California Cannabis Update: December 2020
Dec 23, 2020
As we close out 2020 and head into the new year, we can look forward to several significant proposed changes to California’s current regulatory framework.
In last year’s Governor’s budget was a proposal to consolidate the three licensing authorities (the Bureau of Cannabis Control, the CalCannabis Cultivation Licensing division, and the Manufactured Cannabis Safety Branch) into one agency to be known as the Department of Cannabis Control. Put on hold as a result of the pandemic, the consolidation process will shift to the 2021-2022 budget process. If the 2020 budget proposal shifts to 2021 unchanged, we can expect the following:
- Harmonization of the three different sets of regulations into one consistent set of regulations
- The Department of Cannabis Control will serve as the single point of contact for all licensees
- A dedicated enforcement branch
Cannabis Tax Point of Collection
Other 2020 proposed reforms we hope to see included in the new budget are changes to the point of collection for cannabis taxes. If approved, responsibility for payment of the excise tax will be moved from the distributor to the retailer, and payment of the cultivation tax would be the initial distributor's responsibility.
Cannabis Bills Filed Ahead of the 2021 Legislative Session
The California legislature reconvenes on January 4, 2021 and the following pre-filed bills expected to be taken up during the 2021 session address provisional licensing and the sale of hemp-derived products outside of the cannabis regulatory framework:
SB59 Cannabis Licenses: Extension of Provisional License Provisions
SB59 would extend the provisional license provisions of MAUCRSA from January 1, 2022 to July 1, 2028. The bill would also extend the CEQA exemption contained in MAUCRSA (Business & Professions Code § 26055(h) from July 1, 2021 to July 1, 2028.
AB45 Industrial Hemp Products
AB-45, introduced by State Assembly Member Cecilia Aguiar-Curry, the same assembly member who introduced similar legislation in 2019 and in 2020. If passed, AB-45 will permit the sale of food for human or animal consumption, beverages, dietary supplements, and cosmetics containing CBD or any other cannabinoid, extract, or derivative of hemp. Such products would be subject to the same contaminant testing as cannabis products.
The bill would prohibit smokable hemp flower products and also “processed smokable products” which, as currently drafted, would prohibit vape products containing hemp-derived cannabinoids. The bill requires a report by July 1, 2021 that would describe the steps necessary to incorporate hemp into the cannabis supply chain.
The bill contains a number of other notable provisions that, if passed, will significantly alter the regulatory landscape for the manufacture and sale of hemp products.
New Metrc Restrictions on Types of Products Each License Type Can Receive in a Transfer
CCTT-Metrc recently released Support Bulletin CA_IB_2020_017, which addresses upcoming changes that restrict the types of products that can be received by each license type as well as updated item categories. These changes include:
An update to the Item Categories to include “Capsules.” This change became effective this week.
Restrictions on the types of products that each license type can receive in a transfer based on the Item Category of the package. This change is scheduled to occur on January 19, 2021.
The restrictions to the types of products that can be received may have implications for your business. The bulletin states:
“All manufactured product intended to be transferred to a Distributor or Retailer, and all flower intended to be transferred to a Retailer, must be packaged using an Item Category with a Unit of Measure each. Manufactured product packaged using a Unit of Measure of bulk weight or volume will no longer be able to be transferred to a Distributor or Retailer. In addition, flower packages with a Unit of Measure of bulk weight (i.e. grams or pounds) will no longer be able to be transferred to a Retailer.”
After January 19, 2021, Distributors will no longer be able to receive weight or volume of Extract, Infused Butter/Oil, or Other Concentrate into inventory. Distributors will be able to transport these Item Categories from one licensed Manufacturer to another to further the manufacturing processes, but licensed Distributors may not take title or possession of bulk Extract, Infused Butter/Oil, or Other Concentrate outside of the transportation process.
We encourage you to review CCTT-Metrc Support Bulletin CA_IB_2020_017 to determine if it will impact your current standard operating procedures. If you operate a Distributor or Retailer license that is currently receiving or storing manufactured products in weight or volume, please contact us if you would like to discuss modifying your current procedures to comply with this guidance.
BCC's Revised Branded Merchandise Fact Sheet
A final note is warranted on BCC’s revised branded merchandise fact sheet, posted December 2, 2020. According to the revised fact sheet, the BCC no longer considers all branded merchandise to be advertising and provides five factors by which the BCC will determine whether branded merchandise is advertising. MAUCRSA defines “advertising” as any statement, illustration, or depiction intended to induce sales of cannabis goods.
The 5-Factor Test:
Whether the item is intended to encourage individuals who view it to purchase cannabis goods.
Whether the item is intended to raise awareness of the licensee’s brand.
Whether the item is intended to be viewed within the licensed premises, within a customer’s private property, or in public.
Whether the item is a cannabis accessory that simply indicates the brand of the merchandise for identification purposes.
Whether the purpose of the item is to satisfy a regulatory requirement such as an exit bag, which simply indicates where the purchases were made.
Since it is difficult to imagine a scenario where branded merch is not a form of advertising, we can only conclude from this update that the BCC does not consider all branded merch to be subject to MAUCRSA’s advertising regulations.
Notably, cannabis accessories and exit bags that display a brand name are not deemed advertising and therefore do not require a license number. As for other types of merch, a licensee will have to consider these factors to determine whether their branded merchandise will be considered an advertisement by the BCC.
Please contact our California team if you have questions or need assistance.