Texas Hemp Industry to see rules change; public has less than 24 hours to comment!

By: Mónica Enriquez

The Texas Department of State Health Services (DSHS) is requesting formal comments on the latest version of their proposed rules for consumable hemp products. The deadline to submit formal comments on these rules is 6/8/20. While we strongly recommend that you read the proposed rules, executive director of Texas NORML Jax Finkel shares some key takeaways:

  • The manufacture, processing, distribution, or retail sale of consumable hemp products for smoking will be prohibited. ​
  • A consumable hemp products license will be required before engaging in manufacture, processing or distributing consumable hemp and hemp derived products.
    • These licenses are valid for one year and will cost $250 per facility.
  • Retailers will be required to obtain licenses in order to sell consumable hemp products.
    • These licenses are valid for one year and will cost $150 per location.
  • All hemp or hemp derivatives will be required to be tested by an accredited lab to determine:
    • Presence and concentration of cannabinoids (including THC, which must measure 0.3% or less).
    • Presence or quantity of residual solvents, heavy metals, pesticides and harmful pathogens.
  • Labeling for CBD products will be required to include:
    • Product name, lot ID number and lot date
    • QR codes
    • Manufacturers’ phone numbers and email addresses
    • Certificate of Analysis

Texas businesses will be prohibited from manufacturing, processing, distributing, and retail sale of consumable hemp products for smoking, though consumers will not be banned from possessing these products or from purchasing them online from other states.

Last year, both the state and federal governments legalized low-THC (.3%) cannabis, defining it as hemp. While the in-state manufacturing of hemp products intended for smoking is prohibited by state law (refer to HB 1325), in-state retail sales of products manufactured outside of Texas are not prohibited, as long as the products are federally compliant. Consumable hemp is now completely legal to possess and use. These products – including oils, edibles, hemp flower, and vape cartridges – are widely available throughout Texas. None of the rules up for consideration would ban consumers from possessing these products or from purchasing them online from other states.

According to the proposal, DSHS does not anticipate a cost to local governments from the implementation of the rules. However, for the first five years with these rules in effect, Chief Financial Officer Donna Sheppard has estimated additional cost and revenue to the state government.

“The effect on state government for each year of the first five years the proposed rules are in effect is an estimated cost of $401,008 in fiscal year (FY) 2020; $598,992 in fiscal year FY 2021; $1,067,814 in FY 2022; $1,269,503 in FY 2023; and $1,499,838 in FY 2024; and an estimated increase in revenue of $1,200,000 in FY 2020; $1,475,000 in FY 2021; $1,807,500 in FY 2022; $2,194,000 in FY 2023; and $2,637,500 in FY 2024.”

Also in the first five years with these rules in effect, Sheppard determines that those required to comply may incur economic costs due to requirements for licensure fees and testing of hemp products for consumable hemp manufacturing, processing, and distributing entities, and registration fees for entities involved in the consumable hemp product sales.

Concerning small businesses, micro-businesses, or rural communities, Sheppard does not anticipate an adverse economic effect. The proposal states, “The new rules will expand economic opportunity for individuals interested in the manufacture, processing, or retail sale of consumable hemp products.”

But Texas NORML, a non-profit organization focused on promoting awareness of cannabis laws, offers a different perspective:

“If adopted, these regulations would ban Texas businesses from selling hemp/CBD vape cartridges, cutting them out of this thriving market and pushing consumers to out-of-state retailers. It would also require that any hemp flower being sold is marketed for non-smokable purposes (making tinctures, oils, edibles, lotions, etc.). This means pre-rolled hemp would not be allowed.

Prohibiting Texas companies from selling a product that is legal to possess and use in our state is bad for business and bad for our state. Plus, courts in Indiana and Florida have ruled already against these kinds of restrictions.”

Hemp and CBD retailers like Lazydaze Coffeeshop in San Marcos, TX (pictured) may be required to obtain licenses in order to sell consumable hemp products.

“There’s about a week left to provide your valuable input and hopefully help craft these rules that will shape what the Texas hemp industry looks like in the next few years,” said Hans Enriquez, founder of Texas Green Rush, an organization that provides networking and resources for entrepreneurs and professionals in the hemp and cannabis industry. Enriquez, who recently acquired licenses for handling and producing hemp, continued: “If you haven’t yet, take the time to consider the pros and cons carefully and really communicate your concerns, not just from a business standpoint, but also for the consumers. The industry needs regulation, but we want to be careful of any overreach that prohibits the growth of this booming industry. I am grateful that the DSHS is taking our opinion into consideration as a part of the process.”

Written comments on the proposal may be submitted by email to [email protected]. Please indicate “Comments on Proposed Rule 19R074 Hemp Program” in the subject line. To be considered, comments must be emailed before midnight on the last day of the comment period.

(Learn more about formal comments.)

Read more

Navigating the CBD Advertising, Websites, and Social Media Maze

Even though the Hemp Farming act was passed in December 2018 effectively making hemp and CBD products legal, it did not make selling them simple. Many ad companies, such as Facebook and Google, expressly prohibit using their advertising platform for CBD. Additionally, while the act made selling CBD legal, the FDA still heavily regulates the selling and marketing of CBD products. Making claims on your website about the beneficial impact of CBD use that have not been substantiate by the FDA can easily land you in hot water. Scott Gottlieb, the FDA commissioner, made this very clear in his statement made accompanying the Hemp Farming act.

Yet another piece to this puzzle is an organization very few merchants are aware of called the MMP. MMP stands for merchant monitoring program. Many merchants are unaware that their websites and social media are always under scrutiny from these companies looking for posts and/or statements that violate compliance agreements with Visa/Mastercard. One wrong post and your merchant account can be terminated. It is in every merchant in the green industry best interest to ensure that every website and social media post is reviewed by someone knowledgeable in card brand compliance to ensure you are attracting new business without the risk of losing your merchant account. As a result, he typical model of having an employee run the social media side of the company becomes much more perilous in the CBD industry.

On the advertising front, the key is knowing where you can and can’t advertise and how to still get the most out of platforms that don’t allow explicit CBD advertisements. Because Google does not allow direct CBD advertising, search engine optimization because even more important than it already was. Amazon is another great resource with CBD selling. Amazon allows CBD products and paying for sponsored product placement can be a great way to advertise. Lastly, even though Facebook prohibits advertising and boosting posts related to CBD products, it does not prohibit posts about CBD. Because of this, effective posts that garner many likes can still be a roundabout way to unofficially “advertise” without breaking any rules. Additionally, teaming up with influencers to like your posts so that their followers see your content is another very effective way to game the system for your benefit. This is where a good social media team becomes invaluable.

All of this can seem very overwhelming but the most important thing to remember is that all your website and social media posts need to be curated by someone that understands the compliance issues associated with the CBD industry. Never make any medical claims of any kind on your website or social media and never mention any adjacent industries that are not federally legal. Instead, you can share personal, point-of-view, experiences that convey yours and other’s experiences with CBD without claiming to have medical knowledge. It is also very advisable to speak with your merchant processor and be very clear on what you can and cannot sell. For example, CBD isolate powder is a product that most processors are staying away from for now and you could receive a hefty fine for selling then and/or lose you merchant processing account completely. It is extremely important for you to know the CBD laws as well as your processor’s restrictions inside and out before launching any marketing campaigns.

Read more