California’s Bureau of Cannabis Control Submits Final Regulations for Administrative Review

The three agencies that regulate the cannabis market in California, the Bureau of Cannabis Control, Department of Food and Agriculture, and Department of Public Health, submitted a final version of regulations to the Office of Administrative Law (“OAL”) in California this month. The OAL reviews regulations for compliance with procedural requirements and substantive standards under California law. The OAL has 30 working days — until January 16, 2019 —  to review the regulations.

This blog post will highlight some of the important changes to the regulations made by the Bureau of Cannabis Control (“BCC”).

  • Delivery: One of the most significant developments is that delivery of cannabis goods will continue to be allowed statewide going forward.  This means that deliveries will be permitted even in local jurisdictions that have banned cannabis. However, some notable procedural requirements will have to be met.
    • Deliveries facilitated by technology platforms are permissible, but the delivery must be performed by the licensee or a direct employee of the licensee—the technology platform service provider may not perform actual delivery services. Also, technology platform service providers may not share in profits of the sale of cannabis goods, including a percentage share or any other reflection of volume of sales.
    • The value limit on cannabis carried during a delivery (which had been increased from $3,000 to $10,000 in the Emergency Regulations) has been reduced to $5,000 in the version of the regulations submitted to OAL.
    • Vehicles used in the delivery of cannabis goods must not have any markings on the exterior that indicate that cannabis is carried within for delivery.
      • The secured box used to transport cannabis goods within the vehicle  must be a standalone container.
      • GPS equipment in the vehicle must record a history of all locations traveled to while engaged in a delivery—this record must be maintained for a minimum of 90 days.
  • Commercial Cannabis Activity:
    • Licensees are now prohibited from conducting commercial cannabis activities “on behalf of, at the request of, or pursuant to a contract with” any unlicensed person.
    • The BCC notably removed language that had been included in the initial draft changes to the regulations that identified specific transactions that would be considered commercial cannabis activities, including “manufacturing cannabis goods according to the specifications of a non-licensee” and “packaging and labeling cannabis goods under a non-licensee’s brand or according to the specifications of a non-licensee.”
    • The BCC stated that the inclusion of the clarifying example transactions caused “more confusion,” so they “decided not to move forward with the changes which identify example commercial cannabis activities.”
  • Licensing Fees and Changes in Ownership:
    • Annual licensure fees have been updated with a higher degree of stratification within each license category.
    • For example, retail license fees are now split into 11 gross revenue categories rather than 4 in the previous version of the regulations.
    • Although licenses remain non-transferable or assignable in the event of a change of ownership, there is now clarity as to continuity of business activities during such an event.
      • Notice of the change must be made to the BCC within 14 calendar days (increased from 10).
      • The business is expressly permitted to operate under the active license while the BCC reviews a change of ownership so long as at least one existing owner retains ownership and will remain an owner under the proposed ownership structure.
      • If all owners are transferring their ownership interest, the business may not operate until new licenses have been granted following the full application process.
  • Advertising:
    • The advertising regulations have been tightened to outlaw the following:
      • Depictions of toys, movie characters, cartoon characters, or any other image designed in a manner likely to appeal to minors or anyone under 21.
      • Advertising of free cannabis or giveaways of any type of product including:
        • Buy one get one free promotions
        • Free products with donations
        • Contests, sweepstakes, or raffles
      • Signage—including billboards—located within a 15-mile radius of the California border on an Interstate Highway or State Highway which crosses the California border.
  • Packaging:
    • Packaging must meet guidelines, including being tamper-evident, resealable, and not imitating any packages of goods typically marketed to children.
    • Beginning January 1, 2020, more stringent rules will come into effect requiring packaging to be child-resistant, made of heat-sealed plastic, and labeled to warn that it is no longer child-resistant after opening.
  • Lab Testing:
    • Laboratory testing procedures have been updated to require that laboratories implement chain of custody policies. Additional provisions have been added to regulate vehicles used by laboratories to transport cannabis goods—these largely mirror vehicle requirements found within the delivery and transportation sections of the regulations. Homogeneity testing for edible cannabis products has been removed entirely from the regulation.
  • CEQA Compliance:
    • The regulations previously required all applicants to provide evidence of exemption from or compliance with the California Environmental Quality Act. The regulations submitted to the OAL provide much greater detail on this, including explanations of the content and format of submissions to the BCC, the BCC review process, and required submissions by exempt projects.
  • Other Changes:
    • Procedures for the issuance of emergency decisions and orders for temporary, interim relief to prevent or avoid danger to the public have been added.
    • Guidelines for access by public universities in California to research funds have been added.

If you have any questions about the changes to the BCC’s regulations, please contact Jennifer Briggs Fisher in our San Francisco office.