Month: November 2020

In the CBD and Hemp sector finding a processing company that will accept your processing business and retain your business is very difficult. 

There are few situations more tragic than having a deluge of orders, and then having them fall through or cancelled because you are suddenly dropped by your Payment processor.

You want to work with the largest payment processors because they have the resources to deal with the risks associated with CBD.  They also have the gravitas to deal with nervous credit card companies because the credit card companies want to keep their business with large payment processors because they bring them so much other business.

It is also expensive to properly vet CBD companies so most financial institution don’t have the funds to properly investigate CBD companies that if not properly checked out can bring many headaches to the processor down the line.

You can operate your business on a cash basis, but at point of sale it can get complicated and confusing if you use only cash.  A large percentage of customers don’t like to use cash, and cash can be difficult because of the security and other infrastructure needed to move cash around.

Because CBD payment processing sits in such a gray legal area most financial institutions charge a premium for doing CBD payment processing. 

Areas where they can charge extra because you use CBD are:

•They increase the costs for transaction fees

•They can require escrow or reserve accounts that demand a significant amount of reserve capital in the account. .

•And as stated before there is the constant risk, they will change their minds and shut you down.

•Some CBD organization’s use foreign banks to process their payments.  Using foreign banks is risky because they are not under U.S. jurisdiction so if they act in bad faith and do something unsavory like keep your money your avenues for redress will be limited because they are foreign. 

Will the FDA Act against cannabis or cannabis-related products that are in violation of the FD&C Act?

Officially from the FDA: “When a product is in violation of the FD&C Act, the FDA considers many factors in deciding whether or not to initiate an enforcement action. Those factors include, among other things, agency resources and the threat to the public health. The FDA also may consult with its federal and state partners in making decisions about whether to initiate a federal enforcement action.

Bottom Line:  At this point it has taken no action beyond enforcement letters.  And it doesn’t seem to have the resources to enforce its existing regulations so some compromise will probably have to be reached.

What is the FDA Doing now: Not Much

After hemp and its derivatives were federally legalized under the 2018 Farm Bill, the FDA was mandated under separate appropriations legislation passed late last year to provide an update on its regulatory approach to CBD within 60 days. That deadline passed early last year, but eventually the report and a supplementary notice were made public in the middle of last year.

The agency reviewed what’s known about CBD—acknowledging that data was limited “because cannabis-derived CBD was a Schedule I controlled substance” prior to hemp legalization. The roadblocks to research caused by marijuana’s ongoing restrictive Schedule I status is something legalization advocates have long pointed out.

Future of FDA Regulations: Now We Have Silence

On November 1, 2019 Dr. Stephen Hahn was nominated as the Commissioner of Food and Drugs at the Department of Health and Human Services. Dr. Hahn was confirmed as Commissioner on December 12, 2019.

At this point he has made no strong indications of any more significant future enforcement measures.

Future of State Enforcement on Behalf of FDA: Don’t Bet the Farm on it

The FDA admits; “While the states have their own enforcement programs, as the regulating agency FDA is much more capable of consistent enforcement across the board. State enforcement, for the most part, consists of a patchwork of regulations that are inconsistent across the country and enforcement is generally under-funded and minimally effective. The varying legality of hemp and marijuana products across the country also means that various states will enforce their laws differently. While states have a strong interest in protecting their citizens, it is challenging for them to establish standards for products that are distributed nationally.  Thus, federal enforcement is likely to be the most effective in curbing the proliferation of unlawful CBD products.”

California Assembly Bill 228:

This bill was passed by the California Assembly in May of 2019 but not enacted into law .  If it had been passed into a law, foods containing CBD wouldn’t be considered “adulterated” and would not have to be labelled so.

In March 13, 2019, the bill was amended to say not only would food and beverages with CBD  be considered unadulterated, but it would also say that it would be fine that foods and beverages containing industrial hemp or Hemp CBD are safe for human and animal consumption.

If passed into law, the new law would have stated:

The sale of food or beverages that include hemp or cannabinoids, extracts, or derivatives from industrial hemp shall not be restricted or prohibited based solely on the inclusion of industrial hemp or cannabinoids, extracts, or derivatives from industrial hemp.

(a) This division does not prohibit an entity licensed pursuant to its provisions from cultivating, manufacturing, distributing, or selling products that contain industrial hemp, as defined in Section 11018.5 of the Health and Safety Code, or cannabinoids, extracts, or derivatives from industrial hemp.

(b) A product containing industrial hemp-derived tetrahydrocannabinol (THC) in concentrations above 0.3 percent by product weight is subject to this division.

If passed into law, these changes enacted by 228 would have allowed CBD derived from Hemp into the licensing chain also know as the metrc track and trace system that makes sure all Cannabis in California is tracked as licensed from “seed to sale”. 

Therefore, if CA AB-228 had passed, CBD could have been part of this regulatory system along with marijuana and THC and therefore be legal to sell if the CBD in questions was in compliance with this metrc track system.

As stated, if passed it would move the “adulterated” label from products that contain CBD.

Require labeling of CBD and hemp products that are added to cosmetics, food, and beverages.

Food and beverage manufacturers would need to be registered and demonstrate that their sourced hemp meets all federal requirements.

Require raw hemp to be lab-analyzed and certified before being sold for product use.

The main opponents to the bill made this argument: “In addition to being a public health threat, this bill would have encouraged the recent phenomenon of CBD shops to open and continue to serve as loop- holes in current cannabis regulations. These CBD shops can compete unfairly with the regulated cannabis market by selling similar products without any of the tax revenue benefits to state and local jurisdictions. In addition to that, we have seen these CBD store act as fronts for illicit cannabis shops making it difficult for law enforcement to differentiate between products.”

“These changes would allow CBD derived from Hemp into the licensing chain from “seed to sale” also know as the metric track and trace system that makes sure all Cannabis in California is tracked as licensed from seed to sale.  If CA AB-228 had passed this would have been a possibility.”

The main opponents also said “The bill was held in discussion and time ran out for it to be voted on in the 2018 legislative session. We anticipate the author, Assembly member Aguiar-Curry, attempting its return in 2019 and welcome continued discussion with the Assembly member in hopes of finding a solution that would at minimum require equal safety testing requirements as cannabis CBD products.”

“We remain puzzled why the Assembly member refuses to do so, but hopeful she has learned from the recent vaping crisis which the Associated Press attributes in part due to the unregulated CBD market.”

https://www.angelesemeralds.org/news/2020/1/3/cbd-ab-228-killed

As of this time, this bill has not passed.

I meticulously spelled out the opposition’s reasons for defeating the bill because their logic made absolutely no sense to me.  By defeating this bill, they are preventing CBD from legally entering the California state market alongside THC, when CBD clearly has less to no mind-altering affects known to be caused by THC, and there is very strong evidence that CBD has multiple therapeutic benefits.

By defeating this bill, they have left the legal status of CBD in a fog of uncertainty which will discourage well intended individuals from selling and providing a drug with many proven therapeutic benefits to the people that need it.  And in addition, they have made it very difficult for people that need CBD to have the regulatory enforcement in place that will insure they are buying the CBD they may really need and not some fake or dangerous product that may contain no CBD at all.  

This saga is just another example of our “Pro-Cannabis legislature” bowing down to special interest and endangering the health of the California public. The lack of interest in the welfare of the California public by our state legislature is astounding. 

1. What forms of Industrial hemp derived products will and will NOT be allowed in food in California?

Will be allowed in food (without any claim for health benefits): •

Seeds derived from Industrial hemp.

Industrial hemp seed oil or hemp seed oil derived from industrial hemp.

Will NOT be allowed in food:

Any CBD products derived from cannabis. Any CBD products including CBD oil. derived from  industrial hemp.

Hemp oil that is not derived from industrial hemp seeds.

Industrial hemp seed oil enhanced with CBD or other Cannabinoids.

2. Is hemp seed oil the same as CBD oil?

•Industrial hemp seed oil and hemp-derived CBD oil are two different products. Industrial hemp seed oil is derived from the seeds limited to types of the Cannabis sativa L. plant and may contain trace amounts of CBD (naturally occurring) and other cannabinoids. Food grade Industrial hemp seed oil is available from a variety of approved sources. However, CBD or CBD oil derived from industrial hemp is NOT approved for human and animal consumption by the FDA as food and therefore cannot be used as food ingredient, food additive, or dietary supplement.

3. What is the difference between industrial hemp and cannabis (marijuana) derived cannabidiol (CBD/CBD oil)?

CBD can be derived from both hemp and cannabis. CBD derived from hemp and cannabis is a federally-regulated controlled substance. CBD derived from cannabis is regulated within California as a cannabis product and may only be sourced from, produced, and sold by those with commercial cannabis licenses. CBD derived from industrial hemp is not an approved food additive, and therefore it cannot be added to human or animal foods in California. •CBD derived from cannabis is a prohibited food additive. Cannabis cannot be sold in food retail •CBD derived from a licensed cannabis cultivator, per MCSB regulations, is an allowed additive in cannabis products only.

4. Does California consider food products that contain CBD or CBD oil from Industrial hemp a cannabis product?

Although in California, foods containing industrial hemp are not considered cannabis products (products that are subject to Proposition 64), CBD is an unapproved food additive and NOT allowed for use in human and animal foods per the FDA, and thus it is not approved in California.

5. Can industrial hemp-derived CBD oils be approved as a food ingredient, food additive or dietary supplement to be added in food?

Currently Industrial hemp derived CBD Oil and CBD products are NOT an approved food, food ingredient, food additive or dietary supplement and therefore cannot be used in any human and animal food

6. If CDPH, MCSB regulates and licenses cannabis (marijuana) derived product manufacturers, which agency oversees CBD oil produced from industrial hemp?

There is currently no regulatory agency that provides oversight over the production of CBD oil from industrial hemp. However, CDPH-FDB has authority oversight over food additives, dietary use products, food labeling, and good manufacturing practices for food. Industrial hemp used as a food additive or dietary supplement falls under the authority of CDPH-FDB.

7. Can industrial hemp derived CBD products be allowed for sale in California if they come from other States? For example, if industrial hemp derived CBD oil is manufactured in another state and sold to customers in California via distributors and retailers?

No, CBD is an unapproved food additive and NOT allowed for use in human and animal foods in California regardless of where the CBD products originate.

Bottom Line

At this point, it’s legal for state-sanctioned California companies to grow and produce THC marijuana extracts, but it isn’t legal for these producers to make CBD-rich hemp extracts.

The answers to these above questions clearly show that there is deep seated incompetence in the Government of California.

The State Assembly, The State Senate and Governor Newsome have all demonstrated to the world that when it comes to CBD they are all too competent to be holding office.

There is just no excuse for this type of incompetence when progressive Democrats control all three branches of government by overwhelming numbers and they are all supposed to be Cannabis friendly yet they allow this ridiculous situation with CBD to continue indefinitely.

We would be better off having random people chosen from the phone book populate our government than these bozos. And that goes double for Governor Newsom. He has always touted how pro-Cannabis he is, yet he has let this CBD regulatory disaster continue under his watch for almost two years.

The State of California’s position is made very clear by the California Department of Public Health FAQ for CBD  (Frequently asked Questions for Industrial Hemp and Cannabidiol (CBD) in Food Products)

The California Department of Public Health (CDPH), Food and Drug Branch (FDB) has received numerous inquiries from food processors and retailers who are interested in using industrial hemp-derived cannabidiol (CBD) oil or CBD products in food since the legalization of medicinal and adult-use marijuana (cannabis) in California.

In California, the CDPH Manufactured Cannabis Safety Branch (MCSB) regulates medicinal and adult use manufactured cannabis products. However, food products derived from industrial hemp are not covered by MCSB regulations. Instead, these products fall under the jurisdiction of CDPH-FDB.

California defines “food” as follows: (a) Any article used or intended for use for food, drink, confection, condiment, or chewing gum by man or other animal. (b) Any article used or intended for use as a component of any article designated in subdivision (a).(1)

In California CBD does not fall under the jurisdiction of one of the special departments in California set up for Cannabis which is The California Department of Public Health’s Manufactured Cannabis Safety Branch but falls under the jurisdiction of the old Food and Drug Branch that was created before Cannabis was made legal.

Therefore all the new regulations enacted by the Manufactured Cannabis Safety Branch to legalize and regulate THC in California does not apply to CBD.   

The Farm Bill Act of 2018 created a new legal product called “Hemp.”, however this new product of Hemp was created AFTER the state of California made Cannabis legal.  So this new product HEMP has not been addressed or recognized by the state and therefore anything derived from this new product is considered a new drug and not yet been recognized or covered by California law. 

The Federal Agricultural Act of 2014, also known as the Farm Bill, only legalized the growing or cultivating of industrial hemp by state departments of agriculture and institutions of higher education (as defined in Title 20 of the United States Code section 1001) for purposes of research under a state pilot program or other agricultural or academic research. In addition, growing or cultivation is only permitted under the Farm Bill if growing or cultivating is allowed under the laws of the State in which such state department or institution is located in, and where such research occurs. In California, the cultivation of industrial hemp is regulated by the CDFA

“Industrial Hemp” is defined as follows by the CDFA: “a fiber or oilseed crop, or both, that is limited to types of the plant Cannabis sativa L. having no more than three-tenths of 1 percent tetrahydrocannabinol (THC) contained in the dried flowering tops, whether growing or not; the seeds of the plant; the resin extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds or resin produced therefrom.”

California incorporates federal law regarding food additives, dietary use products, food labeling, and good manufacturing practices for food. The Controlled Substances Act of 1970 classified all forms of cannabis as a Schedule I drug, making it illegal to grow it in the United States.

Currently, the FDA has concluded that it is a prohibited act to introduce or deliver for introduction into interstate commerce any food (including any animal food or feed) to which tetrahydrocannabinol (THC) or CBD has been added. This is regardless of the source of the CBD – derived from industrial hemp or cannabis.

Therefore, although California currently allows the manufacturing and sales of cannabis products (including edibles), the use of industrial hemp as the source of CBD to be added to food products is prohibited. Until the FDA rules that industrial hemp-derived CBD oil and CBD products can be used as a food or California makes a determination that they are safe to use for human and animal consumption, CBD products are not an approved food, food ingredient, food additive, or dietary supplement.

THUS, UNDER CALIFORNIA LAW IT IS ILLEGAL TO SELL CBD AS A FOOD INGREDIENT, FOOD ADDITIVE OR DIETARY SUPPLEMENT.