Cannabis Advisory Committee

Background for Recommendations Related to State Licensing Requirements Bureau of Cannabis Control Department of Public Health – Manufactured Cannabis Safety Branch Department of Food and Agriculture – CalCannabis Cultivation Licensing Division Definition of Owner Question for Advisory Committee: The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) provides a broad definition for owner of a cannabis business. The licensing authorities have made the definition of owner more specific in their respective regulations. While the regulations are similar, there are differences. What should the state consider when reconciling the regulations into a cohesive definition of owner? Current Law: Business and Professions Code (BPC) section 26001, subdivision (al) defines owner as any of the following: 1. A person with an aggregate interest of 20 percent or more in the person applying for a license or a license, unless the interest is solely a security, lien, or encumbrance. 2. The chief executive officer of a nonprofit or other entity. 3. A member of the board of directors of a nonprofit. 4. An individual who will be participating in the direction, control, or management of the person applying for a license. For purposes of MAUCRSA, a person may be an individual or business entity. The chart provided contains a comparison of the three licensing authorities’ current regulations to assist with the committee’s discussion. Considerations: Provide clarity to applicants and licensees on which persons are required to be disclosed as an owner for all license types. Reconciling the definition of owner will streamline the application process for applicants and licensing staff. Definition of Financial Interest Holders Question for the Advisory Committee: MAUCRSA requires applicants to provide a complete list of every person with a financial interest in the cannabis business. The licensing authorities have clarified which persons need to be disclosed as financial interest holders in their respective regulations; however, there are differences. What  should the state consider when reconciling the regulations into a cohesive definition of financial interest holders? Current Law: MAUCRSA does not define what is considered a financial interest; however, it does specifically exclude from disclosure persons (individuals or businesses) whose only interest in a cannabis business is through a diversified mutual fund, blind trust, or similar instrument. (BPC § 26051.5(d).) The chart provided contains a comparison of the three licensing authorities’ current regulations to assist with the committee’s discussion. Considerations: Provide clarity to applicants, licensees, and financial interest holders on which persons are required to be disclosed as a financial interest holder in an application for all license types. Reconciling the definition of financial interest holder will streamline the application process for applicants and licensing staff. Information and Documents Required from Owners and Financial Interest Holders Question for the Advisory Committee: MAUCRSA does not specify what information and documents regarding owners and financial interest holders must disclose with the application. The licensing authorities have specified this information in their respective regulations; however, there are differences. What should the state consider when reconciling the regulations? The chart provided contains a comparison of the licensing authorities’ current regulations to assist with the committee’s discussion. Considerations: Reconciling the requirements for the disclosures of information and documents regarding owners and financial interest holders for all license types will provide clarity and streamline the application process for applicants and licensing staff. Required Documents Related to Business Formation and Finances Question for the Advisory Committee: MAUCRSA does not specify which documents and information related to an applicant’s business formation or finances must be disclosed with the application. The licensing authorities have specified this information in their respective regulations, but there are differences. What should the state consider when reconciling the regulations? The chart provided contains a comparison of the licensing authorities’ current regulations to assist with the committee’s discussion. Considerations: Reconciling the requirements for disclosures of documents and information related to an applicant’s business formation and finances for all license types will provide clarity and streamline the application process for applicants and licensing staff. Agenda Item 8 Background for Recommendations Related to Cultivation Department of Food and Agriculture – CalCannabis Cultivation Licensing Division Allowing Light Deprivation in Outdoor Cultivation Question to the Advisory Committee: Should light deprivation be allowed at outdoor cultivation licensed premises? Current Law: California Code of Regulations, title 3, section 8202, subdivision (g) prohibits outdoor cultivation licensees from using light deprivation. Light deprivation is defined as the use of any technique to eliminate natural light in order to induce flowering. (Cal. Code Regs., tit. 3, § 8000(q).) Considerations: When initially adopting cannabis cultivation licensing regulations, the California Department of Food and Agriculture (CDFA) considered allowing light deprivation at outdoor cultivation premises. CDFA ultimately amended the emergency regulations to explicitly prohibit light deprivation on outdoor cultivation premises because such methods can produce similar numbers of harvests per year as MixedLight Tier 1 license types. License types determine application and license fees based on number of harvests and canopy size. Allowance of light deprivation for outdoor cultivation premises will likely necessitate a reevaluation of application and license fees to account for similar number of harvests as Mixed-Light Tier 1 licenses. Shareable Areas for Licensees with Multiple Licenses Including Nurseries with Propagated Material Question to the Advisory Committee: Should a licensee with multiple licenses be allowed to share propagation areas and other areas among the licensee’s multiple licenses? Current Law: California Code of Regulations, title 3, section 8106, subdivision (a)(1)(J) identifies pesticide and other agricultural chemical storage area(s), composting area(s), and secured area(s) for cannabis waste may be shared between licenses held by one license. Immature plant area(s), designated processing area(s), designated packaging area(s), among others cannot be shared between licenses held by one licensee (Cal. Code Regs., tit. 3, § 8106(a)(1).) With respect to nursery license requirements, only licensees propagating immature plants for distribution or seed to another licensee are required to obtain a nursery license. (Cal. Code Regs., tit. 3, § 8300(c).) Considerations: CDFA initially did not allow for any shared areas between licensed premises even if held by one licensee. The regulations were amended to allow some shared areas based upon how the activities in those areas related to the purpose for  cannabis cultivation licensure i.e. whether those activities would require a separate license. Also, CDFA must consider impacts shared areas would have on administration and enforcement of CDFA regulations. Because of track and trace requirements for propagative material (seeds and clones) through mature and harvested plants, it was necessary for efficient investigation and inspections to prohibit propagation, canopy, processing, and packaging areas from being shared. Public health and safety and prevention of inversion and diversion were additional issues that informed the current regulations. Agenda Item 9 Background for Recommendations Related to Manufacturers Department of Public Health – Manufactured Cannabis Safety Branch Permissible Ingredients for Inhaled Cannabis Products Question for the Advisory Committee: What ingredients should be allowed or prohibited in inhaled cannabis concentrates (vape cartridges, infused pre-rolls, dabs, etc.)? The E-cigarette and Vaping Associated Lung Injury (EVALI) cases occurring in fall 2019 in California were predominately associated with cannabis vaping products obtained from unlicensed, unregulated sources. Though no single chemical agent was identified as the sole cause of EVALI, the state and nation learned more about the chemicals that may be used as ingredients in vaping products and their associated risks to public health. Current Law: Existing regulatory protections for cannabis vaping products include: • Ingredient Disclosures (Cal. Code Regs., tit. 17, § 40408) – Cannabis product labels must include a list of all ingredients contained within the product. If an ingredient contains multiple ingredients, those sub-ingredients must also be listed on the label. • Restrictions on Heavy Metals, Pesticides, Microbials and Mycotoxins – Cannabis products are tested for a variety of contaminants and cannot be transferred to retailers or sold if they exceed any of the established action levels. • Universal Symbol Required on Cannabis Vaping Products (Cal. Code Regs., tit. 17, § 40403(c)(2), AB 1529 (2019)) – Requires the universal symbol for cannabis to be included on the cannabis vape cartridge to inform consumers that the cartridge contains cannabis. Considerations: Restrict inhaled products so that they can only contain cannabis or cannabis oil and botanically derived terpenes (extracted from plants). This restriction would ensure consumers of legal cannabis products continue to be protected from chemicals that may cause harm to health.  Classification of Manufactured Cannabis Goods Question for the Advisory Committee: Are the current cannabis product classifications in regulation sufficient to account for the variety of products in the marketplace or does the state need to consider other ways to classify products? Current Law: The current manufactured cannabis product classifications are: • Cannabis Concentrate (BPC § 26001(h), Cal. Code Regs., tit. 17, § 40100(i)) – Cannabis that has undergone a process to concentrate one or more active cannabinoids, thereby increasing the product’s potency. o Ex: vape cartridges, dab, shatter, wax, extracts, infused pre-rolls o Orally consumed Concentrate (Cal. Code Regs., tit. 17, § 40100(hh)) - A cannabis concentrate that is intended to be consumed by mouth and is not otherwise an edible cannabis product.  Ex: tinctures, capsules, tablets • Edible Cannabis Product (BPC § 26001(t), Cal. Code Regs., tit. 17 § 40100(q)) – A cannabis product intended to be used orally, in whole or in part, for human consumption. For purposes of this chapter, “edible cannabis product” includes cannabis products that dissolve or disintegrate in the mouth but does not include any product otherwise defined as “cannabis concentrate”. o Ex: baked goods, beverages, mints, chocolate, gummies o Orally-dissolving Edible Cannabis Product (Cal. Code Regs., tit. 17, § 40135(b)) – An edible product that is an orally-dissolving product  Ex: sublingual lozenges, mouth strips • Topical Cannabis Product (Cal. Code Regs., tit. 17, § 40100(tt)) - a cannabis product intended to be applied to the skin rather than ingested or inhaled. o Ex: lotions, balms, creams, bath bombs Licensees have expressed some confusion with determining the proper classification for products. Because some requirements – including THC limits, child-resistant packaging, and testing action levels – are based on the product classification, licensees’ ability to properly classify cannabis product is important to ensure compliance. Considerations: Develop product classifications based on method of consumption (ingested, inhaled, mucosal absorption, topical). This pathway would create clarity by tying product classifications to the instructions for use. This pathway would also allow the cannabis licensing authorities to develop product standards (allowed or prohibited ingredients) that reflect risks created by a specific method of consumption. For example, a small amount of pesticide may be toxic if ingested but not if rubbed on the skin. This would create clarity for licensees, while also developing stronger and more targeted protections for consumers. Agenda Item 10 Background for Recommendations Related to Distributors Bureau of Cannabis Control Storage-Only Services Question for the Advisory Committee: Licensed distributors may provide storage services to other licensees for cannabis. Should the state consider making changes to the storage-only regulatory framework? Current Law: BPC section 26053(d) requires each applicant or licensee to apply for and obtain a separate license for each location where the licensee engages in commercial cannabis activity. California Code of Regulations, title 6, section 5301 enables licensed distributors to provide storage services to other licensees. Currently, licensees utilizing storage-only services must have their cannabis goods transported from the storage-only distributor back to their own licensed premises before the cannabis goods are distributed to any other licensee. Bureau licensees have expressed confusion regarding what constitutes storage-only activities and have expressed a desire to have their cannabis goods transported from storage to other licensees without having the cannabis goods returned to their own licensed premises first. Considerations: Clarify the regulations to develop a storage-only framework that specifies the circumstances during which licensees may have their cannabis goods transferred from the storage-only premises to another licensee’s premises. Such framework should harmonize licensees’ storage-only activities with the licensed premises provisions contained in BPC section 26053(d). Trade Samples Between Licensees Question for the Advisory Committee: Samples of cannabis goods must be handled in compliance with all the rules that apply to all other cannabis goods in the system. Should the state consider specific regulatory provisions for the handling of commercial cannabis goods trade samples? Current Law: BPC section 26153 prohibits licensees from giving away any amount of cannabis or cannabis products, or any cannabis accessories, as part of a business promotion or other commercial activity. Due to the limitations enumerated in statute, the regulations do not establish specific rules for the handling of trade samples. Accordingly, samples of cannabis goods must be handled in compliance with all of the rules that apply to all other cannabis goods in the system (e.g., satisfy packaging, labeling, and testing requirements; be transported by a licensed distributor in accordance with the regulations; sold to a customer via a  licensed retailer; satisfy taxation requirements, etc.). Notably, licensees are prohibited from consuming cannabis goods on their licensed premises. Licensees have expressed concerns regarding the inability to conduct “sensory analysis” to determine the quality of cannabis goods and to educate retailers on cannabis goods. Licensees indicate that trade samples are important for small and emerging licensees to enter into the market, and for retailers to gain a better understanding of the effects of the cannabis goods they intend to sell to customers. Considerations: Create a framework that allows for trade samples and ensures that they are properly packaged, tracked, and tested prior to consumption. This could include: limitations to the amount of trade samples that are allowed from a cannabis batch; limitations to the amounts which may be given to licensees for sampling at a given time; and methodologies for classifying and providing samples. Allowing trade samples may assist small businesses gain exposure within the developing commercial cannabis market, while ensuring public health and safety in the handling of trade samples of cannabis goods. Required Use of Fully Enclosed Box, Container, or Cage When Transporting Cannabis Goods Question for the Advisory Committee: Is the current requirement that cannabis goods be within a fully enclosed box, container or cage in the vehicle during transport still necessary to ensure public health and safety? Current Law: California Code of Regulations, title 16, section 5311, subdivision (f) requires that licensed distributors shall ensure that the cannabis goods they are transporting are locked in a fully enclosed box, container, or cage that is secured to the inside of the vehicle or trailer. No portion of the enclosed box, container, or cage shall be comprised of any part of the body of the vehicle or trailer. In the Initial Statement of Reasons and Final Statement of Reasons for the regulation, it was recognized that the licensing authorities are statutorily mandated to hold the protection of the public as the highest priority. By requiring licensees to securely lock the product in a box within the interior of the vehicle, the regulation sought to reduce the risk of theft or robbery, which exposes the general public to harm and danger. Licensees have expressed concern related to the cost of installing separate and distinct cages and suggest that such requirements do not enhance the safety of the driver or the security of the products. Considerations: Allow for a portion of the enclosed box, container, or cage to be comprised of a portion of the vehicle or trailer. This requirement would continue to ensure the security of cannabis goods that are being transported, and thus public health and safety, while minimizing installation costs for Bureau distributor licensees.