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On April 4, 2023, state Representative McNeely introduced North Carolina House (NC) Bill 563 (HB 563), which can be read here. HB 563 is designed to regulate the sale and distribution of products containing hemp-derived cannabinoids as well as to establish a regulatory framework for the commercialization of kratom. This blog post addresses the provisions of HB 563 that govern the sale and distribution of products containing hemp-derived cannabinoids and does not address the provisions relating to kratom. It is also important to note that this post is a summary of HB 563 as it was introduced, not in its final version. As part of the legislative process, HB 563 may be amended before it becomes law or is even voted on. We will continue to monitor this bill as it progresses.

HB 563 defines “hemp-derived cannabinoid” as: “The plant Cannabis sativa (L.) and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than three-tenths of one percent (0.3%) on a dry weight basis.”

Many readers of this blog know this definition well as it is the exact language set forth in the 2018 Farm Bill to define “hemp”

HB 563 sets forth various offenses involving the manufacture, distribution, and sale of hemp-derived cannabinoid products. These offenses include:

  • Selling to a person under the age of 21;
  • Purchasing a hemp-derived cannabinoid product for a person under the age of 21;
  • Distributing samples of hemp-derived cannabinoids on public streets; and
  • Knowingly selling a hemp-derived cannabinoid product without having obtained proof of age from the purchaser.
  • Most importantly, it is an offense to knowingly manufacture, distribute, or sell a product containing a hemp-derived cannabinoid that has a delta-9 tetrahydrocannabinol (D9 THC) concentration of more than three tenths of one percent (0.3%) on a dry weight basis. Of course, this is nothing new since products with D9 THC concentrations that exceed 0.3% are not hemp. They’re marijuana. 

HB 563 also requires that “A person or entity that is in the business of manufacturing, distributing, or selling products containing hemp-derived cannabinoid in NC shall obtain a license authorizing the person or entity to engage in that business prior to the commencement of business or by January 1, 2024, whichever is later.

At this point in time, HB 563 sets licensing fees as follows:

  • $5,000 for a manufacturing license;
  • $2,500 for a distribution license; and
  • $100 for a sales license. 

Licenses are issued on an annual basis and the renewal fees are as follows: $1,000 for a manufacturing license; $500 for a distribution license; and “a renewal fee equal to the initial licensing fee established under subsection (b) of this section”.

HB 563 sets testing requirements for hemp-derived cannabinoid products by requiring all products be tested for the following: cannabinoids; heavy metals; microbials; mycotoxins; pesticides; and residual solvents. The bill specifies that products must be tested using high-performance liquid chromatography for any separation and measurement for testing. Batch testing and expiration dates are also required for products.

In addition to regulations governing sales, testing, and expiration dates, HB 563 provides additional requirements and restrictions for products containing hemp-derived cannabinoids. Packaging requirements stipulate that hemp-derived products must be sold in packaging that is child-resistant. Additional packaging requirements include product labels that must include a list of ingredients, possible allergens, and a nutritional fact panel; caution statements about breastfeeding; a statement about the product not being approved for medical use by the FDA; a statement to keep the product out of reach of children; the amount of cannabinoids per serving and in the entire package; the net weight; and a code that scans to testing data for the product.

As mentioned above, advertising restrictions for hemp-derived products stipulate that the products cannot be advertised, marketed, or offered for sale if the product, its label, design of the product, or product packaging depicts or signifies characters or symbols known to appeal primarily to persons under 21 years of age (including: superheroes, comic book characters, video game characters, television show characters, movie characters, mythical creatures, and unicorns).

Finally, HB 563 imposes restrictions on ingestible products containing hemp-derived cannabinoids. Namely that products cannot be sold in a serving that contains more than 75 milligrams, in the aggregate, of one or more hemp-derived cannabinoids. The products cannot be formed in the shape of an animal or cartoon character.

The language of HB 563 appears to address many common concerns with the hemp-derived products industry. Unlike some states across the country that are trying to ban or severely restrict the sale, distribution and manufacture of these products, HB 563 recognizes the value in allowing its hemp-derived products industry to continue to flourish, provided it is responsibly regulated through sales and marketing restrictions, packaging and labeling standards, and reasonable licensing fees for NC industry participants. Please keep in mind this bill was only recently introduced and will likely change before it is finally voted on, but North Carolinians, the NC hemp industry, and hemp consumers in the state should let elected officials know their feelings on this bill.

We will continue to monitor the status of HB 563 as it works its way through the NC House. If you have any questions regarding HB 563 or anything else cannabis related, please contact Kight Law today.

May 4, 2023


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