Cannabis Retailing – Storefront – OffSite

Cannabis Retailing – Storefront – OffSite

Cannabis Retailing – Storefront – OffSite has significant restrictions on land use, control from county and local authorities, requires third-party security, and ability to restrict access to premises

Retail License Types
  • Retailer – sells cannabis goods to customers at its premises or by delivery. A retailer must have a licensed physical location (premises) where commercial cannabis activities are conducted.
  • Retailer (non-storefront): Sells and delivers cannabis goods to customers. A retailer (non-storefront) must have a licensed premises, but it is not open to the public.
Retail Premises
  • This is defined as a designated structure or structures and land specified in the application that is under the control of the applicant or licensee where the commercial cannabis activity will be conducted. These are the requirements:
  • Each premise must be licensed.
  • Only one licensee may occupy premises. However, a licensee that holds both an A-license and an M-license for the same commercial cannabis activity (e.g., retail sale) may have the same premises for both types.
  • A Premise Diagram that contains specific items must be provided.
  • Premises is not the same as a parcel of land or a property lot. A parcel of land may have more than one licensed premises on it held by one or more licensees.
  • There are strict sublet requirements.
  • Alcoholic beverages and tobacco products may not be sold on the same premises as cannabis goods.
  • Landowner consent
Requirements
  • A licensee with an A‐license and an M‐license may have the  same premises for both types
  • Sells and deliveries may only occur between 6:00 a.m. and 10:00 p.m. Pacific Time.
  • All cannabis goods must be placed in an opaque exit package  prior to leaving the premises
  • Deliveries may be made only by employees of the retailer.
  • Deliveries must be to a physical address
  • The delivery vehicle may not contain more than $3,000 of cannabis products at any time.
  • The retailer must be able to immediately locate all delivery vehicles.
  • There are specific limitations on advertising.

What must be contained in a premises diagram?

§ 5006. Premises Diagram

(a) An applicant shall submit to the Bureau, with the application, a complete and detailed diagram of the proposed premises.

(b) The diagram shall show the boundaries of the property and the proposed premises to be licensed, showing all boundaries, dimensions, entrances and exits, interior partitions, walls, rooms, windows, doorways, and common or shared entryways, and shall include a brief statement or description of the principal activity to be conducted therein.

(c) The diagram shall show and identify commercial cannabis activities that will take place in each area of the premises, and identify limited-access areas.

(d) The diagram shall show where all cameras are located and assign a number to each camera for identification purposes.

(e) The diagram sha11 be to scale.

(f) The diagram shall not contain any highlighting and the markings on the diagram shall be in black-and-white print.

(g) If the proposed premises consists of only a portion of a property, the diagram must be labeled indicating which part of the property is the proposed premises and what the remaining property is used for.

(h) If the proposed premises will be a microbusiness that includes cultivation activities, in addition to the requirements of subsections (b) through (g), the premises diagram shall also include all the required information for a premises diagram under section 5501(d) of this division.

Proposed Regs. – October 19, 2018

Subsection (c) has been amended to include infusion in the examples of commercial cannabis activities that must be included on the premises diagram. This change was necessary to provide additional examples of commercial cannabis activities that Bureau licensees may be engaged in on their premises.

Subsection (d) has been amended to provide a cross-reference to section 5315 which exempts from video surveillance requirements distributor transport only licensees who are operating on the same parcel of land as their manufacturing or cultivation licensed premises. This change was necessary to provide clarity to applicants so that they would know exactly what is required on the premises diagram for their license type.

Subsection (i) has been amended to remove the reference to subsections (b) through (g). The Bureau determined that this reference was not accurate and thus, it was necessary to make an amendment.

The reference section has been revised to correct a typographical error.

Authority: Section 26013, Business and Professions Code. Reference: Section 26051.5, Business and Professions Code.

What are Designation of Owner Requirements?

§ 5003. Designation of Owner

(a)- All applicants for a commercial cannabis license shall have at a minimum one individual who meets the definition of “owner” under Business and Professions Code section 26001(al) and who will submit the information required of owners under section 5002.

(b) “Owner” means any of the following:

(1) A person with an aggregate ownership interest of 20 percent or more in the person applying for a license or a licensee, unless the interest is solely a security, lien, or encumbrance. ,

(2) The chief executive officer of a nonprofit or other entity.

(3) A member of the board of directors of a nonprofit.

(4) An individual who will be participating in the direction, control, or management of the person applying for a license. An owner who is an individual participating in the direction, control, or management of-the commercial cannabis business includes any of the following:

(A) A general partner of a commercial cannabis business that is organized as a partnership.

(B) Anon-member manager or managing member of a limited liability company of a commercial cannabis business that is organized as a limited liability company.

(C) An officer or director of a commercial cannabis business that is organized as a corporation.

Proposed Regs. – October 19, 2018

Subsection (a) has been amended to clarify that reference to section 5002 is a reference to section 5002 of this division. This change was necessary for clarity and consistency throughout the regulations.

Subsection (b) has been amended to add an additional provision. Former subsection (b)(5) is now subsection (b)(6). New subsection (b)(5) includes as an owner an individual who is entitled to a share of 20 percent of the profits of the commercial cannabis business. The inclusion of this provision is necessary because commercial cannabis businesses are seeking alternative methods to acquire capital to cover business costs due to traditional business loans being unavailable. Because of these nontraditional methods, some commercial cannabis businesses have owners that are entitled to profits but may not consider themselves as falling under the aggregate ownership interest of 20 percent because they did not personally provide that much capital to the startup costs. This provision makes clear that an aggregate ownership of 20 percent could be someone who is entitled to at least 20 percent of the profits regardless of how much of an investment they made into the company.

New subsection (b)(6) contains those persons who fall under the statutory provision that an owner is an individual who will be participating in the direction, control, or management of the person applying for a license. This subsection has been amended to add additional provisions to part (D). Subsection (b)(6)(D) has been amended to expand on the provision that an owner is any individual who assumes responsibility for the license. The Bureau has expanded this subsection by adding parts (D)(i)-(D)(iv) to provide examples which individuals fall under the owner category of an “individual who assumes responsibility for a license.” The subsection includes the following: an individual who is managing or directing the commercial cannabis business in exchange for a portion of the profits; an individual who assumes responsibility for the debts of the commercial cannabis business; an individual who is determining how a portion of the cannabis business is run, including non-plant-touching portions of the commercial cannabis business such as branding or marketing; and an individual who is determining what cannabis goods the commercial cannabis business will cultivate, manufacture, distribute, purchase, or sale. The inclusion of these persons as owners is necessary because the Bureau has determined that confusion continued to exist regarding which individuals needed to be disclosed as owners and undergo the background check. The amendment aims to protect public health and safety by ensuring that all individuals that are assuming responsibility for a license are accounted for and qualified as owners.

Subsection (c) has been amended to clarify that when an entity has a 20 percent ownership interest in the commercial cannabis business, then all individuals who are owners of that entity shall be considered owners of the commercial cannabis business. This subsection has also been amended to provide examples such as all entities in a multi-level ownership structure are included as owners as well as persons that have control of a trust, chief executive officers, members of a board of directors, partners, trustees, and managing or non-member managers of the entity. Further clarification is provided by indicating the disclosures must trace back to the actual person holding an interest until only individuals remain. This modification is necessary to provide clarity to applicants on which individuals will be considered an owner of a commercial cannabis business when an entity owns a portion of the commercial cannabis business. The Bureau has received numerous questions regarding this issue with many applicants not understanding that the intent of this section was to reach the individual owners of an entity that owns a portion of the commercial cannabis business, thus further clarification was necessary. To determine if a person has an aggregate interest of more than 20%, the disclosure of actual individuals with ownership in entities is necessary.

Authority: Section 26013, Business and Professions Code. Reference: Sections 26001, 26012 and 26013, Business and Professions Code.

What are the advertising placement requirements?

§ 5040. Advertising Placement

(a) Any advertising or marketing placed in broadcast, cable, radio, print, and digital communications shall only be displayed where at least 71.6 percent of the audience is reasonably expected to be 21 years of age or older, as determined by reliable up-to-date audience composition data.

(b) Upon request, a licensee shall provide to the Bureau audience composition data as required in subsection (a) of this section for advertising or marketing placed by the licensee. This information .shall be provided to the Bureau within the time specified by the Bureau.

(c) If the Bureau determines that audience composition data for advertising or marketing provided by a licensee does not comply with the requirements of subsection (a) of this section, ar the licensee fails to provide audience composition data to the Bureau within the time specified by the Bureau, the licensee shall remove the. advertising or marketing placement in question.

Proposed Regs. – October 19, 2018

Subsection (a)(2) of this section has been revised to provide that licensees shall not use any depictions or images of minors or anyone under 21 years of age. Subsection (a)(3) has been revised to provide that licensees shall not use certain advertising mechanisms that are likely to be appealing to minors or anyone under 21 years of age. This is necessary to assure consistency with Business and Professions Code section 26151(b), which requires licensees to demonstrate that any advertising or marketing shall only be displayed where at least 71.6 percent of the audience is reasonably expected to be 21 years of age or older. To remain consistent with MAUCRSA, the Bureau will change all references in this section of 18 years of age, to 21 years of age.

In addition, subsection (a)(4) has been clarified to state that licensees shall not advertise giveaways of any type of products, including non-cannabis products. This is necessary because a number of commenters sought clarity regarding the use of non-cannabis products in promotional giveaways. The revisions to this section are consistent with the promotional giveaway limitations identified in MAUCRSA at Business and Professions Code section 26153.

Subsection (a)(4)(A) is also amended to clarify that “by one product get one free” means “by one product get one product free.” This is necessary to clarify the meaning of this provision.

Subsection (b)(3) has been added to clarify that outdoor signs, including billboards, shall not be located within a 15-mile radius of the California border or an Interstate Highway or on a State Highway which crosses the California border. MAUCRSA prohibits certain advertisements along Interstate Highways and State Highways that cross the California border but does not clarify to what extent such prohibitions take place. This change is necessary to clarify the prohibitions found in section 26152(d) of the Business and Professions Code, by allowing the placement of outdoor signs or billboards along Interstate Highways or State Highways, provided that they are located further than 15-miles from the California border.  The Bureau determined that a 15-mile radius was a necessary and appropriate distance from the California border because it satisfies that the intent of section 26152(d) of the Business and Professions Code, while assuring that Bureau licensees, including those located in jurisdictions along the California border, still have an opportunity to advertise and market their commercial cannabis operations along Interstate Highways and State Highways if they satisfy the identified radius limitations.

§ 5040.1. Marketing Cannabis Goods as Alcoholic Products

This section has been added to clarify that licensees shall not sell or transport cannabis goods that are labeled as beer, wine, liquor, spirits, or any other term that may create a misleading impression that the product is an alcoholic beverage. This addition is necessary because recently passed legislation prohibits licensees from selling, offering, or providing a cannabis product that is an alcoholic beverage and this provision will prevent consumer confusion that may be caused by use of these terms.

Authority: Section 26013, Business and Professions Code. Reference: Sections 26151 and 26152, Business and Professions Code……..

What are the security requirements?

§ 5042. Access to Limited-Access Areas Licensees shall ensure that any person on the licensed premises, except for employees and contractors of the licensee, are escorted at all times by the licensee or at least one employee of the licensee when in the limited-access areas of the premises.

Proposed Regs. – October 19, 2018

Subsection (b) has been amended to remove “individuals employed by the licensee as well as any” as the Bureau has determined that this edit is necessary for this section to be consistent with section 5000 subsection (m).

The reference section of this regulation has been amended to include a reference to Business and Professions Code section 26160. The Bureau determined this reference should also be included with this section.

Authority: Section 26013, Business and Professions Code. Reference: Section 26070, Business and Professions Code.

§ 5043. Licensee Employee Badge Requirement All agents, officers, or other persons acting for or employed by a licensee shall display a laminated or plastio-coated identification badge issued by the licensee at all rimes while engaging in commercial cannabis activiCy. The identification badge shall, at a minimum, include the licensee’s “doing business as” name and license number, the employee’s first name, an employee number exclusively assigned to that employee for identification purposes, and a color photograph of the employee that clearly shows the full front of the employee’s face and that is at least 1 inch in width and,1.5 inches in height,

Proposed Regs. – October 19, 2018

Authority: Section 26013, Business and Professions Code. Reference: Section 26070, Business and Professions Code.

§ 5044. Video Surveillance System

(a) Each licensed premises shall have a digital video surveillance system with a minimum camera resolution of 1280 x 720 pixels.

(b) The surveillance-system storage device or the cameras shall be transmission control protocol (TCP) capable of being accessed through the Internet.

(c) The video surveillance system shall at all times be able to effectively and clearly record images of the area under surveillance.

(d) Each camera shall be permanently mounted and in a fixed location. Each camera shall be placed in a location that allows the camera to clearly record activity occurring within 20 feet of all points of entry and exit on the licensed premises, and allows for the clear and certain identification of any person and activities in all areas required to be filed under subsection(e).

(e) Areas that shall be recorded on the video surveillance sysCem include the following:

(1) Areas where cannabis goods are weighed, packed, stored, loaded, and unloaded for transportation, prepared, or moved within the premises;

(2) Limited-access areas;

(3) Security rooms;

(4) Areas storing a surveillance-system storage device with at least one camera recording the access points to the secured surveillance recording area; and

(5) Entrances and exits to the premises, which shall be recorded from both indoor and outdoor vantage points.

(f) Retailers shall also record point-of-sale areas and areas where cannabis goods are displayed for sale on the video surveillance system. At each point-of-sale location, camera placement must allow for the recording of the facial feahxres of any person purchasing or selling cannabis goods, or any person in the retail area, with sufficient clarity to determine identity.

(g) Cameras shall record continuously 24 hours per day and at a minimum of 15 &amesper second (FPS).

(h) The physical media or storage device on which surveillance recordings are stored shall be secured in a manner to protect the recording from tampering ar theft.

(i) Surveillance recordings shall be kept for a minimum of 90 days.

(j) Surveillance recordings are subject to inspection by the Bureau, and shall be kept in a manner that allows the Bureau to view and obtain copies of the recordings at the licensed premises immediately upon request. The licensee shall also send or otherwise provide copies of the recordings to the Bureau upon request within the time specified by the Bureau.

(k) Recorded images shall clearly and accurately display the time and date. Time is to be measured in accordance with the United States National Institute Standards and Technology standards.

(1) The video surveillance system shall be equipped with a failure notification system that provides notification to the licensee of any interruption or failure of the video surveillance system or video surveillance-system storage device.

Proposed Regs. – October 19, 2018

This section has been amended to remove the requirement that surveillance system storage devices or the cameras be transmission control protocol capable of being accessed through the internet. The Bureau determined that this requirement was not necessary to ensure the health and safety of the public as recordings are required to be saved for 90 days which provides the Bureau and the licensee with sufficient time to review the surveillance footage in case a crime or unauthorized act occurs on the premises that necessitates an investigation. With the removal of this requirement, the numbering of proposed subsections (b)-(m) have been changed.

Subsection (e) which was formerly subsection (f) has been amended to clarify licensed microbusinesses authorized to engage in retail sales are required to record point-of-sale areas. This change was necessary because the requirement to record point-of-sale areas does not apply to all microbusinesses, it only applies to microbusinesses that have been authorized by the Bureau to engage in retail.

Proposed subsection (h) contains an amendment to the requirement that surveillance recordings be kept for a minimum of 90 days. The Bureau has amended this section to clarify that the 90- day requirement is 90 calendar days. This was necessary to provide consistency with other sections of the regulations where the Bureau has clarified business days and calendar days.

Subsection (j) has been amended to insert “of” into “United States National Institute of Standards and Technology.” This change was necessary for accuracy. A grammatical change was also made to clarify the appropriate standards to be used.

Subsection (l)(3) amends a cross reference to subsection (i). This change was necessary due to the renumbering of the section.

Authority: Section 26013, Business and Professions Code, Reference: Section 26070, Business and Professions Code.

§ 5045. SecuriTy Personnel A retail licensee or microbusiness licensee that is engaged in retail sale shall hire or contract for security personnel to provide security services for the licensed retail premises. All security personnel hired or contracted for by the licensee shall comply with Chapters 11.4 and 11.5 of Division 3 of the Business and Professions Code. Authority: Section 26013, Business and Professions Code. Reference: Section 26070, Business and Professions Code. § 5046. Locks A licensee shall ensure that the limited-access areas described in section 5042 of this division can be securely locked using commercial-grade, nonresidential door locks. A licensee shall also use commercial-grade, nonresidential door locks on all points of entry and exit to the licensed premises.

Proposed Regs. – October 19, 2018

This section has been amended to clarify that security personnel must be on-site at the licensed premises of a licensed retailer or licensed microbusiness authorized to engage in retail sales during the hours of operation. This was necessary because the Bureau has received questions requesting clarity on whether the security personnel needed to be on-site and the hours that the security personnel is required to be on-site. This change also clarifies that these requirements only apply to licensed retailers or licensed microbusinesses authorized to engage in retail sales.

Authority: Section 26013, Business and Professions Code. Reference: Section 26070, Business and Professions Code.

§ 5047. Alarm System

(a) A licensee sha11 maintain an alarm system as defined in Business and Professions Code section 7590.1(n) at the licensed premises.

(b) A licensee shall ensure a licensed alarm company operator ar one or more of its registered alarm agents installs, maintains, monitors, and responds to the alarm system.

(c) Upon request, a licensee shall make available to the Bureau all information related to the alann system, monitoring, and alarm activity.

Proposed Regs. – October 19, 2018

Authority: Section 26013, Business and Professions Code. Reference: Section 26070, Business and Professions Code.

What are rules regarding premises locations?

§ 5026. Premises Location

(a) A premises licensed under this division shall not be located within a 600-foot radius of a school providing instruction in kindergarten or any grades 1 through 12, day care center, ar youth center that is in existence at the time the license is issued.

(b) Notwithstanding subsection (a), if a local jurisdiction has issued a license or permit to conduct commercial cannabis activity at a premises that is located. within a 600-foot radius of a school providing instruction in kindergarten or any grades 1 through 12, day care center, or youth center, the Bureau may approve the premises for licensure if the following conditions are met:

(1) The applicant submits a copy of a valid license or permit from the local jurisdiction with the application for licensure; and

(2) The local jurisdiction notifies the Bureau that the applicant is in compliance with all applicable local ordinances and regulations pursuant to Business and Professions Code section 26055~g)(Z)~~)•

(c) A premises sha11 not be in a location that requires persons to pass through a business that sells alcohol or tobacco to access the licensed premises, or that requires persons to pass through the licensed premises to access a business that sells tobacco or alcohol.

Proposed Regs. – October 19, 2018

Subsection (c) has been amended and divided into two separate subsections, with the new subsection (d) containing the provision that the licensed premises shall not be in a location that requires persons to pass through the licensed premises in order to access a business that sells alcohol or tobacco or in private residence. The remaining subsections are renumbered for consistency. These changes are necessary to clarify the restrictions on-premises locations and make distinct these separate requirements.

Subsection (g) has been added to this section to clarify that nothing in this section shall be interpreted to prohibit two or more licensed premises from occupying separate portions of the same parcel of land or sharing common use areas, such as a bathroom, breakroom, hallway, or building entrance. The Bureau recognizes that some licensed operations may be located on properties with separate buildings or suites, which provide clear separation between licensed premises; many times, such buildings have shared bathrooms or hallways where no licensed activities would take place. This section is necessary to ensure that prospective licensees are aware of location considerations for licensed premises.

Subsection (h) has been added to this section to clarify that all structures included as part of licensed premises shall be permanently affixed to the land by a method that would cause the structure to ordinarily remain affixed for an indefinite period of time. This section also clarifies what structures are not considered permanent structures, such as shipping containers that are not affixed to the land, structures that rest on wheels, or any structure that can be readily moved. This is necessary to assure that a licensee’s premises remain consistent with the premises diagram approved by the Bureau as part of its application process. It also assures that premises that are approved for licensure are easily accessible by Bureau staff for routine inspections, and that the licensed premises may not be indiscriminately moved or modified without informing the Bureau. As the Bureau is required to determine if the location of the premises is appropriate, it is important that a premise cannot easily be relocated.

Authority: Section 26013, Business and Professions Code. Reference: Sections 26051.5, 26054 and 26055, Business and Professions Code.

What are requirements for significant inventory discrepancy?

§ 5034. Significant Discrepancy in Inventory

(a) A significant discrepancy in inventory means a difference in actual inventory compared to records pertaining to the inventory of at least $5,000 or 2 percent of the average monthly sales of the licensee, whichever is less.

(b) For the purposes of this section, average monthly sales shall be calculated by taking a per month average of the total sales for the previous 6 months. If the licensee has not been in operation for at least b months, only the months in which the licensee was operating sha11 be used in determining average monthly sales.

(c) For the purposes of this section, the licensee’s acquisition price shall be used to determine the value of cannabis goods in a licensee’s inventory.

Proposed Regs. – October 19, 2018

An introductory sentence has been added to this section to clarify that a determination by a licensee on whether a discrepancy in inventory is significant shall be made in consideration of certain factors. This new introduction to the section is necessary to ensure that licensees are aware that all of the subsequent subsections are relevant to the determination of a significant discrepancy. 

Subsection (a) of this section has been revised to state that a significant discrepancy in inventory occurs when there is a difference in actual inventory compared to records pertaining to inventory of 3 percent of the average monthly sales of the licensee. The Bureau received several comments expressing concern about how significant discrepancy is determined. Specifically, individuals expressed concern about over-reporting for larger businesses. The adjustment of the threshold was necessary based on information available about the costs of cannabis goods and the typical losses licensees may have in the course of business.

Authority: Section 26013, Business and Professions Code. Reference: Section 26070, Business and Professions Code.

What are rules regarding subletting of premises?

§ 5028. Subletting of Premises A licensee shall not sublet any area designated as the licensed premises for the licensee’s commercial cannabis activity.

Authority: Section 26013, Business and Professions Code. Reference: Sections 26013 and 26070, Business and Professions Code

What are employee age restrictions?

§ 5031. Employee Age Restriction

A licensee shall not employ or retain persons under 21 years of age

Authority: Section 26013, Business and Professions Code. Reference: Section 26140, Business and Professions Code.

What are the rules regarding premises?

§ 5025. Premises

(a) Each license shall have a designated premises for the licensee’s commercial cannabis activity, which is subject to inspection by the Bureau.

(b) The Bureau may allow a licensee to have the same licensed premises for two separate commercial cannabis licenses if all of the following criteria are met:

(I) The licensee holds both an A-license and an M-license for the identical type of commercial cannabis activity;

(2) The licensee who holds both licenses is identical in name, business formation, and ownership;

(3) The licensee only conducts one type of commercial cannabis activity on the premises;

(4) All cannabis and cannabis products are clearly marked with an “A” or “M”; and

(5) Records art kept separately for each license and clearly indicate that the records are related to the A-license or the M-license.

Proposed Regs. – October 19, 2018

Subsection (c) has been amended to clarify that licensed retailers and licensed microbusinesses authorized to engage in retail sales shall only serve customers who are within the licensed premises. This change is necessary because it clarifies that only certain microbusinesses that engage inthe retail activity must comply with this premises provision. This change is also necessary for consistency of terminology throughout the regulations.

Subsection (f) of this section has been clarified to state that the section shall not be interpreted to prohibit cannabis consumption on the premises of a “licensed” retailer or “licensed” microbusiness that is conducted in accordance with Business and Professions Code section 26200(g). This is necessary because it assures terminology consistency throughout the Bureau’s proposed regulations. It also clarifies that in order to avail themselves of such activities allowed under Business and Professions Code section 26200(g), such businesses need to hold an active state license.

Authority: Section 26013, Business and Professions Code. Reference: Sections 26001 and 26053, Business and Professions Code.

What is the license posting requirement?

§ 5039. License. Posting Requirement Upon issuance of any license, the licensee shall prominently display the license on the licensed premises where it can be viewed by state and local agencies. If the licensed premises is open to the publiq the license shall be displayed in an area that is within plain sight of the public.

Authority: Section 26013, Business and Professions Code. Reference: Section 26012, Business and Professions Code.

What are requirements for transactions between licensees?

§ 5032. Commercial Cannabis Activity Between Licensees

The requirements – transactions among Commercial Licensees

(a) All commercial cannabis activity shall be conducted between licensees. Retail licensees may conduct commercial cannabis activity with customers in accordance with chapter 3 of this division.

(b) Beginning July 1, 2018, A-licensees shall only conduct business with A-licensees and M licenses shall only conduct business with M-licensees, except for testing laboratories.

Proposed Regs. – October 19, 2018

The title of this section has been changed from “Designated M and A Commercial Cannabis Activity” to “Commercial Cannabis Activity” as it has been amended to encompass more than just A-designated and M-designated license activity.

Subsection (a) has been amended to clarify that licensed retailers or licensed microbusinesses authorized to engage in retail sales may conduct commercial cannabis activity in accordance with Chapter 3. This clarification is necessary for consistency of terminology throughout the regulations. This clarification also recognizes that only certain microbusinesses may engage in retail activities. Also, “chapter” was amended to “Chapter” for consistency throughout the regulations.

Subsection (b) was added to the regulations to clarify that commercial cannabis activity can only be engaged in by licensees as required by the Act. It specifies that a licensee shall not conduct commercial cannabis activities on behalf of, at the request of, or pursuant to a contract with an unlicensed person. Subsections (b)(1) through (4) provide examples of prohibited activity to guide licensees. The examples include procuring or purchasing cannabis goods from a licensed cultivator or licensed manufacturer, manufacturing cannabis goods in accordance with the specification of a non-licensee, packaging or labeling cannabis goods under a non-licensee’s brand or specifications, and distributing cannabis goods for a non-licensee. The Bureau has received information that licensees may be engaging in such conduct; therefore, this clarification is necessary to assist licensees with determining what activity is allowed.

Subsection (c) has been renumbered from subsection (b).

Subsections (d) and (e) of this section has been amended to clarify that licensed distributors or licensed microbusinesses authorized to engage in distribution shall only transport and sell cannabis goods designated as “For Medical Use Only,” pursuant to the requirements prescribed by the State Department of Public Health in regulation, to M-designated retailers or M-designated microbusinesses authorized to engage in retail. This clarification is necessary for consistency of terminology throughout the regulations. This clarification also recognizes that only certain microbusinesses may engage in distribution and/or retail activities. These subsections were also renumbered based on other amendments to the section.

Authority: Section 26013, Business and Professions Code: Reference: Sections 26001, 26013. and 26053, Business and Professions Code.

Bureau of Cannabis Control

Retail

What are notification requirements for Theft, Loss, and Criminal Activity?

§ 5036. Notification of Theft, Loss, and Criminal Activity

(a) A licensee shall notify the Bureau and local law enforcement within 24 hours of discovery of any of the following situations:

(1) The licensee discovers a significant discrepancy, as defined in section 5034 of this division, in its inventory.

(2) The licensee discovers diversion, the$, loss, or any other criminal activity pertaining to the operations of the licensee.

(3) The licensee discovers diversion, theft, loss, or any other criminal activity by an agent or employee of the licensee pertaining to the operations of the licensee.

(4) The licensee discovers loss or unauthorized alteration of records related to cannabis goods, customers, or the licensee’s employees or agents.

(5) The licensee discovers any other breach of security.

 (b) The notification Yo the Bureau pursuant to subsection (a) of this section shall be in writing and include the date and time of occurrence of the theft, loss, or criminal activity, the name of the local law enforcement agency that was notified, and a description of the incident including, where applicable, the items) that were taken or lost.

Proposed Regs. – October 19, 2018

Subsection (b) has been revised to incorporate by reference the new Notification and Request Form, BCC-LIC-027- (New 10/18), to be used by licensees to provide the required notifications under this section. This is necessary for licensees to have clear guidance on how to provide to the Bureau the notifications required under this section. The form also streamlines the notification process by assuring that applicants are able to fulfill its notification requirements without having to complete additional paperwork.

Authority: Section 26013, Business and Professions Code. Reference: Section 26070, Business and Professions Code.

What are requirements for storage of inventory?

5033. Storage of Inventory

(a) A licensee shall not store cannabis goods outdoors.

(b) Employee’ break rooms, changing facilities, and bathrooms shall be separated from all storage areas.

(c) Each location where cannabis goods are stored must be separately licensed.

Authority: Section 26013, Business and Professions Code. Reference: Sections 26012 and 26070, Business and Professions Code.

What are the licensing provisions applicable to Distributors?

Distributor License – Delivery – Packaging – Testing

Distributor License – Delivery – Packaging – Testing § 5300. Non-Cannabis Distribution Activities A distributor shall not store non-cannabis goods or non-cannabis accessories that are to be sold to another party on any licensed premises. Additionally, a distributor shall not distribute noncannabis goods or non-cannabis accessories at licensed premises. For the purposes of this section, non-cannabis goods are any goods that do not meet the definition of cannabis goods as defined in section 5000(c) of this division.

Proposed Regs. – October 19, 2018

Authority: Sections 26013, Business and Professions Gode. Reference: Section 26070, Business and Professions Code.

§ 5301. Storage-Only Services

A distributor may provide cannabis goods storage-only services to a licensed cultivator, manufacturer, microbusiness, nonprofit, or another distributor, unrelated to the quality assurance and laboratory testing processes.

Proposed Regs. – October 19, 2018

Subsection (b) has been amended to clarify that storage services for other licensees for cannabis goods is limited to storage of cannabis goods that are packaged as they will be sold at retail. This amendment was necessary to ensure that cannabis goods are only stored after they have been packaged and thus protected from contamination.

Subsection (c) was added to require that cannabis goods stored under this section be stored in accordance with section 5302 regarding storage of batches for testing. This addition is necessary to ensure that all cannabis goods and batches stored on a distributor’s premises are stored in the same manner and readily identifiable. The addition of subsection (c) has required a renumbering of the former subsection (c), to subsection (d).

Subsection (d), formerly (c), has also been amended to clarify that the prohibition on storing live plants, does not apply to seeds. This change was necessary because the Act defines live plants to include seeds and the Bureau did not intend to prevent a distributor from storing seeds on the premises.

Authority: Section 26013, Business and Professions Code. Reference: Section 26070, Business and Professions Code.

§ 5302. Storage of Batches for Testing

(a) A distributor shall ensure that all cannabis goods batches are stored separately and distinctly from other cannabis goods batches on the distributor’s premises.

(b) A distributor shall ensure a label with the following information is physically attached to each container of each batch:

(1) The name and license number of the manufacturer or cultivator who provided the batch;

(2) The date of entry into the distributor’s storage area;

(3) The unique identifiers and batch number associated with the batch;

(4) A description of the cannabis goods with enough detail to easily identify the batch;

(5) The weight of or quantity of units in the batch; and

(6), The best-by, sell-by, or expiration date, of the batch, if any.

Proposed Regs. – October 19, 2018

Subsection (b)(1) has been amended to require that the label that is attached to each batch include the licensed premises address of the licensed manufacturer or licensed cultivator who provided the batch. The amendment to include the premises address is necessary for consistency with the requirements for the certificate of analysis and chain of custody that testing laboratories must generate. The addition of the word “licensed” to the words “manufacturer” and “cultivator” is necessary for consistency in terms throughout the regulations.

Authority: Section 26013, Business and Professions Code. Reference: Sections 26110 and. 26120, Business and Professions Code.

§ 5303. Packaging and Labeling

(a) A distributor may package, re-package, label, and re-label cannabis for retail sale.

(b) A distributor shall not package, re-package, label, or re-label manufactured cannabis products except when the distributor also holds a manufacturing license and is packaging, re-packaging, labeling, or re-labeling its own manufactured cannabis products.

(c) Notwithstanding subsection (b) of this section, if it is determined during laboratory testing that a manufactured product is labeled with the incorrect amount of TAC per package or serving but is within the THC limits for sale, the distributor may re-label the package with the accurate THC amount.

Proposed Regs. – October 19, 2018

The title of this regulation has been amended to include rolling as the Bureau allows distributors to roll pre-rolls.

Proposed subsection (a) has been amended to provide clarity regarding how a licensed distributor may package, re-package, label, and re-label cannabis for retail sale. Specifically, subsection (a)(1) requires a distributor’s packaging to meet certain requirements until January 1, 2020, including: packaging that shall protect the cannabis, including pre-rolls, from contamination; packaging that shall be tamper evident; packaging that shall be resealable if it contains more than one serving; and packaging that shall not imitate any package used for goods that are typically marketed to children. Proposed subsection (a)(2) imposes additional requirements on a distributor’s packaging starting January 1, 2020, including: packaging that shall be child-resistant until the package is first opened; packaging that is labeled with the statement, “this package is not child-resistant after opening;” and provides an exception to these requirements for immature plants and seeds. These changes were necessary for consistency between the licensing entities regarding the packaging of cannabis goods. The changes were also necessary to provide additional clarity to licensees regarding how to satisfy MAUCRSA’s packaging requirements. The Bureau determined that a transitional period assures that cannabis goods will be packaged in a child-resistant manner, while ensuring that licensees have an adequate amount of time to comply with packaging requirements.

The Bureau has amended subsection (b) to clarify that a distributor may not process cannabis but may roll pre-rolls that consist exclusively of any combination of flower, shake, leaf, or kief. This amendment was necessary because the prior language was confusing and was not clear that the intent of the section was to allow distributors to roll pre-rolls and not simply package pre-rolls that had already been rolled. Additionally, subsection (b) specifies that pre-rolls shall be rolled prior to regulatory compliance testing. This is necessary, because the paper of a pre-roll will be consumed with the cannabis, thus the entire pre-roll must undergo regulatory compliance testing to ensure the pre-roll is safe for consumption. Proposed subsection (b), which specified that distributors could only package, re-package, label, and re-label cannabis goods if they had a manufacturing license and were doing the activities on their manufacturing premises, has been deleted due to the changes in subsection (c).

Proposed subsection (c) has been amended to allow distributors to label and re-label a package containing manufactured cannabis goods with the amount of cannabinoids and terpenoids based on laboratory testing results. The subsection previously only allowed distributors to re-label the package if the testing results were different than what was labeled. This was required because the State Department of Public Health required all manufactured products to be labeled at the manufacturer, however, the State Department of Public Health has proposed to amend their regulations to allow for labeling of cannabinoids and terpenoids to occur at the distributor premises after the distributor has received the testing results. This change was necessary because the Bureau and State Department of Public Health have determined that re-labeling was often necessary because the testing laboratory results did not match what was labeled on the package. Further, the certificate of analysis would often show that the cannabis goods had failed testing because of the label claim. This created confusion for licensees about whether a batch was able to be sold at retail. With this change, the label on the cannabis goods will match the certificate of analysis and the certificate of analysis will no longer show a batch failed for label claims on cannabinoids or terpenoids.

New Section

§ 5303.1 Net Weight of Dried Flower

This section has been amended to provide a 3% variance for moisture loss in dried flower instead of a 2.5% variance. The Bureau has conducted additional research and determined that 3% is consistent with the variance for other types of goods established by the National Institute of Standards and Technology, thus a change was necessary.

The reference section has been amended to add Business and Professions Code section 26152. This was necessary for accuracy.

Authority: Section 26013, Business and Professions. Code. Reference: Sections 26013 and 26120, Business and Professions Code.

§ 5304. Testing Arrangements

After taking physical possession of a cannabis goods batch, the distributor shall contact a testing laboratory and arrange for a laboratory employee to come to the distributor’s licensed premises to select a representative sample for laboratory testing.

Proposed Regs. – October 19, 2018

This section has been amended to add the term “licensed” in front of “testing laboratory.” This change was necessary for consistency of terms used throughout the regulations. A grammatical change was also made after reference for this section.

Authority: Section 26013, Business and Professions Code. Reference: Sections 26110, Business and. Professions Code.

§ 5305. Testing Sample

(a) The distributor shall ensure that the batch size from which the sample is taken meets the requirements, of this division.

(b) A distributor or an employee of the distributor shall be physically present to observe the laboratory employee obtain the sample of cannabis goods for testing and shall ensure that the increments are taken from throughout the batch.

(c) Tfie sampling shall be video recorded with the batch number stated at the.beginning of the video and a visible time and date indication on the video recording footage. The video recordings shall be maintained for 180 days.

(d) After the sample has been selected, both the distributor and the laboratory employee shall sign and date the chain of custody form pursuant to section 5709 of this division, attesting to the sample selection has occurred. (e) A distributor shall not assist the laboratory employee nor touch the cannabis goods or the sampling equipment while the laboratory employee is obtaining the sample.

Proposed Regs. – October 19, 2018

This section has been amended to clarify that the 90-day storage retention period for the video recordings of the sample selection is 90 calendar days. This was necessary to provide consistency with other sections of the regulations where the Bureau has clarified business days and calendar days.

Authority: Section 26013, Business and Professions Code. Reference: Sections 26104 and 26110, Business and Professions Code.

New Section

§ 5305.1. Resampling

This section has been added to clarify that once a sample has been obtained from a batch for regulatory compliance testing, a licensed distributor may not arrange for or allow another licensed testing laboratory to sample or re-sample the same batch for regulatory compliance testing, unless all of the requirements of section 5705 subsection (g) have been met. This section is necessary to prevent licensees from “shopping” between testing laboratory licensees for favorable testing results. It also ensures the Bureau is kept apprised of any testing activities conducted by licensed testing laboratories.

§ 5306. Laboratory Testing Results

(a) A sample “passes” a laboratory test when the sample meets specifications in chapter 6 of this division.

(b) When a batch from a manufactured or harvest batch passes, the cannabis goods may be transported to one or more retailers.

(c) A sample “fails” a laboratory test when the sample does not meet specifications in chapter 6 of this division.

(d) If a failed sample was collected from a batch and the batch could be remediated pursuant to section 5727 of this division, a distributor may transport or arrange for the transportation of the batch to a cultivator or manufacturer. for remediation.

(e) A distributor shall destroy a batch that failed laboratory testing and cannot be remediated pursuant to section 5727 of this division.

Proposed Regs. – October 19, 2018

Subsection (a) has been revised to amend the word “sample” to “batch.” This change is necessary for clarity because while a sample from the batch is tested, it is the whole batch that passes testing. Subsection (a) has also been revised to correct a typographical error.

Subsection (b) of this section has been amended to specify that a printed copy of the certificate of analysis for regulatory compliance testing shall accompany the batch and be provided to the licensee receiving the cannabis goods. This change was necessary to ensure that a licensee receiving a batch of cannabis goods that had been tested could verify the testing results by having a copy of the certificate of analysis.

Subsection (c) has been revised to amend the word “sample” to “batch.” This change is necessary for clarity because while a sample from the batch is tested, it is the whole batch that passes testing. The subsection has also been amended to correct a typographical error.

Subsection (d) has been amended to clarify a failed batch and not failed sample may be remediated. This change is necessary for clarity because while a sample from the batch is tested, it is the whole batch that fails testing. The subsection has also been amended to include the term “licensed” in front of “manufacturer.” This change was necessary for consistency of terms used throughout the regulations. This subsection has also been amended to include requirements for remediation of cannabis goods that fail laboratory testing. The subsection requires distributors to ensure that a remediation plan is submitted by a licensed manufacturer to the State Department of Public Health or by a licensed microbusiness authorized to engage in manufacturing to the Bureau within 30 calendar days of issuance of the certificate of analysis. The subsection would also require the distributor to ensure that the manufacturer, or microbusiness authorized to engage in manufacturing, begins remediation within 30 calendar days of receiving approval to remediate the goods. The subsection would also require that if the distributor cannot arrange for remediation within 30 calendar days of receiving a certificate of analysis then, the cannabis goods must be destroyed immediately. These changes are necessary to ensure that cannabis goods that have failed testing are remediated in a reasonable amount of time and do not remain on the premises of the distributor or microbusiness for an extended period of time. The Bureau determined that 30 calendar days was necessary as it provides a sufficient amount of time to remediate a batch, while minimizing the potential for failed product to be diverted into the illegal market.

Lastly subsection (e) of this section has been amended to specify in accordance with the new provisions of subsection (d) that a distributor shall destroy a batch that has failed laboratory testing and cannot be remediated within 30 calendar days of issuance of the certificate of analysis. The Bureau determined that 30 calendar days was necessary as it provides a sufficient amount of time to destroy a batch that cannot be remediated, while minimizing the potential for failed product to be diverted into the illegal market.

This section amends the references section to fix a typographical error.

Authority: Section 26013, Business and Professions Code. Reference: Sections 26070, 26104 and 26110, Business and Professions Code.

§ 5307. Quality-Assurance Review When a distributor receives a certificate of analysis stating that the sample meets specifications required by law, the distributor shall ensure the following before transporting the cannabis goods to one or more retailers:

(a) The certificate of analysis the distributor received from the testing laboratory is the certificate of analysis that corresponds to the batch;

(b) The label on the cannabis goods is consistent with the certificate of analysis regarding cannabinoid content and contaminants required to be listed by law;

(c) The packaging complies with applicable packaging laws including, but not limited to, Business and Professions Code section 26120;

(d) The packaging is tamper-evident. “Tamper-evident’ means a one-time-use seal is affixed to the opening of the package, allowing a person to recognize whether or not the package. has been opened;

(e) The weight or count of the cannabis batch comports with that in the track and trace system. A distributor sha11 use scales as required by the Act; and

(f)All events prior to receipt have been entered into the track and trace system.

Proposed Regs. – October 19, 2018

This section has been amended to clarify that the certificate of analysis is for regulatory compliance testing and to add the term “licensed” in front of “distributor” in the first paragraph of the section for consistency of terms used throughout the regulations. This section has also been amended to replace the term “sample” with “batch.” This change is necessary for clarity because while a sample from the batch is tested, it is the whole batch that passes testing and is found to meet specifications required by law. This section has also been amended to clarify that cannabis goods that are being transported to retailers or microbusinesses authorized to engage in retail sales shall be packaged as they will be sold at retail. This inclusion was necessary for consistency with other regulatory sections and to provide clarity to licensees. This section has also been amended to clarify that in transporting cannabis goods to a retailer or microbusiness, the microbusiness must be one that is authorized to engage in retail. This change is necessary for clarity and consistency with terms used throughout the regulations.

Subsection (a) has been amended to specify the certificate of analysis is for regulatory compliance testing rather than referencing section 5714. The subsection has also been amended to add the term “licensed” before testing laboratory. These changes are necessary for clarity and consistency in terms used throughout the regulations. The section has also been amended to clarify that the cannabis goods may be transported to another distributor once the certificate of analysis has been received. This addition is also necessary to align with approved and filed Senate Bill 311, amending Business and Professions Code section 26110 to enable licensed distributor to licensed distributor transfers.

Subsection (b) is a new subsection that has been added to require that in order to transport cannabis goods to another licensee with the certificate of analysis, the certificate of analysis must be less than 12 months old. This is necessary to place an end date on the time frame during which cannabis goods can be transported from licensed distributor to licensed distributor without undergoing new testing. The Bureau determined that 12 months is necessary because it assures that the results found on the certificate of analysis are accurate.

Former subsection (b) is now subsection (c) has been amended to clarify the quality assurance duties of a licensed distributor or licensed microbusiness authorized to engage in distribution. Specifically, this section provides that if the cannabis goods are labeled with the content for cannabinoids, terpenoids, Total THC, and/or Total CBD prior to receiving the certificate of analysis for regulatory compliance testing, the licensed distributor shall ensure that the labeled amounts are accurate in accordance with section 5307.1 of the Bureau’s proposed regulations. If the cannabis goods are not labeled with the content for cannabinoids, terpenoids, Total THC, and/or Total CBD prior to receiving the certificate of analysis for regulatory compliance testing, the licensed distributor shall label the cannabis goods with the amounts listed on the certificate of analysis pursuant to section 5303 of the Bureau’s proposed regulations. These changes were necessary to provide additional clarity regarding the requirements of a licensed distributor or licensed microbusiness authorized to engage in distribution when checking the labels of cannabis goods. These changes were also necessary for consistency with the State Department of Public Health’s regulations.

Subsection (e) is a new section that specifies that cannabis goods cannot be transported if they have exceeded their best-by, sell-by, or expiration date if one is provided. This is necessary to ensure the safety of consumers by prohibiting expired cannabis goods from being transported to retail.

Subsection (d) is now subsection (f) and has been amended to specify that licensed distributors shall use scales as required by the Business and Professions Code and not the Act. The Bureau determined that the citation to the Act was incorrect and that scales are governed under Division 5 of the Business and Professions Code.

Subsection (g) has been amended to state that a licensed distributor or licensed microbusiness authorized to engage in distribution shall ensure that all events prior to the receipt of the certificate of analysis for regulatory compliance testing have been entered into the track and trace system. This change is necessary to assure that licensed distributors or licensed microbusinesses authorized to engage in distribution confirm that all transactions are accurately recorded into the track and trace system once they receive the certificate of analysis for regulatory compliance testing. It also assures that the regulatory agencies are apprised of accurate data related to the movement of cannabis goods within the track and trace system.

Authority: Section 26013, Business and Professions Code. Reference: Sections 26070, 26110 …..and 26120, Business and Professions.Code.

New Sections

§ 5307.1. Quality-Assurance Review for Labeling Cannabinoid Content

This section is a new section that is being proposed to provide variances for cannabinoid and terpenoid content from the labeled amount and the actual amount. This is necessary because the cannabinoid and terpenoid content is based on a sample from a batch. Each individual product of the batch is not tested, so there may be a variance in the labeled cannabinoid and terpenoid content and the actual content. The section allows for a plus or minus 10% variance. Subsection (c) provides the formula to calculate the difference in percent which is necessary to ensure licensees are calculating the difference in percent accurately and consistently.

Subsection (d) references the definitions for Total THC and Total CBD which are contained in chapter 6. This is necessary because the terms are used here but defined in chapter 6 as they primarily apply to the testing laboratory regulations and need to be included there for the convenience of the testing laboratories. Providing a cross-reference here will provide clear guidance to licensees on where to find these definitions.

§ 5307.2. Licensed Distributor to Licensed Distributor Transfers

This section is a new section that has been added to clarify that cannabis goods, packaged as they will be sold at retail, that have undergone and passed regulatory compliance testing and have a certificate of analysis may be transferred to another licensed distributor. The section specifies that cannabis goods that have not been transported to retail within 12 months of the date on the certificate of analysis must be destroyed or retested. This is necessary to ensure that the certificate of analysis accurately reflects the cannabis goods when they are transferred to retail. This addition is also necessary to align with approved and filed Senate Bill 311, amending Business and Professions Code section 26110 to enable licensed distributor to licensed distributor transfers of cannabis goods fit for sale.

§ 5308. Insurance Requirements

(a) An applicant for a distributor license shall provide the Bureau with a certificate of insurance that shows the types of insurance coverage and minimum amounts that have been secured as required by this section, and documentation establishing compliance with subsection (d) of this section.

(b) A distributor licensee shall at all times carry and maintain commercial general liability insurance in the aggregate in an amount no less than $2,000,000 and in an amount no less than $1,000,000 for each loss.

(c) A distributor licensee shall maintain the insurance required in subsection (b) from an insurance company that is: –

(1) A non-admitted insurer that meets the requirements of Insurance. Code section 1765.1 or 1765.2, and the insurance is placed pursuant to Insurance Code section 1763 and Through a surplus line broker licensed under Insurance Code section 1765;

(2) An insurer qualified to do business in California by the Secretary of State and authorized by the Insurance Commissioner to write the liability and property classes of insurance as defined by Insurance Code sections 102, ] 03, 107, 114, 108, and 120; or

(3) A registered risk retention group compliant with the California Risk Retention Act of 1991: (See California Insurance Code sections 125-140.)

(d) Admitted insurers and risk retention groups must show proof of capitalization in the amount of at least $10,000,000.

(e) A distributor licensee shall notify the Bureau in writing within 10 calendar days of a lapse in insurance.

Proposed Regs. – October 19, 2018

Subsection (e) of this section has been amended to allow for notification of a lapse in insurance within 14 calendar days instead of 10. This change is necessary for consistency with other notification requirements contained throughout the regulations. The subsection has also been amended to incorporate by reference new Notification and Request Form, BCC-LIC-027- (New 10/18), to be used by licensees to provide the notification to the Bureau that is required under this section. The form streamlines the notification process by assuring that applicants are able to fulfill its notification requirements without having to complete additional paperwork.

Authority: Section 26013, Business and Professions Code. Reference: Section 26070, Business and Professions Code.

§ 5309. Inventory Reconciliation

(a) A distributor shall reconcile all inventories of cannabis goods at least once every 14 days.

(b) A distributor shall keep an inventory log containing the following information for each batch:

(1) The name and license number of the manufacturer or cultivator who provided the batch;

(2) The date of entry into the distributor’s storage area;

(3) The unique identifiers and batch number associated with the batch;

(4) A description of the cannabis goods with enough detail to easily identify the batch;

(5) The weight of or quantity of units in the batch;

(6) The best-bg, sell-by, or expiration date of the batch, if any; and

(7) Where on the premises the batch is kept.

(c) If a distributor finds a discrepancy between the inventory of stock and the inventory log or track and trace system that is outside of normal weight loss caused by moisture loss, the distributor shall commence a full audit of the batch in which the discrepancy was found.

Proposed Regs. – October 19, 2018

This section has been revised to no longer require licensed distributors to perform inventory reconciliation every 14 days, therefore the title of the section has been amended to “Inventory Accounting” rather than “Inventory Reconciliation.” This section now requires a licensed distributor to be able to account for all inventory and provide that information to the Bureau upon request. The section further specifies that a licensed distributor shall be able to identify the status of the all batches of cannabis goods that are on the licensed premises and specifies that the status shall include: that the batch is held in storage for another licensee; that the batch is awaiting sampling, that the batch has been sampled and is awaiting testing results; that the batch has passed testing; that the batch has failed testing and is awaiting approval for remediation, that the batch has failed testing and is awaiting destruction; and the batch is stored or held for any other lawful purpose under the Act or the regulations. This change was necessary to be consistent with track and trace system requirements and to ensure that licensees were not being required to duplicate their accounting of inventory under this regulation and the track and trace requirements.

Authority: Section 26013, Business and Professions Code. Reference: Sections 26070 and 26160, Business and Professions Code.

§ 5310. Records (a) In addition to the records required by section 5037 of this division, a distributor shall maintain the following records:

(1) Records relating to branding, packaging, and labeling;

(2) Inventory logs and records;

(3) Transportation bills of lading and shipping manifest for completed transports and far cannabis goods in transit;

(4) Vehicle and trailer ownership records;

(5) Quality-assurance records;

(6) Records relating to the destruction of cannabis goods;

(7) Laboratory-testing records;

(8) Warehouse receipts;

(9) Records relating to tax payments collected and paid under Sections 34011 and 34012 of the Revenue and Tax Code.

Proposed Regs. – October 19, 2018

Subsection (f) of this section has been amended to require records related to disposal of cannabis goods. The regulation already required records related to destruction, but disposal was not specifically listed despite the Bureau’s intent that disposal records would be included with destruction. This change was necessary to provide clarity to licensed distributors on which records they must maintain.

Subsection (h) was amended to correct a grammatical error.

Authority: Section 26013, Business and Professions Code. Reference: Sections 26110 and 26160, Business and Professions Code.

§ 5311. Requirements for the Transportation of Cannabis Goods The following requirements apply when transporting cannabis goods between licensees or licensed premises:

(a) Transportation shall only be conducted by persons holding a distributor license under the Act, or employees of those persons.

(b) All vehicles transporting cannabis goods for hire shall be required to have a motor carrier permit pursuant to Chapter 2 (commencing with Section 34620) of Division I4.85 of the Vehicle Code.

(c) Transportation by means of aircraft, watercraft, drone, rail, human-powered vehicle, and unmanned vehicle is prohibited.

(d) Cannabis goods shall only be transported inside of a vehicle or trailer and shall not be visible or identifiable from outside of the vehicle or trailer.

(e) Cannabis goods shall be locked in a box, container, or cage that is secured to the inside of the vehicle or trailer.

(f)While left unattended, vehicles and trailers shall be locked and secured.

(g) A distributor shall not leave a vehicle ar trailer containing cannabis goods unattended in a residential area or parked overnight in a residential area.

(h) At a minimum, a distributor shall have a vehicle alarm system on all transport vehicles and trailers. Motion detectors, pressure switches, duress, panic, and hold-up alarms may also be used

(i) Packages or containers holding cannabis goods shall not be tampered with, or opened, during transport.

(j) A distributor transporting cannabis goods shall only travel between licensees shipping or receiving cannabis goods and its own licensed premises when engaged in the transportation of ..cannabis goods. The distributor may transport multiple shipments of cannabis goods at once in accordance with applicable laws. A distributor sha11 not deviate from the travel requirements described in this section, except for necessary rest, fuel, or vehicle repair stops.

(k) When a distributor holds both an A-license and an M-license, medicinal and adult-use cannabis goods may be transported in the same vehicle only if the cannabis goods are clearly identified and marked as “A” for adult-use cannabis goods, or “M” for medicinal cannabis goods both on the physical packaging of the cannabis goods and on the shipping manifest. While in transport, the medicinal and adult-use cannabis goods shall be placed in separate boxes or containers in the vehicle. Under no circumstances may non-cannabis goods, except for cannabis accessories as defined in Business and Professions Code section 26001(g), be transported with cannabis goods.

(1) Vehicles and trailers transporting cannabis goods are subject to inspection by the Bureau at any licensed premises or during transport at any time.

Proposed Regs. – October 19, 2018

Subsection (a) of this section has been revised to clarify that all vehicles used for transportation shall be owned or leased, in accordance with the Vehicle Code, by the licensee. The Bureau already required this under section 5312, but there was confusion over the requirement including what it means to own or lease a vehicle. This section is necessary for consistency and clarity so that licensees know that they are required to own or lease the vehicles and that what constitutes ownership or lease of a vehicle is governed by the Vehicle Code.

Subsection (d) was amended to correct a grammatical error.

Subsection (f) has been amended to clarify that cannabis goods shall be in a fully enclosed box, container, or cage, and that no portion of the box, container, or cage shall be comprised of any part of the body of the vehicle or trailer. This change was necessary to address questions the Bureau has received regarding what qualifies as a box, container, or cage by providing clarity on how a licensee may transport cannabis goods within a distribution vehicle.

Subsection (n) has been amended to correct the citation to the subsections. The Bureau determined upon review that it had made an error in the subsections it cited to, thus a change was necessary.

Subsection (o) has been added to this section to specify that notwithstanding the prohibition on certain means of transportation, cannabis goods may be transported via waterway to licensees located on Catalina Island. This amendment is necessary because there is no way to transport to Catalina Island by motor vehicle.

Authority: Section 26013, Business and Professions Code. Reference: Section 26070, Business and Professions Code:

§ 5312. Required Transport Vehicle Information

(a) In addition to the information required in section 5314 of this division, any distributor who will be or is transporting cannabis goods shall provide the following information to the Bureau:

(1) Proo£of ownership or a valid lease for each vehicle and trailer used to transport cannabis goods;

(2) The year, make, model, license plate number, and numerical Vehicle Identification Number (VIN) for each vehicle and trailer used to transport cannabis goods; and

(3) Proof of insurance for each vehicle and trailer used to transport cannabis goods.

(b) The distributor shall provide the Bureau with the information required by this section in writing for any new vehicle or trailer that will be used to transport cannabis goods prior to using the vehicle ar trailer to transport cannabis goods.

(c) The distributor shall provide the Bureau with any changes to the information required by this section in writing within 30 calendar days:

Proposed Regs. – October 19, 2018

This section requires applicants to provide proof that the licensed distributor owns or leases the vehicles used for transportation. The Bureau has received a number of inquiries regarding this requirement and has determined that the current language is confusing, and applicants and licensees are unsure of what they need to provide as evidence, therefore an amendment was necessary. Subsection (a)(1) has been amended to replace the phrase “owns or holds a valid lease” with “is the registered owner under the Vehicle Code.” This will now clarify that licensed distributors may provide a copy of their vehicle registration as proof of ownership or lease.

Subsection (c) has also been amended to incorporate by reference new Notification and Request Form, BCC-LIC-027- (New 10/18), for licensees to use in providing to the Bureau the required notifications of this section. The form streamlines the notification process by assuring that applicants are able to fulfill its notification requirements without having to complete additional paperwork.

Authority: Section 26013, Business and Professions Code. Reference: Section 26070, Business and Professions Code.

§ 5313. Transport Personnel Requirements

(a) No person under the age of 21 years old shall be in a commercial vehicle or trailer transporting cannabis goods; and

(b) Only a licensee or an employee of the distributor sha11 be in a vehicle while transporting cannabis goods.

Proposed Regs. – October 19, 2018

Authority: Section 26013, Business and Professions Code. Reference: Section 26070, Business and Professions. Code.

§ 5314. Shipping Manifest

(a) Prior to transporting cannabis goods, a distributor shall generate a shipping manifest through the track and trace system for the following activities:

(1) Testing and sampling;

(2) Sale of cannabis goods to a licensee;

(3) Destruction or disposal of cannabis goods; and

(4) Any other activity, as required pursuant to this division, or by any other licensing authority.

(b) The distributor shall transmit the shipping manifest to the Bureau and the licensee that will receive the cannabis goods prior to transporting the cannabis goods.

(c) The distributor shall ensure and verify that the cannabis goods being taken into possession for transport at the originating licensed premises are as described and accurately reflected in the shipping manifest.

(1) The distributor shall not take into possession ar transport:

(A) Any cannabis goods that are not on the shipping manifest; or

(B) Any cannabis goods that are less than or greater than the amount reflected on the slopping manifest.

(2) The distributor is responsible for any discrepancies between the shipping manifest and the cannabis goods in its possession during transport, and subject to any enforcement or disciplinary action related to such discrepancy.

(3) A distributor shall not void or change a shipping manifest after departing from the originating licensed premises.

(d) A shipping manifest shall accompany every transport of cannabis goods.

(e) Notwithstanding subsection (a) of this section, if a transportiu~ distributor has not obtained access to the track and trace system, the distributor shall complete the shipping manifest outside of the track and trace system and transmit it to the Bureau and the licensee receiving the shipment by electronic mail.

(f) If the transporting distributor has access to the track and trace system and the licensee receiving the shipment has not obtained access to the track and trace system, the distributor shall complete the shipping manifest in the track and trace system and transmit it to the Bureau. However, the distributor shall send a copy to the licensee receiving the shipment by electronic mail.

Proposed Regs. – October 19, 2018

Authority: Section 26013, Business and Professions Code. Reference: Sections 26067 and 26070, Business and Professions Code.

§ 5315. Distributor Transport Only License

(a) A distributor transport only licensee shall be authorized Co engage in the transport of cannabis goods between licensees.

(b) Notwithstanding subsection (a) of this ‘section, a distributor transport only licensee shall not be authorized to transport cannabis goods to the premises of a retailer, except when the licensee is transporting only immature plants and seeds from a licensed nursery to a licensed retailer.

(c) A complete application for a distributor transport only license sha11 includes all the information required in an application for a Type 11-Distributor license.

(d) The licensing fee for a distributor transport only license will be based in part upon whether the licensee intends to transport only cannabis goods that the licensee has cultivated ar manufactured (self-distribution), or whether the licensee intends to transport cannabis goods cultivated or manufactured by other licensees.

(e) A distributor transport only licensee shall comply with all of the requirements for a holder of a Type 11-Distributor license, except for those related to quality assurance and testing. (f) A distributor transport only licensee shall not hold title to any cannabis goods unless the licensee also holds a state-issued cultivation, manufacturing, retailer, or microbusiness license.

(g) Holding a distributor transport only license shall not authorize a licensee to:

(1) Engage in the delivery of cannabis goods as defined in Business and Professions Code section 26001(p);

(2) Engage in the wholesale, destruction, packaging, labeling, or storing of cannabis goods; or

(3) Arrange for the testing of cannabis goods by a testing laboratory.

Proposed Regs. – October 19, 2018

Subsection (a) of proposed regulation has been amended to add the term “authorized to engage in retail sales” after “licensed microbusiness.” This is necessary because the distributor transport only license requirements in this section only apply to microbusinesses that are authorized to engage in such activities. It is also necessary for consistency with terminology used throughout the regulations.

Subsection (g) has been amended to add the term “licensed” in front of manufacturing. This was necessary for consistency of terms used throughout the regulations. Subsection (g) has also been amended to clarify that the citation to Article 5 is Chapter 1, Article 5. This change was necessary for accuracy and clarity.

Chapter 3. Retailers

Authority: Section 26013, Business and Professions Code. Reference: Sections 26012,.26013 and 26070, Business and Professions Code.

Which Green Is it

Distributor License

Distributor License – Delivery – Packaging – Testing

Cannabis Licensing

Bureau Cannabis Control

Retail

Retail Projects

FAQ’s