One of the biggest obstacles for CBD oil distributors and manufacturers in the EU has been the confusion surrounding the legality of certain cannabidiol (CBD) applications. The cosmetics industry has become the latest segment of the private sector to fall victim to this legal grey area. While cannabis is still a strictly government-controlled substance, the legislation surrounding European cosmetics does not properly account for the use and application of CBD. As a result, many industry players have struggled for years to determine whether or not the cosmetics industry was a viable path for cannabidiol companies. Fortunately, a recent ruling by the European Commission may have finally settled this ambiguity by laying the groundwork for a new, legal CBD market.
Overcoming Legal Ambiguity in the CBD Cosmetics Market
European cosmetics isn’t the only industry to be seriously affected by the legal ambivalence of cannabis-products. Earlier this year, businesses were ‘raided’ by government officials in light of the growing confusion around CBD regulations. An Ireland-based CBD café owner, JP O’Brien, has had his products seized, as well as his business and home raided, on several occasions. Even his customers have been threatened with similar repercussions and arrests. This isn’t because O’Brien is actively disobeying the laws, either. In fact, he believes he was following them.
In response to these raids, the executive director of the Hemp Federation Ireland (HFI) has called on the Irish Minister of Health to restore clarity to these regulations by incorporating the lawful, science-based amendments. A spokesperson from the Food Standards Authority in Ireland (FSAI) recently described these incidents as a disconnect between the EU’s own laws and practices. The 0.2% THC threshold set by the EU is, in her opinion, often misunderstood as the tolerance level for THC in food. In reality, the threshold only relates to the import of hemp products (not food) as well as the cultivation of hemp varieties that contain THC. Currently, there is no designated threshold for tolerance set at an EU level. This has inspired countries like the U.K. to introduce a health and safety application process for all foods containing CBD. Though this, too, has resulted in similar regulation problems regarding legalization before and after the March deadline.
As cannabis legalization across Europe continues to progress, many businesses, markets, and industries will have to learn to navigate the fluidity of this legal landscape with as little consequence as possible. Up until now, this has been an extremely difficult endeavour, and one that has generated a lot of hesitancy amongst entrepreneurs and investors looking to enter the European CBD market. The European Commission’s recent regulation update on CBD usage in cosmetics reflects the government’s desire to eliminate legislative confusion and facilitate business. But will this new entry encourage CBD development in Europe or hinder it completely?
Is CBD a Legal Cosmetic Ingredient in the EU?
On February 4, the European Union added cannabidiol to its CosIng guidelines as a legal cosmetic ingredient. CosIng, for those who are unfamiliar, is a database that specifies the authorized and unlawful ingredients that reflect current EU cosmetics regulations. By adding CBD to this already established database, the EU is almost expressly giving permission to cosmetic companies to integrate CBD into their products. This regulatory change, however, does have a catch. According to the European Commission, this new entry only applies to CBD that has been ‘derived from extract or tincture or resin of cannabis,’ not those that have been synthetically produced. This presents a significant wrinkle for not only the cosmetics industry, but also the cannabis industry as a whole. Is synthetic CBD an illegal cosmetics substance? And how should manufacturers and distributors respond?
The Financial Implications
Legal ambiguity, once again, plays a large role in determining the impact of this entry on the CBD cosmetics market. While there is still much to obtain with regards to THC thresholds, as well as health and safety standards, the lack of explicit mention of synthetic CBD poses yet another potentially dangerous grey area. This ambiguity could have serious financial ramifications in terms of how manufacturers diversify or specialize their production.
The areas of production that manufacturers adhere to will also affect their marketability when it comes to distributors looking to capture multiple CBD market segments. Those that specialize in synthetic CBD manufacturing, for instance, may be only valuable to distributors entering segments outside of the CBD cosmetics market. Certain CBD markets in the EU, for example, only permit the usage of synthetic CBD based on the legal ambivalence of the cannabis flower. In the KanaVape case, the European Court of Justice (ECJ) ruled that only the cannabis flower was prohibited from being sold and marketed under French law, and that synthetic CBD was an acceptable and legal product (under the current THC threshold). Why this is a particularly frustrating scenario for many CBD entrepreneurs in Europe is because synthetic and natural CBD (depending on the production method) can share identical chemical properties, making the entire legal landscape completely arbitrary. This isn’t the only financial consequence of banning synthetic CBD as a cosmetic ingredient, though.
Two of the many advantages of synthetic CBD, from a production standpoint, are consistency and efficiency. It is much more cost-effective to produce synthetic CBD than natural CBD because synthetic alternatives can be manufactured in a laboratory setting. This gifts CBD companies the opportunity to produce a precise and pure product that is consistently within the same range of quality. While there isn’t enough information to make a conclusion regarding the cost comparisons of synthetic and natural CBD, a ban like this could act as a substantial barrier for firms who lack access to the land, climate, and legislation required to sufficiently produce CBD on a regular basis.
Therefore, while CBD’s entry as a legal cosmetic ingredient is a huge opportunity for new CBD entrants, it also poses a lot of questions in terms of supply-side decisions. To minimize the number of barriers facing your CBD operation, partner with a wholesale CBD manufacturer who knows the market and existing regulations. To learn more about CanX and its services, contact our team today for more information.