Businesses are increasingly operating on a global scale, and this is having a significant impact on corporate law. For example, businesses need to comply with the laws of different countries, and they also need to consider the impact of international treaties on their operations. As businesses continue to globalize, it is likely that corporate law […]
A message from one of our clients, Baked Bros: https://youtu.be/toHKuRM5bqo
NCIA’s Cannabis Manufacturing Committee
In recent weeks, a growing number of respiratory illness cases associated with nicotine or cannabis vaporizer cartridges have been reported, leading to increasing concern among cannabis cartridge consumers, regulators, and medical experts. The vast majority of these reports are linked to cartridges that were produced and obtained in the illicit and unregulated market, or that were adulterated by consumers. The small number of cases that have so far been associated with legal cannabis products have not shown definitive links to those specific products.
Furthermore, similar cases of respiratory illness have not been reported in Europe, where the regulations governing vapor products are different. Even if, as we suspect, it is confirmed that the source of the current problem is limited to illicit-market products, there are valuable lessons to be learned to ensure the future safety of licensed vapor products and preserve our ability to promote vapor products as a viable and beneficial method of consuming cannabis.
Although cannabis vaporizers and nicotine e-cigs are not the same, there are important commonalities that we can learn from given that the nicotine e-cig market has been around for over a decade. First, it is essential to acknowledge the differences. Although some people view all vaping through the same lens, vaping cannabis and nicotine are as different as drinking alcohol and coffee. The formulations are vastly different in their chemical compositions, and usage patterns of cannabis consumption are far less intensive than those of nicotine e-cigs, which tend to be used many times throughout the day. Notwithstanding those differences, the principles of operation are the same; a heating element is generally used to aerosolize a stored liquid without combustion.
Moreover, in both cannabis and nicotine cartridges, the target active ingredient is typically combined in formulation with other organic compounds. These include glycerol (VG) and propylene glycol (PG) that are more commonly used in nicotine-containing cartridges and dictate the viscosity of the liquid. And flavorants, typically terpenes in the case of cannabis, are included in the formulation to provide particular taste and aroma characteristics.
Nicotine e-cigs have had numerous public health concern moments, some real and some manufactured, but one particular issue is especially illustrative to cannabis manufacturers. In the early days of e-cigs, some smaller e-cig manufacturers added diacetyl to their formulations in order to create flavored e-liquids with buttery notes. Those manufacturers assumed diacetyl to be safe because it is classified as GRAS (Generally Recognized As Safe) by the FDA (we eat it on our popcorn for goodness sake). Nevertheless, that GRAS classification was provided for ingestion, not inhalation. In fact, diacetyl had already been discovered to cause bronchiolitis obliterans, also known as “popcorn lung,” in popcorn factory workers in the early 2000s. And although no one was reported to have been hospitalized or died, the discovery of diacetyl in nicotine vapor products cast a cloud over the entire e-cig industry, even for those companies who employed scientists, practiced good product stewardship and developed internal lists of ingredients that led them to only include ingredients that had low inhalation toxicity risk profiles. This example illustrates that it is in our interest to ensure that all cannabis vapor product manufacturers understand that compounds that are characterized as GRAS are not necessarily safe for inhalation purposes and that an additional level of risk analysis must be performed.
We must ensure vapor product safety because the potential of cannabis vapor products to deliver the necessary medicine to patients without the harmful byproducts of combustion must not be undermined by industry missteps or the loss of public trust. Again, using nicotine e-cigs as an example, we know that vaporization can eliminate the byproducts of the combustion of plant materials. In one study, approximately 1,000 times less harmful chemicals like carbon monoxide, formaldehyde, and acetaldehyde were measured in e-cig vapor when compared to combusted cigarette smoke¹. Designed with the proper materials, protocols, and formulations, nicotine vapor products can have a very low-risk profile relative to combusted cigarettes. In fact, one nicotine vapor product has been evaluated as low risk enough to have been approved by the MHRA (UK equivalent of the FDA), thus adding to the evidence that, generally speaking, vaporization can be considered safer than combustion. Of course, confirmatory studies need to be done with cannabis but combined with the ability of vapor products to deliver fast-acting, precise doses of formulations that can be tailored to an individual’s needs, the importance of vaporized cannabis as a low-risk method of consumption is real.
With this in mind, we, as an industry, must develop standards and best practices. Doing so will build consumer trust while also providing guardrails that still allow for innovation. Other industries have done precisely this, including the fragrance and food additive industries. Moreover, if we do not develop our standards and only react to state regulations, which can tend to lag, we run a higher risk of similar problems in the future. A few simple principles can be applied to this problem.
Dear WINTER LLP Clients and Friends,
Please see the following summaries on new laws going into effect in 2020. This was a very favorable legislative sessions for the cannabis and hemp industries.
Additionally, further below these new laws you can find two new fact sheets published by the BCC related to Distribution.
As always, please let us know if you have any questions, or need any assistance with anything and everything!
SB-34 allows cannabis licensees to donate cannabis and cannabis products to medicinal cannabis patients who have difficulty accessing such products. The purpose of this is to enable ill, low-income individuals to have better access to medical cannabis. Prior law prohibited licensees from donating any amount of cannabis as a business promotion or other commercial activity. SB-34 was passed on October 12, 2019 and allows licensees to give medicinal cannabis products away to compassionate care patients. SB-34 provides for such donations to be excluded from taxes but specifies that if a donation-intended cannabis product is not donated, then the taxes will have to be paid on it subsequently. It will become operative when necessary changes are made to the state’s track-and-trace system or on March 1, 2020, whichever comes first.
SB-153 aims to bring California’s hemp regulations in line with the 2018 Farm Bill. Prior law established the California Industrial Hemp Farming Act and the Industrial Hemp Advisory Board, but this framework existed before the passage of the 2018 Farm Bill and thus is somewhat non-compliant. SB-153 was passed on October 12, 2019 and revises the Farming Act to better conform to the Farm Bill through the following: enhancing county agricultural commission reporting requirements, standardizing THC-level testing procedures, establishing violation consequences, placing temporary bans on individuals who have been convicted of a controlled substance-related felony and permanent bans on those who lied on their applications from participating in the industrial hemp program, and California to develop and submit a state plan for industrial hemp regulations to the federal government by May 1, 2020. SB-153 will go into effect on January 1, 2020.
SB-185 closes a loophole within the current cannabis appellation marketing laws. Prior law aimed to prevent companies from stating or eluding that their product is derived from one place when, in fact, it’s not by requiring that only produced which are 100% produced within the county can bear its name. An example of this would be a cannabis product named “Humboldt’s Finest” when it is not from Humboldt County. Prior law also requires the California Department of Food and Agriculture to establish appellation standards by January 1, 2021. SB-185 was passed on October 12, 2019 and builds on these foundations through various changes aimed to ensure that only products that are grown or produced within a defined boundary can be labeled with a name that includes the territory or any wording that is likely to mislead a customer for this purpose. SB-185 will go into effect on January 1, 2020.
SB-595 requires a cannabis licensing authority to develop and implement a fee deferral or waiver plan by July 1, 2020, to create a path for low-income individuals to apply for and receive cannabis licenses. Prior law authorized licensing authorities to collect fees for cannabis license applications. SB-595 passed on October 12, 2019 and requires them to create a fee waiver program for local equity applicants by January 1, 2021, and to allocate at least 60% of the dollar amount of waiver or deferral fees to equity those applicants. SB-595 will go into effect on January 1, 2020.
AB-1529 changes the requirements of labels on cannabis cartridges and vaporizers so that the labeling requirements would be easier to meet for the industry. Prior law required that a cannabis cartridge or integrated cannabis vaporizer have a black symbol on it that is, at minimum, one-half inch by one-half inch in size that denotes it as a cannabis item. This marking requirement has proved difficult to accomplish for technical reasons. AB-1529 passed on October 12, 2019 and changes this requirement by allowing the symbol to be either in black or white, a minimum of a one-quarter inch by one-quarter inch in size, and affixed by way of either engravement, adhesive, or printing. AB-1529 is classified as an urgency matter and thus goes into effect immediately.
AB-420 authorizes the California Cannabis Research Program (CCRP) to cultivate its own cannabis for the research project that is conducted on the grounds of UC San Diego, and expand what studies may examine, including mold, bacteria, and mycotoxins. Prior law required the CCRP to acquire cannabis from other sources, and to limit the breadth of its studies. AB-420 passed on October 12, 2019 and allows the program to cultivate its own cannabis, subject to federal regulations, to decrease research and supply chain issues that have previously presented themselves. AB-420 will go into effect on January 1, 2020.
AB-404 authorizes a cannabis testing laboratory to amend a certificate of analysis to correct minor errors and retest samples, as specified. Prior law requires a testing laboratory to issue a certificate of analysis for selected lots of each batch tested. AB-404 passed on October 12, 2019 and allows the lab to amend the certificate of analysis once it is issued to correct minor errors and to retest a sample whose test results fall outside of the normal parameters if the lab notifies the bureau that the previous test was compromised and the bureau approves the re-testing. AB-404 will go into effect on January 1, 2020.
AB-37 makes licensees who are engaged in commercial cannabis activities to be eligible to take business deductions for those activities. Prior law disallowed those who engage in commercial cannabis activity from deducting any ordinary and necessary business expenses related commercial cannabis activity on their tax returns due to the federally illegal status of cannabis. AB-37 passed on October 12, 2019 and equalizes the treatment of such taxpayers by allowing them to do so if applicable. AB-37 will go into effect on January 1, 2020.
AB-858 adds to the CDFA’s type 1C cultivation a limit of 2,500 square feet for outdoor grow space. Prior law did not place a canopy size limit on this type of license, also known as a “specialty cottage.” AB 858 corrects this oversight by limiting the growing space to 2,500 square feet. AB-858 will go into effect on January 1, 2020.
AB-1291 requires an applicant for a cannabis license who has 20 or fewer employees to provide a statement that the applicant will enter into a labor peace agreement within 60 days of employing 20 or more employees, and requires applicants who currently have 20 or more employees to provide a statement that they will or already have entered into such an agreement. Prior law required applicants with greater than 20 employees to submit similar statements but placed no timeline restrictions on the submittal, and did not require anything of the like from applicants with fewer than 20 employees. AB-1291 passed on October 12, 2019 and includes a time-line specification and a statement requirement for applicants with less than 20 employees for the purpose of preventing and limiting the possibility of arbitrary employment law enforcement. AB-1291 will go into effect on January 1, 2020.
To All Interested Parties,
The Bureau of Cannabis Control (Bureau) recently published two new fact sheets as a resource for those seeking information about the cannabis distributor and distributor transport only license types. These documents include lists of required procedures and guidelines for various distribution activities such as transportation, storage, transfer of cannabis goods, packaging, labeling, and more.
Both distributor fact sheets have been uploaded to the California Cannabis Portal and are located on the “General Resources” page under the “Resources” section. The fact sheets may also be accessed by clicking the links listed below.
Cannabis Distributor (Type 11) Fact Sheet:
https://cannabis.ca.gov/wp-content/uploads/sites/13/2019/08/BCC_Distributor_Fact_Sheet.pdf
Cannabis Distributor Transport Only (Type 13) Fact Sheet:
Those looking to get in touch with the Bureau of Cannabis Control may contact us directly through email at bcc@dca.ca.gov.