As we mentioned in our last post, lots of bills are headed to Governor Gavin Newsom’s desk to be signed into law. One of which is Assembly 45, which is a measure to create a formal pathway and for hemp-based CBD to be used legally in foods, beverages, cosmetics, and other products in the state of California.
The majority of people in the cannabis and hemp industries are excited for this bill, seeing it as a huge victory and an opportunity to open up the market for retail as well as small farmers and businesses throughout the state. Eventually, it would lead to cannabis businesses being allowed to sell hemp products alongside their cannabis provisions.
However, the bill also includes a temporary ban on hemp products intended for smoking, including CBD flower to help launch the uptick in CBD-infused products, which could generate as much as $1 billion in fresh sales. With that in mind, many hemp farmers are completely against Assembly Bill 45.
One coalition of hemp farmers is preparing a lawsuit that would halt the application of the bill. Since smokable products will be banned, hemp pre-rolls and cigarettes, concentrates, and flower would be illegal to sell in California. While the bill would allow California hemp farmers to sell these products out of state, they won’t be able to in California until the Legislature establishes a new taxing system.
Assembly Member Cecilia Aguiar-Curry has already accounted for this issue, stating that she plans to run a tax bill next year to compensate. However, there’s a good chance that the Legislature wouldn’t approve the proposed bill for several years.
Many hemp and CBD farmers in California are small businesses that may not be able to wait that long. The key complaint from the coalition is that this bill would sacrifice these small farms in favor of larger CBD manufacturing companies.
Josh Schneider, president of the California Hemp Farmers Guild said, “We have already started working on (a lawsuit to halt AB 45’s implementation). We don’t know all the ramifications of this bill, but there are at least as many really bad things that will be caused by it as good things.”
Before the bill was amended, it included a complete ban on smokable hemp products, so getting that moved to a temporary ban was a small victory, but it’s still essential for the future of hemp farmers to have the opportunity to sell their inhalable products. There will be significant impacts on both the marijuana and hemp industries.
Those taking the biggest hit will be those in the hemp industry. In 2018 the state Department of Public Health banned hemp additives in consumable products, including foods and beverages. AB 45 reverses that ban and hands over California’s consumer market to massive hemp goods manufacturers.
As for legal cannabis businesses, the bill will crackdown on unlicensed CBD stores that have been able to sell marijuana and intoxicating hemp products. It might also create an uptick in high-CBD cannabis sales, shifting up to $1 billion back to the cannabis industry and further taking from the hemp industry.
Many cannabis farmers and dispensaries may even begin growing their own CBD strains since they’ll be the only ones able to provide it. As unlicensed CBD stores are pushed out of business under the AB 45 regulations, more market-share opportunities will be created for licensed cannabis retailers.
Another opponent of the bill, the Humboldt County Growers Alliance (HCGA), also has concerns about the testing standards for smokable hemp products. There’s a huge disconnect between testing standards for cannabis and for hemp, and the HCGA policy Director Ross Gordon said that, as written, AB 45 doesn’t “quite get there.”
Smokable hemp should be tested at the same standards as cannabis, considering the hemp industry is going to be changing drastically. As it’s currently worded, this issue hasn’t even been addressed.
As far as the next steps go, the health department will need to establish emergency regulations for implementing the bill over the next few months. The Department of Cannabis Control will need to have a report ready by next July to outline how newly legal hemp is products will be overseen.
The Legislature will also need to consider the possibility of a new tax for smokable hemp products that could be difficult to agree on politically. There are many oppositions against new taxes in any capacity.
However, bringing a tax measure forward for hemp while lowering some of the cannabis taxes might make it more attainable. Broader tax reform could earn more support.
Ultimately, time will tell what will happen with AB 45. Farmers may sue to halt the bill to protect their businesses, but if the bill ends up passing, lots will need to be done to help regulate the industry with taxes and removing the temporary ban on smokable hemp products.
[OCTOBER 2021 UPDATE]: The lowdown on the new AB-45 laws
Since the original posting date of this article, Assembly Bill 45 has now been signed into law. This closely watched bill received strong lobbying that pushed it into passing. The bill offers a long list of both positives and negatives, which we’ve broken down below. Here’s everything made legal or illegal by AB 45
- AB 45 amends the Sherman Food, Drug, and Cosmetic Law, making it so that the presence of CBD and hemp derivatives does not make supplements, foods, beverages, cosmetics, or pet foods considered adulterated. In January 2021, CBD was considered an unsafe additive since the FDA doesn’t regulate it. This amendment exempts CBD from the definition of THC. However, Delta-8 THC, as well as THCA, Delta-9, and Delta-10 THC, are still considered THC and are now illegal in finished hemp products
- It establishes new registration requirements, employs new testing laws, governs packaging and labeling, and prohibits the manufacture and sale of smokable hemp products until taxes are enacted.
- Before being incorporated into a product, all finished hemp products must be tested in raw extract form by an independent testing laboratory.
- If a batch fails testing, it may be reprocessed or remediated. It cannot be sold until it meets all testing requirements.
- AB 45 makes it so that all hemp products must be made with hemp sourced from tested and regulated hemp programs in other states or countries.
- AB-45 also gives the California Department of Public Health the power to add additional regulations, such as imposing an age requirement for purchasing hemp products or setting a cap on maximum potency levels
- AB 45 legalizes the sale of non-smokable hemp products in California retail stores. However, it makes it so that the health department must prepare a report to the Governor and Legislature outlining what will need to be done to include hemp cannabinoids in cannabis dispensaries.
- AB 45 forces a temporary ban on smokable hemp products in California until the Legislature establishes a new taxing system, which could take years.
- AB 45 does NOT prohibit the manufacture of inhalable hemp products to be sold in other states, as long as the other state laws permit them.
- AB 45 requires that hemp products are sold with a certificate of analysis from a laboratory that confirms the product contains less than 0.3% THC and does not contain hemp-derivatives like delta-8 THC.
- AB-45 requires manufacturers of hemp-infused products to register with the health department, as any other food or cosmetic manufacturer would.
- AB 45 makes it illegal for hemp manufacturers or sellers to make health-related statements about hemp products. It also prohibits marketing to children and people who are pregnant or breastfeeding.
- AB 45 outlines the items that must appear on product labels, including the products name, a label for the test results, the name and phone number of the manufacturer, seller, or distributor, the batch number, potency information, contaminant information, an expiration date, compliance statements about children and pregnant or breastfeeding women, and a statement verbatum “THE FDA HAS NOT EVALUATED THIS PRODUCT FOR SAFETY OR EFFICACY.”
- Manufacturers must pay for a license and obtain industrial hemp enrollment and oversight authorization from the health department to make hemp products. The fees paid will be put into a fund used for authorization activities and oversight, inspection, and enforcement activities.
- AB 45 also makes it so that the California Department of Food and Agriculture, State Department of Public Health, and Department of Cannabis Control can work together on compliance and enforcement against unlicensed manufacturers.