The CDPH’s Food & Drug Branch issued notice earlier this month to industrial hemp product manufacturers and extractors that it would be accepting applications and fees for the production of in-state hemp products, as well as in-state and out-of-state extracts.

Permission to legally manufacture, pack, or hold industrial hemp products and extracts requires:

• Authorization from the Industrial Hemp Enrollment and Oversight agency.
• Registration with the department for the applicable food, cosmetic product, or processed pet food.

Those who are making inhalable hemp products are solely required to obtain authorization from the IHEO department.

As our Los Angeles hemp lawyers can explain, hemp growers, producers, distributors, and retailers need to know that their products are going to be subject to strict regulations governing production, testing, labeling, and warehousing to ensure the safety of the products. State law (specifically, HSC 110140) authorizes inspection of any industrial hemp facility or operation by the health department in order to ensure state law and regulation compliance.

Companies that are submitting their applications to the FDB may want to consider having their attorney do it for them, or at least review all materials before submission. You don’t want your application to be turned down on a technicality, but there are many technical considerations that apply. Businesses must submit not only their application and the appropriate fees to the correct authority, but also provide a wealth of supporting documentation.

If you already have an active registration/license for cosmetics, processed pet food, or food through the FDB and are interested in adding hemp products to your mix, you must fill out and submit a brand new application with the IHEA Authorization application.

Applicants are required to demonstration that they’re in compliance with all existing laws and regulations. On top of this, businesses need to be prepared to demonstrate your compliance with inspections – an initial, scheduled inspection with an FDB representative and subsequent inspections that are likely to be unannounced.

It should be noted that there are different application forms for extract manufacturers and human food manufacturers in Los Angeles, San Bernardino, and Orange Counties. There are also industry-specific applications for those who make cosmetics, processed pet food, and canned human food.

Our Los Angeles hemp lawyers have reviewed these forms, and note that they can appear complicated, which may no doubt pose challenges for small business owners, particularly if they are just starting out and have little experience dealing with the highly-regulated California cannabis industry. (Of course, hemp regulation is not nearly as complex as cannabis regulation. Nonetheless, companies would be wise to have their cannabis business attorney prepare these documents for them, or at least re4view them before submission.)

The state health department’s Food & Drug Branch’s regulator authority over the industrial hemp industry is outlined in Chapter 576 of Statutes of 2021.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Certificates and Licenses, California Department of Public Health, Food & Drug Branch

Why Cannabis Companies, CBD Corporations Use Arbitration Agreements

As our Los Angeles corporate CBD lawyers can explain, many cannabis company contracts contain arbitration clauses. Some examples include sales contracts, operating agreements, employment contracts and intellectual property licenses. Dispute resolution should never be an afterthought, so this provision is important.

Arbitration is used in lieu of pursuing the case in court. There is no judge or jury in arbitration. Both parties instead pay an arbitration company or private arbitrator (usually an attorney or former judge) or arbitration panel to preside. Arbitrators don’t represent either side. They’re neutral third parties who hear both sides and then reach a resolution. That can involve damage awards, requiring one party to pay the other.

Arbitration Award Against CBD Distributor Upheld

The question at issue before the Eleventh Circuit in Earth Science Tech, Inc. v. Impact UA, Inc. was whether an arbitration award against a CBD distributor in favor of an international supplier could be enforced. It involved a Florida CBD products distributor and an El Salvador hemp-based product supplier. The two businesses signed a distribution agreement that gave the Florida company exclusive rights to market, sell and distribute the international supplier’s CBD oil in the U.S. The companies would then split the profits.

There was an arbitration clause in the distribution agreement indicating both agreed New York law would apply and if a dispute arose, they would resolve it with arbitration using a specific arbitration firm.

However, the business relationship went south within just a few months, with the supplier, demanding arbitration, accusing the distributor of breach of contract, tortious interference and conversion. The distributor instead filed a state court lawsuit. It was later removed to federal court, but the matter was put on hold pending the outcome of the arbitration.

The case went before an arbitration panel, which awarded the supplier nearly $4 million (mostly on the tortious interference claims). The supplier then asked the federal district court to confirm that award.

The distributor sought to either vacate or modify it, argued the tort claim should never have been subject to arbitration and asserted the award couldn’t be affirmed because it wasn’t consistent with the U.S. Controlled Substances Act.

The court disagreed, siding with the supplier. The distributor appealed, but the Eleventh Circuit affirmed.

Why the Court Rejected CBD Distributor’s Arguments

On the question of whether tort claims were subject to arbitration, the court pointed to the applicability of the Panama Convention, which spells out arbitration rules for how commercial disputes involving the companies in the U.S. and most of Latin America should be resolved. (There are several potentially applicable conventions in these cases, depending on the location of the international company involved.) Provisions of that law allowed for arbitration on the tort claim. But even if they didn’t, the CBD distributor forfeited its right to dispute the award because it agreed – as did the supplier – to submit that issue to the arbitrator.

On the issue of modification, the only grounds distributor would have had to make this argument were that there was an evidence miscalculation. The court quickly determined there was not.

As for the argument of the award’s inconsistency with the U.S. Controlled Substances Act, the distributor argued that when the contract (to which it was a party) was signed six years ago, federal law prohibited the sales of any THC-containing product – including CBD. If the court affirmed the award, the distributor argued, they would be enforcing a contract whose subject was illegal under federal law.

No, the court answered. The distributor bore the burden of proof to establish the subject of the contract was illegal, and its own website stated at the time that its products were federally legal “everywhere in the USA.” The appellate court said it wouldn’t assume the distributor was flagrantly advertising products as legal if they believed them to be illegal. The court further cited the 2018 Farm Bill that removed hemp and hemp-derived CBD from the Controlled Substances Act. Even if the product was illegal then, it isn’t now.

That decision doesn’t set any binding precedent within that circuit, let alone the Ninth Circuit, which oversees cases in California. However, it may prove persuasive to sister courts if similar cases regarding international contracts involving sales of CBD and hemp arise.

Bottom line for California hemp and CBD businesses:

• Talk to an experienced Los Angeles CBD lawyer before entering an agreement with any international firm so you know exactly what rules are gong to apply.
• If you are involved in arbitration with an international firm, you need to be sure you know which convention applies so you can make a strong argument.
• If you had a hemp-CBD business contract that was signed prior to the passage of the 2018 Farm Bill, it’s unlikely you’ll be able to challenge the validity of it on the grounds the subject is unlawful. You might consider, nonetheless, having your attorney review it.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Earth Science Tech, Inc. v. Impact UA, Inc. , April 14, 2020, U.S. Court of Appeals for the Eleventh Circuit

As noted by the Commercial Carrier Journal, drivers face potential criminal action if they navigate through a state that doesn’t have clear hemp rules in place that align with the Farm Bill of 2018. If a state law does not allow hemp, our Los Angeles hemp lawyers would advise farmers and carriers to map their routes accordingly.

There are published cases of at least half a dozen drivers over the last 18 months being arrested and charged with felony counts of marijuana trafficking and distribution. There are also many cases of drivers hauling hemp that is mistaken for marijuana.

Among some of these cases:

• A 39-year-old driver in Texas was arrested by the by a state trooper for hauling some 3,350 pounds of product authorities mistook for marijuana. He was jailed for nearly a month on federal marijuana trafficking, his haul seized. The man was later released, but only after state lab test results concluded the substance was hemp – not marijuana. The stipulation being that hemp contains less than 0.3 percent THC. Texas is still in the process of creating regulation for hemp transportation and farming.
• The New York Police Department confiscated more than 100 pounds of what they believed to be marijuana and arrested the driver on marijuana trafficking charges. The officers tested the plant material at the scenes and the tests reportedly came back positive. However, defense lawyers say police used an outdated testing method. More in-depth testing proved it was hemp.
• A trucker from Oregon on his way to Colorado last year was arrested by Idaho officials who stopped him at a weigh station and crowed the 7,000 pounds of plant material seized amounted to the “biggest drug trafficking bust in state history.” In reality, what the driver was hauling was hemp, as proven later by tests – a substance that had just been made legal by the 2018 Farm Bill. However, because Idaho hadn’t yet changed its laws pursuant to the federal law, transport of hemp through that state was still illegal. He and two other truckers arrested under similar circumstances faced up to five years in prison. They ultimately had their felony charges reduced to misdemeanors and their sentences suspended for time-served, but they will have to serve two years of unsupervised probation and pay more than $5,000 in fees. One driver’s cannabis company employer is now suing the state.

Part of the problem with law enforcement, in addition to possible outdated testing methods, is that the plant looks and smells virtually indistinguishable from high-THC-concentrated marijuana. This makes sense because both are cannabis plants.

Although the intent of the 2018 farm bill is to assure unfettered transport of hemp, carriers and truckers may not want to take chances while some of these matters are still pending at the state level, particularly as courts in a few of these cases have sided with the state. It’s generally advisable for companies that haul hemp across state lines to verify the state laws in every state through which their load will be traveling. Carry a copy of the grower’s license so you are assured the product was legally grown – and you can prove it.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Hauling hemp, though technically legal, still comes with risk — for now, Sept. 27, 2019, By Matt Cole, Commercial Carrier Journal

As Orange County hemp business lawyers can explain, despite Congress’s legalization of non-psychoactive hemp (and its CBD derivative) by way of the 2018 U.S. Farm Bill, allowances for actual production of the crop remains in the hands of local jurisdictions.

California, despite being on track to have the largest legal marijuana market sales in the world, remains one of the last remaining strongholds against production of legal hemp, which, like marijuana, is derived from the cannabis plant. Across the state, entrepreneur efforts to grow hemp are in full force, and the good news is several counties have passed ordinances that will give farmers the permission they need to kick start their hemp-growing ambitions.

All this could soon see California has a hemp-producing powerhouse. The Golden State offers a climate and soil make it perfect for hemp cultivation year-round. The only reason we’ve fallen behind other states that grow hemp is because we’re the only one empower its 58 county agricultural commissioners to make the decision about regulations concerning local cultivation.

As it stands, nearly two dozen (or about 40 percent) have approved hemp cultivation, with the state’s Department of Food & Agriculture having licensed nearly 17,000 acres, 34 “seed breeders” and nearly 260 hemp farmers. That puts California off to something of a slow start, considering the the department gave hemp cultivation businesses the green light back to apply for licenses back in April.

In an analysis that further breaks down the California hemp industry’s statistics, Hemp Industry Daily delved further into the numbers.

Hemp Farming Entrepreneurs Face Local Patchwork of Local Restrictions

Of the counties that have granted acreage requests for hemp entrepreneurs, a couple exist in locations that still have moratoriums in place until next year. In both San Luis Obispo and Shasta, dozens of farmers are delayed from entering the fray. It’s possible that a superseding permanent ordinance that would allow hemp growers the ability to begin operations.

There are 16 California counties wherein there is no ban, but production hasn’t begun. That’s partly because half haven’t taken any position on hemp production at all. The other half have passed ordinances that would allow hemp, but no cultivation company has yet been licensed/approved to get started. In one, Santa Barabara, growing hemp is allowed solely for research purposes.

More than half a dozen counties have some type of temporary moratorium in place, with extensions that could last nearly two years, though final decisions for that would be up to the respective county supervisory boards.

It’s not just counties that are passing ordinances, bans and additional rules/restrictions/guidelines. Several cities have passed their own hemp production rules – in some case running contrary to the county’s position.

Several cities have paused any type of hemp production while they work to craft a city ordinances, while others say more legal research is necessary to parse whether state and federal regulations truly distinguish marijuana from hemp. Others have hit the pause button at least until they can gauge what the impact will be on existing local marijuana businesses.

Some hemp farmers, eager to jump in the game, purchased equipment and secured property via sales or leasing, anticipating setting up operations there – only to be slapped in the face with a local moratorium on hemp production and sales. Orange County hemp farming attorneys understand some are fighting this in court, while others have decided it isn’t worth it, choosing instead to sell the land move their assets to a friendlier region.

It does appear California law is on the side of the farmers. There is a bill currently before the governor that would revise state regulation to expressly allow production of hemp – but it still wouldn’t stop local powers from exercising their authority on this front (similar to what Prop. 64 did, resulting in so-called “weed deserts” that has allowed black market pot sales to thrive.

If you are interested in launching a hemp cultivation business, our hemp law firm can help ensure your business plan, permitting, property use and other allowances are properly secured.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Hemp in California: Counties, cities remain divided on production, Sept. 30, 2019, Hemp Business Daily

Fake THC Cartridges Are Flooding California Of all counterfeit cannabis products, refillable THC cartridges used inside vaping pens are currently most common. Surprisingly, states like California – where recreational cannabis use is legal – appear to be most flooded with counterfeit products. Big brands like Kingpen and Rove have tried to get ahead of counterfeits by repackaging their products, but counterfeits have shown they can keep pace, often reproducing new packaging almost as quickly as the legitimate brands.

And industry insiders unanimously agree, the fakes are getting better all the time. Many knockoff THC vape pens are comprised of illegally but locally grown cannabis, which producers then stuff into refillable cartridge pens, before attaching counterfeit labeling they’ve purchased online, and selling the finished counterfeit pens at discounted prices to illegal pop up shops. To most consumers and law enforcement officials alike, it’s very difficult to tell a real pen from a fake one.

The best way for brands and businesses to protect against counterfeits is to legally trademark cannabis products. Once cannabis companies have a trademark in place, Californian authorities then have jurisdiction to enforce against counterfeits. Without a trademark though, it’s very difficult to prosecute. If you need help trademarking your cannabis products, our marijuana business lawyers of Orange County can help.

A Budding Counterfeit Scene All across California, legitimate cannabis businesses are feeling the pinch. The problem is so wide spread that brazen bootleggers are even advertising counterfeit products on Instagram and Snapchat. An admin for DanksOfficial – a watchdog Instagram account cautioning marijuana users against buying THC cartridges on the black market – who prefers to remain anonymous, says unless consumers can test each cartridge, there’s no way to be sure a vaping cartridge is real or safe. Experts Warn of Health Risks Counterfeits Pose Just as vaping is increasing in popularity across the nation, associated long-term health risks are also becoming increasingly clear. The Center for Disease Control and Prevention (CDC) recently announced that 193 cases of severe lung illness, all possibly linked to vaping, have propped up across 22 states. While the CDC did not share exactly how many cases involved products containing THC, Dr. Illeana Arias, senior scientific advisor and acting deputy director for non-infectious diseases noted “in many cases” patients had confirmed using THC-containing products prior to feeling unwell.

Meanwhile, the California Department of Public Health (CDPH) recently stated as many as 28 cases of acute lung disease among people who recently vaped cannabis products, had been reported across the Golden State. Just this August, the CDPH issued a health alert in Kings County after a cluster of hospitalizations. Between July and August, seven healthy adults were admitted to county hospitals, all showing signs of severe pulmonary disease, after vaping THC products. Nancy Gerking, Kings County assistant director of public health, confirmed the products were all purchased from temporary, unlicensed pop-up shops in the local area.

At about the same time, we also saw the Bureau of Cannabis Control (BCC) launch a public awareness campaign warning consumers about the health risks associated with buying marijuana products from unlicensed dispensaries. That’s because knock off products are completely unregulated and avoid testing for pesticides or other contaminants, which can pose dangerous health risks.

Other industry insiders note, because licensed cannabis growers and businesses cannot distribute their goods to unlicensed stores without risk of suffering heavy fines from regulators, if big brand name products are showing up in unlicensed stores, then those products are almost always fake. Consumers can best protect themselves from subpar goods by buying all cannabis products from licensed, registered cannabis businesses. To check if a California cannabis dispensary is legitimate and meets the state’s high safely standards, enter their business name into the BCC online license search tool (www.CApotcheck.com). Be sure your retailer is listed there, before shopping.

Marked Down Knock Offs Bringing in Big Bucks The state’s registered marijuana operations are projected to make more than $3 billion combined this year. But that number is easily overshadowed by the $8.7 billion in revenue expected to be generated by the unregulated cannabis industry across California in the same time frame.

Legitimate cannabis business operators are at pains to compete. It is widely believed that counterfeits are boosting unlicensed dispensary sales, where business owners can afford to sell cannabis products at lower prices, because they’re skipping out on regulation costs and avoiding taxes.

Authority Clampdowns Showing Signs of Success The Los Angeles Police Department is making strides in limiting the rampant illegal cannabis trade. At the beginning of the year there were almost 300 illegal dispensaries operating in the Los Angeles area, compared to less than 200 today. With authorities primarily focused on closing unlicensed dispensaries, clamping down on counterfeit products is not yet a priority.

Rather than issuing search warrants that could lead to seizing knock off cannabis items, the LAPD is focused on first cutting water and power to properties hosting illegal cannabis activity. While this is a strong first step, some fear counterfeit products not seized when closing down illegal operations, can easily circulate somewhere else down the road.

Legal Implications The black market for cannabis activity is thriving, and counterfeits are boosting sales for unlicensed retailers across the United States. Without regulation, corners are being cut, product safety is in question and health risks are becoming a reality. Additionally, the sophisticated production of knock offs show little signs of slowing down.

In this climate, the best way for cannabis brands to protect the integrity of their products, their brand reputations and the well-being of their customers, is to secure product trademarks, invest in difficult to replicate product packaging, and aggressively pursue counterfeits.

Some industry stakeholders believe knock offs will abate as consumers become more informed over time, and others are frustrated that counterfeits are stoking unlicensed dispensaries, who are taking such a large portion of market share. Either way, legitimate cannabis outfits are working hard to stay licensed, and to keep their businesses running. It seems the longer it takes to clamp down on counterfeits, the harder it will become for legal businesses to continue trading. Let’s hope the ramped up authority crack downs continue to make inroads and pave a smoother path for legal cannabis business owners moving forward. About Cannabis Law Group The Los Angeles CANNABIS LAW Group represents growers dispensaries, ancillary companies, patients and those facing criminal marijuana charges. Call us at 949-375-4734. Additional Resources: The Center for Disease Prevention and Control California Department of Public Health Bureau for Cannabis Control California

And it’s not what we’ve seen in years past. Growers need not fear raids from Sheriffs in Humboldt, as much as they should civil action. That’s right, fines are now being issued in the amount of $10,000 per day, for each violation, capping out only at $900,000. And if that isn’t deterrent enough, next comes property liens and forfeitures.

Do you need help with notices to abate, property leins and forfeiture or civil fines? Our Southern California cannabis business lawyers are only a phone call away.

Violations Escalate Quickly Once a violation is noted, recipients have ten days to remove their plants. And even if growers remove their plants that same day, they’ll still face a minimum $10,000 fine. Failing immediate removal, fines can run for up to 90 days, maxing out at $900,000, before growers face county collection action, and eventual property loss. Local industry insiders say a number of properties are now on the market simply because of their civil abatements.

This is not surprisingly having a wider effect, and breeding compliance, as no one wants to lose everything they’ve worked for.

Ramped Up Law Enforcement Activity As a further deterrent, a combined effort by local and state authorities has resulted in intensified clamp downs on illicit cannabis businesses right across the state. In June this year, a four-day raid lead by the Santa Barbara County Sherrif resulted in the seizure of 20 tons of illegal marijuana. But this was no overnight occurrence. The operation took place only after a two-month long investigation conducted by an assortment of agencies.

Illegal growers are not the only targets as retail stores are on the radar too. The cannabis regulations law, Assembly Bill 97, which was passed in Sacramento in July, allows for fines of $30,000 per day if operating a marijuana storefront without a license. These fines are intended to target illicit stores in Los Angeles competing with legitimate business owners who’ve paid hundreds of thousands of dollars to operate lawfully.

How the Game Has Changed These days, there’s nowhere for growers to hide. Satellite imagery spots grow structures from outer space and authorities use those images to determine who should be sent abatement notices for operating without cultivation licenses. In Santa Barbara, a newly created task force set up specifically for the purpose of combing through cannabis license applications, compares those applications to satellite images to check for possible license fraud. And if found, that is grounds for abatement.

Civil Charges – Cheaper and Quicker While criminal cases can be stretched out for years, often times to the advantage of a defendant, civil code violators have just ten days to appeal a notice to abate. If appeals are made, they are done so quickly, without a judge or jury, and with fairly loose rules surrounding evidence. So no matter how the case plays out, we see action and outcome affected almost immediately. Similarly, sending out 100 abatement letters could cost $49 in postage, while the overtime and man hours needed to carry out police raids can cost well into the millions of dollars.

Implications The outcome of a move toward quick, punitive civil fines being issued in place of long, drawn out criminal trials, means offenders are now avoiding prison time. But they are also getting hit where it hurts business folk most – the pocketbook. This new brand of civil action is leaving offenders bankrupt and without their properties. The fact that criminal charges are being replaced with civil ones, shows that while the war on drugs continues, it has been civilized. And this civil action is closing down California’s long time illegal cannabis operators in a way that criminal prohibition could not. Put simply, civil court cases are faster, cheaper, easier and more effective to pursue, so we can expect to see a lot more of this strategy implemented in future. About Cannabis Law Group The Los Angeles CANNABIS LAW Group represents growers dispensaries, ancillary companies, patients and those facing criminal marijuana charges. Call us at 949-375-4734. Additional Resources: Assembly Bill 97 – The Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA)

The catch though, the California Department of Food and Agriculture (CDFA) is yet to show its ability to approve those provisional or permanent licenses, at the same pace applications are being lodged.

The backlog on approvals may be due to the complexity of the licensing application process itself. Tellingly, by mid July 2019, only 2,053 provisional licenses and 230 permanent licenses had been granted. As it stands, when applying for prospective licenses, cannabis farmers are expected to demonstrate compliance with the stringent California Environmental Quality Act (CEQA), as well as submit:

• Background checks;
• Surety bonds;
• Real property documents;
• Detailed site plans;
• Farm management practices;
• Waste management protocols;
• Security procedures; and
• Pesticide measures.

Obviously once these detailed applications are submitted, someone then needs to review them, which is also a lengthy process. The lag time evident in securing updated license approvals is leaving 7,181 cannabis farmers with a dire choice – either cease operating until a new license is approved, or continue growing and selling, and risk fines as high as $30,000 a day for trading without a license. For many growers, who are low on resources, this is a perilous predicament.

As the cannabis industry continues to grow in California, on July 1 Governor Newsom signed Assembly Bill 97 into law. Essentially, AB 97 helps make way for additional provisional licenses and removes a previous barrier, requiring a cannabis farmer to first hold a temporary license before applying for a provisional license. AB 97 not only opens the doors for a new wave of marijuana growers to join the legal cannabis landscape, but a second function of AB 97 also enables the renewal of provisional licenses for growers who have already obtained these. This particular change gives cannabis farmers more time and some leeway to meet the stringent compliance requirements of the CEQA, before securing a permanent annual license.

But AB 97 does not help temporary license holders. Under the current law, temporary licenses cannot be renewed or extended. To assist farmers with expired temporary licenses who are still waiting for their prospective or permanent licenses, Senator Mike McGuire sponsored Senate Bill 67. It sought to extend and reinstate a grower’s temporary license until September 15, 2019, to help farmers continue operating legally, while waiting for the CDFA to grant their subsequent license approvals. In order to benefit from SB 67, growers must have obtained their temporary licenses and applied for a provisional or permanent license prior to the expiration of their temporary license.

Unfortunately for those 7,181 temporary cannabis license holders now needing new licenses, SB 67 has stalled and shows little signs of progressing any further. Legislators appear to believe AB 97 adequately addresses the majority of cannabis business license issues, meaning farmers yet to receive their updated license approvals, must merely wait it out, no matter how long that takes.

Legal Implications Thus Far State lawmakers are yet to offer any assurances of leeway for marijuana farmers now waiting on the CDFA to approval their provisional or permanent cannabis business license applications. Many will watch with interest to see whether examples are made by law enforcement in this area, amid city sanctioned crack downs and blitzes now in effect that target blatant black market cannabis business operations.

Need Legal Help Obtaining or Renewing a Commercial Cannabis Business License? Our Los Angeles cannabis business licensing lawyers can help answer any questions you may have.

The Los Angeles CANNABIS LAW Group represents growers dispensaries, ancillary companies, patients and those facing criminal marijuana charges. Call us at 949-375-4734. Additional Resources: California Department of Food and Agriculture Assembly Bill 97 Senate Bill 67

Orange County marijuana farming lawyers know this would be a substantial first step to decriminalizing cannabis at the national level, a move that could have significant implications for state-legal dispensaries. Because cannabis remains illegal under the U.S. Controlled Substances Act – especially in the highest-risk classification – California marijuana farms, production centers, labs, landlords and ancillary businesses know the Cole Memo is little more than a tenuous truce. They are largely at the mercy of political whims, and while it seems certain legalization (or at least lower classification) will be inevitable, the question is: When?

A Schedule I narcotic like marijuana is considered by law to be extremely dangerous, highly addictive and have no medicinal value. Even those opposed to federal legalization for recreation know this description is absurd. The problem is its classification has prevented reputable study for decades. Yet the government has argued it doesn’t have enough data to eschew the Schedule I categorization – so it becomes a catch-22.

Congressional Leaders Assert Prompt Action Needed on Pot Policy

As it stands, the federal government has approved just one grower to harvest all pot produced for government research. Lawmakers argued this was woefully inadequate, particularly as there is growing evidence the drug can be a powerfully effective means to treat an array of medical conditions. The process of quality, peer-reviewed study takes time, legislators note. As it stands, any federal research (which holds the most weight when it comes to policy change) must be approved by three separate federal bureaucracies. And that single, licensed grow operation? It’s in Mississippi, and many researchers say not only does it not produce enough, but the quality is sub-par. Even if it were great quality, there are currently so many different cannabis varieties and processing methods that any singular grower would be unable to keep up. The result is that some cannabis researchers take years to get government approval just to start their study. Lawmakers asked for the DEA and the DOJ to do what is necessary to expedite and improve the application process for researchers and expand research opportunities for cannabis in general.

One of those leading the charge was Rep. Eric Swalwell, a Democrat from California. The federal agencies addressed in the letter did not respond to comment by journalists.

As it stands, 33 states plus the District of Columbia have legalized marijuana for medicinal use. Ten, including California, have approved of legal sales for recreational use.

Changes to federal drug policy that would allow more research would ultimately allow us to craft smarter regulation that allows for streamlined and safe production and mutual benefit for businesses and taxpayers and maximum. Shedding the state-federal legal conflict will also help close safety and regulatory loopholes.

The Los Angeles CANNABIS LAW Group represents marijuana researchers, growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

DOJ, DEA urged to expedite process for green-lighting marijuana growers, researchers, May 8, 2019, Associated Press

More Blog Entries:

USDA: Hemp Farmer Intellectual Property Rights Finalized, May 13, 2019, Orange County Marijuana Research Attorney Blog

This may seem a bit confusing, given that section 10114(b) of the 2018 Farm Bill expressly states that no state or Indian Tribe has the authority to bar transportation or shipment of hemp or hemp-derived products across boarders, so long as the products meet the criteria of section 10113.

Straightforward, right?

Why Interstate Hemp Shipping Requires Caution

The problem, as our Los Angeles hemp business attorneys can explain, is that the protection provided herein to hemp farmers and distributors has to do with the fact that last year’s Farm Bill section on hemp transportation is expressly contingent on the previous section. That provision requires federal oversight of hemp production by the USDA, responsible for rubber-stamping state and Native American Tribal regulatory systems that cover hemp production. Such plans must by law be submitted to the federal agency. If a state hasn’t already approved hemp farming, it is to use the framework drafted by the USDA.

Yet so far, the federal government hasn’t approved any state plan, nor has it crafted its own for states with no hemp law. That could change; the USDA hasn’t expressly refused to do this. However unless and until it does, it’s important to bear in mind that hemp and its CBD oil extract are still considered a Schedule I narcotic under the Controlled Substances Act – especially since the U.S. Drug Enforcement Administration issued a new rule expressly indicating hemp and its derivative products are also to be grouped with the THC-containing marijuana.

That doesn’t necessarily mean the government will crack down on hemp distributors sending products to other states, but it means there is still the potential. Consulting with an experienced Los Angeles hemp business attorney can help you determine what specific federal and state statutory provisions might impact your operation and what measures will help ensure a strong argument for a good faith effort to comply with the letter and spirit of the law.

Helpful Arguments for Interstate Hemp Sales

In December, an administrative law judge ruled products containing 2014 Farm Bill-Compliant industrial hemp are allowed to be distributed by mail.

Another point in California hemp farmers’ favor is that it appears to have been the intent of Congress to allow hemp and related products to be sold commercially. Not only did the 2018 Farm Bill expressly remove hemp from the definition of marijuana, it also made it a federal commodity eligible for federal crop insurance. That could be a point worth making if an operation that grows, manufacturers, distributes or markets hemp could make if they did end up before a judge.

Meanwhile, there in the case of Big Sky Scientific LLC v. Idaho State Police, a hemp manufacturer is suing for the return of 7,000 pounds of hemp seized from the company truck by state troopers. The driver was arrested and charged with a felony. Plaintiff asserts that the cannabis on that truck was in fact hemp (a nonpsychoactive cousin of marijuana) and that hemp is legal under the 2014 Farm Bill (with protections broadened under the 2018 Farm Bill). In addition to compensation for monetary losses, plaintiff wants the law enforcement agency to apologize.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734. Additional Resources: Hemp or pot? Cannabis company sues over seizure of truck in Idaho, Feb. 13, 2019, MarketWatch More Blog Entries: California Cannabis Asset Protection When Commerce is All Cash , Feb. 12, 2019, Los Angeles Hemp Lawyer Blog

Despite the fact that now 10 states plus the District of Columbia have marijuana legal for recreational purposes (1 in 4 Americans lives in a state where recreational use is legal), the federal Controlled Substances Act that still designates marijuana as a Schedule I narcotic means banks are reticent to get involved. Doing so could risk the U.S. Department of Justice coming after them for money laundering. Recently, The Modesto Bee reported the U.S. House of Representatives intends to hold hearings on bills that, if passed, could allow marijuana companies easier access to banking services – some six years after states started legalizing the plant for recreational use. It’s not the first time the issue has been raised, but it had always stalled in the past with Republicans being the Congressional majority – even when, as recently as 2017, the House bill had 95 bipartisan co-sponsors and a sister measure in the Senate had 20.

Lawmakers from Colorado and Washington are sponsoring a new marijuana banking bill that cannabis lawyers in Los Angeles know could help these companies – and government workers – avoid the risk of carrying around large cash stashes that may make them vulnerable to criminal targeting. As it now stands, the California Tax and Fee Administration already has to expend substantial resources to carefully plan for cannabis company tax payment drop-offs. In Humbolt County, where a large number of marijuana growers operate, the tax collector’s office has invested in numerous cash-counting machines, which so far have helped to processed some $10.3 million in marijuana tax revenue. Statewide, officials collected nearly $230 million in tax revenue from the marijuana industry in the first nine months of last year. Little less than half of that was reportedly submitted via cash payment.

In Washington state, the government collected nearly $320 million in taxes and licensing fees from marijuana businesses in one recent year (after legalizing the drug in 2012), dissuading businesses from paying cash by relying on small banks and credit unions that have taken on the risk of a potential federal government crackdown.

Our California cannabis attorneys in Los Angeles work with new entrepreneurs in the marijuana industry to help them navigate the complex financial hoops through which they’ll need to jump. Operating any business on a cash-only basis is risky and prone to accounting errors. We help our cannabis business clients at every stage with things like entity formation, structuring and financing, as well as regulatory investigations, internal partner disputes, real estate selling, leasing and development and high-stakes litigation.

There is still no guarantee the newest bill will garner the support it needs. The Senate majority leader recently made it clear he is not in favor of the measure, which is currently being weighed by the Senate Banking Committee.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Pot is legal in 10 states, but the industry still can’t use banks. Will Congress change that? Feb. 11, 2019, By Kate Irby, The Modesto Bee

More Blog Entries:

Medical Board Revoke’s California Doctor’s License for Pot Prescription to Child After Improper Diagnosis, Feb. 11, 2019, California Marijuana Business Lawyers Blog

Los Angeles CBD shop attorneys understand that while these little stores are outnumbered by the full-service cannabis dispensaries in the city hundreds-to-one, these store owners say they were drawn to the business primarily for the health benefits and variety of products (salves, tinctures, creams, edibles, soft gels, tinctures and more), but also for the reduced legal risk and ease in securing insurance and funding. One in L.A., for instance, sells only hemp-made CBD oil expressly for this purpose Shops that sell only CBD aren’t required to have the pricey licensing, as is required by legal cannabis dispensaries in California.

Such stores have also opened in Missouri, Texas, Kansas, Arkansas, North Carolina, Minnesota, Louisiana, Florida, Georgia, Mississippi and Ohio. What the Farm Bill, signed in December by the president, did was remove hemp from the list of controlled substances, allowing states to freely allow permanent cultivation programs, and farmers can be eligible for crop insurance and grants.

There are only trace amounts of TCH in CBD, and it’s even proven effective for some people with epilepsy, cancer, chronic pain and PTSD. The U.S. is also well-known to be the No. 1 importer of hemp products globally. Costs on those items may fall. Our L.A. CBD business attorneys expect these new stores may now start growing like weeds, particularly where access to the drug may be limited to medicinal use.

Meanwhile, some companies have taken to selling these CBD oil products online, particularly in states where cannabis is not legal. However, with no testing regulations in place for CBD products, though the U.S. Food and Drug Administration has issued warnings with regard to making false claims on the medicinal properties, potency and effectiveness of the product they are selling. So long as the the CBD oil is hemp-derived, it is likely to be legal per the provisions of the 2014 Farm Bill and the updated version in 2018, but it’s a good idea to speak with an L.A. CBD shop attorney before launching your online venture – particularly if you plan on shipping out-of-state sales.

Having worked in California’s medicinal and legal cannabis from the start, we have seen the expansion of CBD oil from high-quality medicine to essentially a social commodity. Many companies are rushing to invest their dollars in various sectors industry-wide. Knowing exactly what you are diving into – and ensuring you are following all legal guidelines and required administrative processes. You don’t want to be ensnared in a battle with local or state government officials because paperwork wasn’t properly filed before a hard opening. We can help.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

CBD-Only Stores Start Popping Up Like Weeds, Sept. 7, 2018, By Joanne Cachapero, MGretailer.com

More Blog Entries:

First Church of Cannabis Lawsuit: Marijuana “Rites” of Faith Falter in Court, Jan. 6, 2018, Los Angeles CBD Business Attorney Blog