$25 G’s To Roll A J? My Thoughts On HB 847

By Mark Yurachek

Within Georgia’s cannabis community, HB 847, which includes many proposed changes to Georgia’s Hemp Farming Act, has caused almost as much hysteria as the Coronavirus. The bill originally proposed was a provision for misdemeanor punishment for negligently violating O.C.G.A. §2-23-4, and felony punishment for intentionally violating it. Those controversial provisions were withdrawn from the bill which recently sailed through the Georgia House and is presently before the Senate, but many other provisions, which may have a profound effect on Georgia’s nascent hemp industry, have changed.

A New Definition, And One That Stays The Same

A lot of the bill’s changes to the current law seem to have smokeable hemp as a subtext.

The bill added an exclusion to the term, “[p]rocess,” stating, [t]his term does not include merely placing raw or dried material into another container or packing raw or dried material for resale. The exclusion is a step in the right direction from this standpoint: arguably, under the current law, growers could not harvest their product and even package it to sell on to anyone without also obtaining a far more expensive processing permit. This revision clarifies that merely packing the product up to ship to another party does not constitute processing. By that same token, though, it seems to forbid processors who are not growers from selling smokeable hemp at all, extending the current statute’s ban on retail sale of raw hemp … maybe.

I say, “maybe,” because the bill that passed the House is as notable for what it does not include as for what it does. The original House bill included new exclusion from the definition of “hemp products,” which read: the term shall not include any part of the plant of the genus Cannabis, except for the completely defoliated mature stalks of such plant, fiber produced from such stalks or completely sterilized seeds of the plant which are incapable of germination. As I noted previously, it is unlawful to “[o]ffer for sale at retail the unprocessed flower or leaves of the hemp plant.” Specifically excluding hemp flowers from the definition of hemp product would further seal off the market for Georgia-grown smokeable hemp. This revision was left out of the bill that passed through the House.

Without this change, potential conflicts in the law exist as regard smokeable. Not all commercial sales are retail sales. This is spelled out in the DOA’s revised regs, which define, “commercial sale,” as “the sale of a product in the stream of commerce at retail, at wholesale and online.” So the rules distinguish retail from wholesale, but the law only restricts sale of flower “at retail,” so selling flowers at wholesale is totally legal as well as commercial. Oh, but wait, once the flowers are sold wholesale, are they not hemp products, since they are “prepared in a form available for legal commercial sale?” If so, Georgia’s law says that it is legal to sell hemp products at retail, but unlawful to sell hemp flower (which surely is a hemp product) at retail.

This does not even touch on the question on the minds of many retailers: whether a retailer is required to hold a processor permit. The question is not directly answered in the statute or DOA regs, but there are clues that the answer is, “no.” Many of the restrictions placed on who can trade in raw hemp and under what circumstances do not apply to hemp products, indicating that one who sells the products is in a different position than growers or processors. Further, processors are required to keep records which would be almost impossible for a retail establishment to keep, such as the name, address and phone number of each buyer. So it does not seem to be necessary to be a processor in order to be a retailer.

Some more observations:

Does It Cost 25 G’s To Roll A J?

If someone buys raw hemp at wholesale from a grower, could they then roll it into joints or cigarettes and sell them to customers? It seems to me that they could, just as they could, I believe, package and sell ground flower by the ounce because neither is unprocessed flower. That also suggests that it would be necessary to hold a processor permit to do so, a costly venture just to roll some spliffs.

I don’t think Georgia can require someone to be a processor in that scenario before determining whether or not flower sold at wholesale is hemp product, though. If flower is not a hemp product, a permit is probably necessary just to roll a j since it is being converted “in[to] a form available for legal commercial sale,” thus processed.

If the flower is a hemp product, I don’t see how a buyer would need a permit to grind it and roll it into joints or cigarettes. As a hemp product, it is already “prepared in a form available for legal commercial sale,” and thus already processed, so no permit is needed to do whatever the buyer chooses to do. Plus, if flower purchased at wholesale is a hemp product, then, the purchaser can store, possess and, potentially even sell it at retail without violating any laws.

Penalized For Being A Georgian

Market inefficiency is not a great reason, in and of itself, to change a law, but in this case it is not a bad one, either, since the bill as written places its Georgia’s citizens at a competitive disadvantage.   

Even with some beneficial changes it made concerning hemp commerce, I see a couple of potential problems with the bill’s restrictions on growers’ sale of hemp. A grower is able to “provide or sell hemp” to any person outside of Georgia as long as they 1) live in a state acting in accord with the USDA’s regs, whether through a state plan or in implementing the federal plan and 2) are “authorized to grow or process hemp in that state.” The various states, though, have varying rules about who is and is not authorized to grow and process hemp. Some more restrictive others are more permissive.

Here’s why that is unfair. Say there is a grower in Georgia who does not wish to process her own hemp. She is contacted by Acme Hemp in Georgia which works as a broker or intermediary and wants to buy five hundred pounds of prepackaged smokeable from her to sell on to other interests, but Acme is neither a grower, nor a processor. Now say Consolidated Hemp, a company in California which acts in the exact same capacity as Acme, offers that grower $10/pound less than Acme. California currently does nothing to regulate the “manufacturing, processing or selling of non-food industrial hemp or hemp products,” so Consolidated can legally do just about anything it wants with hemp and thus Georgia law permits the grower to sell the smokeable to them, but not to Acme, even if Acme intended to sell the product to the exact same buyers as Consolidated. The grower is compelled to sell to Consolidated and lose five thousand dollars on the deal.

Now reverse that scenario: say Acme has a relationship with McDonald Farms outside of Fresno, California. McDonald wants to make Acme its exclusive distributor on the East Coast. Acme’s role would merely to be warehousing and distributing legally grown, lab certified hemp shipped in from McDonald, ultimately selling it to processors in Georgia. Under the DOA’s regs, which have the force of law, it cannot do so, because only licensees and permittees may store hemp. Consolidated, though, can pack up the hemp and put it on trucks from its warehouse in Barstow, California, at far greater expense to both McDonald and the various Georgia processors who are purchasing their products.

What if a Georgia retailer wants to buy prerolled joints? Amalgamated Hemp, a processor affiliate of Consolidated in California, needs no special licensing to turn flower into joints and sell them to Georgia retailers, but as discussed above, it may Global Hemp, an affiliate of Acme which does the exact same thing as Amalgamated, $25,000 to do the exact same thing. Georgia has taxed its own company making it much easier for a foreign corporation to undercut it.

After flirting with criminalizing the transportation of raw hemp in this state, the legislature settled instead with requiring that, irrespective of quantity, “[a]ll hemp being shipped, transported, or otherwise delivered into, within or through the state must be accompanied by” documentation that the hemp conforms with state and federal law, along with requirements of what that documentation must include. So what if I legally purchase three grams of smokeable in Tennessee and then drive back to Georgia with it? Do I need a bill of lading which conforms with the statute? The minimum standards for a bill of lading could, along with detailed packaging,be covered by a receipt from a very thorough retailer but that is no sure thing and certainly would not be on one document, as the statute requires.

Penalized For Not Working With Georgia

I also find it odd that, although HB 847 amended the statute to reflect that growers could sell hemp to buyers outside of Georgia, it still requires an applicant to identify the name of a permittee “with whom the applicant has entered into or intends to enter into an agreement,” in order to obtain a license to grow, unless they are “also a permittee or a licensee who will only provide or sell hemp to other licensees.” Permit applicants face a similar dilemma in that they are not able to obtain a permit without showing that they have an agreement in place with a grower, thus requiring Georgia processors to do business with Georgia growers. Where this leaves farmers and processors who have bona fide agreements with out of state entities, but none in Georgia, is seemingly out in the cold.

On the whole, I am surprised that the legislature continues to claim it is fostering the growth of a hemp industry in Georgia, while enacting measures which seem intent on stunting it.  

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