Upon the effective date of designation of a State under paragraph 301(c) of the Act, no products can be prepared within the State unless they are prepared under inspection pursuant to the regulations in this subchapter or are exempted from the requirement of inspection under §303.1 of this subchapter, and no unexempted products which were prepared without any inspection can lawfully be distributed within the State. For a period of 90 days from the effective date of such designation, products which were prepared and inspected and passed under the supervision of a responsible State or local inspection agency can be distributed solely within the State, provided they are not adulterated or misbranded, except that the official inspection legend is not required. Within the 90-day period, products that have been inspected by the State or local inspection agency may be further prepared and otherwise handled in official establishments required to have inspection under §302.1(a)(2) of this subchapter or at establishments exempted from the requirements of such inspection under §303.1 of this subchapter, and may be distributed as provided in this section but otherwise shall be handled in accordance with §305.4 of this subchapter. Such products shall not bear any [Federal] official inspection legends. After said 90-day period, only federally inspected and passed products may be distributed within the designated State, except as provided in §303.1 of this subchapter.