WSLCB - Board Caucus
(October 29, 2019)

Here are some observations from the Tuesday October 29th Washington State Liquor and Cannabis Board (WSLCB) Board Caucus.

My top 3 takeaways:

• WSLCB Cannabis Policy and Rules Coordinator Kathy Hoffman prepared the Board for “very significant [rulemaking] movement” over the coming weeks, including proposed packaging and labeling rules and a board interim policy requested by the industry.
  • Hoffman’s last rulemaking update was during the October 16th Board Meeting. The Board had been active in recent weeks advancing rule packages and emergency rules, the latter in response to emergency rules adopted by the State Board of Health (SBOH) to prohibit “flavored vapor products.”
  • Packaging and Labeling (PAL, WSR 19-12-029, audio - 8m). Hoffman prepared the Board to approve filing a PAL CR-102 with proposed rules at the following day’s board meeting.
    • Influenced by a listen and learn forum hosted on October 11th, Hoffman said the agency had “totally overhauled” PAL and the proposed rules represented “a real nexus between what the industry would like” in terms of marketing and sustainability while “meeting the needs of the prevention community to ensure that these products aren’t appealing to people under 21 years of age.”
    • If approved for filing, the Board would propose rule changes “consistent with the Cannabis Alliance petition[s]” put forward in April to halve packaging thickness and make infused beverage measuring cups optional.
      • Cannabis packaging thickness requirements in WAC 314-55-105 would be lowered from four millimeters to two. Companies could choose to continue their current packaging or reduce anywhere down to two millimeters. Hoffman said the agency wanted to give licensees “the sustainability that they requested.” 
      • Hoffman said the agency was “offering the opportunity to have the measuring cup be optional.” Any company not including a measuring cup would be expected to mark the serving size of beverages containing more than 10 milligrams of tetrahydrocannabinol (THC). This could be “hashmarks on the bottle if they wish or some other measurement device,” according to Hoffman
      • Hoffman believed both measures would reduce packaging waste created as a result of agency regulations and noted prevention community advocates at the listen and learn forum shared sustainability concerns.
    • The proposal also incorporated “structure and function claim language consistent with SB 5298” which Hoffman made “consistent throughout the rule set so folks know where they can apply it and how.” She said that Susan Harrell, the Licensing Program Specialist for Label Approval, and Nicola Reid, Licensing Compliance and Policy Manager, were writing up “guidelines” for how the claim language would operate, “so that all you have to do is take the guideline, take the rule, check the boxes, and you should be good to go.” Hoffman believed the effort “raises compliance and lessens concern around compliance.”
    • Board Chair Jane Rushford confirmed that WSLCB Public Health Education Liaison Sara Cooley-Broschart was “obviously” at the listen and learn forum but asked who else from prevention participated. Hoffman didn’t remember specific names but noted that Broschart’s “fantastic” outreach resulted in “more prevention people” at the listen and learn forum than “licensees and associations.” She called it an “interesting balance, or imbalance” that was uncommon among WSLCB events. Hoffman claimed prevention and industry participants found they had “more in common than they didn’t” during the session. Overall, Hoffman said the comments received were “largely supportive” of the conceptual draft rules.
    • Hoffman said staff would ask to rescind Board Interim Policies adopted at the beginning of the year “because this rule set either incorporated or considers alternative methods to address those concerns.” She highlighted “we’re taking out these restrictions around coloring” and instead specifying packaging must not “reflect or look like commercially available products” to allow licensees “some ability to market their products in a little broader spectrum than they have right now and reduce the subjectivity of what we’ve been doing to this point.”
      • Two BIPs regulated the PAL color palette. BIP 10-2018 restricted colors on packaging and labeling. BIP 09-2018 imposed color limits for infused edible products.
    • Board Member Russ Hauge confirmed that Hoffman meant PAL couldn’t resemble products persons under 21 would “be legitimately interested in.” Hoffman affirmed and added that the language would be consistently written as “persons under 21” to remove “ambiguity” in rules that had used phrases such as “children,” “youth,” and “minors” interchangeably. She described prevention and industry participants as agreeing that “persons under 21” was a “much better bucket to make those types of decisions under.” 
    • Hoffman admitted her revisions of the PAL WAC resulted in a larger rule set “but I think it will help licensees better understand it and others who wish to review the rules.” Rushford called the effort an “incredible body of work” and felt the “return on investment is going to be great for all involved.” Hoffman hoped the “rules will flex with” the needs of the agency, the industry, and the public for years to come.
  • Board Interim Policy on Credit for Returned Vapor Products (BIP 15-2019, audio - 5m). Hoffman next briefed on a new interim policy she planned to ask the Board to adopt the following day to enable retailers to return newly banned flavored THC vapor products to processors for credit.
    • Concerns about processor liquidity were raised by Washington CannaBusiness Association (WACA) Deputy Director Brooke Davies and lobbyist Chris Marr during the October 16th Board Meeting. WSLCB Deputy Director Megan Duffy briefed the Board on the agency’s response on October 22nd. Davies again publicly testified at the October 23rd Special Board Meeting.
    • Hoffman told the Board the BIP had been talked about “quite a bit” by agency staff. It would “allow, for a limited time, our licensed marijuana retailers to return flavored marijuana concentrates and flavored marijuana extracts to processors for credit against future [purchases] of marijuana products” provided that those purchases didn’t “exceed the acquisition cost of the product being returned.”
    • Credit could be applied to returns of affected product from October 9th, the beginning of the ban, through the end of the year. Hoffman stated that the “credit balance may be maintained for up to six months, until June 30th of 2020.” Hauge wondered if that was “long enough” and asked for explicit language that the deadlines in the BIP were “subject to review.” Rushford and Board Member Ollie Garrett agreed.
    • Garrett inquired if the BIP only allowed credits or whether it could include refunds. Hoffman indicated that the BIP said “licensed processors may accept banned vapor products and issue a refund, credit, or exchange of similar product.”
    • Hoffman added that records “must be maintained that clearly show a detailed accounting of each transaction involving a return for refund, credit, or exchange” in keeping with the requirements of WAC 314-55-087. She said she would amend an “absolute start date” and indicate the Board could modify, extend, or rescind the policy as needed.
  • Cannabis Penalties (WSR 18-22-099, audio - 2m). Hoffman explained that the agency hosted a listen and learn forum on the first sections of the Cannabis Penalties conceptual draft rules on September 27th. A second forum “on the [penalty] grids only” was scheduled for Thursday October 31st to elicit stakeholder feedback on the “massively reorganized” penalties. Hoffman said she had begun writing the CR-102 and hoped she could be “extremely aggressive” incorporating feedback to present proposed rules to the Board on either November 13th or 26th. She hoped to have a public hearing on the CR-102 in early 2020.
  • Voluntary Compliance Program (WSR 19-15-074, audio - <1m). Hoffman reported that her staff would host a first meeting about the proposed Voluntary Compliance Program with “licensees and their employees” on November 12th. Hoffman indicated Policy and Rules Assistant Victoria Owen contacted dozens of stakeholders about the meeting via email on October 28th but “so far we’ve heard only from a handful [of stakeholders].”
  • True Party of Interest (TPI, WSR 18-22-054, audio - 3m). A final TPI stakeholder meeting was scheduled for December 9th. From there, Hoffman would prepare a CR-102 with “significant changes” for TPI. Definitions including ‘spouse,’ ‘employee,’ and ‘control’ were nearly settled. Hoffman wanted to “frame those concepts moving forward with Cannabis 2.0 in mind.”
    • Garrett asked about “line[s] of credit” from financiers. Hauge added a story about a processor who “had engaged some out of state lenders in a way that I wasn’t familiar with that Ollie had seen before.” Garrett said it was “something like factoring” wherein a credit card processor advances “funds, lines [of credit], whatever, that is based on sales because they know they will get it back being linked into taking the funds back from the [licensee’s] account.” Hoffman answered that the financiers section hadn’t been addressed yet as it was near the “bottom of the rule set,” adding TPI and financiers were “very different things.”
  • Quality Assurance (QA) Testing and Product Requirements (WSR 18-17-041, audio - 1m). Hoffman said the QA rulemaking project had “suffered from all the things that have come my way and been made a priority” in reference to “vapor product concerns.” She planned to move ahead with the CR-102 “towards the end of November.”
  • Vapor Products (WSR 19-13-036, audio - <1m). Hoffman said the public hearing for the Vapor Products rulemaking project to implement 2019 legislation was scheduled for November 26th.
• The Board denied a new petition for rulemaking about transportation of cannabis while stating an intention to address the issue "outside of the rulemaking process" (audio - 8m).
  • The petition for rulemaking was submitted by Harmony Farms Director of Compliance Lukas Hunter on September 5th following the Board’s denial of another petition regarding transportation and temporary storage of vehicles transporting legal cannabis. Hunter requested amendments to WAC 314-55-085(5)(f) regarding licensees “transporting products from A to B.”
  • Hoffman said she’d already discussed the petition with each board member separately “with respect to the concerns that Luke is stating here.” She acknowledged that his suggestion did fall within the agency’s rulemaking powers but recommended denial of the petition. Hoffman felt there were valid concerns about “the ability for licensees to stop at various places along their route” but emphasized “we’d like to understand the concern more.”
  • Hoffman planned to follow up with producers, processors, and transportation licensees “because it sounds like they may have concerns in common that we may be able to address outside of the rulemaking process.” Hoffman stipulated “as time and resources allow,” her staff would seek to facilitate a discussion to identify and organize licensee concerns. She termed it a “more efficient way to move forward.”
  • In talks with the Enforcement division and licensees, Hoffman observed that “there’s not been any [administrative violation notices] issued” around necessary or unnecessary stops. Garrett felt the petition warranted further talks to ensure Enforcement employed a consistent understanding about what constituted necessary and unnecessary stops. Hauge asked “what’s the problem we’re trying to address here” as he hadn’t seen information suggesting WSLCB officers were enforcing the current language of the rule inconsistently. Rushford stressed that Hunter was articulating a valid safety concern. 
  • The Board signed the petition’s denial with the understanding that Hoffman would arrange a “facilitated discussion” around the topic.
• The Board signed a cannabis compact with the Quinault Indian Nation (audio - 2m).
  • Sovereign tribal nations can choose to enter into marijuana compacts with Washington state “concerning the commercial production, processing, and sale of marijuana.”
    • Director Rick Garza met with Tulalip cannabis regulators in August.
    • The WSLCB Tribal Advisory Council (TAC) met for the first time in over six years last April to consider shared cannabis and alcohol issues. Hauge mentioned scheduling the next TAC meeting during the September 10th Board Caucus.
  • Cain gave the Board the final copy of the compact with the Quinault Indian Nation (QIN) saying it represented the end of “lengthy negotiations” between the Tribe and the State which predated Cain’s tenure at the agency. He explained “there was just some time with the nation getting ordinances and codes adopted” and praised the collaboration of QIN’s Attorney General, Derril Jordan.
  • Cain said that QIN President Fawn Sharp had signed the compact along with Garza. Following the Board’s signature, the compact would go to Governor Jay Inslee for final approval. Cain planned to deliver the compact to the Governor’s office later that day.
  • The compact is the twelfth such agreement the state has entered into since cannabis legalization in 2012. WSLCB Tribal Liaison Brett Cain predicted there could be “several more in, hopefully, the next couple weeks.”