hemp seed import DA
Here come the hemp seeds!

Last Friday, the U.S. Department of Agriculture (“USDA”) released a statement, in which the agency clarified that the passage of the 2018 Farm Bill rendered the importation of hemp seeds legal.

As we previously explained, the 2018 Farm Bill legalized hemp, hemp seeds, and other derivatives, by removing them from the Controlled Substance Act. Accordingly, the USDA held that the DEA “no longer has authority to require hemp seed permits for import purposes.”

The agency further explained that the statement aimed to provide assistance to U.S. producers and hemp seed exporters who have repeatedly requested assistance from the USDA.

Indeed, the USDA received numerous comments pertaining to this issue during its March 13 webinar. Senator Jon Tester (D-Montana) was among some of the commentators who requested assistance with hemp importations. According to the Montana senator, the DEA was blocking Montana farmers from importing hemp seeds. USDA Executive Director, Sonny Perdue, explained that while the USDA was in the process of promulgating rules and regulations, farmers registered under an existing state research pilot program, pursuant to the 2014 Farm Bill, were allowed to import and cultivate hemp.

In its statement, the USDA maintained Perdue’s statement and further clarified that the agency now holds authority over hemp seeds and aims “to provide an alternative way for the safe importation of hemp seeds into the United States.” Specifically, the USDA set forth ways in which hemp seeds should be imported from Canada and other foreign countries.

Hemp seeds imported from Canada must be accompanied by:

  1. a phytosanitary certification from Canada’s national plant protection organization to verify the origin of the seed and confirm that no plant pests are detected; or
  2. a Federal Seed Analysis Certificate (SAC, PPQ Form 925) for hemp seeds grown in Canada.

Hemp seeds imported from countries other than Canada, must be accompanied by a phytosanitary certificate from the exporting country’s national plant protection organization to verify the origin of the seed and confirm that no plant pests are detected.

The agency further explained that “Hemp seed shipments may be inspected upon arrival at the first port of entry by Customs and Border Protection (CBP) to ensure USDA regulations are met, including certification and freedom from plant pests.”

As USDA Commission Purdue has expressed on numerous occasions, the hemp rule making process will take some time given the complex nature of the crop and its close connection with marijuana. However, even if hemp won’t be grown pursuant to the 2018 Farm Bill until regulations are in place, hemp growers who are registered under state pilot programs, and who comply with the newly released importation requirements, are free to import hemp seeds without the risk of DEA enforcement.

For additional information on the importation of hemp and hemp seeds, please contact our team.

cannabis patent pct marijuanaLast week, Canadian corporation Yield Growth Corp. announced that its subsidiary, Urban Juve Provisions, filed a Patent Co-operation Treaty Application (PCT Application) entitled “Cannabis Root Extract, Method of Manufacture, Method of Use.” The PCT Application claims priority to eleven U.S. patents filed in the last year by the company and contains claims to a method of manufacturing cannabis root oil, as well as use of that oil as an active ingredient in various formulas for cosmetics and therapeutics. Penny Green, CEO of Yield Growth commented in the announcement: “Topical products represent a huge opportunity in the cannabis industry. We intend to be a leader in the industry with our use of powerful ingredients like our proprietary hemp root oil combined with our expertise in global brands and international distribution.”

Yield Growth’s PCT Application can be used as a basis for obtaining this patent protection in over 150 countries simultaneously. As the cannabis industry rapidly develops, it won’t be surprising to see a rise in corresponding cannabis PCT Applications as well.

So, what is a PCT Application? It’s essentially a “placeholder” application that establishes a filing date for your invention, which can then be “nationalized” in any of the 150+ countries that are members of the PCT. It can be the first patent application you ever file, or it can claim priority to an earlier-filed application. The process generally looks like this:

  1. You file the PCT Application. You will also designate an International Search Authority (ISA), which is the patent office that will perform an initial review of the claims in your PCT application.
  2. Your ISA searches for prior art. Remember when we talked about prior art here? Your ISA will identify what it deems to be relevant prior art in an International Search Report (ISR). Your ISA will then issue a non-binding Written Opinion (WO) that contains its view on the patentability of your claims. (If you designate the U.S. Patent Office, it aims to issue the ISR and WO within 9 months of the PCT filing date if the PCT application is the first application, or 16 months from the priority date if the PCT application is a subsequent filing). If the WO is favorable, you can enter prosecution early in some jurisdictions. If the WO is not favorable, you can amend the claims at various points during the PCT process.
  3. Your PCT application publishes approximately 18 months after the priority date.
  4. Generally, within 30 months (longer in some jurisdictions) from your priority date, you will “nationalize” the application in the countries you desire. Note that there are sometimes substantial costs for translation preparation and application filings in each of your selected jurisdictions.
  5. Each of your nationalized patent applications will then follow their own country-specific procedures for prosecution to grant. Your PCT Application itself will expire, and it alone cannot issue as an “international patent” (those don’t exist).

There are various benefits to filing a PCT Application instead of starting off with separate patent applications in each country, including deferral of costs and time constraints and the prior art that necessarily gets created when a PCT Application gets published. Circling back to Yield Growth, this was an effective and efficient way for it to ensure its eleven provisional patent applications in the United States are primed for globalization.  We’ll be monitoring its path through the nationalization process and report back on any cannabis-specific issues that may arise.

For more on cannabis patents, check out the following posts:

los angeles cannabis licensing tier IIIThis past weekend was the hallowed 4/20 holiday for those who celebrate and participate. Prior to 4/20, the City of L.A. made some progressive moves towards bolstering consumer protection in the City concerting illegal cannabis (see this pretty great interactive map for your legal cannabis providers in City borders) and rounding out (legally speaking) the Phase III licensing process that’s been long awaited by stakeholders.

When I last wrote about Phase III back in February, things were still fairly up in the air for how the City would allocate the remaining coveted retail licenses. In early February, the Department of Cannabis Regulation (“DCR”) proposed to the Rules, Elections, and Intergovernmental Relations Committee (“Committee”) the concept of a first come, first served system, lottery, or merit-based review to divvy up those licenses between those social equity applicants that had real property and those that didn’t in order to “make our licensing process more efficient, transparent, and, most important, equitable.” The Council (after a hearing with the Committee and the DCR) came back at the DCR with a different set of proposals for Phase III reform. Namely, to study how other cities have handled social equity and limited licensing.

On April 16th, after adopting the City Attorney’s April 12th report, the Council also decided to adopt this April 12th draft ordinance (subject to certain Council amendments and additions to the DCR and City Attorney from April 16th). Council will review this amended ordinance for adoption on April 30th.

The April 12th ordinance does a lot of things to reform cannabis regulations in L.A. It’s biggest impact is the creation of a first come, first served system for Phase III licensing, which basically tracks the original proposals from DCR from back in February. Here is a general overview of how Phase III will now work (assuming the revised ordinance passes on April 30th):

  1. When the DCR decides it’s time, for 60 calendar days (or, on Council’s April 16th recommendation, this window will close 30 days after Council “adopts the findings of the Enhanced Social Equity Analysis”), applicants for Phase III Type 10 retail licensing (i.e., brick and mortar) can apply to the DCR to be vetted and approved as either Tier 1 or Tier 2 Social Equity applicants. Licensing will then be split up into two “Rounds”.
  2. For Round 1 licensing, for a period of 14 calendar days (provided that the DCR posts written notice of Round 1 on its website 15 days before the 14-day window opens), the DCR will process the first 100 Type 10 retail licenses.
  3. To qualify in Round 1, an applicant business must have a Tier 1 or Tier 2 Social Equity applicant already verified (for more on social equity in L.A. generally, see here). Importantly, a Tier 1 or Tier 2 cannot be the social equity component for more than one business applicant in Round 1. And any individual who is an “owner” of an EMMD can’t be the Tier 1 or Tier 2 Social Equity applicant.
  4. During the 14-day application window, applicants have to submit to the DCR a complete application that includes the following: 1) a copy of an executed lease agreement with proof of a deposit or property deed for its business premises; 2) an ownership and financial interest holder form; 3) a financial information form; 4) a Business Premises diagram; 5) proposed staffing and security plans; 6) a dated radius map including horizontal lines and labeling of any sensitive uses relative to a Type 10 retail license; 7) a labor peace agreement attestation form; 8) an indemnification agreement; 9) a current Certificate of Occupancy for retail use for the business premises; and 10) all business records and agreements necessary to demonstrate that a Tier 1 or Tier 2 Social Equity applicant owns the minimum equity share in the business as required under current City law.
  5. The first 100 applicants that meet all of the foregoing will go forward for further license processing, which represents the “first come, first served” system in play.
  6. For Round 2 for the remaining Type 10 retail licenses (which Council instructed the City Attorney to increase the number to 150 from the originally contemplated 100 because of Undue Concentration), when the DCR decides it’s time to open the window, they’ll process Round 2 applications for 30 calendar days, but this Round 2 window cannot open “until DCR has made business, licensing, and compliance assistance available to  [pre-verified] Tier 1 and Tier 2 Social Equity applicants . . . for a period of at least 30 calendar days” (note that Council wants this assistance in place for 45 days before Round 1 opens instead of for 30 days before the commencement of Round 2).
  7. To qualify for Round 2, an applicant must have an individual “owner” that is a Tier 1 or Tier 2 Social Equity applicant that’s already been verified by the City.
  8. During the 30-day application period, applicants have to submit a complete application that includes the following: 1) an ownership and financial interest holder form (though Council requested that the ownership structure information only be required as part of number 9 below); 2) a financial information form; 3) a labor peace agreement attestation form; and 4) an indemnification agreement.
  9. The first 150 applicants that submit an application that meet the foregoing requirements then get 90 calendar days, when the DCR calls it, to then submit: 1) a copy of an executed lease agreement with proof of a deposit or property deed for its Business Premises; 2) a business premises diagram; 3) proposed staffing and security plans; 4) a dated radius map including horizontal lines and labeling of any sensitive uses relative to a Type 10 retail license; 5) an indemnification agreement; 6) a current Certificate of Occupancy for retail use for the business premises; and 7) all business records and agreements necessary to demonstrate that a Tier 1 or Tier 2 Social Equity applicant owns the minimum equity share required by current City law.

Note also that Council wants to add to the ordinance: the ability of Type 10 or 9 retailers to be able to add other non-retail commercial cannabis uses to their license applications when they’re in pursuit of their City annual licenses; that as of January 1, 2010, DCR is allowed to process additional Type 10 retail license applications so long as mandatory social equity ratios are honored and Undue Concentration isn’t violated; and a prohibition on the “sale or major change of ownership” of a social equity licensed business until “minimum standards are adopted” unless “extenuating circumstances” exist as determined by the DCR.

We finally know what Phase III is going to look like in L.A., which will probably cause a lot of relief and also major anxiety. Without a doubt though, Phase III retail licensing in L.A. is now going to be a massive race to get in complete applications, and it will be a feeding frenzy for business folks to partner with social equity applicants (so be on the look out for predatory tactics). For those out there that have been sitting on property in L.A. just waiting for Phase III to open, now is the time to start preparing for the submission of your complete application to the DCR as one missed or incorrect document can spell rejection. Be sure to organize and analyze accordingly.

We’ll be sure to keep our eye on the revised Phase III ordinance as April 30th approaches.

california cannabisOver the last few years, California has gained a reputation of being a state where cannabis is completely legal and out in the open. In reality, cannabis isn’t nearly as “free” as people think it is in the Golden State, with many cities outright banning commercial cannabis activities. Right now, there is an ongoing battle between the state and local governments for access to cannabis, which should be the first place that states (and possibly even Congress) look when considering legalization.

For background, the operative state cannabis law in California—the Medicinal and Adult-Use Cannabis Recreation and Safety Act (“MAUCRSA”)—allows cities and counties to “adopt and enforce local ordinances to . . . completely prohibit the establishment or operation of one or more types of businesses licensed under this division within the local jurisdiction.” This provision (as well as some other related ones) have created a great deal of tension between state and local governments.

The result of this comprehensive local control is that some local governments reject commercial cannabis activity altogether, or only allow very limited licensing and/or no retail sales or delivery. For example, only a small handful of the approximately 90 cities in Los Angeles County allow cannabis retail sales. To boot, many other localities throughout the Golden State prohibit deliveries within their borders. This continued prohibition even occurs in many cities whose voters approved of adult use cannabis sales back in 2016.

Local bans have created a good deal of regulatory and administrative chaos throughout the state, including the fact that the state is not netting the expected tax revenue it would otherwise receive if all local markets were open. One sticking point in particular is the fact that cities that don’t allow cannabis businesses also don’t even allow delivery to their citizens. According to the state though, that’s going to change. And fast.

The Bureau of Cannabis Control (“BCC”) recently created a regulation that allows deliveries by licensed cannabis retailers into any city or county in the state regardless of any local delivery ban. This was widely praised in the cannabis industry but was immediately attacked by localities.

To combat open deliveries, legislation was introduced (AB-1530) to specifically allow cities to forbid deliveries. AB-1530 recently failed passage on April 9, 2019 but may be reconsidered. A number of California cities also recently sued the BCC over this regulation. The litigation was only just filed, but we expect that the cities will move to enjoin the BCC’s implementation of this new open delivery rule—the result would be that deliveries could only occur in cities that allow them, which is the status quo. We don’t yet know how that litigation will unfold but will continue to follow it as it progresses.

Another recently introduced piece of legislation is AB-1356 would require local jurisdictions to allow certain local retail permitting if local voters voted in favor of the Control, Regulate and Tax Adult Use of Marijuana Act of 2016. In other words, AB-1356 would overrule local governments where local voters approved of the adult-use precursor to MAUCRSA.

One thing that’s obvious from these recent challenges and new bills is that there is room for compromise. Cities that don’t want to have brick-and-mortal cannabis operations, for example, could agree to allow regulated deliveries. Whether they agree or not, any total ban is likely to be ineffective and may only result in the further proliferation of the existing black market. Cannabis prohibition didn’t work previously; it’s not likely to work now on the local level either.

This battle is ultimately important for jurisdictions considering adopting cannabis laws. The point of legalization, regulation, and taxation is to outpace the black market and ensure safe and reliable access to cannabis with public health in mind—not to impose additional costs on the state and to shift disputes from the criminal courts to the civil ones. While local control is important and serves a legitimate purpose for protecting communities, lack of access to cannabis will really only serve to harm communities where the unregulated and unscrupulous black market rages on.

cannabis marijuana robot automate drone

Everyone seems to agree that few of us are safe from the impending roboacolypse. Not the farmers, not the restaurant workers, not even the fashion models or (gasp!) the lawyers.

What about those employed in the cannabis industry? Not according to a recent article on Seedo, “an Israeli and Maryland based startup that claims to be able to quadruple the yield of traditional cannabis grows using climate-controlled chambers run by robots.”  According to a news release dated March 19, 2019, Seedo has partnered with Kibbutz Dan in Northern Israel to establish the first fully automated, commercial-scale, pesticide-free containerized cannabis farm in Israel. You can watch the video here.

Seedo claims that its airtight, stackable containers will take the guesswork out of the cultivation process, optimize land-use, and reduce the environmental footprint of the farming operations. Oh – and each container can produce at least 326 pounds of dry cannabis bud per year.

Meanwhile an April 2019 cover story by Marijuana Business Magazine that surveys salaries across the cannabis industry indirectly highlights the benefits of moving to automation. The article notes that at nearly every level of the cannabis industry people tend to earn more than their mainstream counterparts and that for most companies, payroll is the biggest expense.

We would add that payroll aside, employees are often the greatest source of risk for cannabis businesses which are generally held strictly liable for the actions of their employees. This means one bad hire can put at risk an investment millions of dollars. We see this all the time with so-called “consultants,” who offer grand visions of easy money but just as often walk away leaving a business in shambles and carrying a briefcase (or two) full of cash. We also see this in situations where owners and employees are doing their best, but a mistake is made and the regulatory agency steams ahead with license revocation proceedings.

Are robots the answer? Maybe not yet, but in this tightly regulated industry where a mistake (honest or not) can result in license revocation, we should expect cannabis businesses to take advantage of any technology that promises to mitigate risk.

mexico marijuana cannabis

We are committed to keeping our knowledge of international cannabis news current, and as legalized cannabis has become an international reality, our lawyers in Spain and in China are naturally seeing more of this work. Zozayacorrea Sahagún Arizaga, a leading law firm based in Guadalajara, Mexico, gave Harris Bricken the express permission to provide our own English summary along with the original Spanish article.

Mexico’s New Cannabis Laws

Cannabis legalization and regulation in Mexico is imminent.

Late last year, the current Secretary of Government, Olga Sánchez Cordero, presented a legislative proposal to issue the General Law for the Regulation and Control of Cannabis (“The Cannabis Bill”).

The Cannabis Bill would regulate the growing, cultivating, harvesting, producing, transforming, labeling, packaging, advertising, transporting, distributing, selling, marketing, carrying and consuming of cannabis products and its derivatives for personal, scientific and commercial purposes.

In other words, it would regulate pretty much everything.

The Cannabis Bill also proposes creating the Mexican Institute for Regulation and Control of Cannabis (“IMRCC”) to regulate, monitor, sanction, and concentrate registration of cannabis producers and to establish guidelines for cannabis consumption in public spaces. The IMRCC would have the power to issue cannabis licenses and renewable permits for between 5 and 10 years.

In addition to legalizing cannabis production for personal use via production cooperatives, the Cannabis Bill would also set up the following four commercial cannabis categories:

  1. Therapeutic or Herbal Use: Licensed businesses will be allowed to plant, cultivate, harvest, prepare, produce, process, transport, distribute and sell cannabis and its derivatives for therapeutic purposes. This would not require medical authorization or supervision.
  2. Pharmaceutical Use: This commercial cannabis category would allow sowing, cultivating, harvesting, preparing, producing, processing, transporting, distributing and selling cannabis and its derivatives for pharmaceutical purposes. Sale of cannabis and cannabis-derivative products under this category would require a medical prescription with purchase through a licensed pharmacy in compliance with Mexico’s General Health Law.
  3. Adult Use: Businesses licensed under this category would be able to sow, cultivate, harvest, prepare, produce, process, transport, distribute and sell cannabis to adults. Public consumption of cannabis by adults would be regulated the same as tobacco. The sale of cannabis and its derivatives under this category must be made in authorized establishments, which may only market cannabis, derived products and related items. Cannabis sold under this category will be regulated in its amount of tetrahydrocannabinol (“THC”) levels and will require have strict warning and labeling requirements.
  4. Industrial Use: Cannabis businesses licensed under this category will be permitted to sow, cultivate, harvest, prepare, manufacture, produce, distribute and sell cannabis for industrial purposes.

Businesses applying for licenses under all four of the above categories would need to comply with several legal requirements, including reinforcing the legal age of possession and consumption at 18, and not having been convicted of a “high social impact” crime, money laundering or for organized crime. Continue Reading Mexican Cannabis: The New Legal Landscape

 

washington cannabis regulationsSenate Bill 5318 is making its way through the Washington legislature and seems destined for Governor Jay Inslee’s desk. As of April 16, the bill had cleared both the Washington House and Senate. If signed into law, which seems increasingly likely, SB 5318 would drastically change the way the Washington State Liquor and Cannabis Board (“LCB”) operates.

SB 5318 is titled, “An Act Relating to reforming the compliance and enforcement provisions for marijuana licensees.” Washington marijuana licensees, in this writer’s opinion, face the strictest, most punitive regulatory regime in any state that allows recreational marijuana. This is due to the rules around “true parties of interest” and “financiers.”

A true party of interest (“TPI”) refers to a legal owner of any shares or membership interest in a licensed business. The LCB also considers anyone who has the right to receive any percentage of the gross or net profits from a licensed business a TPI. The true party of interest designation also refers to the spouses of anyone who qualifies as a TPI.  The LCB currently mandates that a person apply to become a TPI, which means that spouses, even for marriages after initial licensing, be disclosed and vetted by the WSLCB. TPI relationships can occur unintentionally which results in a violation. The recommended penalty for the first TPI violation is license cancellation and the LCB pushes for cancellation on nearly all TPI cases.

Financiers are defined as any individual who loans or gifts money or goods to a marijuana business must also be vetted. In addition, the LCB must vet any funds that go towards the operation of a marijuana business, regardless of the amount. Failure to do so can result in license cancellation. For example, if a TPI uses his or her personal money to cover payroll for a month when revenues are short, the LCB will cancel the license for failure to vet those funds.

The LCB has taken a few half-measures to address this unworkable system. A few months ago it floated the idea of starting an amnesty program for certain TPI/Financier violations. That never happened. The LCB also adopted an interim policy that lets TPI’s infuse their businesses with cash upon submitting an application to add funds. That policy is a step in the right direction, but does not go nearly far enough.

The result of this “enforcement first” policy has been a contentious relationship between the LCB and state lawmakers, as documented by Lester Black for the Stranger. Without diving into the complex relationship between politicians, lobbyists, the LCB, and stakeholders, it seems safe to say that the LCB’s enforcement policy has reached a boiling point and caused lawmakers to overhaul how that agency operates.

Now that we’ve laid the framework, let’s get into the details of SB 5318:

Notice of Correction. If the LCB discovers a license violation during an inspection or visit, the LCB determines that a licensee is out of compliance with laws or LCB regulations, the LCB may issue a “notice of correction” which would include a summary of what’s wrong and how to fix it, a date when the licensee must comply, contact information for technical assistance from the board, and the process for requesting additional time if needed for good cause. These notices are not considered formal enforcement action and not subject to appeal or public disclosure. The LCB would be required to issue a “notice of correction” before bringing a civil penalty and could not issue a civil penalty before the time period in the notice expires. There are some exceptions where the LCB would not be required to issue the above notice:

  • The licensee has previously been subject to enforcement action for the same or similar violation;
  • Failure to comply with a previous notice;
  • Furnishing sales to a minor;
  • Diversion of revenues to criminal enterprises, gangs, or cartels;
  • Use of firearms in a licensed facility that poses a direct and significant risk to public safety; or
  • The commission of non-marijuana crimes.

Restructuring Penalties. The LCB must rework its current penalty structure. The LCB will still have the ability to include escalating penalties, but the cumulative effect of such penalties must be limited to two years, which is a reduction from the current penalty window of three years. Also, to cancel a license, the licensee must have at least four violations in a two year window. In turn, a single violation cannot result in license cancellation unless the LCB can prove by clear, convincing, and cogent evidence that the violation is caused by intentional or grossly negligent action or inaction that involves one of the public-safety scenarios listed in the previous section (i.e., diversion of marijuana, sales to minors, etc.). Additionally, no violations that occurred before April 30, 2017 may be considered as grounds for denial, suspension, cancellation, or non-renewal of a license unless the LCB can prove that one of the public-safety scenarios is implicated.

Compliance emphasis. The LCB must adopt rules to “perfect and expand existing programs for compliance education” for licensees. These rules must include a voluntary compliance program which has recommendations on abating violations. The LCB must also create a system where licensees can request consultation on compliance issues. The LCB is not totally prohibited from using information from these consultation visits, whether in person or done remotely, but they can not treat the consultation as an investigation.

Employee violations. The LCB may not issue a violation if it results from employee misconduct if the licensee documents that before the violation was issued the licensee established a compliance program and performed training to prevent the violation and that licensee had not enabled or ignored similar violations in the past.

Impact on Administrative Hearings. Administrative Law Judges will be authorized to consider mitigating and aggravating factors and can deviate from any penalties prescribed by LCB regulation. In addition, if a licensee enters into a settlement agreement with the LCB or the LCB’s representative, the LCB must give the terms of the settlement substantial weight and can only disapprove or modify the terms if the agreement is clearly erroneous.

SB 5138 seems very likely to pass but it has not done so yet. Differences between the House and Senate versions of the bill must be reconciled and Governor Inslee must still sign the bill. If passed, it will go into effect 90 days after the current legislative session adjourns.

olcc marijuana alcohol

Why is the OLCC throwing the book at me? This is a question we hear a lot these days from our Oregon cannabis clients in reference to the OLCC’s recent more aggressive approach to enforcement. As we’ve explained, the OLCC has tightened the reins on marijuana applications and rule violations. This has made the prospects of a favorable settlement seem increasingly out of reach for Oregon cannabis businesses that find themselves the subject of an OLCC investigation or receive a proposed notice of cancellation.

Although the OLCC Commissioners have said they are looking for partners in the cannabis industry, it doesn’t always seem that way. This is particularly true when a cannabis business takes reasonable and necessary steps to ensure compliance with the rules only to have an employee violate a rule, whether purposefully or inadvertently. Without fail (in our experience), the OLCC imputes liability for the employee’s actions to the business and the entity finds its license – and its entire business – at risk. Compounding this problem is that for many of regulations, neither the intent of the employee nor the licensee much matter.

The OLCC does not seem to go after holders of liquor licenses with such force.  Here are a just a few such matters that the OLCC has settled in the past few months, on the liquor side:

  • Failing to verify the age of a minor – $1,485 civil penalty or a nine-day suspension
  • Licensee permitted employees to sell alcoholic beverages for off-premises consumption without providing proper training – $1,815 civil penalty or a ten-day suspension
  • Licensee permitted employee to serve alcohol without a valid service permit – $1,485 civil penalty or a nine-day suspension
  • Licensee permitted unlawful activity by employees including the sale or distribution of controlled substances – $1,485 civil penalty or nine-day suspension
  • 41 documented incidents in 29 months described as “serious and persistent” – surrender of license

It is hard to imagine an entity with a recreational marijuana permit settling similar violations in a similar manner (e.g. failing to verify the age of a minor is a Category I violation) much less that the OLCC would tolerate 41 serious incidents over 29 months, or a licensee distributing controlled substances on premises.

So what gives? Although we understand the OLCC’s desire to maintain the integrity of Oregon’s recreational marijuana industry, we believe that as the industry matures the OLCC should treat violations of the rules governing recreational marijuana more like alcohol, not less. This kind of change likely needs to come from the OLCC or the Oregon Legislature.

The State of Washington is contemplating a wholesale revision of its rules governing the enforcement of the recreational marijuana rules because some of the issues described here. Look for a comprehensive post on this blog tomorrow.

As for businesses caught in the OLCC’s web, you can get some idea of what you’re in for here and here. And you should attend the free webinar Cannabis Agency Litigation Next Tuesday, April 23rd that you can register for here.

We’ve written previously about the inability of cannabis companies to receive United States Department of Agriculture (USDA) organic certification for their products (although there are alternative state-level and private certifications available to fill this gap), but what some of our clients are unaware of is that the USDA will provide organic certification for qualified industrial hemp producers.

The USDA provided clarifying instructions in its September 2018 Instruction on Organic Certification of Industrial Hemp Production for the UDSA’s policy regarding the organic certification of industrial hemp production by certifying agents accredited by the USDA National Organic Program (NOP). The UDSA first noted that Section 7606 of the Agricultural Act of 2014 (the Farm Bill) authorized institutions of higher education and state departments of agriculture to establish industrial hemp research pilot programs in states where the production of industrial hemp is legal and subject to certain other conditions.

industrial hemp usda organic

The USDA’s official policy is that “[f]or hemp produced in the United States, only industrial hemp, produced in accordance with the 2014 Farm Bill, as articulated in the Statement of Principles on Industrial Hemp issued on August 12, 2016 by USDA, may be certified as organic, if produced in accordance with the USDA organic regulations.”

For industrial hemp producers operating in accordance with their state’s industrial hemp program, becoming a certified organic operation will be no different than for companies in any other industry. The USDA lays out five basic steps to attaining organic certification:

  1. The farm or business adopts organic practices, selects a USDA-accredited certifying agent, and submits an application and fees to the certifying agent.
  2. The certifying agent reviews the application to verify that practices comply with USDA organic regulations.
  3. An inspector conducts an on-site inspection of the applicant’s operation.
  4. The certifying agent reviews the application and the inspector’s report to determine if the applicant complies with the USDA organic regulations.
  5. The certifying agent issues organic certificate.

All certified organic farms and businesses must also undergo an annual review and inspection process.

It is important to remember that touting your hemp (or cannabis) as certified organic when it is not is illegal under federal law. As mentioned above, for cannabis businesses there are alternative certifications available via some states or via private third-party certification companies.

In California, for example, SB 94 mandated that the California Department of Food and Agriculture (CDFA) create an organic cannabis program by 2021. In 2018, the CDFA formed the “OCal” project, which is a four-person team within CalCannabis dedicated to establishing that organic cannabis program. The program will be similar to the National Organic Program (NOP). OCal is currently in the information-gathering stage and is set to begin soliciting input from stakeholders this month.

In short, it’s clear that both hemp and cannabis companies value organic principles and are seeking certification. The path to such certification is clear for qualifying industrial hemp companies, but for other cannabis companies, the options are much more limited.

Our California, Oregon and Washington cannabis lawyers often receive calls from panicked license holders facing violations from cannabis agencies.

cannabis litigation

These violations have included monetary penalties, notices of non-renewal or straight up cancellation. If you’re a cannabis licensee, you know that the license is your most valuable asset. Without it, your business would no longer be able to operate in the cannabis space, and licenses are challenging and competitive to come by in the first place.

To learn more about how to prevent cannabis agency litigation from happening to you, and how to proceed if it does, please join us on April 23rd at 12pm PST for a free webinar featuring cannabis attorneys Griffen Thorne (California), Jihee Ahn (Oregon), and Daniel Shortt (Washington). Drawing from their extensive experience keeping cannabis businesses compliant and going to bat against cannabis agencies when needed, these cannabis litigation attorneys will discuss the following:

  • An overview of agency enforcement and litigation in California, Oregon and Washington
  • State enforcement priorities and communicating with state authorities in the event of a violation
  • Enforcement actions and notices of violation against licensed operators and unlicensed companies
  • Inter-agency appeals
  • Administrative litigation and state Administrative Procedure Acts
  • State court litigation against agencies

With moderator Vince Sliwoski, the panelists will answer audience questions throughout the presentation. To register for the webinar, please go here.