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Winter LLP Update: Transition Period Q&A

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Greetings everyone!

Please read the following Q&A prepared exclusively for WINTER LLP clients and friends:

  1. Starting on January 1, 2018, can Retailers sell edible cannabis products with THC levels in excess of 100mg and non-edible cannabis products (flower, tinctures, extracts) with THC levels in excess of 2000mg? Section 5029, BCC Regulations.

Yes, between Jan 1, 2018, and July 1, 2018, M-Licensee Retailers can sell

  • Edible cannabis products with THC levels in excess of 100mg (no maximum limit), so long as they are labeled 10mg THC/serving; and
  • Non-edible cannabis products (flower, tinctures, extracts) with THC levels in excess of 2000mg (no maximum limit), no serving size label required.
  1. Starting on January 1, 2018, Can Retailers sell cannabis goods that do not meet the State Labeling Requirements?

Yes, between Jan 1, 2018, and July 1, 2018, Retailers can sell goods that do not meet State Labeling Requirements as long as the following warnings are affixed prior to sale:

  • For cannabis flower: “GOVERNMENT WARNING: THIS PACKAGE CONTAINS CANNABIS, A SCHEDULE I CONTROLLED SUBSTANCE. KEEP OUT OF REACH OF CHILDREN AND ANIMALS. CANNABIS MAY ONLY BE POSSESSED OR CONSUMED BY PERSONS 21 YEARS OF AGE OR OLDER UNLESS THE PERSON IS A QUALIFIED PATIENT. CANNABIS USE WHILE PREGNANT OR BREASTFEEDING MAY BE HARMFUL. CONSUMPTION OF CANNABIS IMPAIRS YOUR ABILITY TO DRIVE AND OPERATE MACHINERY. PLEASE USE EXTREME CAUTION.”
  • For cannabis products: “GOVERNMENT WARNING: THIS PRODUCT CONTAINS CANNABIS, A SCHEDULE I CONTROLLED SUBSTANCE. KEEP OUT OF REACH OF CHILDREN AND ANIMALS. CANNABIS PRODUCTS MAY ONLY BE POSSESSED OR CONSUMED BY PERSONS 21 YEARS OF AGE OR OLDER UNLESS THE PERSON IS A QUALIFIED PATIENT. THE INTOXICATING EFFECTS OF CANNABIS PRODUCTS MAY BE DELAYED UP TO TWO HOURS. CANNABIS USE WHILE PREGNANT OR BREASTFEEDING MAY BE HARMFUL. CONSUMPTION OF CANNABIS PRODUCTS IMPAIRS YOUR ABILITY TO DRIVE AND OPERATE MACHINERY. PLEASE USE EXTREME CAUTION.”
  • For Untested cannabis products: “This product has not been tested as required by the Medicinal and Adult-Use Cannabis Regulation and Safety Act.”
  1. Starting on January 1, 2018, can Manufacturers sell cannabis products to Distributors/Retailers that do not meet the State Packaging and Labeling Requirements?

Yes, Manufacturers may sell cannabis products that do not meet State Packaging and Labeling Requirements provided:

  • The cannabis product was manufactured prior to January 1, 2018.
  • The cannabis product is packaged in child-resistant packaging. A secondary package shall be sufficient.
  • The cannabis product contains the applicable government warning (above).
  • The cannabis product meets the applicable THC limits (100mg for edibles, 1000-2000mg for concentrates.)
    • Please note, this is inconsistent with the BCC regulations which explicitly allow the transport and sale of medical cannabis products prior to July 1, 2018, regardless of the amount of THC. We have submitted comments to the MCSB discussing this inconsistency.
  • The cannabis products contains a sticker with the amount of THC/CBD content per serving and per package.
  1. Starting on January 1, 2018, can Manufacturers manufacture cannabis products that do not meet State Labeling and Packaging Requirements?

No, all cannabis products manufactured from January 1, 2018 onwards must meet State Labeling and Packaging Requirements.

  1. Starting on January 1, 2018, will all cannabis products need to undergo the full panel of testing prior to sale?

Not exactly. There is a “Phase-In” of Required Testing, so that the full panel of testing will not be required until December 31, 2018. Until then, required testing is as follows.

    1. For untested cannabis products manufactured prior to Jan 1, 2018, the following warning needs to be affixed:

i. “This product has not been tested as required by the Medicinal and Adult-Use Cannabis Regulation and Safety Act.”

    1. All cannabis harvested on or after Jan 1, 2018, and all cannabis products manufactured on or after Jan 1, 2018 shall be tested for the following:

i. Cannabinoids

ii. Moisture content

iii. Category II Residual solvents

iv. Category I Residual pesticides

v. Microbial impurities

vi. Homogeneity

    1. All cannabis harvested on or after July 1, 2018 and products manufactured on or after July 1, 2018 shall be tested for all of the above, plus:

i. Category I Residual Solvents and Processing Chemicals

ii. Category II Residual Pesticides

iii. Foreign Material

    1. All cannabis harvested on or after December 31, 2018 and products manufactured on or after December 1, 2018 shall be tested for all of the above, plus:

i. Terpenoids

ii. Mycotoxins

iii. Heavy metals

iv. Water Activity

  1. Which licensee is responsible for arranging for Testing?

Distributors (full distribution licensees) are responsible for contacting a testing laboratory and arranging for a testing lab employee to come to the distributor’s licensed premises and select a representative sample for laboratory testing. Therefore if you are a manufacturer or cultivator and would like to arrange for lab testing, you must obtain a full Distribution license (cannot be Distributor-Transport Only in order to do so.

  1. Will Temporary Licensees be required to record commercial cannabis activity in the Track and Trace system?

No, temporary licensees will not be required to record commercial cannabis activity in the Track and Trace system. Temporary licensees shall track and record activity on paper receipts, invoices, or manifests.

To avoid confusion, please consider only contacting our office for answers to your questions. Otherwise, strongly consider your source (and their source, and that person’s source) before acting.

Thank you, stay safe, and good luck out there! Todd Winter, WINTER LLP.

Winter LLP Update: State Licensing Regulations – Summaries

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Hello Again,

We understand that most of you are working hard towards achieving compliance beginning January 1. So as a follow-up to our recent update regarding the newly released state regulations, we want to provide you with summaries of some of the more important details that we have identified in the state regulations.

As many of you may know, the California cannabis industry will now be governed by three state agencies. The California Bureau of Cannabis Control (BCC) is responsible for regulating distribution, retail and testing, the California Department of Public Health (CDPH) will oversee manufacturing (which includes packaging and labeling), and the California Department of Food and Agriculture (CDFA) will govern cultivation.

BCC Regulations – Distribution, Retail, and Testing

Distribution

There are three different types of distribution licenses (all falling under License Type 11) under the BCC Regulations. All transportation of cannabis or cannabis products must be conducted by a Distributor Licensee or its employees.

  • Distributor (Standard)
    • The holder of a Distributor License does the following: arranges for testing, checks for appropriate packaging and labeling, collects taxes, transports cannabis and cannabis products, and acts as a cannabis wholesaler.
    • Cannabis and cannabis products must pass through a Standard Distributor prior to being sold to customers at a retail establishment.
    • Distributors may package and label cannabis, but not manufactured cannabis products.
  • Transport Only – Self Distributor
    • The holder of a Transport Only Self Distribution License is permitted to transport only its own cannabis and cannabis products, but cannot perform any other function of a Distributor.
    • Transportation to retail licensees is prohibited by a Transport Only License. The lone exception is for the transportation of immature plants and seeds from a nursery to a retailer.
      • Allowed: Cultivator wants to transport its raw products to manufacturer.
      • Not Allowed: Manufacturer wants to transport its products to Dispensary.
  • Transport Only – Third Party
    • A Third Party Transport Only License is identical to a Self-Distributor License, except that it allows the permit holder to transport the cannabis and cannabis products of other licensees rather than their own.
    • Transportation to a retail licensee is prohibited.
      • Allowed: Transportation company wants to deliver products among licensees.
      • Not allowed: Manufacturer wants to transport products to Dispensary.

Retail

  • Retailers cannot package or label cannabis or cannabis products on the premises. All products must be packaged and labeled prior to arriving at the retailer.
  • During the Transition Period, which lasts between January 1 and July 1, retailers may receive products that do not meet packaging and labeling standards. However, before selling to consumers, the retailer must place the products in secondary packaging subject to certain requirements.
  • Retailers may only be open to the public between 6:00 a.m. and 10:00 p.m.
  • All products must be placed in an opaque bag before leaving the retail premises.
  • All deliveries must be made by a direct employee of the licensee to a physical address within CA.
  • Delivery vehicles may contain a maximum of $3000 worth of cannabis or cannabis products at any time.

Testing

  • Provisional Licenses – Testing Labs that are awaiting accreditation from the joint technical committee of the International Organization for Standardization and the Electrotechnical Commission may obtain a 12 month provisional license if they meet all other requirements. The Provisional License may be extended an additional 12 months if the applicant is still awaiting accreditation.

CDPH Regulations – Manufacturing

  • Ethanol is now considered a nonvolatile solvent
  • There are four types of manufacturing licenses:
    • Type 7 – Extraction using volatile solvents (can also do everything a Type 6, Type N, and Type P licensee can do)
    • Type 6 – Extraction using only non-volatile solvents (can also do everything a Type N and Type P licensee can do)
    • Type N – Infusions (can also do everything a Type P licensee can do)
    • Type P – Packaging and labeling only
  • A new license, “Type S,” is expected to be issued starting in early 2018 which will allow businesses to share facility space.

CDFA Regulations – Cultivation

  • Type 5 Large Cultivation licenses will not become available until 2023
  • All individuals and entities are limited to only one Type 3-Medium Outdoor, Type-3A-Medium Indoor, or Type 3B-Medium Mixed-Light A-License or M-License. This means that an individual owner in an entity that holds a Medium Cultivation license cannot also own 20% or more of any other entity that also holds a Medium Cultivation license of any type.
    • There is no equivalent limit on Type 1 or 2 Cultivation Permits or aggregate limit on cultivation. Meaning that an applicant may own 10, 20, or more Type 2 Small Outdoor, Indoor, or Mixed Light grows, and all on the same Premises if you have a large enough parcel or building.
      • Practical Note: Based on the limits of Type 3 permits above, we see no net benefit in trying to obtain a Type 3 permit unless that is all you ever want to own, or unless you are part of a group where each of you will always own less than 20% of the permit. Instead, since many of our clients have multiple cultivation projects, and large enough Premises (parcels or warehouses), we recommend breaking up your cultivation projects into the unlimited variety with the smaller Type 2 permits.
  • A new Processor License type has been created which allows licensees to trim, dry, cure, grade, and package cannabis. Growing cannabis is not permitted under a Processor License.

The newly issued regulations are quite extensive, totaling around 300 pages, and address nearly every aspect of the cannabis industry. The information above is intended only to highlight some of the more important details we have identified in the regulations, and by no means is meant to serve as a complete summary of the regulations. Should you have questions about any of the information above, or about any of the rules and requirements contained in the regulations, please do not hesitate to reach out.

Next, please be on the lookout from our team for further information on Temporary Permits, including required documents, fees, and due dates.

With the addition of Kurt Ketchum, Esq. as an Associate Attorney in our Costa Mesa office, and the promotion of Wendy Lei, Esq. to Senior Associate, we are poised and ready to help each and every one of you navigate and obtain Temporary State Licenses. In addition to everything else we do for our clients…corporate transactions, contracts, regulatory, real estate, trademarks and intellectual property licensing.

You’ve all worked incredibly hard and faced adversity every step of the way the past several years to get to this moment. This is finally your time. Let’s go!

Winter LLP Update: State Licensing Regulations; and Packaging and Labeling Compliance

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Hello all,

As many of you are already aware, California’s three state cannabis licensing authorities (Department of Consumer Affairs’ Bureau of Cannabis Control; Department of Public Health’s Manufactured Cannabis Safety Branch; and Department of Food and Agriculture’s CalCannabis Cultivation Licensing Division) released proposed emergency licensing regulations on Thursday, November 16, 2017. We will be providing comprehensive summaries for each license type in the coming days.

We understand that many of you are anxious to order compliant labels and packages per the updated regulations. Therefore, attached please find the revised Packaging and Labeling Compliance Check Worksheet per the Department of Public Health’s Manufactured Cannabis Safety Branch’s newly released regulations. Please review carefully and ensure that your packages and labels will meet these standards. Although we will try to keep you informed with the most up-to-date regulations, they are subject to further change.

Additionally, please note the following important updates:

THC Limits

  • Edibles
    • 10 mg serving
    • 100 mg per package
  • Tinctures, Capsules, Topicals
    • 10000 mg/package for adult-use
    • 2,000 mg/package for medicinal-use

Universal Symbol

Prohibited Products

  • Products cannot be infused with nicotine or alcohol or have added caffeine.
  • Edible products cannot be shaped like a human, animal, insect, or fruit.
  • The label may not refer to the product as a candy.
  • Meat and seafood, and other products requiring refrigeration, are prohibited for sale as cannabis products. Juice and dried meat made in accordance with requirements are allowed.

What is “child resistant” packaging?

A package is deemed child-resistant if it satisfies the standard for “special packaging” under the Poison Prevention Packaging Act of 1970 (16 C.F.R. §1700.1(b)(4)).

  • 16 C.F.R. §1700.1(b)(4): Special packaging means packaging that is designed or constructed to be significantly difficult for children under 5 years of age to open or obtain a toxic or harmful amount of the substance contained therein within a reasonable time and not difficult for normal adults to use properly, but does not mean packaging which all such children cannot open or obtain a toxic or harmful amount within a reasonable time.

Transition Period

During the Transition Period between January 1, 2018 – July 1, 2018, licensees may do the following:

  • Conduct business with other licensees irrespective of the M or A designation on their licenses.
  • Transport cannabis goods that do not meet the labeling requirements (prescribed by MAUCRSA or the California Department of Public Health) if a sticker with the appropriate warning statement is affixed.
  • Sell cannabis goods held in inventory that are not in child-resistant packaging if they are placed into child-resistant packaging by the retailer at the time of sale.
  • Sell cannabis products that do not meet the medicinal THC limits per package established by the state Department of Public Health.
  • Sell and transport cannabis goods that have not undergone laboratory testing if a label stating that they have not been tested is affixed to each package containing the goods prior to transport by a distributor or prior to sale if held by a retailer. “These cannabis goods have not been tested as required under BPC Section 26070(1).”
  • Individually package and sell dried flower held in inventory by a retailer at the time of licensure.
  • Cannabis products held in inventory by a retailer that do not meet the requirements set by the state Department of Public Health for ingredients or appearance may be sold by a retailer.

Products in possession of a manufacturer prior to January 1, 2018 may enter the commercial cannabis market provided that all of the following conditions are met:

  • The cannabis product is packaged in child-resistant packaging.
  • The cannabis product contains the government warning required (GOVERNMENT WARNING: THIS PRODUCT CONTAINS CANNABIS, A SCHEDULE I CONTROLLED SUBSTANCE. KEEP OUT OF REACH OF CHILDREN AND ANIMALS. CANNABIS PRODUCTS MAY ONLY BE POSSESSED OR CONSUMED BY PERSONS 21 YEARS OF AGE OR OLDER UNLESS THE PERSON IS A QUALIFIED PATIENT. THE INTOXICATING EFFECTS OF CANNABIS PRODUCTS MAY BE DELAYED UP TO TWO HOURS. CANNABIS USE WHILE PREGNANT OR BREASTFEEDING MAY BE HARMFUL. CONSUMPTION OF CANNABIS PRODUCTS IMPAIRS YOUR ABILITY TO DRIVE AND OPERATE MACHINERY. PLEASE USE EXTREME CAUTION.)
  • The cannabis product contains the amount of THC and, if applicable, CBD per serving and per package.

Therefore all inventory prior to January 1, 2018, should be date-stamped to ensure that they are able to transported and sold during the Transition Period.

Should you have any questions about any of the above, or would like us to review your specific packages/labels to ensure compliance, please do not hesitate to reach out to our team.

Thank you, stay safe, and good luck out there! Todd Winter, WINTER LLP.