Texas Built Two Hemp Programs. It Forgot the Handoff.
TDA Finally Defines What a Texas Hemp Processor Can Do
TDA says a registered hemp processor may perform any duties necessary to convert an agricultural commodity into a marketable form. That clarification raises a much bigger question: Why does Texas still lack a workable pathway from agricultural hemp processing into consumable hemp manufacturing?
Author’s note: I am not an attorney, and this article is not legal advice. This is an industry and policy analysis based on Texas statutes, agency rules and a written response I received from the Texas Department of Agriculture. Any legal significance, including its relevance to pending litigation, must be determined by attorneys and the courts.
“A registered hemp processor can perform any duties associated with or necessary to their processing procedure of converting the agricultural commodity into a marketable form.”
That statement did not come from an industry advocate, attorney or hemp business. It came directly from the legal department of the Texas Department of Agriculture.
I recently asked Texas Agriculture Commissioner Sid Miller’s office for a plain-language explanation of what a Texas Industrial Hemp Processor Registration actually authorizes. Commissioner Miller forwarded the inquiry to TDA’s legal department, and Deputy General Counsel for Enforcement and Compliance David A. Castillo provided a written response.
The answer is significant because Texas law has never clearly explained the practical scope of a hemp processor registration. TDA’s rules define processing broadly as converting an agricultural commodity into a marketable form, but the rules provide very little detail about the activities, materials and business relationships that fall within that authority.
TDA’s written response provides some of that missing explanation. It also exposes the larger regulatory disconnect between TDA’s agricultural hemp program and the Department of State Health Services’ consumable hemp program.
What TDA Confirmed
TDA’s legal department confirmed that registered hemp processing is not limited to storing or drying harvested plants. A registered processor may perform any duties associated with or necessary to its process of converting the agricultural commodity into a marketable form.
That language matters.
Agricultural processing can include multiple stages of handling, separation, extraction, refinement, stabilization, packaging and other forms of value-added production. Not every marketable hemp commodity is a finished product intended for a consumer. Hemp may move through several agricultural and industrial forms before it becomes an ingredient in food, beverages, cosmetics or other consumable products.
TDA also confirmed that a registered Texas processor may receive compliant hemp from licensed producers or processors in other states. The shipment must be accompanied by a transport manifest or other valid documentation authorized by another state, USDA, a Tribal nation or a U.S. territory. TDA identified the transfer or transport manifest and chain-of-custody form as the documents containing the necessary shipping, receiving and production information.
The department further confirmed that a registered processor may perform contract or toll processing for another licensed business. This allows one company to retain ownership of its hemp while another registered business provides specialized processing services.
That clarification is particularly important because TDA’s processor application requires the registrant to certify that it will not handle, store or process hemp that it does not own or completely control. TDA’s legal response explains that ownership is not required and that properly completed transfer, transport and chain-of-custody documentation should demonstrate the control necessary to perform contract processing.
Taken together, the response recognizes a real agricultural supply chain. Hemp can move between licensed businesses. It can cross state lines with the appropriate records. It can be processed under contract. And a registered processor may perform the activities necessary to turn that hemp into a marketable nonconsumable commodity.
But the response also places one major limitation on that authority: TDA regulates only nonconsumable hemp processing.
The letter then reaches the sentence that exposes the unresolved problem:
“TDA no longer regulates hemp once it has passed a lab test showing it has a THC level below .3% and when it becomes or starts the process of becoming a consumable product.”
That is where the Texas hemp supply chain loses its clearly defined path.
Where Does TDA End and DSHS Begin?
TDA regulates hemp cultivation and the processing of nonconsumable agricultural commodities. DSHS regulates the manufacturing and processing of consumable hemp products.
On paper, the distinction sounds straightforward. Agricultural commodities remain under TDA until they become consumable products regulated by DSHS.
In practice, hemp does not move directly from a plant in a field into a finished gummy, beverage, tincture or topical. It may be dried, separated, extracted, concentrated, refined or combined with other ingredients before reaching its final form.
A finished consumable hemp product is something prepared for human or animal use, such as a packaged food, drug, device or cosmetic. Raw biomass is not yet that final product. Neither is every bulk oil, extract, terpene fraction or intermediate ingredient moving through the supply chain.
DSHS’s current rules, however, reach further upstream. The agency defines a “hemp-derived cannabinoid product” as an intermediate or final product intended for human or animal use. It also defines processing to include extraction when the resulting component will be sold, incorporated or even intended for incorporation into a consumable hemp product.
Under that approach, the material does not have to be in its final packaged form before DSHS claims jurisdiction. Its intended future use may be enough to move it out of TDA’s processing framework and into the DSHS program.
That creates an obvious question: When does an agricultural commodity “start the process” of becoming consumable?
Is the line crossed when the farmer selects a buyer? When biomass enters an extraction machine? When a bulk ingredient is sold to a manufacturer? When the processor learns how the buyer intends to use it? When formulation begins?
Or only when the material actually becomes a food, drug, device or cosmetic?
The same equipment could process two identical lots of hemp into the same marketable material, yet the agency claiming jurisdiction could depend on what the future buyer intends to do with it.
That is not a clearly defined handoff.
The Legislature Expected TDA Hemp to Enter DSHS Manufacturing
The original Texas hemp law clearly anticipated that TDA-regulated hemp would move directly into DSHS-regulated manufacturing.
Texas Health and Safety Code §443.152 says a person licensed under Agriculture Code Chapter 122 must provide the agricultural test results to the license holder processing the hemp or using it to manufacture a consumable hemp product. Although the statute includes the words “if available,” preharvest testing is not optional for Texas-grown hemp.
Agriculture Code §122.153 requires a representative sample to be collected and tested before harvest. A grower may physically harvest after the sample is collected, but §122.202 permits the harvested plants to be sold or used only after the test results show that the represented lot satisfies the applicable THC limit. By the time Texas-grown hemp is lawfully released into the commercial supply chain, its required agricultural test results should therefore exist and travel with it.
The intended pathway is clear:
Texas hemp producer → required agricultural testing → TDA transport manifest and COA → DSHS-licensed manufacturer → finished consumable hemp product
The agricultural test is not an optional piece of supporting paperwork. It is the document that establishes the crop’s lawful release from the agricultural program and is supposed to provide the foundation for its entry into manufacturing.
What remains unclear is not whether the crop must be tested. It must be. The unanswered question is whether DSHS will accept that TDA compliance test at the handoff, or impose a new testing calculation that prevents the same agricultural material from entering consumable manufacturing.
If the farmer instead uses a specialized agricultural processor to create a marketable intermediate commodity, the pathway may look like this:
Texas hemp producer → agricultural testing → TDA-registered processor → documented intermediate commodity → DSHS-licensed manufacturer → finished consumable hemp product
TDA’s response provides important clarification for the first part of that second pathway. The registered processor may receive the hemp, perform contract processing and carry out the activities necessary to convert it into a marketable form.
The unclear part is what happens next.
There does not appear to be a separate “entry manifest” created by DSHS. The TDA transport manifest documents the movement of hemp outside the production facility. Once the material reaches a DSHS-licensed manufacturer, DSHS requires receiving records, supplier information, licensing documentation, raw-material or ingredient COAs and batch production records.
Those requirements create individual pieces of a recordkeeping system. They do not create a single interagency handoff showing precisely when the TDA-regulated commodity leaves the agricultural system, when DSHS accepts jurisdiction and whether the records accepted by one agency will satisfy the other.
The agricultural test is supposed to travel with the crop into manufacturing. The rules do not clearly explain how a processed agricultural commodity makes the same transition.
DSHS Created a Narrower Gateway
The handoff becomes even more complicated under DSHS’s 2026 rules.
Texas statutes define hemp and regulate consumable hemp products using a delta-9 THC concentration of no more than 0.3% on a dry-weight basis. DSHS has now created a separate definition of “total delta-9 THC” that includes the potential delta-9 THC calculated from THCA:
Total delta-9 THC = delta-9 THC + (0.877 × THCA)
DSHS applies that calculation to hemp plants before consumable processing, hemp-derived ingredients intended for further processing and finished consumable hemp products.
The rules also state that substances exceeding the acceptable total delta-9 THC level may not be transported into Texas for further processing. The current DSHS Chapter 300 rules are available here.
TDA says a registered processor may receive compliant hemp from a licensed out-of-state producer or processor with the appropriate transportation and chain-of-custody documentation. DSHS says material exceeding its total delta-9 threshold cannot enter Texas for further processing.
Those statements are not necessarily addressing identical products or circumstances. TDA’s authority is limited to nonconsumable hemp, while DSHS is regulating material intended for consumption. But that distinction brings the analysis directly back to the unanswered question: At what exact point does an intermediate agricultural commodity become subject to the consumable hemp rules?
Without a clearly defined answer, one agency may authorize the movement and processing of a documented agricultural commodity while the next agency rejects that material based on its intended use or a different testing calculation.
This Is Bigger Than THCA Flower
This regulatory problem should not be reduced to a debate over smokable THCA flower.
It can also affect biomass, full-spectrum extracts, solventless oils, rosin, mechanically separated extracts, recovered terpenes and other value-added hemp ingredients.
Processing naturally changes concentration. Removing cannabinoids from pounds of plant material and placing them into a smaller volume of oil or extract increases their percentage by weight. That concentration does not, by itself, determine how much THC will be present in a serving of the finished product, whether the process introduced harmful contaminants or whether the finished product will be safe for consumers.
An intermediate ingredient is not necessarily a finished consumable product. Concentration is not serving size. Potency is not provenance.
A functional regulatory system would test the crop for agricultural compliance, preserve its source and chain-of-custody records, regulate the methods used to create intermediate ingredients, test those ingredients for hazards associated with processing and then test and label the finished product according to its actual contents and intended use.
Instead, Texas is attempting to apply the same percentage-based calculation across plants, biomass, concentrated ingredients and finished products, materials that perform fundamentally different roles in the supply chain.
An Important Legal Distinction
TDA’s agricultural testing already accounts for the potential conversion of THCA during preharvest compliance testing. Texas Agriculture Code §122.153 requires post-decarboxylation, high-performance liquid chromatography or another similarly reliable method.
The issue is not whether THCA can ever be measured during agricultural testing.
The issue is whether that production-stage testing methodology automatically determines the legal standard for intermediate ingredients and finished products downstream, and whether DSHS has the authority to apply its “total delta-9 THC” definition across the entire supply chain when the statutory language repeatedly refers to delta-9 THC concentration.
I am not an attorney, and I am not claiming that TDA’s response resolves that legal question. It does not invalidate DSHS’s rules, bind DSHS or decide any pending lawsuit. Attorneys and the courts must determine whether the response has legal or evidentiary significance.
What the response does establish is how TDA’s legal department interprets its own processor program.
TDA recognizes that a registered hemp processor may perform any activities necessary to convert an agricultural commodity into a marketable form. It recognizes interstate receipt, contract and toll processing, documented custody and value-added agricultural processing.
TDA then says its jurisdiction ends when that commodity begins becoming consumable, but does not clearly identify when that transformation legally occurs.
DSHS has erected a narrower gateway on the other side without providing a unified path between the two programs.
Texas Needs a Defined Regulatory Handoff
Texas needs one written interagency pathway explaining which hemp commodities and intermediate ingredients may move from TDA jurisdiction into DSHS manufacturing, which licenses apply at each stage and when dual licensing is required.
Businesses need to know how a TDA transport manifest is closed or incorporated into DSHS receiving records, which agricultural COAs DSHS must recognize, when processing has materially changed an ingredient enough to require new testing and how contract or toll processing may lawfully continue across the jurisdictional boundary.
The state must also distinguish between agricultural compliance testing, intermediate-process controls and finished-product testing. Those are different regulatory functions, and they should not be collapsed into a single percentage calculation.
This is precisely why Texas needs a hemp commodity framework. Farmers cannot build markets when the regulatory identity of their crop changes at an invisible line. Processors cannot invest in infrastructure when their authority depends on a buyer’s future intentions. Manufacturers cannot create reliable products when the status of an ingredient changes between the loading dock and the production floor.
Texas legalized the crop. Texas authorized consumable hemp manufacturing. Those are not separate universes. They are consecutive stages of one supply chain.
TDA has now explained what a registered agricultural processor can do.
The question Texas must answer next is how the resulting commodity is supposed to reach the consumable market.
The problem is no longer that Texas lacks hemp rules.
The problem is that the rules do not connect.
Sources and Documents
This article is an industry and policy analysis for educational purposes. It is not legal advice.
CRAFT Strategies is working to build a clearer, safer and more functional regulatory framework for the Texas hemp supply chain. Follow our continuing Fix the Rules, Not the Plant series at joincraft.org.
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