House committee substitute to the 2nd edition makes the following changes.

Part I.

Organizes proposed new GS Chapter 18D into Articles.

Article 1.

Amends the definitions in GS 18D-100 as follows. Amends the definition of cannabinoid by amending the list of included photocannabinoids; adds that the term also includes any synthetic cannabinoid derived from a source other than hemp. Changes the definition of hemp-derived consumable product to a hemp product intended for human ingestion or inhalation that contains a concentration of not more than 0.3% on a dry weight basis total combined of delta-9 tetrahydrocannabinol, delta-7 tetrahydrocannabinol, delta-8 tetrahydrocannabinol, or delta-10 tetrahydrocannabinol, or any amount of another cannabinoid; further excludes from the term seeds or seed-derived ingredients that are generally recognized as safe by the US FDA. Removes the term hemp-derived psychoactive cannabinoid. Amends the definition of independent testing laboratory to require that it hold an ISO 17025 accreditation or be registered with the Drug Enforcement Administration (DEA), instead of requiring both. Amends the definition of manufacture to also include packaging hemp-derived consumable products and to no longer specify that the term includes the process of extraction or infusion of hemp-derived cannabinoids and packaging, repacking, labeling, and relabeling of hemp-derived consumable products. Amends the definition of manufacturer to also include a person or entity engaged in the process of manufacturing hemp-derived consumable products.

Amends proposed GS 18D-101 as follows. Prohibits knowingly, or having reason to know, selling at retail a hemp-derived consumable product that has a concentration of more than 0.3% on a dry weight basis total combined of delta-9 tetrahydrocannabinol, delta-7 tetrahydrocannabinol, delta-8 tetrahydrocannabinol, or delta-10 tetrahydrocannabinol (was, has a delta-9 tetrahydrocannabinol concentration of more than 0.3% on a dry weight basis). Adds that when a penalty is imposed for violating this prohibition, the seller must also pay the actual costs paid for testing the samples that resulted in the violation; requires the fees to be remitted to the ALE Division. Specifies that penalties received as on offer in compromise must also be remitted to the Civil Penalty and Forfeiture Fund. Makes a subsequent violation of the prohibition on engaging in the business of selling a hemp-derived consumable product without a valid license a Class A1 misdemeanor.

Amends proposed GS 18D-103 as follows. Makes it illegal for a manufacturer or distributor to knowingly, or having reason to know, manufacture or distribute a hemp-derived consumable product that has a concentration of more than 0.3% on a dry weight basis total combined of delta-9 tetrahydrocannabinol, delta-7 tetrahydrocannabinol, delta-8 tetrahydrocannabinol, or delta-10 tetrahydrocannabinol (was, has a delta-9 tetrahydrocannabinol concentration of more than 0.3% on a dry weight basis); makes conforming changes. Adds that when a penalty is imposed for violating this prohibition, the seller must also pay the actual costs paid for testing the samples that resulted in the violation; requires the fees to be remitted to the ALE Division. Specifies that penalties received as on offer in compromise must also be remitted to the Civil Penalty and Forfeiture Fund. Provides that when the Department of Revenue (Department) is entitled to suspend or revoke a manufacturer’s or distributor's license (was, seller’s license) the Department may accept an offer in compromise to pay a penalty of not more than $8,000. Makes additional conforming changes.

Amends GS 18D-106 (now GS 18D-104), as follows. Requires a hemp-derived consumable product to be tested before distribution to determine the presence and amounts of the 101 listed substances (was, seven listed substances). Prohibits the products from exceeding the amounts listed for those substances. Violations will result in one or more of the following actions: (1) suspended license for no more than three years; (2) revocation of the license; (3) impose conditions on the operating hours of the licensee's business; or (4) impose civil penalties as follows: no more than $1,000 for a first violation, no more than $5,000 for a second violation within three years, and no more than $7,500 for a third violation within three years of the first violation. Allows the Department, when it is entitled to suspend or revoke a manufacturer's or distributor's license, to accept an offer in compromise to pay a penalty of not more than $8,000. Allows the Department to accept a compromise or revoke a license, but not both; allows the Department to accept a compromise and suspend the license in the same case. Requires the proceeds of the penalties, including those received as an offer in compromise, to be remitted to the Civil Penalty and Forfeiture Fund. Makes additional conforming changes.

Amends GS 18D-107 (now GS 18D-105) by amending and expanding upon the statements that must be included in the consumer protection warnings on hemp-derived consumable products. Prohibits a hemp-derived consumable product intended for ingestion from being sold in a serving that contains more than 100 milligrams, in the aggregate, of one or more of the four listed hemp-derived cannabinoids; and specifies that the prohibition on selling in a serving that contains more than 200 milligrams of one or more hemp-derived cannabinoids includes any of those four listed hemp-derived cannabinoids. Violations will result in one or more of the following actions: (1) suspended license for no more than three years; (2) revocation of the license; (3) impose conditions on the operating hours of the licensee's business; or (4) impose civil penalties as follows: no more than $1,000 for a first violation, no more than $5,000 for a second violation within three years, and no more than $7,500 for a third violation within three years of the first violation. Allows the Department, when it is entitled to suspend or revoke a manufacturer's or distributor's license, to accept an offer in compromise to pay a penalty of not more than $8,000. Allows the Department to accept a compromise or revoke a license, but not both; allows the Department to accept a compromise and suspend the license in the same case. Requires the proceeds of the penalties, including those received as an offer in compromise, to be remitted to the Civil Penalty and Forfeiture Fund.

Moves GS 18D-109 (now GS 18D-106) into Article 1.

Article 2.

Places provision related to the regulation of kratom products under Article 2 instead of in new GS Chapter 18E and makes the following changes.

Amends the definition in GS 18D-200 by changing the term processor to manufacturer; maintains the definition and updates the term throughout.

Amends GS 18D-201 (was, 18E-101) as follows. Allows the Department, when it is entitled to suspend or revoke a seller’s license, to accept an offer in compromise to pay a penalty of not more than $3,000. Allows the Department to accept a compromise or revoke a license, but not both; allows the Department to accept a compromise and suspend the license in the same case. Adds that when a penalty is imposed for violating the prohibition on knowingly, or having reason to know, selling at retail a kratom product that violates the product limitations, the seller must also pay the actual costs paid for testing the samples that resulted in the violation; requires the fees to be remitted to the ALE Division. Specifies that penalties received as on offer in compromise must also be remitted to the Civil Penalty and Forfeiture Fund. Makes a subsequent violation of the prohibition on engaging in the business of selling a kratom product without a valid license a Class A1 misdemeanor.

Amends GS 18D-203 (was, 18E-103) as follows. Provides that when the Department is entitled to suspend or revoke a manufacturer’s or distributor's license (was, seller’s license) the Department may accept an offer in compromise to pay a penalty of not more than $8,000. Adds that when a penalty is imposed for violating the prohibition to knowingly, or having reason to know, manufacture or distribute a kratom product that violates the product limitations, the seller must also pay the actual costs paid for testing the samples that resulted in the violation; requires the fees to be remitted to the ALE Division. Specifies that penalties received as on offer in compromise must also be remitted to the Civil Penalty and Forfeiture Fund.

Article 3.

Article 3 pertains to licensing, combing provisions previously found in 18D-105 and 18E-105. Specifies that a person or entity engaged in more than one of the businesses listed is required to obtain only a single license. Amends the fees for a license to manufacture hemp-derived consumable products or manufacture kratom products, or to distribute hemp-derived consumable products or kratom products, to allow for a lower fee if the applicant can demonstrate their gross income for the prior calendar year was less than $100,000.

Allows the Department to revoke or refuse to issue any license for: (1) failure to comply with or meet any of the licensure qualifications; (2) submission of false or misleading information in an application for licensure or renewal; (3) submission of false or misleading information in any report or information required by this Chapter to be submitted to the Department; and (4) failure to comply with civil penalties.

Requires that proceedings for the assessment of civil penalties authorized in Articles 1 and 2 be governed by GS Chapter 150B. Upon failure to pay a penalty, allows the Department to institute an action in the superior court of the county in which the person resides or has their principal place of business to recover the unpaid amount; specifies that this recovery does not relieve any party from any other penalty prescribed by law.

Requires the Department to develop and make available online an application for the license required by this Article.

Article 4.

Article 4 contains enforcement provisions previously found in GS 18D-104 and makes them applicable to both hemp-derived consumable products and kratom.

Authorizes the ALE Division to take reasonable samples of inventory for testing in order to determine compliance. Requires the ALE Division to report to the Department any violations for which civil penalties are authorized.

Expands upon the forfeiture provisions as follows. Requires safe storage of a product subject to forfeiture until trial. Allows the presiding judge in a criminal proceeding for violation of GS 18D-101(a)(4) or GS 18D-103(a)(3) to do the following after resolution of a charge against the owner or possessor of products subject to forfeiture: (1) if the owner or possessor of the product is found guilty of specified violations, the judge must order the product forfeited; (2) if the owner or possessor of the product is found not guilty, or if the charge is dismissed or otherwise resolved in favor of the owner or possessor, the judge must order the product returned to the owner or possessor; (3) if the product is also needed as evidence at an administrative hearing, the judge must provide that the order does not go into effect until the Department determines that the product is no longer needed for the administrative proceeding. Requires a judge ordering forfeiture of property to order the product destroyed. Allows the owner of products seized for forfeiture to apply to have the products returned if no criminal charge has been made in connection with that product within a reasonable time after seizure. Prohibits ordering return of the product if possession by the owner would be unlawful.

Part II.

Changes the effective date of the repeal of GS 90-94.1 to December 1, 2023 (was, July 1, 2023).

Part III.

Reduces the amount appropriated to the Department of Public Safety for other costs incurred by the Department of Revenue in implementing the act from $500,000 to $375,000 and appropriates $125,000 to be used for any other costs incurred by the ALE Division in implementing the act.

Part IV.

Amends the changes in the bill to Article 29A of GS Chapter 115 to now also include kratom products.

Further amends GS 115C-407 by removing the requirement that the North Carolina Health and Wellness Trust Fund Commission work with local boards of education to provide assistance with the implementation of the policy prohibiting tobacco use in school buildings, grounds, and events, including providing information regarding smoking cessation and prevention resources.

Makes the changes in this section applicable beginning with the 2024-25 school year instead of the 2023-24 school year.

Makes conforming and technical changes throughout. Amends the act’s long title.