Topics and Trends Marijuana: Fall 2018

Note: If you are having trouble viewing this newsletter please update your browser to the latest version.

Packaging and Labeling/Marijuana Infused Edible Review Update

On May 2, 2018, the Washington State Liquor and Cannabis Board (LCB) adopted new rules regarding packaging and labeling of marijuana infused products. In order to lessen the impact to licensees, a phase-in approach was used with the adoption of Board Interim Policy BIP-05-2018, giving licensees until January 1, 2019 to become compliant. Due to feedback received about the January 1, 2019 deadline, the Board to amended the interim policy date for full compliance to June 1, 2019.

Some industry members expressed concerns following a marijuana-infused candy presentation at the regularly scheduled Board meeting. A message was sent soon after clarifying the agency’s process for product and label review. Since the announcement, agency staff have had additional conversations with industry members and industry trade organizations that requested the LCB halt its product review and allow time for stakeholders to be heard. Specifically, a coalition of CORE, the Cannabis Alliance and Washington Cannabusiness Association together formally wrote the LCB requesting the same.

The agency agreed to halt the product review for 30 days and will accept input from licensees and trade organizations regarding alternatives for the agency to consider during that time. Coalition members presented their proposal to the agency on Oct. 31. Staff are considering the proposals and will communicate the outcome of these discussions by Nov. 12, 2018.

The LCB will continue to accept label, package and product submissions prior to the newly proposed deadline. If you have infused edible products that are not presently being discussed for compliance, please submit them to labelapproval@lcb.wa.gov using the new requirements.

Did You Know...

The use of electronic benefit (EBT) cards in ATM or point-of-sale machines is not allowed at certain locations, including marijuana businesses. Businesses are responsible for ensuring machines in these locations do not accept EBT cards. State law (RCW 74.08.580) outlines the rules for card-holders and businesses.

The Department of Social and Health Services’ Office of Fraud and Accountability (OFA) monitors compliance with this law. The OFA will investigate use of an EBT card in a prohibited location. Investigators will work with a business’ manager to block the machine when needed.

Retailers in locations identified in the law may contact the OFA at (800) 562-6906 for ATM machine-blocking instructions.

Transporting Marijuana - What is a Necessary Stop?

Tom Dixon, Enforcement Captain Northwest Region

Preventing the diversion of legally produced marijuana to other states is a top priority for the Liquor and Cannabis Board. To help mitigate the risk there are extensive regulations regarding the transportation of marijuana products across the state.

WAC 314-55-085(5)(f) establishes logistic requirements for all licensees transporting marijuana including the Marijuana Transportation license. One of the key requirements is that all marijuana licensees to travel directly from the shipping licensee to the receiving licensee(s) and avoiding any “unnecessary” stops. So what constitutes a necessary stop? The answer is pretty simple.

To put it plainly, a driver for a licensee should have an articulable reason for the stop. Things like a bathroom break, restaurant, hotel, nap, mechanic, fuel stop or any other occurrence that happens in the course of a highly regulated industry delivery would qualify as a necessary stop. Stopping to visit a friend, going to a movie, etc. would not. Licensees should also be aware that the location of the stop plays a role in determining if it is reasonable. Stopping for lunch in Olympia while making a delivery from Vancouver to Seattle would be reasonable, stopping for lunch in Long Beach (with no deliveries in the area) would not.

WAC 314-55-310(5)(e) deals with logistics specific to the Marijuana Transportation license who are allowed to transport marijuana products for other marijuana licensees. Transportation licensees are required to abide by the “necessary stop” requirements of WAC 314-55-085(5)(f), but are also further obliged by rule to deliver or return marijuana product within forty-eight (48) hours from the original pickup.

If you have questions about transportation of marijuana products, please call your local Enforcement Officer.

Assigning Applications by Region

Our Enforcement Officers are assigned to specific geographic locations (regions) around the state and beginning October 1, 2018, the Licensing Division also began assigning applications by region. We made this move to improve consistency and communications with both applicants and Enforcement. Each Marijuana Supervisor and their team will be assigned cases based on the region where the licensed premises is located.

If you were assigned to a Licensing Specialist before October 1 2018, you will continue to work with that Specialist until the application is complete. We will assign your future applications to a Licensing Specialist in your area. If you submit changes for multiple licensed locations at once in different regions, in most cases, we will assign one Licensing Specialist to process all of them. This will reduce duplicate efforts by the Licensing Specialists and the Licensees.

Applications from:

Region 1 – will be assigned to Licensing Specialists on Shannon Angell’s team
Region 2 - will be assigned to Licensing Specialists on Frank O’Dell’s team
Region 3 – will be assigned to Licensing Specialists on Mistie Jones’ team
Region 4 – will be assigned to Licensing Specialists on Linda Brock’s team

See the map below to identify your region:

Pilot Project: Co-Locating Licensing Specialist with Enforcement

In addition to assigning applications by region, we have out-stationed a Licensing Specialist to the Mount Vernon Enforcement field office. This six month pilot project will help us determine if having Licensing Specialists located in the regional offices helps us develop stronger relationships with applicants and Enforcement Officers. We are hopeful that this will help us work more collaboratively with Enforcement and be more available to Licensees.

Licensing Specialist Senior Jessica Orr is part of Mistie Jones’ team. She will be assigned to marijuana applications in Region 3 and has already learned a lot from being co-located with our Enforcement Officers.

“I am excited about the opportunity to meet face to face with applicants in Region 3.”

Important Reminder for Completing Applications

Only a person listed on the license can submit a change application and conduct the initial interview with the Licensing Specialist.

Trending Now: Agreements including Security and Collateral

Licensing has seen an increase in the use of financial agreements that include security and collateral requirements. Terms outlining security or collateral requirements are used to provide assurance to the lender that a loan will be repaid. Although these are common business practices, marijuana rules and regulations place restrictions on the terms of a security or collateral agreement. For example, licensees may not use marijuana or marijuana product as security or collateral. WAC 314-55-015 and WAC 314-55-020 requires an entity to have a marijuana license before they have the rights to marijuana or marijuana products.

If a financial agreement mandates business decisions related to a licensed marijuana business, WAC 314-55-035 requires the financier to be identified as a True Party of Interest.

If the lender exercises a security agreement that alters the approved operating plan, the licensee must apply to the WSLCB for approval before making changes (see WAC 314-55-020).

Talk to your Enforcement Officer or Licensing Specialist if you have questions regarding these types of agreements.

Observations from the Field: Unapproved Extractor Alterations

LCB officers have recently observed an increasing number of violations involving modifications to marijuana extractors, and the use of unapproved extractors. Our primary observation in the field has been repurposing butane extractors to operate on propane.

Changing these solvents has a significant impact on the machine and requires new approval. Propane runs at a much higher PSI than butane. The additional pressure can create a major threat to public safety if the extractor were to fail. Altering an extractor renders any prior approvals void.

A licensee must go through certain requirements to get an extractor approved that include (WAC 314-55-104):

Certification from a licensed engineer;
Approval from your fire code official;
A new training plan;
Approval from the LCB.

After obtaining your original approval, a license holder must notify the WSLCB in advance of any change in their operating plan, including any alterations to an extractor. Prior approval is required before the change is implemented [WAC 314-55-020 (12)].

Any modification to the equipment that changes the way an extractor operates requires you to resubmit a new operating plan and go through the same procedures above. A good rule of thumb, if your extractor changes from the certification that the licensed engineer approved, you must submit a new operating plan to have the extractor approved for use. The penalty for operating an unapproved or altered extractor is cancellation of the marijuana license (WAC 314-55-520).

If you have any further questions, please contact your local enforcement officer.

Contracts

Marijuana contracts including (but not limited to) consultant, branding, or management agreements require approval from the WSLCB. Licensees who have a business contract that requires approval can email them to licensingcontracts@lcb.wa.gov. A licensing manager will review the contract to ensure it is compliant with marijuana rules and regulations. If you are working with a Licensing Specialist on a change application, the Specialist can review the contract.

Traceability Contact Information and Workarounds

Do you know who to contact for help with marijuana traceability issues? Click here for workarounds to known issues within Leaf Data Systems. This table is updated as issues change and are resolved.