AN ACT TO AMEND TITLE 4 OF THE DELAWARE CODE RELATING TO THE REGULATION OF HEMP PRODUCTS.

Legislation Document

SPONSOR:

Rep. Lynn & Sen. Hoffner

Reps. Wilson-Anton, Lambert, Phillips, Morrison, Ortega; Sen. Cruce

HOUSE OF REPRESENTATIVES

153rd GENERAL ASSEMBLY

HOUSE SUBSTITUTE NO. 1

FOR

HOUSE BILL NO. 401

AN ACT TO AMEND TITLE 4 OF THE DELAWARE CODE RELATING TO THE REGULATION OF HEMP PRODUCTS.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE (Three-fifths of all members elected to each house thereof concurring therein):

Section 1. Amend Title 4 of the Delaware Code by making deletions as shown by strike through and insertions as shown by underline as follows:

Chapter 14. The Delaware Hemp Regulation Act

§ 1401. Purpose and findings.

The purpose of this chapter is to establish a clear regulatory framework for the sale, distribution, and regulation of hemp products in the State. This chapter seeks to establish an environment where hemp products are regularly tested and safe to consume, while protecting minors and ensuring access is limited only to adults.

§ 1402. Definitions.

As used in this chapter:

(1) “DATE” means the Division of Alcohol and Tobacco Enforcement as defined in § 401 of this title.

(2) “Hemp” means the plant Cannabis sativa L. and any part of such plant including the seeds and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than three-tenths of one percent (0.3%) on a dry-weight basis. Hemp and hemp-derived cannabinoids, including cannabidiol, shall be considered an agricultural commodity and not a controlled substance due to the presence of hemp or hemp-derived cannabinoids.

(3) “Hemp derived cannabinoid product” or “HDCP” means a finished product intended for human consumption that contains cannabinoids extracted or derived from hemp.

“HDCP” does not include any beverages that contain hemp.

(4) “OMC” means the Office of the Marijuana Commissioner established under Chapter 13 of this title.

(5) “Package store” means an establishment licensed under § 516 of this title for the sale of alcoholic liquor in a container for consumption off the premises where sold.

(6) “Retailer” means the person or entity that is licensed to sell HDCPs for off-premises consumption.

(7) “Serving” means a discrete portion of an HDCP intended for individual consumption, as defined by regulation of OMC.

(8) “Synthetic additive” means any artificially produced substance that is not from a naturally cannabinoid

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producing plant.

(9) “THC” means delta-9-tetrahydrocannabinol.

§ 1403. Retail licensing for off-site consumption.

(a) Upon proper application and subject to the applicable provisions, restrictions, and prohibitions under this chapter, the OMC shall grant retail HDCP licenses to entities to sell HDCP in the manner provided for in this chapter.

A retail HDCP license authorizes the sale of HDCP only for off-site consumption.

(b) An applicant must conform to all the following:

(1) Restrict access to their establishment or service area to individuals 21 years of age or older.

(2) Require age verification for all purchases of HDCP.

(3) Limit the sale of HDCP to no more than 10 mg of THC per serving.

(4) Restrict sale of HDCP products to containers that hold no more than 10 servings.

(5) Ensure that all HDCP products are sold in sealed containers for off-site consumption only and are not opened, sampled, or consumed on the licensed premises.

(6) Comply with any additional product category limits and packaging requirements adopted through regulation.

(7) Ensure the exterior of the retail premises is free from graffiti, cartoon or animal references, and bubble lettering.

(c) A gas station

, grocery store, or convenience store may not apply for a retail HDCP license.

(d) An applicant may not sell tobacco, alcohol, or vape products unless they hold the appropriate license to sell tobacco, alcohol, or vape products.

(e) To ensure access is limited to individuals 21 years of age or older, an applicant must install and maintain a security access point device at the entrance of the establishment or service area to verify the age of every individual and restrict entry to any person under the age of 21 into the area where HDCP is displayed or sold.

(f) An applicant may not have see-through windows or other transparent openings that allow products, displays, or interior activities of HDCP to be visible from any right-of-way or from any property accessible to the general public.

(g) An applicant must pay a $15,000 application fee to OMC.

(h)

(1) A person required to obtain a background check under this section must submit fingerprints and other necessary information to the State Bureau of Identification in order to obtain a Delaware and national criminal history background check through all of the following:

a. A report of the person’s entire criminal history record from the State Bureau of Identification or a statement that the State Central Repository contains no such information relating to that person.

b. A report of the person’s entire federal criminal history record pursuant to the Federal Bureau of Investigation (FBI) appropriation of Title II of Public Law 92-544 (28 U.S.C. § 534) or a statement that the FBI’s records contain no such information relating to that person.

(2) An individual is ineligible for issuance or renewal of an HDCP retail license if the individual has been convicted, within the 5 years immediately preceding the application, of any of the following offenses:

a. Any felony offense involving fraud, money laundering, forgery, or tax evasion arising from a regulated business activity under this title or Title 16.

b. Any felony crime of violence as defined in § 4201(c) of Title 11.

(3) An individual is ineligible for issuance or renewal of an HDCP retail license if the individual has ever been convicted of the following:

a. A felony offense involving the use of a minor in a drug-related offense.

b. Any felony offense for which the individual remains under a sentence of incarceration, probation, or parole.

(3) Notwithstanding paragraphs (1) and (2) of this subsection, the OMC may waive an ineligibility if any of the following are applicable:

a. The disqualifying conviction has been pardoned, expunged, or vacated.

b. The applicant demonstrates rehabilitation under standards established by regulation, including the time elapsed since the offense, the nature of the offense, and evidence of conduct since the conviction.

(4) The OMC shall by regulation identify specific Title 4, Title 11, and Title 16 offenses that are disqualifying under this chapter and the applicable lookback periods for each category of offense.

(i) Any retailer that can demonstrate continuous compliance with retail sales of HDCP for off-site consumption must be provided a provisional license by the OMC if the retailer demonstrates the following:

(1) It has engaged in the sale of HDCP through a business entity on or before January 1, 2025.

(2) It can document 60% of the applicant’s total retail sales, if any, were derived from HDCP for a period of 12 months preceding [the effective date of this Act].

(j) A provisional license granted under subsection (i) of this section is valid for 1 year from the date the OMC issues the license and is not renewable.

(k) Within 30 days of the issuance of the provisional license under subsection (i) of this section, the retailer must initiate the criminal background check process under subsection (h) of this section. If the retailer is found ineligible after the criminal background check, the provisional license is immediately revoked. If the retailer passes the criminal background check, the provisional license converts to a regular retail license for the remainder of the licensing term.

(

l

) Any person or entity holding a valid retail marijuana store license under Chapter 13 of this title is deemed to hold a retail HDCP license under this chapter and is exempt from the application requirements and fees of this chapter but remains subject to all other requirements of this chapter.

(m) The Commissioner shall refuse to grant a license for the sale of HDCP for consumption off the premises, when there is an existing licensed establishment of similar type within a ½ mile by accessible public road or street in any incorporated city or town, or within 3 miles by accessible public road or street in any unincorporated or rural area measured in driving distance both ways between the existing and proposed establishments.

§ 1404. Prohibition of on-site consumption.

(a) No person may permit the consumption of HDCP on the premises of any establishment licensed under this chapter.

(b) All HDCP sold under this chapter must be sold in sealed containers for off-premises consumption only.

§ 1405. Testing requirements; certificate of analysis.

(a) A manufacturer of a hemp derived cannabinoid product regulated under this chapter must submit representative samples of each lot of the product to a laboratory that is ISO/IEC 17025 accredited. The HDCP testing must consist of all the following:

(1) Industry accepted testing techniques such as high-performance liquid chromatography (HPLC) or liquid chromatography-mass spectrometry (LC-MS) to ensure THC content, per serving and per container.

(2) Random bottle or container selection.

(3) An analyte panel.

(4) CBD, CBN, and other major cannabinoids for full-spectrum compliance.

(5) Testing for heavy metals, pesticides, fungicides, residual solvents, and microbial contaminants.

(6) Testing for synthetic additives.

(b) As part of the lot testing under subsection (a) of this section, the laboratory must issue a certificate of analysis for each lot. The certificate of analysis must include all of the following:

(1) Confirmed cannabinoid concentrations.

(2) A pass/fail status for contaminants.

(3) Lab accreditation details.

(4) Lot identifying information and product traceability reference documented with a QR code or web link.

(c) The data required in the certificate of analysis under subsection (b) of this section must be available to the following parties in the following manner:

(1) To the OMC and HDCP distributors, through a digital format.

(2) The consumer, through a website link or QR code on the label.

(3) Upon the request or inspection of the OMC, for a minimum period of 1 year from the date of the HDCP’s purchase by the retailer, at the physical location of the retailer.

§ 1406. Labeling requirements and prohibitions.

(a) Any HDCP product regulated under this chapter must have a label that meets all of the following requirements:

(1) THC content of the product, stating “THC Content: X mg per serving, X mg per container”, where “X” is replaced with the applicable amount.

(2) Serving size information that defines serving size, the total servings per container, and a recommended serving size.

(3) An ingredient list, providing a full listing of all product components and additives, including cannabinoid content.

(4) A warning statement, “Contains THC – Not for Children. For Adult Use Only (21+). May cause impairment. Do not operate vehicles or machinery after consumption.”.

(5) A warning that the product is “For Adults 21+ Only.”.

(6) A warning that the product is “Not for use by pregnant or breastfeeding individuals.”.

(7) A website link or QR code that provides information from the certificate of analysis under § 1405 of this title.

(b) Any product regulated under this chapter is prohibited from using labeling that is appealing to children. For this section, “appealing to children” means any packaging or labeling that includes any of the following:

(1) Child centric imagery such as cartoons or depictions of celebrities or characters that target or are directed at children.

(2) Packaging that bears a reasonable resemblance to branded products commonly consumed by children, including candy, cookies, snacks, or soft drinks.

(3) Labeling using fonts with bright or neon coloring or bubble style lettering.

(c) A product regulated under this chapter may not be shaped or molded into a design that depicts the shape of a human, animal, food, toy, or any object that would be appealing to children as defined in subsection (b) of this section.

§ 1407. Product standards; enforcement.

(a) A product regulated under this chapter is considered a noncompliant product if the product is offered for sale in this State or if the product is manufactured, imported, distributed, or stored with the intent to be offered for sale in this State in violation of any provision in this chapter, including all of the following:

(1) The product contains more than 0.3 percent THC on a dry weight

basis.

(2) The product contains synthetic additives.

(3) The product contains more than trace amounts of mold, residual solvents, pesticides, fertilizers, or heavy metals.

(4) The product has been produced, prepared, packed, or held under unsanitary conditions where it may have been rendered injurious to health, or where it may have been contaminated with filth.

(5) The container in which the product is stored, in whole or in part, contains any poisonous or deleterious substance that may render the contents injurious to health.

(b) A product regulated under this chapter is a noncompliant product if the product labeling is false, misleading, or in violation of the requirements under § 1406 of this title.

(c) DATE may assume that any product regulated under this chapter that is present in the State, other than a product lawfully possessed for personal use, has been manufactured, imported, distributed, or stored with the intent to be offered for sale in this State if a product of the same type and brand was sold in the State on or after July 1, 2021, or if the product is in the possession of a person who has sold any product in violation of this chapter.

(d) Inspections and enforcement activities are to be conducted by DATE in accordance with Chapter 4 of this title. DATE may conduct administrative inspections under § 403 of this title. The Office of the Marijuana Commissioner may conduct administrative inspections of a premise licensed under any provision of this title at any time the licensee, employee of the licensee, or customer is upon the licensed premise. Administrative inspections under this subsection may be conducted only for the purpose of ensuring compliance with the regulations of this title or the rules and regulations of the Marijuana Commissioner.

§ 1408. Out-of-State manufacturers.

(a) Any out-of-state manufacturer that imports HDCP into this State must do all of the following:

(1) Comply with the THC limits for retail off-site consumption under § 1403 of this title.

(2) Comply with all regulations relating to HDCP testing under § 1405 of this title.

(3) Comply with all regulations relating to product labeling of HDCP under § 1406 of this title.

(b) The requirements under this chapter are not meant to restrict or limit lawful, interstate commerce.

(c) Out-of-state manufacturers and laboratories must cooperate with OMC investigations and audits, including participation in proficiency testing and verification of testing data. The OMC may suspend or revoke a manufacturer’s authority to supply HDCP to this State for repeated noncompliance, failure to cooperate with an investigation or audit, or other good cause.

(d) An out-of-state manufacturer must have a valid Delaware business license to participate in HDCP commerce in Delaware.

§ 1409. Penalties and enforcement.

(a) Any person who is found to have violated this chapter is subject to a civil penalty not less than $500 nor more than $5,000 for each violation.

(b) In determining the appropriate penalty under this chapter, the court or the OMC, as applicable, may consider as a mitigating factor whether the person reasonably and in good faith relied upon a certificate of analysis from an accredited laboratory and maintained records of such reliance. Good faith reliance does not preclude enforcement where the person knew or should have known that the product was noncompliant.

(c) In addition to civil penalties, OMC may suspend or revoke any license issued under this chapter for any violation of this chapter or regulations promulgated under this chapter.

(d)

A product determined to be noncompliant under this chapter is subject to immediate embargo, recall, and destruction at the manufacturer’s expense.

§ 1410. Taxes.

(a) A special excise tax is imposed on the retail sale of all HDCP in this State at a rate of 6% of the retail sales price. The retail sales price is the total amount for which the HDCP product is sold, excluding any tax imposed under this chapter.

(b) The tax imposed under this section is in addition to any other tax or fee imposed by the State and must be collected by the retailer from the consumer at the time of sale. The tax must be separately stated on any invoice or receipt provided to the customer, in a manner prescribed by the Division of Revenue.

(c) Retailers shall maintain records of HDCP purchases and sales, including the tax collected, for a period of not less than 3 years and shall make the records available to the Division of Revenue upon request, in a manner consistent with the recordkeeping requirements applicable to alcoholic beverages under this title.

§ 1411. Collection and administration of the HDCP tax; mandatory reports; preemption.

(a) The HDCP tax imposed on the consumer under § 1410 of this title shall be collected at the point of sale and remitted by each retailer that engages in the retail sale of HDCP products. The HDCP tax is considered a tax upon the retailer that is required to collect the tax, and the retailer is considered a taxpayer.

(b) A retailer shall file a monthly report to the Commissioner, the Division of Revenue, and the Division of Alcohol and Tobacco Enforcement.

(c) A retailer shall pay the HDCP tax to the Division of Revenue in the form and manner prescribed by the Director of Revenue, but not later than with each monthly report.

(d) Except to the extent inconsistent with specific provisions of this chapter, the provisions of Chapter 5 of Title 30 shall govern the assessment, collection, review, and appeal of deficiencies of tax imposed by this chapter, and any interest and penalties thereon, and claims for refund of overpayment of taxes imposed by this chapter.

(e) Any information set forth or disclosed in any report or return required under or as a result of this section, including any information which is required to be attached or included on any report or return required under or as a result of this section, is subject to the provisions of § 368 of Title 30.

(f) The Division of Revenue may prescribe forms and promulgate regulations as necessary for implementation and enforcement of the tax imposed by this chapter.

§ 1412. Regulations.

The OMC shall adopt regulations to effectuate the provisions of this chapter.

Section 2. This Act takes effect immediately and is to be implemented the earlier of the following:

(1) One year from the Act’s enactment.

(2) Notice from OMC published in the Register of Regulations that final regulations to implement this Act have been promulgated.

SYNOPSIS

House Substitute No. 1 for House Bill No. 401 establishes "The Delaware Hemp Regulation Act" under Title 4 of the Delaware Code to create a comprehensive regulatory framework for the sale, distribution, and consumption of hemp-derived cannabinoid products (HDCPs) in the State. It authorizes the Office of the Marijuana Commissioner (OMC) to issue retail licenses for off-premises consumption of HDCPs.

The Act implements age-verification requirements, limiting access to individuals 21 years of age or older, and mandates security and zoning standards for all licensed premises. Furthermore, it requires all HDCPs to undergo potency and contaminant testing by accredited laboratories and establishes strict labeling requirements to prevent products from appealing to children. To ensure compliance, the Act empowers the Division of Alcohol and Tobacco Enforcement (DATE) and the OMC to conduct inspections and provides for the immediate embargo or destruction of noncompliant products.

This Act imposes a 6% excise tax on the retail sales of all HDCPs. The Act takes effect immediately and must be implemented within one year of enactment or upon the publication of final regulations by the OMC.

This Act requires a greater than majority vote for passage because § 11 of Article VIII of the Delaware Constitution requires the affirmative vote of three-fifths of the members elected to each house of the General Assembly to impose or levy a tax or license fee.

House Substitute No. 1 for House Bill No. 401 differs from the original in that it adds a new section to address Division of Revenue enforcement powers and collection authority. It also does the following: (1) restricts the servings per container to 10; (2) prohibits the display of grafitti, cartoon and animal references, and bubble letters on the exterior of HDCP retailers; (3) increases the license cost to $15,000; (4) strikes language referencing local control: (5) requires out-of-state manufacturers to have a Delaware business license; (6) Adds a minimum distance requirement between HDCP retail establishments; (7) Adjusts the showing an HDCP must make regarding for how long and how much of their business has been in HDCP retail prior to this Act; (8) adds explicit administrative enforcement authority for DATE; (9) adds language requiring a national background check in addition to a Delaware background check.