October 12, 2023


House Bill 563. We’re talking about it. Again.

But this is the edition that passed the House in late September. So important for us to talk about what’s new, what’s not new. And. If it passes the Senate, how it might affect your business.

I’m Morgan Davis. I’m a cannabis attorney in Raleigh, North Carolina. Let’s talk about how to keep your business protected and thriving

House bill 563 for those of you who haven’t been paying attention or maybe it just doesn’t matter to you if you’re not in North Carolina, is a House bill from the North Carolina House to regulate hemp products and Kratom specifically. It’s an act to regulate the sale and distribution of hemp derived consumer products and great products and to ban those products from school grounds. We are not talking about nor have we talked about the creative section of this, because that’s not what I do. But I’m sure that there are plenty of people out there who practice in that area of law. Give me a call if you need a referral. For the rest of you who are involved in the hemp industry in North Carolina, this is for you.

This latest version of HB 563 passed the North Carolina House September 21st of this year.

It now goes to the Senate. And if the Senate chooses to, they can pass it before the. End of the session. If they don’t, then the clock starts over next year. It has to be reintroduced. It can come in a new form, etc.. As of right now, it hasn’t passed the Senate. But pay attention because it can be it can come up at any point they choose. HB 563 and our previous conversations does a lot of different things. The the biggest thrust of it is to have it so that manufacturers, distributors and retailers are regulated and enforced by alley or alcohol law enforcement. They have to be licensed. They have to comply with various types of regulations.

Most importantly, you cannot sell to anyone under the age of 18. No one under the age of 18 can possess these products. And as the act puts up front, you can’t have them on school grounds. The biggest concern in North Carolina right now for a lot of legislators is that there are kids getting a hold of intoxicating hemp products and this is their attempt to try and prevent that from happening. That’s a good idea. Most of us agree with the idea of making sure that kids don’t get a hold of intoxicating products that their little brains aren’t ready for yet. However, in addition to that, there are a lot of provisions that come with this that affect hemp product manufacturers, distributors and retailers. So it’s very important to understand them, even though they haven’t become law yet, so that if it does become law, you’re already aware and maybe you’ve already looked into some options to be prepared in case you need to pivot. So let’s go through it.

In our last video we talked about, there was this crazy new hemp derived consumer product definition, which tried to put all products under 3.3% by dry weight cap for every cannabinoid in the product that was not viable. And that became clear to legislators and they rolled that back. So now it’s been changed back to the gold standard or the federal or close to the federal standard, which is the Delta-9 limit of 0.3% or less by dry weight. However, North Carolina has made an interesting choice in this newest definition because at the very end of the not more than 0.3% on a dry wieght basis, but may contain concentrations of other hemp derived cannabinoids, including CBD. CBD, CBG, CBG, CBN, THC, and THC P In excess of that amount.

That would mean your product has to come under the 0.3% Delta-9 limit.

However, if you have above that limit of these other cannabinoids, which I’ve just listed for you, that’s okay. Makes sense for CBD, CBG, CBG, CBN. Very interesting choice by the legislature for THC and THC P. We’re going to see how that plays. Out in the end. But for now, I think there are a lot of people in the industry rejoicing, moving on. There’s a requirement for having all tests done by an independent testing laboratory, and that’s very specifically designed. So that means if you’re a manufacturer or distributor, both come under this requirement, you have to have the product. Tested by an independent. Testing laboratory. Now, what’s not clear to me is if the manufacturers. Tested it, does that. Mean the distributor has to? It’s not made clear in the statute. We’ll see how that plays out. If this passes and it’s enforced by the allie. Maybe that if you’re manufacturers in California or anywhere outside of North Carolina, that then the distributor in North Carolina. Has to have an independent lab test done in North. Carolina.

There are other states that have hemp programs that do that for hemp products that are brought in from out of state. This may be leaning in that direction, but it’s not clear. The reason I say that is one of the requirements of the independent testing laboratory is the laboratory has to be ISO accredited and meet a number of other things. But additionally, it has to have entered into a compliance agreement with the Allie Division to conduct THC sampling and. Testing using a specific testing method. I don’t know what that agreement’s going to look like in the end. I don’t know if they’re going to require be in state. I don’t know if it’s just going to say, Hey, we want to know what kind of testing method you use. And as long as you certify. That it’s this. We’re happy to go have you go forward? No idea. But keep an eye out for that, because that may mean you may need to change who is doing your testing.

You may be required to have additional testing

And if you’re a manufacturer, if you’re a distributor in North Carolina, a wholesaler retailer, and your manufacturer who you’re buying from doesn’t use this kind of testing, you may then be required to go and have additional testing done yourself to comply with these as we just discussed, testing prior to distribution. That requirement falls on both the manufacturer or the distributor. So I believe that’s probably going to be construed that if you’re manufactured and do it, you the distributor, will have to do it. It’s an extra cost. And in addition to that, the testing, the things that they have to be test for now is one quarter page, poll page, full page, whole nother page. It’s a lot of stuff. What’s up, guys? So again, if you are currently sourcing products from outside of the state or you are making anybody in this industry who’s dealing with products, you’re going to need to look at these testing requirements and talk to whoever is getting your who’s ever providing your certificates. Of analysis and say, can. You do this? Because if it’s a lab that cannot do that or it’s going to be an astronomical price, you may want to go ahead and start looking for somewhere else to. Get your surveys done. Packaging requirements. We talked about this before, but just to go back over them. Every product that is every hemp derived consumer products that’s going to be sold in the state is going to have to meet the following patchy packaging requirements.

I highlight that to say I don’t think they’re going to care if you, the distributor, got it from the manufacturer and the manufacturer’s not complying. You, the distributor, are going to be responsible for complying. You, the retailer, are going to be responsible for complying. And in this statute there are civil and criminal penalties attached to noncompliance. That means you sell products that. Do not meet the. Regulations. They can civilly fine you. They can suspend your license. They can revoke your license. And for multiple violations, they can criminally charge you. So it’s important you understand what the requirements on you are no matter where you are in the supply chain. So for anybody in the supply chain, if this passes, all packages have to have a list of ingredients, including a nutritional fact panel and allergens, several different types of warnings , the net weight of the product, the total amount of hemp derived cannabinoids in the entire package measured in milligrams. So that’s not just your THC. It’s going to be every hemp derived cannabinoid that you’ve got in there.

So if you’re selling something that’s a mixed bag of a whole bunch of different cannabinoids, that means you’re going to have to list the amount of each of those in it. If the product is ingestible, the amount of hemp derived cannabinoid in each serving of the product measured in milligrams. So take what I just said, and if it’s consumable, you’re going to have to do that for each serving has to be child resistant and cannot be attractive to children. And it can’t be. If it’s gummies, they can’t be shaped in a cartoon or animal character or something that’s already in the marketplace as being sold to children.

Milligram Caps

When we last spoke, there were milligram caps. So in the last edition there was a. 200 milligram aggregate cap of all cannabinoids per serving. So that’s any cannabinoid had to be in an aggregate of 200 milligrams or less. That’s gone. There was a second category. Of Delta nine, Delta seven, Delta eight, Delta. Ten had to be at ten milligrams or less per serving. It’s now three milligrams per serving. That’s a big change. That’s going to be a big. Change for a lot of people. Currently in the market. To go from ten milligrams of Delta. 9.7, Delta eight, Delta ten. To three milligrams. It’s going to require that a lot of people right now who are in the market are are going to have to reformulate. Now. There’s an interesting thing that happened here. Which is it. Specifically only applies. These limitations. To hemp derived consumer products. Intended for ingestion. That means if. You’re an inhalable product, you are not subject. To these limitations. So yay for all those with inhalable products, you have no milligram caps. But for anybody selling edibles, this could potentially be a problem. If you have a. Beverage, this could be a problem. Because, you know, a beverage container is usually one serving. So that means you can only have three milligrams of any of these in your entire beverage container for a lot of beverages. That’s not that doesn’t really do very much. Doesn’t make you a viable product in the market. So keep an eye on this. If you’re in the edible or beverage market. Last section that applies to hemp derived products in this act talks about what the act doesn’t do.

Employers could still fire you for consuming hemp products if they want to have a drug free policy.

You don’t get to claim discrimination for using these types of products and then you’re fired. It doesn’t allow you to possess the products in certain circumstances that would involve professional malpractice or negligence. So it limits. If your employer decides to enforce a drug free policy or decides to fire you because they don’t like the fact that you’ve got CBD sitting on your desk. This act in no way protects you against that.

Under the Influence vs While Impaired

But there’s two very interesting things that happen in this act that I think everyone should be aware of. One of them is it says the article shall nothing in this article shall be construed construed to do any of the following. Permit a person to operate, navigate or be in actual physical control of a motor vehicle, aircraft, motorized watercraft, or any other vehicle while under the. Influence of a hemp. Derived consumable product. In the law, there’s a difference between under the influence and while impaired. Driving. While impaired involves imbibing enough alcohol or some controlled. Substance that actually. Impairs your mental and physical faculties. It’s measurable. This simply says under the influence. Now, does that mean that if I consume a hemp-derived consumer product, which otherwise meets the statute, and then drive my vehicle and it’s in my system because I took it in the morning, it’s now 5:00 in the afternoon or I took it last night and it’s 8AM and I’m driving to work. I’m not impaired in any way, but it’s technically in my system. Am I under the influence? If so, if that’s what this is meaning to state, which whether or not it’s meaning to it could be construed that way. That puts a higher burden on people who are consuming these products than people who are consuming pretty much any other controlled substance. I think that’s a problem. Additionally, it says nothing in this article shall be construed construed to require an employer to accommodate the use of a hemp derived consumer product in a workplace or an employee working while under the influence of a hemp derived consumer product. So again, I’m a professional. I. I’m a teacher. I have chronic pain or I suffer from sleep deprivation or anxiety. And I take a full. Spectrum hemp product every night before I go to bed because I. Find that it helps with my symptoms. Then I go to work and let’s say for some reason I have. It in my bag and my. Principal. Sees it and they decide. To fire me. Or I ask them, Hey, I’d like. To be able to take this at lunchtime. It has no impairing effect on me. It helps my anxiety. The employer is not only not required to accommodate you, they can fire you without any recourse. Really. So again, is the same applied to anybody who takes prescription medications? No. Why? It’s being applied here just to me signals that the legislature. Still doesn’t believe that this product, that hemp. Or hemp derived products are useful to people for. Anything other than intoxicating purposes. Keep that in mind as you are a consumer of these products, where you take. Them with you and how you use them. And if you are producing these products and manufacturing them, distributing them and selling them. Keep this stuff in mind for when you have customers come in and who ask you questions. There are plenty of things that you’re still not allowed to do. If this law passes. As an employee. Or as regular person driving a vehicle, if you have any questions about HB 563, give us a call. We’ll talk to you about how it might affect your business if it passes and whether or not you need to consider pivoting now.

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