California Cannabis manufacturing lawsOn September 29, 2016, California’s Governor Jerry Brown signed into law AB 2679, which provides long-awaited and much needed guidance for cannabis manufacturers currently operating in California. The bill was authored by the same legislators who drafted the Medical Cannabis Regulation and Safety Act (MCRSA).

Though all cannabis businesses are subject to some risk under federal laws, manufacturing in California has been an even riskier business due to the dangers associated with extracting cannabis using volatile solvents and a state law that makes it illegal to manufacture a controlled substance, such as marijuana, by chemical extraction. Before last week, California cannabis manufacturers had little guidance on how to operate in compliance with current laws. However, under new provisions in AB 2679, collectives and cooperatives that manufacture medical cannabis products are now exempted from criminal sanctions under current state law if they meet specific requirements.

First, the marijuana manufacturer must only use manufacturing processes that: (i) are either solventless or that employ only nonflammable, nontoxic solvents that are recognized as safe under the federal Food, Drug, and Cosmetic Act, and/or (ii) use solvents recognized as safe under the Food, Drug, and Cosmetic Act, exclusively within a closed-loop system designed to prevent off-gassing of solvents to reduce the risk of ignition and explosion and certified by a licensed engineer through a signed and stamped certification document.

Second, the cannabis manufacturer must have approval from the local fire official for its facility, operation, equipment and closed-loop system.

Third, the cannabis manufacturer must meet required fire, safety, and building code requirements under listed state, federal, or international standards.

Fourth, the marijuana manufacturer must hold a valid marijuana seller’s permit from the California Board of Equalization.

Finally, the marijuana manufacturer must hold a valid local license, permit, or other form of authorization for the manufacture of medical cannabis from a city or county and be in compliance with all local cannabis manufacturing laws.

Just as with current laws governing medical marijuana collectives and cooperatives in California, these new cannabis manufacturing provisions will be repealed one year after the Bureau of Medical Cannabis posts a notice on its website that state cannabis licenses have been issued. At that point, the California Department of Public Health will be in charge of issuing licenses to cannabis manufacturers under the MCRSA. The authority of the Department of Public Health was expanded earlier this year to include developing standards for the manufacturing and labeling of all manufactured medical cannabis products, as well as identifying and reporting any medical cannabis products that have been adulterated or misbranded. The agency is now holding pre-regulatory stakeholder meetings across the state to discuss topics relevant to licensing for cannabis manufacturers.

But until the California Department of Public Health takes over its regulation of cannabis manufacturing in 2018, state legislators hope that the new provisions under AB 2679 will provide current cannabis manufacturers with protection from misguided raids by local law enforcement so that they can continue to operate and “to provide patients the medicine they need.” For current manufacturers, it should be a welcome relief to see California’s effort to make a largely grey area a little less grey, but this also means that it is more important than ever for current cannabis manufacturers to secure the proper approvals, certifications, and permits so as to be able to continue manufacturing cannabis through 2018 and beyond.

  • Gregorio Smith

    You say the manufacturer must hold a valid seller’s permit. My non-profit only facilitates the access to the medicine. The patient gives a seed to the grower, who grows it and delivers a bag of medicine back to the patient. The grower is a sub-contractor to the patient. At no time is there a taxable event. Do we still need a seller’s permit?