5 August 2020

Announcement on CBD extracts may have huge consequences

Category: European law

Over the past few months, the European Commission (Commission) has been involved in extensive discussions over novel food applications. In particular, the Commission has been debating whether CBD extracts derived from the ‘hemp flower’ meets the definition of a narcotic for the purpose of novel food applications.

Notably, the Commission has reached a preliminary view on this question and have announced their plans to reject novel food applications for (food) products derived from the hemp flower. This is based on the opinion that such products contain a ‘cannabis extract’ and thus fall within the definition of a narcotic. The position taken by the Commission, although not yet final, could have huge implications for CBD related stakeholders and the industry itself.

What action has been taken to date?

Operators who have related novel food applications have already been informed of the Commission’s preliminary view and have been given two months to provide their submissions on the topic, after which a final decision will be taken. Until a final decision is made, operators should be aware that all novel food applications for products containing extracts derived from the hemp flower will be paused indefinitely, pending the final decision.

What is the basis for the Commissions position on cannabis?

The Commission’s position is essentially founded in the United Nations Single Convention of Narcotic Drugs’ (Single Convention) definition of ‘Cannabis and cannabis resign’ and ‘Extracts and tinctures of cannabis’. These two groups are perceived as narcotics under the Single Convention and historically didn’t regulate CBD. The focus is on THC and other substances in the Cannabis plant family. The Commission’s view is that food products made from hemp flowers contain ‘extracts of cannabis’. This means these products would classify as narcotics.

Impact on novel food stakeholders and the CBD industry in the Netherlands?

Classifying products made from hemp flowers as a narcotic, has a big impact. The EU General Food Regulation does explicitly exclude narcotics from the scope of ‘foods’. This means that ‘food products’ made from hemp flower are no longer classified as ‘foods’, which means that no novel food application would be required. For now, this means that any pending novel food application will be paused indefinitely.

This also means that the products might no longer be fit for distribution or sale within the EU. If a food product includes a narcotic or psychotropic ingredient (although no longer classifying as a food product under EU law), it is not fit for distribution or sale within the EU; hemp flower foods could be illegalized.

EU rules potentially damaging for providers of CBD and Hemp products

Many operators in the CBD industry will arguably perceive this as a narrow and restrictive definition. This is because in terms of the current definition, a food product containing an extract derived from the hemp plant will be considered partly narcotic or psychotropic, regardless of the plants’ THC content or whether it was legally grown.

It is widely recognised that operators who are planning to invest in CBD related novel food applications (or have already done so) are mainly involved in the sale and distribution of ingestible food products. These products typically use a CBD extract derived from, among others, the hemp flower, which means that the Commission’s decision would restrict the lawful sale of these products across the EU.

Apart from the devastating effects on operators, the Industry is set to face a massive setback from the Commission’s potential decision. After experiencing such steady growth in 2018 and 2019, 2020 may prove to be fatal, over and above the already harmful effects of COVID-19. For example, start-ups and established companies may find it increasingly harder to source investment from the EU and will thus shy away from conducting business in the Netherlands, which has attracted an increasingly steady flow business over the years.

How are food operators safeguarding against the potential decision?

In anticipation of the Commission’s final decision, it is expected that many operators will change their labelling to a ‘non-food’ item and pivot the way in which they source their particular CBD extract. This would mean turning to synthetic sources of CBD extract as opposed to the hemp-flower. In addition, it is likely that many investors and companies in the industry will explore new markets and alternative supply chains as opposed to the established centres in Europe, of which the Netherlands is one of the main hubs.

When will the Commission’s final decision on novel food be made?

At this stage, it is uncertain when the Commission will be making their final decision, however, relevant stakeholders with related novel food submissions have already been notified of the preliminary view and have been requested to submit their comments. Until such time as the decision is made, it is important to assess one’s risk and appropriate ways of safeguarding one’s business in light of the impending decision.

To find out more on this topic and how we can assist you, please contact our specialist lawyers in the industry, Mark van Weeren and Simon de Graaff.