The Bureau of Cannabis Control recently announced the release of the proposed cannabis regulations currently under review by the California Office of Administrative Law. The Bureau’s rulemaking action regarding these regulations, initially noticed on July 13, 2018, was submitted to OAL for review on December 3, 2018.
The Bureau has posted the proposed regulations text, in strikethrough and underline, to reflect the differences between the regulations under review and the current readopted emergency regulations. Included in the posting are the final statement of reasons and the order of adoption containing the regulations text under review – without strikethrough and underline for convenience.
Experts who have studied the proposed regulations warn that these rules will hurt current operators and affect businesses.
The draft of regulations would classify more people as owners or people with a financial interest in a business. Executives, lawyers, employees, consultants and landlords who take a share of the profits, even salespeople who earn commission would be considered people with a financial interest in the business. More folks would be required to complete forms that disclose ownership and financial interests in a licensee which would cause a logistical nightmare. The additional disclosure paperwork processes would no doubt overwhelm regulators and slow down the licensing process.
Product delivery from a single vehicle would be cut from $10k to $5k. Under current regulations, drivers would leave with enough product to cover a small order as well as any additional large orders received whilst on the road. Proposed new rules would mean that at least $2k of orders would have to be placed by the customer before the driver leaves the store, which only makes $3k available to fulfill orders while on the road. A stark comparison to having triple that available currently for on the road orders. This proposed change would result in fewer orders being filled as a driver would have to repeatedly return to refill stock, longer wait times and less area would be covered and in order to maintain the standard of business, the overhead for the company would increase as hiring would double to keep efficient delivery practices running.
A proposed change would ban all licensed companies from doing business with any commercial operator that lacks a license. Contract manufacturing (also known as white labeling or co-packaging) allows a licensed maker of edibles or concentrates to produce and package products on behalf of an unlicensed business. Having to move to a new location would be expensive for an unlicensed business in an area that has banned commercial cannabis. An unlicensed company would usually make a deal with a licensed business to manufacture its products in these areas. The proposed changes could potentially cause multiple contract manufacturer businesses to shut down.
The public comment period has closed for these regulations, and the Bureau will not be providing guidance related to these regulations until OAL has completed its review. The proposed regulations submitted to OAL have not yet been approved by OAL and are not currently in effect. While the regulations are under review with OAL, the readopted emergency regulations remain in effect and licensees should continue to comply with those regulations.
An archive of licensing authority’s regulations and rulemaking documents can be accessed here.
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