What is SB0378/HB403 — and what does it mean for you?
Highlights on Tennessee SB0378/HB403 Bill on the Regulation of the Production and Sales of hemp-derived cannabinoids
Update June 5, 2023:
Since May 11, 2023, when Governor Bill Lee signed HB0403, the hemp community in Tennessee has begun to embrace the future of what this means for businesses and consumers and making moves to prepare for the upcoming changes on July 1, 2023. As this process begins, Cultivate Tennessee has received many questions from the community that we’d like to address in an attempt to simplify the process and be a pillar of support through the ever-changing landscape for hemp growers, processors, retailers, and consumers in Tennessee. Below you’ll find information for the timeline of the law going into effect, as well as requirements for consumers, manufacturers, and retailers. HB0403 Tennessee General Assembly Bill Summary.
Please note, anything you read in these explanations is not to be held as legal advice.
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Updates:
TIMELINE OF THE LAW GOING INTO EFFECT
RULEMAKING PROCEDURE OVERVIEW
KEY DEFINITIONS
NEW FAQS
In January, a bill was filed in the Tennessee General Assembly to regulate the sale of products containing hemp-derived cannabinoids. Since the bill was filed, there has been some confusion as to how this may affect businesses. Here, we aim to clarify the points of the bill and alleviate concerns.
What does this legislation accomplish?
First, this bill provides reasonable and long-held food safety protections for Tennessee consumers of hemp-derived cannabinoids. It also provides a framework that will sustain a safe, legal marketplace for these products well into the future. Finally, the core tenets of this legislation were crafted by a wide coalition of industry peers and lawmakers in order to alleviate concerns that were prompting some leaders to call for a total ban of these products.
What this bill does NOT do:
This bill does not redefine hemp. Hemp is defined under Tennessee statute 43-27-101(3) as any part of the cannabis sativa L. plant with a delta-9 tetrahydrocannabinol concentration of not more than three-tenths of one percent (.3%) on a dry-weight basis. This legislation in no way changes this standard.
The bill does not change the hemp license structure for cultivators, propagators, or brokers.
The bill does not ban any product types that are commonly sold with hemp-derived cannabinoids.
Timeline of the Law Effective Dates:
The law has two effective dates, and each brings with it new requirements. Below is an overview of the requirements categorized by the effective date. For a more detailed inquiry into what is required, we recommend reading the bill in its entirety or consulting with a legal professional.
Beginning July 1, 2023 :
Retailers are required to check IDs and only sell to those 21 and older.
Products must be kept behind the counter and inaccessible to customers unless the retailer operates a 21-and-up establishment.
Samples are not allowed to be distributed in public areas.
Retailers are to begin collecting the additional 6% privilege tax on the sale of products.
The Tennessee Department of Revenue will ensure 6% privilege tax collection compliance.
Beginning July 1, 2024:
For suppliers and retailers:
Suppliers (essentially manufacturers and wholesalers) and retailers must obtain a valid license from the Tennessee Department of Agriculture.
Licenses are renewed annually. Failure to obtain and maintain a license subjects the supplier or retailer to potential penalties and fines.
Product testing requirements go into effect.
Laboratory standards for product testing go into effect.
Retail packaging and labeling requirements become effective.
When transporting products for wholesale or resale purposes, a bill of lading must accompany the shipment.
The Tennessee Department of Agriculture is authorized to conduct random, unannounced inspections of suppliers and retailers.
The Tennessee Department of Revenue is also authorized to conduct random, unannounced inspections at retail locations and to seize non-compliant products.
New retail locations may not be opened within 1,000 feet of a K-12 school.
For consumers:
Any unconsumed product must be stored in its original retail packaging. Non-compliance risks a Class C misdemeanor criminal charge.
Rulemaking Procedure Overview:
The new law gives authority to the Tennessee Department of Agriculture and the Tennessee Department of Revenue to write rules and regulations to effectuate the language of the law. Rulemaking is a fairly long process that allows for public comment and input.
A very basic overview of the rulemaking process is as follows:
A department or agency will draft rules in consultation with stakeholders.
A department will publish a draft of the proposed rule and often allow for public (likely electronic) comments.
The department will publish notice of a rulemaking hearing.
The department will hold a rulemaking hearing and often allows for in-person public comment.
The department will finalize a rule draft and send it to the Tennessee Attorney General for a review of the legality and constitutionality.
The finalized rule will be sent to the Secretary of State for filing.
Filed rules generally become effective 90 days after reaching the Secretary of State.
Filed rules are reviewed by the Senate and House’s Government Operations Committee and either adopted by law in the rule omnibus bill, otherwise the rule typically expires on June 30th of the year following the year of its filing.
Key Definitions:
Hemp-derived cannabinoid
The majority of the regulations enacted through the passed legislation surround “hemp-derived cannabinoids.” The bill specifically defines hemp-derived cannabinoids to make a clear distinction between those compounds that are of the highest concern for consumption. The law defines a hemp-derived cannabinoid as follows:
(A) Means:
(i) A cannabinoid other than delta-9 tetrahydrocannabinol, or an isomer derived from such cannabinoid, that is derived from hemp in a concentration of more than one-tenth of one percent (0.1%); or
(ii) A hemp-derived product containing delta-9 tetrahydrocannabinol in a concentration of three-tenths of one percent (0.3%) or less on a dry-weight basis;
Additionally, the bill defines a specific list of compounds that will be “hemp-derived cannabinoids” as of the effective date of the law. These include, but are not limited to:
(i) Delta-8 tetrahydrocannabinol
(ii) Delta-10 tetrahydrocannabinol
(iii) Hexahydrocannabinol (HHC);
(iv) Tetrahydrocannabinol acetate ester (THCo);
(v) Tetrahydrocannabinol (THCp);
(vi) Tetra hydro cannabivarin (THCv); and
(vii) Tetrahyrdrocannabinolic acid (THCa)
The law then specifically defines a list of compounds that are NOT included in the definition of a “hemp-derived cannabinoid.” These cannabinoids were made legal by the 2018 Farm Bill and remain unchanged. These include:
(i) Cannabichromene (CBC/CBCa/CBCv);
(ii) Cannabicitran (CBT/CBTa);
(iii) Cannabicyclol (CBL/CBLa);
(iv) Cannabidiol (CBD/CBDa/CBDv/CBDp);
(v) Cannabielsoin (CBE/CBEa);
(vi) Cannabigerol (CBG/CBGa/CBGv/CBGm);
(vii) Cannabinol (CBN/CBNa);
(viii) Cannabivarin (CBV/CBVa);
(ix) Hemp-derived feed products allowed under title 44, chapter 6; or
(x) Hemp-derived fiber, grain, or topical products;
Serving Size
The enacted law defines a “serving” as “a quantity of a hemp-derived cannabinoid product reasonably suitable for a single person’s daily use.” This definition is then used to further define the allowable quantity of hemp-derived cannabinoids present in a single serving of a hemp-derived cannabinoid product for ingestion. The law states that “an ingestible product containing a hemp-derived cannabinoid shall not: (1) Be sold in a serving that contains more than twenty-five (25) milligrams, in the aggregate, of one (1) or more hemp-derived cannabinoids.” This means that the regulated final product may contain only 25 mg combined of the defined hemp-derived cannabinoids in a single serving size of an ingestible product. It does not regulate any other ingredients outside of defined hemp-derived cannabinoids infused into the final product.
Ingestible
Ingestible is not a defined term under the new law. The legislative intent was to distinguish between “edible” and “inhalable” for 25 mg cap purposes.
Bill of Lading
A detailed list of a shipment of goods in the form of a receipt given by the carrier to the person consigning the goods BOL applies specifically to freight, whereas with postal service, a packing slip would likely suffice.
Ingestible:
A product that you must swallow to consume. This definition does not include inhalable products like vapes and flower.
Manufacturer
A person or company that makes goods for sale.
Retailer
A person or company that sells finished goods to the general public.
Batch
Defined by the new law as “a single stock keeping unit with common cannabinoid input or a hemp flower of the same varietal and harvested on the same date and manufactured during a defined cycle in such a way that it could be expected to be of a uniform character and should be designated as such.”
Manufacturing
“Manufacturing” is defined by statute to mean “compound, blend, extract, infuse, cook, or otherwise make or prepare products containing a hemp-derived cannabinoid, including the process of extraction, infusion, packaging, repackaging, labeling, and relabeling of products containing a hemp-derived cannabinoid.”
Each policy that we intend to put in place with legislation will be done to create a foundation that can be used to build further access to cannabis in the future.
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HB0403 FAQ:
What does the bill define?
The bill defines a “hemp-derived cannabinoid” as a “hemp-derived product containing delta-9 tetrahydrocannabinol in a concentration of three tenths of one percent (0.3%) or less on a dry-weight basis.” This definition serves to ensure clarity that a hemp-derived cannabinoid is a cannabinoid derived from hemp, as currently defined in Tennessee and US law.
Further, the bill articulates the specific cannabinoids that are subject to the regulation framework set forth (D8, etc.), but it does NOT include those in the .3% concentration requirement.
Finally, it specifically excludes the following hemp-derived cannabinoids from the definition, as these cannabinoids are known to be free of stimulating effects: Cannabichromene (CBC/CBCa/CBCv); (ii) Cannabicitran (CBT/CBTa); (iii) Cannabicyclol (CBL/CBLa); (iv) Cannabidiol (CBD/CBDa/CBDv/CBDp); (v) Cannabielsoin (CBE/CBEa); (vi) Cannabigerol (CBG/CBGa/CBGv/CBGm); (vii) Cannabinol (CBN/CBNa); (viii) Cannabivarin (CBV/CBVa); (ix) Hemp-derived feed products allowed under title 44, chapter 6; or (x) Hemp-derived fiber, grain, or topical products.
How will this affect the price of hemp-derived products?
This bill will impose a privilege tax of 6% at the retail point of sale (in addition to the existing sales tax already collected) on all products containing the defined hemp-derived cannabinoids. This tax will be used to fund the regulation and enforcement of these rules and ensure that the aims of these consumer protections are met.
It is important for our industry to take a proactive lead in protecting consumers with the measures set forth in this legislation. As we saw in 2022, without proactive action the industry would be susceptible to measures like wholesale prohibition and product category bans, and in turn the destruction of jobs.
After the mitigation of the potential ban introduced last year, Cultivate Tennessee and others focused on educating legislators on appropriate consumer safety measures while preserving commerce for a vibrant hemp industry in Tennessee. And, while any new regulation can create anxiety, this bill will provide accountability and predictability with guardrails for all those involved.
Since this new law will be regulated by the Department of Ag, which regulates Total THC in the state of Tennessee, what does this do for THCA flower? Can it be grown in TN?
This law is focused primarily on the sale and distribution of “hemp-derived cannabinoid” products, primarily edibles. For information regarding THCa cultivation, please contact the Hemp Program with the Department of Agriculture for current cultivation policies.
Does the new tax apply to only “hemp-derived cannabinoid” products, like Delta 8, or are CBD-only products included?
Only products that contain “hemp-derived cannabinoids” are subject to the new privilege tax. Retailers are responsible for collecting the new, additional 6% tax beginning July 1, 2023. See definition for “hemp-derived cannabinoids” above as well as here. Non-psychoactive cannabinoids (listed above as not included in hemp derived cannabinoids) covered in the 2018 Farm Bill are not subject to this additional tax.
Can you clarify the 25mg per serving restrictions by cannabinoid? Does the 25mg cap apply to the psychoactive cannabinoids only, or do all cannabinoids in one gummy get counted?
Beginning July 1, 2024, a serving size may only contain up to 25 mg of hemp-derived cannabinoids.
The 25 mg cap only applies to hemp products that contain "hemp-derived cannabinoids” as defined above. The below graphic further explains new dosage requirements and what would be considered compliant.
Please define the difference between “Batch” & “Manufacturing”
“Batch” is defined by the new law as “a single stock-keeping unit with common cannabinoid input or a hemp flower of the same varietal and harvested on the same date and manufactured during a defined cycle in such a way that it could be expected to be of a uniform character and should be designated as such.”
“Manufacturing” is defined by statute to mean “compound, blend, extract, infuse, cook, or otherwise make or prepare products containing a hemp-derived cannabinoid, including the process of extraction, infusion, packaging, repackaging, labeling, and relabeling of products containing a hemp-derived cannabinoid.”
What products does this affect? Is it only edibles or does it also affect Vapes and Flower?
Vapes and flower remain legal, and these products fall under the regulations of this bill if they include a “hemp-derived cannabinoid” which is defined to include THCa, Delta-8, Delta-10, HHC, THCp & THCv.
The milligram limits in this law only apply to “ingestibles” that contain “hemp derived cannabinoids” (defined above). The mg limit does not apply to products like vape and flower, however the packaging and testing requirements apply to everything that contains “hemp derived cannabinoids” including but not limited to: THCa, Delta-8, Delta-10, HHC, THCp & THCv.
What is the rule on final product vs. inputs to make the final product.
A full panel test is required on all active cannabinoid molecules prior to final production. Then, a potency test must be conducted on finished goods to confirm consistency with stated potency on the packaging. This must be linked using a QR code on the packaging.
Please Note: The Department of Agriculture is drafting further regulations for which types of tests may be used and qualifications for laboratories. Cultivate Tennessee is working closely with the Department during this process leading up to an expected July 1, 2024 effective date. Regulations like these won’t come as a surprise to the industry! There will be months and months of lead up to a pivot.
Does child resistance at the time of sale count as “child-resistant packaging”? (ie child proof bag sold holds a drink packet, lollipop, or product inside without childproof otherwise known as an “exit bag”).
Beginning July 1, 2024, products must be sold in child-resistant packaging under 16 CFR § 1700.15. A product like a lollipop, if not enclosed in child-resistant packaging, must be placed in such qualifying packaging at the time of retail sale. The answer in all cases depends on the product being sold.
Child-resistance standards depend on the “number of openings and closings customary of its size and contents.” For example, a drink containing one serving need only be child-resistant for one opening. Something containing more than one serving will need to be in a lifetime child-resistant package. Beverages that contain “hemp-derived cannabinoids” will need to be in child-resistant packaging beginning July 1, 2024. This can be accomplished through CR cans or CR “exit bags.”
Please Note: This will get further defined during the rulemaking process.
Is digital verification for online sales an option?
Yes, online digital verification for online sales is approved if the service verifies age through valid identification through the consumers. Beginning July 1, 2023, the law requires a retailer to obtain “proof of age” before selling to a buyer. “Proof of age” includes a valid driver’s license or other government-issued identification card that includes a photograph confirming that the buyer is 21 years old or older.
If the product is properly labeled and the packaging hasn’t been opened, is it safe from seizure? If the product’s original seal has been opened, can law enforcement take the product away?
The circumstances surrounding confiscation are highly fact specific and difficult to list. However, hemp-derived products in the possession of a consumer that are unopened and in their original, compliant packaging are not subject to seizure by law enforcement beginning July 1, 2024. If the original seal has been broken, so long as the product is in its original packaging, the product is not subject to seizure. It is a Class C misdemeanor for a consumer to fail to store a hemp-derived cannabinoid product in its original packaging beginning July 1, 2024.
What are the testing rules exactly?
A full panel test is required on all active cannabinoid molecules prior to final production. The potency test must be conducted on finished goods to confirm consistency with stated potency on the packaging. The Department of Agriculture is drafting regulations for which types of test may be used and qualifications for laboratories.
Please Note: Cultivate Tennessee is working closely with the Department during this process leading up to an expected July 1, 2024 effective date.
What could the future look like if the DEA makes Delta-8 Illegal but TN has protected it?
The law provides for an elastic definition of “hemp-derived cannabinoid” to account for future federal scheduling changes.
Do you have to license every product and if so, what is the cost for that and how often do you have to pay it?
Products are not licensed. Actors in the industry are. For example, by July 1, 2024, suppliers (essentially manufacturers and wholesalers) must be licensed, and retailers must be licensed as well. License holders must renew their license each year by providing certain information to the Department of Agriculture and submitting a renewal fee to the Department of Revenue.
Does the license fee apply to any store that carries or will carry non-psychoactive products? Is there a minimum % of business or dollar value where the store would not have to pay the license fee to sell?
Beginning July 1, 2024, a retail store must be licensed if it sells a single product containing a hemp-derived cannabinoid, as defined by the law. The percentage of revenue made as a result of selling these products is irrelevant.
How will traceability work with out-of-state suppliers? Does the traceability begin once it enters into the state and end when it leaves?
Traceability is not addressed by this bill directly. However, various regulations apply once products enter Tennessee. Products in transit must also be accompanied by a bill of lading (see definition above.)
Will there be a margin of error potency %. (ex. NY allows a 10% variance in potency for claimed mg on the packaging, other states allow 15%. For example - an edible advertised at 100mg can have 90 to 110 mg and still be compliant)
The current law does not provide for potency variance. Each serving for “ingestibles” is limited to a maximum of 25mg of hemp-derived cannabinoids beginning July 1, 2024.
If a business is primarily manufacturing for both in state and out of state brands. Is the business they do out of state subject to the same testing requirements, even if they are never retailed in this state?
Beginning July 1, 2024, any business in Tennessee that manufacturers products containing hemp-derived cannabinoids will be required to obtain and maintain a license.
The full panel testing requirement is applicable to all products manufactured in Tennessee. However, potency testing only applies to finished goods that are packaged to ensure that the potency is as labeled regardless of whether it is sold in Tennessee or elsewhere.
Goods subject to forfeiture: What constitutes a legitimate reason that law enforcement can take products away from someone?
Under this law, the Tennessee Department of Revenue has the authority to confiscate noncompliant hemp-derived cannabinoid products. The circumstances surrounding confiscation are highly fact-specific and difficult to list. However, during the Department’s compliance checks, products not properly tested, labeled, etc. are subject to potential seizure and destruction beginning July 1, 2024. Additionally, products offered for sale by an unlicensed retailer would be subject to forfeiture.
Goods subject to forfeiture: If the product is in properly labeled packaging that hasn’t been opened, is it safe from seizure? If the product’s original seal has been opened, can law enforcement take the product away?
The circumstances surrounding confiscation are highly fact specific and difficult to list. However, hemp-derived products in the possession of a consumer that are unopened and in their original, compliant packaging are not subject to seizure by law enforcement beginning July 1, 2024. If the original seal has been broken, so long as the product is in its original packaging, the product is not subject to seizure. It is a Class C misdemeanor for a consumer to fail to store a hemp-derived cannabinoid product in its original packaging beginning July 1, 2024.
Goods subject to forfeiture: Is a person who is caught with the product considered innocent until proven guilty?
All criminal defendants are innocent until proven guilty, and the district attorney general bears the burden of proving beyond a reasonable doubt that the person charged is guilty of crime under Tennessee law.
Does this mean D8, D10, HHC, etc. would be required to meet the .3% standard?
No. HB403 reflects previous law and only requires the concentration of Delta-9 THC to be below .3% in hemp-derived products.
Does this bill eliminate vapes and flower?
No. Many products containing hemp-derived cannabinoids will be subject to basic consumer safety protections like marketing regulations and testing requirements, all of which are standard throughout the country and throughout the cannabis and food product industries. Specifically, the regulation of “ingestibles” is mentioned throughout the bill. Alternatively, vapes and flower are considered inhalable.
How does the bill regulate defined hemp-derived cannabinoids?
The bill’s purpose is to protect consumers in their use of hemp-derived cannabinoid products that are currently sold in the market.
Manufacture
The bill specifically defines what it means to manufacture using a hemp-derived cannabinoid, including blending, extracting, infusing, cooking, making, preparing and packaging, repackaging, labeling, and relabeling products containing a hemp-derived cannabinoid.
It does not define growing or cultivating, as addressing this part of the supply chain is not the purpose of this bill.
Producer
While current Tennessee law defines a grower, propagator, and broker of hemp, this bill defines a producer of a hemp-derived cannabinoid product as someone who manufactures or sells products containing hemp-derived cannabinoids to retailers.
Retailer
A retailer is specifically defined as someone who sells products containing the defined hemp-derived cannabinoids for consumption and not for resale.
What restrictions are placed on the sale of hemp-derived products?
The primary and most-important restriction placed on the sale of defined hemp-derived products is the restriction of sale to individuals under the age of 21. Establishments that sell hemp-derived products will be required to either maintain these products behind the counter or limit entry in the retail establishment to persons 21 or older.
This important part of the bill is designed to ensure an adults-only market for hemp-derived cannabinoids, and protect Tennessee families with regulations to mitigate irresponsible use of these products by minors.
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Original Article Posted: February 10, 2023
Updates to Article Posted: June 5, 2023
HB0403 Tennessee General Assembly Bill Summary
Please Note: anything you read in these explanations is not to be held as legal advice.
