It has been more than three years since the California Department of Public Health (CDPH) announced in July 2018 that California would not permit ingestible hemp-derived CBD products to be sold in the state, following guidelines from the U.S. Food and Drug Administration (FDA). The state legislature now has overwhelmingly passed Assembly Bill 45, which is expected to be signed by Governor Gavin Newsom shortly. 

Assembly Bill 45 allows for hemp-derived cannabinoids, extracts and derivatives in food and dietary supplements with various restrictions. Though expected to be a game-changer for hemp products sold in the world’s fifth largest economy, this legislation comes just weeks after the FDA denied two New Dietary Ingredient applications filed by well-known CBD brands, and it perpetuates the 50-state patchwork model for hemp products that the FDA was expected to remedy after passage of the 2018 Farm Bill. Here, we offer our analysis of the key provisions of the new legislation and highlight areas of lingering uncertainty and risk. 

Key Provisions of AB45

Hemp Does Not Adulterate Food or Dietary Supplements under State Law

Under AB45, a dietary supplement, food, beverage, cosmetic or pet food is not adulterated by the inclusion of industrial hemp or cannabinoids, extracts or derivatives from industrial hemp if those substances meet specified requirements. A manufacturer of dietary supplements and food that includes industrial hemp is required to register with the CDPH, must demonstrate proper sourcing of the industrial hemp and must comply with good manufacturing practices. Industrial hemp may not be included in products that contain alcohol, tobacco or nicotine. 

Hemp Defined

“Industrial hemp” or “hemp” is defined under the bill as “an agricultural product, whether growing or not, that is limited to types of the plant Cannabis sativa L. and any part of that plant, including the seeds of the plant and all derivatives, extracts, the resin extracted from any part of the plant, cannabinoids, isomers, acids, salts, and salts of isomers, with a delta-9 tetrahydrocannabinol concentration of no more than 0.3 percent on a dry weight basis.” 

Prohibition on Intoxicating Hemp-Derived Products

To curtail the growth of new unregulated intoxicating hemp-derived products such as Delta-8 THC, the bill creates a new definition for “THC or comparable cannabinoid” as applied to industrial hemp products. This includes “Any tetrahydrocannabinol, including, but not limited to, Delta-8-tetrahydrocannabinol, Delta-9-tetrahydrocannabinol, and Delta-10-tetrahydrocannabinol, however derived.” The CDPH is granted discretion to include or exclude within this definition “any other cannabinoid, except cannabidiol, that the department determines … to cause intoxication.” 

Rejection of DEA’s Rule on Noncompliant Hemp Extract

AB45 does not acknowledge the controversial Interim Final Rule of the Drug Enforcement Administration (DEA) that seeks to classify hemp extract that exceeds 0.3% THC concentration at any point during the extraction process (which is practically unavoidable) as a Schedule 1 controlled substance. The bill instead focuses on the final extract, which cannot exceed 0.3% THC concentration. 

Labeling and Advertising

An industrial hemp product that is a dietary supplement, food or beverage must have packaging and labeling that includes all of the following information: 

• A label, scannable barcode, internet website or QR code linked to the certificate of analysis that provides the product name, contact information for the product’s manufacturer or distributor, the product batch number, the concentration of cannabinoids present in the product batch and the contaminant levels within the product batch.

• The product expiration or “best by” date, if applicable.

• A statement indicating that children or those who are pregnant or breastfeeding should avoid using the product prior to consulting with a health care professional about its safety.

• A statement that products containing cannabinoids should be kept out of reach of children.

• The following statement, that “THE FDA HAS NOT EVALUATED THIS PRODUCT FOR SAFETY OR EFFICACY.” 

The bill prohibits labeling, advertising or marketing an industrial hemp product with a “health-related statement” that is untrue as to the effects on health of consuming products containing industrial hemp or hemp-derived cannabinoids, extracts or derivatives. A “health-related statement” includes “a statement of a curative or therapeutic nature that, expressly or impliedly, suggests a relationship between the consumption of industrial hemp or industrial hemp products and health benefits or effects on health.” An exemption exists, however, for structure-function claims that are allowed for dietary supplements made in accordance with the Federal Food, Drug, and Cosmetic Act. 

It also is impermissible to directly target advertising or marketing to children or to persons who are pregnant or breastfeeding. Advertising or marketing placed in broadcast, cable, radio, print or digital communications shall only be displayed where at least 70 percent of the audience is reasonably expected to be 18 years of age or older, as determined by current and reliable audience composition data. 

Serving Size Remains a Tricky Problem

A significant topic left open by AB45 is how the CDPH will regulate maximum serving sizes, active cannabinoid concentration per serving size, the number of servings per container and similar questions. The bill provides CDPH with this authority but provides no guidance. Some industry leaders have warned against “percentage” thresholds of cannabinoids as an appropriate measure for foods and beverages. Due to the potentially large amounts that may be consumed, food and beverages that contain less than 0.3% THC concentration may nevertheless contain a substantial quantity of THC. A typical energy bar of 60 grams, for example, would be allowed to have up to 180 mg THC if limited to 0.3% THC concentration by weight. Regulated cannabis edible products by comparison may only be sold in a serving size of no more than 10 mg, with a limit of up to 100 mg per package. CDPH will need to grapple with this issue. 

Testing

A hemp manufacturer must meet rigorous testing requirements, including that the hemp is tested by an independent testing laboratory in raw extract final form prior to being incorporated into a product, and that the total THC concentration does not exceed 0.3%. The CDPH “may regulate and restrict the cap on extract and may cap the amount of total THC concentration at the product level based on the product form, volume, number of servings, ratio of cannabinoids to THC in the product, or other factors, as needed.” The scope of testing must include any hemp derivatives identified on the product label or in associated advertising. 

A raw hemp product also must demonstrate that the tested sample of the batch did not contain contaminants that are unsafe for human or animal consumption. Testing requirements for contaminant levels are the same as those for cannabis. 

Temporary Prohibition on Inhalable Products

A new tax on inhalable products is authorized by AB45. Until that tax is enacted, however, the manufacture and sale of inhalable products are prohibited except for sale outside California. 

Groundwork for Incorporating Hemp Products into the Cannabis Supply Chain

AB45 instructs the Department of Cannabis Control (California has merged the three state cannabis authorities into this single, new Department) to prepare a report on the necessary steps for incorporating hemp products into the cannabis supply chain. This includes the incorporation of hemp cannabinoids into manufactured cannabis products and the sale of hemp products at cannabis retailers. 

Enforcement and Interagency Cooperation

The bill also facilitates communications between state agencies and local law enforcement for better compliance by and enforcement against unlicensed manufacturers. CDPH is specifically granted seizure/embargo powers for noncompliant hemp products, as well as the ability to initiate recalls. 

Comment

AB45 is expected to provide sorely needed vitality to California’s lagging hemp industry, and lays the groundwork for future synergy with the state’s regulated cannabis market. The legislation will certainly be a boon to hemp- and CBD-infused consumer product manufacturers and retailers even though some questions remain, such as how the state may ultimately regulate inhalable hemp products and the serving size for hemp-infused food and beverages. 

Industry participants should nevertheless proceed with caution due to the specter of the FDA, which has not completed its rulemaking process around CBD. Although it is widely assumed that the FDA will allow CBD in dietary supplements in some form, the same is not true for CBD as a food additive. Final rules by the FDA that are inconsistent with California’s rules will likely result in a showdown between Washington and Sacramento, and may breathe new life into class actions and other litigation brought by the plaintiffs’ bar against hemp and CBD companies in the state. In the meantime, California hemp and CBD manufacturers, distributors and retailers should follow closely and comply with the new regulations that will be coming from the CDPH and other state agencies.