California cannabis licensing
California cannabis licensing has been quite a ride.

If you’re in the cannabis licensing game in California, you know that it’s taking months and months to secure annual licensing from all three agencies overseeing the implementation of the Medicinal and Adult-Use Cannabis Regulation and Safety Act. To date, temporary licensing has propped up the industry. However, those temp licenses can no longer be issued or renewed, effective December 31, 2018. If you recall, it was a race to secure local authorization by December 31 of last year because, without it, you couldn’t get a state temporary license, which meant that your cannabis company would be waiting around for months (maybe even a year) to get annual licensing. And where you can’t open your doors without both local authorization and some form of a state license, state temporary licenses are lifeblood for operators.

Nonetheless, many temp licenses will expire at the end of this month. To bridge the gap between temporary and annual licenses, the legislature came up with the concept of provisional cannabis licenses via SB 1459. To obtain a provisional license: (1) an applicant must hold or previously have held a temporary license for the same commercial cannabis activity for which it seeks a provisional, and (2) the applicant must submit a completed annual license application with proof that California Environmental Quality Act (“CEQA”) compliance is underway. Provisionals last for 12 months and can be issued through the end of 2019.

California cannabis licensing has been quite a ride.

Until last week, the only agency that detailed the provisional licensing process was the California Department of Food and Agriculture (CDFA), which regulates cultivators. The CDFA does not have a separate application for provisional licenses. Per its instructions, once an applicant submits an annual license application (and assuming it held or has a temporary and paid its annual application fees), CDFA staff will determine whether a provisional is warranted. Thankfully, in a series of emails last week, the Bureau of Cannabis Control (BCC) and the California Department of Public Health (CDPH) finally revealed to stakeholders how provisional licenses will work for them. On March 29, both the BCC and CDPH emailed their list serves with the following message:

The Bureau of Cannabis Control, California Department of Public Health, and California Department of Food and Agriculture are taking steps to prevent gaps in licensure when active temporary commercial cannabis licenses expire. Each licensing authority is tracking expiration dates of temporary licenses and intends to issue a provisional license to qualified temporary license holders before their current temporary license expires. To qualify for a provisional license, an applicant must:

Hold or have held a temporary license for the same premises and the same commercial cannabis activity for which the provisional license will be issued; and

Have submitted a completed license application to the licensing authority, which must include a document or statement indicating that California Environmental Quality Act (CEQA) compliance is underway.

If you are contacted by your state licensing authority for additional information, please respond promptly so that processing of a provisional license is not delayed. Please note that a completed application for purposes of obtaining a provisional license is not the same as a sufficient application to obtain an annual license. Licensees issued a provisional license are expected to be diligently working toward completing all annual license requirements in order to maintain a provisional license.

Similar to CDFA, neither the BCC nor the CDPH has an application process for a provisional license. If you qualify, that license will issue automatically.

Without a doubt the heaviest lift here will be filing for that annual license application. This is where you’ll disclose all owners, financial interest holders, and all criminal background information, and you’ll also submit all of your standard operating procedures. Note that the agencies are looking to give folks a break where a “completed application” for purposes of getting a provisional isn’t the same what’s required to actually get the annual, but you still have to provide all of the required information off the bat to ensure that the application is “complete”.

And let’s not forget about SB 67. SB-67’s key provision is that when an applicant files its annual license application, its temporary licenses will remain valid even if those licenses had previously expired. What this means is that if applicants file annuals before the date of temporary license expiration, those applicants will still have temporary approval until a provisional license is issued. This will help dispel any lack of clarity surrounding the provisional licensing process but will still not change the fact that annuals will need to be submitted as soon as possible. These extended temporary licenses would only stay effective until an annual license is issued or denied, a provisional license is issued, or an application is disqualified or abandoned. Notably, in its last draft, SB 67 will now only apply to CDFA licensees if it passes and it will only remain effective through September 15, 2019.

Licensing in California continues to be a roller coaster, but there is one bottom line: get your annual license applications in as soon as you can to avoid significant licensing delays and the risk of not getting a provisional license.

FDA CBDLast week, we explored whether the addition of hemp-derived cannabidiol (CBD) to food and beverages is actually unlawful, notwithstanding FDA policy. In that article we explained that we hadn’t seen much in the way of FDA enforcement, and that we “believe that FDA will likely continue to act where people make health claims that violate the Food Drug & Cosmetic Act” and not much more. A few days later, outgoing FDA commissioner Scott Gottlieb clarified the FDA’s enforcement position in testimony to a Senate subcommittee. That clarification was essentially in line with what we had presumed. So today we can talk about that.

In his testimony, Gottlieb stated that the FDA has been using enforcement discretion. Specifically, Gottlieb advised that “I will take enforcement action against CBD products that are on the market if manufacturers are making what I consider over-the-line claims”; for example, that CBD can “cure cancer or prevent Alzheimer’s disease.” Gottlieb continued:

But there are products on the market right now that, given our enforcement priorities and our limited resources, we haven’t taken action against. That’s not an invitation for people to continue marketing these products—we’re concerned about it—but we heard Congress loud and clear here.”

The products Gottlieb is talking about are seemingly everywhere these days, from farmers’ markets to big box retail stores. Every week, we receive scores of inquiries from current and potential manufacturers, distributors and retailers of these products. They are everywhere. In his testimony on enforcement priorities, Gottlieb acknowledged that Congress intended to legalize industrial hemp and its derivatives via the 2018 Farm Bill. It’s also fair to say, though, that Congress didn’t give much consideration to the effects (or non-effects) the Farm Bill would have on the FDA’s CBD position.

In any case, FDA is focused on the “problem actors” given its limited resources. Problem actors are the people who advertise medical solutions that entice consumers to forego approved treatment, and who generally mislead the public. As we wrote last week, FDA’s concern there is nothing new: it has always been vigilant about unapproved medical claims. (The agency fired off another round of warning letters last Thursday.)

What else can we glean from Gottlieb’s testimony? A couple of things. The first is that the situation with CBD in foods and beverages (and cosmetics, and everything else) is about as legally cumbersome as could be. It has put FDA in a bind. The second is that everyone wants answers, including Congress, which probably should have addressed this in the Farm Bill or in companion legislation. And the third is that FDA’s position could change fast. Gottlieb’s testimony was an exit interview for all intents and purposes. Not only is Gottlieb departing, but the agency has since announced public hearings on CBD products next month, along with a work group “explore potential pathways for dietary supplements and/or conventional foods containing CBD to be lawfully marketed.”

We wrote last week that FDA appears to be moving toward solutions for hemp-CBD in the marketplace, rather than in the opposite direction. People in the market today with products that 1) are responsibly sourced and 2) do not make health claims, have a big head start. Time will tell if those propositions pay off, but they look pretty good right now — at least from an FDA enforcement perspective.

CBD FDA

On April 2, 2019, the federal Food & Drug Administration (“FDA”) Commissioner Scott Gottlieb issued a press release on hemp and hemp-derived cannabidiol (“Hemp CBD”). This is Gottlieb’s first major official press release since the now infamous December 20, 2018 press release which came just hours after the 2018 Farm Bill passed. In that December 20 press release, the FDA stated that even though the 2018 Farm Bill removed hemp from the Controlled Substances Act, the FDA still retained authority over Hemp CBD additives to foods (both human and animal), drugs, and dietary supplements.

Since the 2018 Farm Bill passed and the FDA issued the December 20 press release, there has been a proliferation of various Hemp CBD products nationwide and only very little FDA enforcement. During this time, the FDA has apparently been scrambling to figure out what to do about Hemp CBD (which you can read about here and here).

In today’s press release, the FDA gave some more guidance on what exactly it was doing:

  1. The FDA will be holding a public hearing on May 31, 2019 to get input from the public so that it can use that information in regulating the Hemp CBD;
  2. The FDA is creating a “working group” to “explore potential pathways for dietary supplements and/or conventional foods containing CBD to be lawfully marketed.”
  3. The FDA issued three more warning letters to operators whom it believes have made medical statements concerning Hemp CBD products that were “egregious”.

Another key aspect of the FDA’s guidance is its updated FAQs. In the FAQs (see number 13), the FDA responds to questions regarding cosmetics (which can include things such as topicals) as follows:

If a product is intended to affect the structure or function of the body, or to diagnose, cure, mitigate, treat or prevent disease, it is a drug, or possibly both a cosmetic and a drug, even if it affects the appearance. (See Question #3 for more information about drugs.)

FDA can take action if it has information that an ingredient or cosmetic product is unsafe to consumers. Consumers can report adverse events associated with cosmetic products via the FDA’s MedWatch reporting system, either online or by phone at 1-800-FDA-1088, or by contacting your nearest FDA district office consumer complaint coordinator. For more information, please see the FDA’s webpage on how to report a cosmetic-related complaint.

This is an interesting response and we will be sure to give more insight on it in the coming days. But suffice it to say, the FDA apparently isn’t taking as hard a stance against cosmetics as it is against foods. It appears (at least for now) that the FDA is poised to send warning letters to companies selling Hemp CBD topicals IF those topicals are marketed in a way that makes them “drugs”.

Stay tuned to the Canna Law Blog for more on the FDA’s position on Hemp CBD.

rico cannabis litigation

Last week the federal district court in Oregon dismissed with prejudice the plaintiffs’ amended complaint in Ainsworth v. Owenby, Case 6:17-cv-1935. As you may recall, this is one of several cases tracked by this blog in which a group of residential property owners displeased with alleged deleterious effects of a marijuana production or processing facility on nearby land seek relief in a civil RICO action. We have discussed Ainsworth here and here.

The original complaint was filed in late 2017 and alleged one state-law nuisance claim and two RICO claims. In a prior post we discussed the similarities and differences between Ainsworth and another civil RICO case in Oregon, McCart, which appeared to have resolved through a confidential settlement. We noted that the Ainsworth complaint appeared to have learned some valuable lessons from the motions to dismiss in McCart. Ultimately, however, whatever lessons learned were not enough to meet the onerous requirements for a civil RICO claim.

First, let’s set the stage for the recent order. In August 2018 the district court dismissed the plaintiffs’ RICO claims without prejudice, thereby giving them the opportunity to amend. That dismissal turned on the plaintiffs’ failure to plausibly allege a tangible property loss, with the court reasoning that “a plaintiff who has not alleged specific prior attempts to monetize a property interest must plausibly allege at least a present intent or desire to do so.” The court found plaintiffs’ reliance on the abstract harm of a reduction in fair market values insufficient to satisfy RICO. The plaintiffs must, said the court, make good faith allegations that they attempted or currently desire to convert those interests into a pecuniary form.

The plaintiffs then set about amending their complaint to address the shortcomings identified by the court. With respect to RICO, two of the plaintiffs now alleged that the grow operation depressed the value of their property and, as a direct result, prevented them from obtaining a larger home equity loan to finance the construction of a perimeter fence. The defendants again moved to dismiss, contending these plaintiffs still failed to allege a concrete loss as required by RICO.

The question then was whether the plaintiffs’ inability to obtain a larger home equity loan transformed their otherwise intangible injury into one resulting in concrete loss.

On March 27, 2019, the court answered that question in the negative. The key reason was that the plaintiffs’ financial position was no worse than it would have been absent the alleged racketeering activity—since the plaintiffs incurred less debt and, presumably, paid less interest based on the smaller principal. In other words, plaintiffs were in a better position than they otherwise would have been. Could the plaintiffs have potentially pleaded concrete financial harm? The court gives some hints – noting that plaintiffs did not allege they were charged a higher interest rate or otherwise offered the loan on less favorable terms, such that they were in a worse financial position.

Although Ainsworth is out of federal court absent a successful appeal, the recent order does not necessarily end litigation. That’s because the court declined to exercise supplemental jurisdiction over the state-law claims for nuisance and intentional infliction of emotional distress.  Absent a successful appeal, however, plaintiffs can no longer hold RICO’s threat of treble damages and attorneys’ fees over these Oregon cannabis producers.

For more on RICO cannabis litigation, check out the following posts:

marijuana banking cannabisAfter its introduction on Tuesday, March 26, 2019, the House Financial Services Committee has voted 45-15 to advance the SAFE Banking Act of 2019 to the House floor on a to-be-determined date. Currently, the Safe Banking Act has 152 cosponsors, including 12 Republicans, which is more than one-third of the entire House of Representatives. House Rules Committee Chairman James McGovern (D-MA) is hopeful that the chamber will vote on and pass the legislation within weeks.

We will guide it to the House floor for a vote, which I think it will pass with an overwhelming vote – Democrats and I think a lot of Republicans as well. If we have a strong bipartisan vote that will increase the pressure on the Senate to do something.”

Of course, much of the focus was on the “public safety concern for legitimate businesses that currently have no recourse but to operate with just cash,” as Chairwoman Maxine Waters (D-CA) indicated on Tuesday. However, Chairwoman Waters and several other Democratic supporters framed the legislation as “part of a holistic approach toward providing criminal justice reform” that “should not by any means be the only bill the House takes up on the important issue of cannabis reform.” Conversely, Rep. Patrick McHenry (R-NC), the House Financial Services Committee’s top Republican, urged in his opening remarks that the Committee “ensure that we’re doing our due diligence before proceeding” and acknowledge that “it is a massive change in federal policy.” The vote occurred on Thursday morning following two days of proceedings and over GOP objections.

Several amendments were proposed, considered, and even passed during the Committee markup. The following were most notable:

  • Additions requiring the federal government to study diversity and inclusion in the marijuana industry: this would require federal regulators to conduct studies and provide annual reports “tracking information and data on the availability of access ot financial services for minority-owned and women-owned cannabis-related legitimate businesses” (Rep. Ed Perlmutter (D-CO));
  • Additions requiring the Government Accountability Office to study banks’ previous reports on their marijuana business customers to understand how effective they are in identifying bad actors, passed via voice vote (Rep. Scott Tipton (R-CO));
  • Extension of protections to “de novo” banking institutions that seek charters or master accounts from a Federal Reserve bank, passed via voice vote (Rep. Katie Porter (D-CA));
  • Expansion of protections to insurance companies, passed via voice vote (Rep. Steve Stivers (R-OH));
  • Delay of the bill’s effective date until marijuana is federally descheduled, withdrawn (Rep. Bill Huizenga (R-MI));
  • Delay of the bill’s enactment until federal regulators are able to issue guidance to banks, defeated via voice vote and roll call vote 35-25 (Rep. Bill Huizenga (R-MI));
  • Limitation of the bill to only protect hemp businesses, defeated via voice vote and roll call vote 42-18 (Rep. Andy Barr (R-KY));
  • Withdrawal of protections from banks that serve marijuana businesses located within 1,000 feet of schools, youth centers, public parks, child care facilities, public housing, civic centers or designated drug-free zones, defeated via voice vote and roll call vote 34-26 (Rep. Sean Duffy (R-WI)).

It is expected that Senators Jeff Merkley (D-OR) and Cory Gardner (R-CO) will file companion legislation to the SAFE Banking Act in the Senate soon. The former iteration gained 20 cosponsors in the chamber but did not receive a hearing or vote. Only time will tell if cannabis banking will get a vote in the Senate, but the pressure continues to build. If nothing else, the passage of cannabis banking legislation by the House would be a truly historic marker in the march to end prohibition.

california cannabis delivery

For a few moments there, it seemed like the California cannabis delivery companies could deliver anywhere in the state—even to cities that said no. It now looks like that may not be allowed.

In January 2019, the California Bureau of Cannabis Control (“BCC”)—which regulates cannabis delivery companies—issued Rule 5416(d), which says that “A delivery employee may deliver to any jurisdiction within the State of California provided that such delivery is conducted in compliance with all delivery provisions of this division.” In plain English, this rule clearly allows licensed retailers to deliver cannabis to any jurisdiction in the state—even ones that didn’t allow it. This rule immediately drew the ire of cities across the state.

I’ve been writing about this rule since it was first proposed back in October 2018. In a post just after the rule was passed, I wrote that we expected litigation to ensue over this rule. Many—if not most—of the cities in the state either ban or heavily restrict cannabis operators, and many of them vocally opposed this rule in the rulemaking period. In spite of their opposition, the BCC still passed the rule. This is probably the best example of the BCC siding with the industry over municipalities, but was destined to cause a stir.

As of mid-February, it looks like at least one city was poised to sue the BCC. The City of Sonora, one of many anti-delivery cities, announced that it would file a lawsuit. If that lawsuit proceeds, however, it will be a while before there’s a final resolution unless there is some early injunction motion to hold off implementation of the rule, as litigation can take years to be resolved.

There may be another, faster way in which deliveries will be banned—state legislation. California Assembly Bill 1530 (“AB-1530”) would amend existing state law to state: “A local jurisdiction may adopt an ordinance or resolution pursuant to Section 26200 that permits, restricts, limits, or bans the delivery of cannabis or cannabis products to a location within its jurisdictional boundaries.”

If AB-1530 is passed, it will put an end to the issue. The rule would be a major disruption for cannabis delivery companies who invested heavily in a multi-city delivery business model. Some delivery licensees are permitted in small cities surrounded by numerous cities that don’t allow delivery, and if the new law is passed, it could spell major trouble for these operators.

The bill is still in its relative infancy and there may still be public hearings on it in the future. To be clear, just because the bill is up for consideration doesn’t mean it’s going to be passed. So it’s important for anyone in support of statewide delivery to oppose the legislation.

fda cbd foodDuring a recent interview with the Brookings Institution, Scott Gottlieb, the departing head of the Food and Drug Administration (“FDA”), explained it would take several years for the agency to come up with rules that would legalize the use of hemp-derived cannabidiol (Hemp-CBD) in food products, unless Congress steps in.

Gottlieb acknowledged the strong interest among CBD stakeholders and lawmakers in developing a regulatory framework through which Hemp-CBD could be infused to food. The problem, Gottlieb explained, is that CBD has been approved as a drug (i.e., Epidiolex) and was not previously used in the food supply.

The FDA Commissioner further argued that putting a drug that wasn’t previously used in food into the food supply would require the agency to go through a formal rulemaking process.

As we previously discussed, thus far, the FDA has only adopted informal, non-binding guidelines as its primary method of policy making for CBD as they afford the agency more flexibility. Adopting regulations through the formal rulemaking process would take two to three years, possibly longer, given the controversial nature of CBD as a compound closely associated with marijuana and that is used as a drug ingredient. Gottlieb suggested that a more efficient way of clarifying the situation would be for Congress to issue additional legislation that expressly allow the use of Hemp-CBD in foods. While the congressional intend behind the 2018 Farm Bill was to legalize the production of Hemp-CBD, lawmakers failed to define the meaning of “production,” thus, leaving open for interpretation whether the sale of Hemp-CBD and its use in food product was legal.

Similarly to a statement made in front of a House Appropriations subcommittee last month, the Commissioner suggested that the approval of Hemp-CBD infused food may turn on whether the CBD infused to food is an isolate or is used in its naturally-occurring form (see here for more background information on this distinction).

I think you need to come up with a framework that defines concentration levels, where you would create some kind of cut off, and that would be up to the agency to do….CBD in high concentrations isn’t risk-free, and in low concentration, it probably is safe—I don’t want to make a declaration here. It’s also a question of whether it’s providing any kind of therapeutic benefit in those concentrations, although people seem to believe that it has some value.”

During the interview, the Commissioner also shared that the Drug Enforcement Administration (“DEA”) would have to “formally deschedule” Hemp-CBD before moving forward with regulatory changes, even though the 2018 Farm Bill removed Hemp-CBD from the Controlled Substance Act and shifted its regulation from the Department of Justice (which oversees the DEA) to the U.S. Department of Agriculture.

I think the prevailing view is that the plain language of the statute [the Farm Bill] intended for that, but I’m not sure that DEA has done that yet. But that’s another step that would have to take place. DEA would have to formally de-schedule CBD derived from hemp.”

For now, Gottlieb explained that the agency is creating a “high-level work group” tasked with identifying “some potential legislative pathways to create a framework for allowing CBD into the food supply.” The work group will soon be formally announced and will hold a public meeting to solicit comments from Hemp-CBD stakeholders. According to the Commissioner, the work group should release recommendations by the summer.

Last Thursday, in one of the few (to our knowledge) contested cases heard by the OLCC concerning cannabis, the OLCC accepted unanimously the findings of a state Administrative Law Judge (ALJ) and denied an application for a recreational marijuana producer license. You can read the press release here.

The decision merits comment as a case study in how the administrative hearing process works and how long it takes. Earth People’s Garden, LLC, applied for a recreational marijuana producer license in May 2016. In February 2018, the applicant – through a consultant it had hired – submitted documents stating that its sole member, Mr. Shirley, had completed the tests required to obtain a Marijuana Worker’s Permit and to demonstrate proficiency with Metrc, Oregon’s Cannabis Tracking System. But several inconsistencies caused the OLCC to question whether Mr. Shirley had in fact taken these tests. After a thorough investigation, the OCC issued a notice of proposed license denial in May 2018. Mr. Shirley requested administrative review and the ALJ received evidence and testimony in October 2018. The record closed at the end of November 2018 after the parties provided the ALJ the required post-hearing submissions and the ALJ issued a proposed order in early January 2019. Mr. Shirley took exceptions to the proposed order and on March 21, 2019, the OLCC heard oral argument.

So roughly 10 months’ passed from initial notice to final order. Is that the average time? Much faster? Much slower? It’s hard to say based on the sample size. Although much of the timing of the administrative process is governed by set rules and regulations, other aspects depend on the ALJ’s caseload. On this point it is worth noting that the Office of Administrative Hearings typically holds over 30,000 hearings a year via its 65 professional ALJs.

The final order adopted by the OLCC reveals the thoroughness of the OLCC’s investigation and its preparation for the hearing. (Note: the order is not available online; email me if you want a copy.) Here, the lead investigator—after noticing the discrepancies in the test certification process and contacting Mr. Shirley—requested assistance from an OLCC Permit Specialist who reviewed Mr. Shirley’s account including dates/times when it was accessed and what account changes were made (e.g. correcting the misspelling of Mr. Shirley’s last name). The lead investigator also worked with the Metrc Support Desk Manager to review computer records related to the testing, including the IP address of the computer from which the test was taken. The IP address was then geolocated using publicly available tools which revealed that the test was not taken from a computer in Cave Junction, Oregon, as Mr. Shirley had said he had done, but from a computer in the Medford-Talent area of Oregon. The lead investigator then worked with an OLCC Network Administrator to ensure the accuracy of the geolocation. These and other investigatory findings caused the OLCC investigator to conclude that Mr. Shirley’s consultant (not Mr. Shirley) had taken the tests. (A fact Mr. Shirley later admitted at the hearing.)

oregon cannabis litigation olcc
OLCC wants to dance with you. Usually that’s good.

Clearly the OLCC takes very seriously any potential misrepresentations made to it at any point. Several Commissioners reinforced this theme at oral argument, explaining that it is incumbent upon applicants and licensees to be truthful and transparent with the OLCC. A second theme of the oral argument was that the OLCC does not take lightly a ruling that may deny a person the ability to engage in the livelihood of their choice (i.e. the cannabis industry). Several Commissioners described this as a “tough case,” but their concerns about the applicant’s candor to the OLCC and the possibility that someone could have entered the recreational market without proper seed-to-sale training outweighed any misgivings about denying the application.

The takeaway is that the OLCC is looking for willing partners in the cannabis industry and does not look kindly on attempts to skirt or bypass rules that it views as essential to maintaining the integrity of Oregon’s cannabis industry and to ensuring that Oregon remains a leader in the recreational cannabis industry.

To read more on OLCC policies and enforcement, check out the following:

cannabis litigation

Those who have been running businesses in the cannabis industry for years, as well as those that are working hard to become licensed, know it is not a simple task to stay in compliance with state and local regulations. The complexity of such regulations can cause businesses to inadvertently make mistakes, which can lead to really serious violations that at times end up in monetary penalties, or even worse–license revocation.

To avoid losing your business’ most valuable asset, learn how to get ahead of the compliance curve. Our cannabis lawyers have been guiding clients through agency litigation and enforcement for a long time, and we are here to help. To learn more about how to avoid the time, effort, and cost of agency litigation, and how to navigate litigation against the state when needed, please attend our free webinar entitled “It Could Happen to You: Cannabis Agency Litigation and Enforcement” at noon Pacific on April 23, 2019. Featuring Harris Bricken lawyers Daniel Shortt (Washington), Jihee Ahn (Oregon), and Griffen Thorne (California), this webinar will provide an overview of agency enforcement and litigation against cannabis companies.

Drawing from their experiences across all west coast states, the panelists will discuss:

  • Inter-agency appeals
  • Administrative litigation and the Administrative Procedure Act
  • State enforcement priorities and communicating with state authorities in the event of a violation
  • State court litigation against agencies
  • Enforcement actions and written and verbal notices of violation against licensed operators and unlicensed companies and how to mitigate early and often

Moderated by Vince Sliwoski, the panelists will address audience questions throughout the presentation. To register for the webinar, please go here. Please feel free to write to firm@harrisbricken.com with any questions.

We hope you can join us!

Recently the United States Post Office (“USPS”) issued an advisory on “Acceptance Criteria for Cannabidiol (CBD) Oil and Products Containing CBD.” Those criteria are as follows:

1. A signed self certification statement, subject to the False Statements Act (18 U.S.C. § 1001). Statements must be printed on the mailer’s own letterhead, must be signed by the mailer, and must include the text “I certify that all information furnished in this letter and supporting documents are accurate, truthful, and complete. I understand that anyone who furnishes false or misleading information or omits information relating to this certification may be subject to criminal and/or civil penalties, including fines and imprisonment.”

This first prong is straight forward. The mailer must include a sworn statement that all the related documents are accurate and truthful and include the above quote indicating an understanding of the penalties that come along with lying to a federal agency.

2. The industrial hemp producer possesses a license issued by the Department of Agriculture, for the state where the Post Office/acceptance unit is located, which includes documentation identifying the producer by name and showing the mailer is authorized by the registered producer to market products manufactured by that producer.

The second prong is a little more complicated. It requires that the hemp producer hold a license from the state Department of Agriculture where the Post Office or acceptance unit is located. This statement fails to consider cases where hemp or hemp products are shipped from a state that is different than the state of cultivation. Consider an online hemp retailer operating out of New York. New York has an industrial hemp program but is not a major hemp growing state so our retailer sources products that were produced and processed in Colorado. The retailer has done her due diligence and has copies of each farmer’s license to cultivate hemp. However, based on the fact that she uses hemp cultivated in another state, it does not appear that she could comply with this prong. Her best option is likely to include copies of the Colorado licenses with her shipments.

The second prong also requires documentation showing that the mailer is authorized by the register producer to “market products.” A letter from the producer could likely satisfy this requirement but it may also prove challenging for retailers who may not have a direct relationship with the producers who are growing hemp that is used in Hemp-CBD products.

3. The industrial hemp, or products produced from industrial hemp, contains a delta-9 THC concentration of not more than 0.3% on a dry weight basis.

The third prong requires that the hemp or hemp product has less than 0.3% THC concentration. This means that both raw hemp and products derived from hemp must have a THC concentration of less than 0.3%. Usually, these test results are contained in a Certificate of Analysis (“COA”). That means that each shipment of hemp or hemp products should have the corresponding test results for that lot or batch.

Marijuana Moment first reported on the new guidance from USPS. We’ve written about how USPS lost an administrative appeal over the mailability of shipping Hemp-CBD before so it’s not as if this new guidance means that the USPS will now allow CBD to be mailed. I read the guidance to provide insight as to what the USPS is looking for when it finds a shipment of hemp or Hemp-CBD. This guidance is also only temporary and specifically states that it may be altered or rescinded as other federal agencies figure out exactly how to regulate hemp. What this letter does not do is prevent state-level law enforcement from seizing hemp shipments, as was recently the case in Idaho. State agencies are not bound by USPS memos.

For now, it’s best for industry stakeholders to try their best to comply with this guidance by providing the sworn statement, a copy of any licenses associated with hemp being mailed, and a copy of any COAs associated with the hemp or hemp products.