Hemp-Derived Products: The Law Does Not Stop at Labeling Requirements

I work with many manufacturers and distributors of hemp-derived products and am often surprised by the fact that few understand their general obligations beyond labeling requirements.

Every state that authorizes and formally regulates the manufacture, distribution, and sale of these products – Colorado is a good example – imposes stringent manufacturing requirements that squarely align with those imposed on food products, dietary supplements, and cosmetics free of a hemp-derived ingredients under the Federal Food, Drug, and Cosmetic Act (FDCA).

Some of these requirements include complying with Current Good Manufacturing Practice (CGMP) to ensure the quality and safety of food products, dietary supplements, and cosmetics, as well as deliver properly labeled products to consumers. CGMPs provide for mechanisms that assure monitoring and control of manufacturing processes and facilities. This includes, for example, registering the manufacturing facility for inspection purposes, establishing standard operating procedures (SOPs), detecting and investigating product quality deviations, using reliable testing protocols, and ensuring proper packaging and labeling.

Both federal law and state laws prohibit the introduction or delivery into interstate commerce and intrastate commerce of any food, dietary supplement, or cosmetic that is adulterated or misbranded. The FDCA defines “interstate commerce” to mean commerce between any State, the District of Columbia, or Territory and applies to all steps in a product’s manufacture, packaging, and distribution. Because “interstate commerce” is broadly defined, nearly everyone involved in the supply chain (manufacturers, packers, distributors, and retailers) is responsible for ensuring that they are not dealing with products that are unsafe for human consumption, or products that contain inaccurate, false, or misleading information on the label or packaging– EVEN IF someone else caused the adulteration or misbranding. In other words, if a company introduces a product into interstate commerce or receive it in interstate commerce, they are responsible for any issue with the product. It is also worth pointing out that even if a company limits the sale of their products within one state (i.e., “intrastate commerce”), chances are, some of their ingredients or packaging originate from another state or country, and thus fall under the definition of “interstate commerce.”

As such, these interstate and intrastate obligations force everyone in the supply chain to play their part and help mitigate the risk of product defect. For instance, distributors of dietary supplements must establish and follow written procedures for holding and distributing operations that will protect the finished product against contamination and deterioration. This includes holding products under appropriate conditions of temperature, humidity, and light so that the product’s purity, strength, and composition are not compromised between the time it leaves the manufacturer’s facility and lands on the retailers’ shelves.

These mutual obligations further mean that companies should enter into thoroughly drafted agreements that clearly stipulate each party’s obligations and liabilities. These agreements should contain, at a minimum, robust representations and warranties regarding the parties’ compliance with all relevant regulations and obligations to disclose specific information, such as SOPs and product recalls, to the other side, as well as sound indemnification provisions.

The lack of federal regulations regarding the manufacture, sale, and marketing of hemp-derived products should not deceive stakeholders into thinking that state and other general requirements imposed on food products, dietary supplements, and cosmetics do not apply to hemp-derived products. If anything, lawfully venturing into this market is twice as burdensome on these manufacturers, packers, distributors, and retailers because they must meet twice as many requirements: those generally imposed on the category of products they are producing and selling AND hemp-specific requirements.

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