This post was written by attorney Kamran Aryah with the Kight on Cannabis law firm.

On Monday North Carolina Senate Bill 315 (“SB 315” or “the Bill”) passed the NC Senate by a margin of 31-14. It is now bound for a series of legislative committees before the NC House will vote on it. SB 315 will establish a state hemp cultivation and regulation program that is in line with the 2018 Farm Bill. This is all well and good, and many other states are in the process of doing the same.

However, the Bill also contains some distinctly problematic provisions concerning smokable hemp flower. Last month, we wrote about the NC State Board of Investigation (SBI) wishlist pertaining to hemp and CBD issues, where the SBI took a particularly hard line stance on hemp flower. The SBI contends that since hemp flower and marijuana flower can sometimes be indistinguishable, SB 315 would effectively legalize marijuana legal in North Carolina. We were not persuaded by this, or any of the other arguments SBI made that sought to limit the legal status of hemp in North Carolina. With this latest version of SB 315 to pass the Senate, the SBI’s wishes may come true at least as far as hemp flower is concerned.

The most recent version of SB 315 creates novel civil and criminal penalties for the possession and sale of “smokable hemp”, which is basically hemp flower, or any hemp that is ground or rolled into hemp cigarettes (detailed definition below). There is an exception for licensed hemp cultivators and processor when in possession of the smokable hemp for the purposes of processing into a lawful hemp product. If the smokable hemp is sold to a consumer, the seller can be liable regardless of whether or not s/he holds a license.

Here are the current bill provisions:

106-568.66. Civil penalties states:

(a) The Commissioner may assess a civil penalty of not more than two thousand five hundred dollars ($2,500) per violation against any person who…

…(5) Knowingly or intentionally manufactures, delivers, sells, or possesses smokable hemp, except for hemp plants or parts of a hemp plant grown or handled by a licensee for processing or manufacturing into a legal hemp product.

106-568.67. Criminal penalties states:

Any person that knowingly or intentionally manufactures, delivers, sells, or possesses smokable hemp, except for hemp plants or parts of a hemp plant grown or handled by a licensee for processing or manufacturing into a legal hemp product, shall be deemed guilty of a Class 1 misdemeanor.

The Bill defines “Smokable Hemp” at § 106-568.61. “Definitions” as:

(14) “Smokable hemp” means a product that does not exceed the federally defined THC level for hemp in a form that allows THC to be introduced into the human body by inhalation of smoke. “Smokable hemp” includes hemp buds, hemp flowers, whole or ground raw hemp plant material, hemp cigars, and hemp cigarettes.

Smokable Hemp is not included in the definition of “Hemp Product” under the Bill:

“Hemp product” means any product within the federally defined THC level for hemp derived from, or made by, processing hemp plants or plant parts, that are prepared in a form available for commercial sale, including, but not limited to, cosmetics, personal care products, food intended for animal or human consumption as approved by the United States Food and Drug Administration or the United States Department of Agriculture, cloth, cordage, fiber, fuel, paint, paper, particleboard, plastics, and any product containing one or more hemp-derived cannabinoids, such as cannabidiol. “Hemp product” does not include smokable hemp.

Part of this definition for Hemp Product requires that it is in a form available for commercial sale. Removing Smokable Hemp from this definition of Hemp Product implies that Smokable Hemp is not eligible for sale in North Carolina under this version of the Bill. The civil and criminal penalties back up this position.

Oddly enough, Smokable Hemp does, however, remain excluded from the definition of “Marijuana” under NC law. § 90-87 “Definitions” states:

(16) “Marijuana” … [The term] does not include hemp products, hemp extracts, or smokable hemp

So what does this all mean? Ostensibly, SB 315 would create a new category of crime, namely, the possession and sale of hemp flower. This new crime doesn’t fall under the state Controlled Substances Act marijuana penalties, since smokable hemp is not marijuana. Instead, it creates an entirely new category of cannabis that is somehow both “hemp”, and “not hemp” at the same time. Smokable hemp must meet the definition of hemp by being within the federal THC limit. However, it is not legal for commercial sale or possession by the general public if it can be smoked. This is a novel way to categorize hemp and seems disingenuous compared to the plain language of both the federal and North Carolina definitions of hemp. NC defines hemp as:

Hemp. – 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, within the federally defined THC level for hemp.

The federal definition of hemp is essentially the same, except that it specifies that hemp’s lawful status depends on whether it contains delta-9-THC concentrations not in excess of 0.3% by dry weight. Both definitions include the phrase “and all of that plant”, which necessarily includes the flowers. The definitions of hemp and smokable hemp are at odds with each other.

There is nothing in the Farm Bill definition of hemp that purports to make hemp flower illegal or determines legal and non-legal hemp by whether or not one is capable of smoking it. In no version of federal hemp legislation have we seen marijuana, hemp, or any type of cannabis classified based on its smokablity. Frankly, this is patently absurd since it is technically possible for a person to smoke any part of the hemp plant. In fact, one can smoke almost anything.

While there remains a question as to whether states can outlaw the sale of hemp, the Farm Bill does prohibit states from making laws that interfere with interstate transport of hemp. If this Bill passes as is, the result would be a massive chilling effect on transport of hemp through NC, as neighboring producers will be hesitant to raise suspicion that they are selling “smokable hemp” in the state. Or, even more likely, the North Carolina law will fall, at least with respect to transporters of hemp. The irony of this occurrence is that the SBI will still have to deal with the issue of determining whether a particular load of cannabis is legal hemp or illegal marijuana, while chilling the production and sale of a safe, valuable, and much desired product.

At SECTION 14.(d) The Bill states that it shall review this policy pending a few occurrences:

“The State Bureau of Investigation shall notify the Agriculture and Forestry Awareness Study Commission in writing when the United States Drug Enforcement Agency has adopted an approved immediate testing method to determine whether hemp is within the federally defined THC level for hemp. Upon the receipt of notification from the State Bureau of Investigation, the Agriculture and Forestry Awareness Study Commission shall study whether the prohibition on the sale of smokable hemp should be repealed and make legislative recommendations.”

The Bill cedes discretion to the SBI as to when this policy is reviewed. Not only has the DEA recognized hemp as lawful, but Attorney General William Barr indicated prior to confirmation that he was essentially retaining the Cole Memo policy of allowing actors in marijuana legal states to cultivate and possess marijuana in line with state law without federal prosecution. In fact, field tests currently exist and are in use in Europe. Attorney Rod Kight presented one to the Senate Agriculture Committee at a hearing a few weeks ago:

If SB 315 becomes law, it would lay a huge portion of the NC hemp market to waste. All hemp flower would have to be processed into an acceptable, extracted, and commercially marketable form, and contain delta-9-THC concentrations at or below 0.3% before being lawfully sold to in NC. The Bill re-criminalizes the sale of hemp flower and is at direct odds with the economic interests of the state, which is poised to flourish next year as one of the leaders in hemp production in the country. In fact, growing hemp for quality smokable flower is one of the most lucrative ways to farm hemp. Surely, the NC state legislature does not want to hamstring NC farmers?

The House Agriculture Committee meets this Tuesday (6-25-19). We strongly encourage you to write, call, and have lunch with your legislators and encourage them to support smokable hemp flower in NC. In fact, the NC Industrial Hemp Association (NCIHA) is actively working to educate and encourage the NC Legislature not to ban smokable hemp flower. The Executive Director, Blake Butler, is making weekly visits to Raleigh for meetings with the NC General Assembly. You can visit the NCIHIA’s website by clicking here. The website includes information about the NC House Agriculture Committee members.

As always, we remain here to address your specific hemp business legal concerns on a more in depth level.

June 21, 2019

This post was written by Kight on Cannabis attorney Kamran Aryah. He works closely with clients to develop compliance strategies. Kight on Cannabis is a law firm founded by attorney Rod Kight that represents legal cannabis businesses. You can contact us by clicking here.