by Madeline Grant and Michelle Rutter, NCIA Government Relations Managers
The sun is hot, and the halls of Capitol Hill are empty… it must be August recess, but as your congressional representatives take a break from their busy schedule in D.C., we are still hard at work in the nation’s capital. We are continuing the momentum that the 116th Congress has had in changing cannabis policy. This summer there were many important hearings and events. Let’s take a look back at a few of them:
In June, the House Committee on Small Business held a hearing entitled “Unlocked Potential? Small Businesses in the Cannabis Industry.” The hearing allowed members of the Committee to learn about the opportunities the legitimate cannabis industry presents for small businesses in states with legal cannabis, as well as entrepreneurs from traditionally underserved communities. The hearing also discussed the challenges also faced by “ancillary” or “indirect” cannabis businesses. The Chairwoman of NCIA’s Banking Access Committee, Dana Chaves, testified, as well as representatives from the Minority Cannabis Business Association (MCBA), the Veterans Cannabis Coalition (VCC), and The Heritage Foundation. In the testimony NCIA submitted for the record, we wrote, “[SBA] programs were specifically designed to stimulate economic activity and create jobs through small-business enterprises. Offering funding to the emerging regulated cannabis industry, which is mostly comprised of small businesses, would perfectly align with SBA’s primary objective to maintain and strengthen the Nation’s economy.” You can read NCIA’s full testimony here.
In addition to the Small Business Committee hearing, there was a resounding, victorious Floor vote in June that put every single member of the House of Representatives on the record when it comes to cannabis. Known as the Blumenauer-McClintock-Norton amendment, this provision that was added to the Commerce, Justice, Science, and Related Agencies (CJS) Appropriations Act of 2020, passed by a vote of 267-165 and would prevent any federal funds from being used to target state-legal cannabis programs. The vote was decisive: it had support from all but eight Democrats and picked up 41 ‘Ayes’ from Republicans.
In July, for the first time ever, lawmakers in the House of Representatives held a hearing to address the disproportionate ways in which marijuana prohibition has negatively impacted people of color and marginalized communities. The hearing, entitled “Marijuana Laws in America: Racial Justice and the Need for Reform,” was called by the House Judiciary Subcommittee on Crime, Terrorism, and Homeland Security and exclusively featured testimony from witnesses in favor of sweeping cannabis policy reforms. Notably, none of the members of the subcommittee or witnesses advocated for keeping cannabis illegal.
Less than a month ago, the Senate Committee on Banking, Housing, and Urban Affairs held a public hearing, “Challenges for Cannabis and Banking: Outside Perspectives,” to discuss the current banking challenges faced by the legal cannabis industry and to assess the unintended consequences and public safety risks associated with commercial businesses operating in an all-cash environment. Earlier this year, to help find close the gap between federal and state cannabis laws, Senators Jeff Merkley (D-OR) and Cory Gardner (R-CO) introduced S. 1200 – The Secure And Fair Enforcement (SAFE) Banking Act, to provide protections for financial institutions that engage with state-legal cannabis-related businesses, including ancillary businesses that have a connection with cannabis businesses. The bill currently has 31 cosponsors in the Senate and is expected to have a House floor vote this Fall.
NCIA stayed busy outside the halls of Congress, too. In June, NCIA responded and submitted public comments to the U.S. Food and Drug Administration’s (FDA) request for comments on Scientific Data and Information About Products Containing Cannabis or Cannabis-Derived Compounds. Given the substantial interest in this topic and the need for regulations and standardization throughout the industry, NCIA and this coalition are providing specific insight into all facets the FDA would like to examine, including health and safety risks, manufacturing and product quality, and marketing, labeling, and sales.
Since your representatives are not here in D.C., you don’t need to buy a plane ticket for them to hear your voice. Many representatives take this month to listen to their constituents, so there are many opportunities to speak to your members of Congress and make your voice heard. Go to https://townhallproject.com/ to find town halls in your area, invite your members of Congress to tour your business, or go visit their local office and schedule a meeting.
This is an important time in our country – history is changing right before our eyes. Cannabis policy has taken huge steps just these past months, and we cannot let that momentum stop. With your continued advocacy and support, we can continue to lead the change in our community.
Do you have questions or want to learn more about how you can help our efforts on Capitol Hill? We’d love to connect and tell you more via email or phone. Please send an email to Madeline@TheCannabisIndustry to set up an appointment to chat.
Committee Podcast: The Emerging National Hemp Market
In this interview, industry specialist and NCIA Infused Products Committee member Ashley Hanson of Humboldt Green Light Kitchen speaks with Mike Perry, President and founder of PNX Botanicals, about the emerging national hemp market. Ashley and Mike discuss the relationship between cannabis and hemp products, the effects of regulation on small and medium-sized businesses, and testing standards for hemp CBD products. With state and federal governments rapidly developing new regulations, the conversation focuses especially on improving the conversation surrounding dosing, labeling, and product quality standards.
NCIA’s Infused Products Committee focuses on edible and topical products, reviewing existing business practices and state regulations. Regulation of these products is the IPC’s initial key focus, but the committee’s purpose is to ensure the infused product sector is helping shape its destiny, rather than being driven by differing jurisdictional regulations. The IPC is also working with the Council on Responsible Cannabis Regulation (CRCR) to develop standardized regulations for legislators and regulators to adopt as their states legalize the industry.
WEBINAR: Streamlining Your Packaging Process and Innovating for the Future
Be sure to join us at NCIA’s 6th Annual Cannabis Business Summit & Expo in San Jose, California, on July 22-24, 2019 at the Wednesday afternoon panel session titled “Cannabis Packaging: Evaluating, Streamlining, & Innovating.” Presented by members of NCIA’s Packaging & Labeling Committee, this panel session will dive into key aspects of cannabis packaging that impact today’s businesses.
Committee Blog: The Hiring Process Checklist
by NCIA’s Human Resource Committee: Kara Bradford of Viridian Staffing, Kerry Arnold of Canndescent, Heidi Quan of Murchison & Cumming LLP, Nichole McIntyre of Urban-Gro, Michelle Whitmore of H2 Talent, and Mark Hackett of Emerge Law Group.
Maybe you’re just getting your business started. Perhaps you’ve already been rolling full steam ahead. Either way, people are crucial to your business. The NCIA Human Resource Committee formed this past year. The committee, headed by Kara Bradford of Viridian Staffing, includes experienced HR Practitioners, Recruiters and Employment Attorneys, who have all brought their collective “best practices” together in an effort to assist NCIA members to navigate the often complex world of employment.
The HR Committee is starting off by releasing a series of checklists to provide some essential guidelines for your firm during the hiring, on-boarding and termination phases of employment. Without further ado…
Welcome to the first installment of the NCIA Human Resources Committee Employer Checklist Series! Today, we begin where every employer begins – the hiring process – and present the Hiring Process Checklist. Although laws may vary from state to state and each employer’s approach to hiring may differ, the Hiring Process Checklist provides a framework to assure your hiring process includes basic best practices, so you can attract and hire the best candidates.
Why is it important to have a well thought out hiring process? In this era of full employment, you just need to hire warm bodies before your competitors, right? Wrong! There are at least three critical reasons to make sure you put a good hiring process in place.
First, your hiring process must comply with the law. Are your job postings nondiscriminatory? Does your job application request potentially illegal information, such as criminal background, salary history or prior workers’ compensation claims? Are interviewers only asking applicants appropriate questions? Are you storing applications and other information about applicants for the required length of time? A good hiring process greatly reduces your risk of legal problems.
Second, hiring the wrong applicant is expensive. According to a study by SHRM (The Society for Human Resource Management), the average cost of hiring an employee is just over $4,100. This does not include the cost of training a new employee, a new employee’s lower productivity and greater likelihood of making mistakes or the stress on your other employees who must pick up the slack while the new employee ramps up. A good hiring process can improve your bottom line by significantly increasing the likelihood that you hire the right employee the first time.
The third and perhaps most important reason to lock down your hiring process: you are introducing potential employees to your company for the very first time. From the time they read your job posting until you inform them of your hiring decision, the applicant is assessing and judging your company. In this competitive job market, you need to quickly give that applicant a reason to want to work for you, rather than all the other hungry employers vying for their services.
An unstructured, haphazard hiring process sends all the wrong messages. Right or wrong, it tells an applicant that the company is not serious about hiring the best employees. It tells the applicant that you don’t value their time. Would you want to work at that company?
You only get to make one first impression, so make it a good one! Be upfront and clear with the applicant about the hiring process and your timeline and stick to them. Keep the interview process on schedule and make sure interviewers are well-prepared. If you tell an applicant you will get back to them by a certain date, get back to them by that date. If the timeline changes, let the applicant know. Treat every applicant with respect at every stage of the hiring process.
Once you establish your hiring process, the hard part begins – putting the plan into action. Even the best hiring process is useless if your staff doesn’t understand it. Clearly explain the hiring process to staff who will implement or supervise it. Provide them with the training and tools they need. Finally, periodically review the success of the hiring process and make improvements, so you continue to attract high-quality job applicants.
We hope you find the Hiring Process Checklist a useful tool as you develop your company’s hiring process, but it is not the only tool available. Take advantage of the many resources available to you in books and magazines, on the internet, and through the services of an HR professional or attorney.
Happy hiring!
The HR Committee needs and values your feedback. We exist to serve NCIA members, so please tell us how we can serve your needs by emailing us at HRC@TheCannabisIndustry.org. Thank you.
Committee Blog: Social Justice in the Cannabis Industry – Your Answers Will Take Minutes, But The Impact Could Be Long-Lasting
By Rudy Schreier, MMLG
NCIA’s Marketing & Advertising Committee’s Social Justice Subcommittee
The cannabis industry is evolving at light speed. From nationwide legalization, to massive corporations developing green thumbs, cannabis culture is shifting daily. Exciting, yes, but this rapid cultural shift poses a threat to social justice by disregarding the harms caused by the war on drugs. Now, more than ever, the cannabis industry needs to come together and determine a course of action to ensure that social justice isn’t brushed aside.
Where should we start? And how can all of us in the industry handle something as daunting as social justice with the appropriate sensitivity? Let’s review some of the basics.
Cannabis has been aggressively policed since the mid-to-late twentieth century. Minorities from marginalized communities were disproportionately punished for cannabis crimes, contributing to the rise of mass incarceration. Those same communities punished for past involvement with cannabis face an extremely high barrier of entry in the newly legal industry. Many cities and states are adopting social equity programs to lower the barrier. For example, Los Angeles recently approved $10.5 million in funding over the next three years for its social equity program. Initiatives like Los Angeles’ are a step in the right direction; however, there’s still a lot more to be done.
While social justice in the cannabis industry is a new focus for some, others have been fighting for decades. Omar Figueroa, a cannabis lawyer and advocate located in Northern California, helped to convince the Sonoma County District Attorney to clear cannabis convictions and has defended numerous activists pro bono over the years. When asked how the cannabis industry should address social justice, Omar replied, “[We need to] provide grants and loans to address disparities in access to capital, continue to advocate against cannabis prohibition, and create a leadership institute to empower people directly affected by the war on cannabis.” Omar, like many other committed ‘canna-pros’, are constantly fighting for fair and equitable practices in our industry. With so much work to be done, it can be challenging figuring out where to start. This is where you come in.
As we build the new cannabis culture, we have the unique opportunity to do things differently, ethically, and better. NCIA’s Marketing & Advertising Committee’s Social Justice Subcommittee is developing an approach to social justice for the cannabis industry, and we need your help. Since we can’t tackle everything, we’re asking you to make your voice heard and help us navigate the difficult terrain ahead. Please take this 4-question survey about what social justice should mean in the cannabis industry. Your answers will take minutes, but the impact could be long-lasting. Feeling ambitious? Share this ‘gram-sized graphic’ in your own social channels to spread the ‘poll power’ far and wide!
Interested in learning more? NCIA’s Social Justice Subcommittee will be hosting a panel titled “Cannabis Reform Stops Short: Why We Can’t Let Social Justice Get Lost” at NCIA’s Cannabis Business Summit & Expo in San Jose on Tuesday, July 23, from 1:30 PM – 2:30 PM. Register for the conference today!
Marketing and Advertising Committee: (MAC) of National Cannabis Industry Association (NCIA) — develops best practices in cannabis industry marketing /education, opening dialogues with media outlets that ban cannabis-related advertising.
Social Justice Subcommittee: An arm of the MAC committee, the aim is to ensure that social justice issues are positively addressed via cannabis reform. Team Members: MMLG, Cannawise, Canna Advisors, Annabis.
The Author: From operations and marketing, to office and project management, Rudy Schreier wears many hats for the Los Angeles-based licensing and compliance consultancy MMLG. Schreier co-founded the #StartsAtThePolls campaign, which utilized social media platforms to inform voters on how to register to vote, how to get to the polls, and pro-cannabis candidates running for the 2018 elections. The Panel: Be sure to catch the Social Justice Subcommittee’s panel featuring Lisa Jordan (Canna Advisors), Omar Figueroa (Law Offices of Omar Figueroa), Shanita Penny (Minority Cannabis Business Association), and Felicia Carbajal (The Social Impact Center) at NCIA’s Cannabis Business Summit & Expo titled, “Cannabis Reform Stops Short: Why We Can’t Let Social Justice Get Lost.”
WEBINAR: How to Approach Your Local Government – What You Don’t Know Could Hurt You!
Discussing cannabis and approaching government officials can both be daunting, but with a little knowledge and confidence, both can work together quite well!
Join members of NCIA’s State Regulations committee to get guidance and your questions answered so that you can be your best and help your community at the same time.
NCIA’s State Regulations Committee examines and reviews the varying cannabis industry-specific statewide regulations and work to establish best practices or guidelines for states and municipalities to facilitate the development of regulations and compliance procedures.
Committee Blog: Cannabinoid Analogues Offer a Promising Future for Medical Cannabis
As outside industries fuse with the cannabis market, we will begin to see innovations that will flesh out our understanding of cannabinoids and how they interact with the human body. I had the opportunity to sit down with chemist Dr. Mark Scialdone and Chris Barone, founder and lead chemist at The Clear™ to discuss the introduction of semi-synthetic cannabis compounds to the market. We focused on hydrogenated cannabinoids; cannabis with a slight twist that could change everything about why and how we consume cannabis.
Hydrogenation is simply treating a compound with hydrogen, which causes a chemical reaction between hydrogen (H2) and another compound or element, usually in the presence of a catalyst such as nickel, palladium, or platinum. This is done in order to reduce or saturate organic compounds, imbuing them with properties the original compounds did not have. These cannabinoid analogues (or semi-synthetic compounds) have a number of applications in manufacturing and medicine.
Hydrogenation is a minor modification to the natural framework of the compounds the cannabis plant produces biologically. Barone describes the process as, “adding hydrogens across the double bonds, thus changing the molecular weight, the molecules geometry, and also its effects on the body.”
Benefits of Hydrogenated Cannabinoids
A major benefit to hydrogenation is that it offers stability at the molecular level, assisting with both shelf life, and resistance to heat. Scialdone explained, “hydrogenation is a chemical transformation on unsaturated compounds to improve their stability and resistance to thermo-oxidative breakdown,” – which occurs when these compounds are in the presence of air. This is the reason you cannot leave cooking oils on the counter exposed to sunlight, as eventually this reaction will cause them to go rancid. Hydrogenation improves the oxidative stability by removing the unsaturation.
Based on a study referenced in Scialdone’s patents (US10071127B2 & US9694040B2), the effects of cannabinoids and hydrogenated cannabinoids were examined, in reference to tumor growth in mice. In these cases, the hydrogenated cannabinoids showed significant improvement in the reduction of tumor sizes; with Hexahydrocannabinolic Acid (HHCA) at a 39.70% reduction, and HCBDA at 55.83% reduction (compared to the non-hydrogenated compounds THCA at 37.67% and CBDA at 47.02%) (source). It’s possible that hexahydrocannabinoid (HHC), being more stable than tetrahydrocannabinoid (THC), and less prone to dehydrogenation (converting to DHC and CBN), may have an impact on resistance towards oxidative metabolic breakdown in the liver, though there is no critical examination at this time. It has been observed in metabolic studies that hydrogenated compounds are resistant to this kind of breakdown, suggesting that hydrogenated cannabinoids may exhibit this trait as well.
Image: Cannabinoid Structures
Difference Between Natural and Semi-Synthetic Cannabinoids
There is still much research to be done to define the exact pharmacological differences between hydrogenated and their plant-derived cannabinoids, but the chemical differences are quite distinct. “Tetrahydrocannabinoids like THC are metabolized into the 11-Hydroxy-THC-metabolite and ultimately the nor-carboxy-THC-metabolite; because we’ve converted the THC to HHC, metabolites will differ from the ones derived from THC,” explained Scialdone. Thus, they will have a different pharmacokinetic profile because the metabolites are going to be different in hydrogenated compounds. Meaning, the hydrogenated compounds could have a longer half life and bind to different receptors within the ECS.
A study published in the Journal of Medicinal Chemistry evaluates the ability of various cannabinoid analogues to modulate the production of reactive oxygen intermediates (ROI) various metabolic functions as well as their binding capabilities to the cannabinoid receptor (CB1). It was found that hydrogenated CBD and Cannabidiol-dimethylheptyl (CBD-DMH) demonstrated bioactivities different from their original compounds (source). The study focused on the anti-inflammatory and immune responses that have been previously observed in the non-analogue compounds. To compare the hydrogenated cannabinoids, they observed the derivative compounds for their ability to suppress the production of ROI, nitric oxide (NO), and tumor necrosis factor (TNF-⍺) by activated macrophages in vitro. Some of the compounds (7 and 4) exhibited an increase in their suppressive effects of NO, TNF-⍺, and ROI. Compounds 7 and 8 are strongly bound to the central cannabinoid receptor (CB1), but with an opposite effect on their ability to modulate the release of inflammatory mediators. When compared to the effects of natural cannabinoids, it is noted that isolated cannabidiol (CBD) also has tumor growth suppressive qualities, with similar functions of hydrogenated CBD (source). The distinction between the two is the bioavailability and slow breakdown of the hydrogenated compounds, however more research is required.
Image: Chemical Structure of Cannabidiol Derivatives
The JMC study concluded, hydrogenated cannabinoids exhibited good binding to CB1, but have varying effects on inflammation – which could spring opportunities for anti-inflammatory and immunosuppressive properties in murine collagen-induced arthritis, as suggested by the Ben-Gurion University. This is because the hydrogenated cannabinoids seem to have a strong effect on hyper-inflammation, which would reduce pain and swelling of the joints.
Public Health and Safety
When dealing with new compounds, it is crucial that health and safety are considered. “We will want to look at what impacts the hydrogenation has on the metabolic profile, and whether or not the hydrogenation is having a beneficial impact on biological actions with the cannabinoids,” explained Scialdone.
It will still take a few years for a product like this to be available to the public. Although the market may see hydrogenated cannabinoids present in medical and recreational states sooner, extensive research on these compounds will remain difficult under current federal laws. The Federal Analog Act states any substance derived from a schedule I or II substance will be treated as the same schedule substance when its purpose is for human consumption. “Pseudo-synthetic cannabinoids should be allowed in my opinion,” Barone adds, “but only through close analysis of the SOPs and quality control conditions. In states where they do not have the resources, I believe manufacturers should be mandated to hire third-party chemical manufacturers to audit and approve the techniques being used.”
Image: Crystalized HHCA Captured by CM Botanical
Research in this arena will provide greater understanding as researchers gain further understanding about hydrogenated cannabinoids and their impact on the human body. Barone pointed out, “I’d like to emphasize that the human interaction with this molecule is the driving force of the progression. Without the idea and the human, the molecules sit untouched and unexplored.” Utilizing the unbound creativity of science, the cannabis plant has more to offer than we once knew.
Courtney Maltais is co-founder and lead biologist at The Clear; a California-based extract company that brought the first Cannabis distillate to market in 2013. Maltais works with industry leaders in cultivation, manufacturing, and product development to create efficient, safe, and standardized lab practices. Her passion for science and education has led her to expand into educational outreach for both business owners, employees, and consumers alike.
NCIA’s Scientific Advisory Committee is comprised of practicing chemists and other scientific field professionals to advise other NCIA committees as they work to develop standards and guidelines for the various sectors of our industry, ensuring that any formal recommendations produced by other NCIA committees are scientifically sound, sustainable, and legitimate.
Committee Blog: Accurate Pasteur Pipette or Grandma’s Turkey Baster – Cannabis Dosing
by NCIA’s Infused Products Committee; contributors Todd Winter, Ashley Hansen, Danielle Maybach, Lee Hilbert, Trevor Morones, and Greg Scher
Where is cannabis in the journey of dosing edibles?
Edibles are growing as a market share only behind concentrates. It is essential to have accuracy across the industry to protect human health and stabilize the consumer market. Potency, homogeneity, absorption rate, interpretation of dose (by State, County, International), percentage error/variance, labeling, and source of raw materials are just some of the items always questioned.
While we are discussing this issue, there will be no right answer for everybody. What is the dose? What is a serving? A check of an operator’s shelves will show chocolate bars with 800 mg of THC and a similar sized bar with 80 mg of THC. If you walked off the street and bought the 800 mg bar with only experiencing the 80 mg bar; you are in for a trip, and not a good one.
BDS Analytics’ GreenEdge Retail Tracking Platform as presented by Tamar Maritz in February had shown that when California consumers purchased cannabinoid products in 2018, they often want to know the CBD and THC content.
Label requirements vary state by state on the THC side and are often inaccurate both in the reporting of potency and the way they are displayed on CBD products. Extracts used as raw ingredients in product formulation come in various forms, it is important for the manufacturers to know the percent of actual CBD or THC when making purchase decisions. CBD extracts can be in the form of isolates with low bioavailability, or full spectrum which means the cannabinoid retains more of the plant’s original components.
Additionally, there are infused products, where the flower is extracted by an infusion into an oil, retaining even more of the original cannabinoid profile. All these extracts have specific formulation and labeling nuances that need standardization. The medical community wants even more specific terpene profile information as individual levels of Limonene, Myrcene, and other terpenes gain recognition for properties that have some additional benefit.
Do the terpenes solely earn the credit for their benefits or is it in combination with the other chemical compositions?
There are many ways to add cannabinoids into edibles; for example, when developing cannabis-infused products, are the manufactures using the “sprinkle” method to add the raw material/additive by literally sprinkling isolate? Are they using a pipette for exact measurement from a reputable supplier that is approved for food contact having been third-party audited, or a turkey baster from grandma’s kitchen utensil drawer which has seen some years? Methods abound!
Perhaps the most accurate method to create a homogenous product is to incorporate the raw material during the mixing step; before cooking, gassing (CO2), or pasteurization. Not everybody that starts an edible factory comes from the food or pharmaceutical industry. A standard serving size or dosage, whichever you prefer, could make life easier for all stakeholders with a few exceptions. As yield models mature for extraction, markets will adjust, and prices can stabilize based on real data.
In Iowa, they have just legalized for medical use, but the flower is not legal. It is 100% treated as a drug. Any product needs to have no more than 3% THC to be permitted. We can’t forget our colleagues dealing with burdensome regulation. I doubt they can measure with turkey baster there, and if we saw a manufacturer in Iowa, we would probably see a pipette. Consensus on a dose can help elected officials know more and lift heavy restrictions.
Caffeine, like cannabis, is a naturally occurring alkaloid in 60+ plants. Cannabis produces THC and CBD, which are cannabinoids. The next step for the industry in supporting cannabinoid dosing of THC and CBD or any other cannabinoid is to increase general public recognition, routine toxicology studies, and develop appropriate data and work methods to obtain public recognition or certification for food safety, public safety, and documentation.
In the United States caffeine, when in soda, is limited to 65 mg per 12 liquid ounces of beverage. In pill form, the FDA allows 200 mg of caffeine. While this is about THC/CBD, the parallels are plain. While the Cannabis industry addresses dosing challenges are many. Stakeholders composed of consumers, operators, manufacturers, laboratories, distributors, and regulators would like to see the order in the industry.
The Federal Government does not yet consider cannabis as a food additive that is “Generally Recognized as Safe (GRAS).” Caffeine, a GRAS substance under current regulation, attained status under industry practices over 60 years ago. Within our industry, GRAS is not a deeply-rooted measurement for quality or safety standards. Cannabis has no history of being hazardous when infused in products and defining a serving, or a dose should not impact the operations of notable brands that provide excellent food safety and quality.
Each consumer (patient or recreational user) has their personal approach to cannabis dosing based upon their due diligence. Manufacturers are producing THC and CBD products that range from “micro-dose” to “mega-dose” because they understand that no one standard dose is the right for every individual.
Consumers look at labels to determine which product to buy. Manufacturers rely on testing to confirm THC and CBD content. CBD and micro-dose product categories are trending; unfortunately, many laboratories are not equipped to test CBD products accurately and consistently. THC Micro-dose products have similar problems. Not all laboratories have equipment that can report trace amounts accurately. Homogeneity, labeling, and raw ingredient sourcing are opportunities for manufacturers to set themselves apart to the retail operators in a wide-open market. Let us collectively work together towards clarifying the issue and work with all the stakeholders to define for the public some language that can be understood by all, encourage federalization, and develop a standard of excellence.
NCIA’s Infused Products Committee (IPC) focuses on edible and topical products, reviewing existing business practices and state regulations. Regulation of these products is the IPC’s initial key focus, but the committee’s purpose is to ensure the infused product sector is helping shape its destiny, rather than being driven by differing jurisdictional regulations. The IPC is also working with the Policy Council and Council on Responsible Cannabis Regulation (CRCR) to develop standardized regulations for legislators and regulators to adopt as their states legalize the industry.
WEBINAR: Cannabis Testing & How to Read Test Results
Learn from expert panelists: Alena Rodriguez, Managing Director, Rm3 Labs; Garrett Cropsey, Project Manager, Canna Advisors; and Tiffany Coleman, Director of Quality, Copperstate Farms.
Without delving too much into the testing methodologies used, we discuss reporting limits and some reasons for variability in test results. We also discuss the basic terminology used in test reports, provide examples of test results, and show you how to read them.
This webinar is great for general audiences that want to learn more about why we test in cannabis, how to interpret test results, and how you can use results as a consumer or cannabis business.
The Scientific Advisory Committee (SAC) is comprised of practicing chemists and other scientific field professionals to advise other NCIA committees as they work to develop standards and guidelines for the various sectors of our industry, ensuring that any formal recommendations produced by other NCIA committees are scientifically sound, sustainable, and legitimate.
For a deeper dive into cannabis testing policy, download this report prepared by NCIA’s Policy Council, where we explore recommendations for cannabis testing policies including requirements for proficiency, contaminants, potency and active ingredients, as well as records retention and laboratory accreditation.
Committee Blog: Streamlining Your Cannabis Packaging Process – Four Steps For Success
The beginning of a new year brings an opportunity to take stock of your cannabis business and ensure you’re doing everything possible to succeed. And because packaging is such a critical piece to brand wins and losses in this market, now is an ideal time to evaluate your process. It’s absolutely possible for your cannabis packaging to stand out while staying operationally efficient, it just takes careful planning. Get started with these four steps to streamlining your cannabis packaging process.
Step 1: Look for Flexibility
Rules and regulations for the cannabis and hemp industries are continually evolving. Streamlined cannabis packaging and labeling should accommodate data that changes regularly—as well as any required content that may be revised in the future. Always leave space on your package for legibly printed variable data (state-mandated warnings, potency, testing results, etc.). Utilizing secondary labels are often an unfortunate necessity of cannabis packaging. However, if these additional labels are composed creatively, they can actually serve a functional purpose and enhance the package design. A great example of this is a well-designed label that offers messaging while making the package tamper-evident. If possible, consider using an on-demand printing system on pre-printed label stock to minimize material cost and waste.
Step 2: Confirm Compliance
Now that you’ve dialed in your packaging options and are confident you can be agile with information, it’s time to ensure your product is compliant with state regulations. Brands with non-compliant packages can have their products pulled from store shelves or even face fines from state regulators. Re-printing labels or packaging can be very costly in print, labor and time.
Confirm that your package or label includes correct warnings, universal symbols, and produced with the correct material thickness and opaqueness if necessary. Edible products may need to include allergen information and other FDA requirements. Many states require tamper-evident or child-resistant packaging. Verify that your packaging container is compliant by requesting child-resistant certification from your supplier, or check to see if it is already on your state’s pre-approved packaging list.
It is highly recommended that brands don’t rely on their own interpretation of the laws. Consulting legal counsel is well worth the investment of confirming your packaging meets all the necessary requirements.
Step 3: Efficient & Effective from Sale to Shelf
Key to streamlining the packaging process is making sure your packaging is efficient and effective from the time you sell it, to the moment it’s merchandised on shelf. This relates to both the process of packaging your product and protecting your profits. Being efficient and effective with packaging will have a significant impact on your bottom line.
We suggest brands design their packaging to fit the size of the item. Oversized packaging costs more and can be misleading to the customer. In addition to selecting an appropriately sized package, brands need to accurately determine the labor cost associated with packaging options. Adding a sealed pouch for a pre roll takes labor hours. Consider the amount of time it takes to package a single product in comparison to the wholesale unit price. It’s easy to overdo packaging for a small profit margin. Make sure to test prototypes or samples with your production team or partners before you order a large quantity of packaging or labels. It’s essential to understand what the package will be subjected to once it leaves your facility. If at all possible, consult with existing distribution associates or wholesale customers for their input before investing in packaging. For example, your retail clients may prefer to display their products utilizing slat wall, which means that peg holes would be a valuable consideration to your package design.
Another consistent issue is knowing how dispensaries store your product in the back of house. If you have big mylar packaging for a small item, organizing those in bins, drawers or big safes becomes a mess down the line. Wholesale cannabis producers can also benefit from a primary panel label paired with a child-resistant container or mylar bag to streamline their distribution or sales process.
Step Four: Timing is Everything!
Advice we consistently offer brands? Understand your production timeline before you place any packaging order.Think about the implications of ordering stock or custom containers, and your shipping options. While custom containers and labels ensure differentiation in retail stores, they may take longer to produce than ordering off the shelf solutions. Processing art, approving proofs, production and shipping will all impact how fast your product can get to market. Packaging shortages in the cannabis industry are widespread so if you do decide to use stock containers such as glass jars or child-resistant tubes, make sure to place an order far in advance or well before you run out of packaging. Having a plan B can also be helpful. Ordering custom packaging may take longer, so stock items (like a label on a pouch or pop-top) can be used in the interim and may also be used for samples.
One Last Tip
It’s always smart to network with other brands that have similar packaging challenges to you. If they are willing to share them, lessons learned in the market are invaluable to brands making packaging decisions. Doing your fair share of market research by seeing what’s working in retail can also guide you in the right direction.
Have any tips yourself? We’d love to hear them in the comments!
Member Blog: Advice for Surviving and Thriving in the New Era of Legal Cannabis From Those Who Have Climbed The Mountain (Part 1)
The challenges facing companies pioneering a new industry where each state deals with its own issues are numerous. The importance of strategic business planning and the ability to predict future problems are essential to survival.Colorado, Washington, and Oregon have each dealt with their unique issues and challenges but there are also common problems that every cannabis business experiences: burdensome regulation, unfair taxation, and banking prohibition to name a few. Building your company and brand is dependent on your ability to maneuver your company through the obstacles that will arise in your state market while also planning for a future of legal interstate commerce through a change in federal policy. To place your company in a position to be successful, you should understand the past to predict the future.
Quick Summary of Cannabis History
The history of cannabis is long and distorted, however a few basic points of what brought us to the current state of federal prohibition and individual state markets should be noted for context.
Cannabis use as medicine dates back to 2700 BC in China, and has been used throughout history. In 1850, it was added to the U.S. Pharmacopeia. Prior to state and then Federal prohibition, cannabis was an elixir/tincture used in many common household cough/cold syrups and other medications for stomach-aches, asthma, depression, and many others. In the 1930s, cannabis was regulated as a drug in all states, and in 1937, the passing of the Marihuana Tax Act regulated it federally. Then in 1970, the Controlled Substances Act determined cannabis to be a Schedule 1 drug meaning it has no medical benefit and a high risk for abuse. From 1970 to 1996 the manufacture, use, or possession of cannabis was illegal in all fifty states.
CALIFORNIA
In 1996, California became the first state to legalize the medical use of cannabis through Proposition 215. California was the first domino to fall and further background of the early days of California medical cannabis will be addressed in later blogs in this series focusing on California. Over the next twenty years, 37 states have joined California with medically legal cannabis, and nine states have passed and implemented legal “recreational” (now referred to as “adult use”) cannabis programs.
OREGON
Oregon was the second state to pass medical cannabis in 1998 and that was the start of this author’s journey through the cannabis industry. Prior to 1998, Oregon had been a bastion of black market cannabis cultivation due to its climate and wide open spaces especially in rural southern and eastern Oregon. After 1998, the state “protections” offered by medical cannabis state law allowed the cultivation industry to flourish. However, as opposed to California the state was more focused on growing weed and selling it around the country rather than setting up a distribution system to the medical patients of Oregon. This led to some of the early challenges of the medical cannabis program in Oregon. At this time, the Oregon population was relatively small compared to the state’s cannabis production. Oregon was on its way to being one of the largest cannabis producers in the country. But because cannabis was so easily accessible there was little effort put into a healthy distribution system to Oregon patients. Most patients either grew for themselves or had a designated “grower” and that is where I started in the industry.
OREGON: FORMATION OF RETAIL ESTABLISHMENTS
As a nurse who had self medicated with cannabis for ADHD, I began growing for patients because I wanted to provide others with access to the amazing health benefits of cannabis. This was the common way most patients accessed their cannabis. There were no dispensaries when the program started and patients who didn’t have a grower were relegated to barter trade types of acquisition. In 2005, the Oregon Legislature allowed growers to be reimbursed for the cost of production and in 2010, the first dispensaries began to pop up. However, it wasn’t until 2012 that legal retail entities were allowed. This lack of a retail access point for patients was one of the first impediments to the program and allowed states like Colorado and California to take the mantel on progress of a robust program of medical cannabis distribution.
COLORADO
In 2000, Colorado became the sixth state to allow medical cannabis with Amendment 20. Its medical program remained low key until 2010 when the Colorado Medical Marijuana Code was created, which provided for licensing of production and retail establishments. This change was a giant step to the progress of cannabis legalization.
Colorado followed the early model presented in California and began implementing licensed retail establishments for card carrying medical cannabis patients. Retails stores began to flourish and this laid the groundwork for the establishment of the Adult Use program. In 2012, Colorado became the first state to legalize what was originally referred to as recreational cannabis now called “Adult Use” cannabis, which allowed the sales of cannabis to all adults aged twenty-one and older and the boom began. Colorado’s medical program developed into a rapidly growing Adult Use system and with the new federal guidance of the Cole Memo in 2013 canna-businesses began growing rapidly.
COLORADO: SEED TO SALE TRACKING
The primary language of the Cole Memo highlights a “robust tracking system” of all products produced and sold. The Cole Memo did not provide protections for cannabis businesses but provided guidance that helped assure businesses of some safety from federal interference. With the advent and implementation of a tracking system we could now be assured of where products came from and be able to track them back to their origin.
COLORADO: LAB TESTING
Once tracking was in place, lab testing for the safety of the consumer came to the forefront of industry progress. This was one of the first problems Colorado realized it had with its blossoming industry. As opposed to Oregon which required all products sold through its immature dispensary system since 2012, Colorado had not required lab testing of all its products until 2016 after several large quarantines and destruction of unsafe contaminated products. Many Colorado producers struggled with new pesticide regulations and was an early sticking point to growth of the industry. Over the first years of Adult Use cannabis program, Colorado struggled with the infancy of a brand new industry and how to regulate it and consequently, businesses suffered.
Other early challenges that the first legal state dealt with were allowable dosages and changes to dosing, as well packaging changes and the look of products, specifically how or if the products were attractive or marketed to children. The obstacles of a new industry most directly affect the businesses and their bottom lines. These are important points to consider when strategizing your business model and planning for inevitable changes to regulations. The time spent preparing for a system that will change will go a long way to ensuring for success.
WASHINGTON
Now let’s talk about Washington.
Washington was the third state to approve medical cannabis but had problems with implementation due to legislative issues. As multiple pieces of legislation were offered, adopted, and repealed, the lack of clarity prevented the medical cannabis industry from launching. Washington passed its adult use cannabis program at the same time as Colorado in 2012. In Washington, the two major obstacles the industry faced were licensing issues and taxes. A previously existing strong medical program in Colorado allowed for a seamless transition to an adult use program, but that was not present in Washington and this added to difficulties with implementing an adult use program.
Because the industry was just getting off the ground, both states relied on their medical programs as a foundation to the adult use. However, Washington’s medical program was murky and disorganized which lead to complications, Washington also limited licenses and put unfair taxes on the industry. These two factors aided in keeping the black market as the primary driver of the industry, rather than pulling people or businesses into a controlled, tracked, and regulated system.
280E TAX CODE
This provides a nice segue to one of the challenges all cannabis business face: unfair taxes in the 280E tax code. Internal Revenue Code section 280E specifically denies a deduction or credit for any expense in a business consisting of trafficking in illegal drugs “prohibited by Federal law or the law of any State in which such trade or business is conducted” which translates to only “Cost of Goods Sold” as the only deductible expenses. This means administrative costs, executive salaries, marketing and advertising, banking fees, etc., are non-deductible expenses for any cannabis business and subjects them to much higher taxes as most normal business deductions are prohibited. This challenge is one all cannabis businesses deal with and must be factored into financial modeling.
BANKING
While we are on the the subject of taxes and non-allowable deductions, banking is the other major challenge all cannabis businesses face. Due to federal policy around an illegal substance, FDIC insured institutions force canna-businesses to operate in all cash for fear of prosecution under racketeering and money laundering laws. There are a handful of financial institutions, credit unions, or state banks that offer “Enhanced Monitoring Accounts” for cannabis companies. However, they are highly priced and rare. The average cannabis bank account is likely to run $1,000.00 a month, just to have access to banking services, not including additional fees. This $12,000 a year budget line item, while not only expensive, is not a tax write-off per 280E tax code.
One can quickly see from just these two major hurdles or challenges to the industry, normal operations can be difficult. These obstacles are not to be taken lightly; they can be addressed but it must be factored into operating procedures, financial planning/budgeting, and strategic vision.
NOW BACK TO STATE SPECIFIC ISSUES
As Washington and Colorado dealt with its issues, Oregon voted to approve “Adult Use” cannabis in 2014. Using Colorado and Washington as a guide, Oregon implemented their system with more deliberation and vision based on what had been experienced in the first two states. But as was seen with the unique challenges in the first two states, Oregon encountered an entirely different set of problems. Oregon currently faces a massive oversupply problem which has affected all facets of business across the industry. In normal business and supply and demand economics, if an area is oversupplied, business move their products to where the demand is higher or the supply is lower. However, cannabis remains a federally illegal product and therefore interstate commerce remains illegal.
Oregon’s unique problem originated from two main issues:
Oregon had already established itself as a cultivation mecca
The regulatory authority decided against a cap on licenses
This lack of license caps has allowed the number of licensees to explode and thereby allowed the oversupply issue to occur and continue to grow. As stated, this is not a problem exclusive to cultivator/producers. Because of a 75% drop in value, cannabis attorneys, electricians, HVAC, security companies and other ancillary businesses are not getting paid. The oversupplied market and decreased revenue has reverberated across the industry and driven otherwise thriving companies into bankruptcy.
As you can see, each state deals with its unique challenges when implementing its Adult Use cannabis program, while we all deal with some issues that affect us all. The key to thriving… or surviving is to prepare your company to deal with the current challenges shared by us all and predict the challenges that your business will face in your state while preparation is taken for a national and international market.
James Schwartz RN, BSN, LNC, is an experienced medical legal consultant and CEO of CascadeHigh Organics with 20 years experience cultivating legal cannabis. James is a self-described organic minimalist cultivating in the most sustainable manner. James believes in clean cannabis and its use as a wellness drug. His Oregon licensed cultivation, Cascade High, has been featured in Dope Magazine and on the cover of Oregon Leaf’s Sustainability issue (March ‘18). James was featured as the Inaugural Stoner Owner by OR Leaf in Dec 2018. He has articles published by Dope Magazine about Cannabusiness and the Pharmaceutical Industry (May 2017), as well as a medical cannabis article in the Jan. 2019 Healthcare issue of OR Leaf. James is currently on the NCIA Cannabis Cultivation Committee and has presented Cannabis topics to multiple audiences at conferences including Cannabis Science Conference, PDX Hempfest, Cannabiz Convention, CBD Expo and Webinar series, Cannabis Collaborative Conference(CCC), Cannabis Nurse Conference, NCIA and educational industry mixers. His business, legal, medical, and agricultural knowledge provides a unique perspective on the industry. James has lobbied for Cannabis on both the national and state level with Oregon Cannabis Association and is a fierce advocate for the plant and all who use it.
WEBINAR: Michigan Voted to Legalize Adult-Use Cannabis – What You Need To Know Now
On Election Day, Michigan voters resoundingly approved Prop 1 to legalize and regulate adult-use marijuana under state law. It’s an exciting time with great possibilities, but what does this mean for the future state of Michigan’s legal cannabis landscape?
Watch this recording of the webinar from NCIA’s State Regulations Committee, presenting its first-ever interactive webinar designed to help you answer the pressing questions about Michigan’s new adult-use market.
Join NCIA’s State Regulations Committee members, including Chair Maureen McNamaraof Cannabis Trainers, Committee Vice Chair Michael Cooperof MadisonJay Solutions, and Barton Morris of Cannabis Legal Group, as they help us fill in the blanks for adult-use regulations in the state of Michigan. The webinar helps answer what we currently know about the laws, any key open questions that remain, and what potential market entrants should be doing now to get ready.
Watch the webinar “Michigan Voted to Legalize Adult-Use Cannabis: What You Need To Know Now” hosted by members of NCIA’s State Regulations Committee.
As 2018 came to an end, the FINAL proposed text of the permanent regulations for California cannabis were submitted to the Office of Administrative Law (OAL) by the three regulatory agencies – the California Department of Food and Agriculture (CDFA), California Department of Public Health (CDPH), and the Bureau of Cannabis Control (BCC). The cannabis regulations submitted to the OAL are currently undergoing a 30-day administrative review to ensure alignment with MAUCRSA and statutory requirements. These “final’ regulations shall become effective immediately upon approval/adoption which should be on/before January 16th 2019.
What “final” means in this evolutionary process of California cannabis regulations is debatable, as there are already several Assembly and Senate bills queued up to be put through the legislative tango and all three of the regulatory agencies have indicated that there will be further clean-ups and clarifications of the “permanent” regulations. Although there will assuredly be changes ahead, this is a highlight reel of where California Cannabis stands now.
For those that dug into the October redrafts, much of the substantial changes that occurred in that version carried over into the final proposed text. Here we will highlight the top eight changes impacting cannabis businesses in California.
The Final Statement of Reasons from the BCC, which also included responses to pertinent comments received during the previous 15- and 45-day comment periods, is where some greater clarity about the regulatory changes and intents can be found. It is by spelunking into these deeper caverns of reasoning where the sweet ore of further clarity can sometimes be extracted.
Here are 8 highlights for anyone interested in California cannabis.
1. Ownership and Financially Interested Parties
In October we saw the expansion of the definition of ownership and financially interested parties that clearly sought to capture the identification of any and all warm bodies that stand to direct, control, or financially benefit from commercial cannabis. While there were some changes in sections §5003 and §5004 between the previous and current version, the scope and intent remained the same. One particularly vague line §5003.b.6.D “Any individual who assumes responsibility for the license.” was removed from the BCC’s definition of owner, this very line turned up over the in the CDPH’s update in §40102.a.4.D.
The Ownership and Financially Interested Parties disclosures dovetail into the White Labeling issues (See #2) in that “Brand Owners” that may be licensing IP to contract manufacturers have been impacted by the prohibition on non-licensees conducting commercial cannabis business with licensees. In the response to comments in the FSOR was this gem of insight, “In response to commenter’s questions, if a licensee includes as one of their owners a brand-owner, the licensee can produce the branded products because in this case the licensee is not engaged in commercial cannabis activity on behalf of an unlicensed person. Because the owner of the brand is an owner of the licensee, there is no unlicensed person involved.” Of course, before everyone runs off and adds brand-owners as owners of their contract manufacturing business, let’s take a moment to reflect on the value and critical importance of a well-drafted contract.
2. §5032 (b) The So-Called “White Label Prohibition”
5032.b shall go down in infamy as one of the more talked-about sections of the BCC’s regulations. This simple sentence, “Licensees shall not conduct commercial cannabis activities on behalf of, at the request of, or pursuant to a contract with any person that is not licensed under the Act,” brought with it a level of confusion and white-hot panic regarding the inferred white label prohibition contained therein. October’s version had more explanatory examples for the types of “on behalf of, at the request of, or pursuant to” activities that the BCC was talking about, such as, “procuring or purchasing cannabis goods from a licensed cultivator or licensed manufacturer. Manufacturing cannabis goods according to the specifications of a non-licensee, Packaging and labeling cannabis goods under a non-licensee’s brand or according to the specifications of a non-licensee, Distributing cannabis goods for a non-licensee.” This language was removed in the final version submitted to the OAL and is one of the examples of where the FSOR is enlightening.
From the BCC’s FSOR: “Initially, the Bureau determined that it was necessary to assist licensees with determining what types of activities may or may not be allowed under the Act and its implementing regulations. The initial proposed change identified certain transactions that would generally be considered commercial cannabis activities under the Act. However, the Bureau has determined that inclusion of the clarifying example transactions is causing more confusion. Accordingly, the Bureau has decided not to move forward with the proposed changes which identify examples of specific commercial cannabis transactions.” The definition of “commercial cannabis activities,” therefore, is an important one, and we can refresh ourselves on that one (Business and Professions Code §26001.k) “‘Commercial cannabis activity’ includes the cultivation, possession, manufacture, distribution, processing, storing, laboratory testing, packaging, labeling, transportation, delivery or sale of cannabis and cannabis products as provided for in this division.”
This has been a hot, hot topic, and there have been some great analysis articles of this provision that dig further into solutions and scenarios related to this section. Get thee to Google and find out more!
3. Option to label THC/CBD post-final testing by Distributor
This was a big win for the industry! A substantial percentage of testing failures for “label claims” are due to products, previously required to be labeled with THC/CBD content prior to final testing (the one test that counts!) not falling within the 10% allowable variance threshold. It’s common knowledge that the science of cannabinoid testing is still getting dialed in, and the labs have some serious challenges in hitting the same tiny target twice. Especially when they are dealing with the vast array of cannabis product matrices, and an industry that it still learning about important things such as homogenization. The good news is, the CDPH now allows products to be labeled for THC/CBD content after that all-important final test, which should eliminate well-upwards of 50% of the product failures in California and ensure a steadier supply chain.
4.Regulation of Technology Platforms
The cannabis industry has always been a place of innovation and loophole-finding. These regulations are an attempt to close some of those loopholes that seem to have created a situation where unlicensed tech platforms were enjoying the privileges of licensed commercial cannabis without undergoing the slings and arrows of local/state licensure and regulation. Seeing themselves outside of the regulatory purview, certain business claimed that agencies such as the BCC had no dominion over their activities. Well, they may have wanted to wait until the ink dried on the final regs before making such an assertion, as now it seems the BCC has expanded its reach to embrace all kinds of advertising, facilitating, and delivery platforms.
5. Delivery to a Physical Address
This was (potentially) a huge win for patient access, however, it remains to be seen how this truly shakes out. When the BCC added the line that “a delivery employee may deliver to any jurisdiction within the State of California” it caused some serious outrage from municipalities that have banned commercial cannabis activity, the League of Cities, law enforcement, and others that saw this as a huge overstepping of the local authority ensured by Prop 64 and MAUCRSA. The LOC even launched a “wandering weed” campaign, in response to which it seems that a subsection that includes “a restriction on delivering cannabis goods to a school providing instruction in kindergarten or any grades 1 through 12, day care center, or youth center” was added to the regulations, for clarity. Whether the OAL will approve as is, and how this interacts with local bans, tax requirements, and law enforcement, and lawsuits… stay tuned! While the BPC (§26090.e & 26080.b) explicitly prohibits a local jurisdiction from preventing delivery, and transportation, of cannabis goods on public roads, it does not prevent localities that have banned commercial cannabis in their area from adopting ludicrous tax rates for deliveries that would in effect ban via taxation delivery in their area.
6. Sale of Non-Cannabis Goods (aka No Hemp)
While the seeming victory of the Farm Bill has folks leaping with joy for the future of hemp, statements from the FDA and other agencies have certainly rained on the parade of many a CBD vendor. Add to that the collections of California cannabis regulations that in effect eliminate hemp-derived CBD from cannabis dispensaries and products.
“In addition to cannabis goods, a licensed retailer may sell only cannabis accessories and any licensee’s branded merchandise.” (BCC §5407)
This limitation for retail (and retail delivery) is further clarified in the BCC’s FSOR in their responses to comments:
“Cannabis retailers are licensed to sell cannabis goods. The definition of cannabis within the Act explicitly excludes industrial hemp products. Industrial hemp is regulated by the California Industrial Hemp Program under the California Industrial Hemp Farming Act.”
“A retail license from the Bureau authorizes the retailer to sell cannabis goods and cannabis accessories. A retail license from the Bureau does not authorize licensees to sell items that are unrelated to cannabis.”
Combined with the retail prohibition on non-cannabis products, this trifecta from the CDPH extends that prohibition to manufacturers:
“A manufacturer licensee shall only use cannabinoid concentrates and extracts that are manufactured or processed from cannabis obtained from a licensed cannabis cultivator.” (CDPH §40175.c)
“Except for cannabis, cannabis concentrate, or terpenes, no product ingredient or component shall be used in the manufacture of an edible cannabis product unless that ingredient or component is permitted by the United States Food and Drug Administration for use in food or food manufacturing, as specified in Everything Added to Food in the United States, or is Generally Recognized as Safe (GRAS) under sections 201(s) and 409 of the Federal Food, Drug, and Cosmetic Act.” (CDPH §40305.a)iii. “Except for cannabis, cannabis concentrate, or terpenes, topical cannabis products shall only contain ingredients permitted for cosmetic manufacturing in accordance with Title 21, Code of Federal Regulations, Part 700, subpart B (section 700.11 et seq.) (Rev. March 2016), which is hereby incorporated by reference.” (CDPH §40306.a)
For now, it seems, non-cannabis derived CBD is DOA in CA.
7. Child Resistant Packaging (CRP) Requirement
Heads continue to spin (and cannabis business’ cash to hemorrhage) in response to the changes in the packaging requirements. As of July 1, 2018, all cannabis products were to be in child-resistant packaging, and retailers had converted back to the statutory requirement that all exit packaging was to be “opaque,” allowing them to use reusable totes and paper bags to satisfy this requirement. In the October regs, we saw a pivot that allowed for a seeming “grace period” for the child-resistant requirement to return to being able to be satisfied by the retail via CR exit bag. Some confusion remained as to whether products that were already IN child-resistant packaging would have to be put INSIDE of child-resistant packaging for the next year. The addition of the statement from the CDPH, “Until the date specified [1/1/20] the child-resistant package requirement [§26120] may be met through the use of a child-resistant exit package at retail sale.” (CDPH §40417.d) suggests that the significant ecological impact of CR packaging within CR packaging MAY be avoided, however, most legal counsel will probably be advising retail clients to use the CR exit bag to avoid potential liabilities. Viva Kafka!
In the CDPH’s Statement of Reasons, they said “This is necessary to comply with the packaging requirements in Business and Professions Code section 26120 while providing licensees with time to comply with packaging requirements.” Compliant operators were left somewhat confused, as they had been required to comply with these packaging requirements since July!
8. OSHA Training for Everyone!
All three regulatory agencies added the following requirement for OSHA training:
“For an applicant with more than one employee, the applicant shall attest that the applicant employs, or will employ within one year of receiving a license, one supervisor and one employee who have successfully completed a Cal-OSHA 30-hour general industry outreach course offered by a training provider that is authorized by an OSHA Training Institute Education Center to provide the course.”
This will be an additional training requirement, on top of existing state and local training requirements for cannabis operators. And remember, all that training documentation must be kept, like all other records, for seven years!
As with everything in life, more will be revealed as we get deeper into 2019.
Juli Crockett is a member of the NCIA’s State Regulations Committee and is Director of Compliance at MMLG. Slides from Juli’s recent Workshop on this topic are available for download here. You can also watch the workshop video in its entirety on MMLG’s Facebook page.
Committee Blog: Transacting in Equity – The Basics
by Charlie Christopher, VP, Finance, Cirrata NCIA’s Finance and Insurance Committee
“A prudent man must seek to satisfy himself about the means to an end. This demands that he must revisit, again and again, the very elemental principles of his craft independent of how others think and act.” – Tony Deden
In businesses of all sizes it is common to transact in a number of currencies other than cash. The focus of this piece is on transactions involving common equity, the most fundamental unit of business ownership. The first section establishes a framework for how to view equity as currency, and what differentiates equity from other mediums of exchange such as cash. The second section introduces the process for creating reasonable projections based on sound logic. The third section demonstrates a somewhat novel application of concepts, and provides an example of the flexibility that can be introduced into the process. The conclusion is a reminder that these concepts can easily be misused, and that nothing should replace common sense when dealing with extreme uncertainty.
The Problem
Valuing any business is hard. Valuing a start-up is even harder still, not because of process, but because of the ambiguity associated with the output. When a valuation is based on multiple layers of high variance variables then the resulting distribution of value is rightfully broad. This poses a major challenge for operators and investors trying to agree on fair terms, and it can lead to irreparable damage to a young company.
Imagine for a second that you, and everyone else, have a crystal ball that can see the future with just enough variance to keep things interesting. How would that change the way you think about your equity? Would you be offering the same equity deals to your entire team? Would you be flexible with investors interested in your business? Of course not, you would look into the future every morning, update your projections and you would transact in equity in a similar manner to how you would with cash. Even though we do not have a crystal ball in the real world, it stands that to transact in equity with absolutely no opinion of value is the equivalent to being indifferent between paying $.10 or $100,000 for the same product or service.
Equity is a form of currency. It has value. However, its value has a built-in variance that rewards beating expectations, and punishes missing expectations. This is why equity awards are typically used to incentivize contributions that can increase the odds of achieving the former. The act of issuing the reward, in theory, immediately increases the value of the firm through the alignment of incentives. The common exaltation of the aforementioned qualitative attributes of the incentive over the quantitative attributes is also why the standard practice of ignoring a non-cash expense like share-based compensation is so indefensible. The value creation may be real, but to deny that a currency has transacted to create that value is to double count the benefit to shareholders.
The Process
Valuing a business begins from the top down and ends from the bottom up. Top down refers to projections based on the broader market while bottom up refers to firm specific capabilities extrapolated into the broader market. A common mistake operators make is to build up based on capabilities with no regard for how the aggregate ecosystem will react to the sum of all fundamental behaviors in the ecosystem. Starting from the top-down with a defensible position regarding both the size of the addressable market and the number of competitors participating in the market provides parameters for the business’s potential revenue.
Arguing for market share using a top-down analysis is fundamentally flawed if it does not reflect the true capacity of the business. A bottom-up analysis reflecting firm-specific capabilities should be compared to the top-down analysis for reasonableness. Ultimately, bottom-up analysis drives operating assumptions, and operating assumptions are the inputs to nearly every valuation technique.
I subscribe to the theory that posits that the variance in all of the assumptions can be quantified using an appropriate discount rate. In other words, if I’m uncertain and find my forecasted outcome to be highly unreliable I may choose to use a much higher discount rate to calculate the present value of the business than for a business with lower variance assumptions. When valuing a start-up company, I consider the corresponding ultra-high discount rate to cloud too much insight. For start-ups I first calculate a probability of firm failure in each of the forecast years and multiply my operating assumptions by the cumulative probability of success, I then use a more reasonable discount rate as if the firm was not highly speculative. This allows start-ups in the seed stage to more easily defend increases in value before launch. For example, the filling of a major executive leadership position justifies a small reduction in the probability of failure. Thus, your first executive hire has a reason to have received a higher percentage equity award than your last hire, even though the dollar value of the award might be equal. The process facilitates fair negotiations among all shareholders who may commit under vastly different circumstances and with different information. All too often this doesn’t take place, and the animosity that can develop as a result is as real as it is avoidable.
Valuation is admittedly more art than science. Many astute readers will point out that markets don’t operate in the orderly, fundamental matter I’ve proposed. Those critics are absolutely correct. It is a fair caution that not only are the trappings of certainty intoxicating, but sometimes simply observing how others are transacting is sufficient to make decisions. The market is often wrong, but it’s also often right. Remember to update your assumptions as new information becomes available.
Charlie is a Co-Founder of Cirrata where he lends his extensive knowledge from being both an entrepreneur as well as a securities analyst. As VP of Finance, Charlie combines his skills to assist clients through the application process, ongoing operations, and exit strategies.
Prior to joining Cirrata, Charlie co-founded a luxury women’s ready-to-wear label where he oversaw two separate rounds of funding as CFO. He has consulted numerous clients in the cannabis, construction, music, financial services and software industries in which his primary focus was on information systems, optimization, cash forecasting, securities offerings, licensing and capital allocation.
Brought to you by NCIA’s Marketing and Advertising Committee, Social Justice Subcommittee
Lisa Jordan, Canna Advisors; Rudy Schreier, MMLG; and Carolyn Gerin, Cannawise
The objective of the Social Justice Subcommittee of NCIA’s Marketing and Advertising Committee is to ensure that the social justice work of addressing convictions, providing opportunities, and reinvesting in poor and minority communities that have been battered for decades by the “war on drugs” is not lost in the broader cannabis reform efforts. The Social Justice Subcommittee’s recent activities have been focused on the #StartsAtThePolls campaign, and bringing NCIA members and their staff this #StartsAtThePolls Voter Kit.
This simple Voter Kit was created to help voters prepare for the Election Day on November 6. It includes prep tips, resources, voter rights, and what to do/who to contact if they sense a violation (i.e.: can’t find their polling place, etc). #StartsAtThePolls is where it all begins. We all need to show up to vote as Americans and an industry. NCIA helps bring it all together in an organized fashion at the national level.
The Voter Kit is an excerpt from the recently published title ‘Road Map For Revolutionaries: Resistance, Activism, and Advocacy For All” written by authors Elisa Camahort Page (co-founder of BlogHer), Carolyn Gerin (Co-Founder, Cannawise), and Jamia Wilson (Executive Director, Feminist Press). This Voter Kit was created by the publicity team of Random House/Ten Speed Press with their permission for NCIA committees to use as a resource for NCIA members and their staff, and published with the endorsement of the Marketing and Advertising Committee, and Social Justice subcommittees.
By NCIA’s Infused Products Committee
Contributors include Radojka Barycki, Noval Compliance; Karin Clarke, KC Business Solutions; Lee Hilpert, Organnx; Danielle Maybach, Eva Gardens; Trevor Morones, Control Point; and Todd Winter, Winter LLP
You have spent months fighting sleep deprivation to build a strong pitch deck as the next most desired infused cannabis company. Educating staff, family, and friends, through role-plays and recent published journal entries. Blog after blog, inspirational book after book, and you start to believe that the deck is complete. Dress to impress then review the multi-colored sticky notes that list the risks of your operation. Some are likely, others are less, but what about the ones that are high? Is ALL of your due-diligence completed to pitch to the venture capital groups in the cannabis world?
The Issue
While legalization has quickly brought cannabis and cannabis-related products into international markets, relevant food safety regulations need to be implemented and adopted to protect patients and consumers. The infused product manufacturing sector, in particular, requires more uniform safety requirements to guide operating professionals, many of whom lack knowledge, resources, and incentive to standardize safety.
As target consumers range from large groups of adult consumers to medical users, safety is a paramount concern for all. This is especially true for medical users, as they are predominately high-risk consumers regardless of their specific medical condition.
The cannabis industry, especially the infused edible products sector, has a prime opportunity to incorporate and implement existing food safety regulations into their manufacturing processes. This will demonstrate alliance with the general food manufacturing industry and help to ensure that cannabis-infused product manufacturers are regulated no more stringently than any other food manufacturer.
The Risk
In addition to the already controversial nature of our industry, safety issues will undoubtedly garner public and press attention when as few one people become ill as a result of an unsafe product. Contamination inevitably comes from a variety sources, such as chemical, physical, or biological hazards in the growing and extraction process (and lack of testing), employee contamination (failure to use gloves, wash hands, dirty garments and tools, etc.), failure to adhere to basic food safety processing standards and practices (clean food contact surfaces, improper chemical concentrations, introducing biological contaminants).
Without clear and industry applicable guidelines and processes, product safety issues will emerge and take over headlines. Issues of product safety damage consumer and industry trust, resulting in lost revenue, loss of market share, decreased share value and loss of talent. One most recent example of the exorbitant cost related to product safety was made ominously clear in the multi-state Chipotle case. This incident caused a tragic decline in customer confidence and many days of double-digit stock value plunges.
The Solution
Site-specific training for all team members is the preventative action to reduce risks and generate positive audit results. Rigorous training programs expand food/product safety knowledge, generate a stronger culture, reduce risk, and prevent contamination. By focusing on how each employee can positively impact safety through their daily actions and contribute to the market value and customer satisfaction, employees take on a stronger safety and excellence culture, resulting in higher Net Promoter Scores (NPS).
Measurement is critical to quality control and ongoing excellence. Food Safety Management Systems (FSMS) provide operating structure and validate the process to prove the system is operating as intended. These proven systems operate on a foundation of integrity that mitigates risk throughout the process of a product. No doubt the learnings there transfer to the cannabis products, especially infused products.
What’s Next?
The IPC’s goals are to raise awareness, effectuate positive change, and help establish protocols and standards for food safety, dosing, and testing within the cannabis industry. This will establish baselines from which cannabis business operators can rely upon, prevent inapplicable regulatory requirements that are not relevant to our industry, and most of all provide for the safety of consumers.
Now, when did food safety leave a bitter taste in your mouth? Precisely! Never would we need an Upton Sinclair to transform the industry from a negative outlook on the truths. Collectively we will unite and hold our operations to a standard of excellence that will be called upon during the end of cannabis probation on a national level.
Committee Blog: “Cannabis Reform” Stops Short
by Lisa Jordan, VP of Marketing, Canna Advisors NCIA’s Marketing and Advertising Committee, Social Justice Subcommittee
As support for legalization continues to climb and speculation of “cannabis reform” at the federal level continues to swirl, one critical opportunity stands to be lost in the fray of voices and messages: Social Justice.
Cannabis reform, alone, stops short. The deeper work is addressing convictions, providing opportunities, and reinvesting in poor and minority communities that have been battered for decades by the “war on drugs.”
With focused attention, we can shape policies and legislation that expunge records, provide employment opportunities, and further offset the disproportionate effects on people and communities of color. Expungement of misdemeanor charges, alone, can mean the difference in getting a job or housing for residents of poor and minority communities across the country.
The objective of the Social Justice Subcommittee of NCIA’s Marketing and Advertising Committee is to make sure this opportunity maintains visibility and action and that cannabis reform doesn’t stop short.
#StartsAtThePolls
This level of policy change starts at the polls.
The November 6 elections are pivotal to voting in candidates who are not only in favor of cannabis reform, overall, but will also push forward with social justice initiatives.
3 Actions for Everyone
In these final days before the election, each person can take a few, mindful actions to make sure that social justice doesn’t get lost:
1. Register to Vote:
Some states allow voter registration until election day. Check your state’s deadlines here: https://www.headcount.org/deadlines-dates/
If you missed your state’s deadline for this year, go ahead and register now so you’ll be ready next time.
2. Know Your Candidates
Do your research to know where your state and federal level candidates stand on cannabis reform, overall, and on social justice issues.
It’s up to us to make sure this opportunity maintains visibility and action and that cannabis reform doesn’t stop short.
#StartsAtThePolls
Lisa Jordan leads the brand development and marketing strategy for Canna Advisors and provides expert guidance in these areas to clients. With proven success in emerging industries, Lisa’s work has won numerous awards including a Bronze Lion at the Cannes Lions International Festival of Creativity, national awards for predictive analytics, and local ADDYs. Lisa has spoken at cannabis industry conferences and was selected to serve on the NCIA’s Marketing and Advertising Committee and serves as Chair of the Social Justice Subcommittee.
Over time, Lisa hopes to make cannabis brands as mainstream and iconic as familiar, big brands. In her downtime, you will find Lisa on a hiking trail with her husband and four big mutts or finding any excuse to spend time at Red Rocks.
Member Blog: Common Cannabis Capital Cadence
by Sumit Mehta, CEO of MAZAKALI
NCIA’s Finance and Insurance Committee
Companies often benefit from capital infusions that can help them grow their businesses. When and how much capital to raise is a common question, once that is best addressed by balancing need for cash with dilution of equity. This article outlines typical stages for corporate growth along with potential sources of capital and required documentation along the way.
Common Cannabis Capital Cadence
Introduction
While a business does not need to raise money to be successful, one of the primary reasons businesses fail is that they run out of money. Businesses that do need money to survive or to accelerate growth can benefit from outside capital balanced by the related loss of ownership. Effective capital management is thus crucial to business growth and success.
Access to necessary capital can be a significant challenge, as money is cheapest to borrow when you least need it. Access to liquidity, while difficult in any industry, is even more challenging in the cannabis industry for a myriad of reasons. Despite these challenges, cannabis capital infusions are at an all-time high. Companies are well-served to be focused on ‘capital readiness’ well in advance of their desired capital needs.
The true entrepreneur does more and dreams less
Fail to prepare and you may be preparing to fail. Maintaining focus on cash needs and related documentation at every stage of your business growth is crucial to its ultimate success.
Idea Stage – Founders
A founder collaboration agreement can help lay out a working agreement along with conflict-resolution steps for future disputes. A common stock purchase agreement is a binding contract which highlights basic terms for the sale of shares to founders. This agreement will define the parties, the shares to be sold, the purchase price, the timing and method of payment, and the closing date. A shareholder agreement typically accompanies the stock purchase agreement and highlights shareholder rights, pricing mechanisms, voting arrangements and shareholder privileges and protections.
Documentation: Founder collaboration agreement, common stock purchase agreement, shareholder agreement.
Early Stage – Friends & Family
Friends and family can be some of the easiest sources of capital. They are typically more forgiving about business ups and downs, and having a resourceful network of trusted early investors is a good step towards securing money from future investors. It is common to use convertible notes at this stage, and relevant here are a convertible note purchase agreement along with a board of director consent. The intention of this note is that it converts to equity when the company conducts an equity financing.
Documentation: Convertible note purchase agreement, board of director consent.
Seed Stage – Angel Investors
An angel or seed investor is an affluent individual who provides capital for a business start-up, usually also in exchange for convertible debt. An advantage of this type of financing is that it is less risky than debt financing. In the event of business failure, invested capital does not have to be paid back. In addition to the documentation above, most angels will want to see a business plan and a pitch deck.
While the term ‘Venture Capital’ broadly applies to any capital provided to a venture, it typically describes a structured institutional scenario. Advantages of venture capital include amounts typically larger than angel funding rounds along with valuable information and resources that can contribute to business success. Challenges here include the length and complexity of the diligence process along with the documentation burden as highlighted below.
Documentation: A robust data room that includes the above documents along with a 5-year pro-forma model, cap table, valuation, subscription agreements, stock purchase agreements, incorporation documents & bylaws; and vendor, contractor & employee agreements.
Growth Stage – Private Equity
Private equity investments typically result in either a majority or a substantial minority ownership stake in a company. These generally come with strings attached, which can be wound tightly at times. While private equity offers the opportunity to raise large amounts of capital, it is also often accompanied by a loss of control. In order to amplify returns, private equity firms typically raise a significant amount of debt to introduce leverage into the transaction. This has helped coin the term ‘Leveraged Buyout’.
Documentation: A robust data room as above with PE specific documents that may include supply chain verification, tax and audit, legal reviews, intellectual property opinions and management team background checks.
Final Stage – Public Equity
A substantial increase in liquidity is one of the main advantages of this final stage of liquidity. Other advantages include increasing brand and prestige, attracting employees with a stock option plan, and making acquisitions with company stock. Going public is no easy task and requires a large absorption of new obligations, including filing SEC reports, getting shareholder approval for corporate actions, additional legal liabilities and other regulations as introduced by the Securities Act of 1933 and its many subsequent amendments.
Documentation: In addition to compliance with Regulation FD and Sarbanes-Oxley, filing and reporting requirements include annual reports, quarterly reports, proxy statements and insider holding filings.
Conclusion: A sustained and successful capital cadence raises investor confidence and subsequent recommendations to others. Determining a timeline for liquidity is the cornerstone of capital raise decision-making, and a plan created with financial rigor is useful for management and investors alike. While the preservation of liquidity is of primary importance, this is best balanced by the desire to retain ownership and control. When and how to raise money are amongst the biggest challenges for any business, and preparation is paramount to the capitalization of the arrival of opportunity.
Chance often favors the prepared.
In addition to his role as Founder and CEO at MAZAKALI, Sumit is a consultant to The Arcview Group and the Managing Partner of Emerald Ventures. A frequent speaker at investment seminars, Sumit acts as a mentor to Arcview and Canopy companies and serves on the Canopy Investment committee as well as the NCIA Finance & Insurance committee. Sumit and MAZAKALI support NCIA, the Marijuana Policy Project and Students for Sensible Drug Policy.
Sumit has earned an MBA from the University of Michigan, a BA in Economics with Honors from the University of Texas and currently holds Series 7, 63, 65 and 79 licenses. He resides in San Francisco where he enjoys riding his motorcycle, yoga, and craft beer.
Committee Blog: Progression in Packaging – Challenges & Opportunities for Cannabis Brands
Any visit to a licensed dispensary is proof of how far we’ve come with the packaging of legal cannabis. Sure, we still have plenty of standard glass jars, CR pouches, pop-tops and cans; but we also now see proprietary package structures, full branded lines commanding shelf space and packaging so beautiful it doubles as a merchandising tool. Just in the past several months, cannabis packaging design trends have been covered by mainstream media including The Dieline and Packaging Digest.
These are exciting times to say the least, but packaging and labeling remains at the crux of the serious challenges and opportunities that cannabis brands face today.
Keeping Up With Compliance
Here in California, the challenge of keeping up with compliance is beyond real. The race to meet state regs by July 1st were only met with a new set of checklists (literally) the following day. Added labels is the name of the game for any California supplier. This is a real problem for those brands who are trying to stand out with their packaging. Understandably, companies are hesitant to invest in their packaging when the regulations are still in flux. Those who are in this for the long haul need to be agile and forward thinking when it comes to packaging and labeling.
Branding… Because it Really Does Matter With limitations on how a brand can reach today’s cannasumer, packaging is a critical marketing tool. It’s the one guaranteed touchpoint we have, and just like in traditional retail environments, every second counts when trying to capture a shopper’s attention. While it’s tempting to go with the standard compliant packages, a lack of brand value will commoditize your product (and thus, the price point). Brands should ensure that their package is reflective of their unique position in the market. Whether it’s a regional play, a potency position or targeting the growing number of boomer consumers—your packaging should speak directly to who your target market is. Now is the time to create brand loyalists!
Taking a Note from Natural Products
All across retail industries, we are seeing a market demand for products that have a more “natural” approach. From clean ingredients to plant-based everything, it’s impossible to avoid this trend. As the OG natural product, cannabis brands have a real opportunity to take advantage of today’s more discerning shoppers. Tell your story, explain your growing practices, show us your social responsibility… It’s all part of the package, literally and figuratively.
A Need for Sustainable Solutions
To really take our natural story to the next level, we can all agree on the need for more sustainable options for packaging and labeling. It’s great to see some brands, companies, and organizations like W Vapes initiating recycling programs. But as an industry, we need to rally together to work on this issue. It’s definitely a challenge that NCIA’s Packaging and Labeling Committee discuss regularly.
An Optimistic Future for the Realists
For those cannabis brands who can be agile, patient and focused—there is a bright future ahead. Despite the challenges of cost and compliance, an effective package can pay for itself. And if other industries like food and beverage are integrating technologies beyond the QR code (think AR and VR), we’re just getting warmed up. As both in-store and retail experiences evolve, so will the opportunities for cannabis packaging. Form, function, technology and product development are bound to take packaging and labeling to exciting new heights.
Committee Blog: How can we help your cannabis business?
What can we provide that can help you in your cannabis business?
NCIA’s member-driven Marketing & Advertising Committee is focused on developing best practices in cannabis industry marketing; opening dialogues with major media outlets that ban most or all cannabis-related advertising; holding in-person or virtual educational events for NCIA members; and developing educational content that supports the industry.
This year, the NCIA Marketing & Advertising Committee is creating a Resource Kit for cannabis business owners. Which tools would be most valuable to you? Please take a moment to share your opinion on what topics you are most interested in.
Committee Blog: California Regulations Public Comment Period Nears Close – Act Now!
Do you have views on the regulations that will govern California’s cannabis industry? If so, California’s window for the public to make comments on the proposed permanent industry regulations is about to draw to a close. But you don’t need to be an expert on arcane administrative procedure or even a lawyer to participate in the comment period. Keep reading to learn more about what is at stake and how to make sure your voice is heard.
Overview and Introduction to the Regulatory Process
On Friday, July 13, 2018, California’s three cannabis licensing agencies (the Bureau of Cannabis Control, or “BCC”; the Department of Food and Agriculture, or “CDFA”; and the Department of Public Health, or “CDPH”) released their much-anticipated proposed permanent regulations for cannabis businesses pursuant to the Medicinal and Adult Use Cannabis Regulation and Safety Act. This began the 45-day public comment period of the regular rule-making process. During this time, the public has a chance to review and comment on the proposed regulations, and the agencies must consider these comments and may make changes based on this feedback.
Below are links to the proposed regulations and the summary sheets released by the agencies:
Currently, cannabis businesses in California are operating under emergency regulations that were originally adopted in December 2017 and re-adopted (with a few changes) in June 2018. The emergency regulations will stay in effect until the regular rule-making process is complete and the final regulations have been formally adopted at the end of this year.
In addition to publishing the proposed regulations, the agencies also each published a Notice of Proposed Rulemaking Action (NPRM), which contains various information about the proposed rules such as a summary of existing law and who to contact with questions and comments. The agencies were also each required to publish an Initial Statement of Reasons (ISOR), which contains the agencies’ reasoning and basis behind why they crafted a rule the way they did.
These regulations will have a number of impacts on how the cannabis industry operates in California. For example, new advertising regulations would go into effect; packaging and labeling requirements would change; certain edible products could contain up to 500mg THC per package (versus the current limit of 100mg THC per package); and outdoor licensees would be prohibited from using light deprivation.
Those are just a few of the key proposed changes. Please refer to the summary sheets published by the agencies, listed above, for a more comprehensive list.
What Makes an Effective Public Comment?
There are six standards in the Administrative Procedures Act (APA) that agencies including the BCC, CDPH and CDFA must follow when conducting rulemaking actions. They are:
Authority – The agency must be permitted or obligated by law to craft a particular regulation. (Gov. Code § 11349(b))
Reference – The agency must refer to the provision of law that the agency is implementing or interpreting via the regulation. (Gov. Code § 11349(e))
Consistency – The regulation cannot be inconsistent with other laws and/or regulations, and needs to be harmonious with existing provisions of law. (Gov. Code § 11349(d))
Clarity – The regulation must be easily displayed or written so that it will be easily understood by the people affected. (Gov. Code § 11349(c))
Nonduplication – The regulation cannot serve the same purpose as another existing state or federal law or regulation. (Gov. Code § 11349(f))
Necessity – There must be substantial evidence in the record for needing the regulation in order to fulfil the purpose of the statute or other provision of law that the regulation implements or interprets. (Gov. Code § 11349(a))
Since the BCC, CDFA and CDPH have to comply with the standards above, it’s a good idea to focus your comments around one or more of those specific areas, as opposed to just making a comment that you dislike a particular proposed regulation without giving any reason why. That way, it is more likely that the agency will respond to your comment by making an adjustment to the proposed regulation(s) in question.
How to Submit Your Comments
Comments on the proposed regulations can be submitted to the agencies by mail or email, or offered in-person at one of the agencies’ scheduled public hearings. Your comment must include the following: (1) the subject title of the proposed regulation; and (2) specific concerns regarding the proposed regulation, which the agencies deem most helpful if they identify the section number in question, discuss the issue, suggest changes to the text, and explain why any desired modifications address the issue.
Please note that all comments received during the public comment process become part of the official record which is public information. Thus, you may not want to include any confidential or identifying information in your comments.
All comments must be submitted to the respective agencies by 5:00pm on August 27, 2018 or provided at one of the scheduled public hearings. Below are the locations of the public hearings, which will take place throughout the state during the months of July and August. (This information is subject to change; please check for updates on the California Cannabis Portal.)
Bureau of Cannabis Control Hearing Dates and Locations
The first two BCC public hearings have passed. There will be a final public hearing on August 27, 2018 from 10:00 a.m. to 12:00 p.m. at the Tsakopoulos Library Galleria, 828 I Street, Sacramento, CA, 95814.
California Department of Public Health Hearing Dates and Locations
The first two CDPH public hearings have passed. There will be a final public hearing on August 27, 2018 at 10:00 a.m. at 8400 Edes Avenue, Oakland, CA, 94621.
California Department of Food & Agriculture Hearing Dates and Locations
The first three CDFA public hearings have passed. There will be a final public hearing on August 28, 2018 from 1:00 p.m. to 3:00 p.m. at the California Department of Food & Agriculture Auditorium, 1220 N Street, Sacramento, CA, 95814.
Some Final Words
Collaborate. Join with other groups, trade associations, brain trusts, friends. Have reading groups. Get together and consider problems and solutions from multiple points along the supply chain, so that the solutions you offer can be relevant, functional, and comprehensive. There are many smart people working on this right now, so if you don’t have the time to this by yourself, link up with a trusted group that is commenting in accordance with your interest. Comment letters signed on by many stakeholders are very powerful.
Most importantly, “Keep Calm and Carry On!” Even though operators may see major changes being contemplated in these regulations, these are NOT YET IN EFFECT. Operators still need to remain compliant with the EMERGENCY regulations that are currently in effect, until the final regulations – post comment period – are officially adopted. This draft can and will change, so folks shouldn’t be making major business decisions based on the draft, as elements may either fall away, shift, or be added. (Think about the 24-hour security guard requirement in the Readopted Emergency Regs – it came and went within a 5-day comment period.) There are items in this draft that are sure to receive a LOT of comments and suggestions, so keep calm and carry on following the emergency regulations during this comment period.
Finally, even for operators outside of California, this process is nevertheless important to watch as the path that California takes will impact how the rest of the country chooses to regulate the cannabis industry, and it is also important to participate in if you plan to expand into the Golden State.
NCIA’s member-led State Regulations Committee (SRC) examines and reviews the varying cannabis industry-specific statewide regulations and works to establish best practices or guidelines for states and municipalities to facilitate the development of regulations and compliance procedures.
A year ago, NCIA’s Infused Products Committee (IPC) made the decision to tackle the issue of cannabis testing. It is an issue we feel is at the heart of cannabis legalization and is negatively impacting cannabis businesses across the nation. Although it has been a struggle to get comparable lab results across different labs, IPC believes there is a future where cannabis testing will reach consistency.
We began our process by asking several questions and with the assistance of the NCIA, we crafted a survey that was sent to experts in the field. During our preliminary research, we discovered that most cannabis testing labs view their protocols and procedures as proprietary information.
To gain better insight about the testing sector, we asked Alena Rodriguez, a member of NCIA’s Scientific Advisory Committee (SAC) to participate in an interview. Alena represents Rm3 Labs, a cannabis testing laboratory in Colorado.
IPC: Are you concerned about the inconsistent and varying test results and the impact it has on consumer safety?
Alena: Yes, I’m concerned. I do not take my job lightly; I know that contaminated cannabis can be harmful and sometimes life threatening. That is why I am involved with state regulators and groups like NCIA’s SAC and Testing Policy Working Group. We aim to educate regulators and stakeholders on the importance of practices such as independent audits, proficiency testing and ISO/IEC 17025 accreditation for cannabis testing labs.
IPC: Do you think we are close to having consistent cannabis test results from different laboratories?
Alena: We are well on our way. In Colorado, licensed labs must undergo Proficiency Testing (PT) twice per year. PT is done through an inter-laboratory comparison where participating labs receive the same sample and analyze it using their methodology. Even though our procedures are not standardized to one method, most of the labs arrive at the same result. Unfortunately, not all states require PT yet, but I feel more and more states will adopt these programs.
Along with PT, consistent testing across labs requires the use of high-quality reference materials that are used to validate analytical methods and calibrate instruments. Cannabis testing labs in the United States have limited access to reference standards. Like cannabis, most industries started with limited resources, but over time the science will progress as federal barriers are lifted to make more research and better standards possible. It took decades to develop standardized, consistent methods in other industries, such as in pharmaceuticals and food testing. I don’t see the cannabis industry being any different.
IPC: Should there by penalties if a testing lab consistently provides drastically different results from prior tests of the same product?
Alena: It depends on the situation. If the lab is knowingly breaking the rules or trying to cheat the system, then absolutely. But, most of the time inconsistent results have causes other than fraud or negligence. This industry produces new products every day and some manufacturers and laboratories don’t “get it right” on the first try. There is a lot of research and development that is involved. Three of the biggest hurdles for consistent testing of cannabis products are 1) the variety of sample types 2) the lack of certified reference materials for uncommon cannabinoids and terpenoids and difficulties in obtaining concentrated standards and 3) inhomogeneity in some infused products or concentrates. Product uniformity is critical and should be confirmed by analytical testing for consumer safety. Variable results across multiple labs may suggest a product lacks uniformity.
IPC: Do you believe testing procedures and protocols areproprietary?
Alena: Yes, third-party cannabis laboratory protocols are just as proprietary as the protocols developed by cultivators, concentrate extractors and infused product makers. Testing labs having proprietary methods is not novel to this industry. If a lab in any other industry (e.g. food, medical, agriculture, environment) develops an alternative method to the standard method, they can use it if they can validate against the reference method.
IPC: Should labs be required to prove their analytical methods are accurate by submitting their practices confidentially to a regulatory body?
Alena: Absolutely! Colorado labs are currently required to send all new Standard Operating Procedures (SOPs) and method validations to the CDPHE prior to implementation. I hope more states adopt this practice, if they aren’t doing so already. As of January 1, 2019, all cannabis testing labs in Colorado will be required to be ISO/IEC 17025 accredited. ISO/IEC 17025 accreditation is the international gold standard for assessing the competence and quality management systems of testing labs across all industries to ensure consistent, accurate test results. More than a dozen cannabis labs have achieved this accreditation across the country.
IPC:Are you aware that the ASTM Committee D37 reportedly drafted testing procedures? If published, will cannabis testing labs follow published procedures that are not their own?
Alena: Yes, I’m excited! This is a great step for our industry. I imagine the committee will develop similar protocols to those being used by third-party labs. But as I mentioned before, labs will have the choice to use the published standard methods or their own alternative method, granted it is validated against the reference method. I expect some labs will attempt to validate their methods against the standard methods and some will adopt ASTM’s methods.
IPC: Are you aware of testing labs that allow for “tipping” on their order forms? Does this concern you, and why?
Alena:It concerns me that there are bad actors in the testing sector of the cannabis industry but I’m afraid there are bad actors in every segment of every industry. At Rm3 Labs, we do not participate in or condone unethical behavior such as paying for the results you want. We would never risk falsifying test results because we are aware immunocompromised individuals and children are possibly taking the products we are testing. I would not risk my entire scientific career to give you 5% higher THC potency results or lie about your contaminant testing results. I advise all cannabis testing labs to always act ethically because you are in the business of public safety and your lab is subject to investigation by regulatory agencies at any time.
IPC conducted the above enlightened interview with SAC. While we were inspired by some of the answers, much like our survey attempt this past year, many of our questions remain unanswered. For example, we don’t agree that cannabis cultivators or manufacturers are to blame for receiving inaccurate “clean/approved” test results from labs due to products being inhomogeneous.
That said, it is clear by a couple of the responses that some states, like Colorado, are making substantial progress in oversite and legal requirements for testing laboratories, while other states, like California, are still leaving significant and dangerous gaps.
In our opinion, the industry’s need for consistent and accurate testing results remains at the forefront of the issues facing commercial cannabis today. The ability to send the same sample, from the same batch, under the same conditions, and have it tested by multiple labs, achieving the same results, is paramount to our industry’s future and success. State laws should require it. The industry should demand it. And the consumers most certainly deserve it.
As such, the IPC will continue its mission to drive this conversation forward with both testing labs and operators alike. Only together, can we really solve this crucial issue facing our amazing industry.
Apply for an NCIA Committee for the 2018-19 term!
Coming off a strong and productive year of Committee work, NCIA is excited to announce that we are accepting applications for the 2018-19 Committee term. We need your skills, passion, and wide-ranging perspectives to build upon our energetic, inclusive, and innovative committees. NCIA committees are an opportunity for our members to get engaged in specific industry issues and sectors of their professional expertise and interest.
NCIA Committees enable our members to engage their vast and varied areas of expertise and passion to:
effect change and influence public opinion and policy,
enhance their leadership skills,
expand their professional and personal network, and
develop best practices and guidelines to shape the future of our industry.
“They are all experts in their fields and are all committed to the responsible and equitable growth of the Cannabis Industry. In over 30 years in the insurance industry, this is the most fun I’ve had!” – John Balian, Wood Gutmann & Bogart Insurance Brokers, NCIA’s Finance and Insurance Committee
“There is no doubt that my fellow Committee Members will be the ones to help drive our industry forward and the relationships I’ve made are a valuable benefit of my NCIA Membership.” – Michael Weiss, Nature’s Dream, Inc. (aka Cannacopia), NCIA’s Marketing & Advertising Committee
The following topics are areas to be aware of while creating and designing packaging. Using these tips can save you time and money in the process of creating or selling cannabis products.
Originality of content – Imitating consumer packaged goods for your packaging design through parody of a popular brand logo or using parody in packaging design can lead to serious issues. Use packaging is an opportunity to define your brand.
Lead times – Timing and shipping are usually underrated factors that can cause headache and unnecessary costs. Depending on the complexity of the packaging, if tooling is be required, this can easily add six weeks to your delivery time. Is your packaging being produced domestically or internationally? How much space will packaging use and where will it be stored?
Issues compliance labeling on design – If you are creating a product to be sold at a dispensary, make sure to consider additional labeling that will appear on the final product delivered to customers at retail. There needs to be enough surface area or clever design to make sure your packaging identity isn’t lost amongst compliance stickers. If you are a retailer, it is important to educate salespeople about where to place required labels to not obscure important information that may be on the packaging.
Adaptable – Rules change constantly. Your company’s strategies to deal with changing regulations should include packaging and labeling. You could predict and order units based on when regulations go into effect, or start with packaging that goes beyond current standards. As a retailer, can you find a way to insist the brands you carry comply with child resistant standards or order more exit bags? Going above and beyond current regulations can save you money and elevate your product.
It is important to have packaging graphics that get noticed at retail. Consumers often skim shelves quickly looking for brands that are known to them or graphics that catch their eye. With limited space in dispensaries it is important to have branding that is well presented in the packaging. Creating packaging that represents your brand is best done early in the process so that it is not rushed and attainable lead times for desired packaging can be met. In our industry, states can update packaging guidelines at any time, make sure your final packaging adheres to all regulations structurally and graphically.
You may have read about how the Federal Trade Commission (FTC) has been cracking down on labeling of CBD products and how labeling of your Cannabis products could land you in court. Here are some tips on that may reduce the risk getting into trouble.
Don’t Make Any Claims or Guarantees About the Results of Using Your Cannabis Products. Even the use of testimonials purporting to say that a Cannabis product gave them positive results could get you into trouble.
Don’t Label Your Cannabis Products “Organic.”
Cannabis is illegal on the federal level and is not regulated by the US Department of Agriculture or the Environmental Protection Agency and most states do not have regulatory oversight over products that are purported to be “organic.”
Be Careful About Calling Your Cannabis Products “Gluten Free,” “Paleo,” and “Certified Vegan.”
Food advocacy groups own federal certification trademarks for these names. Indeed, the Gluten Intolerance Group (“GIG”) recently sued celebrity chef Jamie Oliver for trademark infringement, among other things, for using the letters “GF” surrounded by a circle and the words “Certified Gluten Free.” If you want to be able to call your Cannabis products “Gluten Free,” “Paleo,” or “Certified Vegan,” you will need to find out what is required by the owners of these trademarks to avoid a costly lawsuit.
Make Sure Geographic Claims are Accurate.
One similarity between the wine and cannabis industries is the association of certain geographical regions with the characteristics and quality of the product produced in them. Think Bordeaux, Champagne, Burgundy (wine) and Humboldt, Emerald Triangle, “BC Bud” (cannabis). As the cannabis industry matures and consumers become increasingly sophisticated, growers and manufacturers will most likely seek to distinguish and capitalize on their products’ geographical origins. California’s nascent labeling regulations already acknowledge this likelihood by specifically prohibiting a label to even use the name of a California county unless the cannabis used in the product was grown there. And many states prohibit misleading or untruthful statements on a label. Thus a cannabis business should be wary about including geographical names on their labels if the labeling could mislead consumers into believing that the cannabis was grown in a specific area when it was not.
Share the Rules With Your Designers.
States with labeling and packaging rules on the books largely have one rule in common: labels/packaging must not be attractive to minors. Such regulations among states may differ regarding what “attractive to minors” means. Sharing this, and all, restrictions with your creative team on the front end may save you time and money on the back. Otherwise you may find yourself having already paid for the perfect logo, just to have it rejected by the regulators. It may also be a good idea to communicate regularly with regulators during the design process to ensure you do not run afoul of the regulations. A lot of these rules and definitions are subjective (e.g. “exaggerated features” or “superhuman powers”), so determining the regulators’ interpretations may be advantageous.
Disclose all Additives and Ingredients. Many concentrate and extract manufacturers add substances to their products to increase/decrease viscosity, obtain a certain appearance, or achieve a certain flavor. But, for a variety of reasons, may not list them on the label. Licensees may believe this compliant with labeling regulations because the licensee does not consider such substances “ingredients” or the regulations may require ingredients only for edible labels. But, many states’ regulations contain a blanket prohibition on untruthful, misleading, or false information, or misrepresentations. Licensees in these circumstances must carefully weigh the commercial benefits of omitting certain information with risks that regulators might consider such omissions misrepresentations.
No set of tips can eliminate the risk that regulators will find fault with your labeling practices, but following these suggestions may save you unnecessary headaches down the road.
This post is for informational purposes only and is not to be construed as legal advice.
This site uses cookies. By using this site or closing this notice, you agree to the use of cookies and our privacy policy.
Watch this webinar from 
Watch this webinar from 
James Schwartz RN, BSN, LNC, is an experienced medical legal consultant and CEO of 
Lisa Jordan leads the brand development and marketing strategy for 
Branding… Because it Really Does Matter
A Need for Sustainable Solutions
