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RE: WINTER LLP Update – Newly signed Cannabis Laws; and Bureau of Cannabis Control Publishes New Distributor Fact Sheets

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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:

https://cannabis.ca.gov/wp-content/uploads/sites/13/2019/08/BCC_Distributor_Transport_Only_Fact_Sheet.pdf

Those looking to get in touch with the Bureau of Cannabis Control may contact us directly through email at bcc@dca.ca.gov.

WINTER LLP UPDATE: U.S. Senate Votes To Legalize Hemp After Decades-Long Ban Under Marijuana Prohibition

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The non-psychoactive cannabis cousin of marijuana would finally become legal to grow in the United States under a bill overwhelmingly approved by the Senate.

Photo by Chris Wallis // Side Pocket Images

The wide-ranging agriculture and food policy legislation known as the Farm Bill, passed by a vote of 86 – 11 on Thursday, contains provisions to legalize the cultivation, processing and sale of industrial hemp.

The move, championed by Senate Majority Leader Mitch McConnell (R-KY), would also make hemp plants eligible for crop insurance.

“Consumers across America buy hundreds of millions in retail products every year that contain hemp,” McConnell said in a floor speech on Thursday. “But due to outdated federal regulations that do not sufficiently distinguish this industrial crop from its illicit cousin, American farmers have been mostly unable to meet that demand themselves. It’s left consumers with little choice but to buy imported hemp products from foreign-produced hemp.”

McConnell also took to the Senate floor on Tuesday and Wednesday to tout the bill’s hemp legalization provisions in separate speeches.

In April, the GOP leader introduced standalone legislation to legalize hemp, the Hemp Farming Act, the provisions of which were included in the larger Farm Bill when it was unveiled earlier this month.

The Senate Committee on Agriculture, Nutrition and Forestry approved the bill by a vote of 20-1 two weeks ago.

During that committee markup, Sen. Charles Grassley (R-IA), one of Congress’s most ardent opponents of marijuana law reform, threatened to pursue serious changes to the bill’s hemp provisions on the floor. Namely, he wanted to remove the legalization of derivatives of the cannabis plant, such as cannabidiol (CBD), which is used by many people for medical purposes. But Grassley never ended up filing a floor amendment, allowing hemp supporters to avoid a contentious debate and potentially devastating changes to the bill.

Hemp legalization enjoys broad bipartisan support.

“Legalizing hemp nationwide ends decades of bad policymaking and opens up untold economic opportunity for farmers in Oregon and across the country,” Sen. Ron Wyden (D-OR) said upon passage of the Farm Bill on Thursday. “Our bipartisan legislation will spur economic growth in rural communities by creating much-needed red, white and blue jobs that pay well. I’m proud to have worked with my colleagues to get the bipartisan Hemp Farming Act through the Senate. Today marks a long-overdue, huge step forward for American-grown hemp.”

BIG news for industrial hemp farming! Today, the Senate passed my bipartisan #HempFarmingAct, legislation that would lift a decades-old ban on growing industrial hemp on American soil. #RonReport

— Ron Wyden (@RonWyden) 3:09 PM – Jun 28, 2018

Earlier this month, the Senate approved a nonbinding resolution recognizing hemp’s “growing economic potential.”

“For the first time in 80 years, this bill legalizes hemp. We forget, but hemp was widely grown in the United States throughout the mid-1800s,” Sen. Michael Bennet (D-CO) said in a floor speech on Wednesday. “Americans used hemp in fabrics, wine, and paper. Our government treated industrial hemp like any other farm commodity until the early 20th century, when a 1937 law defined it as a narcotic drug, dramatically limiting its growth. This became even worse in 1970 when hemp became a schedule I controlled substance. In Colorado, as is true across the country–I have talked to a lot of colleagues about this–we see hemp as a great opportunity to diversify our farms and manufacture high-margin products for the American people.”

McConnell’s standalone hemp bill currently has 29 cosponsors signed on—17 Democrats, nine Republicans and two independents.

A Congressional Research Service report released last week says that the “global market for hemp consists of more than 25,000 products.”

House Republican leaders blocked a vote to make hemp legalization part of that chamber’s version of the Farm Bill. But now that the language is included in the version approved by the Senate, it will be part of discussions by the bicameral conference committee that will merge both chambers’ bills into a single piece of legislation to be send to President Trump’s desk. All indications are that McConnell, as the most powerful senator, will fight hard for the survival of his hemp proposal.

A White House statement of administration policy released this week outlining concerns with the Farm Bill does not mention its hemp legalization provisions.

In 2014, McConnell included provisions to allow limited state-authorized hemp research programs in that year’s version of the Farm Bill.

Kentucky’s agriculture commissioner cheered the passage of the new hemp provisions on Thursday..

For farmers across KY, there is no piece of legislation more important than the #FarmBill. I am excited that @SenateMajLdr’s #HempFarmingAct made it into this measure, which will allow states to unleash the full economic potential of our industrial hemp pilot programs. #KyAg365

— Commissioner Quarles (@KYAgCommish) 3:17 PM – Jun 28, 2018

Tom Angell publishes Marijuana Moment news and founded the nonprofit Marijuana Majority. Follow Tom on Twitter for breaking news and subscribe to his daily newsletter.

WINTER LLP UPDATE: FDA approves first drug derived from marijuana

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The Food and Drug Administration (FDA) on Monday gave a green light to the country’s first drug derived from marijuana.

Epidiolex, manufactured by GW Pharmaceuticals, is intended to treat seizures associated with two rare and severe forms of epilepsy that begin in childhood. The drug is made of cannabidiol (CBD), a component of marijuana that doesn’t give users a high.

The approval could spur more research into marijuana products, though marijuana itself remains illegal.

“This approval serves as a reminder that advancing sound development programs that properly evaluate active ingredients contained in marijuana can lead to important medical therapies,” FDA Commissioner Scott Gottlieb said in a statement.

In a separate statement, Gottlieb stressed the importance of using proper research on the medical uses of marijuana and noted the approval doesn’t mean the agency will be lowering its approval standards for marijuana.

“This is an important medical advance. But it’s also important to note that this is not an approval of marijuana or all of its components,” he said. “This is the approval of one specific CBD medication for a specific use.”

Medical marijuana is available in about half of states. But federal regulations classify CBD as a Schedule 1 drug, which means it has no medical value and a high potential for abuse, because it is a chemical component of the cannabis plant.

This means the Drug Enforcement Administration (DEA) will have to reclassify it before GW can begin marketing Epidiolex.

The FDA said it is providing medical and scientific information and recommendations to the DEA about CBD.

WINTER LLP Update: In Truckee, Cannabis Businesses Are Still Coming Out Of The Shadows

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TRUCKEE, Calif. — Though the town of Truckee has allowed commercial cannabis delivery for a year now with no cap on the number of permits issued, there’s only one operating delivery service fully permitted by the town and the state.
While the town has seemingly strict regulations, working with town staff to obtain a use permit was a relatively smooth process, said Todd Winter, owner of Winter Greens Delivery.
“This is a brand new industry,” said Winter. “It’s always going to seem harsh at the very beginning.”
Winter has also worked as an attorney representing clients in the cannabis industry for the past 10 years.
“In dealing with municipalities all over the state, the Town of Truckee was amazingly receptive in the process,” he said. “The business license process was shorter than anywhere else we’ve dealt with for a client.”
In order to operate legally, businesses must obtain a use permit from both their local municipality and the state. As a veteran of the industry, Winter said licensing his delivery business may have been a smoother process because he was familiar with the regulations.
“I do permits and licenses and everything related to cannabis businesses all over the state of California with my team,” said Winter. “It’s much easier for me than other delivery businesses in town that were faced with challenges that I didn’t have because I have this expertise.”
Truckee’s regulations allow businesses to only deliver to a private physical addresses. However each delivery service must have a fixed location to run operations, at which direct sales cannot take place.
The businesses cannot exceed 3,000 square feet or have a retail storefront. They must maintain at least 600 feet of distance from schools, daycares and youth centers and will be limited to areas zoned for manufacturing, downtown manufacturing, service commercial and general commercial.
Businesses in the general commercial zone may not be located on the ground floor.
Starting a legal cannabis business takes more money and resources than most other businesses, Winter said.
“It’s expensive. You have to find property. You have to talk to landlords that will see eye-to-eye with you and be OK with cannabis in their space.”
In December the Truckee Planning Commission granted Tahoe Herbal Care a use permit, a delivery service attempting to operate out of a second-story suite in Donner Lake Village. The planning commission’s decision was appealed, however, and the owners later withdrew their application due to regulations within the home owners association, according to Jenna Gatto, Truckee planning manager.
“A lot of landowners don’t want cannabis in their space,” said Winter.
As cannabis is still federally illegal, businesses face another hurdle with federal regulations banning them from using bank services.
“It makes it very difficult for cannabis companies to handle simple things like payroll or paying bills,” said Winter. “Fortunately a lot of the industry still works on a cash basis.”
Ultimately Winter said there are no drawbacks to being a legalized cannabis business “because we’re finally coming out of the shadows now.”
Hannah Jones is a reporter for the Sierra Sun. She can be reached at hjones@sierrasun.com or 503-550-2652.

RE: WINTER LLP Update – Monterey lowers cannabis tax!

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Hello all Monterey clients and friends,

In case you were not yet heard, the Monterey County Board of Supervisors voted last night to lower the cannabis tax rates across the board.

Please see the following new tax rates:

  • Mixed Light Cultivation (greenhouses): $5 per square foot
  • Indoor Cultivation: $8 per square foot
  • Nurseries: $1 per square foot
  • Manufacturers: 2.5% of gross receipts
  • Distributors: 2% of gross receipts
  • Testing: 1% of gross receipts
  • Retailers: 4% of gross receipts

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

WINTER LLP UPDATE: Licensed Weighmaster Q&A

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Dear All,

Some of you may have received emails from the State requiring you to register as a “licensed weighmaster.” We have prepared the following Q&A which will hopefully answer some of your questions about this requirement. Please review carefully, and do not hesitate to reach out with further questions or if you require assistance in registering as a licensed weighmaster.

  1. What is a licensed Weighmaster?

The Division of Measurement Standards (a division within the CA Dept of Food and Agriculture) administers the Weighmaster Enforcement Program. This program licenses individuals or firms as Weighmasters, who are responsible for weighing, measuring, or counting bulk commodities and issuing certificates of accuracy. Weighmaster certificates are then used as the basis to buy or sell the commodity identified on the certificate.

  1. Do I need to register as a licensed Weighmaster?

Pursuant to the Emergency Regulations released by Manufactured Cannabis Safety Branch (Section 40277) and CalCannabis (Section 8213), “For bulk shipments of cannabis and cannabis products, a licensee shall be licensed as a weighmaster, and a certificate shall be issued by a licensed weighmaster.” Therefore cultivators, manufacturers, distributors, and microbusinesses will all need to register as licensed Weighmasters. Please find further information and the application at https://apps1.cdfa.ca.gov/weighmasterpublic/newapplication. Please additionally note there are also County-specific requirements (see #9 below).

  1. What do I need to weigh? (non-exhaustive list)
    1. Containers/packages of trimmings
    2. Containers/packages of flowers/buds
    3. Dried flower
    4. Edibles
    5. Topicals
    6. Shatter
    7. Oils
    8. Tinctures
    9. Extracts
  1. What needs to be on the Weighmaster Certificate?

Please see your County website for requirements. Samples here and here. Copies of voided certificates, issued certificates, and all records need to be maintained for four years.

  1. When do I issue a Weighmaster Certificate?

Whenever payment for your product is dependent on a written or printed weight, measure, or count (any bulk shipments/sales/transports).

  1. What is a Deputy Weighmaster?

All persons who determine weight, measure, or count and/or will be signing weighmaster certificates must be licensed as Deputy Weighmasters. A weighmaster may employ any person to act for them as a deputy weighmaster and shall be responsible for all acts performed by that person. There is no age limit.

  1. What are the fees for a weighmaster license?

Fixed location $75

Each additional fixed location $30

Location other than fixed $200

Deputy $20

  1. How long is a license good for?

The license is good for one year and must be renewed annually.

  1. What kinds of scales do I need? Do I need to register the scales with the County?

More information about the types of scales suitable for commercial purposes can be found here. You must only use weighing devices that have been approved, tested, sealed, and registered with the County Sealer (please find your County and see requirements).

  1. What will happen if I don’t register as a Weighmaster or fail to issue Weighmaster Certificates?

You may be found to be in violation of BPC 26031 (repeated offenses may result in revocation of your State cannabis license), and the violation is punishable by fines up to $1000 and/or six months in jail.

Again, should you need any assistance with the application process (State or County), please let us know.

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

WINTER LLP UPDATE: Coastal Zone Ordinance – Effective Date TBD (Not Yet)

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Hello All,

As I am sure you are all aware by now, last week the Coastal Commission approved Monterey County’s Coastal Ordinance. This is obviously extremely good news. However, there are still a few more steps that need to be taken by the County before the Ordinance goes into effect. Note, some lobbyists are telling clients the Coastal Ordinance is in effect now. That is NOT accurate.

The County still needs to go through the formal adoption process to approve the ordinance, including a formal hearing and vote by the Board of Supervisors. This hearing is currently scheduled for the March 13th Board of Supervisors meeting. After the Board formally adopts the Coastal Ordinance, it must then go back to the Coastal Commission for final certification.

Based on this timeline, it appears as if the Coastal Ordinance may go into effect sometime in April at the earliest, depending on how long it takes for the Coastal Commission to conduct their final review/approval. Once that is completed, the County can accept your full permit applications.

So, we recommend starting on those now with our office so we are as far along as possible (hopefully complete) by the time April/May rolls around.

As always, we will continue to keep you posted with any new developments, and please feel free to reach out to us with any questions.

Thank you. Todd Winter, WINTER LLP.

WINTER LLP UPDATE: California Trademarks (Success); and CBD Trademarks Federally

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Hello everyone,

As a follow up to our warning email below regarding cannabis trademarks in California, we would like to report that, thanks to the trust of couple of our clients, and with some painful conversations and written arguments with the California Secretary of State, we have now successfully prosecuted a few California state level trademarks for clients.

We still maintain the analysis below w/re to the enforcement and value of state vs. federal trademarks. But I wanted to assure any of you that may be on the fence about filing for California state level trademarks, we believe we have educated the Secretary of State’s office sufficiently to provide you with a positive path forward for In Use Cannabis-specific Trademarks, if you wish to proceed. Please let us know.

Additionally, we are also excited to announce we have overcome the USPTO’s prior objections to clients’ CBD related trademark applications. Previously the USPTO had refused CBD marks based on the FDA/DEA positions. But with only a slight modification to our current filings, we have overcome these objections, and our CBD related trademarks are now moving their way through the USPTO towards full federal registration.

Please let us know if you have any questions. Thank you.

WINTER LLP UPDATE: URGENT – CANNABIS CONSULTANTS / PACKAGING / LOBBYISTS / ETC.

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Hello Everyone,

It is becoming painfully obvious to us that the so called cannabis consultants, packaging and design companies, lobbyists, and others target marketing cannabis clients in our industry, do not possess the level of knowledge or expertise necessary to legitimately and correctly advise cannabis companies in California w/re to local permitting, state licensing, real estate compliance, trademarks, and most recently packaging. We, as a firm, are spending a tremendous amount of our time fixing problems for clients who have engaged non-experts in these areas.

PLEASE BE ADVISED, 100% of ALL client PACKAGING that HAS been sent to us for COMPLIANCE review HAS FAILED. Every single package we have reviewed has been non-compliant forcing clients to spend 1,000’s to fix. Don’t let this happen to you.

We understand you are all under severe pressure and time constraints to get licensed and get your products out in the market and flowing again. But in doing so, please don’t rely on these companies for legal compliance, permitting, state licensing, trademarks, or packaging. It will cost you much more time and money in the end. We can literally save you 10’s of thousands in design and packaging costs alone, if you just send us your designs/packaging for review first.

Please let us help you on the front end of your projects to avoid unnecessary delays, costs, and/or worse loss of permits and licensing.

WINTER LLP UPDATE: Transition Period FAQ Update – Clarification for MANUFACTURERS re THC Limits on Products prior to 1/1/18

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Hello all,

As you may recall, there was some confusion regarding the applicable THC limits for cannabis products manufactured prior to January 1, 2018. Specifically, the Manufactured Cannabis Safety Branch (MCSB) required cannabis products that were manufactured prior to January 1, 2018 to meet the applicable THC limits (100 mg for edibles, 1000-2000mg for concentrates). However, the Bureau of Cannabis Control also indicated in their Emergency Regulations that products manufactured prior to January 1, 2018 could only enter the market if basic packaging and labeling requirements were met (no THC limits). These two statements were obviously contradictory and caused a lot of confusion in the industry.

Well, we are pleased to announce that, as a likely result of the comments we submitted, the MCSB has released a new FAQ today which clarifies the above as follows:

“During the transition period, which lasts from January 1 until July 1, 2018, cannabis products may enter the commercial cannabis market if they have child-resistant packaging and the label contains the government warning statement and the amount of THC per serving.”

To be completely clear, there is now no mention of meeting the applicable THC limits for products manufactured prior to January 1, 2018 in this newly released update. This should be welcome news to many of you and your distributors.

Please note, however, products manufactured on or after January 1, 2018 still must meet all of the required packaging and applicable THC limits.

We hope the above is helpful. Please feel free to contact us with any questions. Thank you.

Thank you. Todd Winter, WINTER LLP.