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AB-2223 Cannabis: industrial hemp. (2023-2024)

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Date Published: 05/17/2024 04:00 AM
AB2223:v97#DOCUMENT

Amended  IN  Assembly  May 16, 2024
Amended  IN  Assembly  April 10, 2024

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Assembly Bill
No. 2223

Introduced by Assembly Member Aguiar-Curry

February 07, 2024

An act to add Section 26003 to the Business and Professions Code, to amend Sections 110065, 111920, 111921, 111921.7, 111922, 111923.3, and 111926.2 of, to add Section 111923.6 to, to add Article 11 (commencing with Section 111930) to Chapter 9 of Part 5 of Division 104 of, and to repeal Section 111923.9 of, the Health and Safety Code, and to amend Section 34016 of the Revenue and Taxation Code, relating to cannabis.


LEGISLATIVE COUNSEL'S DIGEST


AB 2223, as amended, Aguiar-Curry. Cannabis: industrial hemp.
The Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA), an initiative measure approved as Proposition 64 at the November 8, 2016, statewide general election, authorizes a person who obtains a state license under AUMA to engage in commercial adult-use cannabis activity pursuant to that license and applicable local ordinances. The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities and requires the Department of Cannabis Control to administer its provisions.
Existing law governs the cultivation of industrial hemp in this state and establishes a registration program administered by county agricultural commissioners and the Department of Food and Agriculture for growers of industrial hemp, hemp breeders, and established agricultural research institutions, as defined.
The Sherman Food, Drug, and Cosmetic Law, among other things, regulates the labeling of food, beverages, and cosmetics and makes it a crime to distribute in commerce any food, drug, device, or cosmetic if its packaging or labeling does not conform to these provisions. Existing law establishes a process for the embargo, condemnation, and destruction of a food, drug, device, or cosmetic that is adulterated, misbranded, or falsely advertised, gives the authority to place items under embargo to authorized agents of the State Department of Public Health, and requires the department to take specified actions. Violation of the Sherman Food, Drug, and Cosmetic Law is a misdemeanor. Existing law also requires hemp manufacturers who produce specified products that include industrial hemp or who produce raw hemp extract, as defined, to complete a registration process, under the State Department of Public Health, and to meet various requirements for testing and labeling on products. Existing law, as part of the registration process, requires the department to assess specified fees, including an oversight and authorization enrollment fee, to cover the actual reasonable costs of implementing the regulatory program.
Existing law exempts industrial hemp, as defined, from the definition of cannabis and from MAUCRSA, but requires the Department of Cannabis Control to prepare a report, on or before July 1, 2022, to the Governor and the Legislature outlining the steps necessary to allow for the incorporation of hemp cannabinoids into the cannabis supply chain.
This bill would state that MAUCRSA does not prohibit a licensee from manufacturing, processing, distributing, or selling products that contain industrial hemp or cannabinoids, extracts, or derivatives from industrial hemp if the product complies with all applicable state laws and regulations. The bill would authorize a licensed manufacturer or microbusiness to obtain industrial hemp from a person registered with the State Department of Public Health, as specified, and would require industrial hemp purchased by a licensee to be tracked as a separate batch through the manufacturing process. The bill would require a licensee that manufactures, distributes, or sells products that contain industrial hemp to record all transactions and specified data in the state track and trace system. The bill would prohibit a licensed manufacturer from incorporating delta-9 tetrahydrocannabinol THC or comparable cannabinoid, as defined, that has been converted from a hemp-derived cannabinoid and would also prohibit licensed retailers and distributors from selling or distributing cannabis or hemp products that contain converted delta-9 tetrahydrocannabinol. THC or comparable cannabinoid. The bill would require the department to implement a process by which any licensee that is also a registered hemp manufacturer may use the same premises.
This bill would revise and recast the provisions of the Sherman Food, Drug, and Cosmetic Law regulating industrial hemp to redefine certain terms, expand the prohibition that raw hemp extract not exceed 0.3% of a tetrahydrocannabinol or comparable cannabinoid, limit the level of total THC that can be in an industrial hemp final form product, and prohibit the manufacture, distribution, or sale of an industrial hemp product that contains a synthetically derived cannabinoid, as defined, unless authorized by the department in regulation. The bill would prohibit an industrial hemp food and beverage product from being labeled, marketed, or advertised as a product intended to create an intoxicating effect. The bill would require that industrial hemp human food and beverage final form products meet specified guidelines and would specify that violations of the act are grounds for revocation of an industrial hemp enrollment and oversight authorization. The bill would require an out-of-state hemp manufacturer who produces certain products such as industrial hemp food, beverages, or cosmetics for importation or sale in this state to register with the department. The bill would establish a separate process for the embargo, condemnation, and destruction of industrial hemp products and would give authority to seize or embargo those products to a peace officer or a state official who possesses seizure authority in specified circumstances and would require the peace officer or state official who began the embargo to seek voluntary condemnation from the owner or commence proceedings for condemnation. The bill would make a violation of provisions regarding the retail sale of industrial hemp a misdemeanor and would impose a civil penalty. By creating a new crime, this bill would impose a state-mandated local program.
Existing law authorizes the California Department of Tax and Fee Administration (CDTFA) or a law enforcement agency to seize cannabis or cannabis products not contained in secure packaging to seize cannabis or cannabis products possessed, stored, owned, or sold by an unlicensed person or that were not reported in the track and trace system, as specified, and provides that seized cannabis or cannabis products are deemed forfeited, as specified.
This bill would, in certain circumstances, establish a presumption that any product containing or purporting to contain any cannabinoid is a cannabis product, unless there is reasonable cause to believe that the product is authorized to be distributed or sold as an industrial hemp product.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 (a) The Legislature finds and declares that the legal cannabis industry faces challenges from a thriving illicit cannabis marketplace.
(b) It is the intent of the Legislature to enhance the viability of cannabis licensees in the marketplace by pursuing measures to relieve tax and regulatory requirements, and to authorize licensees to manufacture, distribute, and sell hemp and cannabidiol (CBD) products in compliance with current law.

SEC. 2.

 Section 26003 is added to the Business and Professions Code, to read:

26003.
 (a) This division does not prohibit a licensee from manufacturing, processing, 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, if the product complies with all applicable state laws and regulations, including Division 24 (commencing with Section 81000) of the Food and Agricultural Code or Chapter 9 (commencing with Section 111920) of Part 5 of Division 104 of the Health and Safety Code, as applicable.
(b) A licensed manufacturer or microbusiness may obtain industrial hemp from a person registered with the State Department of Public Health pursuant to Section 110460 of the Health and Safety Code.
(c) Industrial hemp that is purchased by a licensee shall be tracked as a separate batch throughout the manufacturing process in order to document the disposition of that hemp or hemp product. A licensee that manufactures, distributes, or sells products that contain industrial hemp shall record all transactions and relevant data, as prescribed by the department, in the state track and trace system.
(d) A manufactured cannabis product that incorporates industrial hemp shall comply with all of the requirements for cannabis contained in this division and any regulations adopted by the department.
(e) A licensed manufacturer shall not incorporate delta-9 tetrahydrocannabinol that has been converted from a hemp-derived cannabinoid. THC or comparable cannabinoid, as defined in subdivision (n) of Section 111920 of the Health and Safety Code, that has been converted from a hemp-derived cannabinoid into cannabis, a cannabis product, or an industrial hemp product. A licensed retailer or distributor shall not sell or distribute cannabis, a cannabis product, or an industrial hemp product that contains converted delta-9 tetrahydrocannabinol. THC or comparable cannabinoid, as defined in subdivision (n) of Section 111920 of the Health and Safety Code, that has been converted from a hemp-derived cannabinoid.
(f) The department shall implement a process by which a licensee that is also a registered hemp manufacturer in accordance with Article 2 (commencing with Section of 110460) of Chapter 5 of Part 5 of Division 104 of the Health and Safety Code may use the same premises.
(g) (1) Notwithstanding any other law, the department shall adopt and readopt emergency regulations to implement this section on or before July 1, 2025. The provisions of Section 26013 shall apply to emergency regulations adopted or readopted pursuant to this section. The emergency regulations authorized by this section shall be deemed an emergency and necessary for the immediate preservation of public peace, health, safety, or general welfare.
(2) Emergency regulations for the implementation of this section shall be exempt from the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), except that the department shall post any proposed emergency regulations on its internet website for public comment for 30 days. The department shall consider these comments in developing its regulations. The final adopted regulations shall be filed with the Office of Administrative Law for publication in the California Code of Regulations.

SEC. 3.

 Section 110065 of the Health and Safety Code is amended to read:

110065.
 (a) The department may adopt any regulations that it determines are necessary for the enforcement of this part. The regulations shall be adopted by the department in the manner prescribed by Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code. The department shall, insofar as practicable, make these regulations conform with those adopted under the federal act or by the United States Department of Agriculture or by the Internal Revenue Service of the United States Treasury Department.
(b) (1) The department may adopt emergency regulations to implement this division.
(2) The department may readopt any emergency regulation authorized by this section that is the same as, or substantially equivalent to, an emergency regulation previously adopted as authorized by this section. That readoption shall be limited to one time for each regulation.
(3) Notwithstanding any other law, the initial adoption of emergency regulations and the readoption of emergency regulations authorized by this section shall be deemed an emergency and necessary for the immediate preservation of the public peace, health, safety, or general welfare. The initial emergency regulations and the readopted emergency regulations authorized by this section shall be each submitted to the Office of Administrative Law for filing with the Secretary of State and shall remain in effect for no more than 360 days, by which time final regulations shall be adopted.
(c) Initial regulations regarding industrial hemp shall be exempt from the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code), except that the department shall post the proposed regulations on its internet website for public comment for 30 days. The comments received shall be considered by the department and the final adopted regulations shall be filed with the Office of Administrative Law for publication in the California Code of Regulations.

SEC. 4.

 Section 111920 of the Health and Safety Code is amended to read:

111920.
 For purposes of this chapter, the following definitions apply:
(a) “Department” means the State Department of Public Health.
(b) “Established and approved industrial hemp program” means a program that meets any applicable requirements set forth in federal law regarding the lawful and safe cultivation of industrial hemp.
(c) “Final form product” is a product intended for consumer use to be sold at a retail premise.
(d) “Hemp manufacturer” means either of the following:
(1) A processor extracting cannabinoids from hemp biomass.
(2) A processor purchasing industrial hemp raw extract for the purpose of manufacturing a final form product.
(e) “Independent testing laboratory” means a laboratory that meets all of the following requirements:
(1) Does not have a direct or indirect interest in the entity for which testing is being done.
(2) Does not have a direct or indirect interest in a facility that cultivates, processes, distributes, dispenses, or sells raw hemp products in this state or in another jurisdiction.
(3) Does not have a license issued pursuant to Division 10 (commencing with Section 26000) of the Business and Professions Code, other than as a licensed testing laboratory.
(4) Is either of the following:
(A) A testing laboratory licensed pursuant to Division 10 (commencing with Section 26000) of the Business and Professions Code, if the licensed testing lab has notified the Department of Cannabis Control.
(B) Accredited by a third-party accrediting body as a competent testing laboratory pursuant to ISO/IEC 17025 of the International Organization for Standardization.
(f) “Industrial hemp” has the same meaning as in Section 11018.5. “Industrial hemp” does not include any synthetically derived cannabinoid.
(g) (1) “Industrial hemp product” or “hemp product” means a finished product containing industrial hemp that meets all of the following conditions:
(A) Is a cosmetic, food, food additive, dietary supplement, inhalable product, or herb.
(B) (i) Is for human or animal consumption.
(ii) “Animal” does not include livestock or a food animal as defined in Section 4825.1 of the Business and Professions Code.
(iii) Does not include THC isolate as an ingredient.
(2) “Industrial hemp product” does not include industrial hemp or a hemp product that has been approved by the United States Food and Drug Administration or a hemp product that includes industrial hemp or hemp that has received Generally Recognized As Safe (GRAS) designation. For purposes of nonfood applications, “industrial hemp product” does not include a hemp product that contains derivatives, substances, or compounds derived from the seed of industrial hemp.
(h) “Limit of detection” means the lowest quantity of a substance or analyte that can be distinguished from the absence of that substance within a stated confidence limit.
(i) (1) “Manufacture” or “manufacturing” means to compound, blend, extract, infuse, or otherwise make or prepare an industrial hemp product.
(2) “Manufacturing” includes all aspects of the extraction process, infusion process, and packaging and labeling processes, including processing, preparing, holding, storing, warehousing, and distributing of industrial hemp products.
(3) “Manufacturing” also includes processing, preparing, holding, or storing hemp components and ingredients.
(4) “Manufacturing” does not include planting, growing, harvesting, drying, curing, grading, or trimming a plant or part of a plant.
(j) “Raw extract” or “industrial hemp raw extract” means extract not intended for consumer use and that contains a THC concentration of not more than an amount determined by the department in regulation.
(k) “Raw hemp product” means a product that is derived from industrial hemp that is intended to be included in a food, beverage, dietary supplement, or cosmetic.
(l) “Retail” has the same meaning as in Section 113895.
(m) “Synthetically derived cannabinoid” means a substance that is derived from a chemical reaction that changes the molecular structure of any substance separated or extracted from the plant Cannabis sativa L. A synthetically derived cannabinoid does not include any of the following:
(1) A naturally occurring chemical substance that is separated or extracted from the plant by a chemical or mechanical extraction process, as long as that naturally occurring chemical substance does not undergo a change in molecular structure.
(2) Cannabinoids that are produced by decarboxylation from a naturally occurring cannabinoid acid.
(3) Any other chemical substance approved by the department in regulation.
(n) “THC” or “THC or comparable cannabinoid” means any of the following:
(1) Tetrahydrocannabinolic acid.
(2) Any tetrahydrocannabinol, including, but not limited to, Delta-8-tetrahydrocannabinol, Delta-9-tetrahydrocannabinol, and Delta-10-tetrahydrocannabinol, however derived, except that the department may exclude one or more isomers of tetrahydrocannabinol from this definition under subdivision (a) of Section 111921.7.
(3) Any other cannabinoid, except cannabidiol, that the department determines, under subdivision (b) of Section 111921.7, to cause intoxication.
(o) “THCA” means tetrahydrocannabinolic acid, CAS number 23978-85-0.
(p) “Total THC” means the sum of all THC or comparable cannabinoids, as defined in subdivision (n). Total THC shall be calculated using the following equation: total THC concentration (mg/g) +/- the measurement of uncertainty, as defined by the United States Department of Agriculture.

SEC. 5.

 Section 111921 of the Health and Safety Code is amended to read:

111921.
  (a) An industrial hemp product shall not be manufactured, distributed, or sold in the state except in conformity with all applicable state laws and regulations, including this chapter and any regulations promulgated thereunder, and with documentation that includes a certificate of analysis from an independent testing laboratory that confirms all of the following:
(1) The industrial hemp raw extract used in the industrial hemp product does not exceed a total THC concentration of 0.3 percent, or a lower amount determined allowable by the department in regulation.
(2) The industrial hemp product was tested for any hemp derivatives identified on the product label or in associated advertising in accordance with Section 111926.2.
(3) The industrial hemp product was produced from industrial hemp grown in compliance with Division 24 (commencing with Section 81000) of the Food and Agricultural Code if sourced from within California, or licensed in accordance with United States Department of Agriculture (USDA) requirements if sourced from outside the state.
(4) The industrial hemp product is in conformity with all other applicable requirements for final form products.
(b) A person shall not manufacture, distribute, or sell an industrial hemp product that contains synthetically derived cannabinoid unless explicitly approved by the department in regulation.
(c) A person shall not manufacture, distribute, or sell any of the following:
(1) Industrial hemp raw extract derived from, or an industrial hemp product containing, industrial hemp that was not produced from industrial hemp grown in compliance with Division 24 (commencing with Section 81000) of the Food and Agricultural Code if sourced from within California, or licensed in accordance with USDA requirements if sourced from outside the state.
(2) Industrial hemp raw extract with a total THC concentration that exceeds 0.3 percent, or a lower amount determined allowable by the department in regulation.
(3) An industrial hemp product containing industrial hemp raw extract with a total THC concentration that exceeds 0.3 percent, or a lower amount determined allowable by the department in regulation.

SEC. 6.

 Section 111921.7 of the Health and Safety Code is amended to read:

111921.7.
 (a) The department may exclude from the definition of “THC or comparable cannabinoid” one or more isomers of tetrahydrocannabinol if the department determines, consistent with subdivisions (c) and (d), that the tetrahydrocannabinol isomer does not cause intoxication.
(b) The department may include any other cannabinoid, in addition to those expressly listed in subdivision (m) of Section 111920, in the definition of “THC or comparable cannabinoid” if the department determines, consistent with subdivisions (c) and (d), that the cannabinoid causes intoxication.
(c) In making a determination under subdivision (a) or (b), the department shall consider scientific evidence concerning the pharmacological effects of the tetrahydrocannabinol or other cannabinoid in humans or other animals, if that evidence is available.
(d) Any initial determination under subdivision (a) or (b) shall not be subject to the administrative rulemaking requirements of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, but the department, without being subject to those administrative rulemaking requirements, shall establish a process to receive public comment regarding those determinations, and shall publicly post all determinations on its internet website.

SEC. 7.

 Section 111922 of the Health and Safety Code is amended to read:

111922.
 (a) The department, through regulation, may determine or modify maximum serving sizes for hemp-derived cannabinoids, hemp extract, and products derived therefrom, active cannabinoid concentration per serving size, the number of servings per container, and any other requirements.
(b) Industrial hemp human food and beverage final form products shall be prepackaged and shelf stable and shall meet all of the following:
(1) A single serving of an industrial hemp product shall be based on the amount of food or beverage customarily consumed in one eating occasion for that food or beverage.
(2) A single serving of an industrial hemp dietary supplement in pill, tablet, or capsule form shall be one unit.
(3) A product shall not exceed five servings per package.
(c) An industrial hemp final form product shall not have a level of total THC that exceeds one milligram. Each serving per package shall not exceed .25 milligrams of THC. A qualified testing laboratory shall establish a limit of detection of one milligram or lower for total THC and a sample shall pass if total THC does not exceed the limit of detection.
(d) The department may adopt regulations pursuant to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) to implement this section. The adoption of any emergency regulations that are filed with the Office of Administrative Law within one year of the effective date of this act shall be deemed to be an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare.

SEC. 8.

 Section 111923.3 of the Health and Safety Code is amended to read:

111923.3.
 (a) (1) A hemp manufacturer located in this state who produces an industrial hemp product that is a food or beverage or an out-of-state hemp manufacturer who produces an industrial hemp product that is a food or beverage for importation into this state or for sale in this state shall register with the department pursuant to Article 2 (commencing with Section 110460) of Chapter 5.
(2) Sections 110473 and 110474 shall not apply to dietary supplements and food products that include industrial hemp. Fees associated with Sections 110875 and 112730 shall be in addition to any registration fees.
(b) Notwithstanding the voluntary nature of registration provided in Section 111795, a hemp manufacturer located in this state who produces an industrial hemp product that is a cosmetic or an out-of-state hemp manufacturer who produces industrial hemp cosmetics for importation into this state or for sale in this state shall register pursuant to Article 4 (commencing with Section 111795) of Chapter 7.
(c) A hemp manufacturer located in this state who produces an industrial hemp product that is a processed pet food or an out-of-state hemp manufacturer who produces industrial hemp pet food for importation into this state or for sale in this state shall obtain a license pursuant to Article 2 (commencing with Section 113060) of Chapter 10 of Part 6.
(d) (1) An in-state hemp manufacturer who produces raw hemp extract and who does not produce an industrial hemp product, or an out-of-state hemp manufacturer who produces raw hemp extract with the intent to import that raw hemp extract into this state, shall register with the department pursuant to Article 2 (commencing with Section 110460) of Chapter 5.
(2) Sections 110473 and 110474 shall not apply to hemp manufacturers who register pursuant to this subdivision. Fees associated with Sections 110875 and 112730 shall be in addition to any registration fees.
(e) All hemp manufacturers shall notify the department immediately of any change of information in their application for a license of registration.

SEC. 9.

 Section 111923.6 is added to the Health and Safety Code, to read:

111923.6.
 (a) A violation of this part or a regulation adopted pursuant to this part shall be grounds for denying, suspending, forfeiting, revoking, or surrendering of an industrial hemp enrollment and oversight authorization.
(b) The department may deny, suspend, forfeit, revoke, or order to surrender an industrial hemp enrollment and oversight authorization when a peace officer, state official, or local official has notified the department that a manufacturer within its jurisdiction is in violation of state law and regulations relating to industrial hemp, and the department, through an investigation, has determined that the violation is grounds for or contributes to other factors for denial, suspension, forfeiture, revocation, or surrender of the industrial hemp enrollment and oversight authorization. An investigation conducted pursuant to this subdivision shall include reasonable notice to the manufacturer and an opportunity for the manufacturer to defend any allegations of a violation.
(c) The department may take disciplinary action against a manufacturer for a violation of this part when the violation was committed by the manufacturer’s officers, directors, owners, agents, or employees while acting on behalf of the manufacturer or engaged in industrial hemp activity.
(d) The denial, suspension, forfeiture, revocation, order to surrender, or expiration of an industrial hemp enrollment and oversight authorization issued by the department, or its denial, suspension, forfeiture, revocation, surrender, or cancellation or other remedy by order of a court of law, or its surrender without the written consent of the department, shall not, during any period in which it may be renewed, restored, reissued, or reinstated, deprive the department of its authority to institute or continue a disciplinary proceeding against the manufacturer upon any ground provided by law or to enter an order to deny, suspend, forfeit, surrender, or revoke the license or otherwise take disciplinary action against the manufacturer.

SEC. 10.

 Section 111923.9 of the Health and Safety Code is repealed.

SEC. 11.

 Section 111926.2 of the Health and Safety Code is amended to read:

111926.2.
 (a) An industrial hemp product that is a dietary supplement, food, or beverage shall not be distributed or sold in the state without packaging and labeling on the product that includes all of the following information:
(1) A label, scannable barcode, internet website, or quick response (QR) code linked to the certificate of analysis of the final form product batch by an independent testing laboratory that provides all of the following information:
(A) The product name.
(B) The name of the product’s manufacturer, packer, or distributor, and their address and telephone number.
(C) The batch number, which matches the batch number on the product.
(D) The concentration of cannabinoids present in the product batch, including, at minimum, total THC and any marketed cannabinoids or ingredient, as required by the department in regulation.
(E) The levels within the product batch of contaminants, as required in subdivision (c) of Section 111925.2.
(2) The product expiration or best by date, if applicable.
(3) A statement indicating that children or those who are pregnant or breastfeeding should avoid using the product prior to consulting with a health care professional about its safety.
(4) A statement that products containing cannabinoids should be kept out of reach of children.
(5) The following statement, “THE FDA HAS NOT EVALUATED THIS PRODUCT FOR SAFETY OR EFFICACY.”
(b) The requirements of this section shall apply to products manufactured 90 days or more after the enactment of this section.
(c) An industrial hemp human food and beverage product shall not be labeled, marketed, or advertised as a product intended to produce an intoxicating effect.

SEC. 12.

 Article 11 (commencing with Section 111930) is added to Chapter 9 of Part 5 of Division 104 of the Health and Safety Code, to read:
Article  11. Seizure and Embargo

111930.
 (a) (1) A peace officer or a state official who possesses seizure authority may seize or embargo an industrial hemp product in any of the following circumstances:
(A) The industrial hemp product is subject to recall, quarantine, or embargo by the department.
(B) The industrial hemp product is subject to condemnation and destruction by the department or a court of law.
(C) The industrial hemp product is seized related to an investigation or disciplinary action by the department.
(2) Whenever a peace officer or state official who possesses seizure authority finds, or has probable cause to believe, that any industrial hemp is unlawful, or that the sale of that industrial hemp product would be in violation of this part, that peace officer or state official may seize or embargo the industrial hemp product under the provisions of this article.
(b) The peace officer or state official may affix a tag or other appropriate marking to the industrial hemp product.
(c) The peace officer or state official shall give notice that the industrial hemp product is, or is suspected of being, unlawful, or that its sale would be in violation of this part, and that the industrial hemp product has been seized or embargoed.
(d) When the peace officer or state official has found that the seized or embargoed industrial hemp product is lawful, and that its sale would not otherwise be in violation of this part, the peace officer or state official shall remove any tag or other marking previously affixed to the industrial hemp product.
(e) When a peace officer or state official under this section finds, or has reasonable cause to believe, that the embargo will be violated, that peace officer or state official may remove the embargoed industrial hemp product to a place of safekeeping.
(f) It is unlawful for a person to remove, sell, or dispose of an industrial hemp product seized, detained, or embargoed under the provisions of this article without permission of the peace officer or other official responsible for the seizure, detention, or embargo, or a court of competent jurisdiction.

111930.1.
 (a) A peace officer or state official who takes an action under Section 111930 shall:
(1) Request voluntary condemnation and destruction of the seized or embargoed industrial hemp product by the retailer or other owner.
(2) Commence proceedings in the superior court in whose jurisdiction the seized or embargoed industrial hemp product is located, for condemnation and destruction of the industrial hemp product against the retailer or other owner.
(3) Release the embargo or otherwise return the seized industrial hemp product if compliance with this chapter has been established.
(b) In the absence of a court order, the seized or embargoed industrial hemp product may be destroyed pursuant to the written consent of the retailer or other owner or their respective attorney or authorized representative.
(c) (1) If the court finds that the seized or embargoed industrial hemp product is unlawful, or that its sale would otherwise be in violation of this part, the seized or embargoed industrial hemp product shall, after entry of the judgment, be destroyed at the expense of the claimant, retailer, owner, or manufacturer. Fees and costs shall be assigned to the retailer unless the retailer proves that fees and costs should be assigned to a claimant, owner, or manufacturer.
(2) If the court finds that a seized or embargoed industrial hemp product’s unlawful condition can be corrected and when all provisions of this part can be complied with, then, after entry of the judgment and after costs, fees, and expenses have been paid and a sufficient bond conditioned that the industrial hemp product will be brought into compliance, the court may, by order, direct that the industrial hemp product be delivered to the claimant, retailer, owner, or manufacturer to be brought into compliance. The expense of any required supervision shall be paid by the claimant, owner, or manufacturer. Fees and costs shall be assigned to the retailer unless the retailer proves that fees and costs should be assigned to a claimant, owner, or manufacturer. The bond shall be discharged when the court finds that the industrial hemp product is no longer held for sale in violation of this part and that all of the expenses of supervision have been paid.
(d) Under this section, all fees and costs associated with the investigation, the condemnation, and the destruction of the illegal industrial hemp product, including, but not limited to, the costs of storage and testing, shall be incurred by the claimant, retailer, owner, or manufacturer of the industrial hemp. Fees and costs shall be assigned to the retailer unless the retailer proves that fees and costs should be assigned to a claimant, owner, or manufacturer.

111930.2.
 (a) A person in violation of this chapter regarding the retail sale of industrial hemp shall be subject to civil penalties of up to two thousand five hundred dollars ($2,500) per violation.
(b) In assessing a penalty under this section, a court shall give due consideration to the appropriateness of the amount of the civil penalty with respect to factors the court determines to be relevant, including all of the following:
(1) The gravity of the violation.
(2) The good faith, or lack thereof, of the person responsible for the violation.
(3) Any history of previous violations by the person responsible for the violation.
(4) Whether, and to what extent, the person responsible for the violation profited from the violation.
(c) An action for civil penalties under this section may be brought by the Attorney General on behalf of the people or on behalf of the department or another state agency, by a county counsel or district attorney, or by a city attorney or city prosecutor.
(d) (1) If an action for civil penalties pursuant to this section is brought by the Attorney General on behalf of the people or on behalf of the department or another state agency, the penalty shall first be used to reimburse the Attorney General and the department or the state agency for the costs of investigating and prosecuting the action, including expert fees and reasonable attorney’s fees, with the remainder, if any, to be deposited into the General Fund.
(2) If an action for civil penalties pursuant to this section is brought by a county counsel or district attorney, the penalty shall first be used to reimburse the county counsel or district attorney for the costs of bringing the action for civil penalties and for the costs of investigating and prosecuting the action, including expert fees and reasonable attorney’s fees, with the remainder, if any, to be deposited into the county’s designated fund.
(3) If the action for civil penalties pursuant to this section is brought by a city attorney or city prosecutor, the penalty collected shall first be used to reimburse the city attorney or city prosecutor for the costs of bringing the action for civil penalties and for the costs of investigating and prosecuting the action, including expert fees and reasonable attorney’s fees, with the remainder, if any, to be deposited into the city’s designated fund.
(e) An action for civil penalties pursuant to this section shall not be commenced unless the action is filed within three years from the date of the violation.

111930.3.
 (a) In addition to any other criminal penalties provided under this part, violations of this chapter regarding the retail sale of industrial hemp is a misdemeanor or punishable by a penalty fine not to exceed one thousand dollars ($1,000) for each violation or by imprisonment in the county jail for a period not exceeding one year, or both. Each day a violation continues shall be considered a separate violation.
(b) The department may, by regulation, provide for additional administrative penalties for any violation of this chapter.

111930.4.
 (a) The remedies under this article are in addition to, and do not supersede or limit, any and all other remedies, civil or criminal.
(b) This article does not limit any authority conferred on the department to administer and enforce the provisions of this part.
(c) This chapter does not limit the exercise of any other authority conferred by law.

111930.5.
 This article does not preempt or otherwise prohibit the adoption or enforcement of any local ordinance or regulation that imposes greater restrictions on the retail sale of industrial hemp products than the restrictions imposed by this part. To the extent that there is an inconsistency between this part and a local ordinance or regulation that imposes greater restrictions on the retail sale of industrial hemp products, the greater restriction on the retail sale of industrial hemp products shall be enforceable by the local jurisdiction.

SEC. 13.

 Section 34016 of the Revenue and Taxation Code is amended to read:

34016.
 (a) Any peace officer or department employee granted limited peace officer status pursuant to paragraph (6) of subdivision (a) of Section 830.11 of the Penal Code, upon presenting appropriate credentials, is authorized to enter any place as described in paragraph (2) and to conduct inspections in accordance with the following paragraphs, inclusive.
(1) Inspections shall be performed in a reasonable manner and at times that are reasonable under the circumstances, taking into consideration the normal business hours of the place to be entered.
(2) Inspections may be at any place at which cannabis or cannabis products are sold to purchasers, cultivated, or stored, at any site where evidence of activities involving evasion of tax may be discovered, or at any place where any package, label, advertisement, or other document or object of any kind bearing the universal symbol as described in paragraph (7) of subdivision (c) of Section 26130 of the Business and Professions Code are sold or stored in violation of Section 26031.6 of the Business and Professions Code.
(3) Inspections shall be conducted no more than once in a 24-hour period.
(b) Any person who fails or refuses to allow an inspection shall be guilty of a misdemeanor. Each offense shall be punished by a fine not to exceed five thousand dollars ($5,000), or imprisonment not exceeding one year in a county jail, or both the fine and imprisonment. The court shall order any fines assessed be deposited in the California Cannabis Tax Fund.
(c) (1) (A) The department or a law enforcement agency may seize cannabis or cannabis products from a person who possesses, stores, owns, or has made a retail sale of those cannabis or cannabis products if any of the following apply:
(i) Until January 1, 2023, the cannabis or cannabis products are without evidence of tax payment.
(ii) The cannabis or cannabis products are not contained in secure packaging.
(iii) The person is an unlicensed person specified in paragraph (1) of subdivision (a) of Section 34015.1.
(iv) The cannabis or cannabis products were not reported in the track and trace system, as specified in subdivision (b) of Section 34015.1.
(B) (i) For purposes of this section, it shall be presumed that a product containing or purporting to contain a cannabinoid is a cannabis product, regardless of the nature or source of the cannabinoid, if there is reasonable cause to believe that the product is not a product authorized to be distributed or sold under Chapter 9 (commencing with Section 111920) of Part 5 of Division 104 of the Health and Safety Code, or any regulations promulgated pursuant to that chapter. This presumption may be rebutted by evidence showing that the product complies with Chapter 9 (commencing with Section 111920) of Part 5 of Division 104 of the Health and Safety Code, or any regulations promulgated pursuant to that chapter.
(ii) Nothing in this section shall be construed to establish a tax on inhalable hemp products as contemplated by subdivision (b) of Section 111921.6 of the Health and Safety Code or to state the intent of the Legislature to otherwise fulfill the requirements of that section.
(C) The department may seize any package, label, advertisement, or other document or object of any kind bearing the universal symbol in violation of Section 26031.6 of the Business and Professions Code and deemed contraband. Any package, label, advertisement, or other document or object seized by the department pursuant to this paragraph shall be deemed forfeited and the department shall comply with the procedures set forth in Sections 30436 to 30449, inclusive.
(D) Any cannabis or cannabis products seized by a law enforcement agency or the department shall be deemed forfeited and the department shall comply with the procedures set forth in Sections 30436 through 30449, inclusive.
(2) Any seizures authorized pursuant to paragraph (1) of this subdivision are in addition to any criminal or civil penalties that may be imposed by law, including subdivision (e) of this section.
(3) For purposes of this section, “cannabinoid” includes, but is not limited to, any form of tetrahydrocannabinol or tetrahydrocannabinolic acid.
(d) Any person who renders a false or fraudulent report is guilty of a misdemeanor and subject to a fine not to exceed one thousand dollars ($1,000) for each offense.
(e) Any violation of any provisions of this part, except as otherwise provided, is a misdemeanor and is punishable as such.
(f) All moneys remitted to the department under this part shall be credited to the California Cannabis Tax Fund.

SEC. 14.

  No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.