2-20-23 Senate 3rd Read
3-13-23 Held March 6th, Land, Agriculture & Rural Affairs Committee
Revises findings and requirements for rulemaking, licensing, inspection, recordkeeping and
enforcement for industrial hemp and hemp-derived products.
After years of being regulated as a controlled substance, industrial hemp production has been
gradually legalized under federal and state law. The Agricultural Improvement Act of 2014 allowed
state departments of agriculture and higher education institutions to produce hemp as part of a
research pilot program or if the cultivating industrial hemp is allowed under the state law. Crucially,
hemp crops must have a Delta-9 tetrahydrocannabinol (THC) concentration of 0.3% or less (dry
weight); otherwise, they are considered marijuana and classified as a Schedule 1 controlled
substance. (Public Law 113-79). The Agriculture Improvement Act of 2018 authorized the
production of hemp and removed hemp and hemp seeds from the Drug Enforcement
Administration’s Schedule of Controlled Substances. This act also directed the U.S. Department
of Agriculture (USDA) to issue regulations and guidance to implement a program for hemp
production in the United States (Public Law 115-334). The U.S. Domestic Hemp Production
Program was established the following year (84 Federal Register 58522). The program allows
states and Indian Tribes to have primary regulatory authority over their hemp production if their
programs meet certain requirements—including licensing, recordkeeping and monitoring for
compliance—and are approved by the USDA. All plans are required to contain. States and Indian
tribes that choose not to operate their own programs or whose plans are not approved are subject
to a federal plan issued by the Secretary of USDA (7 C.F.R. Part 990).
Arizona established a regulatory program for commercial industrial hemp production and a pilot
program for this crop in 2018. The Arizona Department of Agriculture licenses those who grow,
harvest, transport, and process hemp and certifies hemp seed in accordance with its rules. As
part of the department’s oversight role, it can conduct inspections and collect samples for analysis
(Laws 2018, Chapter 287). This industrial hemp program regulatory program received USDA
approval and became effective in 2022.
Definitions (Sec. 1)
- Removes the definition of agricultural pilot program and hemp products.
- Adds to the definition of crop any industrial hemp grown under an authorized industrial hemp
program of USDA, another state, Indian tribe or United States territory or an industrial hemp
program under the authorization of the USDA Director.
- Adds to the definition of grower anyone who produces industrial hemp.
- Defines hemp-derived products as any product or by-product derived from the flower or flower
parts of the hemp plant or any derivative, extract, cannabinoid, isomer, acid, salt or salt of
isomers of an authorized industrial hemp crop that is intended for human or animal
consumption, inhalation or topical application.
- Specifies that hemp-derived products do not include hemp seed, industrial hemp products not
intended for human or animal consumption or any drug that does not qualify for an exception
for criminal possession, use, production, sale or transportation of marijuana.
- Includes in the definition of industrial hemp or hemp all seeds and derivatives, extracts,
cannabinoids, isomers, acids, salts and salts of isomers.
- Defines industrial hemp products as the products and byproducts made from the sterile seed,
stem, stalk or immature plant of a crop, not including hemp seed, hemp-derived products,
hemp flower or flower parts, or any derivative, extract, cannabinoid, isomer, acid, salt or salt
of isomers of industrial hemp.
- Adds to the definition of license an authorization granted by AZDA to anyone producing,
manufacturing or offering industrial hemp for retail sale.
- Adds to the definition of licensee a manufacturer or retailer with a valid license.
- Defines manufacturer as an individual, partnership, company or corporation that is licensed
by AZDA to receive industrial hemp or hemp-derived product components for manufacturing
- Defines retailer as an individual, partnership, company or corporation that offers hemp-derived
products for sale.
- Defines total Delta-9 Tetrahydrocannabinol Concentration as the value determined after the
process of decarboxylation or the application of a conversion factor that expresses the
potential total Delta-9 THC content derived from the sum of the THC and
Tetrahydrocannabolic Acid content and reported on a dry-weight basis.
Legislative Findings (Sec. 2)
- States that the purpose of the article is to allow commercial production of industrial hemp as
authorized by federal law while maintaining strict control of marijuana.
- Authorizes industrial hemp propagation, production, harvesting, transporting, processing,
manufacturing and retailing in the state pursuant to statute and the rules and orders adopted
by the AZDA Director.
- Allows industrial hemp research to be conducted in the state under an exempt fee license
issued by AZDA so long as the industrial hemp produced does not enter the stream of
commerce and is disposed of according to the rules and orders adopted by the director, unless
the hemp seed is produced under an exempt fee that complies with statute.
a) pilot program approval and authorization for industrial hemp growth, research, cultivation
and marketing; and
b) authorization of hemp seed that is derived from previously authorized hemp seed.
- Requires the AZDA Director to oversee and prescribe requirements for labeling and retail sale
of hemp-derived products. (Sec. 3)
- Requires the AZDA Director to use rulemaking to protect the health, safety and welfare of
consumers. (Sec. 3)
- Allows the AZDA Director to authorize qualified applicants to produce or manufacture
industrial hemp. (Sec. 3)
- Requires AZDA to use fees established by the AZDA Director to regulate hemp-derived
products. (Sec. 3)
- Exempts AZDA from rulemaking requirements for one year. (Sec. 8)
Licenses (Sec. 4)
- Requires a manufacturer or retailer of industrial hemp to apply for and obtain a license from
- Exempts applicants for retail licenses from being required to provide proof of possession of a
fingerprint clearance card when establishing license eligibility.
- Removes the provision that a member of an Indian tribe may apply for a license pursuant to
the same requirements prescribed by statute and making the member subject to the same
Inspection & Recordkeeping
- Specifies that the state agricultural laboratory or a laboratory certified by the state agricultural
laboratory may perform an official analysis of an industrial hemp site to ensure compliance
with AZDA rules. (Sec. 5)
- Allows the official analysis of a crop to determine the total delta-9 THC concentration within
an acceptable margin of error. (Sec. 5)
- Allows the total delta-9 THC concentration to be calculated using a chromograph technique
that uses heat to convert THC acid into tetrahydrocannabinol or a liquid chromograph
technique that uses the conversion Total THC = [(0.877 X THC acid) + Tetrahydrocannabinol].
- Removes the requirement that a licensed grower notify the department of the sale or
distribution of any industrial hemp grown under the grower’s license, the name and address
of the person or entity receiving the industrial hemp, and the amount of industrial hemp sold
or distributed. (Sec. 5)
- Allows the AZDA Director or a designee to enter any public or private premises during regular
business hours to access regulated products and records and evaluate compliance with
department rules and statute. (Sec. 5)
- Allows the director of AZDA to issue and enforce a written cease and desist order against an
industrial hemp licensee that prohibits further manufacturing except on approval of the
director. (Sec. 6)
- Adds hemp-derived product to the list of crops and products that the director of AZDA is
allowed to seize and destroy for noncompliance with its rules. (Sec. 6)
- Makes the possession of an industrial hemp license or status as a designee or agent of a
licensee an affirmative defense to any prosecution for the possession or cultivation of
marijuana or narcotic drugs. (Sec. 7)
- Excludes the possession of an industrial hemp license as a defense to a charge of possession,
sale, transportation or distribution of marijuana or narcotic drugs. (Sec. 7)
- Makes technical and conforming changes. (Sec. 1-6)