Legislative Update: Hemp Cultivation Bill SB 153 Passed by Legislature and Awaiting Governor’s Signature; Hemp Manufacturing Bill AB 228 Dead
By Andrew Kingsdale, Esq. (with Omar Figueroa, Esq.)
September 12, 2019
Introduced by Republican Senator Scott Wilk, California Senate Bill 153 has made it out of the Legislature and is likely to be signed into law soon. This hemp cultivation bill will amend and supplement existing laws governing industrial hemp cultivation and hemp breeders, including new provisions on hemp registration, testing, and enforcement.
SB 153 is intended to conform California hemp law to the requirements for a state plan under the federal Agriculture Marketing Act of 1946, as amended by the Agriculture Improvement Act of 2018 (the “2018 Farm Bill,” which we discussed here). While many changes are merely clerical, some substantive changes include:
- New enforcement penalties for negligent and grossly negligent conduct;
- New conditions on eligibility to participate in the industrial hemp program (e.g. disqualifying acts include a controlled-substances felony conviction);
- New agency reporting requirements, to transmit registered-cultivator information first to CDFA and then to the Secretary of Agriculture (currently Sonny Perdue), who is head of the United States Department of Agriculture (USDA), and;
- New deadline–May 1, 2020 (previously January 31)–for California to submit its 2018 Farm Bill state plan to USDA.
Technically, until California has a USDA-approved state plan under the 2018 Farm Bill, all hemp cultivation must be consistent with the 2014 Farm Bill, which limits approved cultivators to established agricultural research institutions. SB 153 new creates a registration process for such institutions.
California intentionally regulates hemp separately and differently from cannabis. And, as one SB 153 revision makes abundantly clear, cannabis cultivators are free to cultivate industrial hemp in premises licensed for commercial cannabis cultivation, but such industrial hemp (regardless of its THC content) will be subject to the licensing and regulatory requirements of the Medicinal and Adult Use Cannabis Regulation and Safety Act (MAUCRSA):
“Industrial hemp, regardless of its THC content, that is cultivated on a premises licensed by the department for cannabis cultivation shall be considered cannabis as defined in subdivision (f) of Section 26001 of the Business and Professions Code and subject to licensing and regulatory requirements for cannabis pursuant to Division 10 (commencing with Section 26000) of the Business and Professions Code.”
[Proposed Food & Ag Code §81006(c)]
Finally, SB 153 adds registration requirements for “hemp breeders” (formally called “seed breeders”), which are distinct from growers of industrial hemp and defined as entities that “develop cultivars intended for sale or research.” [Proposed Food & Ag Code §81006(c).] Under SB 153, hemp breeders will have to submit a “variety development plan” to their local agricultural commissioner. This variety development plan will detail the hemp breeder’s “planned approach to growing and developing a new cultivar for industrial hemp.” [Proposed Food & Ag Code §81006(c), effective once USDA approves California’s state plan.] The plans now will have to include: the hemp varieties to be used, and “if applicable, how those varieties will be used in the development of a cultivar”; a plan for testing all of the plants grown; and measures to destroy any plants with THC concentrations that test above 0.3 percent. [Proposed Food & Ag Code §81004(a)(2).]
In summary, with SB 153 the differences between California’s regulation of industrial hemp cultivation compared to cannabis cultivation will remain stark. Hemp farmers benefit from lower barriers to entry–including lower registration/licensing fees (US$900), a simpler application process, and relatively minimal testing requirements (testing for THC content only).
Furthermore, federal legalization under the 2018 Farm Bill has opened numerous doors to hemp that are still not available to cannabis. For example, hemp farmers have better access to banking than cannabis growers, who are heavily scrutinized by banks and also disclosed to the U.S. Treasury Department through Suspicious Activity Reports (SARs). The National Credit Union Administration has issued a regulatory alert stating that, “It is NCUA’s understanding that SARs are not required to be filed for the activity of hemp-related businesses operating lawfully, provided the activity is not unusual for that business.”
The USDA is taking steps to support the hemp farmers by making federal crop insurance available and accepting applications of seed-propagated hemp for plant variety protection.
And of course, hemp benefits from federal legalization in other critical ways too, such as federal trademark protection, right to interstate transportation, and no tax headaches from Internal Revenue Code section 280E.
Overall, it is a promising regulatory outlook for California’s hemp farmers.
Not so much for hemp-product manufacturers, however. AB 228 would have expanded opportunities for hemp-product manufacturers (in increased competition to cannabis-product manufacturers) by, among other changes, specifying that foods, non-alcoholic beverages, and cosmetics are not “adulterated” by the inclusion of industrial hemp, or cannabinoids, extracts, or derivatives from industrial hemp. But AB 228 never made it out of the suspense file, and is dead for now.
This information is provided as an educational service, and is not intended as legal advice. For questions regarding industrial hemp or cannabis licensing and regulations, contact the Law Offices of Omar Figueroa at (707) 829-0215 or info@omarfigueroa.com to schedule a confidential legal consultation.