Reading the Cannabis Leaves: California’s Bureau of Cannabis Control Releases Responses to Summarized Public Comments

Last week, California’s Bureau of Cannabis Control (“BCC“) finally announced the withdrawal of the MCRSA retailer, transporter, and distributor rules in light of the passage of the Medicinal and Adult Use Cannabis Regulation and Safety Act (“MAUCRSA” a/k/a SB 94) this past June. With that announcement also came some insight from the BCC on what we can expect in the emergency MAUCRSA rules that will drop this November. Specifically, the BCC posted on the California Cannabis Portal website that:

The three cannabis licensing authorities are in the process of drafting emergency regulations based on the new law for the commercial medicinal and adult-use cannabis industries. The licensing authorities will consider the public comments received on the draft medical cannabis regulations and use the feedback to inform the draft emergency regulations. The emergency regulations are expected to be published in November 2017.

And with that website post, the BCC also included a “high level” stakeholder-focused summary telling the public what it learned from the public comments to the MCRSA rules and how it will address those comments in the forthcoming retailer, microbusiness and distributor MAUCRSA rules.

Ultimately, it appears that the majority of public comments will be squared away automatically by MAUCRSA. For example, one summarized public comment was that specialty licenses for “delivery only” or “special events” should be created under the MCRSA. MAUCRSA takes care of both of these by allowing delivery for only retail and by providing “a state temporary event license at a county fair or district agricultural association event in local jurisdictions that authorize such events.”

There were though some summarized public comments where the BCC’s responses tell us what to expect in the future:

1. One summarized public comment was that “The regulations should specify which party in the supply chain of transactions (manufacturer, transporter, or dispensary) bears the risk of loss and how much liability should attach.” And the BCC’s response was that liability pretty much has to be negotiated between licensees, which is 100% the right answer. We’ve blogged multiple times about the dangers of product liability (and Prop. 65 violations) in the industry and how to prepare for and shift that risk in your goods and services contracts.
2. There were several comments about changing the definition of “owner,” lowering the 600-foot buffer requirement, and removing the mandatory labor peace agreement if you have 20 or more employees, dropping the minimum bond requirement, and other MAUCRSA-mandated operational standards, but the BCC made clear that its hands are tied where they must follow SB 94 as written.
3. The public requested that the BCC convene a hotline for assistance with applications, and the BCC replied that “The Bureau will have a call center available to help answer applicant’s questions, as well as materials on its website with information to assist applicants, licensees, and the public.”
4. Another comment was that “The regulations should provide applicants a streamlined process for converting a business from a not-for-proft business to a for-proft business,” and the BCC punted in its response by stating that MAUCRSA doesn’t require any particular business structure for operation (again, the old collective model is not mandatory for compliance with MAUCRSA, so, if your local jurisdiction permits it, you should begin to think about corporate conversion as application time ramps up).
5. Colocation of multiple licenses at the same “premises” is still up in the air and the BCC will address it in the emergency rules–helpfully, AB 133 removed the “separate and distinct” requirement for multiple licenses and licenses of different types.
6. In regards to comments about continued operations to ensure no disruption of services and goods to qualified patients, the BCC’s response is that temporary licensing should serve to prevent that disconnect.
7. The public commented that licenses, themselves, should be transferable, and the BCC responded that “By law, each owner must meet certain requirements to hold a license, therefore, a new application is needed. The Bureau is evaluating if a notification, rather than a new application, is appropriate when changes in persons with a financial interest in the business do not include a new owner, who is required to submit fingerprints.” Given that the withdrawn MCRSA rules rendered licenses non-transferable, we’re likely to see that again in the MAUCRSA rules, which means business purchases will likely be the only way to get a hold of a license (as long as you notify the BCC beforehand and the BCC approves that ownership change request). In any event, you should be aware of California’s M & A red flags.
8. Summarized public comment wanted either that the distributor license be eliminated or that small businesses should be able to self-distribute. The BCC responded that it can’t get rid of the distributor license because it’s required under MAUCRSA but that it is considering the creation of another distributor license that is transportation only. And, not to worry folks, you can self-distribute and you don’t need to contract with a distributor anymore in order to make a sale to a retailer.
9. The BCC is reviewing whether licensees will be able to engage in “other [non-cannabis] activities.” This review came from a summarized public comment that distributors should be able to store and distribute non-cannabis related products. In all other states, licensees are restricted to only commercial cannabis activity for their license type, so it would be pretty groundbreaking for California to go against that norm to allow licensees to take on other lines of business.
10. The BCC isn’t going to allow for delivery or transport of cannabis other than by enclosed motor vehicle with sufficient GPS tracking despite summarized comments that the BCC should relax restrictions regarding the same to allow for bike curriers and other modes of transport of product.
11. On delivery, public comments asked that the BCC allow delivery by third party contractors or couriers, and the BCC batted back citing to MAUCRSA, which only allows delivery by “an employee of a licensed retailer, microbusiness, or non-proft.”
12. Summarized public comments also leaned towards asking that BCC fees for licenses be set according to a sliding scale of total net revenue. In response the BCC stated that “Business and Professions Code section 26180 requires that fees are set on a scaled basis based on the size of the business. The Bureau is examining what method is most appropriate to determine the scaled fee, including total net revenue.”

All in all, the BCC has its work cut out for it as it goes back to the drawing board on the MAUCRSA regulations. A lot of issues will be out of the BCC’s control because MAUCRSA will require certain unchangeable operational standards and restrictions. However, November will fill in many of the outstanding “don’t knows” that still remain for rulemaking, so stay tuned.

source http://www.cannalawblog.com/reading-the-cannabis-leaves-californias-bureau-of-cannabis-control-releases-responses-to-summarized-public-comments/