RELATING TO HEMP.

SB2712

THE SENATE

S.B. NO.

2712

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

relating
to hemp
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

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SECTION 1.
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The
legislature finds that industrial hemp grown and processed for fiber can
strengthen the State's agricultural economy, create high-quality local jobs,
support local manufacturing, and reduce import dependence for paper, packaging,
construction materials, and other fiber products.
�
Industrial hemp, as defined in title 7 United
States Code section 1639o, is distinct from cannabinoids and is utilized for a
variety of things including fiber and other material uses that avoid overlap
with controlled substances or human food laws that restrict cannabinoids.

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The legislature further finds that the
State faces high import costs for packaging and building material, ongoing
recovery needs related to wildfires, waste management challenges, and
long-standing soil health challenges.
�
Fiber
hemp can contribute to soil improvement, sequester carbon, and provide locally
sourced feedstock for products such as paper, molded fiber packaging,
insulation, and erosion-control materials.
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Targeted incentives, transparent reporting,
and sunset review are appropriate to accelerate private investment while
ensuring accountability.

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Accordingly, the
purpose of this Act is to:

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(1)
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Establish
the Hawaii hemp fiber special fund to provide grants, per-ton incentives, and
pilot projects that expand fiber-only hemp production, processing, and in-state
manufacturing with strong equity and fiscal controls;

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(2)
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Establish
the hemp paper packaging pilot program;

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(3)
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Establish
the industrial hemp license surcharge;

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(4)
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Require
reports to the legislature; and

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(5)
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Appropriate
funds.

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SECTION 2.
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Chapter 141, Hawaii Revised Statutes, is amended by adding a new part to
be appropriately designated and to read as follows:

"
Part
Industrial hemp

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�141-A
�
Definitions.
�
As used in this part:

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"Affiliate"
means any entity that, directly or indirectly, controls, is controlled by, or
is under common control with the applicant, including through ownership of more
than fifty per cent of the voting interests or the power to direct management
and policies.

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"Approved
processor" means any processor licensed under this chapter that meets
quality assurance, safety, and measurement standards adopted by the department
by rule.

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"Department"
means the department of agriculture and biosecurity.

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"Fiber
materials" means products derived from industrial hemp biomass, including
textiles, paper, building materials such as hemp-lime and insulation,
bioplastics, composite panels, rope, mulch, and animal bedding, excluding any
cannabinoid-derived products.

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"Fund"
means the Hawaii hemp fiber fund.

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"Hemp
paper packaging" means paper, paperboard, or molded-fiber packaging made
primarily from industrial hemp biomass and water, containing no intentionally
added per- and polyfluoroalkyl substances and no oxo-degradable additives or
bisphenols, and meeting compostability or recyclability standards adopted by
the department by rule in consultation with the department of health and the
state procurement office, which may reference nationally recognized standards
including ASTM D6400 or D6868 and Federal Trade Commission Green Guides.

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"Industrial
hemp" means the plant Cannabis sativa L. and any part of that plant,
including the seeds thereof 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 0.3 percent on a
dry weight basis.

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"Industrial
hemp biomass" means non-viable hemp plant material, including foliage,
stalk, hurd, bast fiber, and root, excluding viable seed, for industrial uses
consistent with this chapter.

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"Native
Hawaiian-owned" means a business at least fifty-one per cent owned by
Native Hawaiians, as defined in section 10-2.

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"Producer"
means a person or entity licensed by the department to cultivate industrial
hemp.

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"Smallholder
farm" means a farm with annual gross receipts under $500,000.

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�141-B
�
Hawaii hemp fiber special fund; established.
�
(a)
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There is established within the state
treasury a special fund to be designated as the Hawaii hemp fiber special fund
to be administered by the department to provide grants, per-ton incentives, and
pilots for fiber-only industrial hemp production, processing, and in-state
manufacturing.
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Moneys deposited in the
special fund shall be used to fulfill the purposes of this part and shall
include:

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(1)
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Any
moneys appropriated by the legislature to the special fund;

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(2)
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Any
moneys received from the federal government or from private contributions;

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(3)
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Any
moneys from the industrial hemp license surcharge collected pursuant to section
141-C; and

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(4)
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The
interest or return on investments earned from moneys in the special fund.

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(b)
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Moneys in the fund shall be used for the
following, subject to rules adopted under chapter 91 and, as applicable,
procurement under chapter 103D:

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(1)
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Producers
grants for cultivation, harvest, drying, and fiber-handling equipment and
on-farm processing that supports fiber-only production;

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(2)
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Processer
grants, not more than $500,000 per award, for equipment and site readiness
including decortation, drying, power upgrades, material handling, metering, and
quality assurance systems;

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(3)
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Converter
and manufacturer grants, not more than $500,000 per award, to establish or
expand Hawaii-based converting or finishing of fiber materials including hemp
paper packaging, tooling, line setup, testing, and quality systems;

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(4)
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Grants
to nonprofit organizations and public institutions of higher education for
training, testing, workforce development, demonstrations, and research and
development related to industrial hemp fiber, including paper and packaging
applications; provided that the grants shall comply with chapter 42F, as
applicable, and shall produce public reports or shareable technical materials;

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(5)
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Per-ton
incentives of $300 per delivered dry ton of industrial hemp biomass to an
approved processor, verified by scale tickets and geotagged field maps.
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For the purposes of this paragraph "dry
ton" shall be defined by rule, including moisture-content methodology; provided
that the department may prohibit reimbursement of any cost item already
reimbursed by a separate award to prevent duplication of benefits;

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(6)
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The
hemp paper packaging pilot program; and

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(7)
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Administrative
costs not exceeding ten per cent of annual expenditures from the fund.

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(c)
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Grants awarded pursuant to this section:

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(1)
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For
producers, shall not exceed more than $500,000 per fiscal year and not more
than $1,000,000 in the aggregate over any thirty-six month rolling period per
applicant; provided that per-ton incentive payments pursuant to subsection
(b)(5) shall not count towards the grant awards; provided further that to
receive a producer grant, any per-ton incentive payment under subsection (b)(5)
shall not exceed $150,000 per licensed producer per fiscal year;

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(2)
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For
processors, shall not exceed more than $750,000 per fiscal year and not more
than $1,500,000 in the aggregate over any thirty-six month rolling period per
applicant; provided that not more than thirty-five per cent of the fund's total
annual disbursements shall be awarded to processors in any fiscal year.
�
For the purposes of this paragraph
"disbursements" includes any grant, incentive payment, or other cash
outlay from the fund;

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(3)
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For
converters and manufacturers, shall not exceed $500,000 per fiscal year and not
more than $1,000,000 in the aggregate over any thirty-six month rolling period
per applicant; and

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(4)
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For
nonprofit organizations and public institutions of higher education, shall not
exceed $400,000 per fiscal year and not more than $800,000 in the aggregate
over any thirty-six month rolling period per applicant.

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(d)
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An
applicant may receive more than one award in a fiscal year; provided that:

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(1)
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The
scopes of each application do not overlap;

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(2)
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Awards
do not reimburse the same cost items; and

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(3)
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The
caps provided under paragraphs (c)(1) through (c)(4) are not exceeded.

The
department may sequence or consolidate awards to administer these caps.

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(e)
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The
department shall require disclosure of all other public funding for the same
project or cost items and may deny, reduce, or condition any award to prevent
duplication of benefits.
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Applicants
shall certify the accuracy of the disclosures under penalty of administrative
sanctions.

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(f)
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The
chairperson of the board of agriculture and biosecurity may waive the caps in subsection
(c) for a project of statewide importance that serves two or more counties,
documents at least twenty-five per cent non-state cost share, and demonstrates
supply chain benefits to both farming and processing; provided that any waiver
and its rationale shall be included in the report required by section
141-D(e)(5).

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(g)
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All
award agreements shall include audit rights and repayment obligations for
nonperformance, fraud, or misuse of funds.
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Any awardee who knowingly makes a false
statement or misrepresentation in connection with an application, claim, or
report under this section shall be subject to administrative sanctions, in
addition to any other remedies available at law or in equity, including debarment
from future awards.

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(h)
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Any geospatial data submitted by applicants shall be treated as
confidential to the extent permitted by chapter 92F and used solely for program
verification and reporting in aggregated form.

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(i)
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Nothing
in this section authorizes cannabinoid production or use.
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All activities shall comply with federal law
and state licensing under this chapter.

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�141-C
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Industrial hemp license surcharge;
established.
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(a)
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In addition to any license fee established
and levied by the department under this part, there shall be levied, assessed,
and collected an industrial hemp license surcharge equal to five per cent of
the license fee on each industrial hemp producer or processor license issued pursuant
to this part.

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(b)
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The
surcharge shall be deposited into the Hawaii hemp fiber special fund
established pursuant to section 141-B.

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(c)
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The department shall establish minimum and maximum dollar amounts for
the surcharge to avoid disproportionate impacts on smallholder farms.

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�141-D
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Hemp paper packaging pilot program;
established.
�
(a)
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There is established within the department a
hemp paper packaging pilot program to evaluate locally manufactured or converted
hemp paper packaging for state and county uses, including retail bags,
food-service items, protective wraps, hang tags, and shipping inserts.

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(b)
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The hemp paper packaging pilot program shall provide funds to qualified
entities engaged in hemp paper packaging to cover converter tooling and line
setup; test runs and samples; third-party testing for food safety,
compostability, recyclability, and environmental product declarations; and
logistics for limited deployments.

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(c)
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To
be eligible for receipt of funds, hemp paper packaging product items:

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(1)
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Shall
not contain intentionally added per- and polyfluoroalkyl substances and
oxo-degradable additives; meet compostability or recyclability criteria adopted
by rule, which may reference nationally recognized standards including ASTM
D6400 or D6868 and Federal Trade Commission Green Guides; and disclose biobased
content as required by rule; and

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(2)
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In
contact with food shall comply with department of health requirements and all
applicable United States Food and Drug Administration regulations.

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(d)
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For
solicitations issued after July 1, 2027, state and county purchasing agencies
may apply a price preference of up to five per cent for qualified hemp paper
packaging meeting subsection (c) and subject to chapter 103D and availability;
provided that the product is comparable in quality and availability and the
evaluated bid cost shall not exceed the lowest responsive bid by more than five
per cent.
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The state procurement office
may issue guidance.

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(e)
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The
department shall:

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(1)
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Establish
a competitive evaluation system that prioritizes awards to smallholder farms,
entities located in or serving rural or economically distressed communities,
Native Hawaiian-owned businesses, native Hawaiian organizations as defined in
title 15 United States Code section 637(a)(15), and businesses controlled by the
organizations;

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(2)
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Set
a program goal that at least thirty per cent of annual pilot program dollars shall
be made to applicants meeting any of the priority categories pursuant to
paragraph (1), to the extent practicable and consistent with applicable law,
without creating a set-aside or quota; provided that applications shall be
evaluated with priority scoring for sustainable practices, including
water-efficient cultivation and soil remediation, to align with state climate
and soil goals; provided further that in scoring applications, the department
shall give additional consideration to projects that establish in-state
converting capacity for hemp paper packaging and that demonstrate off-take
commitments from local end users or public procurement pilots;

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(3)
�
Establish
performance metrics, including acres planted, dry tons processed, jobs created
and retained (full-time equivalents), private match ratio, import substitution
value, units of hemp paper packaging piloted and end markets served, and tons
of carbon dioxide equivalent avoided;

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(4)
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Establish
a schedule and methodology for the development and periodic updating of
Hawaii-specific life-cycle assessments and environmental product declarations;
and

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(5)
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No
later than September 1 of each year, submit an annual report to the chairpersons
of the senate committees on agriculture and environment and ways and means, chairpersons
of the house committees on agriculture and food systems and finance, and the
state auditor, detailing:

���������
(A)
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Sources
and uses of the fund;

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(B)
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Awardees,
amounts, islands served, and priority categories met;

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(C)
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Acres
planted, dry tons processed, and jobs created and retained;

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(D)
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Local
content and import substitution estimates;

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(E)
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The
status of life-cycle assessment and environmental product declaration
publications and public-pilot outcomes;

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(F)
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The
number of awards per applicant;

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(G)
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Any waivers granted under
section 141-B(f); and

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(H)
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Outcomes
of the hemp paper packaging pilot program including unit costs, compostability
or recyclability performance, greenhouse gas impacts, and supply chain
readiness;

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(6)
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Collaborate
with the department of business, economic development, and tourism; department
of accounting and general services; department of health; and state procurement
office to effectuate the hemp paper packaging pilot program; and

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(7)
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Publish
a non-confidential program summary on its website, including aggregated metrics
and award lists by island.

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(f)
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The department and the state auditor may conduct financial and
performance audits as necessary.
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If key
metrics are not met, including on-time and on-budget delivery of at least
ninety per cent, unallocated funds may revert for reprogramming within the
fund."

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SECTION 3.
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Chapter 712, Hawaii Revised Statutes, is amended by adding a new section
to part IV to be appropriately designated and to read as follows:

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"
�712-

�
Industrial hemp.
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The possession, cultivation, sale,
receipt, or transfer of industrial hemp as authorized under part
of chapter 141 shall not constitute an offense under
this part.
"

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SECTION 4.
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(a)
�
The department of agriculture
and biosecurity shall adopt rules pursuant to chapter 91, Hawaii Revised
Statutes, to implement this Act, including eligibility criteria, application
and award procedures, licensing, monitoring and reporting requirements,
claw-back provisions for nonperformance, compostability and recyclability
standards for packaging pilots, and data collection for life-cycle assessments
and environmental product declarations.

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(b)
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The
department of agriculture and biosecurity shall initiate rulemaking within
ninety days of the effective date of this Act and adopt rules, including any
temporary or expedited rules as permitted under chapter 91, Hawaii Revised
Statutes, no later than twelve months after the effective date.
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Indirect costs charged to a grant under this
Act shall not exceed ten per cent of the award.

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SECTION 5.
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Nothing in this Act shall be construed to authorize cannabinoid
production or use.
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All activities shall
comply with federal law, including the Agriculture Improvement Act of 2018
(title 7 United States Code section 1639o, et seq.), state licensing under this
chapter, and any amendments thereto.

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SECTION
6
.
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There is appropriated out of the
general revenues of the State of Hawaii the sum of $25,000,000 or so much
thereof as may be necessary for fiscal year 2026-2027 to be deposited into the
Hawaii hemp fiber special fund.

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SECTION
7
.
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There is appropriated out of the
Hawaii hemp fiber special fund the sum of
$ or so much
thereof as may be necessary for fiscal year 2026-2026 for the hemp paper
packaging pilot program; provided that money appropriated pursuant to this
section shall not lapse at the end of the fiscal year for which the moneys have
been appropriated; provided further that any moneys appropriated pursuant to
this section that are unexpended or unencumbered as of June 30, 2030, shall
lapse on that date.

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The
sum appropriated shall be expended by the department of agriculture and
biosecurity for the purposes of this Act.

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SECTION 8.
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If any provision of this Act, or the application thereof to any person
or circumstance, is held invalid, the invalidity does not affect other
provisions or applications of the Act that can be given effect without the
invalid provision or application, and to this end the provisions of this Act
are severable.

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SECTION 9.
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In codifying the new sections added by section 2 of this Act, the
revisor of statutes shall substitute appropriate section numbers for the letters
used in designating the new sections in this Act.

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SECTION 10.
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This Act shall take effect on July 1, 2026, and shall be repealed on
June 30, 2030.

INTRODUCED BY:

_____________________________

Report Title:

Department
of Agriculture and Biosecurity; Industrial Hemp; Agriculture; Hawaii Hemp Fiber
Special Fund; Hemp Paper Packaging Pilot Program; Reports; Appropriation

Description:

Establishes the
Hawaii
Hemp Fiber Special Fund.
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Establishes
the
Hemp Paper Packaging Pilot
Program.
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Establishes the Industrial
Hemp License Surcharge.
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Requires reports
to the Legislature.
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Appropriates funds.
�
Sunsets 6/30/2030.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.