The State of California Cannabis Track & Trace

The State of California Cannabis Track & Trace

A transitional period and how to be prepared for Metric integration

Prepared by: Ben Bradley and Chelsey Miles

The regulations guiding California’s legal adult-use cannabis market are very clear regarding track-and-trace requirements for annual license holders. Essentially, once annual licenses are issued, all cannabis operations will need to utilize the California Cannabis Track-and-Trace (CCTT) system – administered by Metrc – either directly or through a 3rd party Application Programming Interface (“API”). The CCTT will require input for every product at every stage of the cannabis sales lifecycle: true “seed-to-sale” tracking.

While that is clear, currently California’s cannabis market is in an unusual grey area. The cannabis market was technically legalized January 1, 2018, but only some of the regulatory systems were in place. To date, only temporary cannabis licenses have been issued, and temporary licenses have their own set of governing regulations. Additionally, CCTT is not currently operational, leaving many cannabis operations in the dark about what is expected of them.

In the following, we will look in to current regulations, lay out exactly what is required, and explore best methods to comply.

What do the Cannabis Regulations Say?

While there is some variation in requirements for the different license types, the basics are that all transactions between cannabis operators must be documented on sales receipts and invoices. We’ve pored over the regulations for each business type and best practices for Distributors, Manufacturers, Cultivators and Retailers, is to include the following information:

  • Name, address, and license number of the seller;

  • Name, address, and license number of the purchaser,

  • Date of sale or transfer (month, day and year);

  • Description or type of cannabis or cannabis product;

  • Weight or quantity of cannabis or cannabis product sold or transferred;

  • Cost to the purchaser of the cannabis or cannabis product.

For the majority of license types, the regulations clearly state that sales receipts and invoices must be kept on paper hard copies. But the regulations for cultivators do allow for electronic retention as long as the information is readily available for examination by state regulators.

So as such, we recommend that all business types keep hard copies of sales receipts and invoices until the annual licenses are issued. Once the annual licenses are in play, all transactions between annual license holders will have to be tracked through CCTT. But transactions with temporary license holders must continue to be recorded through hard paper copies (even if one party is an annual license holder).

The Consequences for Failing to Track Transactions Properly

If a temporary license holder fails to properly track transactions, they risk losing their license, a fine levied by the state, and the possibility that future applications for temporary and/or annual licenses will be denied. So it is very important to maintain compliance as a temporary license holder.

What Changes Once Annual Licenses are Issued?

When annual licenses are issued, all cannabis operations will be required to attend training, and once that is complete, must: “input all required inventory and other reportable information into the track and trace system no later than 30 days (after completing training).”

There is currently no requirement to enter the activities undergone during operation under a temporary license into the CCTT after the annual license is received, which relieves a potentially tiresome burden. But, the imperative to be up-to-date in the CCTT within 30 days could present a major roadblock for cannabis operations with significant inventory and activity.

The “vanilla” or free version of METRC, which is the foundation of the CCTT, will require manual input of transaction and inventory data. Converting from the hard copy recordkeeping of temporary license operation to the manual entry of data to meet CCTT requirements can be a potentially disruptive shift in operation.

How to get a Head-Start on California Cannabis Track-and-Trace Requirements

In the process of advising a wide variety of California cannabis operations, we at MilesBradley have become proponents of using 3rd part APIs as the foundational technology solution for cannabis enterprises. The right API can make data entry, inventory tracking, tax payments, and regulatory compliance much simpler, and the API can also provide beneficial operational analytics.

There are two additional benefits to having a compliant API system for temporary license holders. The first is that having an operational API that connects to CCTT will make the transition to the annual license track-and-trace requirements a breeze. You will simply connect your program to the CCTT upon launch, and all previous and current data will upload. Ideally, making regulatory compliance almost instant. This will have tremendous operational benefits, as far less time and effort will be wasted rushing to attain compliance within the 30-day window.

And the second benefit – which is admittedly only speculative best practices at this point – Is that having a compliant technology solution in place before annual licenses are issued could have a positive impact on the selection and issuance process. Our discussions with regulatory bodies suggest that proving that your cannabis operation is already aligned to regulatory requirements will demonstrate due diligence and operational integrity: two factors regulators will be looking for when issuing licenses.

In Conclusion

In California’s “soft launch” of the legal cannabis industry, the Track-and-Trace requirements are relatively straight-forward and we recommend maintaining hard copies of essential data for each transaction. And to prepare for stringent track-and-trace requirements, greater regulatory scrutiny and the annual license application process, establishing a compliant technology solution now will not only help the transition to operation under an annual license, but it may also help you receive the license.

If you have any questions about California’s Track-and-Trace requirements, regulatory compliance or the selection and implementation of APIs, please feel free to reach out to us.

 

Ben BradleyComment