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Winter LLP Update: Temporary Permits Q&A

Greetings!

As many of you may already aware, the Bureau of Cannabis Control (BCC) released the Temporary Applications for Retailers, Distributors, Microbusinesses, and Testing Labs, and the Manufactured Cannabis Safety Branch (MCSB) released their Temporary Applications for Manufacturers today. CalCannabis has not yet released its Temporary Application for Cultivators.

Please note that there are 3 agencies (BCC, MCSB, and CalCannabis) issuing different license types, and each agency has their own website and different application requirements. Below you will find a brief outline of the required documents and submittal processes from the BCC and MCSB.

We strongly recommend that you contact our office to either (1) assist with completing required application forms; and/or (2) review the required application documents before submittal.

  1. What documents do I need to submit to the BCC as a Retailer, Distributor, Microbusiness, or Testing Lab for a Temporary License?
    1. Temporary License Application
    2. Premises Diagram Form

i. Please carefully review the attached Premises Diagram form in each respective License folder. The requirements are very specific and will likely require the assistance of an architect to draft.

    1. Local Authorization Document
    2. Evidence of Legal Right to Occupy

i. Deed or Title; OR

ii. Lease AND Statement from Property Owner authorizing commercial cannabis activities

  1. How do I submit the Temporary License Application for a Retailer, Distributor, Microbusiness, or Testing Lab?

You will need to create an online account with the BCC (https://www.bcc.ca.gov/). Please see attached “BCC Online Licensing Instructions.” Please note that all required information must be submitted via the online licensing system, including uploading any additional required documents (Premises Diagram, Local Authorization, Evidence of Legal Right to Occupy).

If there is more than 1 owner/applicant, only 1 person needs to submit the application. All other owners will be listed on the application.

There is no application or licensing fee.

  1. What Documents do I need to submit to MCSB as a Manufacturer for a Temporary License?
    1. Temporary License Application
    2. Local Authorization Document
  1. Do I need to submit the Premises Diagram Form or Evidence of Legal Right to Occupy for the Temporary Manufacturing License?

It does not appear that you need to submit the Premises Diagram Form or Evidence of Legal Right to Occupy for the Temporary Manufacturing License.

  1. How do I submit the Temporary License Application for a Manufacturer?

You will need to submit the Application Form and Local Authorization Document via Email OR Mail:

Email to: MCLS@cdph.ca.gov OR

Mail to:

CDPH – Manufactured Cannabis Safety Branch Attn: Licensing Unit

PO Box 997377, MS-7606

Sacramento, CA 95899-7377

There is no application or licensing fee.

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

Please contact us directly with any questions, or if you need assistance.

Winter LLP Update: Transition Period Q&A

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

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

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

california triangle symbol 1

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.

Winter LLP Update: Self-Distribution of Cannabis Products

There has been a lot of confusion recently about Self-Distribution under state and local laws. It hasn’t helped matters that some local (city/county) ordinances, in jurisdictions such as Monterey County, for example, allow cultivation and manufacturing permit holders to “self-distribute” their material or products without the use of a third-party distributor.

As such, this update is being provided to help you understand what, exactly, “self-distribution” means at the state level.

Under current California law, there are only two types of businesses that can legally transfer or transport cannabis: (1) Licensed dispensaries that are authorized to provide delivery services can “transfer” cannabis or cannabis products directly to a customer, and (2) licensed distributors can “transport” cannabis and cannabis products between licensees. It is important to emphasize that Section 26070 of the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) expressly states that “the transportation of cannabis and cannabis products shall only be conducted by persons holding a distributor license.

Section 26110 of MAUCRSA does allow a cultivation or manufacturing licensee to self-distribute its cannabis or cannabis products to other licensees. However, this is only allowed if the business also holds a valid Type 11 state distribution license. Accordingly, while a local city or county ordinance may allow a permitted manufacturer or cultivator to distribute its own cannabis or cannabis products without a separate locally issued distribution permit, a Type 11 state distribution license is still required.

Whether self-distributing or not, all must comply with the regulations and requirements placed upon regularly licensed distributors, which include the following:

  • Prior to transportation, distributors shall:
    • Complete an electronic shipping manifest.
    • Transmit the manifest to the bureau and the licensee receiving product.
  • During transportation, distributors shall:
    • Maintain a physical copy of the manifest and make it available upon request to the Department of Consumer Affairs and law enforcement officers.
  • Upon receipt, licensee receiving shipment shall:
    • Submit to the licensing authority a record verifying receipt of the shipment and the details of the shipment.

We hope this clears up some of the confusion surrounding the requirements placed on cannabis businesses that hope to Self-Distribute their material or products to other licensees.

As always, should you have any questions or want any additional information regarding Self-Distribution, or any other local permitting or state licensing requirements, please let us know.

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

What is Proposition 65?

1. What is Proposition 65?

Proposition 65 (Prop 65) requires businesses to notify Californians about significant levels of chemicals in products they purchase, in their homes or workplaces, or that are released into the environment.[1] Prop 65 also prohibits California businesses from knowingly discharging significant amounts of listed chemicals into sources of drinking water. Once a chemical is listed as one of the Prop 65 chemicals, businesses have 12 months to comply with warning requirements and 20 months to comply with the discharge prohibition. The Office of Environmental Health Hazard Assessment (OEHHA) administers Prop 65, which is part of the California Environmental Protection Agency (EPA). The California EPA also evaluates all currently available scientific information on substances considered for placement on the Prop 65 list.[2]

Businesses are required to provide a “clear and reasonable” warning before knowingly and intentionally exposing anyone to a listed chemical. This warning can be given by labeling a consumer product, posting signs at the workplace, distributing notices at a rental housing complex, or publishing notices in a newspaper.

2. Which types of businesses are exempt from Prop 65 warning requirements?

  1. Businesses with less than 10 employees;
    1. In Consumer Advocacy Group, Inc. v Pilot Automotive, Inc., the court found that the defendant corporation’s staff of less than 10 employees, was a substantial factor in finding that the corporation had not violated Prop 65 when it sold steering wheel covers which contained lead. The court stated:
    2. The corporation’s staff cannot be held liable under Health & Safety Code § 25249.11 because it contains fewer than 10 employees. Health & Safety Bode § 25249.11(b) states that a “person” under the Act does not include a “person employing fewer than 10 employees in his or her business.”
  1. Government agencies; and
  2. Businesses whose exposures are so low as to create no significant risk[3] of cancer, birth defects,[4] or other reproductive harm.

3. What are the content requirements that a Noticing Party must comply with before commencing an action alleging a Prop 65 violation?

  1. General Information. Each notice shall include as an attachment a copy of “The Safe Drinking Water and Toxic Enforcement Act of 1986 (Proposition 65): A Summary” prepared by the lead agency. This attachment need not be included in the copies of notices sent to public enforcement agencies.
  2. Description of violation.U A notice shall provide adequate information from which to allow the recipient to assess the nature of the alleged violation, as set forth in this paragraph. The provisions of this paragraph shall not be interpreted to require more than reasonably clear information, expressed in terms of common usage and understanding, on each of the indicated topics.

4. What information must the Noticing Party identify in the Notice?

  1. The name, address, and telephone number of the noticing individual or a responsible individual within the notice entity and the name of the entity;
  2. The name of the alleged violator or violators;
  3. The approximate time period during which the violation is alleged to have occurred; and
  4. The name of each listed chemical involved in the alleged violation.

5. What information is the Notice not required to contain?

  1. The specific retail outlet or time or date at which any product allegedly violating the Act was purchased;
  2. The level of exposure to the chemical in question;
  3. The specific admissible evidence by which the person providing the notice will attempt to prove the violation;
  4. For product, the UPC number, SKU number, model or design number or stock number or other more specific identification of products;
  5. For geographic areas, the lot, block or other legal description of the property in question

6. Do the products alleged to be in violation of Prop 65 need to be included?

Yes. For notices of violation of § 25249.6 of the Act involving consumer product exposures, the name of the consumer product or service, or the specific type of consumer product or services, that cause the violation, with sufficient specificity to inform the recipients of the nature of the items allegedly sold in violation of the law and to distinguish those products or services from others sold or offered by the alleged violator for which no violation is alleged.

7. Do the means by which an individual alleges to have been exposed to the chemicals in the products need to be stated?

Yes. For all notices of violation of § 25249.6, the route by which exposure of the listed chemical is alleged to occur needs to be stated in the Notice. For example, various types of ways people are exposed to harmful chemicals include inhalation, ingestion, dermal contact, etc.

8. How must the Notice be served on the alleged violator?

Notices shall be served by first class mail or any manner that would be sufficient for service of a summons and complaint under the California Code of Civil Procedure. In lieu of service as prescribed in the California Code of Civil Procedure, a notice may be served on the Attorney General and a district attorney or city attorney by electronic mail if:

  1. The Attorney General, District Attorney or City Attorney has specifically authorized such service and the authorization appears on the Attorney General’s Web site.
  2. The Notice and related documents are sent to the electronic mail address specified, and in the format (e.g. Word, Adobe Acrobat) specified.
  3. Service by this method is not effective until the documents are actually received. Notice is actually received when it is acknowledged by the recipient.
  4. Where a document is served electronically, time shall be computed as it would for service by mail within the State of California.

9. Does the Notice require a certificate of service?

Yes, certificate of service shall be attached to each notice listing the time, place, and manner of service and each of the parties upon which the notice was served.

10. Who else shall be served with the Notice of an alleged violation?

Notices shall be served upon each alleged violator, the Attorney General, the district attorney of every county in which a violation is alleged to have occurred, and upon the city attorneys of any cities with populations according to the most recent decennial census of over 750,000 and in which the violation is alleged to have occurred.

  1. Where the alleged violator has a current registration with the California Secretary of State that identifies a Chief Executive Officer, President, or General Counsel of the corporation, the notice shall be addressed to one of those persons.

11. What other necessary documents must the Noticing Party provide to the alleged violator in its Notice?

If a private party alleges that a violation occurred based on one of the exposures described above, the private party must first provide the alleged violator a notice of special compliance procedure and a proof of compliance form. The alleged violator must complete and submit the compliance form to the Noticing Party at an address provided postmarked within 14 days of receiving the notice.

12. How does an alleged violator respond to a Notice?

A private party may not file an action against the alleged violator for these exposures, or recover in a settlement any payment in lieu of penalties or any reimbursement for costs and attorney’s fees, if the notice of violation was served on or after October 5, 2013, and the alleged violator has done all of the following within 14 days of being served notice:

  • Corrected the alleged violation;
  • Agreed to pay a civil penalty of $500 to the private party within 30 days
  • Notified the private party serving the notice in writing that the violation has been corrected

An alleged violator may satisfy these conditions only one time for a violation arising from the same exposure in the same facility or the same premises. The satisfaction of these conditions does not prevent the Attorney General, a district attorney, a city attorney of a city greater than 750,000 in population, or any full-time city prosecutor with the consent of the district attorney, from filing an enforcement action against an alleged violator. The amount of any civil penalty for a violation shall be reduced to reflect a payment made by the alleged violator for the same alleged violation to a private party.

13. What kind of action is the Plaintiff entitled to commence after the 60 days have elapsed form the date of service of Notice and what can the alleged violator do to avoid such action?

An action is deemed to have been “commenced more than 60 days after the person has given notice” where more than 60 days have elapsed from the date of service of the notice, as the date would be calculated for service of a document pursuant to the provisions of the Code of Civil Procedure § 1013.

The plaintiff is entitled to commence a private enforcement action, which refers to individually initiated litigation, either as stand-alone or follow-on action, before a court to remedy an infringement of antitrust law. If successful, the legal action leads to some sort of civil sanction imposed by a court such as damages, restitution, injunction, nullity or interim relief. Unlike public enforcement agencies, private parties do not have special (public) powers in civil law disputes.

In order to avoid private action enforcement on behalf of the Plaintiff, an alleged violator must ascertain that it has completed the following:

  • Posted warning or warnings about the alleged exposure that complies with the law, and attaching a copy of that warning and a photograph accurately showing its placement on its premises
  • Posted the warning or warnings demanded in writing by the Noticing Party, and attaching a copy of that warning and a photograph accurately showing its placement on its premises, OR
  • Eliminating the alleged exposure, and attaching a statement accurately describing how the alleged exposure has been eliminated.

14. What are the civil penalties for a business found in violation of Prop 65?

A business found to be in violation of Prop 65 is subject to civil penalties of up to $2,500 per day for each violation. In addition, the business may be ordered by a court to stop committing the violation.



[2] The list contains a wide range of naturally occurring and synthetic chemicals that are known to cause cancer or birth defects or other reproductive harm. These chemicals include additives or ingredients in pesticides, common household products, food, drugs, dyes, or solvents. Listed chemicals may also be used in manufacturing and construction, or they may be byproducts of chemical processes, such as motor vehicle exhaust.

[3] For chemicals that are listed as causing cancer, the “no significant risk level” is defined as the level of exposure that would result in not more than one excess case of cancer in 100,000 individuals exposed to the chemical over a 70 year life time. In other words, a person exposed to the chemical at the “no significant risk level” for over 70 years would not have more than a “one in 100,000” chance of developing cancer as a result of that exposure.

[4] For chemicals that are listed as causing birth defects or reproductive harm, the “no observable level” is determined by identifying the level of exposure that has been shown to not pose any harm to humans or laboratory animals. Prop 65 then requires this “no observable effect level” to be divided by 1,000 in order to provide an ample margin of safety.

The Truth About the DEA and CBD

Fundamentally, CBD derived from hemp is not specifically defined under the Federal Controlled Substances Act (the “CSA”) which can be found under 21 U.S.C. 812. Therefore it is not a Schedule I Substance under the United States Code. (U.S.C.)

When Congress passes a law, it is recorded in a set of books known as The United States Code, or U.S.C. That is where the CSA can be found.

However, the CFR, or Code of Federal Regulations (CFR) is written by government agencies responsible for the subject matter of the laws. The regulations found in the CFR do not stand on their own; they must be based on statutes passed by Congress and are only valid if they put into effect an actual statute enacted by Congress.

Yesterday, the DEA amended the CFR to define all extracts from cannabis as a Schedule 1 drug. However, the United States Code (U.S.C.) and CSA remain unchanged. The DEA has no authority to change the law (U.S.C.) and as such, unless or until Congress amends the definition of marijuana in the U.S.C. (CSA), the DEA has no authority to enforce its “regulations.” As indicated above, the CFR is simply a book of regulations written by governmental agencies, and do not stand on their own as laws unless based upon actual acts of Congress. Congress has made no acts with respect to CBD derived from hemp.

When the DEA in 2003 attempted to initiate rules and interpretations concerning cannabinoid constituents of marijuana that were not expressly set forth under the CSA or the DEA’s own regulations, the Ninth Circuit Federal Court of Appeals struck down its efforts, stating that “an agency is not allowed to change a legislative rule retroactively through the process of disingenuous interpretation of the rule to mean something other than its original meaning.”

Then, in another case in 2004, the court stated “In keeping with the definitions of drugs controlled under Schedule I of the CSA, the DEA Final Rules can regulate foodstuffs containing natural THC if it is contained within marijuana, and can regulate synthetic THC of any kind. But they cannot regulate naturally-occurring THC not contained within or derived from marijuana — i.e., non-psychoactive hemp products — because non-psychoactive hemp is not included in Schedule I. The DEA has no authority to regulate drugs that are not scheduled, and it has not followed procedures required to schedule a substance.”

In other words:

  1. The CSA, as found in the United States Code, remains unchanged. CBD derived from hemp is not a Schedule I substance as found in the CSA. This is the law.
  2. The DEA has no authority to change Congress’ interpretations or make laws, and Congress has not scheduled CBD derived from hemp as a Schedule 1 drug. The regulations found in the CFR are not enforceable unless based upon actual statutes found in the U.S.C.
  3. The DEA has not properly followed procedures required to schedule CBD derived from hemp as a Schedule 1 drug, and therefore it has no authority to regulate drugs that are not scheduled.
  4. Unless or until Congress amends the United States Code to reschedule CBD from hemp as a Schedule 1 drug, the DEA’s power to enforce its “Final Rules” is limited. And even if it does somehow attempt to enforce the “rule”, the DEA can be successfully challenged in court.

The two primary factors to keep your eyes on as our industry moves forward, in my opinion, are (i) the continuing approval of (CA – R) Dana Rohrabacher’s Spending Bill provisions limiting federal funds for enforcement efforts in legal cannabis states; and (ii) if Congress is somehow convinced to change the CSA by the DEA’s shenanigans, which I think is highly doubtful.

WINTER LLP is a corporate, transactional, regulatory and intellectual property law firm focused on traditional and emerging markets, with offices in Orange County, San Francisco, and Arizona, servicing clients around the world.

Prop 64 Quick Reference – Key Points

Personal Use

  • Goes into effect immediately
  • Anyone over the age of 21
    • Can purchase, possess, or give away up to 28.5 grams of cannabis (not in the form of concentrated cannabis) or up to 8 grams of concentrated cannabis
    • Can possess up to 6 plants, as well as the cannabis produced from the plants in accordance with any reasonable local regulation or ordinance
    • Can purchase, possess, manufacture, or give away cannabis accessories to anyone over 21
    • Can smoke or ingest cannabis or cannabis products
  • Cannabis and cannabis products cannot be smoke or ingested
    • In public place
    • Anywhere where smoking tobacco is prohibited
    • Within 100 feet of a school, daycare center, or youth center (unless in a private residence)
  • Cannot ingest or possess an open container of cannabis or cannabis product while either driving or riding as a passenger in a motor vehicle

Medical Cannabis Patients

  • Beginning on January 1, 2018, a qualified patient must possess a new identification card supported by a physician’s recommendation
  • Personal information of patients and their primary caregivers are considered “medical information” and enjoys the same protection as all other forms of confidential medical information
  • The status as a qualified patient cannot be used to restrict parental rights in any proceeding before a family or juvenile court

Cannabis businesses and Licensing

  • State licensing authorities are required to begin issuing licenses to recreational cannabis business no later than January 1, 2018
  • Commercial recreational cannabis activity is lawful if the business (1) is in possession of both a state issued license and locally issued license, and (2) operate in accordance with all applicable regulations
  • There are nineteen different license classifications to be issued by the state, they are:
    • Type I = Cultivation; specialty outdoor; Small.
    • Type IA = Cultivation; Specialty indoor; small.
    • Type IB = Cultivation; Specialty mixed-light; Small.
    • Type 2 = Cultivation; Outdoor; Small
    • Type 2A = Cultivation; Indoor; Small
    • Type 2B = Cultivation; Mixed-light; Small.
    • Type 3 = Cultivation; Outdoor; Medium.
    • Type 3A = Cultivation; Indoor; Medium.
    • Type 3B = Cultivation; Mixed-light; Medium
    • Type 4 = Cultivation; Nursery.
    • Type 5 = Cultivation; Outdoor; Large.
    • Type 5A = Cultivation; Indoor; Large.
    • Type 5B = Cultivation; Mixed-light; Large.
    • Type 6 = Manufacturer 1.
    • Type 7 = Manufacturer 2.
    • Type 8 = Testing.
    • Type 10 = Retailer.
    • Type 11 = Distributor.
    • Type 12 = Microbusiness.
  • All licenses are valid for 12 months, and must be renewed annually
  • A separate license is required for each location where the applicant operates
  • A single recreational cannabis business can obtain multiple licenses of different types,
  • The exception is that an entity holding a license for testing is prohibited from holding any other license
  • The same business can hold both recreational and medicinal licenses
  • A recreational cannabis business cannot also be a licensed retailer of alcohol
  • No cannabis business can be located within 600 feet of a school or daycare center (although this can be increased or decreased by local ordinances)
  • Until December 19, 2018, an applicant must demonstrate five years of continuous California residency to be eligible for a license
  • Licensing Authorities will give priority to applicants that can demonstrate they operated in compliance with the Compassionate Use Act prior to September 1, 2016, or is currently in compliance with the Medical Cannabis Regulation and Safety Act (MSCRA)
  • Regulations governing commercial cultivation will be issued and enforced by the State Department of Food and Agriculture
  • Regulations governing commercial manufacturing will be issued and enforced by The Department of Public Health

Product and Labeling Requirements

  • Recreational cannabis and cannabis products cannot be sold to anyone under the age of 21
  • Medical cannabis can be sold to persons 18 and older who possess a valid identification card
  • All cannabis and cannabis products must be sold in child resistant packaging and display a specific government warning in bold letters
  • Cannabis products cannot contain more than 10 milligrams of THC per serving
  • Edible cannabis products must be divided into standardized serving sizes, and producers must ensure uniform distribution of THC and other cannabinoids throughout the product
  • All cannabis and cannabis products for sale must contain a label stating the manufacture and/or cultivation date, source, and net weight of the cannabis contained in the package
  • The labeling of all cannabis and cannabis products must list the pharmacologically active ingredients and the amount of such ingredients per serving and per package
  • The labeling of all cannabis and cannabis products must list any solvents, nonorganic pesticides, herbicides, and fertilizers that were used during cultivation and manufacturing
  • Labeling for cannabis products must comply with all other state and federal nutritional labeling requirements

Local Regulations

  • Local governments can enact their own zoning, land use, licensing, and other reasonable requirements
  • Local governments can ban any and all forms of commercial cannabis activities
  • Local governments can allow cannabis to be smoked and ingested on the premises of a retailer if access is restricted to those 21 years of age or older, cannabis is not visible from a public place, and no alcohol or tobacco are served

Taxes

  • Retail sales of cannabis and cannabis products are subject to a state excise tax of 15% of gross receipts
  • Cannabis cultivation is subject to a state tax of $9.25 per dry-ounce weight of cannabis flowers, and $2.75 per dry-ounce weight for leaves (these amounts are subject to adjustment and categories can be added or changed by the state)
  • Cities and counties can enact and collect their own taxes on commercial cannabis activity in addition to the taxes established by the state

WINTER LLP® is a corporate, transactional, regulatory and intellectual property law firm focused on traditional and emerging markets, with offices in Orange County, San Francisco, and Arizona, servicing clients around the world.

U.S. v. McIntosh: Ninth Circuit says that the Department of Justice May Not Prosecute Legal Cannabis Dispensaries

On August 16, 2016, the Ninth Circuit ruled in U.S. v. McIntosh that the Department of Justice may not expend federal money to prosecute state-law compliant medical marijuana providers and entities.

Since 2014, through appropriations riders, Congress has ruled that the Department of Justice may not use appropriated funds to pursue federal enforcement actions in ways that would thwart state medical marijuana laws. The relevant language in the budget bills passed in 2014 and renewed in 2015 reads:

“ None of the funds made available in this Act to the Department of Justice may be used, with respect to the States of Alabama, Alaska, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, Oregon, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Washington, and Wisconsin, to prevent such States from implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana.”

However, the DOJ contended that the ban did not undermine its right to prosecute state-law compliant growers and distributors. The Ninth Circuit’s ruling interprets the legislation to mean that it does indeed “prohibit DOJ from spending funds from relevant appropriations acts for the prosecution of individuals who engaged in conduct permitted by state medical marijuana laws and who fully complied with such laws.” U.S. v. McIntosh.

Although a favorable ruling for the cannabis industry, the court also articulated the following two important points limiting its benefits:

  1. The ruling only applies to medical marijuana. No federal appellate-level court has directly endorsed, tacitly or otherwise, state-legal recreational cannabis businesses. This implicates much of the cannabis community, especially as medical programs are set to yield to or merge into recreational programs in a number of states that have adopted medical cannabis reform.

  1. Instead of ordering lower courts to dismiss the criminal charges, the Ninth Circuit ordered that the cases be remanded to the lower courts to investigate whether the appellants were, in fact, fully compliant with their states’ laws regarding medical cannabis. Compliance with state law is turning out to be the cornerstone for protection from federal criminal prosecution.

That said, the DOJ’s enforcement of the federal Controlled Substances Act cannot occur without the necessary funds to do so and, in making its ruling, the Ninth Circuit Court of Appeals affirmed Congress’s intent to prohibit executive agencies from using appropriated funds for exactly that purpose. Hence, this ruling reduces the risk of federal raids for state-law abiding cannabis businesses in those states within the Ninth Circuit’s purview; namely, Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington.

WINTER LLP® is a corporate, transactional, regulatory and intellectual property law firm focused on traditional and emerging markets, with offices in Orange County, San Francisco, and Arizona, servicing clients around the world.

FDA Deeming Regulations – How it Impacts the Cannabis Industry

BACKGROUND

On May 10, 2016, the FDA published the final “deeming rule,”[1] which extends the FDA’s tobacco product authority under the federal Food, Drug, and Cosmetic Act (FDCA) to all products meeting the statutory definition of “tobacco product.” Up until now, the existing FDA statutes and rules have only addressed cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco. The new rules expand the term “tobacco products,” to include, among others, vaporizers, vape pens, hookah pens, electronic cigarettes, e-pipes, and all other ENDS (Electronic Nicotine Delivery Systems). Notably, manufacturers of components and parts of ENDS which are sold or distributed separately for consumer use – i.e. e-liquids, cartridges, atomizers, certain batteries, cartomizers and clearomizers, tank systems, drip tips, flavorings for ENDS, and programmable software – are subject FDA’s product authorities.

Newly deemed “tobacco products” are now subject to the same premarket review provisions of Section 905(j) and 910 of the FDCA that govern currently regulated tobacco products, meaning that manufacturers of newly deemed products will be required to obtain premarket authorization through one of three premarket pathways: SE Exemption Requests; SE Reports; or Premarket Tobacco Product Applications (PMTAs). Because the “grandfather date” of February 15, 2007 still stands, and most e-cigarette and vapor products were commercially marketed after the grandfather date, the deeming rule effectively mandates that these products will be subject to the PTMA review process.

Manufacturers will have a 24-month initial compliance period from August 8, 2016, to prepare PTMAs for authorization, as well as a 12-month continued compliance period after those dates in which to obtain FDA authorization. Importantly, the aforementioned compliance policy applies only to products that are commercially marketed as of the effective date of the deeming rule (August 8, 2016): any new product not on the market as of August 8, 2016, is not covered by the compliance policy and is subject to enforcement if marketed without premarket authorization. [2]

Submission of a PMTA will cost between $117,000 to $466,000, as indicated by the FDA.[3] However, industry experts suggest the FDA is underestimating costs and have placed the figure at well over $1 million.

QUESTIONS AND ANSWERS FOR THE CANNABIS INDUSTRY

1. How will the new FDA regulations affect the cannabis industry?

Although the FDA has thus far limited its contact with the cannabis industry, the new rules may indirectly apply to cannabis products because of the dual-use nature of many “tobacco products” – such as vape pens that can be used for either tobacco/nicotine-derivatives or cannabis-derivatives.

A key phrase the FDA uses in defining a “tobacco product” in its Deeming Rule is whether the product is “intended or reasonably expected to be” used for human consumption of a tobacco product or alter or affect a tobacco product. This “intended or reasonably expected to” language will likely have further reaching effects to the cannabis industry for a couple of reasons: (1) cannabis is still currently federally classified as a Schedule I drug; and as such, (2) most cannabis-related products have been marketed as for use with tobacco/nicotine.

Therefore, the FDA will be able to regulate cannabis products that are marketed as “intended or reasonably expected to be used for human consumption of a tobacco product or alter or affect a tobacco product” – which includes most cannabis vaporizer components (empty vape cartridges, batteries, cartomizers, tank systems, etc.)

Please note that these new regulations are targeted at tobacco/nicotine products; therefore, they do not specifically address the FDA’s role in regulation of cannabis oil. For more information specifically about cannabis oil, please see Question 7.

2. Will the FDA regulations affect the importation (from other countries) of vaporizer components, parts, and accessories, i.e. vape cartridges, batteries, cartomizers, etc.?

In the “Draft Guidelines for Industry – Premarket Tobacco Product Applications for Electronic Nicotine Delivery Systems (ENDS)”, the FDA states that:

“At this time, FDA intends to limit enforcement of the requirements of ENDS products sold or distributed separately for consumer use. FDA does not, at this time, intend to enforce these requirements for components and parts of newly deemed products that are sold or distributed solely for further manufacturing into finished tobacco products and not sold separately to the consumer. For example, an e-liquid that is sold or distributed for further manufacturing into a finished ENDS products is not itself a finished tobacco product, and at this time, FDA does not intend to enforce such e-liquids that are sold or distributed without a marketing order. In contrast, an e-liquid sealed in final packaging that is to be sold or distributed to a consumer for use is a finished tobacco product. FDA intends to enforce against such finished e-liquids that are sold or distributed without a marketing order.”[4]

Therefore, with respect to our clients that import vape cartridges, batteries, cartomizers, etc. for use with cannabis, the FDA should not have the authority to regulate the importation of such components so long as the components are not sold separately to the customer and will be “sold or distributed solely for further manufacturing.” In other words, the FDA will only be regulating the importation of vape pens, cartridges, batteries, etc. that are sealed in final packaging and are ready for sale to a consumer.

As explained in further detail below in (4), although FDA intends to work with the U.S. Customs and Border Protection (CBP) to ensure tobacco products that enter U.S. borders comply with applicable regulations, the FDA is ultimately responsible for determining whether an FDA-regulated article offered for importation into the United States is in compliance with the laws enforced by FDA.

3. There are new products (cartridges, batteries, vape pens) available on the market. Can I upgrade my current models to reflect those changes?

In short, we advise against introducing any “new products” (particularly products that can also be used with tobacco/nicotine products) that were not on the market as of August 8, 2016. This includes refraining from incorporating new technology, methods, packaging, labeling, etc. relating to vape pens and its components. Although the new Deeming Rule is targeted at manufacturers and retailers of tobacco/nicotine products, it is foreseeable that by introducing new vape technology, packaging, or products, manufacturers of cannabis-related products will “awaken” the FDA regulatory authorities to their products. Also, as discussed above, the FDA will be able to regulate cannabis products that are marketed as “intended or reasonably expected to be used for human consumption of a tobacco product or alter or affect a tobacco product” – which includes most cannabis vaporizer components (empty vape cartridges, batteries, cartomizers, tank systems, etc.)

Moving forward, the packaging, labeling and advertising of cannabis-related products with a conceivable dual purpose could be an important factor in determining whether the FDA will deem the product a “tobacco product” subject to the new rules. However, the industry faces a tricky dilemma as labeling a product “for use with cannabis only” is federally illegal, while labeling a product as “for use with tobacco” will cause it to be regulated as a tobacco product. It is also conceivable that sometime in the near future, particularly if the federal government legalizes cannabis, the FDA will embark on similar rulemaking related to cannabis products.

4. How will the FDA enforce these regulations?

To date, the most recent “Enforcement Action Plan” was published in 2010 by the FDA Office of Compliance & Enforcement, Center for Tobacco Products. Until the FDA publishes a new “Enforcement Action Plan,” we can assume that the 2010 regulations are still valid. In its plan, the FDA outlined the following procedures for enforcement of its tobacco regulations:[5]

  • Tobacco Marketing Surveillance: This surveillance would include monitoring and evaluating various sources of information, including: regulatory submissions made to the FDA, point-of-sale advertising and other promotional materials for tobacco products, internet promotional materials, and complaints.
  • State Tobacco Retailer Compliance Check Inspection Program: The FDA will award contracts to State agencies to assist the FDA in inspecting retail establishments that sell cigarettes and/or smokeless tobacco products. These retail inspections will cover the age and identification (youth access) requirements, as well as requirements relating to tobacco product promotion and advertising. FDA may direct an inspection of a particular retailer if a complaint or report is received, including unlicensed establishments and non-traditional vendors.
  • FDA Inspections of manufacturers and distributors: FDA plans to conduct inspections of manufacturers and distributors. If appropriate, inspections of manufacturers and distributors may be conducted by FDA in response to a complaint.
  • Imports Program: FDA intends to work with the U.S. Customs and Border Protection (CBP) to ensure tobacco products that enter U.S. borders comply with the requirements established by the Tobacco Control Act and applicable regulations. CBP, an agency within the Department of Homeland Security, is responsible for administering the nation’s laws relating to imports, exports and the collection of duties. However, FDA is responsible for determining whether an FDA-regulated article offered for importation into the United States is in compliance with the laws enforced by FDA. As previously mentioned, the FDA will not have the authority to regulate the importation of components so long as the products will be sold or distributed for “further manufacturing.” Therefore, please ensure that the FDA product code[6] on your Customs documentation indicates that your vape component is “for further manufacturing.”
  • Enforcement Tools: FDA has the authority to take enforcement action against violative tobacco products and against persons who violate the requirements established by the Tobacco Control Act and applicable regulations. FDA may utilize several enforcement tools, including but not limited to, the following: warning Letters, civil money penalties, no-tobacco-sale orders, seizures, injunctions, and/or criminal prosecutions.

5. Do I need to apply for a PMTA to continue manufacturing vape components, such as oil, cartridges, batteries, cartomizers, etc.?

As discussed above, manufacturers of “tobacco products” will have a 2-3 year compliance period to apply for and receive a “tobacco marketing order,” and any new product not on the market as of August 8, 2016, is not covered by the compliance policy and is subject to enforcement if marketed without premarket authorization. Moreover, the FDA will likely view cannabis vaporizers and its components as a “tobacco products” because they can “reasonably expected to be” used for human consumption of a tobacco product.

However, the FDA will only enforce against “finished tobacco components, including components and parts of ENDS products sold or distributed separately for consumer use.” [7] “In the case of ENDS hardware/apparatus components, FDA expects that it may be difficult for manufacturers to make the showing necessary to meet the statutory standard, given the great extent of possible variations in combinations of hardware components, if all are 70 considered and sold separately. Thus, with respect to apparatus, FDA expects that manufacturers will be most successful where authorization is sought for entire delivery systems, rather than individual components.” [8]

In other words, with respect to cannabis oil, our clients will not be able to apply for a PMTA because the FDA is only regulating e-liquids with nicotine content. Cannabis oil is not therefore a “tobacco product.”

With respect to cannabis vape components (batteries, empty cartridges, cartomizers, etc.), our clients will likely not be able to apply for a PMTA for the individual components because the FDA has suggested that they will only be approving “entire delivery systems, rather than individual components.”

However, with respect to the entire cannabis vape delivery system (without the oil), our clients may be interested in applying for an “Open Aerosolizing Apparatus” PMTA (without e-liquid and including components and parts). If the PTMA is approved by the FDA, our clients would be able to continue producing their cannabis vaporizers (without cannabis oil) and sell/distribute them to licensees, retailers, and customers even after the 2-3 year compliance period.

6. I am interested in applying for an “Open Aerosolizing Apparatus” PMTA for my entire cannabis delivery system (without the cannabis oil). What are my next steps?

Manufacturers must comply with the following requirements:

  1. Register your establishment and submit a list of all tobacco products that are being manufactured for commercial distribution by December 31, 2016.
  2. Submit tobacco health documents[9]
  3. Submit ingredient listing[10]
  4. Include Required Warning Statements on Packages and Advertisements[11]
  5. Submit quantities of Harmful and Potentially Harmful Constituents[12]
  6. Submit Premarket Tobacco Application (PMTA)

For Steps 1-5, although mailing the Center for Tobacco Products (CTP) is permitted, the FDA recommends electronic submission via the FDA’s eSubmitter software[13] to package documents and the CTP Portal[14] to upload eSubmitter package.

In its “Draft Guidelines for Industry – Premarket Tobacco Product Applications for Electronic Nicotine Delivery Systems (ENDS)”, the FDA recommends that your PMTA application for “Open Aerosolizing Apparatus” include detailed descriptions of the following:

  • Aerosolizing apparatus features;
  • Material and/or ingredient functions;
  • Capabilities to monitor product performance (e.g. temperature sensing, voltage sensing, battery life detection);
  • Instructions, and method of operation;
  • Materials of all aerosolizing apparatus components;
  • Operating ranges (e.g. lower and upper wattage, voltage limits that users can adjust);
  • Power supply, such as batteries (including whether it is rechargeable or replaceable);
  • Charging source and the safety of using different charging sources; and
  • Heating source (e.g. heating coil, chemical reaction).

FDA also recommends that your PMTA contain detailed aerosolizing apparatus schematics (e.g. CAD drawings) with dimensions, pictures, and labeling, accompanied by engineering design parameters.

Finally, electrical safety should be discussed, and applicable standards to which conformance have been demonstrated should be identified. This discussion should include appropriate data (e.g. test protocol, data, results). Additionally, you should provide a description of all built-in electrical safety features. If the product contains a controller, you should list and discuss power management techniques used, such as pulse width modulation or direct current.

It is important to note that since many of the regulations in the Deeming Rule are brand new and the FDA has never seen or approved a PMTA for an “Open Aerosolizing Apparatus,” it could be a few months before clearer guidelines and instructions are available. Again, although the FDA has estimated costs to be in the range of $117,000 to $466,000, there are no precedents available to be able to gauge the actual amount of work and costs involved. We will continuously monitor the FDA website for any news and updates regarding PMTAs for “Open Aerosolizing Apparatus.”

Finally, with respect to applying for an “Open Aerosolizing Apparatus,” PMTA, our clients may wish to consider setting up a separate corporate entity that only manufactures the finished vaporizer (without the cannabis oil). The separate, parallel entity could then license the vaporizer back to the parent cannabis entity, as well to other companies/retailers/distributors.

7. I am unsure about applying for a PMTA. Can the FDA regulate the manufacturing of cannabis oil?

It does not appear that the deeming rule has any direct effect on the current status quo of the regulatory environment surrounding the manufacturing of cannabis oils. According to the FDCA, an e-liquid is considered a “covered tobacco product” if it contains nicotine, tobacco, or any derivative of nicotine or tobacco.[15] The FDA has intimated that in many instances it is reasonably expected that e-liquids, such as flavored liquids, will be combined with liquid nicotine, or other similar substances, prior to consumption and will therefore be regulated as components of tobacco products.[16] However, it would be difficult to craft a credible argument that cannabis oil is reasonably expected to be consumed with a tobacco product. Accordingly, the deeming rule does not give the FDA any new or modified ability to regulate the manufacturing of cannabis oil.

However, in recent years, the FDA has demonstrated that it maintains at least some ability to regulate cannabis oils, and most specifically cannabidiol (CBD). The FDA has concluded that selling products containing CBD as dietary supplements as well as the introduction of food containing CBD into interstate commerce constitute violations of the FDCA.[17] In both 2015 and 2016 the FDA has sent “warning letters” to manufacturers for their improper marketing of products containing CBD.[18] In short, the FDA has limited its “regulation” to companies that make inaccurate claims in labels or presenting human health risks.

It is important to note, though, that to date the FDA has not shown a particularly large appetite for enforcement actions against cannabis oil manufacturers. When determining whether to initiate an enforcement action for a perceived violation of the FDCA, the FDA considers factors such as agency resources and the threat posed to public safety.[19] In 2015, only 6 warning letters were sent by the FDA to CBD manufacturers, and 8 in 2016, and it is not apparent whether any further action was taken against any of the recipients. Further, the letters themselves only required that the recipient notify the FDA of the steps it intended to take to correct the alleged violations.[20]

CONCLUSION

The FDA’s use of the phrase “tobacco product” and its rationale for regulation based on the public health risk due to “highly addictive nicotine” establish that the rules do not directly affect cannabis-related products. However, the “intended or reasonably expected to” language could be the proverbial back door for the FDA to regulate cannabis-related products if there is a possibility of dual use with tobacco – such as with vape pens that can be used for either tobacco/nicotine-derivatives or cannabis-derivatives.

In summation, we recommend that cannabis companies that manufacture vape pens, components, and parts to consumers refrain from introducing any new parts/models at this time. Furthermore, companies may wish to consider applying for an Open Aerosolizing Apparatus PTMA to continue the manufacture and sale of its vape pens (sans oil/cartridges) to consumers.

With respect to cannabis oil only, the Deeming Rule does not give the FDA any new or modified ability to regulate its manufacturing. Nevertheless, it is also conceivable that sometime in the near future, particularly if the federal government legalizes cannabis, the FDA will embark on similar rulemaking related to cannabis products.

WINTER LLP® is a corporate, transactional, regulatory and intellectual property law firm focused on traditional and emerging markets, with offices in Orange County, San Francisco, and Arizona, servicing clients around the world.



[1]“Deeming Tobacco Products to be Subject to the Food, Drug, and Cosmetic Act, as Amended by the Family Smoking Prevention and Tobacco Control Act; Regulations Restricting the Sale and Distribution of Tobacco Products and Required Warning Statements for Tobacco Product Packages and Advertisements,” available at https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-10685.pdf

[2] FDA, Small Entity Compliance Guide: FDA Deems Certain Tobacco Products Subject to FDA Authority, Sales and Distribution Restrictions, and Health Warning Requirement’s for Packages and Advertisements (May 2016), at 17, available at https://www.fda.gov/TobaccoProducts/Labeling/RulesRegulationsGuidance/ucm499355.htm.

[3] https://www.fda.gov/TobaccoProducts/AboutCTP/ucm378205.htm#13

[6] https://www.accessdata.fda.gov/scripts/ora/pcb/index.cfm

[8] Deeming Rule at pg 69-70, https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-10685.pdf

[9] https://www.fda.gov/downloads/TobaccoProducts/Labeling/RulesRegulationsGuidance/UCM208916.pdf

[10] https://www.fda.gov/downloads/TobaccoProducts/Labeling/RulesRegulationsGuidance/UCM192053.pdf

[11] https://www.fda.gov/downloads/TobaccoProducts/Labeling/RulesRegulationsGuidance/UCM499354.pdf

[12] https://www.fda.gov/downloads/TobaccoProducts/Labeling/RulesRegulationsGuidance/ucm297828.pdf

[13] https://www.fda.gov/ForIndustry/FDAeSubmitter/ucm189469.htm

[14]https://www.fda.gov/TobaccoProducts/GuidanceComplianceRegulatoryInformation/Manufacturing/ucm515047.htm