Highlights of the Changes to the Department of Cannabis Control Regulations

This entry was posted on Friday, October 15th, 2021 and is filed under Cannabis Law.

On September 27, 2021, the Office of Administrative Law (OAL) approved the Department of Cannabis Control’s consolidated emergency regulations available here: DCC Emergency Cannabis Regulations September 2021. These regulations consolidate, streamline, clarify and make consistent application, licensing, and disciplinary requirements for commercial cannabis businesses.

Here are the top highlights of the new regulations:

1 – Notable New Definitions

  • “Appellation of Origin” means a designation to indicate that the cannabis meets the requirements developed by the program established pursuant to section 26063 of the Act.
  • “Final form” refers to cannabis and cannabis products that are packaged and labeled as they will be sold at retail to a consumer.
  • Clarified that the definition of “Non-Volatile Solvent” includes carbon dioxide, ethanol, and nonhydrocarbon-based or other solvents such as water, vegetable glycerin, vegetable oil, animal fat, and glycerin.
  • “Tincture” means a solution of cannabis extract, derived either directly from the cannabis plant or from a manufactured cannabis extract, dissolved in alcohol, glycerin, or vegetable oils.

2 – Owners and Financial Interest Holder Disclosures

The new rules clarified the definition of “Owner” across all license types and provided for a single definition of Owner, as well as a single approach for processing ownership changes.

  • The new rules provide additional examples of individuals who qualify as Owners of a commercial cannabis business: chief executive officer, president or their equivalent, or an officer, director, vice president, general manger or their equivalent
  • The threshold for disclosure of financial interest holders was raised to 10% of the total shares in both a publicly traded or privately held company.

3 – Issuance and Renewal of Provisional Licenses 

  • DCC will stop issuing provisional licenses as of June 30, 2022
  • Applications for provisional licenses will not be accepted after March 31, 2022
  • After June 30, 2022 and until September 30, 2022, the DCC may in its sole discretion issue a provisional license for a cultivation if a complete application was submitted before June 30, 2022 and certain criteria were met pursuant to Section 15001.1 of the Emergency Regulations; 
  • After June 30, 2022 and until June 30, 2023, the DCC may in its sole discretion issue a provisional license to an equity applicant
  • Cultivation applications received by DCC on or after January 1, 2022, may be issued a provisional license if issuance of the license would not cause the commercial business to hold multiple cultivation licenses on a contiguous premises to exceed 1 acre of total canopy for outdoor cultivation or 22,000 sq. ft. for mixed-light or indoor.   

For provisional license renewals from July 1, 2022 through July 30, 2023, the license holder must provide DCC with evidence that certain CEQA requirements have been met.

4 – Notice of Provisional License Review

DCC adopted a process for notifying licensees of its intent to suspend, revoke, or deny renewal of a provisional license.

  • The Notice of Provisional License Review must be in writing and state: 

(i) the nature and facts of each violation; 

(ii) the manner in which licensee must correct the violation; and

(iii) the disciplinary action DCC is considering. 

  • The licensee may request an informal meeting with DCC to discuss the matter and may be accompanied by an attorney or representative.
  • DCC may immediately suspend any provisional license or impose licensing restrictions if necessary to protect public health, safety, or welfare.

5 – Annual License Application Requirements

DCC simplified the application process.

  • Applicant must identify a Designated Responsible Party who has the legal authority to bind the applicant and who shall be the primary contact for application and license-related issues. 
  • Owners are no longer required to disclose convictions; however, DCC may request and receive certified records of all arrests and convictions from a local or state agency.  
  • Applicants may use an aggregate surety bond when applying for multiple licenses.
  • DCC deleted the financial information disclosure requirements (loans, investments, gifts, and bank accounts).  
  • DCC repealed the previously required CEQA forms; however, the regulations still provide that if the applicant doesn’t have a CEQA document from its local jurisdiction, the applicant shall submit the forms prescribed by DCC. 
  • DCC no longer requires a distributors to submit a Certificate of Insurance, but the minimum insurance requirements still remain in effect.

6 – Branded Merchandise

  • Clarified that “Branded Merchandisemeans non-consumable consumer goods utilized by licensee for advertising and marketing purposes (cannot sell bottles of water). 
  • Eliminated the approval requirement for items not enumerated in the definition of branded merchandise.
  • After December 31, 2021, licensee’s license number must be permanently affixed and clearly visible from the outside of the branded merchandise. 
  • Branded Merchandise must not be designed in any manner that is attractive to children.
  • Licensees are allowed to sell other licensees’ branded merchandise. 

7 – Advertising

  • The restriction on advertising giveaways of non-cannabis products was removed.
  • A restriction on advertising giveaways of cannabis accessories was added.

8 – Trade Samples

  • “Trade Sample” means a limited amount of cannabis goods designated to be provided to other licensees for the purposes of targeted advertising.
  • Once designated as a trade sample in METRC, the designation cannot be changed.
  • Live plants and seeds cannot be designated as trade samples.
  • Only cultivators, manufacturers, distributors, and microbusinesses engaging in the aforementioned activities can designate cannabis goods as trade samples. 
    1. Retailers, cannabis event organizers, transport-only distributors, and testing labs cannot designate or provide trade samples to other licensees. 
  • All trade samples must be packaged and labeled in accordance with the regulations for cannabis goods sold at retail.
  • All trade samples must be labeled with “TRADE SAMPLE. NOT FOR RESALE OR DONATION.” 
  • Trade samples must pass all applicable laboratory testing requirements.
  • Trade samples may be transported by an employee of a distributor in a vehicle that is not registered to the licensee, provided the employee must comply with the possession limits of Health & Safety Code § 11357 (28.5g of cannabis or 8g of concentrated cannabis).  
  • Licensees are limited to designating the following aggregate amounts of cannabis goods as trade samples in a calendar month period: 
    1. Dried flower: 2 pounds  
    2. Manufactured/non-manufactured cannabis products: 900 individual units  
  • Licensees are limited to providing the following aggregate amounts of cannabis goods as trade samples to each recipient licensee in a calendar month period: 
    1. Dried flower: 5 grams per strain, and no more than 6 strains to each recipient licensee; 
    2. Manufactured/non-manufactured cannabis products: 5 individual units per cannabis product line and no more than 6 individual cannabis product lines.

9 – Labor Peace Agreement

For businesses with less than 20 employees, a labor peace agreement must be entered into within sixty (60) days of employing its 20th employee.

10 – Packaging and Labeling

  • Established labeling requirements for bulk products, seeds, and immature plants. 
  • Clarified that packages of seeds are not required to be placed in child-resistant packing prior to sale.
  • If the immediate container holding the cannabis goods is separable from the outermost packaging, the immediate container shall be labeled with the universal symbol (previously only applied to manufactured products).  
  • Supplemental labeling may not be used to fulfill the following labeling requirements after December 31, 2021:
    1. The name of the licensed manufacturer (either the legal business name or DBA) that manufactured the cannabis product and the manufacturer’s contact number or website address;
    2. UID
  • Labeled cannabinoid content shall reflect the amount indicated on the Certificate of Analysis. The amount may be rounded to the nearest whole number, except that packages shall not be labeled with an amount greater than the allowable THC limits. If the THC or CBD content of a manufactured cannabis product is indicated on the Certificate of Analysis as “Not Detected” or “<LOQ,” the cannabinoid content shall be labeled as “0 mg” or “<2 mg.”
  • Colored bottles that obscure the color of the liquid inside shall be considered opaque v.  previously only amber bottles were considered opaque.

11 – General Operating Requirements

  • Requires licensees that are not open to the public to establish a sign-in/sign-out procedure for all persons accessing the premises, including authorized individuals, suppliers, and visitors. 
  • Clarifies that only agents or employees of a licensee conducting retail sales or participating in a temporary cannabis event must wear badges. 
  • Clarified that activities must be recorded in the track and trace system within 24 hours of occurrence.
  • Clarified that canopy shall be of sufficient size to contain the mature plants in their entirety and that no portion of the plant can hang over an established canopy boundary. 
  • Established complaint procedures and voluntary and mandatory recall procedures for all license types.

By: KVK Team, October 15, 2021