatory updates. Part of the DCC Hemp Report’s conclusion noted the following: “As the statutory and regulatory provisions for hemp and cannabis currently reflect two separate systems and supply chains, the first step in this process must be for policy makers to identify a more specific policy direction, which will in turn inform the development of necessary statutory changes. Once these statutes are enacted and necessary funding is appropriated, (DCC) would engage in extensive programmatic development, including engaging in state contracting processes that would likely implicate current contracts when feasible and new contracts when necessary to implement specific mandates, including modifications to the California Cannabis Track and Trace system and possibly (DCC’s) licensing systems.”
9. Double referral. This bill was heard in the Senate Business and Professions Committee on June 24, 2024, and passed with a 9-0 vote.
10. Prior legislation. AB 420 (Aguiar-Curry of 2023) would have specified that MAUCRSA does not prohibit a cannabis licensee from manufacturing, distributing, or selling industrial hemp products if the product complies with applicable laws and regulations governing industrial hemp; strengthened the prohibition against industrial hemp containing chemically synthesized cannabinoids by furthering the definition of “chemically synthesized cannabinoid,” and by prohibiting the manufacture, distribution, or selling of an industrial hemp product that contains a cannabinoid that is not present in nature in commercially meaningful quantities in the plant of Cannabis sativa L., unless explicitly approved by CDPH in regulation. AB 420 was held on the Senate Appropriations Committee suspense file.
    
    AB 1656 (Aguiar-Curry of 2022) stated that MAUCRSA does not prohibit a cannabis licensee from manufacturing, distributing, or selling industrial hemp products, as defined in state law and including cannabinoids, extracts, or derivatives of industrial hemp, if the product complies with all applicable state laws and regulations. AB 1656 was not taken up on the Senate Floor.
    
    SB 292 (Wilk, Chapter 485, Statutes of 2021) conformed current state law to the FDA’s Interim Final Rule regarding reporting and testing of industrial hemp.
    
    AB 45 (Aguiar-Curry, Chapter 576, Statutes of 2021) established a regulatory structure in CDPH for food, beverage and cosmetic products containing industrial hemp, and limiting these products to containing no more than 0.3% concentration of THC.
    
    AB 228 (Aguiar-Curry of 2019) would have established a regulatory framework for industrial hemp products that contain no more than 0.3% THC and is a cosmetic, food, food additive, dietary supplement, or herb. AB 228 was held on the Senate Appropriations Committee suspense file.
    
    SB 94 (Committee on Budget and Fiscal Review, Chapter 27, Statutes of 2017) establishes a single system of administration for cannabis laws in California, combining the MCRSA with the Adult Use of Marijuana Act.
    
    AB 266 (Bonta, Chapter 689, Statutes of 2015), SB 643 (McGuire, Chapter 719, Statutes of 2015), and AB 243 (Wood, Chapter 688, Statutes of 2015) were a package of bills that established a licensing and regulatory framework for medical marijuana under MCRSA.
    
    SB 566 (Leno, Chapter 398, Statutes of 2013), allows hemp to be grown in California, upon federal approval, by defining “industrial hemp” to be excluded from the definition of “marijuana”, a Schedule I controlled substance.
11. Support. This bill is co-sponsored by the California Cannabis Industry Association and the United Food and Commercial Workers, and they are joined by a coalition of supporters that include the California Retailers Association, the California Cannabis Manufacturers Association, Weedmaps, Cannacraft, and others. Supporters state that this bill addresses urgent public health concerns related to hemp products by strengthening the regulatory framework established by AB 45 in 2021. Additionally, this bill facilitates the integration of hemp cannabinoids into the regulated cannabis supply chain, promoting a robust, transparent, and economically viable cannabis and hemp industry in California.
    
    A coalition of law enforcement associations write in support, stating that the current lack of oversight and enforcement has created a Wild West atmosphere, where bad actors can exploit loopholes and put the public at risk. These products are often mislabeled, marketed as safe alternatives to cannabis, and sold without age restrictions, resulting in a new wave of substance misuse and public safety concerns, particularly among our youth. By strengthening enforcement provisions, closing loopholes, and empowering regulatory agencies to crack down on illicit products, this bill takes a critical step in bringing much-needed accountability to the hemp industry.
    
    The San Diego Regional Chamber of Commerce states, in support, that back in 2018, the federal Farm Bill clarified that industrial hemp is an agricultural crop and removed hemp from the federal Controlled Substances Act schedules. This has allowed farmers to cultivate industrial hemp with levels of psychoactive compounds of 0.3% or less, fostering the rising popularity of CBD products used for pain relief, anxiety, or other disorders. However, intoxicating hemp products have also gained popularity using a loophole in federal law that measures THC content by weight, rather than intoxicating effect. While certain cities across the State currently prohibit commercial cannabis operations, the emergence of intoxicating hemp poses a significant threat to public health and safety, particularly for our youth, that are being presented to mislabeled products.
12. Concerns, support if amended, oppose unless amended. A number of different organizations, some of which submitted letters as part of a coalition, have concerns or requested amendments from a broad spectrum of views, many in direct contradiction with each other. The following is a summary of the various positions different groups have taken on this bill.
    1. Those wanting more restrictive limitations. PHI, Marin Residents for Public Health Cannabis Policies, Bay Area Clinical Associates, Safe Launch, and others submitted a joint letter of support if amended. These groups note that with the limit of 1 mg THC per package and the prohibition on synthetic cannabinoids, this bill has greatly improved and will have a substantial positive public health impact, but serious issues persist. These groups request an even lower limit of 0.5 mg per package, and making it more clear that inhalable products are prohibited. These groups do not support the provisions in this bill allowing industrial hemp products to be sold by the cannabis industries, and that doing so will undermine legal cannabis operators who have been following the rules. These groups suggest amendments strengthening the prohibition against synthetics, and recommends a minimum age of 21 years for purchase of any industrial hemp product.
    2. Those opposing integration with cannabis. The Origins Council, representing 800 small and independent cannabis businesses in rural legacy producing counties, most of whom are homestead and legacy cultivators, oppose this bill unless amended, focused primarily on the provisions to incorporate hemp into legal cannabis products. A number of cannabis organizations and farmers joined the Origins Council in this argument. The Origins Council points to the Hemp Report published by DCC which discusses the numerous policy and logistical challenges in this policy area. In particular, the Origins Council emphasizes a critical point that has often been overlooked in discussions on integration: this bill’s integration provisions would allow hemp cultivators (not licensed by DCC) to sell hemp biomass, including hemp-derived THC, to cannabis manufacturers for integration into legal cannabis products, yet these cultivators are regulated to a dramatically lesser degree than DCC-licensed cannabis cultivators growing the same plant for largely the same purposes. While amendments have been taken to incrementally address this dynamic, it is not fully resolved, and so the Origins Council is requesting that the bill prohibit the incorporation of naturally-occurring THC and comparable cannabinoids extracted from hemp into legal cannabis products until cannabis and hemp cultivation are regulated equally as agriculture. Additionally, the Origins Council requests that hemp products produced outside the cannabis supply chain and sold at cannabis retailers to be integrated at the point of cannabis distribution, and requests that integration regulations be promulgated through normal rulemaking rather than emergency regulations. Finally, the Origins Council, similar to the PHI, requests that the allowable quantity of THC in a hemp product be reduced to 0.5 mg.
    3. Those wanting exceptions for medical uses. Bonnie Goldstein, MD, who is one of the leading physicians using cannabis products to care for children with treatment-resistant epilepsy, submitted a letter concerned about the impact of limiting the amount of delta-9 THC that occurs naturally in full spectrum hemp-derived CBD products. According to Dr. Goldstein, the effective ratio of CBD to THC for the majority of children with severe conditions range from 15:1 to 50:1, with the majority using between 20:1 to 30:1. According to Dr. Goldstein, these products do not cause intoxication or impairment when used medically. Seriously ill children primarily use hemp-derived CBD-dominant tincture products due to the high doses required, which are difficult to deliver through edible products. Tinctures allow for accurate and personalized dosing. Dr. Goldstein states that studies indicate that children with severe epilepsy, autism and other serious illnesses often need CBD doses as high as 25 mg per kilogram of body weight per day. For a child weighing 25 kg, this amounts to 625 mg of CBD per day, and Dr. Goldstein emphasizes that there are no products available in California dispensaries that can deliver these doses in an affordable manner. CBD-dominant cannabis products with the appropriate ratios that are available in dispensaries contain at most 1000 mg per bottle, insufficient for even two days of dosing for the child in this example. Dr. Goldstein notes that although these high doses of CBD are accompanied by naturally occurring THC, the titration dosing method employed by these patients prevents unwanted impairment. Due to the lack of appropriate high-ratio CBD products in dispensaries, parents have turned to the hemp-derived CBD market, which offers products with the proper ratios and concentrations of CBD and THC at affordable costs. To maintain effective ratios for these vulnerable patients, Dr. Goldstein argues that the THC in these products must be higher than what is proposed in this bill. California NORML, which previously had been listed in support of this bill, recently submitted a letter of support if amended to accommodate high-CBD medicinal hemp extracts along the lines of what Dr. Goldstein is recommending.
    4. Those who believe the THC restrictions are too limiting and want to sell hemp products with some level of THC. The US Hemp Roundtable submitted an oppose unless amended letter, stating that the controls in this bill are so tight that California companies that have played by the rules would be put out of business while effectively leaving the intoxicating products on many store shelves. According to the US Hemp Roundtable, this bill would cause hemp CBD businesses to pull out of the California market rather than reformulate their products to comply with the staggeringly low milligram cap in the bill. If the level of THC is forced down to this miniscule level, the therapeutic benefits will dissipate and the demand for hemp CBD products will largely evaporate. The US Hemp Roundtable requests amendments to increase the allowable milligrams of THC in a hemp CBD product to a level that protects the ability of the industry to serve the California market, and to eliminate the cap on the number of servings per package.
       
       The Cann + Botl Company, and Cheech and Chong Global Holdings are opposed to this bill unless amended to permit low-dose (which they state is 5 mg), hemp-derived THC beverages. These companies argue that consumers go to cannabis dispensaries to purchase high-dose THC flower, edibles, vape pens, and concentrate products, which collectively make up approximately 95% of cannabis sales in California, as opposed to beverages, especially low-dose, hemp-derived beverages. These companies suggests there is an effective and practical alternative to this bill’s restrictions, focused on low-dose, hemp-derived beverages. Specifically, these companies are asking for the following amendments:
       1. Place the licensing, regulation, and enforcement of low-dose, hemp-derived beverages under the authority of the California Department of Alcohol Beverage Control (ABC);
       2. Permit low-dose beverages with up to 5 mg of hemp-derived THC per beverage to be sold by ABC-licensed and DCC-licensed entities;
       3. Restrict sales of these beverages to those 21 and older with age verification prior to sale; and,
       4. Subject hemp-derived beverages to the same DCC testing standards as beverages containing THC derived from cannabis.
13. Policy comment. As illustrated in the wide variety of positions on this bill, the past few years have seen the hemp industry expand into products that include some, and in some cases, a significant amount, of intoxicating forms of THC or comparable cannabinoids. While there was an acknowledgement when AB 45 was enacted that there could be a small amount of THC in a hemp product, since a small amount occurs naturally, proponents of hemp at the time focused on the potential beneficial properties of CBD. It was never intended to permit a product to be sold with intoxicating levels of THC, hence the reason that no age limit was included in AB 45. Much of the discourse around this bill hinges, at least in part, on the extent to which THC and comparable cannabinoids should be allowed to be derived from industrial hemp. This bill proposes a limit of 1 mg per product, satisfying some of the proponents who want a strict limit, though some prefer 0.5 or even less. Others argue this low level would decimate the hemp product industry, implying that there is very little demand for products with just CBD, and the market is demanding at least some higher level of the intoxicating compounds associated with cannabis plants. If we were starting from scratch, with no regulatory framework for either cannabis or industrial hemp, this conversation might be different. But there is an extensive regulatory framework for cannabis, with significant and costly requirements for cannabis farmers in particular that do not apply to hemp farmers. Permitting THC products to be derived from hemp risks undercutting cannabis cultivators who have invested significant resources in playing by the rules. Given these competing interests, the author and sponsors have chosen to focus on strengthening the industrial hemp statutes to crack down on synthetic forms of THC, placing a tighter limit on THC in hemp products, and integrating hemp products into the DCC-regulated cannabis market. As this bill moves forward, the author may wish to consider more clearly limiting the ability of manufacturers to use industrial hemp to extract THC and comparable cannabinoids, even when integrated into the DCC-regulated marketplace, while there exists such a disparity in cultivation requirements.
14. Technical Assistance amendments under consideration. The author's office is currently considering significant technical assistance (TA) amendments provided by the Administration to increase consumer protections and protect youth, enhance enforcement of illegal hemp products, and establish a comprehensive framework for the integration of hemp-derived cannabinoid products within the DCC-regulated cannabis infrastructure. These changes clearly distinguish between products that contain intoxicating THC and those containing only hemp-derived CBD, by requiring that any products containing THC may only be sold in a DCC regulated dispensary.

SUPPORT AND OPPOSITION:

Support: California Cannabis Industry Association (co-sponsor)
United Food and Commercial Workers (co-sponsor)
Angeles Emeralds
Arcadia Police Officers' Association
Burbank Police Officers' Association
California Cannabis Manufacturers Association
California Coalition of School Safety Professionals
California Minority Alliance
California Narcotic Officers' Association

California NORML
California Reserve Peace Officers Association
California Retailers Association
California State Association of Counties
California State Grange
Cannabis Distributors Association
CannaCraft, INC.
Claremont Police Officers Association
Coachella Valley Cannabis Alliance Network
Corona Police Officers Association
Culver City Police Officers' Association
Deputy Sheriffs' Association of Monterey County
Embarc
Fullerton Police Officers' Association
Good Farmers Great Neighbors
Kiva Confections
League of California Cities
Long Beach Collective Association
Los Angeles School Police Management Association
Los Angeles School Police Officers Association
March and Ash
Murrieta Police Officers' Association
Newport Beach Police Association
Novato Police Officers Association
Palos Verdes Police Officers Association
Placer County Deputy Sheriffs' Association
Pomona Police Officers' Association
Riverside Police Officers Association
Riverside Sheriffs' Association
Rural County Representatives of California
San Diego Regional Chamber of Commerce
San Francisco Cannabis Retailers Alliance
Santa Ana Police Officers Association
Silicon Valley Cannabis Alliance
Social Equity LA
United Cannabis Business Association
Upland Police Officers Association
Weedmaps

Two individuals

Oppose: Be the Influence (unless amended)
Big Sur Farmers Association (unless amended)
Cann + Botl Company (unless amended)

Cheech and Chong’s Global Holdings (unless amended)
Humboldt County Growers Alliance (unless amended)
Marin Residents for Public Health Cannabis Policies (unless amended)
Mendocino Cannabis Alliance (unless amended)
Nevada County Cannabis Alliance (unless amended)

North Fork Distribution
Ojai Energetics (unless amended)
Origins Council (unless amended)
RRLED LLC Dba Bar Beverages (unless amended)
Social Advocates for Youth San Diego (unless amended)
Trinity County Agriculture Alliance (unless amended)
US Hemp Roundtable (unless amended)

Seven individuals

-- END --

SENATE COMMITTEE ON HEALTH

Senator Richard Roth, Chair

BILL NO: AB 2223

SUBJECT: Cannabis: industrial hemp

SUMMARY:

Revises the requirements governing industrial hemp products to clarify and expand the prohibition on synthetic forms of THC, limits hemp products to no more than one milligram of THC per product, including no more than 0.25 milligrams per serving, establishes a seizure and embargo process for unlawful hemp products, and provides for the integration of hemp products into the marketplace for cannabis regulated by the Department of Cannabis Control.

Existing law:

1. Enacts the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to establish a comprehensive system to control and regulate the cultivation, distribution, transport, storage, manufacturing, processing, and sale of both medicinal cannabis and cannabis products, and adult-use cannabis and cannabis products for adults 21 years of age and over, regulated by the Department of Cannabis Control (DCC). [BPC §26000, et seq.]
2. Defines “cannabis,” for purposes of MAUCRSA, as all parts of the plant Cannabis sativa Linnaeus, Cannabis indica, or Cannabis ruderalis, the seeds thereof, the resin, and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds, or resin. Excludes “industrial hemp,” as defined in the California Uniform Controlled Substances Act (UCS Act), from the definition of cannabis for purposes of MAUCRSA. [BPC §26001(f)]
3. Defines industrial hemp, under the UCS Act, as an agricultural product, whether growing or not, that is limited to types of the plant Cannabis sativa L. and any part of that plant, including the seeds of the plant and all derivatives, extracts, the resin extracted from any part of the plant, cannabinoids, isomers, acids, salts, and salts of isomers, with a delta-9 tetrahydrocannabinol (THC) concentration of no more than 0.3% on a dry weight basis. Excludes industrial hemp from the UCS Act, and from MAUCRSA, and instead requires industrial hemp to be regulated by the California Department of Food and Agriculture (DFA), as specified. [HSC §11018.5]
4. Establishes a regulatory structure for the cultivation of industrial hemp, and an Industrial Hemp Advisory Board, under the DFA. Requires a grower of industrial hemp for commercial purposes to register with the county agricultural commissioner. [FAC §81000, et seq.]
5. Establishes a regulatory structure in the Sherman Food, Drug, and Cosmetic Law (Sherman Law) under the jurisdiction of the California Department of Public Health (CDPH) for food, beverage and cosmetic products containing industrial hemp, and limits these products to containing no more than 0.3% concentration of THC. [HSC §111920, et seq.]
6. Defines “industrial hemp,” for purposes of food, beverage, and cosmetic products under the Sherman Law, as having the same definition as in the UCS Act above, and additionally specifically prohibits industrial hemp from including cannabinoids produced through chemical synthesis. [HSC §111920(f)]
7. Defines “THC or comparable cannabinoid,” for purposes of the regulatory structure for industrial hemp products, as including, in part, any THC, including Delta-8, Delta-9, and Delta-10, and any other cannabinoid, except cannabidiol (CBD), that CDPH determines causes intoxication. [HSC §111920(l)]
8. Restricts a licensed cannabis retailer, in addition to cannabis goods, to selling only cannabis accessories and the branded merchandise of any licensee. However, permits a licensed retailer who operates a consumption area on the premises to also sell prepackaged, non-cannabis-infused, non-alcoholic food and beverages if the applicable local jurisdiction permits such sales. [4 CCR §15407]

This bill:

Provisions incorporating industrial hemp into MAUCRSA:

1. Specifies that MAUCRSA does not prohibit a DCC licensee from manufacturing, processing, distributing, or selling products that contain industrial hemp, or cannabinoids, extracts, or derivatives from industrial hemp, if the product complies with all applicable state laws and regulations, including provisions governing the cultivation of industrial hemp under the DFA, and provisions in the Sherman Law governing the manufacture and sale of industrial hemp products.
2. Permits a DCC licensed manufacturer or microbusiness to obtain industrial hemp from a person registered with CDPH under the provisions of the Sherman Law governing industrial hemp.
3. Requires industrial hemp that is purchased by a DCC licensee to be tracked as a separate batch throughout the manufacturing process in order to document the disposition of that hemp or hemp product. Requires a DCC licensee that manufactures, distributes, or sells products that contain industrial hemp to record all transactions and relevant data, as prescribed by DCC, in the state track and trace system.
4. Requires a manufactured cannabis product that incorporates industrial hemp to comply with all of the requirements for cannabis contained in MAUCRSA, and any regulations adopted by DCC.
5. Prohibits a DCC licensed manufacturer from incorporating THC or comparable cannabinoids that have been converted from a hemp-derived cannabinoid into cannabis, a cannabis product, or an industrial hemp product. Prohibits a DCC licensed retailer or distributor from selling or distributing cannabis, a cannabis product, or an industrial hemp product that contains THC or a comparable cannabinoid that has been converted from a hemp-derived cannabinoid.
6. Requires DCC to implement a process by which a licensee that is also a registered hemp manufacturer under the Sherman Law to use the same premises.
7. Requires DCC, notwithstanding any other law, to adopt and readopt emergency regulations to implement the provisions in 1) through 6) above on or before July 1, 2025. Requires provisions of existing law governing the adoption of emergency regulations by DCC to apply to this requirement. Exempts these emergency regulations from the Administrative Procedures Act, except DCC is required to post any proposed emergency regulations for public comment for 30 days, and to consider these comments in developing its regulations.

Provisions revising the regulation of industrial hemp under the Sherman Law:

1. Revises provisions of existing law permitting CDPH to adopt emergency regulations to implement provisions of law governing industrial hemp, by extending the length of time the emergency regulations can remain in effect before final regulations are adopted from 180 days to 360 days, and by repealing the restriction on using emergency regulations to establish an age limit for purchasing industrial hemp or determining maximum serving sizes.
2. Adds the following definitions to the provisions of law governing industrial hemp:
   1. “Limit of detection” means the lowest quantity of a substance or analyte that can be distinguished from the absence of that substance within a state confidence limit; and,
   2. “Synthetically derived cannabinoid” means a substance that is derived from a chemical reaction that changes the molecular structure of any substance separated or extracted from the plant Cannabis sativa L. Specifies that a synthetically derived cannabinoid does not include: a naturally occurring chemical substance that is separated or extracted from the plant by a chemical or mechanical extraction process, as long as that naturally occurring chemical substance does not undergo a change in molecular structure; cannabinoids that are produced by decarboxylation from a naturally occurring cannabinoid acid; or, any other chemical substance approved by CDPH in regulation.
3. Revises the requirement that an industrial hemp product include a certificate of analysis from an independent testing laboratory by requiring the analysis to confirm that the industrial hemp raw extract used in the industrial hemp product does not exceed a total THC concentration of 0.3% or a lower amount determined allowable by CDPH in regulation, rather than requiring that the mass of the industrial hemp extract used in the final form product does not exceed a THC concentration of 0.3%. Additionally requires the analysis to confirm the hemp product is in conformity with all other applicable requirements for final form products.
4. Prohibits the manufacture, distribution, or sale of an industrial hemp product that contains synthetically derived cannabinoids unless explicitly approved by CDPH in regulation.
5. Prohibits the manufacture, distribution, or sale of any of the following:
   1. Industrial hemp raw extract derived from, or an industrial hemp product containing, industrial hemp that was not produced from industrial hemp grown in accordance with provisions governing the cultivation of industrial hemp under the DFA if it was sourced from within California, or licensed in accordance with USDA requirements if sourced from outside the state;
   2. Industrial hemp raw extract with a total THC concentration that exceeds 0.3%, or a lower amount determined allowable by CDPH in regulation; or,
   3. An industrial hemp product containing industrial hemp raw extract with a total THC concentration that exceeds 0.3% or a lower amount determined allowable by CDPH in regulation.
6. Repeals a requirement that an initial determination by CDPH to exclude or include one or more isomers of THC or other cannabinoids from the definition of THC or comparable cannabinoid be confirmed through regulations no later than 18 months following the date of the initial determination.
7. Requires industrial hemp human food and beverage final form products to meet all of the following requirements:
   1. Requires a single serving of an industrial hemp product to be based on the amount of food or beverage customarily consumed in one eating occasion for that food or beverage;
   2. Requires a single serving of an industrial hemp dietary supplement in pill, tablet, or capsule form to be one unit; and,
   3. Prohibits a product from exceeding five servings per package.
8. Prohibits an industrial hemp final form product from exceeding 0.25 milligrams of THC per serving, or from having a total THC of more than one milligram per product. Requires a qualified testing laboratory to establish a limit of detection of one milligram or lower for total THC and requires a sample to pass if total THC does not exceed the limit of detection.
9. Permits CDPH to adopt regulations to implement 14) and 15) above, and permits the use of emergency regulations if filed within one year of the effective date of this bill.
10. Clarifies that the requirement for hemp manufacturers to register with CDPH applies to both California manufacturers and out-of-state manufacturers.
11. Specifies that a violation of any of the laws or regulations governing industrial hemp to be grounds for denying, suspending, forfeiting, revoking, or surrendering of an industrial hemp enrollment and oversight authorization.
12. Permits CDPH to deny, suspend, forfeit, revoke, or order to surrender an industrial hemp enrollment and oversight authorization when a peace officer, state official, or local official has notified CDPH that a manufacturer within its jurisdiction is in violation of state law and regulations relating to industrial hemp, and CDPH, through an investigation, has determined the violation is grounds for the action. Requires an investigation to include reasonable notice for the manufacturer to defend any allegations of a violation.
13. Prohibits an industrial hemp human food and beverage product from being labeled, marketed, or advertised as a product intended to produce an intoxicating effect.
14. Makes various technical, clarifying, and conforming changes.

Provisions related to seizure and embargo, and civil penalties:

1. Permits a peace officer or state official who possesses seizure authority to seize or embargo an industrial hemp product in any of the following circumstances: the product is subject to recall, quarantine, or embargo by CDPH; the product is subject to condemnation and destruction by CDPH or a court of law; or, the product is seized related to an investigation or disciplinary action by CDPH.
2. Permits a peace officer or state official, whenever the officer or official has probable cause to believe that any industrial hemp product is unlawful, or that the sale of that product would be in violation of the laws governing industrial hemp, to seize or embargo the product.
3. Permits the peace officer or state official to affix a tag or other appropriate marking to the industrial hemp product, and to give notice that the product is, or is suspected of being, unlawful and that it has been seized or embargoed.
4. Requires, when the peace officer or state official has found that the seized or embargoed product is lawful, to remove any tag or other marking previously affixed to the product.
5. Permits a peace officer or state official, when there is reasonable cause to believe that the embargo will be violated, to remove the embargoed product to a place of safekeeping.
6. Requires a peace officer or state official who seizes or embargoes an industrial hemp product to do the following:
   1. Request voluntary condemnation and destruction of the product by the retailer or other owner;
   2. Commence proceedings in the superior court for condemnation and destruction of the product against the retailer or other owner; and,
   3. Release the embargo or otherwise return the product if compliance has been established.
7. Permits the product to be destroyed pursuant to the written consent of the retailer or other owner in the absence of a court order.
8. Requires the seized or embargoed hemp product, if a court finds it is unlawful, to be destroyed at the expense of the claimant, retailer, owner, or manufacturer. Requires fees and costs to be assigned to the retailer unless the retailer proves that fees and costs should be assigned to another claimant, owner, or manufacturer.
9. Permits a court to order the industrial hemp product, if it finds that a product’s unlawful condition can be corrected and all provisions governing industrial hemp can be complied with, after costs, fees, and expenses have been paid, to be delivered to the claimant, retailer, owner, or manufacturer to be brought into compliance. Requires the claimant or retailer to provide a sufficient bond that is conditioned upon the product being brought into compliance, and requires the bond to be discharged when the court finds the product has been brought into compliance and all expenses of supervision have been paid.
10. Requires all fees and costs associated with the investigation, condemnation, and destruction of an illegal hemp product, including the costs of storage and testing, to be incurred by the claimant, retailer, owner, or manufacturer of the industrial hemp, and requires fees and costs to be assigned to the retailer unless the retailer proves that fees and costs should be assigned to a claimant, owner, or manufacturer.
11. Provides for civil penalties of up to $2,500 per violation for violations of the laws governing the retail sale of industrial hemp. Permits an action for civil penalties to be brought by the Attorney General on behalf of the people or on behalf of the department or another state agency, by a county counsel or district attorney, or by a city attorney or city prosecutor. Requires the penalty to first be used to reimburse the Attorney General, county counsel or district attorney, or city attorney or city prosecutor that brought the civil action. Establishes a statute of limitation for civil penalties of three years from the date of violation.
12. Provides that a violation of the provisions of law governing industrial hemp is a misdemeanor or punishable by a penalty fine not to exceed $1,000 for each violation or by imprisonment in the county jail for a period not exceeding one year, or both. Specifies that each day a violation continues is considered a separate violation.
13. Permits CDPH, by regulation, to provide for additional administrative penalties for any violation of the industrial hemp laws. Specifies that the remedies under this bill are in addition to, and do not supersede or limit, any and all other remedies, civil or criminal, nor does this bill limit any authority conferred on CDPH to administer and enforce the law.
14. Includes a non-preemption clause, by specifying that the laws governing industrial hemp do not preempt or otherwise prohibit the adoption or enforcement of any local ordinance or regulation that imposes greater restrictions on the retail sale of industrial hemp products, and to the extent there is an inconsistency between state law and a local ordinance or regulation, the greater restriction on the retail sale of industrial hemp product shall be enforced.
15. Establishes a rebuttable presumption that a product containing or purporting to contain a cannabinoid is a cannabis product if there is reasonable cause to believe that the product is not an authorized industrial hemp product.

FISCAL EFFECT:

According to the Assembly Committee on Appropriations, one-time and ongoing costs in the millions of dollars to DCC and costs of approximately $500,000 to CDPH.

PRIOR VOTES:

COMMENTS:

1. Author’s statement. According to the author, since the federal “Farm Bill” legalized industrial hemp in 2018, hemp-derived products containing cannabidiol (CBD) and other cannabinoids have been widely produced and sold to consumers at grocery stores, fitness centers, and other retail locations. In 2021, I authored AB 45 (Aguiar-Curry, Chapter 457, Statutes of 2021) to create the most protective testing standards and regulations for the hemp industry in the nation while maintaining access to CBD, a non-intoxicating product that is used to treat epilepsy, anxiety, chronic pain and other health concerns. However, a lack of enforcement and evolving industry practices have led to a proliferation of intoxicating hemp products that are easily accessible in our communities, including to youth, threaten public health, and undercut the legal hemp and cannabis markets. This bill aims to protect public health by eliminating access to intoxicating cannabinoids outside permitted dispensaries, while providing a pathway for well-regulated hemp and cannabis industries to participate in the federally- and state-legal hemp market. Specifically, this bill: 1) increases enforcement against illegal hemp products, including further empowering state and local public health agencies; 2) ensures that all intoxicating products are treated, regulated and taxed as cannabis; and, 3) allows California to join 17 other states to integrate hemp into the cannabis supply chain.
2. What is CBD used for and is it safe? Hemp-derived CBD has been touted for a wide variety of health issues, but the strongest scientific evidence is for its effectiveness in treating some types of epilepsy, which led to FDA approving the first ever cannabis-derived medicine for these conditions, Epidiolex, which contains CBD. CBD is commonly used to address anxiety, insomnia, different types of chronic pain, and various other ailments, although it is important to note that none of these medical uses have been sanctioned by the FDA. According to the Mayo Clinic, while CBD is being studied as a treatment for a wide range of conditions, research supporting the drug’s benefits is still limited. Though it is often well tolerated, CBD can cause side effects such as dry mouth, diarrhea, reduced appetite, drowsiness and fatigue, and can also interact with other medications such as blood thinners. The Mayo Clinic states that another cause for concern is the unreliability of the purity and dosage of CBD products. A study of 84 CBD products bought online showed that more than a quarter of the products contained less CBD than labeled, and in addition, THC was found in 18 products. On the other hand, according to a report published in November of 2017 by the World Health Organization (WHO), CBD exhibits no effects indicative of any abuse or dependence potential. The WHO stated that CBD is generally well tolerated with a good safety profile.
3. Federal status of the use of CBD from industrial hemp. After initially being legalized for cultivation for research purposes only in the 2014 Farm Bill, Congress removed industrial hemp from the definition of marijuana in the Controlled Substances Act in the 2018 Farm Bill. This meant that cannabis plants and derivatives that contain no more than 0.3% Delta-9 THC on a dry weight basis are no longer controlled substances, which legalized the cultivation of industrial hemp. However, the 2018 Farm Bill did not eliminate the authority of the FDA to regulate cannabis compounds. The FDA approved Epidiolex, a drug that is 98% CBD isolate, to provide treatment for epileptic seizures. Based on this and other drug applications, the FDA has taken the position that CBD is a drug ingredient, and cannot be marketed as a dietary supplement or added to foods without its approval. However, FDA’s enforcement of this position, until recently, had been limited to cease and desist letters to companies that are making health claims. For example, on December 22, 2020, the FDA issued five warning letters to companies for selling products containing CBD in ways that violate the Food, Drug, and Cosmetic Act, with all five warning letters addressing the illegal marketing of unapproved CBD products claiming to treat medical conditions. In addition, the warning letters addressed violations relating to the addition of CBD to food, and the impermissible marketing of CBD products as dietary supplements. More recently, the FDA has sent warning letters related to products containing Delta-8 THC, described in 4) below.
   
   In May of 2019, the FDA held its first hearing on CBD products, as it evaluated the regulation of CBD. According to an article in the Washington Post published on May 31, 2019, during ten hours of testimony, hemp growers, start-up businesses, academic researchers and consumer advocates argued about how FDA should regulate the already booming CBD industry, with some demanding strict oversight, while others lobbied for looser regulation. At the hearing, scientists and consumer advocates warned that for the thousands of CBD products being sold, there is little data to guide dosage levels, expiration dates, and manufacturing protocols to make sure they don’t also contain other elements like THC. The FDA held another stakeholder meeting in July of 2020, and held a multidisciplinary scientific conference in November of 2020. After convening a high-level, internal working group to explore potential pathways for CBD products, the FDA announced on January 26, 2023, that it had concluded that a new regulatory pathway for CBD is needed that balances individuals’ desire for access to CBD products with the regulatory oversight needed to manage risk, and stated it was prepared to work with Congress on this matter. As part of this statement, it also denied three citizen petitions that had asked FDA to conduct rulemaking to allow the marketing of CBD products as dietary supplements. According to the FDA: “Given the available evidence, it is not apparent how CBD products could meet safety standards for dietary supplements or food additives. For example, we have not found adequate evidence to determine how much CBD can be consumed, and for how long, before causing harm. Therefore, we do not intend to pursue rulemaking allowing the use of CBD in dietary supplements or conventional foods.”
   
4. Concern over Delta-8 THC and other artificially derived forms of intoxicating hemp. On February 27, 2021, the New York Times published an article, “This Drug Gets You High, and Is Legal (Maybe) Across the Country.” The article suggested that a form of THC that is permissible in industrial hemp is being touted as an alternative to the psychoactive ingredient in cannabis. Under federal law, psychoactive Delta-9 THC is explicitly prohibited, but the law is silent on Delta-8 THC. The FDA states that Delta-8 THC is one of over 100 cannabinoids produced in the Cannabis sativa L. plant (which is the plant used for industrial hemp), but is not found naturally in significant amounts. Concentrated amounts of Delta-8 THC are typically manufactured from hemp-derived CBD and have psychoactive and intoxicating effects. According to the New York Times article, with Delta-8, entrepreneurs believe they have found a way to take advantage of the country’s fractured and convoluted laws on recreational marijuana use, and have begun extracting and packaging it as a legal edible alternative. The article states that it’s not quite that simple, and that federal agencies, including the Drug Enforcement Administration, are still considering their options for enforcement and regulation. According to the article, “Precisely what kind of high Delta-8 produces depends on whom you ask. Some think it as ‘marijuana light,’ while others are pitching it as pain relief with less psychoactivity.” The article quotes an editor of Leafly.com, a popular source of information about cannabis, as saying that Delta-8 has become “extremely ascendant” and reflects “prohibition downfall interregnum,” where consumer demand and entrepreneurial activity are exploiting the holes in rapidly evolving and fractured law. In May of 2022, the FDA issued warning letters to five companies for selling products labeled as containing Delta-8 THC in ways that violate the Food Drug and Cosmetic Act. The warning letters address the illegal marketing of unapproved Delta-8 THC products as unapproved treatments for various medical conditions or for other therapeutic uses.
   
   Beyond Delta-8, businesses are using chemistry to make other artificially derived cannabinoids, including Delta-10 THC (or THCO), hexahydrocannabinol (HHC), and tetrahydrocannabiphorol (THC-P). According to the Public Health Institute (PHI), THC-P is more than 30 times the potency of traditional Delta-9 THC, making it particularly hazardous. Even more than hemp-derived products containing traditional Delta-9 THC, artificially derived cannabinoid products are often packaged in high doses, including packages that containing hundreds or even thousands of milligrams. PHI states that a single gummy may contain 100mg or more of these artificially derived cannabinoids, easily capable of knocking out a child or adult.
5. Letter from the Cannabis Regulators Association urging federal action on hemp-derived cannabinoid products. On April 17, 2023, the Cannabis Regulators Association (CANNRA), which represents cannabis and hemp regulatory agencies from more than 40 member states and U.S. territories, sent a letter to congressional leaders urging federal action to provide a regulatory framework for hemp-derived cannabinoid products. CANNRA states that these products lack federal manufacturing, testing, and labeling requirements, and they pose consumer safety and public health risks. According to CANNRA, while the 2018 Farm Bill was drafted with a focus on agricultural commodities and non-intoxicating hemp products, its language created a thriving market for intoxicating cannabinoid products that fit within the definition of “hemp.” State regulators have observed several loopholes that businesses are using to justify the manufacture or sale of intoxicating hemp derived products, including the “0.3% loophole.” CANNRA states that while the threshold of 0.3% Delta-9 THC by weight is a small amount of THC in a hemp plant, when applied to hemp-derived products like chocolate bars or beverages that weigh significantly more, 0.3% by weight can amount to hundreds of milligrams of THC. For example, a 50-gram chocolate bar at 0.3% THC would have around 150mg of THC (30 times the standard 5mg THC dose established by the National Institute on Drug Abuse). Another loophole identified by CANNRA is the “derivatives loophole,” because the definition of hemp also includes “all derivatives” of the plant. As a result, many hemp businesses are taking CBD derived from hemp and chemically converting it into intoxicating cannabinoid derivatives like Delta-8 THC, THCO acetates, and HHC. This loophole is resulting in chemically derived compounds that have not been well studied for human safety. CANNRA stated that federal engagement is urgently needed to support states in the regulation of these products and to protect public health and consumer safety.
6. State regulation of cannabis. In 1996, California first legalized cannabis for medical consumption via Proposition 215, also known as the Compassionate Use Act. Prop 215 protected qualified patients and primary caregivers from prosecution related to the possession and cultivation of cannabis for medicinal purposes. In 2015, the Legislature passed the Medical Cannabis Regulation and Safety Act (MCRSA), which established a comprehensive, statewide licensing and regulatory framework for the cultivation, manufacture, transportation, testing, distribution, and sale of medicinal cannabis. Shortly following the passage of MCRSA in November 2016, California voters passed Proposition 64, the "Control, Regulate and Tax Adult Use of Marijuana Act,” which legalized adult-use cannabis. Less than a year later in June 2017, the Legislature passed a budget trailer bill, SB 94 (Committee on Budget and Fiscal Review, Chapter 27, Statutes of 2017), that integrated MCRSA with Prop 64 to create MAUCRSA, the current regulatory structure for both medicinal and adult-use cannabis. Beginning in 2018, Prop 64 permitted adults 21 years of age or older to legally grow, possess, and use cannabis for nonmedical purposes, with certain restrictions. In 2020, Governor Newsom proposed consolidation of the three licensing and regulatory programs within separate state agencies to form a single department with a goal of streamlining and simplifying access to licensing and regulatory oversight of cannabis. In 2021, DCC was formally established with licensing, regulatory and enforcement authority. DCC was designed to centralize and align critical licensing, compliance, and enforcement responsibilities to help build a sustainable and successful legal cannabis market by creating a single point of contact for cannabis applicant, licensees, and local governments.
7. The legal separation of industrial hemp and cannabis. Supply chains and regulations for industrial hemp and cannabis are kept principally separate in California. DCC, through regulations, prohibits cannabis retailers from selling any non-cannabis goods besides cannabis accessories and branded merchandise, and industrial hemp falls under the category of a “non-cannabis good.” In addition, California law stipulates that industrial hemp may not be cultivated on premises licensed by DCC to cultivate or process cannabis. Finally, CBD products derived from cannabis are regulated quite differently from the same CBD products containing hemp-derived CBD, despite being essentially the same. Many cannabis retailers may wish to also sell products derived from hemp, as the costs may be lower given the taxation and regulatory differences.
8. The Hemp Report. AB 45 (Aguiar-Curry, Chapter 576, Statutes of 2021), which established a regulatory structure in CDPH for food, beverage and cosmetic products containing industrial hemp, also required DCC to prepare a report for the Governor and the Legislature outlining the steps necessary to allow for the incorporation of hemp cannabinoids into the cannabis supply chain by July 1, 2022. The Hemp Report was released in January of 2023. The report did not provide a specific framework for including hemp into the cannabis marketplace and instead provided guidance into the areas of contrast in cannabis and hemp regulations and the particular areas that would need to be addressed or reconciled in order to safely and appropriately integrate hemp into MAUCRSA while maintaining alignment with Prop 64, which specifically excluded hemp from the commercial cannabis regulatory framework. The report identified several issues that need to be resolved, including transportation requirements, as all cannabis or cannabis-regulated products may only be transported by a licensed distributor which is not the same for hemp products. Additionally, packaging and labeling requirements for cannabis products are very specific, and do not apply to hemp products. The report also raised issues related to compliance with track and trace; the inclusion of hemp that is sourced outside of California, as cannabis or cannabis products are only to include California-sourced product; market impacts and tax implication; and, necessary time for regulatory updates. Part of the DCC Hemp Report’s conclusion noted the following: “As the statutory and regulatory provisions for hemp and cannabis currently reflect two separate systems and supply chains, the first step in this process must be for policy makers to identify a more specific policy direction, which will in turn inform the development of necessary statutory changes. Once these statutes are enacted and necessary funding is appropriated, (DCC) would engage in extensive programmatic development, including engaging in state contracting processes that would likely implicate current contracts when feasible and new contracts when necessary to implement specific mandates, including modifications to the California Cannabis Track and Trace system and possibly (DCC’s) licensing systems.”
9. Double referral. This bill was heard in the Senate Business and Professions Committee on June 24, 2024, and passed with a 9-0 vote.
10. Prior legislation. AB 420 (Aguiar-Curry of 2023) would have specified that MAUCRSA does not prohibit a cannabis licensee from manufacturing, distributing, or selling industrial hemp products if the product complies with applicable laws and regulations governing industrial hemp; strengthened the prohibition against industrial hemp containing chemically synthesized cannabinoids by furthering the definition of “chemically synthesized cannabinoid,” and by prohibiting the manufacture, distribution, or selling of an industrial hemp product that contains a cannabinoid that is not present in nature in commercially meaningful quantities in the plant of Cannabis sativa L., unless explicitly approved by CDPH in regulation. AB 420 was held on the Senate Appropriations Committee suspense file.
    
    AB 1656 (Aguiar-Curry of 2022) stated that MAUCRSA does not prohibit a cannabis licensee from manufacturing, distributing, or selling industrial hemp products, as defined in state law and including cannabinoids, extracts, or derivatives of industrial hemp, if the product complies with all applicable state laws and regulations. AB 1656 was not taken up on the Senate Floor.
    
    SB 292 (Wilk, Chapter 485, Statutes of 2021) conformed current state law to the FDA’s Interim Final Rule regarding reporting and testing of industrial hemp.
    
    AB 45 (Aguiar-Curry, Chapter 576, Statutes of 2021) established a regulatory structure in CDPH for food, beverage and cosmetic products containing industrial hemp, and limiting these products to containing no more than 0.3% concentration of THC.
    
    AB 228 (Aguiar-Curry of 2019) would have established a regulatory framework for industrial hemp products that contain no more than 0.3% THC and is a cosmetic, food, food additive, dietary supplement, or herb. AB 228 was held on the Senate Appropriations Committee suspense file.
    
    SB 94 (Committee on Budget and Fiscal Review, Chapter 27, Statutes of 2017) establishes a single system of administration for cannabis laws in California, combining the MCRSA with the Adult Use of Marijuana Act.
    
    AB 266 (Bonta, Chapter 689, Statutes of 2015), SB 643 (McGuire, Chapter 719, Statutes of 2015), and AB 243 (Wood, Chapter 688, Statutes of 2015) were a package of bills that established a licensing and regulatory framework for medical marijuana under MCRSA.
    
    SB 566 (Leno, Chapter 398, Statutes of 2013), allows hemp to be grown in California, upon federal approval, by defining “industrial hemp” to be excluded from the definition of “marijuana”, a Schedule I controlled substance.
11. Support. This bill is co-sponsored by the California Cannabis Industry Association and the United Food and Commercial Workers, and they are joined by a coalition of supporters that include the California Retailers Association, the California Cannabis Manufacturers Association, Weedmaps, Cannacraft, and others. Supporters state that this bill addresses urgent public health concerns related to hemp products by strengthening the regulatory framework established by AB 45 in 2021. Additionally, this bill facilitates the integration of hemp cannabinoids into the regulated cannabis supply chain, promoting a robust, transparent, and economically viable cannabis and hemp industry in California.
    
    A coalition of law enforcement associations write in support, stating that the current lack of oversight and enforcement has created a Wild West atmosphere, where bad actors can exploit loopholes and put the public at risk. These products are often mislabeled, marketed as safe alternatives to cannabis, and sold without age restrictions, resulting in a new wave of substance misuse and public safety concerns, particularly among our youth. By strengthening enforcement provisions, closing loopholes, and empowering regulatory agencies to crack down on illicit products, this bill takes a critical step in bringing much-needed accountability to the hemp industry.
    
    The San Diego Regional Chamber of Commerce states, in support, that back in 2018, the federal Farm Bill clarified that industrial hemp is an agricultural crop and removed hemp from the federal Controlled Substances Act schedules. This has allowed farmers to cultivate industrial hemp with levels of psychoactive compounds of 0.3% or less, fostering the rising popularity of CBD products used for pain relief, anxiety, or other disorders. However, intoxicating hemp products have also gained popularity using a loophole in federal law that measures THC content by weight, rather than intoxicating effect. While certain cities across the State currently prohibit commercial cannabis operations, the emergence of intoxicating hemp poses a significant threat to public health and safety, particularly for our youth, that are being presented to mislabeled products.
12. Concerns, support if amended, oppose unless amended. A number of different organizations, some of which submitted letters as part of a coalition, have concerns or requested amendments from a broad spectrum of views, many in direct contradiction with each other. The following is a summary of the various positions different groups have taken on this bill.
    1. Those wanting more restrictive limitations. PHI, Marin Residents for Public Health Cannabis Policies, Bay Area Clinical Associates, Safe Launch, and others submitted a joint letter of support if amended. These groups note that with the limit of 1 mg THC per package and the prohibition on synthetic cannabinoids, this bill has greatly improved and will have a substantial positive public health impact, but serious issues persist. These groups request an even lower limit of 0.5 mg per package, and making it more clear that inhalable products are prohibited. These groups do not support the provisions in this bill allowing industrial hemp products to be sold by the cannabis industries, and that doing so will undermine legal cannabis operators who have been following the rules. These groups suggest amendments strengthening the prohibition against synthetics, and recommends a minimum age of 21 years for purchase of any industrial hemp product.
    2. Those opposing integration with cannabis. The Origins Council, representing 800 small and independent cannabis businesses in rural legacy producing counties, most of whom are homestead and legacy cultivators, oppose this bill unless amended, focused primarily on the provisions to incorporate hemp into legal cannabis products. A number of cannabis organizations and farmers joined the Origins Council in this argument. The Origins Council points to the Hemp Report published by DCC which discusses the numerous policy and logistical challenges in this policy area. In particular, the Origins Council emphasizes a critical point that has often been overlooked in discussions on integration: this bill’s integration provisions would allow hemp cultivators (not licensed by DCC) to sell hemp biomass, including hemp-derived THC, to cannabis manufacturers for integration into legal cannabis products, yet these cultivators are regulated to a dramatically lesser degree than DCC-licensed cannabis cultivators growing the same plant for largely the same purposes. While amendments have been taken to incrementally address this dynamic, it is not fully resolved, and so the Origins Council is requesting that the bill prohibit the incorporation of naturally-occurring THC and comparable cannabinoids extracted from hemp into legal cannabis products until cannabis and hemp cultivation are regulated equally as agriculture. Additionally, the Origins Council requests that hemp products produced outside the cannabis supply chain and sold at cannabis retailers to be integrated at the point of cannabis distribution, and requests that integration regulations be promulgated through normal rulemaking rather than emergency regulations. Finally, the Origins Council, similar to the PHI, requests that the allowable quantity of THC in a hemp product be reduced to 0.5 mg.
    3. Those wanting exceptions for medical uses. Bonnie Goldstein, MD, who is one of the leading physicians using cannabis products to care for children with treatment-resistant epilepsy, submitted a letter concerned about the impact of limiting the amount of delta-9 THC that occurs naturally in full spectrum hemp-derived CBD products. According to Dr. Goldstein, the effective ratio of CBD to THC for the majority of children with severe conditions range from 15:1 to 50:1, with the majority using between 20:1 to 30:1. According to Dr. Goldstein, these products do not cause intoxication or impairment when used medically. Seriously ill children primarily use hemp-derived CBD-dominant tincture products due to the high doses required, which are difficult to deliver through edible products. Tinctures allow for accurate and personalized dosing. Dr. Goldstein states that studies indicate that children with severe epilepsy, autism and other serious illnesses often need CBD doses as high as 25 mg per kilogram of body weight per day. For a child weighing 25 kg, this amounts to 625 mg of CBD per day, and Dr. Goldstein emphasizes that there are no products available in California dispensaries that can deliver these doses in an affordable manner. CBD-dominant cannabis products with the appropriate ratios that are available in dispensaries contain at most 1000 mg per bottle, insufficient for even two days of dosing for the child in this example. Dr. Goldstein notes that although these high doses of CBD are accompanied by naturally occurring THC, the titration dosing method employed by these patients prevents unwanted impairment. Due to the lack of appropriate high-ratio CBD products in dispensaries, parents have turned to the hemp-derived CBD market, which offers products with the proper ratios and concentrations of CBD and THC at affordable costs. To maintain effective ratios for these vulnerable patients, Dr. Goldstein argues that the THC in these products must be higher than what is proposed in this bill. California NORML, which previously had been listed in support of this bill, recently submitted a letter of support if amended to accommodate high-CBD medicinal hemp extracts along the lines of what Dr. Goldstein is recommending.
    4. Those who believe the THC restrictions are too limiting and want to sell hemp products with some level of THC. The US Hemp Roundtable submitted an oppose unless amended letter, stating that the controls in this bill are so tight that California companies that have played by the rules would be put out of business while effectively leaving the intoxicating products on many store shelves. According to the US Hemp Roundtable, this bill would cause hemp CBD businesses to pull out of the California market rather than reformulate their products to comply with the staggeringly low milligram cap in the bill. If the level of THC is forced down to this miniscule level, the therapeutic benefits will dissipate and the demand for hemp CBD products will largely evaporate. The US Hemp Roundtable requests amendments to increase the allowable milligrams of THC in a hemp CBD product to a level that protects the ability of the industry to serve the California market, and to eliminate the cap on the number of servings per package.
       
       The Cann + Botl Company, and Cheech and Chong Global Holdings are opposed to this bill unless amended to permit low-dose (which they state is 5 mg), hemp-derived THC beverages. These companies argue that consumers go to cannabis dispensaries to purchase high-dose THC flower, edibles, vape pens, and concentrate products, which collectively make up approximately 95% of cannabis sales in California, as opposed to beverages, especially low-dose, hemp-derived beverages. These companies suggests there is an effective and practical alternative to this bill’s restrictions, focused on low-dose, hemp-derived beverages. Specifically, these companies are asking for the following amendments:
       1. Place the licensing, regulation, and enforcement of low-dose, hemp-derived beverages under the authority of the California Department of Alcohol Beverage Control (ABC);
       2. Permit low-dose beverages with up to 5 mg of hemp-derived THC per beverage to be sold by ABC-licensed and DCC-licensed entities;
       3. Restrict sales of these beverages to those 21 and older with age verification prior to sale; and,
       4. Subject hemp-derived beverages to the same DCC testing standards as beverages containing THC derived from cannabis.
13. Policy comment. As illustrated in the wide variety of positions on this bill, the past few years have seen the hemp industry expand into products that include some, and in some cases, a significant amount, of intoxicating forms of THC or comparable cannabinoids. While there was an acknowledgement when AB 45 was enacted that there could be a small amount of THC in a hemp product, since a small amount occurs naturally, proponents of hemp at the time focused on the potential beneficial properties of CBD. It was never intended to permit a product to be sold with intoxicating levels of THC, hence the reason that no age limit was included in AB 45. Much of the discourse around this bill hinges, at least in part, on the extent to which THC and comparable cannabinoids should be allowed to be derived from industrial hemp. This bill proposes a limit of 1 mg per product, satisfying some of the proponents who want a strict limit, though some prefer 0.5 or even less. Others argue this low level would decimate the hemp product industry, implying that there is very little demand for products with just CBD, and the market is demanding at least some higher level of the intoxicating compounds associated with cannabis plants. If we were starting from scratch, with no regulatory framework for either cannabis or industrial hemp, this conversation might be different. But there is an extensive regulatory framework for cannabis, with significant and costly requirements for cannabis farmers in particular that do apply to hemp farmers. Permitting THC products to be derived from hemp risks undercutting cannabis cultivators who have invested significant resources in playing by the rules. Given these competing interests, the author and sponsors have chosen to focus on strengthening the industrial hemp statutes to crack down on synthetic forms of THC, placing a tighter limit on THC in hemp products, and integrating hemp products into the DCC-regulated cannabis market. As this bill moves forward, the author may wish to consider more clearly limiting the ability of manufacturers to use industrial hemp to extract THC and comparable cannabinoids, even when integrated into the DCC-regulated marketplace, while there exists such a disparity in cultivation requirements.
14. Technical Assistance amendments under consideration. The author's office is currently considering significant technical assistance (TA) amendments provided by the Administration to increase consumer protections and protect youth, enhance enforcement of illegal hemp products, and establish a comprehensive framework for the integration of hemp-derived cannabinoid products within the DCC-regulated cannabis infrastructure. These changes clearly distinguish between products that contain intoxicating THC and those containing only hemp-derived CBD, by requiring that any products containing THC may only be sold in a DCC regulated dispensary.

SUPPORT AND OPPOSITION:

Support: California Cannabis Industry Association (co-sponsor)
United Food and Commercial Workers (co-sponsor)
Angeles Emeralds
Arcadia Police Officers' Association
Burbank Police Officers' Association
California Cannabis Manufacturers Association
California Coalition of School Safety Professionals
California Minority Alliance
California Narcotic Officers' Association

California NORML
California Reserve Peace Officers Association
California Retailers Association
California State Association of Counties
California State Grange
Cannabis Distributors Association
CannaCraft, INC.
Claremont Police Officers Association
Coachella Valley Cannabis Alliance Network
Corona Police Officers Association
Culver City Police Officers' Association
Deputy Sheriffs' Association of Monterey County
Embarc
Fullerton Police Officers' Association
Good Farmers Great Neighbors
Kiva Confections
League of California Cities
Long Beach Collective Association
Los Angeles School Police Management Association
Los Angeles School Police Officers Association
March and Ash
Murrieta Police Officers' Association
Newport Beach Police Association
Novato Police Officers Association
Palos Verdes Police Officers Association
Placer County Deputy Sheriffs' Association
Pomona Police Officers' Association
Riverside Police Officers Association
Riverside Sheriffs' Association
Rural County Representatives of California
San Diego Regional Chamber of Commerce
San Francisco Cannabis Retailers Alliance
Santa Ana Police Officers Association
Silicon Valley Cannabis Alliance
Social Equity LA
United Cannabis Business Association
Upland Police Officers Association
Weedmaps

Two individuals

Oppose: Be the Influence (unless amended)
Big Sur Farmers Association (unless amended)
Cann + Botl Company (unless amended)

Cheech and Chong’s Global Holdings (unless amended)
Humboldt County Growers Alliance (unless amended)
Marin Residents for Public Health Cannabis Policies (unless amended)
Mendocino Cannabis Alliance (unless amended)
Nevada County Cannabis Alliance (unless amended)

North Fork Distribution
Ojai Energetics (unless amended)
Origins Council (unless amended)
RRLED LLC Dba Bar Beverages (unless amended)
Social Advocates for Youth San Diego (unless amended)
Trinity County Agriculture Alliance (unless amended)
US Hemp Roundtable (unless amended)

Seven individuals

-- END --

SENATE COMMITTEE ON

BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT

Senator Angelique Ashby, Chair

2023 - 2024 Regular

Bill No: Hearing Date: June 24, 2024

Subject:

SUMMARY:

Authorizes a cannabis licensee to manufacture, distribute, and sell designated hemp products, as specified; requires the acquisition of hemp products to be from a person registered with the California Department of Public Health (CDPH); enhances enforcement for illegal hemp products and places additional restrictions on hemp products contacting tetrahydrocannabinol (THC) or comparable cannabinoids.

NOTE:

This measure is double-referred to the Senate Committee on Health, second.

Existing law:

1. Enacts the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to provide for a comprehensive regulatory framework for the cultivation, distribution, transport, storage, manufacturing, processing, and sale of medicinal and adult-use cannabis. (Business and Professions Code (BPC) §§ 26000 et seq.)
2. Excludes industrial hemp from the definition of cannabis under MAUCRSA. (BPC § 26001)
3. Establishes the Department of Cannabis Control (DCC) within the Business, Consumer Services, and Housing Agency for purposes of administering and enforcing MAUCRSA. (BPC § 26010)
4. Required the DCC to prepare a report to the Governor and the Legislature outlining the steps necessary to allow for the incorporation of hemp cannabinoids into the cannabis supply chain on or before July 1, 2022, so that the Legislature may consider whether and how to take legislative action concerning the incorporation of hemp into the cannabis supply chain no later than the 2023–24 legislative session. (BPC § 26013.2)
5. Provides for twenty total types of cannabis licenses including subtypes for cultivation, manufacturing, testing, retail, distribution, and microbusiness; requires each licensee except for testing laboratories to clearly designate whether their license is for adult-use or medicinal cannabis. (BPC § 26050)
6. Establishes grounds for disciplinary action against cannabis licensees, including failures to comply with state requirements as well as local laws and ordinances. (BPC § 26030)
7. Prohibits the sale of cannabis products that are alcoholic beverages, including through an infusion of cannabis or cannabinoids derived from industrial hemp into alcoholic beverages. (BPC § 26070.2)
8. Expresses that state cannabis laws shall not be interpreted to supersede or limit the authority of a local jurisdiction to adopt and enforce local ordinances to regulate cannabis businesses. (BPC § 26200)
9. Defines “industrial hemp” as a crop that is limited to types of the plant Cannabis sativa L. having no more than three-tenths of 1 percent THC contained in the dried flowering tops, whether growing or not; the seeds of the plant; the resin extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds or resin produced therefrom. (Health and Safety Code (HSC) § 11018.5(a))
10. Exempts industrial hemp from MAUCRSA. (HSC § 11018.5(b))
11. Prohibits industrial hemp products from being labeled or advertised with 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. (HSC § 110407)
12. Provides that a cosmetic is not adulterated because it includes industrial hemp in compliance with the law. (HSC § 111691)
13. Establishes a regulatory framework for industrial hemp under the Sherman Food, Drug, and Cosmetic Law administered by the California Department of Public Health (CDPH), under which manufacturers of products containing industrial hemp are required to obtain a process food registration and comply with good manufacturing practices. (HSC §§ 111920 et seq.)
14. Requires the distribution or sale of industrial hemp products to include documentation of a certificate of analysis from an independent testing laboratory that confirms that the industrial hemp raw extract, in its final form, does not exceed THC concentration of an amount determined allowable by the CDPH in regulation, or that the mass of the industrial hemp extract used in the final form product does not exceed a THC concentration of 0.3 percent. (HSC § 111921)
15. Authorizes the CDPH to exclude from the definition of “THC or comparable cannabinoid” isomers that do not cause intoxication, but that the CDPH may include any other cannabinoids that the CDPH determines do cause intoxication. (HSC § 111921.7)
16. Authorizes the CDPH to adopt regulations to determine maximum serving sizes for hemp-derived cannabinoids, hemp extract, and products derived therefrom, active cannabinoid concentration per serving size, the number of servings per container, and any other requirements for foods and beverages. (HSC § 111922)
17. Requires hemp manufacturers to register with the CDPH. (HSC § 111923.3)
18. Requires industrial hemp products to meet specified packaging and labeling requirements, including a label that includes the concentration of cannabinoids present in the product batch, including, at minimum, total THC and any marketed cannabinoids. (HSC § 111926.3)
19. Prohibits inhalable hemp products from being sold to consumers under 21 years of age. (HSC § 111929)
20. Authorizes a peace officer to inspect any place at which cannabis or cannabis products are sold and to take enforcement action and seize any products found not to comply with the law. (Revenue and Taxation Code § 34016)
21. Provides the California Department of Food and Agriculture (CDFA) with responsibility for administering and enforcing laws governing the growing, cultivating, and distributing of industrial hemp. (Food and Agricultural Code §§ (FAC) 81000 et seq.)
22. Establishes an Industrial Hemp Advisory Board with members appointed by the Secretary of Food and Agriculture to advise the secretary and make recommendations on all matters pertaining to industrial hemp seed law and regulations, enforcement, related annual budgets, and the setting of an appropriate assessment rate necessary for the administration of the law. (FAC § 81001)
23. Allows only approved cultivars to grow industrial hemp. (FAC § 81002)
24. Requires growers of industrial hemp, hemp breeders, and established agricultural research institutions to register with the commissioner of the county in which the grower intends to engage in industrial hemp cultivation. (FAC §§ 81003 – 81005)
25. Requires each registered established agricultural research institution, registered grower of industrial hemp, and registered hemp breeder to report on its hemp production in the state and any changes to the location where it will produce hemp to the Farm Service Agency of the United States Department of Agriculture. (FAC § 81004.6)
26. Imposes limitations and prohibitions on the growth of industrial hemp and requires each crop of industrial hemp to be tested by a laboratory to determine the THC levels of a random sampling of its dried flowering tops. (FAC § 81006)

This bill:

1. Authorizes a cannabis licensee to manufacture, process, distribute, or sell products that contain industrial hemp, as defined, or cannabinoids, extracts or derivatives from industrial hemp, if the hemp product complies with all applicable state laws and regulations, as specified.
   
2. Authorizes a licensed manufacturer or microbusiness to obtain industrial hemp from a person registered with the CDPH, as authorized.
   
3. Requires industrial hemp that is purchased by a cannabis licensee to be tracked as a separate batch throughout the manufacturing process in order to document the disposition of that hemp or hemp product.
   
4. Requires a licensee that manufactures, distributes, or sells products that contain industrial hemp to record all transactions and relevant data, as prescribed by the DCC, in the state track and trace system.
   
5. Requires a manufactured cannabis product that incorporates industrial hemp to comply will all of the requirements for cannabis contained in MAUCRSA and any regulations adopted by the DCC.
   
6. Prohibits a licensed cannabis manufacturer from incorporating THC or comparable cannabinoid, as defined,
   
7. Requires the DCC to implement a process by which a cannabis licensee that is also registered as a hemp manufacturer may use the same premises.
   
8. Requires the DCC to adopt and readopt emergency regulations to implement the integration of hemp into the cannabis supply chain as specified in 1-7) above on or before July 1, 2025.
   
9. Deletes from the authorization for the CDPH to create [insert]
   
10. Adds inhalable product to the definition of “industrial hemp product”.
    
11. Defines “limit of detection” to mean the lowest quantity of a substance or analyte that can be distinguished from the absence of that substance within a stated confidence limit.
12. Defines “synthetically derived cannabinoid” to mean a substance that is derived from a chemical reaction that changes the molecular structure of any substance separated or extracted from the cannabis plant, but does not include:
    
13. A naturally occurring substance that is separate or extracted from the plant by a chemical or mechanical extraction process, as long as the naturally occurring chemical substance does not undergo a change in molecular structure;
    
14. Cannabinoids that are produced by decarboxylation from a naturally occurring cannabinoid acid;
    
15. Any other chemical substance approved by the DCC.
    
16. Prohibits the manufacturing, distribution, or sale of an industrial hemp product that contains synthetically derived cannabinoid unless explicitly approved by the CDPH in regulation.
17. Prohibits a person from manufacturing, distributing, or selling any of the following:
18. Industrial hemp raw extract derived from or an industrial hemp product containing, industrial hemp that was not grown in compliance with the law.
19. Industrial hemp raw extract with a total THC concentration that exceeds 0.3 percent or a lower amount determined allowable by the CDPH in regulation.
20. Industrial hemp products containing industrial hemp raw extract with a total THC concentration that exceeds 0.3 percent or a lower amount determined allowable by the CDPH in regulation.
21. Repeals the requirement that any initial determination regarding an exclusion from the definition of “THC or comparable cannabinoid” shall be confirmed through rulemaking in compliance with the Administrative Procedure Act within 18 months.
22. Requires industrial hemp human food and beverage final form products to meet all of the following requirements:
23. A single serving of an industrial hemp product shall be based on the amount of food or beverage customarily consumed in one eating occasion for that food or beverage.
24. A single serving of an industrial hemp dietary supplement in pill, tablet, or capsule form shall be one unit.
25. A product shall not exceed five servings per package.
26. Prohibits an industrial hemp final form product from having a level of total THC that exceeds one milligram; each serving per package cannot exceed .25 milligrams of THC; and, requires a qualified testing laboratory to establish a limit of detection of that amount or lower for total THC.
27. Authorizes the CDPH to adopt regulations pursuant to the Administrative Procedure Act to implement the regulations pertaining to food and beverage products containing hemp, as specified, and the adoption of any emergency regulations filed with the Office of Administrative Law within one year of the effective date of this bill must be deemed to be an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare.
    
28. Requires out-of-state hemp manufacturers who produce industrial hemp pet food for importation into California or for sale in California to obtain a license from the CDPH.
29. Authorizes the CDPH to deny, suspend, forfeit, revoke, or order to surrender an industrial hemp enrollment and oversight authorization when a peace officer, state official, or local official has notified the CDPH that a manufacturer within its jurisdiction is in violation of state law and regulations relating to industrial hemp, and the CDPH, through an investigation, has determined that the violation is grounds for or contributes to other factors for denial, suspension, forfeiture, revocation, or surrender of the industrial hemp enrollment and oversight authorization.
30. Requires an investigation to include reasonable notice to the manufacturer and an opportunity for the manufacturer to defend any allegations of a violation.
31. Allows the CDPH to take disciplinary action against a manufacturer for a violation when the violation was committed by the manufacturer’s officers, directors, owners, agents, or employees while acting on behalf of the manufacturer or engaged in industrial hemp activity.
32. Authorizes the CDPH to deny, revoke, suspend or take other action against an industrial hemp oversight and enrollment authorization under specified conditions, including when a peace officer, state official or local official notifies the CDPH of a violation of state law, as specified.
    
33. Repeals outdated language providing safe harbor for hemp manufacturers and retailers within three months of the effective date of prior legislation.
    
34. Prohibits an industrial hemp human food and beverage product from being labeled, marketed, or advertised as a product intended to produce an intoxicating effect.
    
35. Authorizes peace officers and state officials to seize or embargo an industrial hemp products in any of the following circumstances:
    
36. The industrial hemp product is subject to recall, quarantine, or embargo by the CDPH;
    
37. The industrial hemp product is subject to condemnation and destruction by the CDPH or a court of law; and,
    
38. The industrial hemp product is seized related to an investigation or disciplinary action by the CDPH.
39. Requires whenever a peace officer or state official who possesses seizure authority finds or has probable cause to believe that any industrial hemp is unlawful, or that the sale of that industrial hemp product would be in violation, the peace officer or state official may seize or embargo the industrial hemp product; authorizes the peace officer or state official to affix a tag or other marketing; and requires the peace officer or state official to give notice that the industrial hemp product is or is suspected of being unlawful, and establishes the process to return those items to sale if found not in violation, as specified.
40. States that it is unlawful for a person to remove, sell, or dispose of an industrial hemp product seized, detained, or embargoed under the provisions of this bill, without permission of the peace officer or other official responsibilities for the seizure, detention, or embargo or a court of competent jurisdiction.
    
41. Requires peace officers or state officials who seize or embargo industrial hemp products to take specified procedural actions and specifies the fees to be charged associated with the procedure.
    
42. Provides that violations of laws regarding the retail sale of industrial hemp shall be subject to civil penalties of up to $2,500 per violation but requires a court to give due consideration to the appropriateness of the amount of the civil penalty with respect to factors the court determines to be relevant, including the gravity of violation and the good faith of the person.
43. States that an action for civil penalties may be brought by the Attorney General, by a county counsel, district attorney, or by a city attorney or city prosecutor, as specified, and specifies that any penalties collected may be used to reimburse the prosecuting agency for costs associated with prosecuting the case, and specifies where the remaining penalty funds are to be appropriated.
    
44. Additionally provides that violations of laws regarding the retail sale of industrial hemp is a misdemeanor.
    
45. Provides that the above remedies are in addition to, and do not supersede or limit, any and all other remedies, civil or criminal.
46. Expressly provides that the provisions of the bill do not preempt or otherwise prohibit the adoption or enforcement of any local ordinance or regulation that imposes greater restrictions on the retail sale of industrial hemp products and that to the extent that there is an inconsistency, the greater restriction on the retail sale of industrial hemp products shall be enforceable by the local jurisdiction.
47. Creates a statutory presumption that a product containing or purporting to contain a cannabinoid is a cannabis product, regardless of the nature or source of the cannabinoid, if there is reasonable cause to believe that the product is not a lawful industrial hemp product.
48. Provides that amendments to the Revenue and Taxation Code are not to be construed to establish a tax on inhalable hemp products.
49. States the finding and declaration that the legal cannabis industry faces challenges from a thriving illicit cannabis marketplace.
    
50. States that it is the intent of the Legislature to enhance the viability of cannabis licensees in the marketplace by pursuing measures to relieve tax and regulatory requirements, and to authorize licensees to manufacture, distribute and sell hemp and cannabidiol products in compliance with current law.
51. Makes numerous other technical, clarifying and conforming changes.

FISCAL EFFECT:

According to the Assembly Committee on Appropriations, this bill will result in the following:

1. DCC anticipates one-time and ongoing costs in the millions of dollars (Cannabis Control Fund). DCC identifies the following costs to implement this bill: substantial regulatory modifications, reconfiguring the track-and-trace system to track hemp in the supply chain, and possible changes to the cannabis licensing framework. DCC would need to add staff to scale up testing capacity and increase the capacity to conduct onsite inspections of co-located cannabis and hemp manufacturing premises, and to expand the product safety and recall program due to the expanded scope of permissible products. DCC states it would need an infusion of support for increased overall enforcement demands associated with allowing hemp to enter the cannabis supply chain under specific circumstances. 
   
2. CDPH estimates costs of approximately $500,000 for three staff positions and other expenses (General Fund).

According to the Legislative Analyst’s Office, the General Fund faces a structural deficit in the tens of billions of dollars over the next several fiscal years. 

COMMENTS:

1. Purpose. This bill seeks to incorporate a pathway for industrial hemp to integrate into the legal cannabis market and enhance the current regulatory structure for industrial hemp, currently under the jurisdiction of the CDPH, in an effort to ensure that intoxicating hemp products are only accessible in the appropriately licensed entities. The California Cannabis Industry Association and the United Food and Commercial Workers are the sponsors of this bill. According to the author, “Since the federal “Farm Bill” legalized of industrial hemp in 2018, hemp-derived products containing cannabidiol (CBD) and other cannabinoids have been widely produced and sold to consumers at grocery stores, fitness centers, and other retail locations. In 2021, I authored AB 45 (Aguiar-Curry, Chapter 457, Statutes of 2021) to create the most protective testing standards and regulations for the hemp industry in the nation while maintaining access to CBD, a non-intoxicating product that is used to treat epilepsy, anxiety, chronic pain and other health concerns. However, a lack of enforcement and evolving industry practices have led to a proliferation of intoxicating hemp products that are easily accessible in our communities, including to youth, threaten public health, and undercut the legal hemp and cannabis markets. This bill aims to protect public health by eliminating access to intoxicating cannabinoids outside permitted dispensaries, while providing a pathway for well-regulated hemp and cannabis industries to participate in the federally- and state-legal hemp market. Specifically, this bill: 1) increases enforcement against illegal hemp products, including further empowering state and local public health agencies 2) ensures that all intoxicating products are treated, regulated and taxed as cannabis, and 3) allows California to join 17 other states to integrate hemp into the cannabis supply chain.”
2. Background.

Cannabis and Hemp Regulations. Pursuant to the provisions of MAUCRSA, the regulated commercial cannabis market in California operates as a closed system. Cannabis may not be transported outside of California and cannabis sourced in other states is not allowed into California’s cannabis market. Cannabis products in California must meet California’s regulatory requirements, derived from the voter initiative Prop 64. California’s cannabis products are required to meet safety standards prior to retail sale and are subject to product testing requirements. The DCC requires all batches of cannabis goods be tested before they can be sold. Licensed testing labs test cannabis goods to make sure they are free of contaminants and labeled with accurate amounts of cannabinoids and terpenes. Licensed testing laboratories report results on a “Certificate of Analysis” (COA), which states whether the batch passes or fails testing for each substance.

In addition to information pertaining to the product’s chemical profiles and contaminants, the COA documents administrative information about the laboratory, the distributor or microbusiness, dates and signatures, and other non-testing data. Cannabis products that fail a test must be either remediated or destroyed, and testing laboratories must obtain and maintain ISO/ISE 17025 accreditation. Cannabis testing laboratories are licensed by the DCC and applicants for licensure must adhere to the DCC’s requirements for testing cannabis products as specified in BPC § 26104, and further in the DCC’s regulations.

Under DCC’s regulations, 2, CCR § 15701, a licensed testing laboratory may test items not regulated under MAUCRSA if they comply with the laws governing the testing of such items. A licensed testing laboratory shall maintain separate and distinct records of their activities regulated by MAUCRSA and their activities that are subject to other laws. This bill would allow hemp to be integrated into the cannabis market place and be subject to testing, track and trace and meet the standards of MAUCRSA requirements.

Industrial hemp is produced from the Cannabis sativa (C. sativa) plant, which is primarily grown for its fiber and oilseed. Industrial hemp has been a fixture of human agriculture for thousands of years and was introduced to North America in the 16th century. Hemp production reached its peak in the United States in the mid-1800s, but decreased as other fiber crops such as cotton increased in popularity. The Marihuana Tax Act of 1938 ended the legal production of hemp in the United States, and hemp was added to Schedule I of the CSA. The Cannabis sativa (C. sativa) plant is the exact same plant where “cannabis” which are recognized as those varieties of the species that contain sufficient levels of the cannabinoid THC to produce an intoxicating psychoactive effect, or “high”; this plant and its associated products are regulated by the DCC under MAUCRSA. Under existing law, (BPC § 26001(f)), states that cannabis does not mean “industrial hemp” as defined in the HSC, which means an agricultural product, whether growing or not, that is limited to types of the plant Cannabis sativa L. and any part of that plant, including the seeds of the plant and all derivatives, extracts, the resin extracted from any part of the plant, cannabinoids, isomers, acids, salts, and salts of isomers, with a delta-9 tetrahydrocannabinol concentration of no more than 0.3 percent on a dry weight basis.

Currently, hemp manufacturing and hemp products and the agriculture side of hemp are regulated by the CDPH and CDFA, respectively. The CDPH currently has regulatory authority over industrial hemp products with respect to food, beverage and consumer products under the Sherman Food, Drugs and Cosmetic laws (Sherman law). Consumer dietary supplements, food, or beverage products manufactured using industrial hemp must comply with the Sherman law. In addition, manufacturers and distributors of industrial hemp products must register with the CDPH's Food and Drug Branch and obtain an Industrial Hemp Enrollment and Oversight authorization. The Sherman Act also specifies the allowed composition of industrial hemp products and imposes specific labeling and marketing restrictions.

Labeling requirements for industrial hemp products identified as dietary supplements, food or beverages as specified in HSC § 11926.2, require a label, accessible information on testing, product expiration, a statement that children or those who are breastfeeding should consult with a healthcare professional, products should be kept out of reach of children and a statement that the FDA has not evaluated the product for safety or efficacy.

Under MAUCRSA, all cannabis product labels must display, in bold print, a specified warning about the contents of cannabis in the product including a statement about the intoxicating effects of cannabis, which could impair operation of machines or motor vehicles. MAUCRSA also requires certain information about the product’s ingredients and contents to be listed, as well as information associated with a unique identifier for purposes of tracking the cannabis goods. MAUCRSA also authorizes the DCC to set its own additional requirements for cannabis packaging and labeling. Regulations promulgated by the DCC and its predecessors have incorporated additional labeling standards. For example, all labels must be “unobstructed and conspicuous” in at least 6 point type size, and must be written in English. If the cannabis product is edible, the regulations require specific information about potential allergens in the product, the names of any artificial colorings, and any sugar, carbohydrates, and total fat per serving and specifically prohibit the labels of cannabis goods from containing content that is attractive to individuals under the age of 21. While labeling requirements exist for both hemp and cannabis products, cannabis products require more stringent labeling and information.

Types of products that can be made with hemp may include food items such as baked goods and candy, dietary supplements, pet foods, or cosmetics. Unlike cannabis products, which are restricted to individuals 21 years of age or older and are subject to licensed retailers or microbusinesses as to where a consumer can obtain cannabis or cannabis products, integrated hemp products are not restricted to any sales location as long as they meet Sherman law requirements.

Businesses engaged in the manufacturing, packing, or holding of industrial hemp products are required to register with CDPH. However, for those that grow industrial hemp as a crop, is under the jurisdiction of the CDFA.

The Legal Separation of Industrial Hemp and Cannabis. No part of hemp regulation in California is conducted by the DCC, however, testing laboratories issued a licensed by the DCC are also authorized to test hemp products, as specified. Hemp products are specifically prohibited under the provisions of MAUCRSA. Supply chains and regulations for industrial hemp and cannabis are kept principally separate in California. DCC presently mandates that licensed cannabis retailers are prohibited from selling any non-cannabis goods besides cannabis accessories and branded merchandise (4, CCR § 15407), and industrial hemp falls under the category of a “non-cannabis good”. In addition, California law stipulates that industrial hemp may not be cultivated on premises licensed by DCC to cultivate or process cannabis. Finally, CBD and CBD products derived from cannabis are regulated quite differently from the same CBD products containing hemp-derived CBD, despite being essentially the same. Many cannabis retailers may wish to also sell products derived from hemp, as the costs may be lower given the taxation and regulatory differences.

By federal and California law, industrial hemp is defined as C. sativa plants, which have low levels of THC (under 0.3%), the primary psychoactive component of medicinal and recreational cannabis, which commonly contains levels ranging from 15-40% THC. C. sativa plants grown for commercial purposes found to have THC levels over this limit are required to be destroyed.

Legislative Efforts for Hemp. SB 566 (Leno, Chapter 398, Statutes of 2013) passed the Industrial Hemp Farming Act, which established a regulatory framework for the cultivation and processing of industrial hemp that would go into effect upon legalization by the federal government. SB 566 required growers of industrial hemp for commercial purposes to register with the county agricultural commissioner of the county in which the grower intends to engage in industrial hemp cultivation among various provisions. Several years later, the 2018 Federal Farm Bill removed industrial hemp from the Controlled Substances Act and put it under the purview of the USDA as an agricultural commodity. The Farm Bill lists hemp as a “covered commodity” under crop insurance and allows the states to regulate the industry. Since then, industrial hemp production in the United States has seen a resurgence in the last few years.

AB 45 (Aguiar-Curry, Chapter 576, Statutes of 2021) established a regulatory framework for food, beverage, and cosmetic products containing industrial hemp or cannabinoids (such as CBD), extracts, or derivatives of industrial hemp under the Sherman law. AB 45 was enacted to clarify and expand the framework under which industrial hemp and CBD derived from industrial hemp can be included in dietary supplements, food, beverages, cosmetics, or pet food. AB 45 required manufacturers of dietary supplements and food that includes industrial hemp products to register with CDPH and demonstrate that their products meet all state and federal guidelines, including consumer safety standards. In addition, AB 45 prohibited manufacturers, distributors, or sellers of industrial hemp products from advertising unsubstantiated health-related statements regarding industrial hemp and CBD. AB 45 also requires all industrial hemp products sold or distributed in California conform to all applicable state laws and regulations. Manufacturers must include a certificate of analysis to confirm approved THC concentration and product content, and they must provide proof that the product in its final form or extract was from an approved growing program.

The Hemp Report and hemp integration in California. Among the creation of the regulatory structure for hemp product production and farming under the CDPH and the CDFA, AB 45 also required DCC to prepare a report for the Governor and the Legislature outlining the steps necessary to allow for the incorporation of hemp cannabinoids into the cannabis supply chain by July 1, 2022. The Hemp Report was released in January of 2023. As stated in the DCC Hemp Report, “the inclusion of hemp into the commercial cannabis supply chain is a complex undertaking that requires careful consideration of significant policy questions. The approach utilized to accomplish this end would have direct impacts on the cannabis industry, hemp industry, the standard consumer market, medicinal and adult-use consumers, Department staff and the public.” The report raised issues related to compliance with track and trace, the inclusion of hemp from sources outside of California, as cannabis or cannabis products are only to include California-sourced product; market impacts and tax implications; and necessary time for regulatory updates.

The report did not provide a specific framework for including hemp into the cannabis marketplace, but instead provided guidance into the areas of contrast in cannabis and hemp regulations and the particular areas that would need to be addressed or reconciled in order to safely and appropriately integrate hemp into MAUCRSA while maintaining alignment with Prop 64, which specifically excluded hemp from the commercial cannabis regulatory framework. As currently drafted, this bill would require hemp included in the manufacturing of a cannabis product to be tracked as a separate batch and record all transactions and relevant data in the track and trace system. As noted in the Hemp Report, “The current configuration of the CCTT system does not have the ability to track hemp and the inclusion of hemp was not contemplated when the system was developed. Without modification of the CCTT system, hemp could only be treated as any other ingredient used in cannabis products, such as sugar or flour, which are not specifically tracked. While incorporating hemp into the commercial cannabis supply chain in this manner would not require modification to the CCTT system, such incorporation would create potential inconsistencies between products containing exclusively hemp or exclusively cannabis and hybrid products containing a combination of hemp and cannabis. Without modifying the CCTT system to track hemp, the Department would be unable to determine the source of the cannabinoids, track the disposition of the product in the supply chain as is done with cannabis, or trace back for health and safety purposes in instances of recalls.”

This bill opens the door to allow the incorporation of hemp into the cannabis regulatory framework and under the jurisdiction of the DCC, by expressly allowing for the integration of industrial hemp into the licensed cannabis supply chain. This bill would only allow cannabis licensees to obtain industrial hemp from individuals registered with the CDPH, and that hemp would be tracked as a separate batch throughout the manufacturing process in order to document the disposition of that hemp or hemp product. Manufactured cannabis products incorporating hemp would be required to comply with MAUCRSA. The DCC would be required to implement a process by which a licensee that is also a registered hemp manufacturer may use the same premises. This bill would provide the DCC with emergency rulemaking authority until July 1, 2025, to be able to adopt necessary regulations to implement the provisions of this bill, including the regulatory construct necessary to ensure that hemp products utilized by cannabis licensees are appropriately regulated under the DCC, and conform to current law with respect to cannabis.

Intoxicating Hemp. A significant portion of the bill seeks to address growing concerns regarding the perceived proliferation of intoxicating hemp products. The California Cannabis Industry Association (CCIA), this bill’s sponsor, issued a white paper in October of 2022 titled Pandora’s Box: The Dangers of a National, Unregulated, Hemp-Derived Intoxicating Cannabinoid Market. The CCIA report argued that loopholes in the 2018 Farm Bill, which defined industrial hemp as having no more than 0.3 percent delta-9 THC content by dry weight, inadvertently led to the proliferation of intoxicating hemp products.

In April of this year, Governor Newsom released a statement where he directed the CDPH and the California Department of Alcoholic Beverage Control to issue notices addressing the sale and distribution of illegal hemp products. The Governor’s release stated, “…Today’s notices come after a number of highly intoxicating hemp beverages have been seen in retail settings across the state – which could lead to them dangerously winding up in the hands of young Californians. Hemp products, which are separately regulated from the legal cannabis market, are required to comply with a number of consumer safety laws, including strict labeling requirements. Distributing or selling products that do not meet these requirements is a crime, and can result in the loss of an applicable license.”

In addition, California’s Attorney General joined efforts with multiple other states Attorney Generals and sent a letter urging Congress “to protect Californians from intoxicating hemp products by updating language of the Farm Bill. The letter argues that vagueness in the 2018 Farm Bill has led to the proliferation of intoxicating hemp products across the nation and challenges the ability for states and localities to respond to the resulting health and safety crisis.”

Additionally, recent news headlines have emphasized the concerns about intoxicating hemp products and its link to consumer harm, while the negatively affecting the legal cannabis market. According to the FDA, “Delta-8 tetrahydrocannabinol, also known as delta-8 THC, is a psychoactive substance found in the Cannabis sativa plant, of which marijuana and hemp are two varieties. Delta-8 THC is one of over 100 cannabinoids produced naturally by the cannabis plant but is not found in significant amounts in the cannabis plant. As a result, concentrated amounts of delta-8 THC are typically manufactured from hemp-derived cannabidiol (CBD).” The FDA further notes that it has received adverse action reports in patients who consumed delta-8 products, and that additionally national poison control centers have received adverse incident reports as well. In September of 2021, the CDC released a health advisory to altert the public and healthcare professionals about the increase availability of products containing Delta-8 and its potential for adverse effects. The advisory notes that some part of the increase is due to insufficient labeling of the products containing the Delta-8. This bill would expressly prohibit intoxicating hemp products from being manufactured or sold in California.

This bill would prohibit any person from manufacturing, distributing, or selling an industrial hemp product that contains synthetically derived cannabinoids, unless approved by the CDPH, and further specifies that a final form hemp product (a food or beverage, etc.) cannot have a level of total THC that exceeds one milligram and each serving per package cannot exceed .25 milligrams of THC.

This bill additionally includes enforcement tools and penalty provisions to embargo or seize industrial hemp products under certain circumstances, including if the product is subject to recall, quarantine, condemnation or quarantine or if probable cause exists. These enforcement provisions are similar to what is authorized under MAUCRSA.

Last year, this Committee heard and passed AB 420 (Aguiar-Curry of 2023). AB 420, as part of MAUCRSA, would have made it clear that the provisions of MAUCRSA would not prohibit a cannabis licensee from manufacturing, distributing, or selling industrial hemp products, as defined in state law including cannabinoids, extracts, or derivatives of industrial hemp, if the product complied with all applicable state laws and regulations. In addition, the bill would have placed various updates to the industrial hemp program under CDPH’s jurisdiction. AB 420 was ultimately held in the Senate Committee on Appropriations. This bill provides a slightly more robust framework by requiring cannabis licensees to incorporate hemp by requiring track and trace and requiring that licensees only source hemp from CDPH authorized entities and licensees otherwise abide by all other regulations and laws of MAUCRSA.

1. Prior Related Legislation. AB 420 (Aguiar-Curry of 2023) would have provided that MAUCRSA does not prohibit a cannabis licensee from manufacturing, distributing, or selling industrial hemp products, as defined in state law and including cannabinoids, extracts, or derivatives of industrial hemp, if the product complies with all applicable state laws and regulations, and makes updates to the industrial hemp program under the CDPH, as specified. (Status: This bill was held in the Senate Committee on Appropriations)

AB 1656 (Aguiar-Curry of 2022) would have stated that the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) does not prohibit a cannabis licensee from manufacturing, distributing, or selling industrial hemp products, as defined in state law and including cannabinoids, extracts, or derivatives of industrial hemp, if the product complies with all applicable state laws and regulations. (Status: Died on the Senate Inactive File)

AB 45 (Aguiar-Curry, Chapter 576, Statutes of 2021) established a regulatory framework for industrial hemp under the Sherman Food, Drug, and Cosmetic Law.

SB 292 (Wilk, Chapter 485, Statutes of 2021) conformed current state law to the United States Department of Agriculture’s (USDA) Interim Final Rule regarding reporting and testing of industrial hemp in the United States.

SB 235 (Allen of 2021) would have established a structure for food, beverage, and cosmetic products containing industrial hemp, would have required industrial hemp product manufacturers to register with the CDPH, and would have required industrial hemp to be tested prior to incorporating it into a product. (Status: Moved to inactive file on Senate Floor)

SB 153 (Wilk, Chapter 838, Statutes of 2019) revised provisions regulating the cultivation and testing of industrial hemp to conform to the requirements for a state plan under the 2018 Farm Bill.

SB 94 (Committee on Budget and Fiscal Review, Chapter 27, Statutes of 2017) combined AUMA and MCRSA into one system for the regulation of cannabis, resulting in MAUCRSA.

SB 566 (Leno, Chapter 398, Statutes of 2013) allowed hemp to be grown in California, upon federal approval, by defining “industrial hemp” to be excluded from the definition of “marijuana,” a Schedule I controlled substance.

1. Arguments in Support. California Cannabis Industry Association, United Food and Commercial Workers International Union, California Retailers Association, California Cannabis Manufacturers Association, CalNORML, Cannabis Distribution Association, Good Farmers Great Neighbors, Weedmaps, Embarc, CannaCraft || March & Ash write in support and note, “This bill addresses urgent public health concerns related to unregulated hemp products by strengthening the regulatory framework established by AB 45 (Aguiar-Curry, 2021). Additionally, AB 2223 facilitates the integration of hemp cannabinoids into the regulated cannabis supply chain, promoting a robust, transparent, and economically viable cannabis and hemp industry in California.”

A coalition of law enforcement associations write in support and note, “The current lack of oversight and enforcement has created a Wild West atmosphere, where bad actors can exploit loopholes and put the public at risk. These products are often mislabeled, marketed as safe alternatives to cannabis, and sold without age restrictions, resulting in a new wave of substance misuse and public safety concerns, particularly among our youth. By strengthening enforcement provisions, closing loopholes, and empowering regulatory agencies to crack down on illicit products, AB 2223 takes a critical step in bringing much-needed accountability to the hemp industry.”

Kiva Confections writes in support and notes, “In addition to fulfilling a long-standing commitment to integrate hemp cannabinoids into the regulated cannabis supply chain, AB 2223 strengthens the enforcement provisions of existing hemp law to ensure public health and safety. AB 2223 mitigates public health risks associated with unregulated hemp cannabinoids, and enhances the competitiveness of regulated cannabis products.”

The San Diego Regional Chamber of Commerce writes in support and notes, “Back in 2018, the federal Farm Bill clarified that industrial hemp is an agricultural crop and removed hemp from the federal Controlled Substances Act (CSA) schedules. This has allowed farmers to cultivate industrial hemp with levels of psychoactive compounds of 0.3% or less, fostering the rising popularity of CBD products used for pain relief, anxiety, or other disorders. However, intoxicating hemp products have also gained popularity using a loophole in federal law that measures THC content by weight, rather than intoxicating effect. While certain cities across the State currently prohibit commercial cannabis operations, the emergence of intoxicating hemp poses a significant threat to public health and safety, particularly for our youth, that are being presented to mislabeled products.”

1. Arguments in Opposition. Origins Council, Humboldt County Growers Alliance, Big Sur Farmers Association, Nevada County Cannabis Alliance, Mendocino Cannabis Alliance, and Trinity County Agricultural Alliance are opposed unless amended and note, “…AB 2223’s integration provisions would allow hemp cultivators (not licensed by DCC) to sell hemp biomass, including hemp-derived THC, to cannabis manufacturers for integration into legal cannabis products; and yet these hemp cultivators are regulated to a dramatically lesser degree than DCC-licensed cannabis cultivators growing the same plant for largely the same purposes. Amendments taken in the Assembly Appropriations Committee incrementally address, but do not fully resolve, this dynamic. To address these issues, we request the following amendments: 1. Prohibit the incorporation of naturally-occurring THC and comparable cannabinoids extracted from hemp into legal cannabis products unless and until cannabis and hemp cultivation are regulated equally as agriculture. 2. Require hemp products produced outside the cannabis supply chain and sold at cannabis retail to be integrated at the point of cannabis distribution 3. Promulgate integration regulations through the normal rulemaking process, rather than through emergency rulemaking. Additionally, in the parts of the bill that regulate the existing hemp market, we request an additional amendment: 4. Decrease the allowable quantity of THC in a hemp product from 1 milligram to 0.5 milligrams.”

The U.S. Hemp Roundtable notes, “we urge the [Committee] to opposes AB 2223 (Aguiar-Curry) unless amended to raise the allowable milligrams of THC in a hemp CBD product to a level that protects the ability of the industry to serve the California marker. We also urge an amendment to the bill to eliminate the cap on the number of servings per package.”

Cheech and Chong’s Global Holdings is opposed unless amended and writes, “Currently, AB 2223 neglects the nascent hemp beverage market…we are asking for the following amendments:

1. 5 mg per customary serving size container. 
2. Excise tax of 5% on hemp consumables. Our intent is to have this tax offset the coming increase in excise tax (from 15% to 19%) for the sale of cannabis in CA. 
3. Integration of hemp derived cannabinoids into cannabis manufacturing licenses in CA, such that licensed manufacturers (DCC licenses, working with metric tracked material) would be able to purchase bulk hemp cannabinoids on the national market and use those to manufacture products for sale in cannabis dispensaries in CA. “
4. Comments. There are a number of groups who are in support of this bill, but request additional amendments. Youth Forward, Public Health Institute, Marin Residents for Public Health Cannabis Policies, Bay Area Clinical Associates, Safe Launch, San Dieguito Alliance, and Shasta Family YMCA note general support for prohibiting synthetically derived cannabinoids whether made by the hemp or the cannabis industry, but would like to see this bill amended to address a few outstanding concerns. Specifically, they note that this bill does not clearly prohibit inhalable hemp products and they should be clearly prohibited, the bill should not authorize the CDPH to authorize “Any other chemical substance approved by the department in regulation” in the prohibition of synthetically derived cannabinoids, and that the bill should include an age requirement of 21 or above for purchasing industrial hemp products.

Charlotte’s Web and OneHemp are also in support of the bill if amended; however, instead of restricting the 1 mg THC limit, these organizations would like to request that the bill be amended to increase the THC cap from 1 to 1.5 mg. They write, “It is crucial to recognize that Delta 9 THC occurs naturally in these products, and our stance should be aimed at safeguarding the integrity of naturally occurring full spectrum CBD. This stance is pivotal for maintaining consumer access to products that have shown significant benefits”

, “We recommend amending the bill to set the THC limit at 1.5 mg per serving. This recommendation is backed by scientific research, including the THC impairment study conducted by Johns Hopkins University, which demonstrated no impairment at a 2.8 mg THC serving. By adopting a 1.5 mg limit, the legislature can establish a precautionary measure against potential misuse of hemp products while ensuring that non-intoxicating full-spectrum CBD remains accessible for wellness consumers in California.”

1. Policy Issues for Consideration.

Timeline for Implementation. As currently drafted, this bill would take effect on January 1, 2025. Hemp would be permitted into the cannabis and cannabis product market with a short timeframe for the DCC to establish a regulatory framework. The author may wish to continue working with stakeholders and potentially delay implementation of hemp integration into the cannabis marketplace to allow the DCC and other regulators the necessary time to ensure that hemp products are integrated safely and appropriately and consistent with overall cannabis regulation as directed by Prop 64.

Regulatory Construct. Separate state departments regulate hemp cultivation and product manufacturing; hemp cultivation is under the jurisdiction of CDFA and product manufacturing is under the jurisdiction of CDPH, likely returning a regulatory framework for cannabis and cannabis products to be reliant upon separate regulatory agencies with oversight over different aspects of the product, while including in the cannabis regulatory framework. Would a single agency be better capable to oversee any type of product that contains CBD (intoxicating or not)? The author should continue to work with stakeholders and the regulatory departments to ensure the current three-agency oversight of various forms of hemp is appropriate for integrating hemp into the cannabis regulatory framework.

Final Form Products and Milligram Limits. As amended in the Assembly, this bill currently prohibits an industrial hemp final form product from having a THC limit that exceeds one milligram and prohibits a serving per package from exceeding .25 milligrams. As noted by stakeholder comments above, this limit is either too high or too low and does not account for the varying types of products offered in the marketplace. While this number was amended into the bill in May, should additional studies or reviews be conducted to ensure that the limits set by this bill are appropriate for the products they are included in? Is there an additional mechanism to ensure that the product limits are not too high and inadvertently are sold to youth or unsuspecting consumers? Could there be products that are for 21-years or older that the limits should meet different standards? The author should continue to work with all stakeholders to ensure that any statutory limit is scientifically based and will not undermine the protections and clarifications that this bill seeks to address.

SUPPORT AND OPPOSITION:

Support:

California Cannabis Industry Association (co-sponsor)
UFCW - Western States Council (so-sponsor)

Arcadia Police Officers' Association
Burbank Police Officers' Association
California Cannabis Manufacturers Association
California Coalition of School Safety Professionals
California Narcotic Officers' Association
California NORML
California Reserve Peace Officers Association
California Retailers Association
California State Grange
Cannabis Distributors Association
Cannacraft, INC.
Claremont Police Officers Association
Corona Police Officers Association
Culver City Police Officers' Association
Deputy Sheriffs' Association of Monterey County
Embarc
Fullerton Police Officers' Association
Good Farmers Great Neighbors
Kiva Confections
Lompoc Valley Cannabis Association, Santa Barbara County
Los Angeles School Police Management Association
Los Angeles School Police Officers Association
March and Ash
Murrieta Police Officers' Association
Newport Beach Police Association
Novato Police Officers Association
Palos Verdes Police Officers Association
Placer County Deputy Sheriffs' Association
Pomona Police Officers' Association
Riverside Police Officers Association
Riverside Sheriffs' Association
San Diego Regional Chamber of Commerce
Santa Ana Police Officers Association
Upland Police Officers Association
Weedmaps

Opposition:

Big Sur Farmers Association
Cheech and Chong’s Global Holdings
Humboldt County Growers Alliance
Mendocino Cannabis Alliance
Nevada County Cannabis Alliance
Origins Council
Trinity County Agriculture Alliance
U.S. Hemp Roundtable

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 2223

Author:(Aguiar-Curry)

As Amended Ver:May 16, 2024

Majority vote

SUMMARY

Allows for cannabis licensees to manufacture, distribute, or sell products that contain industrial hemp and places additional restrictions on industrial hemp products containing tetrahydrocannabinol (THC) or comparable cannabinoids.

Major Provisions

1. States that it is the intent of the Legislature to enhance the viability of cannabis licensees in the marketplace by pursuing measures to relieve tax and regulatory requirements, and to authorize licensees to manufacture, distribute, and sell hemp and cannabidiol (CBD) products in compliance with current law.
2. Provides that the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) does not prohibit a licensee from manufacturing, processing, distributing, or selling products that contain industrial hemp, or cannabinoids, extracts, or derivatives from industrial hemp, in compliance with state law.
3. Allows for a licensed manufacturer or microbusiness to obtain industrial hemp from a person registered with the California Department of Public Health (CDPH).
4. Requires industrial hemp purchased by a cannabis licensee to be tracked as a separate batch throughout the manufacturing process in order to document the disposition of that hemp.
5. Requires a cannabis licensee that manufactures, distributes, or sells products that contain industrial hemp to record all transactions and relevant data in the state track and trace system.
6. Requires manufactured cannabis products containing industrial hemp to comply with MAUCRSA and any regulations adopted by the Department of Cannabis Control (DCC).
7. Prohibits a licensed cannabis manufacturer from incorporating THC or comparable cannabinoids that have been converted from a hemp-derived cannabinoid, and prohibits a licensed cannabis retailer or distributor from selling or distributing cannabis, a cannabis product, or an industrial hemp product that contains THC or comparable cannabinoids.
8. Requires the DCC to implement a process by which a licensee that is also a registered hemp manufacturer may use the same premises.
9. Provides that the DCC shall adopt and readopt emergency regulations to implement hemp integration into the cannabis supply chain and provides for a limited exemption from the Administrative Procedure Act for those regulations.
10. Exempts regulations adopted by the CDPH to set maximum serving sizes for hemp-derived cannabinoids, hemp extract, and products derived from industrial hemp from the existing exemption from the Administrative Procedure Act.
11. Prohibits the manufacturing, distribution, or sale of an industrial hemp product that contains synthetically derived cannabinoids unless explicitly approved by the CDPH in regulation.
12. Prohibits a person from manufacturing, distributing, or selling any of the following:
    1. Industrial hemp raw extract derived from, or an industrial hemp product containing, industrial hemp that was not grown in compliance with the law.
    2. Industrial hemp raw extract with a total THC concentration that exceeds 0.3 percent, or a lower amount determined allowable by the CDPH in regulation.
    3. Industrial hemp products containing industrial hemp raw extract with a total THC concentration that exceeds 0.3 percent, or a lower amount determined allowable by the CDPH in regulation.
13. Requires industrial hemp products to be manufactured, distributed, or sold with a certificate of analysis from an independent testing laboratory that confirms that the raw extract used in the product does not exceed a total THC concentration of 0.3 percent, or a lower amount determined allowable by the CDPH.
14. Repeals the requirement that any initial determination regarding an exclusion from the definition of "THC or comparable cannabinoid" shall be confirmed through rulemaking in compliance with the Administrative Procedure Act within 18 months.
15. Requires industrial hemp human food and beverage final form products to meet all of the following requirements:
    1. A single serving of an industrial hemp product shall be based on the amount of food or beverage customarily consumed in one eating occasion for that food or beverage.
    2. A single serving of an industrial hemp dietary supplement in pill, tablet, or capsule form shall be one unit.
    3. A product shall not exceed five servings per package.
16. Prohibits an industrial hemp final form product from having a level of THC that exceeds one milligram, with a maximum of .25 milligrams of THC per serving, and requires a qualified testing laboratory to establish a limit of detection of that amount or lower for total THC.
17. Authorizes the CDPH to take action against an industrial hemp enrollment when a peace officer, state official, or local official has notified the CDPH that a manufacturer within its jurisdiction is in violation of state law and regulations relating to industrial hemp.
18. Authorizes peace officers and state officials to seize or embargo illicit industrial hemp products and provides that violations of laws regarding the retail sale of industrial hemp shall be subject to civil penalties of up to $2,500 per violation or a misdemeanor.
19. Prohibits industrial hemp products from being labeled, marketed, or advertised as a product intended to produce an intoxicating effect.

COMMENTS

Cannabis versus Hemp. Botanically speaking, both industrial hemp and what has historically been referred to as marijuana are members of the same plant species, Cannabis sativa. Under California law, the term "cannabis" typically refers to varieties of the species that contain sufficient levels of the cannabinoid THC to produce an intoxicating psychoactive effect, or "high"; this plant and its associated products are regulated by the DCC under MAUCRSA. Hemp, meanwhile, is commonly regarded more as an agricultural plant and has historically been used for products such as paper, textiles, cosmetics, and fabric. California law requires industrial hemp to contain less than 0.3 percent THC, which is considered trace amounts compared to psychoactive cannabis (which frequently contains between 15-40 percent THC). Hemp is regulated by the CDFA for agricultural purposes and by the CDPH when it is used in food, beverage, and cosmetic products.

While industrial hemp does not share the same psychoactive properties as cannabis due to its significantly lower amount of THC, both hemp and cannabis contain another cannabinoid known as cannabidiol (CBD). According to the National Institute of Health, CBD has pain relieving, anti-inflammatory, anti-psychotic, and tumor-inhibiting properties. Two products, dronabinol and nabilone, are federal Food and Drug Administration (FDA)-approved drugs used for the prevention or treatment of chemotherapy-related nausea and vomiting. There are currently over 100 clinical trials of CBD listed on the National Library of Medicine's website. These trials are testing CBD's utility in treating epilepsy, substance use disorders, pain, psychosis, and anxiety, among other disorders and conditions.

Integration of Cannabis and Hemp. Notwithstanding the biological and chemical similarities of cannabis and hemp, hemp products are widely considered "non-cannabis goods" for purpose of MAUCRSA. Under the DCC's regulations, cannabis retailers are prohibited from selling any non-cannabis goods besides cannabis accessories and branded merchandise. (Proposed regulations recently announced by the DCC would further allow for the sale of prepackaged non-cannabis infused and food and beverages, subject to local authorization.) While presumably an individual or entity could both engage in a licensed cannabis business and in a business involving hemp, it is understood that the two supply chains must remain fully distinct.

Whether hemp and cannabis products should be allowed to coexist in a regulatory context has been debated consistently over the past several years. Because both plants contain the same cannabinoids, it is often the case that two essentially identical products—CBD gummies, for example—are regulated and sold differently based on whether the CBD was derived from cannabis or industrial hemp. Many cannabis retailers may wish to also sell products derived from hemp. However, some in the cannabis industry may see hemp as an unwelcomed competitor, and concerns have been expressed that the difference in regulatory systems and consumer safety requirements should keep the two products separated.

AB 45 included language requiring the DCC to prepare a report to the Governor and the Legislature outlining the steps necessary to allow for the incorporation of hemp cannabinoids into the cannabis supply chain. The report is required to include, but is not be limited to, the incorporation of hemp cannabinoids into manufactured cannabis products and the sale of hemp products at cannabis retailers. Language in AB 45 also stated the intent of the Legislature to consider, in light of the DCC's report, "whether and how to take legislative action concerning the incorporation of hemp into the cannabis supply chain."

The DCC published The Hemp Report: Steps and Considerations for Incorporating Hemp Into the Commercial Cannabis Supply Chain and submitted it to the Legislature in January of 2023. The report submitted by the DCC stated that "incorporating hemp into the regulated commercial cannabis supply chain presents both policy and implementation challenges. From the policy perspective, several determinations would need to be made to move forward with the inclusion of hemp." In the report's conclusion, the DCC summarized its determinations and conclusions as follows:

"As detailed in this report, the inclusion of hemp into the commercial cannabis supply chain is complex and requires careful consideration of significant policy questions to arrive at an approach that is in the best interests of California. The approach utilized to accomplish this end would directly impact the cannabis industry, hemp industry, standard commercial market, medicinal and adult-use consumers, and the Department and other responsible California state agencies. While this report raises significant policy considerations to inspire and support deliberations between policy makers and stakeholders, it should not be interpreted as containing every single issue that may need to be considered and addressed by policy makers to determine when or if to incorporate hemp into the cannabis supply chain. If California chooses to allow hemp into the commercial cannabis supply chain, irrespective of which approach California adopts, implementation will likely require significant time and resources."

In 2023, AB 420 was introduced to as a vehicle for continued discussions around how California might integrate industrial hemp into the supply chain for cannabis. Initially, the bill contained a simplistic statement that nothing in MAUCRSA prohibits integration. Subsequent amendments to the bill that were made in the Senate provided for greater details regarding how integration would be achieved. The amendments also expanded prohibitions against industrial hemp containing synthetic THC or similar cannabinoids. However, the bill was ultimately held under submission on the suspense file in the Senate Committee on Appropriations.

This bill now represents the author's fifth year of leading efforts to strengthen California laws governing the cultivation, manufacturing, and sale of hemp products. Language in the bill would expressly allow for the integration of industrial hemp into the licensed cannabis supply chain. The bill then imposes a number of requirements to ensure that integration occurs safely. This bill would only allow cannabis licensees to obtain industrial hemp from individuals registered with the CDPH, and that hemp would be tracked as a separate batch throughout the manufacturing process in order to document the disposition of that hemp or hemp product. Manufactured cannabis products incorporating hemp would be required to comply with MAUCRSA. The DCC would be required to implement a process by which a licensee that is also a registered hemp manufacturer may use the same premises.

Intoxicating Hemp. A significant portion of the bill is aimed at addressing concerns regarding the perceived proliferation of intoxicating hemp products. The California Cannabis Industry Association (CCIA) issued a white paper in October of 2022 titled Pandora's Box: The Dangers of a National, Unregulated, Hemp-Derived Intoxicating Cannabinoid Market. The CCIA report argued that loopholes in the 2018 Farm Bill, which defined industrial hemp as having no more than 0.3 percent delta-9 THC content by dry weight, inadvertently led to the proliferation of intoxicating hemp products. Specifically, the white paper points to a Ninth Circuit decision that the CCIA says "unleashed a Wild West of intoxicants when it ruled that products containing delta-8 THC meet the statutory definition of industrial hemp."

According to the FDA, delta-8 THC is a cannabinoid typically synthetically manufactured from hemp-derived CBD that has significant psychoactive and intoxicating effects. The FDA has expressed concern that delta-8 THC products "likely expose consumers to much higher levels of the substance than are naturally occurring in hemp cannabis raw extracts." There were reportedly 104 reports made to the FDA of adverse events in patients who consumed delta-8 THC products between December 1, 2020, and February 28, 2022, over half of which resulted in medical intervention or hospital admission.

In April of 2023, the Cannabis Regulators Association (CANNRA), a coalition of regulatory agencies overseeing cannabis and hemp industries in more than 40 states and territories in the United States, wrote a letter to congressional leadership requesting action at the federal level provide a regulatory framework for products containing THC derived from hemp. CANNRA specifically called attention to the fact that a 0.3 percent threshold of delta-9 THC by weight is a relatively small amount of THC in a hemp plant, but is significantly more when included as an ingredient in edible products and beverages. A 50-gram chocolate bar, for example, would have around 150 milligrams of THC at the 0.3 percent THC limit – 30 times the standard 5 milligram THC dose established by the National Institute on Drug Abuse.

This bill seeks to close loopholes created in federal law by explicitly prohibiting intoxicating hemp products from being manufactured and sold in California. Under the bill, cannabis manufacturers would be prohibited from incorporating THC or comparable cannabinoids derived from hemp in their products. The bill would then further prohibit the manufacturing, distribution, or sale of industrial hemp products containing synthetically derived cannabinoids unless explicitly approved by the CDPH.

Additionally, this bill would prohibit any person from manufacturing, distributing, or selling food and beverage final form products that exceed five servings per package. The total level of THC per final form product would then be capped at 1 milligram total. Additionally, the bill would prohibit more than .25 milligrams of THC per serving.

According to the Author

"Since the federal "Farm Bill" legalized of industrial hemp in 2018, hemp-derived products containing cannabidiol (CBD) and other cannabinoids have been widely produced and sold to consumers at grocery stores, fitness centers, and other retail locations. In 2021, I authored AB 45 (Aguiar-Curry, Chapter 457, Statutes of 2021) to create the most protective testing standards and regulations for the hemp industry in the nation while maintaining access to CBD, a non-intoxicating product that is used to treat epilepsy, anxiety, chronic pain and other health concerns. However, a lack of enforcement and evolving industry practices have led to a proliferation of intoxicating hemp products that are easily accessible in our communities, including to youth, threaten public health, and undercut the legal hemp and cannabis markets. This bill aims to protect public health by eliminating access to intoxicating cannabinoids outside permitted dispensaries, while providing a pathway for well-regulated hemp and cannabis industries to participate in the federally- and state-legal hemp market. Specifically, this bill: 1) increases enforcement against illegal hemp products, including further empowering state and local public health agencies 2) ensures that all intoxicating products are treated, regulated and taxed as cannabis, and 3) allows California to join 17 other states to integrate hemp into the cannabis supply chain."

Arguments in Support

The California Cannabis Industry Association (CCIA) is sponsoring this bill. The CCIA writes: "AB 2223 seeks to enhance the enforcement provisions in existing law by addressing the critical and urgent public health issue of unregulated, high-potency intoxicating hemp products that are showing up in gas stations, smoke shops, and even prominent retail outlets, blatantly subverting the state's rigorous cannabis laws and taxation framework. AB 2223 also offers a compelling solution to the industry's cost challenges by permitting the integration of certain hemp cannabinoids into cannabis products." The CCIA argues that "AB 2223 will help address the immediate public health, youth access, and exposure issues generated by the widespread availability of unregulated, intoxicating hemp products and pave the way for a robust, transparent, economically viable and socially equitable cannabis industry in California."

Arguments in Opposition

Public Health Institute (PHI) opposes this bill, writing: "We do not support the provisions allowing hemp products to be sold by the cannabis industries, especially with the lower standards applying to hemp. The Department of Cannabis Control was also hesitant to do so in its report last year. Doing so will undermine legal cannabis operators who have been following the rules, especially cultivators. These businesses are already being affected by vast overproduction in both the legal and illegal markets which has dramatically driven down prices. Creating further competition from the large, more loosely regulated and untaxed intoxicating hemp market will simply cause more legal cannabis operators to fail. It will create further pressure to drive up consumption. If intoxicating hemp is not prohibited, it would allow the sale of current legal Delta-9-THC industrial hemp edibles at cannabis retailers with more THC than legal cannabis edibles. Hemp products also do not face the same requirements for product design, packaging, marketing, and advertising and warning labels, including limits on attractiveness to children and not being easily confused with non-cannabis foods. We cannot have two conflicting standards of taxation, safety, and information for selling similar Cannabis sativa derived products in the same stores."

FISCAL COMMENTS

According to the Assembly Committee on Appropriations, one-time and ongoing costs in the millions of dollars to the DCC and costs of approximately $500,000 to the CDPH.

VOTES

ASM BUSINESS AND PROFESSIONS: 18-0-0

YES: Berman, Flora, Alanis, Bains, Juan Carrillo, Chen, Dixon, Grayson, Irwin, Jackson, Low, Lowenthal, McKinnor, Stephanie Nguyen, Pellerin, Sanchez, Soria, Zbur

ASM JUDICIARY: 12-0-0

YES: Kalra, Dixon, Bauer-Kahan, Bryan, Connolly, Haney, Maienschein, McKinnor, Pacheco, Reyes, Sanchez, Waldron

ASM APPROPRIATIONS: 11-0-4

YES: Wicks, Arambula, Bryan, Calderon, Wendy Carrillo, Mike Fong, Grayson, Haney, Hart, Pellerin, Villapudua

ABS, ABST OR NV: Sanchez, Dixon, Jim Patterson, Ta

UPDATED

VERSION: May 16, 2024

CONSULTANT: Robert Sumner / B. & P. / (916) 319-3301 FN: 0003281

Date of Hearing: May 15, 2024

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 2223

Author:(Aguiar-Curry) – As Amended Ver:April 10, 2024

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill allows cannabis licensees to manufacture, distribute, or sell products that contain industrial hemp, places restrictions on industrial hemp products containing tetrahydrocannabinol (THC) or comparable cannabinoids, and provides for enforcement.

Specifically, this bill:

1. Clarifies that the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) does not prohibit a cannabis licensee from manufacturing, processing, distributing, or selling products that contain industrial hemp, or cannabinoids, extracts, or derivatives from industrial hemp, in compliance with state law.
2. Allows a licensed manufacturer or microbusiness to obtain industrial hemp from a person registered with the California Department of Public Health (CDPH).
3. Requires a cannabis licensee to track purchased industrial hemp as a separate batch throughout the manufacturing process.
4. Requires a cannabis licensee that manufactures, distributes, or sells products that contain industrial hemp to record transactions in the state track and trace system.
5. Prohibits a licensed cannabis manufacturer from incorporating delta-9 tetrahydrocannabinol (THC) that has been converted from a hemp-derived cannabinoid, and prohibits a cannabis retailer or distributor from selling or distributing an industrial hemp product that contains converted delta-9 THC.
6. Requires the Department of Cannabis Control (DCC) to implement a process by which a licensee that is also a registered hemp manufacturer may use the same premises.
7. Requires DCC to adopt and readopt, on or before July 1, 2025, emergency regulations to implement hemp integration into the cannabis supply chain and provides for a limited exemption from the Administrative Procedure Act for those regulations.
8. Exempts regulations adopted by CDPH to set maximum serving sizes for hemp-derived cannabinoids, hemp extract, and products derived from industrial hemp from the existing exemption from the Administrative Procedure Act.
9. Modifies the definition of “industrial hemp product” to include inhalable products and to exclude a synthetically derived cannabinoid.
10. Prohibits the manufacturing, distribution, or sale of an industrial hemp product that contains synthetically derived cannabinoid unless explicitly approved by CDPH in regulation.
11. Prohibits a person from manufacturing, distributing, or selling specified industrial hemp raw extract products.
12. Prohibits the manufacture, distribution, or sale of an industrial hemp product without a certificate of analysis from an independent testing laboratory that confirms that the raw extract used in the product does not exceed a total THC concentration of 0.3 percent, or a lower amount determined by CDPH.
13. Prohibits an industrial hemp final form product from having a level of THC that exceeds one milligram (mg), and each serving, as defined, from exceeding 0.25 mg THC. Prohibits a product form having more than five servings per package.
14. Requires an in-state manufacturer who produces an industrial hemp product that is a food, beverage, or cosmetic, or an out-of-state hemp manufacturer who produces an industrial hemp product that is a food, beverage, or cosmetic for importation into the state, to register with CDPH.
15. Requires an in-state manufacturer who produces an industrial hemp product that is a processed pet food, or an out-of-state hemp manufacturer who produces an industrial hemp pet food for importation into the state, to obtain a cannabis license.
16. Authorizes CDPH to deny, suspend, forfeit, revoke, or order to surrender an industrial hemp enrollment and oversight authorization under specified circumstances.
17. Allows CDPH to take disciplinary action against a manufacturer for a violation of this statute when the violation was committed by the manufacturer’s officers, directors, owners, agents, or employees, as specified.
18. Authorizes peace officers and state officials to seize or embargo an industrial hemp products under specified circumstances and requires those peace officers or state officials to take specified procedural actions.
19. Provides that violations of laws regarding the retail sale of industrial hemp shall be subject to civil penalties of up to $2,500 per violation but requires a court to give due consideration to factors the court deems relevant.
20. Prohibits an industrial hemp human food or beverage product form being labeled, marketed, or advertised as a product intended to produce an intoxicating effect.
21. Authorizes a peace officer or state official with seizure authority to seize or embargo an industrial hemp product in specified circumstances, and establishes a process for the condemnation and destruction of the seized or embargoed product. Requires all fees and costs associated with the investigation, condemnation, and destruction of the illegal industrial hemp product, including the costs of storage and testing, to be incurred by the claimant, retailer, owner, or manufacturer of the industrial hemp.

FISCAL EFFECT:

1. DCC anticipates one-time and ongoing costs in the millions of dollars (Cannabis Control Fund). DCC identifies the following costs to implement this bill: substantial regulatory modifications, reconfiguring the track-and-trace system to track hemp in the supply chain, and possible changes to the cannabis licensing framework. DCC would need to add staff to scale up testing capacity and increase the capacity to conduct onsite inspections of co-located cannabis and hemp manufacturing premises, and to expand the product safety and recall program due to the expanded scope of permissible products. DCC states it would need an infusion of support for increased overall enforcement demands associated with allowing hemp to enter the cannabis supply chain under specific circumstances. 
   
2. CDPH estimates costs of approximately $500,000 for three staff positions and other expenses (General Fund).

According to the Legislative Analyst’s Office, the General Fund faces a structural deficit in the tens of billions of dollars over the next several fiscal years. 

COMMENTS:

1. Purpose. This bill is sponsored by the California Cannabis Industry Association (CCIA). According to the author:

Since the federal “Farm Bill” legalized industrial hemp in 2018, hemp-derived products containing cannabidiol (CBD) and other cannabinoids have been widely produced and sold to consumers at grocery stores, fitness centers, and other retail locations. In 2021, I authored AB 45 (Aguiar-Curry, Chapter 457, Statutes of 2021) to create the most protective testing standards and regulations for the hemp industry in the nation while maintaining access to CBD, a non-intoxicating product that is used to treat epilepsy, anxiety, chronic pain and other health concerns. However, a lack of enforcement and evolving industry practices have led to a proliferation of intoxicating hemp products that are easily accessible in our communities, including to youth, threaten public health, and undercut the legal hemp and cannabis markets. This bill aims to protect public health by eliminating access to intoxicating cannabinoids outside permitted dispensaries, while providing a pathway for well-regulated hemp and cannabis industries to participate in the federally- and state-legal hemp market. Specifically, this bill: 1) increases enforcement against illegal hemp products, including further empowering state and local public health agencies 2) ensures that all intoxicating products are treated, regulated and taxed as cannabis, and 3) allows California to join 17 other states to integrate hemp into the cannabis supply chain.

1. Background. In 2021, AB 45 (Aguiar-Curry), Chapter 576, Statutes of 2021) significantly expanded and clarified the framework under which CBD derived from industrial hemp may be used in food, beverages and dietary supplements. The bill revised or added various definitions relating to hemp products and placed new requirements on hemp manufacturers in exchange for more explicit authority to produce manufactured goods containing CBD derived from hemp. In doing so, the bill expressly specified that foods, beverages, dietary supplements, cosmetics, and pet food are not adulterated by the inclusion of industrial hemp cannabinoids.

Hemp products are widely considered “non-cannabis goods” for purposes of MAUCRSA. DCC regulations prohibit licensed cannabis retailers from selling any non-cannabis goods besides cannabis accessories and branded merchandise. While an individual or entity could presumably engage in a licensed cannabis business and in a business involving hemp, it is understood that the two supply chains must remain fully distinct.

Because both plants contain the same cannabinoids, essentially identical products are regulated and sold differently based on whether the CBD was derived from cannabis or industrial hemp. Many cannabis retailers may wish to also sell products derived from hemp. However, some people contend the two products should be separated because they are subject to differing regulatory systems and consumer safety requirements.

1. Related Legislation. AB 420 (Aguiar-Curry) authorizes the integration of industrial hemp into the licensed cannabis supply chain and strengthens prohibitions against industrial hemp containing synthesized cannabinoids. AB 420 was held in Senate Appropriations Committee.
   
2. Prior Legislation.
   
   1. AB 45 (Aguiar-Curry), Chapter 576, Statutes of 2021, established a regulatory framework for industrial hemp under the Sherman Food, Drug, and Cosmetic Law.
      
   2. SB 292 (Wilk), Chapter 485, Statutes of 2021, conforms state law to the U.S. Department of Agriculture’s Interim Final Rule regarding reporting and testing of industrial hemp.
      
   3. SB 153 (Wilk), Chapter 838, Statutes of 2019, revises provisions regulating the cultivation and testing of industrial hemp to conform to the requirements for a state plan under the 2018 Farm Bill.
      
   4. AB 1656 (Aguiar-Curry), of the 2021-22 Legislative Session, would have authorized the integration of industrial hemp into the licensed cannabis supply chain. AB 1656 died on the Senate inactive file.
      
   5. AB 228 (Aguiar-Curry), of the 2019-20 Legislative Session, would have established a regulatory framework for industrial hemp under the Sherman Food, Drug, and Cosmetic Law. AB 228 was held in Senate Appropriations Committee.

Analysis Prepared by: Allegra Kim / APPR. / (916) 319-2081

Date of Hearing: April 16, 2024

ASSEMBLY COMMITTEE ON JUDICIARY

Ash Kalra, Chair

ABPCA Bill Id:AB 2223

Author:(Aguiar-Curry) – As Amended Ver:April 10, 2024

SUBJECT: Cannabis: industrial hemp

KEY ISSUES:

1. SHOULD PEACE OFFICERS OR STATE OFFICIALS WHO SEIZE OR EMBARGO AN INDUSTRIAL HEMP PRODUCT BE REQUIRED TO EITHER RETURN THE PRODUCT OR REQUEST VOLUNTARY CONDEMNATION AND DESTRUCTION OF THE PRODUCT IF THEY DO NOT COMMENCE PROCEEDINGS IN SUPERIOR COURT REGARDING THE PRODUCT?
2. SHOULD PUBLIC PROSECUTORS BE AUTHORIZED TO PURSUE CIVIL ACTIONS AND COLLECT CIVIL PENALTIES FOR VIOLATIONS OF THE PROPOSED PROVISIONS REGULATING INDUSTRIAL HEMP PRODUCTS?

SYNOPSIS

California has implemented extensive measures to regulate the exponential growth of the cannabis industry, particularly since the passage of Proposition 64 in 2016, including statutory penalties for unlicensed cannabis operations up to three times the applicable licensing fee. However, there remain various areas of discrepancy in cannabis law, including regulations on the growth and sale of certain industrial hemp products. According to the author, a lack of enforcement and evolving industry practices have led to a proliferation of intoxicating hemp products that are easily accessible in our communities, including to youth, threaten public health, and undercut the legal hemp and cannabis markets. This bill aims to protect public health by eliminating access to intoxicating cannabinoids outside permitted dispensaries, while providing a pathway for well-regulated hemp and cannabis industries to participate in the federally- and state-legal hemp market.

This analysis focuses on the elements of this bill within the Committee’s jurisdiction, namely the enforcement mechanisms that fall to the courts. In particular, the bill proposes two civil enforcement mechanisms: first, to require a peace officer or state official who seizes or embargoes hemp products to either return the product or request voluntary condemnation and destruction of the product if they do not initiate proceedings in superior court for condemnation and destruction, and second to authorize public prosecutors to initiate civil actions and collect civil penalties for violations of the bill’s provisions.

This bill is sponsored by the California Cannabis Industry Association (CCIA) and supported by cannabis industry advocates including California Norml, Weedmaps, and UFCW Western States Council. A number of organizations have submitted a position of oppose unless amended, including the Mendocino Cannabis Alliance, the Nevada County Cannabis Alliance, Public Health Institute, and Be the Influence. This bill was previously heard by the Assembly Committee on Business and Professions and was approved by a vote of 18 – 0.

SUMMARY: Proposes specific regulations of industrial hemp products and enforcement mechanisms to ensure compliance. Specifically, this bill:

1. States that it is the intent of the Legislature to enhance the viability of cannabis licensees in the marketplace by pursuing measures to relieve tax and regulatory requirements, and to authorize licensees to manufacture, distribute, and sell hemp and cannabidiol (CBD) products in compliance with current law.
2. Provides that MAUCRSA does not prohibit a licensee from manufacturing, processing, distributing, or selling products that contain industrial hemp, or cannabinoids, extracts, or derivatives from industrial hemp, in compliance with state law.
3. Allows for a licensed manufacturer or microbusiness to obtain industrial hemp from a person registered with the CDPH.
4. Requires industrial hemp purchased by a cannabis licensee to be tracked as a separate batch throughout the manufacturing process in order to document the disposition of that hemp or hemp product.
5. Requires a cannabis licensee that manufactures, distributes, or sells products that contain industrial hemp to record all transactions and relevant data, as prescribed by the department, in the state track and trace system.
6. Requires manufactured cannabis products containing industrial hemp to comply with MAUCRSA and any regulations adopted by the DCC.
7. Prohibits a licensed cannabis manufacturer from incorporating delta-9 THC that has been converted from a hemp-derived cannabinoid, and prohibits a licensed cannabis retailer or distributor from selling or distributing cannabis, a cannabis product, or an industrial hemp product that contains converted delta-9 THC.
8. Requires the DCC to implement a process by which a licensee that is also a registered hemp manufacturer may use the same premises.
9. Provides that the DCC shall adopt and readopt emergency regulations to implement hemp integration into the cannabis supply chain and provides for a limited exemption from the Administrative Procedure Act for those regulations.
10. Exempts regulations adopted by the CDPH to set maximum serving sizes for hemp-derived cannabinoids, hemp extract, and products derived from industrial hemp from the existing exemption from the Administrative Procedure Act.
11. Adds inhalable products to the definition of “industrial hemp product.”
12. Defines “limit of detection” as the lowest quantity of a substance or analyte that can be distinguished from the absence of that substance within a stated confidence limit.
13. Defines “synthetically derived cannabinoid” as a substance that is derived from a chemical reaction that changes the molecular structure of any substance separated or extracted from the cannabis plant, but exempts certain naturally occurring chemical substances and any other chemical substances approved by the CDPH in regulation.
14. Prohibits the manufacturing, distribution, or sale of an industrial hemp product that contains synthetically derived cannabinoid unless explicitly approved by the CDPH in regulation.
15. Prohibits a person from manufacturing, distributing, or selling any of the following:
    1. Industrial hemp raw extract derived from, or an industrial hemp product containing, industrial hemp that was not grown in compliance with the law.
    2. Industrial hemp raw extract with a total THC concentration that exceeds 0.3 percent, or a lower amount determined allowable by the CDPH in regulation.
    3. Industrial hemp products containing industrial hemp raw extract with a total THC concentration that exceeds 0.3 percent, or a lower amount determined allowable by the CDPH in regulation.
16. Requires industrial hemp products to be manufactured, distributed, or sold with a certificate of analysis from an independent testing laboratory that confirms that the raw extract used in the product does not exceed a total THC concentration of 0.3 percent, or a lower amount determined allowable by the CDPH.
17. Repeals the requirement that any initial determination regarding an exclusion from the definition of “THC or comparable cannabinoid” shall be confirmed through rulemaking in compliance with the Administrative Procedure Act within 18 months.
18. Requires industrial hemp human food and beverage final form products to meet all of the following requirements:
    1. A single serving of an industrial hemp product shall be based on the amount of food or beverage customarily consumed in one eating occasion for that food or beverage.
    2. A single serving of an industrial hemp dietary supplement in pill, tablet, or capsule form shall be one unit.
    3. A product shall not exceed five servings per package.
19. Prohibits an industrial hemp final form product from having a level of THC that exceeds one milligram, and requires that each serving package be capped at .25 milligrams of THC. Requires a qualified testing laboratory to establish a limit of detection of that amount or lower for total THC.
20. Requires out-of-state hemp manufacturers who produce industrial hemp pet food for importation into California or for sale in California to obtain a license from the CDPH.
21. Authorizes the CDPH to deny, suspend, forfeit, revoke, or order to surrender an industrial hemp enrollment and oversight authorization when a peace officer, state official, or local official has notified the CDPH that a manufacturer within its jurisdiction is in violation of state law and regulations relating to industrial hemp, and the CDPH, through an investigation, has determined that the violation is grounds for or contributes to other factors for denial, suspension, forfeiture, revocation, or surrender of the industrial hemp enrollment and oversight authorization.
22. Requires an investigation to include reasonable notice to the manufacturer and an opportunity for the manufacturer to defend any allegations of a violation.
23. Allows for the CDPH to take disciplinary action against a manufacturer for a violation of this part when the violation was committed by the manufacturer’s officers, directors, owners, agents, or employees while acting on behalf of the manufacturer or engaged in industrial hemp activity.
24. Repeals outdated language providing safe harbor for hemp manufacturers and retailers within three months of the effective date of prior legislation.
25. Prohibits an industrial hemp human food and beverage product from being labeled, marketed, or advertised as a product intended to produce an intoxicating effect.
26. Authorizes peace officers and state officials to seize or embargo industrial hemp products under specified circumstances.
27. Requires peace officers or state officials who seize or embargo industrial hemp products to take the following procedural actions:
    1. Request voluntary condemnation and destruction of the seized or embargoed industrial hemp product by the retailer or other owner.
    2. Commence proceedings in the superior court in whose jurisdiction the seized or embargoed industrial hemp product is located, for condemnation and destruction of the industrial hemp product against the retailer or other owner.
    3. Release the embargo or otherwise return the seized industrial hemp product if compliance with this chapter has been established.
28. Permits, in the absence of a court order, the seized or embargoed industrial hemp product to be destroyed pursuant to the written consent of the retailer or other owner or their respective attorney or authorized representative.
29. If the court finds that the seized or embargoed industrial hemp product is unlawful, or that its sale would otherwise be in violation of this part, requires the seized or embargoed industrial hemp product, after entry of judgement, be destroyed at the expense of the claimant, retailer, owner, or manufacturer. Assigns fees and costs to the retailer unless the retailer proves that fees and costs should be assigned to the claimant, owner, or manufacturer.
30. Authorizes a court, if the court finds that a seized or embargoed industrial hemp product’s unlawful condition can be corrected and when all provisions of this bill can be complied with, then, after entry of the judgment and after costs, fees, and expenses have been paid and a sufficient bond conditioned that the industrial hemp product will be brought into compliance, to direct that the industrial hemp product be delivered to the claimant, retailer, owner, or manufacturer to be brought into compliance.
    1. Requires the expense of any required supervision to be paid by the claimant, owner, or manufacturer. Requires fees and costs to be assigned to the retailer unless the retailer proves that fees and costs should be assigned to a claimant, owner, or manufacturer. Requires the bond to be discharged when the court finds that the industrial hemp product is no longer held for sale in violation of this bill’s provisions and that all of the expenses of supervision have been paid.
31. Requires all fees and costs associated with the investigation, the condemnation, and the destruction of the illegal industrial hemp product including, but not limited to, the costs of storage and testing, to be incurred by the claimant, retailer, owner, or manufacturer of the industrial hemp. Requires fees and costs to be assigned to the retailer unless the retailer proves that fees and costs should be assigned to a claimant, owner, or manufacturer.
32. Provides that violations of laws regarding the retail sale of industrial hemp shall be subject to civil penalties of up to $2,500 per violation in an action brought by the Attorney General on behalf of the people or on behalf of the department or another state agency, by a county counsel or district attorney, or by a city attorney or city prosecutor.
    1. In assessing a penalty under this bill, requires a court to give due consideration to the appropriateness of the amount of the civil penalty with respect to factors the court determines to be relevant, including all of the following:
       1. The gravity of the violation;
       2. The good faith, or lack thereof, of the person responsible for the violation;
       3. Any history of previous violations by the person responsible for the violation;
       4. Whether, and to what extent, the person responsible for the violation profited from the violation.
33. Directs penalties to be used first to reimburse the Attorney General and the department or the state agency for the costs of investigating and prosecuting the action, including expert fees and reasonable attorney’s fees, with the remainder, if any, to be deposited into the General Fund.
    1. Specifies that if an action for civil penalties is brought by a county counsel or district attorney, the penalty shall first be used to reimburse the county counsel or district attorney for the costs of bringing the action for civil penalties and for the costs of investigating or prosecuting the action, including expert fees and reasonable attorney’s fees, with the remainder, if any, to be deposited into the county’s designated fund.
    2. Specifies that if an action for civil penalties is brought by a city attorney or city prosecutor, the penalty shall first be used to reimburse the city attorney or city prosecutor for the costs of bringing the action for civil penalties and for the costs of investigating or prosecuting the action, including expert fees and reasonable attorney’s fees, with the remainder, if any, to be deposited into the city’s designated fund.
34. Establishes a three year statute of limitations for actions for civil penalties pursuant to 32).
35. Additionally provides that violations of laws regarding the retail sale of industrial hemp is a misdemeanor punishable by a penalty fine not to exceed $1,000 for each violation or by imprisonment in the county jail for a period not exceeding one year, or both. Specifies that each day a violation continues constitutes a separate violation.
36. Authorizes the department, by regulation, to provide for additional administrative penalties for any violation of this bill.
37. Provides that the above remedies are in addition to, and do not supersede or limit, any and all other remedies, civil or criminal.
38. Expressly provides that the provisions of the bill do not preempt or otherwise prohibit the adoption or enforcement of any local ordinance or regulation that imposes greater restrictions on the retail sale of industrial hemp products and that to the extent that there is an inconsistency, the greater restriction on the retail sale of industrial hemp products shall be enforceable by the local jurisdiction.
39. Creates a statutory presumption that a product containing or purporting to contain a cannabinoid is a cannabis product, regardless of the nature or source of the cannabinoid, if there is reasonable cause to believe that the product is not a lawful industrial hemp product.
40. Provides that amendments to the Revenue and Taxation Code are not to be construed to establish a tax on inhalable hemp products.

EXISTING LAW:

1. Enacts the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to provide for a comprehensive regulatory framework for the cultivation, distribution, transport, storage, manufacturing, processing, and sale of medicinal and adult-use cannabis. (Business and Professions Code Sections 26000 et seq. Unless otherwise specified, all future statutory references are to the Business and Professions Code.)
2. Excludes industrial hemp from the definition of cannabis under MAUCRSA. (Section 26001.)
3. Establishes the Department of Cannabis Control (DCC) within the Business, Consumer Services, and Housing Agency for purposes of administering and enforcing MAUCRSA. (Section 26010.)
4. Requires the DCC to prepare a report to the Governor and the Legislature outlining the steps necessary to allow for the incorporation of hemp cannabinoids into the cannabis supply chain on or before July 1, 2022, so that the Legislature may consider whether and how to take legislative action concerning the incorporation of hemp into the cannabis supply chain no later than the 2023–24 legislative session. (Section 26013.2.)
5. Provides for twenty total types of cannabis licenses including subtypes for cultivation, manufacturing, testing, retail, distribution, and microbusiness; requires each licensee except for testing laboratories to clearly designate whether their license is for adult-use or medicinal cannabis. (Section 26050.)
6. Establishes grounds for disciplinary action against cannabis licensees, including failures to comply with state requirements as well as local laws and ordinances. (Section 26030.)
7. Prohibits the sale of cannabis products that are alcoholic beverages, including through an infusion of cannabis or cannabinoids derived from industrial hemp into alcoholic beverages. (Section 26070.2.)
8. Expresses that state cannabis laws shall not be interpreted to supersede or limit the authority of a local jurisdiction to adopt and enforce local ordinances to regulate cannabis businesses. (Section 26200.)
9. Defines “industrial hemp” as a crop that is limited to types of the plant Cannabis sativa L. having no more than three-tenths of 1 percent THC contained in the dried flowering tops, whether growing or not; the seeds of the plant; the resin extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds or resin produced therefrom. (Health and Safety Code Section 11018.5 (a).)
10. Exempts industrial hemp from MAUCRSA. (Health and Safety Code Section 11018.5 (b).)
11. Prohibits industrial hemp products from being labeled or advertised with 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. (Health and Safety Code Section 110407.)
12. Provides that a cosmetic is not adulterated because it includes industrial hemp in compliance with the law. (Health and Safety Code Section 111691.)
13. Establishes a regulatory framework for industrial hemp under the Sherman Food, Drug, and Cosmetic Law administered by the California Department of Public Health (CDPH), under which manufacturers of products containing industrial hemp are required to obtain a process food registration and comply with good manufacturing practices. (Health and Safety Code Sections 111920 et seq.)
14. Requires the distribution or sale of industrial hemp products to include documentation of a certificate of analysis from an independent testing laboratory that confirms that the industrial hemp raw extract, in its final form, does not exceed THC concentration of an amount determined allowable by the CDPH in regulation, or that the mass of the industrial hemp extract used in the final form product does not exceed a THC concentration of 0.3 percent. (Health and Safety Code Section 111921.)
15. Authorizes the CDPH to exclude from the definition of “THC or comparable cannabinoid” isomers that do not cause intoxication, but that the CDPH may include any other cannabinoids that the CDPH determines do cause intoxication. (Health and Safety Code Section 111921.7.)
16. Authorizes the CDPH to adopt regulations to determine maximum serving sizes for hemp-derived cannabinoids, hemp extract, and products derived therefrom, active cannabinoid concentration per serving size, the number of servings per container, and any other requirements for foods and beverages. (Health and Safety Code Section 111922.)
17. Exempts initial regulations regarding industrial hemp adopted by the CDPH from the Administrative Procedure Act, with the exception of regulations to set maximum serving sizes for hemp-derived cannabinoids, hemp extract, and products derived from industrial hemp. (Health and Safety Code Section 110065.)
18. Requires hemp manufacturers to register with the CDPH. (Health and Safety Code Section 111923.3.)
19. Requires industrial hemp products to meet specified packaging and labeling requirements, including a label that includes the concentration of cannabinoids present in the product batch, including, at minimum, total THC and any marketed cannabinoids. (Health and Safety Code Section 111926.3.)
20. Prohibits inhalable hemp products from being sold to consumers under 21 years of age. (Health and Safety Code Section 111929.)
21. Authorizes a peace officer to inspect any place at which cannabis or cannabis products are sold and to take enforcement action and seize any products found not to be in compliance with the law. (Revenue and Taxation Code Section 34016.)
22. Provides the California Department of Food and Agriculture (CDFA) with responsibility for administering and enforcing laws governing the growing, cultivating, and distributing of industrial hemp. (Food and Agricultural Code Sections 81000 et seq.)
23. Establishes an Industrial Hemp Advisory Board with members appointed by the Secretary of Food and Agriculture to advise the secretary and make recommendations on all matters pertaining to industrial hemp seed law and regulations, enforcement, related annual budgets, and the setting of an appropriate assessment rate necessary for the administration of the law. (Food and Agricultural Code Section 81001.)
24. Allows only approved cultivars to grow industrial hemp. (Food and Agricultural Code Section 810002.)
25. Requires growers of industrial hemp, hemp breeders, and established agricultural research institutions to register with the commissioner of the county in which the grower intends to engage in industrial hemp cultivation. (Food and Agricultural Code Sections 81003 – 81005.)
26. Requires each registered established agricultural research institution, registered grower of industrial hemp, and registered hemp breeder to report on its hemp production in the state and any changes to the location where it will produce hemp to the Farm Service Agency of the United States Department of Agriculture. (Food and Agricultural Code Section 81004.6.)
27. Imposes limitations and prohibitions on the growth of industrial hemp and requires each crop of industrial hemp to be tested by a laboratory to determine the THC levels of a random sampling of its dried flowering tops. (Food and Agricultural Code Section 81006.)

FISCAL EFFECT: As currently in print this bill is keyed fiscal.

COMMENTS: California has implemented extensive measures to regulate the exponential growth of the cannabis industry, particularly since the passage of Proposition 64 in 2016, including statutory penalties for unlicensed cannabis operations up to three times the applicable licensing fee. However, there remain various areas of discrepancy in cannabis law, including regulations on the growth and sale of certain hemp products. According to the author:

Since the federal “Farm Bill” legalized of industrial hemp in 2018, hemp-derived products containing cannabidiol (CBD) and other cannabinoids have been widely produced and sold to consumers at grocery stores, fitness centers, and other retail locations. In 2021, I authored AB 45 (Aguiar-Curry, Chapter 457, Statues of 2021) to create the most protective testing standards and regulations for the hemp industry in the nation while maintaining access to CBD, a non-intoxicating product that is used to treat epilepsy, anxiety, chronic pain and other health concerns.

However, a lack of enforcement and evolving industry practices have led to a proliferation of intoxicating hemp products that are easily accessible in our communities, including to youth, threaten public health, and undercut the legal hemp and cannabis markets. This bill aims to protect public health by eliminating access to intoxicating cannabinoids outside permitted dispensaries, while providing a pathway for well-regulated hemp and cannabis industries to participate in the federally- and state-legal hemp market. Specifically, this bill: 1) increases enforcement against illegal hemp products, including further empowering state and local public health agencies 2) ensures that all intoxicating products are treated, regulated and taxed as cannabis, and 3) allows California to join 17 other states to integrate hemp into the cannabis supply chain.

Cannabis vs. hemp. Briefly, cannabis and hemp derive from the same family of plant known as cannabis sativa. California law refers to “cannabis,” to mean cannabis sativa that has a sufficient level of THC so as to produce an intoxicating effect, or “high.” Cannabis and cannabis products are regulated by the Department of Cannabis Control (DCC) and the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). “Hemp” on the other hand is considered an agricultural plant, and has typically been used in products such as paper, textiles, cosmetics, and fabric. Under existing law, industrial hemp products are required to have less than .3 percent THC. Hemp is regulated by the California Department of Food and Agriculture (CDFA) and occasionally the California Department of Public Health (CDPH) when used in food, beverage, or cosmetic products.

The long history of cannabis regulation in California. The use of cannabis in California was first authorized for medical patients, with a valid prescription from a doctor, with the approval of Proposition 215 known as the Compassionate Use Act. In the early years of the permissible use of medical marijuana, there was little oversight or regulation of the practice. In 2003, the Legislature stepped into the fray and enacted the state’s Medical Marijuana Program by passing aptly numbered SB 420 (Vasconcellos) Chap. 875, Stats. 2003. The Medical Marijuana Program provided for a voluntary medical marijuana patient card, which could be used to verify that the patient or their caregiver had state authorization to cultivate, possess, transport, or use medicinal cannabis. Despite the passage of SB 420, the medical marijuana industry still remained largely unregulated. Clinics began to open whereby doctors could prescribe cannabis for a host of conditions, some of which were considered to be generally innocuous. Further, with the adoption of the medical marijuana cards, forgeries began to proliferate throughout the state. Frustrated with the state-level oversight, many local agencies stepped up enforcement against medical marijuana dispensaries and passed several harsh ordinances regulating the medical marijuana industry. The battle between the medical marijuana industry and local governments came to an apex at the California Supreme Court, which held that state law did not expressly or implicitly limit the inherent authority of a local jurisdiction to pass ordinances or enact land use measures to regulate the industry. (Riverside v. Inland Empire Patients (2013) 56 Cal. 4th 729.)

Following the ruling in Inland Empire Patients, the Legislature was once against forced to confront how to regulate the marijuana industry in California. After several attempts, in 2015 the Legislature enacted a comprehensive package of bills to implement the Medical Marijuana Regulation and Safety Act. (AB 243 (Wood) Chap. 668, Stats. 2015, AB 266 (Bonta et al.) Chap 669, Stats. 2018, and SB 643 (McGuire) Chap. 719, Stats. 2015.) These bills established the Bureau of Cannabis Control within the Department of Affairs and, along with the Departments of Public Health and Food and Agriculture, tasked the Bureau with developing a system for regulating the cultivation, manufacture, transportation, testing, distribution, and sale of medicinal cannabis.

The next year, California voters enacted Proposition 64, the Adult Use of Marijuana Act. That Act built upon the existing regulations developed pursuant to the Medical Marijuana Regulation and Safety Act, and retained the Bureau of Cannabis Control as the primary regulator of cannabis in California. Subsequent to the passage of Proposition 64, the Legislature enacted SB 94 (Committee on Budget and Fiscal Review, Chap. 27, Stats. 2017), which reconciled the differences between the medical marijuana regulatory structure and the adult recreational use regulations, creating the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). MAUCRSA vested licensing authority for the various aspects of the cannabis business system with the Bureau of Cannabis Control, the Department of Public Health, and the Department of Food and Agriculture. Additionally, other state agencies, including the Department of the Transportation, the Department of Forestry and Fire Protection, and the State Water Resources Control Board, were tasked with participating in various regulatory processes regarding cannabis in those agencies’ area of jurisdiction. Several of the participating agencies have limited enforcement powers of their own to enforce the state’s cannabis regulations.

Despite the flurry of legislation to regulate the state’s cannabis industry, the tangential industrial hemp industry has not been as heavily regulated. SB 566 (Leno, Chap. 398, Stats. 2013) established the Industrial Hemp Farming Act, which created a regulatory scheme for the cultivation and processing of industrial hemp in California pending approval by the federal government. Among other provisions, the bill required growers of industrial hemp for commercial purposes to register with the county agricultural commissioner in the county where they intended to engage in cultivation. The U.S. Agriculture Improvement Act of 2018 (also referred to as the Farm Bill) legalized the growing, cultivating, and transportation of industrial hemp between states. Notably, however, the Farm Bill resulted in the reclassification of products containing CBD approved by the FDA from a Schedule I to a Schedule V product under the Controlled Substances Act. As a result, industrial hemp products are now separated and treated differently than certain cannabis products, which continue to be Schedule I drugs, on the federal level.

The Farm Bill also directs states to devise their own restrictions and regulations, with oversight by the U.S. Department of Agriculture (USDA). SB 153 (Wilk, Chap. 838, Stats. 2019) revised provisions of SB 566 regulating the cultivation and testing of industrial hemp pursuant to the requirements of the Farm Bill. Two years later SB 292 (Wilk, Chap. 485, Stats. 2021) also conformed state law with the USDA Interim Final Rule regarding reporting and testing of industrial hemp in the U.S.

AB 45 (Aguiar-Curry, Chap. 574, Stats. 2021) significantly expanded and clarified which CBD products derived from industrial hemp can be used in food, beverages, and dietary supplements. In addition to clarifying definitions, the bill imposed new requirements on hemp manufacturers and granted more explicit authority to product goods containing CBD derived from hemp. Last year, AB 420 (Aguiar-Curry) sought to begin the process of integrating industrial hemp into the cannabis supply chain. However, the bill was held under submission on the suspense file in the Senate Committee on Appropriations.

In order to strengthen California’s statutory regulation of the industrial hemp industry, this bill proposes to integrate the industrial hemp industry into the cannabis supply chain, allow cannabis licensees to manufacture, distribute, or sell products that contain industrial hemp and place additional restrictions on industrial hemp products containing tetrahydrocannabinol (THC) or comparable cannabinoids. Of particular relevance to this Committee, the bill proposes enforcement mechanisms to ensure adherence with the new regulations.

This bill’s specific proposals regarding the regulation and integration of industrial hemp products, including definitions and qualifying levels of THC are outside of this Committee’s jurisdiction. Therefore, the remainder of this analysis will focus on the bill’s proposed enforcement mechanisms.

As currently written, the enforcement provisions raise a number of practical concerns. The bill in print currently requires “a peace officer or state official who takes an action under Section 111930 [regarding seizure and embargo] [to] [c]ommence proceedings in the superior court in whose jurisdiction the seized or embargoed industrial hemp product is located, for condemnation and destruction of the industrial hemp product against the retailer or other owner.” (Proposed Section 11930.1 (a)(2).)

It appears this language conflates two distinct authorities – the authority to order seized products to be condemned and destroyed and the authority to initiate civil proceedings in superior court. Other provisions of the Health and Safety Code authorize the condemnation of food products through administrative action. (See e.g., Health and Safety Code Section 112225, regarding shellfish held or offered for human consumption.) However, this language provides for the condemnation of the hemp product in a proceeding in superior court initiated by a peace officer. This language would seem to require any peace officer or state official who seizes unlawful hemp products with the authority to initiate proceedings in superior court – a responsibility that lies with a discreet group, namely public prosecutors such as the Attorney General, city attorneys, district attorneys, or county counsels.

The unintended consequences of such an allowance are potentially immense. Current practice requires coordination between local law enforcement officers and their corresponding district attorney’s office or other public prosecutor in order to make decisions regarding what type of claim to initiate. These public prosecutors have the requisite training to determine which claims are worthwhile to pursue and, quite importantly, are licensed to litigate in superior court. As currently written, this bill would create a scenario in which local law enforcement would be required to bypass those procedures, creating the potential for significant confusion and delay. It is possible that the intent of this provision of the bill was to require a peace officer who seizes or embargoes the illegal hemp product to coordinate with their local public prosecutor’s office to initiate legal proceedings, or alternatively, to initiate administrative proceedings to make the appropriate determinations regarding the condemnation and destruction of the seized product. However, neither of these options are currently reflected in the text of the bill, instead the language raises a potentially problematic scenario in which individual peace officers are filing suit in superior court where a public prosecutor would be the appropriate entity to do so.

The author may wish to consider amendments to clarify that only public prosecutors and public agencies, rather than peace officers, are authorized to initiate civil litigation to enforce this bill’s provisions.

The bill authorizes specified public prosecutors to bring a claim for recovery of civil penalties up to $2,500 per violation. Under the bill’s provisions, a claim may be initiated by the Attorney General, county counsel or district attorney, or city attorney or city prosecutor. (Proposed Section 111930.2 (a) – (d).) This provision alone seems straightforward and unproblematic. However, neither this provision nor the provision discussed above seem to authorize the Department of Cannabis Control (DCC) to initiate either civil litigation or administrative actions to enforce the bill’s new requirements. Considering the Department’s expertise and interest in ensuring compliance with existing and proposed regulations, the author may wish to consider increasing enforcement options by authorizing DCC to initiate both administrative actions and civil litigation to enforce the bill’s provisions.

The remaining portions of the bill’s enforcement provisions appear to be reasonably designed to meet the bill’s underlying goal of ensuring compliance with the overall intent of the measure. Specifically, the provision relating to seizure and embargo does the following:

1. If the court determines that the product can be brought into compliance, permits the court to order the industrial hemp product be delivered to the claimant, retailer, owner, or manufacturer after it is compliant.
2. Assigns fees and costs relating to the seizure, embargo, and destruction to be assigned to a retailer unless the retailer can demonstrate that the costs should be borne by the claimant, owner, or manufacturer.

The proposed section relating to public prosecutors’ authority to pursue civil enforcement actions provide the following:

1. Authorize civil penalties of up to $2,500 per violation
2. In determining the appropriateness of the civil penalty, requires a court to consider the gravity of the violation, the good faith of the person responsible for the violation, any history of previous violations, and whether the person responsible from the violation profited from the violation.
3. Directs disbursement of the civil penalties to first reimburse the public prosecutor’s office that brought the action for the costs of investigating, and the remainder to be deposited into the General Fund, or the county or city’s designated fund, as applicable.
4. Imposes a three-year statute of limitations for initiating claims.

Each of the above specifications regarding the court-related procedures seem reasonably constructed to balance the interests of the state and local governments in enforcing the new regulations against the interests of individuals who are now subject to them.

A number of organizations have assumed a position of oppose unless amended. In particular, they request amendments to proposed section 111922 (c) which, as previously in print, left the level of THC in a qualifying industrial hemp product blank and proposed the following language:

111922. (a) An industrial hemp final form product shall not exceed the limit of detection defined by the department or 0.5 milligram per package, whichever is lower.

(b)(1) The department shall establish, no later than January 1, 2027, a limit of detection for total THC of an industrial hemp final form product.

The Assembly Committee on Business and Professions amended this bill on April 10 to address this concern. The bill now reads:

111922. (a) The department, through regulation, may determine or modify maximum serving sizes for hemp-derived cannabinoids, hemp extract, and products derived therefrom, active cannabinoid concentration per serving size, the number of servings per container, and any other requirements.

[…]

(c) An industrial hemp final form product shall not have a level of total THC that exceeds one milligram of THC. Each serving per package shall not exceed .25 milligrams of THC. A qualified testing laboratory shall establish a limit of detection of one milligram or lower for total THC and a sample shall pass if total THC does not exceed the limit of detection.

The previous committee also amended proposed Section 111926.2 of the bill to include a prohibition against the labeling, marketing, or advertisement of an industrial hemp human food and beverage product as intended to produce an intoxicating effect.

As they deal primarily with the details surrounding the regulation and development of industrial health, rather than the enforcement of the proposed regulations in civil court, the concerns raised by the opposition fall squarely into the jurisdiction of the Assembly Committee on Business and Professions. Moreover, the two amendments seem to be reasonable efforts to provide greater clarity as to the appropriate development and promulgation of industrial hemp products, and as such there appears to be no need to second guess their expertise.

It’s worth nothing that it seems that the only portion of the bill that Public Health Institute and similarly-situated organizations do not have a concern with are the bill’s enforcement provisions – the exact portions of the bill that are within this Committee’s jurisdiction.

ARGUMENTS IN SUPPORT: This bill is sponsored by the California Cannabis Industry Association (CCIA). It is supported by cannabis industry advocates including California Norml, Weedmaps, and UFCW Western States Council. In support of the measure the sponsors write:

Specifically, AB 2223 seeks to enhance the enforcement provisions in existing law by addressing the critical and urgent public health issue of unregulated, high-potency intoxicating hemp products that are showing up in gas stations, smoke shops, and even prominent retail outlets, blatantly subverting the state’s rigorous cannabis laws and taxation framework. AB 2223 also offers a compelling solution to the industry's cost challenges by permitting the integration of certain hemp cannabinoids into cannabis products.

AB 2223 includes crucial measures that will protect consumers, bolster the California cannabis industry’s growth and success, and provide vital tax revenue for the state. In so doing, CCIA firmly believes that AB 2223 will address the many immediate and urgent issues currently faced by California’s licensed industry and provide a path for the legal industry to grow and thrive.

ARGUMENTS IN OPPOSITION: A number of organizations have submitted a position of oppose unless amended, including the Mendocino Cannabis Alliance, the Nevada County Cannabis Alliance, Public Health Institute, and Be the Influence. Public Health Institute submits the following:

This legislation addresses some important enforcement lacunae not adequately resolved by AB 45 (Aguiar Curry, Chapter 576, Statutes of 2021) at the time of its passage, and we appreciate the effort of the author to correct these problems. Nevertheless, the proposed language does not solve the key threat to children, education, and the cannabis industry of intoxicating hemp and creates new problems. At the time of passage of AB 45, PHI called the attention of the legislature to the expected marketing of intoxicating hemp products that would arise absent vigorous regulation. That is precisely what has happened. Indeed, California Attorney General Bonta just joined 19 other state attorneys general to ask the federal government to urgently end the plague of intoxicating hemp products. California children can’t wait for federal action, we urge the author and the legislature to act decisively now to fix this problem.

At the time of consideration of AB 45, the intent that the bill would permit marketing of CBD but not permit the marketing of intoxicating products was clear. The Assembly Health analysis at the time describes the intent of the author as: “Hemp-derived cannabidiol (CBD) does not produce a “high” because CBD derived from hemp contains only trace amounts of THC (less than 0.3%), …“There is no evidence of any public health related problems associated with the use of CBD.” ….” This is an opportunity for California to make it easier for its citizens to access a non-intoxicating-alternative product they want, and for farmers to establish themselves in a fast-growing industry.”

The concerns raised at the time of passage both by public health and the cannabis industry have fully materialized. Highly intoxicating industrial hemp products are sold widely across the state and are freely available to children and youth at a wide range of businesses including smoke shops, vape shops, convenience stores and gas stations, outside of the legal cannabis system. This undermines the legal cannabis system while exposing children and consumers in general to a wide range of harmful and intoxicating products. Yet more seriously, a wide range of highly intoxicating artificial cannabinoids generally derived from chemical modification of cannabidiol (CBD) in hemp are also now sold widely.

The California Department of Public Health (CDPH) has not yet exercised the regulatory authority it received under AB45 to clearly prohibit these intoxicating products or to impose age limits. Although it has publicly posted its position that they consider these artificial cannabinoids to be products of chemical synthesis and not legal industrial hemp, that position has not been sufficiently enforced. This situation is not unique to California, and we are seeing a wave of corrective legislation in many states.

[…]

On the positive side, we strongly support the bill’s important provisions strengthening state registration requirements and local enforcement authority. These are sorely needed. Our community partners have sought to work with local governments to get illegal products out of their communities and been deeply frustrated by a perceived lack of authority and absent enforcement. We also strongly support the bill’s language that makes it clear that local action is not pre-empted.

REGISTERED SUPPORT / OPPOSITION:

Support

California Cannabis Industry Association (sponsor)

Angeles Emeralds
California Minority Alliance
California Norml
Coachella Valley Cannabis Alliance Network
Kiva Confections
Lompoc Valley Cannabis Association, Santa Barbara County
Long Beach Collective Association
San Diego & Imperial Counties Cannabis Industry Labor Management
San Francisco Cannabis Retailers Alliance
Silicon Valley Cannabis Alliance
Social Equity LA
UFCW - Western States Council
United Cannabis Business Association
Weedmaps

Opposition

Be the Influence
Big Sur Farmers Association
Humboldt County Growers Alliance
Marin Residents for Public Health Cannabis Policies
Mendocino Cannabis Alliance
Nevada County Cannabis Alliance
Origins Council
Public Health Institute
Trinity County Agriculture Alliance
Youth Forward

1 Individual

Analysis Prepared by: Manuela Boucher-de la Cadena / JUD. / (916) 319-2334

Date of Hearing:

ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS

Marc Berman, Chair

ABPCA Bill Id:AB 2223

Author:(Aguiar-Curry) – As Introduced Ver:February 7, 2024

NOTE: This bill is double referred and if passed by this Committee will be re-referred to the Assembly Committee on Judiciary.

SUBJECT: Cannabis: industrial hemp.

SUMMARY: Allows for cannabis licensees to manufacture, distribute, or sell products that contain industrial hemp and places additional restrictions on industrial hemp products containing tetrahydrocannabinol (THC) or comparable cannabinoids.

EXISTING LAW:

1. Enacts the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to provide for a comprehensive regulatory framework for the cultivation, distribution, transport, storage, manufacturing, processing, and sale of medicinal and adult-use cannabis. (Business and Professions Code (BPC) §§ 26000 et seq.)
2. Excludes industrial hemp from the definition of cannabis under MAUCRSA. (BPC § 26001)
3. Establishes the Department of Cannabis Control (DCC) within the Business, Consumer Services, and Housing Agency for purposes of administering and enforcing MAUCRSA. (BPC § 26010)
4. Required the DCC to prepare a report to the Governor and the Legislature outlining the steps necessary to allow for the incorporation of hemp cannabinoids into the cannabis supply chain on or before July 1, 2022, so that the Legislature may consider whether and how to take legislative action concerning the incorporation of hemp into the cannabis supply chain no later than the 2023–24 legislative session. (BPC § 26013.2)
5. Provides for twenty total types of cannabis licenses including subtypes for cultivation, manufacturing, testing, retail, distribution, and microbusiness; requires each licensee except for testing laboratories to clearly designate whether their license is for adult-use or medicinal cannabis. (BPC § 26050)
6. Establishes grounds for disciplinary action against cannabis licensees, including failures to comply with state requirements as well as local laws and ordinances. (BPC § 26030)
7. Prohibits the sale of cannabis products that are alcoholic beverages, including through an infusion of cannabis or cannabinoids derived from industrial hemp into alcoholic beverages. (BPC § 26070.2)
8. Expresses that state cannabis laws shall not be interpreted to supersede or limit the authority of a local jurisdiction to adopt and enforce local ordinances to regulate cannabis businesses. (BPC § 26200)
9. Defines “industrial hemp” as a crop that is limited to types of the plant Cannabis sativa L. having no more than three-tenths of 1 percent THC contained in the dried flowering tops, whether growing or not; the seeds of the plant; the resin extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds or resin produced therefrom. (Health and Safety Code (HSC) § 11018.5(a))
10. Exempts industrial hemp from MAUCRSA. (HSC § 11018.5(b))
11. Prohibits industrial hemp products from being labeled or advertised with 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. (HSC § 110407)
12. Provides that a cosmetic is not adulterated because it includes industrial hemp in compliance with the law. (HSC § 111691)
13. Establishes a regulatory framework for industrial hemp under the Sherman Food, Drug, and Cosmetic Law administered by the California Department of Public Health (CDPH), under which manufacturers of products containing industrial hemp are required to obtain a process food registration and comply with good manufacturing practices. (HSC §§ 111920 et seq.)
14. Requires the distribution or sale of industrial hemp products to include documentation of a certificate of analysis from an independent testing laboratory that confirms that the industrial hemp raw extract, in its final form, does not exceed THC concentration of an amount determined allowable by the CDPH in regulation, or that the mass of the industrial hemp extract used in the final form product does not exceed a THC concentration of 0.3 percent. (HSC § 111921)
15. Authorizes the CDPH to exclude from the definition of “THC or comparable cannabinoid” isomers that do not cause intoxication, but that the CDPH may include any other cannabinoids that the CDPH determines do cause intoxication. (HSC § 111921.7)
16. Authorizes the CDPH to adopt regulations to determine maximum serving sizes for hemp-derived cannabinoids, hemp extract, and products derived therefrom, active cannabinoid concentration per serving size, the number of servings per container, and any other requirements for foods and beverages. (HSC § 111922)
17. Exempts initial regulations regarding industrial hemp adopted by the CDPH from the Administrative Procedure Act, with the exception of regulations to set maximum serving sizes for hemp-derived cannabinoids, hemp extract, and products derived from industrial hemp. (HSC § 110065)
18. Requires hemp manufacturers to register with the CDPH. (HSC § 111923.3)
19. Requires industrial hemp products to meet specified packaging and labeling requirements, including a label that includes the concentration of cannabinoids present in the product batch, including, at minimum, total THC and any marketed cannabinoids. (HSC § 111926.3)
20. Prohibits inhalable hemp products from being sold to consumers under 21 years of age. (HSC § 111929)
21. Authorizes a peace officer to inspect any place at which cannabis or cannabis products are sold and to take enforcement action and seize any products found not to be in compliance with the law. (Revenue and Taxation Code § 34016)
22. Provides the California Department of Food and Agriculture (CDFA) with responsibility for administering and enforcing laws governing the growing, cultivating, and distributing of industrial hemp. (Food and Agricultural Code §§ (FAC) 81000 et seq.)
23. Establishes an Industrial Hemp Advisory Board with members appointed by the Secretary of Food and Agriculture to advise the secretary and make recommendations on all matters pertaining to industrial hemp seed law and regulations, enforcement, related annual budgets, and the setting of an appropriate assessment rate necessary for the administration of the law. (FAC § 81001)
24. Allows only approved cultivars to grow industrial hemp. (FAC § 81002)
25. Requires growers of industrial hemp, hemp breeders, and established agricultural research institutions to register with the commissioner of the county in which the grower intends to engage in industrial hemp cultivation. (FAC §§ 81003 – 81005)
26. Requires each registered established agricultural research institution, registered grower of industrial hemp, and registered hemp breeder to report on its hemp production in the state and any changes to the location where it will produce hemp to the Farm Service Agency of the United States Department of Agriculture. (FAC § 81004.6)
27. Imposes limitations and prohibitions on the growth of industrial hemp and requires each crop of industrial hemp to be tested by a laboratory to determine the THC levels of a random sampling of its dried flowering tops. (FAC § 81006)

THIS BILL:

1. States that it is the intent of the Legislature to enhance the viability of cannabis licensees in the marketplace by pursuing measures to relieve tax and regulatory requirements, and to authorize licensees to manufacture, distribute, and sell hemp and cannabidiol (CBD) products in compliance with current law.
2. Provides that MAUCRSA does not prohibit a licensee from manufacturing, processing, distributing, or selling products that contain industrial hemp, or cannabinoids, extracts, or derivatives from industrial hemp, in compliance with state law.
3. Allows for a licensed manufacturer or microbusiness to obtain industrial hemp from a person registered with the CDPH.
4. Requires industrial hemp purchased by a cannabis licensee to be tracked as a separate batch throughout the manufacturing process in order to document the disposition of that hemp or hemp product.
5. Requires a cannabis licensee that manufactures, distributes, or sells products that contain industrial hemp to record all transactions and relevant data, as prescribed by the department, in the state track and trace system.
6. Requires manufactured cannabis products containing industrial hemp to comply with MAUCRSA and any regulations adopted by the DCC.
7. Prohibits a licensed cannabis manufacturer from incorporating delta-9 THC that has been converted from a hemp-derived cannabinoid, and prohibits a licensed cannabis retailer or distributor from selling or distributing cannabis, a cannabis product, or an industrial hemp product that contains converted delta-9 THC.
8. Requires the DCC to implement a process by which a licensee that is also a registered hemp manufacturer may use the same premises.
9. Provides that the DCC shall adopt and readopt emergency regulations to implement hemp integration into the cannabis supply chain and provides for a limited exemption from the Administrative Procedure Act for those regulations.
10. Exempts regulations adopted by the CDPH to set maximum serving sizes for hemp-derived cannabinoids, hemp extract, and products derived from industrial hemp from the existing exemption from the Administrative Procedure Act.
11. Adds inhalable products to the definition of “industrial hemp product.”
12. Defines “limit of detection” as the lowest quantity of a substance or analyte that can be distinguished from the absence of that substance within a stated confidence limit.
13. Defines “synthetically derived cannabinoid” as a substance that is derived from a chemical reaction that changes the molecular structure of any substance separated or extracted from the cannabis plant, but exempts certain naturally occurring chemical substances and any other chemical substances approved by the CDPH in regulation.
14. Prohibits the manufacturing, distribution, or sale of an industrial hemp product that contains synthetically derived cannabinoid unless explicitly approved by the CDPH in regulation.
15. Prohibits a person from manufacturing, distributing, or selling any of the following:
    1. Industrial hemp raw extract derived from, or an industrial hemp product containing, industrial hemp that was not grown in compliance with the law.
    2. Industrial hemp raw extract with a total THC concentration that exceeds 0.3 percent, or a lower amount determined allowable by the CDPH in regulation.
    3. Industrial hemp products containing industrial hemp raw extract with a total THC concentration that exceeds 0.3 percent, or a lower amount determined allowable by the CDPH in regulation.
16. Requires industrial hemp products to be manufactured, distributed, or sold with a certificate of analysis from an independent testing laboratory that confirms that the raw extract used in the product does not exceed a total THC concentration of 0.3 percent, or a lower amount determined allowable by the CDPH.
17. Repeals the requirement that any initial determination regarding an exclusion from the definition of “THC or comparable cannabinoid” shall be confirmed through rulemaking in compliance with the Administrative Procedure Act within 18 months.
18. Requires industrial hemp human food and beverage final form products to meet all of the following requirements:
    1. A single serving of an industrial hemp product shall be based on the amount of food or beverage customarily consumed in one eating occasion for that food or beverage.
    2. A single serving of an industrial hemp dietary supplement in pill, tablet, or capsule form shall be one unit.
    3. A product shall not exceed five servings per package.
19. Prohibits an industrial hemp final form product from having a level of THC that exceeds a currently undetermined amount, and requires a qualified testing laboratory to establish a limit of detection of that amount or lower for total THC.
20. Requires out-of-state hemp manufacturers who produce industrial hemp pet food for importation into California or for sale in California to obtain a license from the CDPH.
21. Authorizes the CDPH to deny, suspend, forfeit, revoke, or order to surrender an industrial hemp enrollment and oversight authorization when a peace officer, state official, or local official has notified the CDPH that a manufacturer within its jurisdiction is in violation of state law and regulations relating to industrial hemp, and the CDPH, through an investigation, has determined that the violation is grounds for or contributes to other factors for denial, suspension, forfeiture, revocation, or surrender of the industrial hemp enrollment and oversight authorization.
22. Requires an investigation to include reasonable notice to the manufacturer and an opportunity for the manufacturer to defend any allegations of a violation.
23. Allows for the CDPH to take disciplinary action against a manufacturer for a violation of this part when the violation was committed by the manufacturer’s officers, directors, owners, agents, or employees while acting on behalf of the manufacturer or engaged in industrial hemp activity.
24. Repeals outdated language providing safe harbor for hemp manufacturers and retailers within three months of the effective date of prior legislation.
25. Authorizes peace officers and state officials to seize or embargo an industrial hemp products under specified circumstances.
26. Requires peace officers or state officials who seize or embargo industrial hemp products to take specified procedural actions.
27. Provides that violations of laws regarding the retail sale of industrial hemp shall be subject to civil penalties of up to $2,500 per violation but requires a court to give due consideration to the appropriateness of the amount of the civil penalty with respect to factors the court determines to be relevant, including the gravity of violation and the good faith of the person.
28. Additionally provides that violations of laws regarding the retail sale of industrial hemp is a misdemeanor.
29. Provides that the above remedies are in addition to, and do not supersede or limit, any and all other remedies, civil or criminal.
30. Expressly provides that the provisions of the bill do not preempt or otherwise prohibit the adoption or enforcement of any local ordinance or regulation that imposes greater restrictions on the retail sale of industrial hemp products and that to the extent that there is an inconsistency, the greater restriction on the retail sale of industrial hemp products shall be enforceable by the local jurisdiction.
31. Creates a statutory presumption that a product containing or purporting to contain a cannabinoid is a cannabis product, regardless of the nature or source of the cannabinoid, if there is reasonable cause to believe that the product is not a lawful industrial hemp product.
32. Provides that amendments to the Revenue and Taxation Code are not to be construed to establish a tax on inhalable hemp products.

FISCAL EFFECT: Unknown; this bill is keyed fiscal by the Legislative Counsel.

COMMENTS:

Purpose. This bill is sponsored by the California Cannabis Industry Association. According to the author:

“Since the federal “Farm Bill” legalized of industrial hemp in 2018, hemp-derived products containing cannabidiol (CBD) and other cannabinoids have been widely produced and sold to consumers at grocery stores, fitness centers, and other retail locations. In 2021, I authored AB 45 (Aguiar-Curry, Chapter 457, Statutes of 2021) to create the most protective testing standards and regulations for the hemp industry in the nation while maintaining access to CBD, a non-intoxicating product that is used to treat epilepsy, anxiety, chronic pain and other health concerns. However, a lack of enforcement and evolving industry practices have led to a proliferation of intoxicating hemp products that are easily accessible in our communities, including to youth, threaten public health, and undercut the legal hemp and cannabis markets. This bill aims to protect public health by eliminating access to intoxicating cannabinoids outside permitted dispensaries, while providing a pathway for well-regulated hemp and cannabis industries to participate in the federally- and state-legal hemp market. Specifically, this bill: 1) increases enforcement against illegal hemp products, including further empowering state and local public health agencies 2) ensures that all intoxicating products are treated, regulated and taxed as cannabis, and 3) allows California to join 17 other states to integrate hemp into the cannabis supply chain.”

Background.

Cannabis versus Hemp. Botanically speaking, both industrial hemp and what has historically been referred to as marijuana are members of the same plant species, Cannabis sativa. Under California law, the term “cannabis” typically refers to varieties of the species that contain sufficient levels of the cannabinoid THC to produce an intoxicating psychoactive effect, or “high”; this plant and its associated products are regulated by the DCC under MAUCRSA. Hemp, meanwhile, is commonly regarded more as an agricultural plant and has historically been used for products such as paper, textiles, cosmetics, and fabric. California law requires industrial hemp to contain less than 0.3 percent THC, which is considered trace amounts compared to psychoactive cannabis (which frequently contains between 15-40 percent THC). Hemp is regulated by the CDFA for agricultural purposes and by the CDPH when it is used in food, beverage, and cosmetic products.

While industrial hemp does not share the same psychoactive properties as cannabis due to its significantly lower amount of THC, both hemp and cannabis contain another cannabinoid known as cannabidiol (CBD). According to the National Institute of Health, CBD has pain relieving, anti-inflammatory, anti-psychotic, and tumor-inhibiting properties. Two products, dronabinol and nabilone, are federal Food and Drug Administration (FDA)-approved drugs used for the prevention or treatment of chemotherapy-related nausea and vomiting. There are currently over 100 clinical trials of CBD listed on the National Library of Medicine’s website. These trials are testing CBD’s utility in treating epilepsy, substance use disorders, pain, psychosis, and anxiety, among other disorders and conditions.

Regulation of Cannabis. Consumption of cannabis was first made lawful in California in 1996 when voters approved Proposition 215, or the Compassionate Use Act. Proposition 215 protected qualified patients and caregivers from prosecution relating to the possession and cultivation of cannabis for medicinal purposes, if recommended by a physician. This regulatory scheme was further refined by SB 420 (Vasconcellos) in 2003, which established the state’s Medical Marijuana Program. After several years of lawful cannabis cultivation and consumption under state law, a lack of a uniform regulatory framework led to persistent problems across the state. Cannabis’s continued illegality under the federal Controlled Substances Act, which classifies cannabis as a Schedule I drug ineligible for prescription, generated periodic enforcement activities by the United States Department of Justice. Threat of action by the federal government created significant apprehension within California’s medical cannabis community.

After several prior attempts to improve the state’s regulation of cannabis, the Legislature passed the Medical Marijuana Regulation and Safety Act—subsequently retitled the Medical Cannabis Regulation and Safety Act (MCRSA)—in 2015. MCRSA established, for the first time, a comprehensive statewide licensing and regulatory framework for the cultivation, manufacture, transportation, testing, distribution, and sale of medicinal cannabis. While entrusting state agencies to promulgate extensive regulations governing the implementation of the state’s cannabis laws, MCRSA fully preserved local control. Under MCRSA, local governments may establish their own ordinances to regulate medicinal cannabis activity. Local jurisdictions could also choose to ban cannabis establishments altogether.

Not long after the Legislature enacted MCRSA, California voters passed Proposition 64, the Adult Use of Marijuana Act (AUMA). The passage of the AUMA legalized cannabis for non-medicinal adult use in a private home or licensed business; allowed adults 21 and over to possess and give away up to approximately one ounce of cannabis and up to eight grams of concentrate; and permitted the personal cultivation of up to six plants. The proponents of the AUMA sought to make use of much of the regulatory framework and authorities set out by MCRSA while making a few notable changes to the structure still being implemented.

In the spring of 2017, SB 94 (Committee on Budget and Fiscal Review) was passed to reconcile the distinct systems for the regulation, licensing, and enforcement of legal cannabis that had been established under the respective authorities of MCRSA and the AUMA. The single consolidated system established by the bill—known as the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA)—created a unified series of cannabis laws. On January 16, 2019, the state’s three cannabis licensing authorities—the Bureau of Cannabis Control, the California Department of Food and Agriculture, and the California Department of Public Health—officially announced that the Office of Administrative Law had approved final cannabis regulations promulgated by the three agencies respectively.

In early 2021, the Department of Finance released trailer bill language to create a new Department with centralized authority for cannabis licensing and enforcement activities. This new department was created through a consolidation of the three prior licensing authorities’ cannabis programs. As of July 1, 2021, the Department has been the single entity responsible for administering and enforcing the majority of MAUCRSA. New regulations went into effect on January 1, 2023 to effectuate the consolidation and make other changes to cannabis regulation.

Regulation of Hemp. SB 566 (Leno, Chapter 398, Statutes of 2013) established the Industrial Hemp Farming Act, which provided a regulatory scheme for the cultivation and processing of industrial hemp in California that would go into effect upon approval by the federal government. SB 566 required growers of industrial hemp for commercial purposes to register with the county agricultural commissioner of the county in which the grower intends to engage in industrial hemp cultivation among various provisions. Established agricultural research institutions were exempted from these requirements.

The U.S. Agriculture Improvement Act of 2018 (known as the Farm Bill) federally legalized the growing, cultivating, and the transporting of industrial hemp between states. However, the Farm Bill resulted in CBD containing products that have been approved by the FDA to be removed from the list of Schedule I substances under the CSA and reclassified as a Schedule V drug. This policy was enacted because of the findings that it does not contain any psychoactive or addictive properties and has a very low abuse potential. This separates industrial hemp from marijuana specific cannabis products, which remains a Schedule I drug on the federal level. The Farm Bill also classifies CBD as a food product.

Importantly, the Farm Bill also requires states to devise their own sale restrictions and regulations, of which the U.S. Department of Agriculture (USDA) is responsible for overseeing. SB 153 (Wilk, Chapter 838, Statutes of 2019) revised provisions in SB 566 regulating the cultivation and testing of industrial hemp to conform to the requirements for a state plan under the 2018 Farm Bill. SB 292 (Wilk, Chapter 485, Statutes of 2021) additionally conformed state law to the USDA Interim Final Rule regarding reporting and testing of industrial hemp in the United States.

In 2021, AB 45 (Aguiar-Curry, Chapter 576, Statutes of 2021) was enacted to significantly expand and clarify the framework under which CBD derived from industrial hemp can be used in food, beverages and dietary supplements. The bill revised or added various definitions relating to hemp products and placed new requirements on hemp manufacturers in exchange for more explicit authority to produce manufactured goods containing CBD derived from hemp. In doing so, the bill expressly specified that foods, beverages, dietary supplements, cosmetics, and pet food are not adulterated by the inclusion of industrial hemp cannabinoids.

Integration of Cannabis and Hemp. Notwithstanding the biological and chemical similarities of cannabis and hemp, hemp products are widely considered “non-cannabis goods” for purpose of MAUCRSA. Under § 15407 of the DCC’s regulations, licensed cannabis retailers are prohibited from selling any non-cannabis goods besides cannabis accessories and branded merchandise. (Proposed regulations recently announced by the DCC would further allow for the sale of prepackaged non-cannabis infused and food and beverages, subject to local authorization.) While presumably an individual or entity could both engage in a licensed cannabis business and in a business involving hemp, it is understood that the two supply chains must remain fully distinct.

Whether hemp and cannabis products should be allowed to coexist in a regulatory context has been debated consistently over the past several years. Because both plants contain the same cannabinoids, it is often the case that two essentially identical products—CBD gummies, for example—are regulated and sold differently based on whether the CBD was derived from cannabis or industrial hemp. Many cannabis retailers may wish to also sell products derived from hemp. However, some in the cannabis industry may see hemp as an unwelcomed competitor, and concerns have been expressed that the difference in regulatory systems and consumer safety requirements should keep the two products separated.

AB 45 included language requiring the DCC to prepare a report to the Governor and the Legislature outlining the steps necessary to allow for the incorporation of hemp cannabinoids into the cannabis supply chain. The report is required to include, but is not be limited to, the incorporation of hemp cannabinoids into manufactured cannabis products and the sale of hemp products at cannabis retailers. Language in AB 45 also stated the intent of the Legislature to consider, in light of the DCC’s report, “whether and how to take legislative action concerning the incorporation of hemp into the cannabis supply chain.”

The DCC published The Hemp Report: Steps and Considerations for Incorporating Hemp Into the Commercial Cannabis Supply Chain and submitted it to the Legislature in January of 2023. The report submitted by the DCC stated that “incorporating hemp into the regulated commercial cannabis supply chain presents both policy and implementation challenges. From the policy perspective, several determinations would need to be made to move forward with the inclusion of hemp.” In the report’s conclusion, the DCC summarized its determinations and conclusions as follows:

“As detailed in this report, the inclusion of hemp into the commercial cannabis supply chain is complex and requires careful consideration of significant policy questions to arrive at an approach that is in the best interests of California. The approach utilized to accomplish this end would directly impact the cannabis industry, hemp industry, standard commercial market, medicinal and adult-use consumers, and the Department and other responsible California state agencies. While this report raises significant policy considerations to inspire and support deliberations between policy makers and stakeholders, it should not be interpreted as containing every single issue that may need to be considered and addressed by policy makers to determine when or if to incorporate hemp into the cannabis supply chain. If California chooses to allow hemp into the commercial cannabis supply chain, irrespective of which approach California adopts, implementation will likely require significant time and resources.”

In 2023, AB 420 was introduced to as a vehicle for continued discussions around how California might integrate industrial hemp into the supply chain for cannabis. Initially, the bill contained a simplistic statement that nothing in MAUCRSA prohibits integration. Subsequent amendments to the bill that were made in the Senate provided for greater details regarding how integration would be achieved. The amendments also expanded prohibitions against industrial hemp containing synthetic THC or similar cannabinoids. However, the bill was ultimately held under submission on the suspense file in the Senate Committee on Appropriations.

This bill now represents the author’s fifth year of leading efforts to strengthen California laws governing the cultivation, manufacturing, and sale of hemp products. Language in the bill would expressly allow for the integration of industrial hemp into the licensed cannabis supply chain. The bill then imposes a number of requirements to ensure that integration occurs safely.

This bill would only allow cannabis licensees to obtain industrial hemp from individuals registered with the CDPH, and that hemp would be tracked as a separate batch throughout the manufacturing process in order to document the disposition of that hemp or hemp product. Manufactured cannabis products incorporating hemp would be required to comply with MAUCRSA. The DCC would be required to implement a process by which a licensee that is also a registered hemp manufacturer may use the same premises.

Intoxicating Hemp. A significant portion of the bill is then aimed at addressing growing concerns regarding the perceived proliferation of intoxicating hemp products. The California Cannabis Industry Association (CCIA), this bill’s sponsor, issued a white paper in October of 2022 titled Pandora’s Box: The Dangers of a National, Unregulated, Hemp-Derived Intoxicating Cannabinoid Market. The CCIA report argued that loopholes in the 2018 Farm Bill, which defined industrial hemp as having no more than 0.3 percent delta-9 THC content by dry weight, inadvertently created led to the proliferation of intoxicating hemp products. Specifically, the white paper points to a Ninth Circuit decision that the CCIA says “unleashed a Wild West of intoxicants when it ruled that products containing delta-8 THC meet the statutory definition of industrial hemp.”

According to the FDA, delta-8 THC is a cannabinoid typically synthetically manufactured from hemp-derived CBD that has significant psychoactive and intoxicating effects. The FDA has expressed concern that delta-8 THC products “likely expose consumers to much higher levels of the substance than are naturally occurring in hemp cannabis raw extracts.” There were reportedly 104 reports made to the FDA of adverse events in patients who consumed delta-8 THC products between December 1, 2020, and February 28, 2022, over half of which resulted in medical intervention or hospital admission.

In April of 2023, the Cannabis Regulators Association (CANNRA), a coalition of regulatory agencies overseeing cannabis and hemp industries in more than 40 states and territories in the United States, wrote a letter to congressional leadership requesting action at the federal level provide a regulatory framework for products containing THC derived from hemp. CANNRA specifically called attention to the fact that a 0.3 percent threshold of delta-9 THC by weight is a relatively small amount of THC in a hemp plant, but is significantly more when included as an ingredient in edible products and beverages. A 50-gram chocolate bar, for example, would have around 150 milligrams of THC at the 0.3 percent THC limit – 30 times the standard 5 milligram THC dose established by the National Institute on Drug Abuse.

This bill seeks to close loopholes created in federal law by explicitly prohibiting intoxicating hemp products from being manufactured and sold in California. Under the bill, cannabis manufacturers would be prohibited from incorporating delta-9 THC derived from hemp in their products. The bill would then further prohibit the manufacturing, distribution, or sale of industrial hemp products containing synthetically derived cannabinoids unless explicitly approved by the CDPH.

Additionally, this bill would prohibit any person from manufacturing, distributing, or selling food and beverage final form products that exceed five servings per package. The total level of THC per final form product would then be capped, with the specific number still subject to determination; testing laboratories would be required to establish a limit of detection to ensure that this maximum THC content is not exceeded. The author intends to provide for the specific limits on THC for industrial hemp final form products following further discussion with stakeholders.

Enforcement of Illicit Hemp Products. A number of additional provisions in this bill would provide for greater enforcement tools and penalty options for illicitly produced and sold hemp products, which will be discussed more thoroughly when the bill is heard in the Assembly Committee on Judiciary.

Prior Related Legislation.

AB 420 (Aguiar-Curry) of 2023 would have authorized the integration of industrial hemp into the licensed cannabis supply chain and strengthened prohibitions against industrial hemp containing synthesized cannabinoids. This bill was held on suspense in the Senate Committee on Appropriations.

AB 1656 (Aguiar-Curry) of 2022 would have authorized the integration of industrial hemp into the licensed cannabis supply chain. This bill died on the Senate inactive file.

AB 45 (Aguiar-Curry, Chapter 576, Statutes of 2021) established a regulatory framework for industrial hemp under the Sherman Food, Drug, and Cosmetic Law.

SB 292 (Wilk, Chapter 485, Statutes of 2021) conformed current state law to the United States Department of Agriculture’s Interim Final Rule regarding reporting and testing of industrial hemp.

SB 153 (Wilk, Chapter 838, Statutes of 2019) revised provisions regulating the cultivation and testing of industrial hemp to conform to the requirements for a state plan under the 2018 Farm Bill.

AB 228 (Aguiar-Curry) of 2019 would have established a regulatory framework for industrial hemp under the Sherman Food, Drug, and Cosmetic Law. This bill was held on suspense in the Senate Committee on Appropriations.

SB 94 (Committee on Budget and Fiscal Review, Chapter 27, Statutes of 2017) combined AUMA and MCRSA into one system for the regulation of cannabis, resulting in MAUCRSA.

SB 566 (Leno, Chapter 398, Statutes of 2013) allowed hemp to be grown in California, upon federal approval, by defining “industrial hemp” to be excluded from the definition of “marijuana,” a Schedule I controlled substance.

ARGUMENTS IN SUPPORT:

The California Cannabis Industry Association (CCIA) is sponsoring this bill. The CCIA writes: “AB 2223 seeks to enhance the enforcement provisions in existing law by addressing the critical and urgent public health issue of unregulated, high-potency intoxicating hemp products that are showing up in gas stations, smoke shops, and even prominent retail outlets, blatantly subverting the state’s rigorous cannabis laws and taxation framework. AB 2223 also offers a compelling solution to the industry's cost challenges by permitting the integration of certain hemp cannabinoids into cannabis products.” The CCIA argues that “AB 2223 will help address the immediate public health, youth access, and exposure issues generated by the widespread availability of unregulated, intoxicating hemp products and pave the way for a robust, transparent, economically viable and socially equitable cannabis industry in California.”

ARGUMENTS IN OPPOSITION:

Public Health Institute (PHI) opposes this bill unless current placeholder language is amended to cap THC content for hemp food and beverage products, as the author clearly intends. According to PHI: “AB 2223 fails to fulfill the most critical challenge which is to end the sale of intoxicating hemp products once and for all. While it has language in 111922 (c) which sets the stage for so doing, the critical THC level is left blank.” PHI recommends “capping THC content to nonintoxicating levels,” specifically amending the bill to prohibit industrial hemp final form products from exceeding 0.5 milligrams per package, or a lower amount determined by the CDPH. PHI further opposes language in the bill relating to inhalable products as well as provisions allowing hemp products to be sold by cannabis licensees.

POLICY ISSUE(S) FOR CONSIDERATION:

As currently constructed, this bill would effectively ban hemp products that contain levels of THC that are substantial enough to produce a psychoactive effect. However, in the interest of ensuring that compliance with the law is technically achievable by manufacturers, this bill would permit a relatively low level of THC to be permissible within the limit of detection when the products are tested. While this small degree of flexibility is arguably appropriate when considering the naturally occurring variances in cannabinoid content contained in hemp, it could unintentionally lead to the advertisement of “microdosing” hemp products, or products labeled with an implication that the purchaser should consume multiple products to achieve a high. The author may wish to prohibit these forms of marketing to ensure that this loophole is not created.

IMPLEMENTATION ISSUES:

The intent of this bill is clearly to cap the level of THC content that may be contained in industrial hemp products; however, the specific maximum amount in the bill currently remains blank. This placeholder language was initially introduced as a vehicle to facilitate ongoing discussions with stakeholders to determine what numbers are appropriate for inclusion in those provisions. As the bill leaves this committee, these blanks should be filled in with reasonable limits on total THC content so that the Legislature may consider a substantively implementable proposal. It is likely that stakeholder negotiations will remain ongoing as the bill continues to move through the legislative process, and that the author may subsequently choose to further amend the bill. In the meantime, amendments to provide for specific maximum levels of THC in hemp products would aid the Legislature in its deliberation of how best to safeguard consumers.

AMENDMENTS:

1. To provide for a specific maximum level of THC that may be contained in industrial hemp products, subdivision (c) in Section 7 of the bill should be amended as follows:

(c) An industrial hemp final form product shall not have a level of total THC that exceeds one milligram. Each serving per package shall not exceed .25 milligrams of THC. A qualified testing laboratory shall establish a limit of detection of one milligram or lower for total THC and a sample shall pass if total THC does not exceed the limit of detection.

1. To prohibit manufacturers and retailers from marketing industrial hemp products as psychoactive, a new section of the bill should be added to add a new subdivision (c) to Section 111926.2 of the Health and Safety Code as follows:

(c) An industrial hemp human food and beverage product shall not be labeled, marketed, or advertised as a product intended to produce an intoxicating effect.

REGISTERED SUPPORT:

California Cannabis Industry Association (Sponsor)

Angeles Emeralds
California Minority Alliance
California NORML
Coachella Valley Cannabis Alliance Network
Kiva Confections
Long Beach Collective Association
San Diego & Imperial Counties Cannabis Industry Labor Management
San Francisco Cannabis Retailers Alliance
Silicon Valley Cannabis Alliance
Social Equity LA
UFCW – Western States Council
United Cannabis Business Association

REGISTERED OPPOSITION:

Be the Influence
Big Sur Farmers Association
Humboldt County Growers Alliance
Marin Residents for Public Health Cannabis Policies
Mendocino Cannabis Alliance
Nevada County Cannabis Alliance
Origins Council
Public Health Institute
Trinity County Agriculture Alliance

Four individuals

Analysis Prepared by: Robert Sumner / B. & P. / (916) 319-3301