On June 24, 2022, the Texas Supreme Court upheld Health and Safety Code, Section 443.204 (4), which prohibits the processing and manufacturing of consumable hemp products for smoking in Texas. However, the Court upheld our challenge to the state’s retail and distribution rule, meaning that the retail sale and distribution of consumable hemp products for smoking remains legal in the state. Read on to learn more about the latest update on Texas’ Consumable Hemp Program from the Texas Department of State Health Services (“DSHS”) and how it will impact the Texas hemp industry.
What is a Consumable Hemp Product?
A consumable hemp product is a hemp-containing product processed or manufactured for consumption in the form of food, drugs, devices, or cosmetics. To be considered a consumable hemp product, a product cannot contain above 0.3% concentration of Delta-9 tetrahydrocannabinol (“THC”).
Some examples of consumable hemp products include:
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- Cannabidiol (“CBD”) oil
- CBD gummies
- CBD- infused food and beverage products
- Over-the-counter drugs containing CBD
- Topical lotions and cosmetics containing CBD
Is it Legal to Distribute Consumable Hemp Products in Texas?
It remains legal to distribute and retail sale consumable hemp products in Texas, so long as your entity holds the proper license. In addition, you must comply with the packaging and labeling regulations outlined in 25 Texas Administrative Code, Chapter 300.
The Plan to Begin Enforcement
In a January 2023 update on the webpage and via email to program licensees, DSHS officials announced that they would begin enforcing the prohibition of manufacturing or processing consumable hemp products for smoking in Texas in March 2023. Interestingly, DSHS noted they believe that the white labeling of a consumable hemp product for smoking is illegal if the entity that directs the process is based in Texas. DSHS has arrived at this conclusion by classifying smokable hemp products as a “food.”
Interestingly, Section 431.002 (16) of the Texas Food, Drug, and Cosmetic Act (“FDCA”) defines food as:
(16) “Food” means:
(A) articles used for food or drink for man;
(B) chewing gum; and
(C) articles used for components of any such article.
While our cannabis lawyers may disagree with that classification, it has permitted DSHS to rely on the following statutory language for their decision to prohibit white labeling:
(2) “Food manufacturer” means a person who combines, purifies, processes, or packages food for sale through a wholesale outlet. The term also includes a retail outlet that packages or labels food before sale and a person that represents itself as responsible for the purity and proper labeling of an article of food by labeling the food with the person’s name and address. The term does not include a restaurant that provides food for immediate human consumption to a political subdivision or to a licensed nonprofit organization if the restaurant would not otherwise be considered a food manufacturer under this subdivision.
According to DSHS, simply directing an out-of-state manufacturer to place the label on the product, even when done out of state, is illegal in the state of Texas. Indeed, DSHS reiterates this stance on its FAQs page, stating:
What happens if I white-label (private-label) consumable hemp products for smoking from out-of-state?
White labeling (also called private labeling) occurs when the name and address of a Texas firm (the white labeler) is on the label of the product instead of the name and address of the firm that actually manufactured the product. In this situation, the contact information of the white labeler is usually preceded by the words “manufactured for” or “distributed by.” In Texas statute, a white labeler is considered a manufacturer who takes responsibility “for the purity and proper labeling” of the product by placing its name and address on the label.
Because white labeling is manufacturing and, in the context of Consumable Hemp Products, requires a Consumable Hemp License (manufacturing) the white labeling of hemp products for smoking by Texas firms is not allowed. Texas statutes and regulations prohibit manufacturing or processing of consumable hemp products for smoking in Texas.
DSHS’s position may render it susceptible to legal challenges in the event they attempt to enforce it. Based on the email to licensees and website information, the agency certainly intends to commence enforcement actions immediately. DSHS advised that those currently manufacturing or processing consumable hemp products for smoking in the state should “cease this activity immediately.”
What does this mean for Retailers selling CHPs for smoking?
Retailers not licensed to sell and distribute consumable hemp products for smoking must acquire a retail hemp registration from DSHS by March 1, 2023. To obtain a license, retailers must follow DSHS’s online retail hemp registration process. The DSHS retail hemp registration is only required for retailers who meet the following criteria:
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- Sells CHPs and doesn’t make any changes, including adding a company name to the hemp product or packaging
- Sells CHPs online, not through a storefront location, and doesn’t make any changes, including adding a company name to the hemp product or its packaging
In its January 2023 announcement, DSHS also stated that wholesale distributors must obtain a Food Wholesaler License, Warehouse Operator License, or Food Wholesaler Registration from the DSHS by March 1, 2023. Entities holding a valid Consumable Hemp Products (“CHP”) license do not require food wholesaler licensing. Those entities that do may obtain a license by following the Regulatory Services Online Licensing System.
Given the changing legal landscape of consumable hemp products in Texas, the state’s cannabis community needs to stay informed and active in the current legislative session. The ban on manufacturing and prohibition in our statute solely punishes Texas-based businesses, and our legislature has the power to change it.
As an experienced attorney, Chelsie Spencer offers years of experience and unique insight into understanding hemp and cannabis law. She and the rest of the team at Ritter Spencer Cheng are prepared to help your hemp or cannabis business navigate changes in the cannabis industry. Contact Ritter Spencer Cheng or give us a call at 214.295.5070 for more information.
