SB2986 SD1

SECTION 1. The legislature finds that hemp is a high-value crop that has the potential to bring significant and diverse revenues to Hawaii. Hemp has over fifty thousand recognized uses including as a fuel; a food, including the seeds, oil, the juice from leaves, and herbal tinctures; and fiber used in supercapcitors, cloth, building materials, and bioplastic. Hemp has significant potential to provide a lucrative crop for Hawaii farmers and can support food security for the State. Many Hawaii farms subsidize food production with non-farming income or jobs. Hemp could provide a farm-based income for farmers to expand or stabilize their food production.

The legislature further finds, however, that Hawaii's hemp industry remains in a nascent stage, largely due to overregulation, which has stifled the State's hemp industry. The Hawaii hemp cannabinoid and cannabidiol (CBD) market is approximated to be $32,000,000 to $54,000,000 annually, but most of that money goes to hemp producers outside Hawaii due to prohibitions banning Hawaii farmers from making and selling these products in Hawaii. Moreover, overregulation of production and processing has driven many hemp farmers out of business in Hawaii, which makes Hawaii farmers non-competitive in the hemp market.

The legislature also finds that access to communal infrastructure will make hemp farming more affordable and equitable in the State. Hemp should be an agricultural commodity, not a controlled substance. Allowing hemp producers to access communal agricultural refrigerated space, freezers, and packing areas in their local agricultural park or food hub will help make Hawaii hemp farmers more competitive. Also, most hemp farms are small, with less than two acres cultivated in hemp. Many agricultural commodities such as lemon grass and lavender can be processed on farm and their essential oils are extracted without special processing permits. Often the same equipment and process are utilized regardless of the plant that is being used for extraction, including hemp. Licensed processors are not available on every island and small hemp farms do not grow the volumes required for licensed processors. Additionally, most Hawaii hemp producers cannot afford the tolling fees that often total fifty per cent or more of the crop. Prior to 2021, when hemp processing rules were adopted, licensed hemp producers processed small batches of hemp on their farms with no adverse consequences. Allowances for licensed Hawaii hemp producers to process and manufacture hemp products on their farm are needed for those producers to survive in a competitive hemp market.

The legislature further finds that transparency in hemp product labeling is also needed. Given the number of "Buy Local", "Buy Aloha", "Eat Local" campaigns that have been launched, Hawaii residents, when given the opportunity and transparent data, will often choose Hawaii grown products.

The legislature further finds that the Agriculture Improvement Act of 2018, informally known as the 2018 "Farm Bill", legalized hemp by removing hemp from the definition of "marihuana" contained in the federal Controlled Substances Act. Therefore, hemp is no longer classified as an illegal drug under federal law. In October 2019, the United States Department of Agriculture established new regulations through which states may monitor and regulate hemp production. In light of these federal reforms, state laws regarding hemp should also be reformed.

Accordingly, the purpose of this Act is to:

(1) Eliminate double regulation of hemp production, which will reduce costs for the State and Hawaii farmers;

(2) Establish and revise rules for processing that recognize the unique constraints of Hawaii farmers, while protecting human health;

(3) Require transparency in labeling of hemp products manufactured and sold in Hawaii to identify the percentage of Hawaii grown hemp or hemp product in all hemp products and, if those products are not from Hawaii, the origin of any hemp or hemp product; and

(4) Allow licensed hemp producers to sell hemp directly to consumers who reside out of state, as allowed by most other states.

SECTION 2. Section 141-42, Hawaii Revised Statutes, is amended to read as follows:

"[[]§141-42[]] Commercial hemp production. (a) It shall be legal for an individual or entity to produce hemp, as defined in title 7 United States Code section 1639o, if that individual or entity has a license to produce hemp, issued by the Secretary of the United States Department of Agriculture pursuant to title 7 United States Code section 1639q; provided that:

(1) Any person convicted of a felony related to a controlled substance under state or federal law is prohibited from producing hemp, or being a key participant in an entity producing hemp, for a period of ten years following the date of conviction;

(2) Hemp shall not be grown outside of a state agricultural district;

(3) Hemp shall not be grown within [~~500~~] five hundred feet of pre-existing real property comprising a playground, childcare facility, or school; provided that this restriction shall not apply to an individual or entity licensed to grow hemp in those areas under the [~~State~~] state industrial hemp pilot program [~~prior to~~] before August 27, 2020;

(4) Hemp shall not be grown within [~~500~~] one hundred feet of any pre-existing house, dwelling unit, residential apartment, or other residential structure that is not owned or controlled by the license holder; provided that this restriction shall not apply to an individual or entity licensed to grow hemp in those areas under the [~~State~~] state industrial hemp pilot program [~~prior to~~] before August 27, 2020; and

(5) Hemp shall not be grown in any house, dwelling unit, residential apartment, or other residential structure[.], unless that structure is part of a United States Department of Agriculture area.

(b) An individual or entity licensed to produce hemp pursuant to paragraph (a) may transport hemp within the State to a facility authorized by law to process hemp or to another licensed producer's grow area, provided that:

(1) The hemp to be transported has passed all compliance testing required by the United States Department of Agriculture; and

(2) The transportation has been [~~authorized by~~] reported to the department. The department may require movement reports[~~, inspections, sampling, and testing~~] of the hemp to be transported and may deny authorization if the hemp is found to not comply with any law or regulation.

[~~(c) An individual or entity licensed to produce hemp pursuant to paragraph (a) may export hemp; provided that:~~

~~(1)~~ ~~The hemp to be exported has passed all compliance testing required by the United States Department of Agriculture; and~~

~~(2)~~ ~~The licensed producer complies with all laws relating to the exportation of hemp, including state and federal laws and the laws of the state or country of import.~~

~~(d)~~] (c) Any individual or entity who [~~violates this section or any rule adopted pursuant to this section~~] grows hemp without a United States Department of Agriculture license shall be fined not more than $10,000 for each separate offense. Any notice of violation of this section may be accompanied by a cease and desist order, the violation of which constitutes a further violation of this section. Any action taken to collect the penalty provided for in this subsection shall be considered a civil action.

[~~(e)~~] (d) For any judicial proceeding to recover an administrative penalty imposed by order or to enforce a cease and desist order against [a] an unlicensed hemp producer, the department may petition any court of appropriate jurisdiction and need only show that:

(1) Notice was given;

(2) A hearing was held or the time granted for requesting a hearing has expired without such a request;

(3) The administrative penalty was imposed on the individual or entity producing hemp; and

(4) The penalty remains unpaid or the individual or entity continues to produce hemp.

(e) An individual or entity licensed to produce hemp in Hawaii by the United States Department of Agriculture may sell hemp biomass directly to consumers via online platforms.

(f) In addition to all other labeling requirements, the identity statement used for labeling or advertising any hemp product shall identify the percentage of Hawaii grown or processed hemp product in all hemp products; provided that any hemp product not grown or processed in Hawaii shall identify the origin of the hemp product.

(g) Hemp producers licensed by the United States Department of Agriculture to grow hemp shall follow all inspection and sampling rules and protocols established by the United States Department of Agriculture. No other inspections or sampling by the State shall be required, nor shall the State issue violations or penalties to hemp producers licensed by the United States Department of Agriculture that are following United States Department of Agriculture rules and protocols. Penalties shall only be issued for growing hemp without a licensed issued by the United States Department of Agriculture."

SECTION 3. Section 328G-1, Hawaii Revised Statutes, is amended by amending the definition of "hemp processor" to read as follows:

""Hemp processor" means a person processing hemp to manufacture a hemp product[.], except for a person licensed by the United States Department of Agriculture to grow hemp in the State and produces less than six hundred pounds of dry hemp per year."

SECTION 4. Section 328G-2, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) No person shall process hemp without being registered by the department as a hemp processor pursuant to this part and any rules adopted pursuant to this chapter[.]; provided that the following hemp producers licensed by the United States Department of Agriculture are exempt from this subsection:

(1) Producers who grow less than six thousand dry pounds of hemp annually; and

(2) Producers who process hemp without solvents such as water, ice, or freeze drying agents."

SECTION 5. Act 14, Session Laws of Hawaii 2020, is amended by amending section 9 to read as follows:

"SECTION 9. This Act shall take effect upon its approval, and shall be repealed on [~~June 30, 2022;~~] July 1, 2027; provided that the definition of "marijuana" in section 329-1, Hawaii Revised Statutes, and the definitions of "marijuana" and "marijuana Concentrate" in section 712-1240, Hawaii Revised Statutes, shall be reenacted in the form in which they read on the day prior to the effective date of this Act."

SECTION 6. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 8. This Act shall take effect upon its approval, and shall be repealed on July 1, 2027; provided that section 141-42, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day before the effective date of this Act.

THE SENATE	S.B. NO.	2986
THIRTY-FIRST LEGISLATURE, 2022		S.D. 1
STATE OF HAWAII