On November 16, 2017, the California Bureau of Cannabis Control published emergency regulations governing both the medical and the adult-use cannabis industries in California. Below are the highlights of the emergency regulations and how they may impact adult-use and/or medicinal retailers, or dispensaries as they are more commonly known.
This post is the third in a series of entries on the Duane Morris Cannabis Industry blog that will provide an analysis of the new California emergency regulations. If you have any questions about the regulations, please contact Jennifer Briggs Fisher in our San Francisco office or Justin Santarosa in our Los Angeles office.
Transition Period
As with other licensed entities, and as we discussed previously, currently licensed retailers will be able to apply for and operate under a temporary license until an annual license is issued. In addition, a licensed retailer will be given 6 months to bring all of its operations into compliance with the emergency regulations. The transition period will allow retailers to sell or transport non-compliant inventory.
During this transition time, a retailer may do all of the following:
(1) Conduct business with other licensees irrespective of the designation on their licenses.
(2) Cannabis goods held in inventory by a retailer at the time of licensure that are not in child-resistant packaging may be sold if they are placed into child-resistant packaging by the retailer at the time of sale.
(3) Non-edible cannabis products that do not meet the THC limits per package specified by the State Department of Public Health in regulation may be transported and sold.
(4) An M-license retailer may transport or sell medicinal edible cannabis products that are 10 milligrams of THC or less per serving regardless of the THC amount in the package.
(5) Cannabis goods that do not meet the labeling requirements prescribed by the Act or the State Department of Public Health in regulation may be transported and sold if a sticker with the applicable warning statement is affixed to the cannabis goods prior to sale by the retailer.
(6) Cannabis goods that have not undergone laboratory testing may be transported and sold if a label stating that the cannabis goods have not been tested is affixed to each package containing the cannabis goods prior to sale by the retailer.
(7) Dried flower held in inventory by a retailer at the time of licensure that is not packaged may be packaged by the retailer into individual packages for sale.
(8) Cannabis products held in inventory by a retailer that do not meet the requirements set by the State Department of Public Health for ingredients or appearance may be sold by the retailer.
Operations
The emergency regulations set forth numerous requirements regarding the operation of a retail store. It will be important for licensees to establish compliance processes covering topics such as interacting with customers, sales, returns, deliveries and inventory. As with any regulated industry, thorough compliance processes will help ensure that a retail store operates efficiently and in accordance with the applicable regulations.
Access to Premises. Access to a retail store is limited to those 21 years of age or older for adult-use retail stores and 18 years of age or older and a valid physician’s recommendation for medicinal cannabis retail stores. If a retail store is licensed for both adult-use and medicinal sales then either type of person may be granted access. Retail stores will be limited to operating between the hours of 6 a.m. and 10 p.m.
Sales. A retailer may only sell adult-use cannabis goods to customers who are at least 21 years old and medicinal cannabis goods to customers who are at least 18 years old and possess a valid physician’s recommendation. The identity and age of a customer is required to be verified before each sale.
Adult-use sales to one person are limited to no more than 28.5 grams of non-concentrated cannabis, no more than 8 grams of concentrated cannabis, and no more than 6 immature cannabis plants in a single day. Medicinal sales are limited to no more than 8 ounces of medicinal cannabis in a single day to a single customer.
A retailer will also need to maintain an accurate record of sale for every sale made to a customer. A record of a medicinal cannabis goods sale must contain the following information: (1) the first name and employee number of the retailer employee who processed the sale; (2) the first name of the customer and a retailer assigned customer number for the person who made the purchase; (3) the date and time of the transaction; (4) a list of all the cannabis goods purchased, including the quantity purchased; and (5) the total amount paid for the sale including the individual prices paid for each cannabis good purchased and any amounts paid for taxes.
Inventory. A retailer must keep accurate records of inventory and such records may be reviewed by the Bureau of Cannabis Control, upon request. The inventory records must include: (1) a description of each item; (2) the quantity of the item; (3) the date and time the items were received by the retailer; (4) the sell-by or expiration date, if any; (5) the name and license number of the licensee that delivered the cannabis goods; (6) the name and license number of the distributor that provided the cannabis goods to the retailer; and (7) the price the retailer paid for the cannabis goods, including taxes, delivery costs, or any other costs. A retailer must perform a reconciliation of its inventory at least once every 14 days.
Delivery
All deliveries made by a retailer must be to a physical address and must be made by employees of the retailer who are at least 21 years of age. While delivering cannabis goods, the vehicle used for delivery must be equipped with a GPS device and the delivery person must travel only between the licensed premises and to and from delivery addresses. A delivery person cannot carry cannabis goods worth in excess of $3,000 at any time.
A retailer may also apply for a Type 9-Non Storefront Retailer license which will allow the retail sales of cannabis exclusively by delivery.
Other Considerations
Retail stores will need to be at least 600 feet from a K-12 school, day care center, or youth center in existence when the license issued. Cannabis window displays are forbidden, and interior displays must not be visible to the outside public. Additionally, retail stores are subject to the same advertising restrictions as all other cannabis licensees. Keep in mind that local town, city or county ordinances may impose further restrictions on dispensaries.
Further Updates
Please continue to check the Duane Morris Cannabis Industry blog, as we will be providing further updates and a more detailed analysis of how these regulations will impact distributors and other licensed entities