BREAKING: California Releases Its Emergency MAUCRSA Regulations

Today, the Bureau of Cannabis Control (along with the Departments of Public Health and Food and Agriculture) dropped their much anticipated emergency rules (see here, here, and here) to fully implement the Medicinal and Adult-Use Cannabis Regulation and Safety Act in California. The agencies kept a lot of what we saw from the withdrawn rules under the Medical Cannabis Regulation and Safety Act (MCRSA). (see here, here, here, and here), but there are also some new, notable additions and some interesting gap-fillers that now give us the foundation for operational standards across license types. While we can’t cover every single change or topic from these rules in one post (and because we’ll be covering the license types and application details in other posts in the coming days and weeks), here are some of the highlights of the emergency rules:

1. We now have a revised definition of “canopy,” which is “the designated area(s) at a licensed premise that will contain mature plants at any point in time.” In addition, Canopy shall be calculated in square feet and measured using clearly identifiable boundaries of all area(s) that will contain mature plants at any point in time, including all of the space(s) within the boundaries; Canopy may be noncontiguous but each unique area included in the total canopy calculation shall be separated by an identifiable boundary which include, but are not limited to: interior walls, shelves, greenhouse walls, hoop house walls, garden benches, hedgerows, fencing, garden beds, or garden plots; and
   1. If mature plants are being cultivated using a shelving system, the surface area of each level shall be included in the total canopy calculation.
   2. “Nonvolatile solvent” has been further defined to mean “any solvent used in the extraction process that is not a volatile solvent,” which “includes carbon dioxide (CO2) used for extraction and ethanol used for extraction or post-extraction processing.”
2. Temporary licensing has now been fully detailed to include online applications, the personal information for each owner that must be disclosed, contact information for the applicant’s designated point of contact, physical address of the premises, evidence that the applicant has the legal right to occupy the premises for the desired license type, proof of local approval, and the fact that the temporary license (which is good for 120 days) may be renewed and extended by the state for additional 90 day periods so long as a “complete application for an annual license” has been submitted to the state. No temporary license will become effective until January 1, 2018.
3. For the full blown “annual license,” the application requirements are pretty much the same as under the MCRSA rules except that now you have to disclose whether you’re applying for an “M License” or an “A License” and you have to list out all of your financing and financiers which include: “A list of funds belonging to the applicant held  in savings, checking, or other accounts maintained by a financial institution, a list of loans (with all attendant loan information and documentation, including the list of security provided for the loan), all investment funds and names of the investors, a list of all gifts, and a list with certain identifying information of anyone with a “financial interest” in the business. “Financial interest” means “an investment into a commercial cannabis business, a loan provided to a commercial cannabis business, or any other equity interest in a commercial cannabis business.” The only exempt “financial interests” are bank or financial institution lenders, individuals whose only financial interest is through an interest in a diversified mutual fund, blind trust, or “similar instrument”, and those shareholders in a publicly traded company who hold less than 5% of the total shares.
4. As part of your application, among other requirements, you’ll still need to submit a premises diagram drawn to scale along with all of your security procedures and inventory procedures (and pretty much all corresponding operational SOPs), and a $5,000 bond is still required for all licensees (as well as mandatory insurance). And all owners will still need to submit their felony conviction criminal histories as specifically enumerated in the regulations and that are substantially related to running the business as well as rehabilitation statements.
5. Several new licenses have been created (and/or brought back from dead from the MCRSA): the cannabis event organizer license (to enable people to take advantage of the temporary cannabis event license), the distribution transporter only license (which allows this licensee to only move product between licensees, but not to retailers unless what’s being transported are  immature plants or seeds from a Type 4 nursery), the processor license (a cultivation site that conducts only trimming, drying, curing, grading, packaging, or labeling of cannabis and nonmanufactured cannabis products), the Type N and P manufacturing licenses are back, and there’s now a Type 9 delivery only Non-Storefront Retailer license.
6. We also now have the non-refundable licensing fee schedules per license that vary from license type to license type and they’re mostly nominal though some increase with increased gross receipts, and small and medium sized growers will have to pay pretty robust fees.
7. If you want any changes after-the-fact to your premises or ownership structure, you have to ask the state first and get its approval.
8. All growers are again limited to 1 Type 3 medium cultivation license each, whether it’s an M License or an A License.
9. A retailer can sell non-cannabis goods on the premises so long as their city or county allows it (this excludes alcohol, tobacco, and tobacco products). Retailers can  also sell  non-flowering, immature plants (no more than 6 in  a single day to a single customer). M-licensed retailers and microbusinesses an also give cannabis away free of charge to qualified patients or  their caregivers.
10. Notably, until July 1, 2018, licensees may conduct commercial cannabis activities with any other licensee, regardless of the A or M designation of the license.
11. The renewable energy requirements for cultivators have been re-vamped hopefully to the content of growers.
12. Again, the licenses are NOT transferable, so we’re looking at folks only being able to purchase the bsuinesses that hold them.
13. Distributors will be able to re-package and re-label only flower, but not infused cannabis products unless they hold a manufacturing license. Distributors also cannot store any non-cannabis goods at their premises. The state has also laid out what must take place during a distributor’s quality assurance review and the chain of custody protocol with third party labs for testing.
14. We have a detailed list of all permissible extraction types, including that any CO2 extractions must be done within a closed loop system.
15. The prohibited products list is pretty much the same as it was under the  MCRSA rules (so, no nicotine or caffeine infused cannabis products).
16. In regards to “premises,” the Bureau’s regulations mandate that a licensee may have up to two licenses at a given premises that are for the same license type so long as they’re owned by the same company and one is an A-license and  the other is an  M-license.
17. In addition to other relatively onerous advertising requirements, licensees must “Prior to any advertising or marketing from the licensee involving direct, individualized communication or dialog, the licensee shall use age affirmation to verify that the recipient is 21 years of age or older.” Direct, individualized communication or dialog, may occur through any form of communication including: in person, telephone, physical mail, or electronic. And a method of age verification is not necessary for a communication if the licensee can verify that “the licensee has previously had the intended recipient undergo a method of age affirmation and the licensee is reasonably certain that the communication will only be received by the intended recipient.”
18. Retailers and microbusinesses are now required to hire third party security to protect and watch the premises.
19. In order to hold a microbusiness license, a licensee must engage in at least three (3) of the following commercial cannabis activities: cultivation, manufacturing, distribution, and retail sale. There are also now a slew of regulations surrounding each activity a microbusiness can undertake.
20. Live entertainment is now allowed at a licensed premises so long as it follows the bevy of regulations regarding content and presentation.

Overall, we have a close-ish copy of the withdrawn MCRSA rules that will lead us into 2018. Be sure to read the rules again and again before pursuit of a license—applicants will have their work cut out for them on both the state and local levels.

 

source https://www.cannalawblog.com/breaking-california-releases-its-emergency-maucrsa-regulations/