Wendel Rosen Business & Legal Updates

California Hemp Ramps Up

hemp farm

California hemp grow registrations have skyrocketed in 2019 due to Federal decriminalization and a nationwide demand for hemp-derived products.

Meanwhile, the state’s fledgling hemp industry closely monitored two 2019 bills that legislators introduced to take advantage of a vast new hemp business opportunity. One, Senate Bill 153, was intended to ensure that California’s regulations conform to new federal hemp laws. The other, Assembly Bill 228, was meant to bypass federal Food and Drug Administration prohibitions on hemp-based CBD in food, beverages and cosmetics.

As the 2018-2019 legislative session recently came to a close, the results were mixed. But the California hemp industry has continued to ascend.

Earlier this month, the State Legislature approved SB 153, which modifies California hemp regulations so that they line up with federal law and can be approved by the U.S. Department of Agriculture. SB 153’s approval is a key step to a wide open California commercial hemp market.  Governor Newsom is expected to approve SB 153 in the coming days.

In contrast, state lawmakers failed to decide on AB 228, which, in California, would have legalized the manufacture and sale of food, beverages  and cosmetics that include hemp-derived CBD. The bill died in the Senate Appropriations Committee without a vote and with little public explanation.

AB 228 contradicted the U.S. Food and Drug Administration (FDA), which deems products with CBD as “adulterated,” and prohibits them from being introduced into interstate commerce. The FDA position is based on its decision to approve CBD as an active ingredient in the pharmaceutical drug Epidiolex, which treats a rare form of epilepsy. In turn, the FDA deems CBD to be like all other active drug ingredients, which may not be added to food and dietary supplements.

The 2018 federal Farm Bill decriminalized hemp by removing it from the Controlled Substances Act. Meanwhile, the bill did not remove Marijuana. Marijuana is what the federal government has long called cannabis that includes more than trace amounts of THC. The State of California regulates a commercial cannabis industry separate from hemp.

The FDA prohibits CBD in food, beverages and cosmetics regardless of whether the CBD is derived from cannabis that includes THC, (the psychoactive constituent of cannabis) or from hemp. Hemp is defined as cannabis with extremely low concentrations of THC (not more than 0.3 percent on a dry weight basis). See our related blog here.

Thus far, the California Department of Public Health (CDPH) has followed the FDA’s restrictions on  CBD in food, beverages and cosmetics. Meanwhile hemp-derived CBD wellness products are filling the shelves of small businesses as well as large chains. This has created immense confusion among businesses and consumers.

The FDA and CDPH prohibition is seen by many as inconsistent with the 2018 Federal Farm Bill, which OK’d the production and sale of hemp, as well as the interstate commercial transfers of hemp and hemp products,  including hemp-derived CBD.

Following the lead of a handful of other states, including Colorado and Oregon, California Assemblymember Cecilia Aguiar-Curry (D-Winters), tried to address the federal CBD disconnect by way of AB 228. When the bill failed to get out of committee despite wide support, Aguiar-Curry vowed to bring it back in early 2020.

Legislative hiccups and regulatory confusion aside, the California hemp industry is gaining momentum. Q3 statistics from the California Department of Food and Agriculture show that the number of registered hemp growers in California increased from 74 in June 2019 to 292 as of August 26. In addition, there are now at least 629 registered help cultivation sites and 17,571 acres associated with growers and seed breeders. See a Q3 report compiled by CA-Hemp here.

Under the 2018 Farm Bill, hemp cultivation is fairly straightforward. Farmers must pay $900 and register with their County Agricultural Commissioner, who shares registrations with the state. During the past year, the state created a limited regulatory structure, knowing it would be amended. That structure will now be supplemented by SB 153.

Based on technical reading of the Farm Bill, counties may only allow cultivation pilot programs until the USDA confirms that their state’s hemp plan conforms with federal law. As a result, at least half of California countries have temporary bans or restrictions on hemp cultivation, but that is expected to change quickly.

California is said to be working on its hemp conformance plan and SB 153 aids that effort by adding testing, enforcement, and other administrative provisions. SB 153 also extends the state’s deadline for completing a hemp plan from Jan. 31 to May 1, 2020.

The California hemp industry is gearing up for a big 2020. Manufacturers are expected to continue using hemp-derived CBD despite the FDA and CDPH positions, and growers will be more than happy to supply them with product. But, the success of hemp is not entirely dependent on CBD. Instead, hemp is an extremely versatile and sustainable crop that can be refined for thousands of uses, including paper, textiles, clothing, biodegradable plastics, paint, insulation, biofuel, food, and animal feed. Some predict that hemp products will soon be everywhere.

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