Commercial cannabis activity: Licensed Distributors

With so many ups-and-downs, the cannabis industry in California is looking like it will face several more obstacles before settling down. There are several bills in the California Senate that have significant impact on how the industry will run.

SB-1459 Provisional Licenses – Enrolled 10/07/2018

First and foremost, there has been a panic over the permanent state licenses considering that the largest markets (LA, SF, SD) have yet to issue local approval or have only issued temporary approval, if at all. SB-1459 allows the state to issue provisional licenses instead of temporary or permanent licenses. Essentially, the state is conceding that it will most likely not be until 2020 that proper permanent licenses are in full swing.

An act to amend Section 26110 of the Business and Professions Code, relating to cannabis, and declaring the urgency thereof, to take effect immediately.

LEGISLATIVE COUNSEL’S DIGEST

SB 311, Pan. Commercial cannabis activity: licensed distributors.

Existing law, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), provides for the licensure and regulation of commercial cannabis activity. Existing law requires a licensed distributor to arrange for a testing laboratory to obtain a representative sample of each cannabis batch at the distributor’s premises for testing and, upon issuance of a certificate of analysis by a licensed testing laboratory, conduct a quality assurance review before distribution to ensure the labeling and packaging conform to the legal requirements. Existing law authorizes cannabis and cannabis products fit for sale to be transported only from the distributor’s premises to the premises of a licensed retailer, microbusiness, or nonprofit.

This bill would require that transportation to be for the purpose of retail sale. The bill would also authorize a licensed distributor to transport cannabis or cannabis products that are fit for sale to the premises of another licensed distributor for further distribution.

This bill would declare that it is to take effect immediately as an urgency statute.

DIGEST KEY

Vote: 2/3 Appropriation: no Fiscal Committee: no Local Program: no

BILL TEXT

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1.

Section 26110 of the Business and Professions Code is amended to read:

26110.

(a) Cannabis batches are subject to quality assurance and testing prior to sale at a retailer, microbusiness, or nonprofit licensed under Section 26070.5, except for immature cannabis plants and seeds, as provided for in this division.

(b) A licensee that holds a valid distributor license may act as the distributor for the licensee’s cannabis and cannabis products.

(c) The distributor shall store, as determined by the bureau, the cannabis batches on the premises of the distributor before testing and continuously until either of the following occurs:

(1) The cannabis batch passes the testing requirements pursuant to this division and is transported to a licensed retailer or to another licensed distributor.

(2) The cannabis batch fails the testing requirements pursuant to this division and is destroyed or transported to a manufacturer for remediation as allowed by the bureau or the State Department of Public Health.

(d) The distributor shall arrange for a testing laboratory to obtain a representative sample of each cannabis batch at the distributor’s licensed premises. After obtaining the sample, the testing laboratory representative shall maintain custody of the sample and transport it to the testing laboratory.

(e) Upon issuance of a certificate of analysis by the testing laboratory that the cannabis batch has passed the testing requirements pursuant to this division, the distributor shall conduct a quality assurance review before distribution to ensure the labeling and packaging of the cannabis and cannabis products conform to the requirements of this division.

(f) (1) There shall be a quality assurance compliance monitor who is an employee or contractor of the bureau and who shall not hold a license in any category or own or have an ownership interest in a licensee or the premises of a licensee.

(2) The quality assurance compliance monitor shall conduct random quality assurance reviews at a distributor’s licensed premises before distribution to ensure the labeling and packaging of the cannabis and cannabis products conform to the requirements of this division.

(3) The quality assurance compliance monitor shall have access to all records and test results required of a licensee by law in order to conduct quality assurance analysis and to confirm test results. All records of inspection and verification by the quality assurance compliance monitor shall be provided to the bureau. Failure to comply shall be noted by the quality assurance compliance monitor for further investigation. Violations shall be reported to the bureau. The quality assurance compliance monitor shall also verify the tax payments collected and paid under Sections 34011 and 34012 of the Revenue and Taxation Code are accurate. The monitor shall also have access to the inputs and assumptions in the track and trace system and shall be able to verify their accuracy and that they are commensurate with the tax payments.

(g) After testing, all cannabis and cannabis products fit for sale may be transported only from the distributor’s premises to the premises of another licensed distributor for further distribution, or to a licensed retailer, microbusiness, or nonprofit for retail sale.

(h) A licensee is not required to sell cannabis or cannabis products to a distributor and may directly contract for sale with a licensee authorized to sell cannabis and cannabis products to purchasers.

(i) A distributor performing services pursuant to this section may collect a fee from the licensee for the services provided. The fee may include, but is not limited to, the costs incurred for laboratory testing. A distributor may also collect applicable state or local taxes and fees.

(j) This section does not prohibit a licensee from performing testing on the licensee’s premises for the purposes of quality assurance of the product in conjunction with reasonable business operations. The testing conducted on the licensee’s premises by the licensee does not meet the testing requirements pursuant to this division.

SEC. 2.

This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:

In order to promote the reliable and safe distribution of cannabis at the earliest time possible, it is necessary for this act to take effect immediately.