California Department of Public Health released a proposal, on the 13th of June, to ban all hemp-derived products that are intoxicating and contain cannabinoids.
CDPH estimated that the proposal could lead to 115 business closures and 18 478 job losses in just five years, with a loss of $3.14 Billion in revenue.
The CDTFA states that “impacts on revenues affects the ability of businesses remain financially stable, economically viable and to have adequate monthly cashflow to cover overhead costs and operating expenses.” Notice of 22 pages The proposed rulemaking. The impact on small business is disproportionate.
The CDPH has a current regulations, Which Gov. Gavin Newsom issued In September 2024 industrial hemp foods, beverages, and dietary supplements for human consumption will be required to have emergency regulations No, The package must contain no more than 5 servings and contain detectable THC, or “comparable cannabis” per serving.
This emergency rule is in conflict with the federal definition for hemp contained in 2018 Farm Bill, which allows up to 0,3% delta-9THC dry-weight during a field test conducted before harvest. The federal legislation does allow states to implement more strict regulations around their hemp programs.
The emergency regulations will expire in 2025. However, CDPH has now scheduled a 45 day rulemaking period to consider public objections, comments and recommendations. The CDPH set a Public Hearing The 28th of July at 10:00 a.m.
According to the CDPH notice of June 13, despite the negative economic impact, the proposed regulation would protect public health by protecting consumers and youth, particularly those under the age of 21. It will also reduce the risk of injury, illness or death.
This sentiment is similar to comments Newsom said in September when he stated that his administration would take action to close gaps and to increase enforcement so as to prevent children accessing unsafe and unregulated goods.
The governor stated that “we will not stand by as dangerous hemp products with THC, unregulated and sold in our stores at retail outlets, target children.”
Children under the age of 21 who suffer from certain medical conditions could still access California’s medicinal cannabis program. However, hemp CBD products would be unavailable to them. CDPH estimates that under its proposal, only “a small number” non-intoxicating CBD product would remain out of the licensed marijuana market.
For hemp products to comply with proposed regulations and the emergency regulations, manufacturers will need a CBD isolate purified that removes all traces of THC.
According to the CDPH, CBD isolate and cannabinoid isolats that do not contain detectable THC total are expensive. “It is estimated that there were not any preexisting hemp products in the California market, prior to the emergency regulations, that would have reliably complied with the no-detectable-total-THC standard. Many products previously available that were marketed as ‘CBD’ had very low levels of total THC but would still have been noncompliant with the proposed regulations due to trace amounts of total THC that would still be detectable at some level.”
According to the department, approximately 100 out of the 115 hemp producers licensed by the state would have been removed from the market. About 10 of the remaining 15 CDPH licensed manufacturers would have to pay a relabeling fee, which is an average cost per company of $20,000. Around 50 companies would be affected by these costs.
Intoxicating hemp products sold in gas stations, convenience stores, and vape shops across the State were sold before September’s emergency regulations. There was no restriction on age or advertising to young shoppers. CDPH reports that hemp products were marketed to children using graphics and labels similar to those of candy brands and other popular snacks.
Newsom has been appointed as the new governor of California less than 8 months after emergency rules came into effect. In May, 99.7% (of the state’s licensed alcohol establishments) were compliant. However, Governor’s Administration did not provide compliance rates for non-licensed retail businesses. According to the CFPH’s proposal, enforcement compliance costs are projected at $785,000 annually.
CDPH invited public submissions by email to help reduce any negative economic impacts on business.[email protected]You can also contact us by fax (916-636-6200) or mail (California Department of Public Health Office of Regulations 1415 L Street Suite 500 Sacramento, CA 95814).
CDPH estimated that carryout retailers would have the greatest impact under this proposal, with a revenue drop of $2,02 billion in the first 5 years. Manufacturers ($615 millions), food service retail ($268millions) and wholesalers ($227millions) would all be affected.
Department also expects many Californians who purchase hemp regularly to replace their local purchases by mail-orders from outside the state. California will be unable to compete effectively with businesses in other states.
According to the CDPH notice, “all businesses will suffer a reduction in their competitiveness and the manufacturing and processing hemp products will be moved out of the state.” The California THC market is largely supplied by illegal markets and businesses from out-of-state.
The rule-making process requires that the Department determines that there is “no other reasonable alternative”, that was considered by it or brought to its notice, that would better achieve the goal of the proposal : protecting the health and safety of the public.