California’s Cannabis Regulations for Manufacturers

We turn next in our series to the businesses who make edibles, topicals, concentrates, and other such products out of the plant material.

Your regulations come from the Department of Public Health, but they resemble those of the Department of Food and Agriculture (for growers) and the Bureau of Cannabis Control (for retailers, testing labs, distributors, and others). So they share a lot of the same or similar rules. You must disclose a lot about yourself to get a license in the first place. You must have detailed operating procedures for inventory, transportation, security, quality control, and waste management. You must abide by state environmental law. You must tag and report your inventory in the track-and-trace system. You must issue proper invoices and receipts for each sale or transfer. You must keep books and records for at least seven years, and you must report material events within hours or days. You must pay an annual fee that runs from $2,000 to as much as $75,000 depending on your gross annual revenue. And you’re subject to audit, inspection, and investigation at will.

Manufacturers have their own rules too, of course. Among others, you must follow a master manufacturing protocol for each product you make, and you must prepare a complete production record for every batch. You also must have a detailed quality-control plan to ensure your products are not misbranded or adulterated, and you must explain how you will recall them if they are.

Overall, there are five types of license: a Type 7 if you use volatile solvents to extract cannabinoids from the plant; a Type 6 if you don’t; a Type N if you use some process other than extraction; a Type P if you only package or label (or repackage or relabel); and a Type S for smaller licensees who infuse or extract with butter or food-grade oils and manufacture out of a facility operated by a Type 7, 6, or N licensee.

In particular, you may do extractions in only four ways without prior approval. You may do them mechanically; chemically using nonvolatile solvents like water, glycerin, vegetable oils, or animal fats; chemically using volatile solvents in a professional closed-loop system; or chemically using a professional closed-loop carbon-dioxide system. If you want to use another method, you must request authorization beforehand. And there are additional rules for chemical extractions with volatile solvents or carbon dioxide. You must not do them in a residential zone, for example, and you must get the local fire department’s approval.

To enforce these rules, the department may serve you a notice to comply. The notice will describe your violation, cite the statute or regulation, and give you a reasonable time to fix it.

Beyond that, the department can move to revoke your license, suspend it, or put you on probation. To do so, it may file a case against you in the administrative courts, where you’re entitled to a hearing, discovery, and other rights. But if it thinks you’re an immediate danger to public health, safety, or welfare, it will issue an emergency order to restrict your license or freeze your inventory before that process plays out. It may even do so without prior notice to you. Afterward, you have three business days to request an informal hearing that takes place within five business days of your request. But you’re not entitled to discovery or cross-examination yet. The department will then make a decision within five business days of the hearing, and it must file a formal case within ten days of that. If you lose there, you can appeal to the Cannabis Control Appeals Panel or sue in the superior court. Or, sometimes, you can bypass that process altogether and go straight to court.