State Permanent Regulations: Comments and Observations

by Sergio Ingstrom

With Los Angeles, San Francisco, and other major markets coming into play, it’s easy to lose sight that the State is also open for public comment on the permanent regulations. Indeed, the red-line version for the BCC is available here (https://www.bcc.ca.gov/law_regs/cannabis_redline.pdf) Please note there are 3 governing boards, which will be discussed in subsequent emails. The BCC governs all retail and distribution plus any microbusiness with these components.

The State will be accepting written comment via email and must be received no later than 5:00 PM on August 27, 2018. There are also public hearings schedules in the following locations:

Oakland – August 7, 2018 10am – 12 pm

Los Angeles – August 14, 2018 10am – 12pm (will be attending)

Sacramento – August 27, 2018 10am – 12pm

Now let’s dig into some of the specific changes and proposed changes. First, the State will no longer be issuing temporary licenses after December 31, 2018. However, any temporary license issued or extended with an expiration date after December 31, 2018 will be valid until it expires, but cannot be extended past the expiration date.

In terms of license transfers, if there is an ownership change, the business must apply again with the State. That being said, the business may continue to operate under the active license while the bureau reviews the application if at least one of the owners is not transferring his or her ownership interest and will remain as the owner under the new license and ownership structure. If all owners are transferring the license, the business must CEASE operations. This is an important change, since before any ownership change could mean a gap of two to three months.

For Testing Labs (also under regulation of the BCC), there are added SOPs for testing methods that are now required:

– Heavy metal
– Microbial Impurities
– Moisture content & water activity
– Mycotoxins
– Residual pesticides
– Residual solvents and processing chemicals
– If tested, terpenoids

Moreover, section 5709 highlights the laboratory’s transportation procedures, which must be followed. Essentially, the BCC is asking lab van drivers to lock up samples and hide them from plain sight. Transportation can only occur between a licensed premises and the licensed lab.

One of the great updates is a big win for distribution license holders. First, the State added Storage Only services, in which a licensed distributor may offer storage services to a licensed manufacturer, cultivator, or other distributor. This would allow product to move through California more smoothly, as it allows businesses to make several stops before reaching their final destination. Moreover, it relieves distributors of having to test product every time they take it in. One exception, however, is that distributors cannot store any live plants.

Next, under Section 5303, the State has clarified that distributors can, indeed, package pre-rolls. Indeed, distributors can now buy flower from various cultivators and create their own label and brand. This is very smart, considering that now is the time to start building market distinction. In the future, many products will survive due to marketing efforts – just like in many industries. By creating a brand now, you’re helping ensure recognition once the market opens up across the US. For now, the market and brands are state by state, with very few being able to move between them. The exception is that the products to be packaged must be flower… distributors cannot package manufactured cannabis products, except when they hold their own manufacturing license.

It is important to be involved in public comment and to specify the problems facing businesses today. Therefore, I ask that you attend a public comment session or email your public comments to the BCC to help shape regulations that are pro-business and make sense. We have to remember that many of the policy-makers are not experts in the cannabis industry. Indeed, many of them came from the ABC. We all know that alcohol runs very differently than cannabis. Thus, it’s imperative that we have our voices heard.