ICYMI: California’s Hashish Consolidation Trailer Invoice

Love it or hate it, California is continuing its democratic experiment on the regulated production, distribution, and sale of cannabis under the Regulation and Safety of Cannabis for Medical and Adult Use Act (“MAUCRSA”). Although the licensing program here in California had many regulatory issues, the existing regulations are full of ambiguity, and enforcement has been everywhere (or has not been or was almost entirely dictated by local governments), we’ll see more technical issues with fixes to the law on the horizon.

The governor’s cannabis consolidation bill was finally published earlier this month. What am i talking about Back in January 2020, Governor Newsom announced that he intended to merge the cannabis control bureau, CalCannabis, and the manufactured cannabis safety division into a single cannabis agency to enforce cannabis regulations and oversee licensees in California. These efforts have been stalled by the emergence and ongoing impact of COVID-19. Finally, under the 2021-2022 budget, on February 2, Governor Newsom announced his plans for this mass consolidation.

Back in January, the governor’s office released a budget summary that outlines what the trailer bill will do with California cannabis. Here are the highlights as we see them:

Combined agencies. If this bill is passed, the three cannabis agencies currently in operation will be merged into a single Cannabis Control Unit (“DCC”) (within the California Bureau of Business, Consumer Services and Housing) beginning July 1, 2021 .

Regulatory transfers. All currently applicable regulations within the scope of MAUCRSA are automatically adopted by the DCC when they are created, provided and until they are repealed, replaced, changed, etc. This was a pretty big question for licensees: if they are consolidated, will we see an overhaul of all government regulations? At the moment the answer seems to be “not really”.

Advanced background checks. The review of the criminal law background will be expanded to include criminal records as part of the draft law:

. . . Certified local or state agency records of all arrests and convictions, certified probation records, and any other related documentation required to conduct an investigation into an applicant or licensee. A local or state agency may make these records available to a licensing authority upon request.

Verticality break. If the bill is passed,[a] Individual with a financial interest in a state test laboratory license. . . It is forbidden to have a financial stake in any other type of cannabis license. “This wasn’t necessarily the case before, at least not under the MAUCRSA regulations – although it makes perfect sense not to allow anyone to test their own cannabis.

Ag product name. Cannabis would now be viewed as an agricultural product under the law some of the other states have done, granting licensed cannabis certain statuses and safeguards that it currently lacks.

Environmental controls. The impact on the environment will now be the focus for farmers. The bill provides that:

When issuing licenses for cannabis cultivation, the [DCC] takes into account issues including, but not limited to, water use and environmental impact. If the State Water Resources Control Board or the Department of Fish and Wildlife determines, based on substantial evidence, that growing cannabis in a watershed or other geographic area has significant adverse effects on the environment, the [DCC] may not issue new licenses or increase the total number of plant identifiers in this watershed or area.

Asset ID program. The state would have to set up a “unique identification program” that appears to be different from the Track & Trace requirements and applies only to farmers who identify the origin of all cannabis / cannabis plants.

Chain of custody requirements. If testing laboratories are coordinated for quality assurance testing, the drivers moving the product must now be direct employees of the laboratory. Laboratories can now receive samples directly from a manufacturer or a cultivator for “quality control” purposes and such samples cannot be certified for retail sale. That said, cultivators and manufacturers could go straight to the labs to have samples tested first before sending entire batches to dealers for government-mandated quality assurance testing.

Provenance restrictions. It is now clear that a cannabis product grown, processed, manufactured, packaged or stored in a location without a government license will be labeled as fake and will violate the law (and in those circumstances would be destroyed) falsely branded (or falsified products) can be recalled either by the licensee concerned or by the DCC under certain conditions that pose a threat to public health and safety. Adulterated or mislabelled products (that are not otherwise from or stored in an unlicensed location / source) will be banned, and affected licensees can contact the DCC to continue manufacturing the product if the DCC has certain restrictions / Controls imposed.

Social justice administration. The governor’s office for business and development will advance state social equity and corporate licensing (and funding) efforts in California by working with all local equity programs and serving as the point of contact for all local equity programs eligible for MAUCRSA grants receive. The Bureau of Cannabis Control’s Equity-Local Liaison Unit would also be expanded to provide services to all social justice applicants of all license types.

Housekeeping. The bill eventually cleans up all legal notices related to the Medical Cannabis Regulation and Safety Act and the Medical Marijuana Regulation and Safety Act to add the Law on the Regulation and Safety of Cannabis for Doctors and Adults (MAUCRSA) describe.

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If you remember, MAUCRSA was born back in 2017 from Governor Brown’s trailer budget bill. Therefore, it is not uncommon for budget accounting to make extensive changes to existing laws. While the Govenor Newsom bill is not a massive reform effort, it definitely creates some technical fixes and clarifications needed by the industry. Furthermore, it certainly can’t hurt to have just one chef in the kitchen – like pretty much every other state with a cannabis license – when it comes to consistent rule-making and more centralized enforcement.

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