HB 1325: Texas Hemp Products, Part II

HB 1325 (or, “Bill”) is still pending in the Texas Legislature. The Bill will allow hemp growth in Texas for licensed hemp growers and will legalize hemp products, including CBD. HB 1325 will have an impact on manufacturers of hemp-derivative products in Texas and on hemp products in Texas. Today, we review what this impact will be and take a closer look at some of the pertinent provisions of the Bill.

HB 1325, Hemp, and the Texas Controlled Substance Act

HB 1325 defines “hemp” as

the plant Cannabis sativa L. and any part of that plant, including the seeds of the plant and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.

One of the most notable immediate impacts of HB1325 is that it would amend the current Texas definition of “controlled substance” in Tex. Health & Safety Code § 481.002 (5) to explicitly exclude “hemp, as defined by Section 121.001, Agriculture Code, or the tetrahydrocannabinols in hemp.” The Bill would further amend the definition of “marihuana,” § 481.002 (26), to exclude “hemp, as that term is defined by Section 121.001, Agriculture Code.” Thus, properly sourced hemp and hemp-derived tetrahydrocannabinol (“THC”) would no longer be controlled substances in Texas. These amendments will establish that CBD that has been properly sourced is legal in Texas, as long as the hemp product contains less than .3% THC.

HB1325 passed the Texas House of Representatives unanimously on April 24, 2019. The Bill is pending scheduling for committee hearing in the Senate. Once it advances to the floor, the Bill’s text may be further amended before vote. If a two-thirds majority vote is achieved in the Texas Senate, HB1325 will become effective on the date that it is signed into law, in lieu of the September 1, 2019, effective date.

Processing or Manufacturing Hemp and/or Hemp Products

The Bill grants primary jurisdictional authority over the processing, manufacturing, packaging, transportation, sale, and use of consumable hemp products within the state to the Texas Department of State Health Services (“SHS”). SHS and the Department of Agriculture (together, the “Departments”) must consult to develop and adopt rules that regulate the sale of hemp products which reflect the following principles:

  1. Hemp-derived cannabinoids, including cannabidiol, are not considered controlled substances or adulterated;
  2. Products containing one or more hemp-derived cannabinoids, such as cannabidiol, intended for ingestion are to be considered foods, not controlled substances or adulterated products;
  3. Hemp products must be packaged and labeled in the manner provided for in the Bill; and
  4. The processing or manufacturing of hemp products for smoking is prohibited.

The Bill provides that “[n]otwithstanding any other law, a person may possess, transport, sell, and purchase legally produced hemp products.” “Hemp product” is defined as

a finished product that does not exceed the federally-defined THC level for hemp, that is derived from or made by processing a hemp plant or plant part, and this is prepared in a form available for commercial sale. The term includes cosmetics, personal care products, food intended for human or animal consumption, cloth, cordage, fiber, fuel, paint, paper, particleboard, plastics, and any product containing one or more hemp-derived cannabinoids, including cannabidiol.

The Bill text currently states, “[n]otwithstanding any other law, derivatives of hemp, including hemp-derived cannabidiol, may be added to cosmetics, personal care products, and products, intended for human or animal consumption, and the addition is not considered an adulteration of the products.”

The Texas Department of Agriculture is required to adopt program rules that will permit authorization to “an individual or business entity to participate in the state hemp program as a hemp producer.” The Bill defines “hemp producer” as “a person authorized by the department to cultivate, handle, or process hemp in [the] state.” Under the current definition, manufacturers will likely require a license due to the inclusion of the word “handle” into this definition. However, this provision is likely intended to govern growers, extractors, and processors. Once the Department of Agriculture adopts the governing rules and regulations for Texas’ hemp program, a more definitive answer can be ascertained on whether the Departments will require a certain license for manufacturers of hemp goods.

Labeling Requirements for Hemp Products

 The Bill requires “consumable hemp product[s]” to be labeled with either a QR code or a URL to the manufacturer’s website that leads a consumer to the following required information:

  1. Batch identification number;
  2. Batch size;
  3. Batch date;
  4. Batch number;
  5. Product name;
  6. Total Quantity Produced;
  7. An internet link for downloading a certificate of analysis for the product;
  8. The name of the product’s manufacturer; and
  9. A certification that the product does not exceed the federally defined THC level for hemp, including precursors.

The Departments will presumably adopt regulatory rules which govern violations of the packaging and labeling requirements.

Shipping Certificate for Hemp and Hemp Products

 The Department of Agriculture will develop “a shipping certificate or cargo manifest that the department may issue to a hemp producer in connection with the transportation of hemp or hemp products.” That document must include a “unique identifying number for the shipment and the Department’s contact information to allow law enforcement during a roadside inspection…to verify that the shipment consists of hemp or hemp products produced in compliance” with the Bill. Though the Bill does not specify, it is presumed that this shipping certificate or cargo manifest must be included with shipment of hemp products. Once the Departments promulgate the program rules, this may be clarified.

Import of Domestic Products and Export of Texas Hemp Products

 Outside products produced in other states are eligible for retail sale in Texas provided that the “products and hemp used in the products were processed and cultivated legally in another state or jurisdiction that has the same or substantially similar requirements for processing hemp products or cultivating hemp” as Texas. Most approved State programs should meet the “substantial similarity” threshold; however, the Department of Agriculture will be required to maintain a list of states and jurisdictions which meet the requirements.

The Bill provides that hemp products produced in Texas may be legally transported across state lines and exported to foreign jurisdictions in accordance with federal law and the law of the respective target export destination. The Agriculture Improvement Act of 2018, P.L. 115-334 (the “2018 Farm Bill”) includes a rule of construction, meaning that this rule governs how courts and other agencies shall interpret the Act. The rule of construction provides that nothing in the Act authorizes interference with the interstate commerce of hemp or hemp products. The Act specifically provides that “[n]o State or Indian Tribe shall prohibit the transportation or shipment of hemp or hemp products produced in accordance with subtitle G of the Agricultural Marketing Act of 1946 (as added by section 10113) through the State or the territory of the Indian Tribe, as applicable.” This would include interference with transportation or shipment of hemp or hemp products across state lines by the DEA.

Violations by Hemp Producers

The Bill is largely silent as to violations by hemp producers of hemp products; however, it does provide that in the event of a violation, the department must “provide to a retailer of hemp products fair notice of a potential violation concerning hemp products sold by the retailer and an opportunity to cure a violation made unintentionally or negligently.” The Departments may institute some form of administrative process for adjudication of violations.

FDA Supremacy

Though the Texas Bill attempts to permit CBD as a food additive, the federal Food and Drug Cosmetics Act (“FD&C Act”) governs food and beverage items in interstate commerce. Because the sale of food and beverage impacts national public health, it is well settled that the FDA may regulate these products through the authority granted to it under the FD&C Act.

Currently, the FDA maintains that CBD and THC may not be added to a food, beverage or cosmetic product and that they may not be marketed as a dietary supplement under the FD&C Act. The FDA’s public meeting for comment on this issue is scheduled for May 31, 2019. Congressional drafters of the 2018 Farm Bill’s hemp provisions have publicly stated that if the FDA cannot find a regulatory pathway to provide guidance on use of CBD by the public, Congress will act. Until that point, HB 1325 (if signed into law) will not supersede the FDA’s stance.

What’s Next?

Check out the full text of HB 1325 here. Stay tuned to the blog. Our hemp lawyers will be reviewing what the Bill has to say about hemp cultivation in Texas and what we know about the regulations that will impact Texas hemp growers so far.

Ritter Spencer, PLLCHB 1325: Texas Hemp Products, Part II

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