Steven Schain of Hoban Law Group.
Generating $11.6 billion of revenue in 2019, and legal in 34 states, marijuana is mainstream, profitable and intensely regulated.
Because current federal illegality prevents transporting cannabis between states or across U.S. borders, regulation presently occurs at the state level most particularly in cannabis food products commonly known as “consumables.”
When it comes to transporting consumables, food service distributors should be aware of what products may be sold and the requirements for obtaining a cannabis transportation license, transporting marijuana products and cannabis transportation record-keeping.
Legalized Marijuana’s Supply Chain
Those cultivating, processing, infusing, transporting or dispensing cannabis are deemed to be a “plant touching” marijuana related business (MRBs) and, despite being legal in the majority of American states, marijuana remains federally illegal.
The Comprehensive Drug Abuse Prevention and Control Act of 1970, 21 U.S.C. Sections 801, Et. Seq (1970) (CSA) currently lists marijuana next to heroin as a Schedule I controlled substance having “a high potential for abuse” and for which there’s “no currently accepted medical use in treatment” and “a lack of accepted safety for use” “under medical supervision.” The CSA prohibits marijuana’s cultivation, distribution, dispensation and possession and, pursuant to the U.S. Constitution’s supremacy clause, state laws conflicting with federal law are generally preempted and void. See U.S. Const., Art. VI, cl. 2; Wickard v. Filburn, 317 U.S. 111, 124 (1942)(”No form of state activity can constitutionally thwart the regulatory power granted by the commerce clause to Congress”).
Those cultivating, processing, transporting, distributing, or dispensing marijuana, (i.e., literally touching marijuana at some point along the supply chain), are deemed “plant touching” enterprises. See “FIN-2014-G001: BSA Expectations Regarding Marijuana-Related Businesses,” FinCEN, Feb. 14, 2014. Licensed and regulated by the state, plant touching MRBs include those planting, cultivating, harvesting, processing/extracting, testing, packaging, disposing, transporting and dispensing marijuana. See U.S. Senate, “S. 1726: Marijuana Businesses Access to Banking Act of 2015,” July 9, 2015; Representatives, H. R. 2076, April 28, 2015. Further, any entity having a financial or controlling interest (regardless of ownership percentage) in a plant touching MRB, including “investment” or “management” shell companies, are deemed plant touching MRBs.
Businesses providing products and services to plant touching MRBs, but not directly manufacturing, processing, transporting, distributing or dispensing marijuana, are “nonplant touching” MRBs and include: advertising, public relations and marketing agencies; banking, payment processing and armored car services; commercial real estate (landlord and property management); construction, plumbing and electrical; professional services (accounting, legal, insurance, lobbying and consulting); hydroponics and cultivation products; packaging and supplies; investment; professional training and education; support items retailer (paraphernalia); security services and equipment; technology and software; and testing and lab services.
Because the CSA prevents cannabis from being sold outside of each respective legalized-marijuana state and, thus, no “interstate cannabis commerce” can occur, state regulators like Washington state’s Liquor and Cannabis Board (LCB), and not federal agencies like the Food and Drug Administration (FDA), regulate MRBs.
What Cannabis Infused Products May Be Sold
Whether deemed “medical” (purchasable only with a state-issued card to treat resident’s statutorily defined “covered medical condition”) or adult-use (purchasable by anyone over 21 with a valid identification), cannabis takes four forms: “flower” that is smoked; “oils” ingested by vaporizing; “concentrates” only consumable after being heated to a high temperature; and “infused” products ranging from eye drops to “edibles.” With few exceptions, medical and adult-use cannabis items are identical and delineated only by their purchasers: medical card “patients” or “adult use” consumers.
In Washington state, permissible “marijuana infused edibles” are defined by the LCB as “low hazard foods” not supporting “bacterial or toxigenic growth” like: nonrefrigerated baked goods (cookies, brownies, fruit pies and tarts); chocolates candies and sugar or syrup-based confections (molded chocolates, fruit rolls, roasted coated nuts, and nonbaked bars or granola products); flavored, carbonated and lemonade style beverages; dry mixes (coffee granules, leaf tea, soup mixes, beverage mixes, and seasonings); jams, jellies, roasted nut butters, honey and syrups; and vinegars.
Conversely, the LCB prohibits commercial sale of “potentially hazardous” Cannabis-infused foods including those which: must be temperature controlled (frozen, refrigerated, or hot-holding); require acidification to assure food safety (ex., ready-to-drink tea and barbecue sauce); must be retorted or pasteurized to assure food safety; dairy products (butter, cheese, ice cream or milk); fruit or vegetable juices (except shelf-stable concentrates); oils and vegetable butters; pies containing egg (pumpkin or custard); and dried or cured meats.
How to Transport Cannabis-Infused Products
Transportation of cannabis-infused consumables can only presently occur within a “legalized Marijuana state’s” confines by a state-licensed transporter from a state-licensed grow or processing facility to a state-licensed dispensary or retail store.
Washington state’s transportation licensee requirements include that: all drivers carry a valid Washington driver’s license and be at least 21 years of age; consumables be in a sealed, LCB-approved package or container; sealed packages or containers cannot be opened during transport; consumables be in a locked safe and secure storage compartment secured to the vehicle’s inside; and any vehicle transporting consumables must deliver them, or return to the shipper, within 48 hours of pickup. Washington state transportation license applicants must provide the LCB with “criminal history background check” materials, Utilities and Transportation Commission common carrier permits, and proof of commercial general liability insurance.
The LCB also imposes specific “marijuana transportation record keeping requirements” upon the manufacture and retailers from, and to whom, the consumables are being transported. Upon transporting any marijuana or marijuana product, a licensee must notify the LCB of the type and amount or weight of marijuana and marijuana products being transported, the transporter’s name, and information about the transporting vehicle, times of departure and expected delivery. Similarly, upon receiving the shipment, the licensee must report the amount and/or weight of marijuana or marijuana products received and a complete printed transport manifest on a LCB provided form which must be kept with the consumables at all times.
Further, because consumables cannot be transported outside of the state, a transportation licensee must have enacted operating procedures ensuring that their drivers never cross state or U.S. borders.
Until marijuana is removed from the CSA, and the FDA can provide uniform national regulations governing interstate transportation of consumables, food service distributors must keep current on each state’s regulations and respective licensing and recordkeeping requirements.
Steve Schain is senior counsel to global cannabis law firm Hoban Law Group. With 17 offices and 54 lawyers, Hoban Law Group is only practice 100% devoted to cannabis and hemp law. Admitted to practice in Pennsylvania and New Jersey, Schain represents entities, governments and individuals in litigation, regulation, compliance, preparing and submitting license applications, entity formation, and drafting legislation. Contact him at [email protected]