WSLCB - Board Meeting
(October 30, 2019)

Here are some observations from the Wednesday October 30th Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 3 takeaways:

• The Board adopted an interim policy to temporarily allow processors to issue credits to retailers for returned vapor products (audio - 3m).
  • Calls for a system of credit were prompted by unplanned economic pressures created by Washington state’s prohibition on “flavored vapor products.” Governor Jay Inslee’s executive order on a health scare attributed to unidentified vapor products was subsequently implemented as emergency rules passed by the State Board of Health (SBOH) on October 9th. WSLCB adopted initial emergency rules for cannabis processors and retailers at the October 16th board meeting and additional emergency rules at the October 23rd special board meeting. WSLCB Cannabis Policy and Rules Coordinator Kathy Hoffman prepared the Board to adopt the new interim policy during the previous day’s board caucus.
  • BIP 15-2019, regarding the “Return of flavored marijuana vapor products by retailers to processors in exchange for credit” was presented by Hoffman, who described the interim policy as allowing “for a limited time, licensed marijuana retailers to return flavored marijuana concentrates for inhalation and marijuana extracts for inhalation as defined” in SBOH’s emergency rule under WAC 246.80 to licensed processors “for credit against future purchases of marijuana products.”
    • The interim policy permitted processors to “accept banned vapor products and issue a refund, credit, or exchange of similar product, not to exceed the acqusition[sic] cost of the product being returned, until December 31, 2019. A credit balance may be maintained for up to six months, until June 30, 2020. Records must be maintained that clearly show a detailed accounting of each transaction involving a return for refund, credit, or exchange. A record of all expired credit must also maintained. All records most comply with WAC 314-55-087.”
    • The policy would apply retroactively to SBOH’s ban, which went into effect October 10th.
  • Board Member Russ Hauge followed up on a line of questioning raised during caucus to confirm “the intent here is that if the deadlines set [in the BIP] are not sufficient to provide the necessary relief to the industry” the Board could adjust them. Hoffman agreed that was the intent of the policy.
  • The Board voted to adopt BIP 15-2019. The agency announced the new BIP via email later in the day.
  • During subsequent general public comments, Washington CannaBusiness Association (WACA) Deputy Director Brooke Davies lauded the board for their action. WACA had been the most vocal proponent for the move, addressing the Board publicly at both the October 16th board meeting and the October 23rd special board meeting in addition to substantial backchannel communication. She thanked the board members and staff for their efforts, saying “on behalf of our members, I think that this will provide some relief to them during this time.” Davies called attention to Hoffman specifically “for your work and collaboration on the packaging and labeling rules. We really appreciate it and look forward to continued collaboration” (audio - 1m).
  • The cannabis industry was not unanimously in favor of introducing a temporary system of credit. Washington SunGrowers Industry Association (WSIA) Executive Director Crystal Oliver sent WSLCB a memo dated October 20th which was highly critical of a potential credit policy, arguing it would primarily hurt small growers and processors most.
    • After surveying 30 licensee members and speaking to a dozen by phone, Oliver reported that “Most small businesses opposed rules being modified to allow the issuance of credit to retailers returning product.” She informed the agency that WSIA members were facing layoffs and closures after an already troubled and consolidating processor market was further pressured by the flavored vape ban.
    • Rather than a temporary credit policy, licensees contacted had a number of suggestions:
      • Some processors felt that refunds should be delayed at least 120 days in case final rules are modified or litigation forces the ban to be lifted.
      • A few processors indicated that splitting the financial impact between the processor and retailer was the most equitable solution and were offering 50% refunds to their retailers.
      • Others felt that the state should provide retailers a tax credit equivalent to the value of the impacted product.
      • Others felt the state should be responsible for reimbursing impacted licensees.
    • Oliver’s letter listed responses to numerous questions about the ban and credit policy’s impact. She concluded by observing: “Processors expressed frustration that the state had adopted this ban on flavored product without any indication that flavors are to blame for the recent public health crisis. Many highlighted the fact that the Center for Disease Control and Prevention states that “most of the cases” are linked to products “obtained off the street or from other informal sources (e.g. friends, family members, illicit dealers)” indicating that additional regulation of the licensed and legal marketplace is unlikely to address the health crisis leveraged to support this emergency action.”
• Board members voted to move ahead with proposed rules for cannabis packaging and labeling (audio - 3m).
  • Also discussed at the October 29th board caucus, packaging and labeling (PAL) had preoccupied WSLCB staff for over a year following the agency’s re-evaluation of PAL for Marijuana Infused Edibles (MIEs). The current PAL rulemaking project was opened at the end of May. Previously packaged product sell through deadlines for retailers were extended in August. WSLCB hosted a listen and learn forum to discuss conceptual draft rules on October 11th.
  • Hoffman presented a request for board approval to file the CR-102 with the Office of the Code Reviser (OCR). She indicated the proposal modified WAC 314-55-105 as well as “two specific sections of WAC 314-55-077, subsections (8) and (9) that has to do with rules relating to marijuana processors’ licenses.”
  • Hoffman said the proposal “reflects the outcome of an inclusive and engaged rule development process” which balanced the goals of different stakeholders, ensuring products wouldn’t appeal to persons under 21 years of age while “offering a more concise and flexible framework to provide licenses the ability to engage in product development, design, and marketing that will support their business growth.”
    • The PAL rulemaking project had become a focal point for uncharacteristic public engagement from prevention community organizations. During the previous day’s board caucus, Hoffman noted WSLCB Public Health Education Liaison Sara Cooley Broschart’s “fantastic” outreach resulted in “more prevention people” at the listen and learn forum than “licensees and associations.”
  • In addition, the new rules would support “sustainable business practices that will reduce industry waste and environmental impact while maintaining an emphasis on public safety,” a reference to the Cannabis Alliance petitions for rulemaking on package thickness and disposable beverage measuring cups which sparked the latest round of PAL rulemaking.
  • Hoffman indicated staff had labored to ensure “required product warnings are aligned by product type and, to the extent possible in rule, provide guidance for the provision of structure and function claims consistent” with SB 5298 which was “anticipated to increase consumer product knowledge.”
  • Hoffman added that the reforms “provide clarity regarding what types of labeling designs and packaging characteristics should be avoided to reduce the possibility of unintended, accidental exposure” to cannabis products. She concluded by saying the rules were a “nexus and balance” of the competing needs she identified.
  • The Board voted unanimously to adopt the CR-102. Hoffman closed by projecting the bill’s lifecycle:
    • October 29th: CR-102 filed with OCR
    • November 20th: CR-102 published by OCR
    • December 11th: public hearing
    • December 18th: Board adoption of CR-103 with new PAL rules
    • January 1st, 2020: new PAL rules go into effect
• A citizen familiar to the Board addressed “waste” cannabis and medical patient needs during public comment (audio - 4m).
  • Renton-based cannabis patient and advocate Don Skakie had been a regular voice at agency meetings including an August listen and learn forum. He last spoke before the Board at the October 2nd board meeting.
  • Skakie established that Washington state was “environmentally conscious” and acknowledged changes to limit packaging waste in the just-adopted CR-102. On a related note, he pointed out that the rules for disposing of cannabis plant matter waste required they be “ground up and mixed with other material.” Skakie indicated this plant matter could be “suitable to be used as animal feed.” He added, “and if there is a concern that we might be getting animals intoxicated” the Board could limit the sustainability practice to material testing below “the hemp limit” of 0.3% tetrahydrocannabinol (THC). In addition to redirecting useful materials from the waste stream, Skakie suggested this was an area where the agency could work with industry to “improve their bottom line.”
  • Next, Skakie turned his comments to medical cannabis patients, calling them “underserved in the regulated system” as they weren’t “finding the cultivars and the products that they need” or in “the weights” they’d prefer. Skakie said accessibility challenges common among patients prevented them “from going to the [cannabis retail] store time after time after time.” Instead, Skakie argued it could be “more economical to package products in a larger amount” which state law allowed patients to possess. Since amounts of this size couldn’t be purchased recreationally, larger packaging limits for patients would “inhibit non-patients from purchasing up those products lines” which patients “need to be well.”
  • Skakie also advised the Board to allow producers to source cannabis genetics from outside the 502 system. He said doing so would help ensure “products that the patients desire but cannot currently find” would be available within the regulated marketplace. He concluded, “If we keep patients from obtaining the products that they need we actually force them to go to the black market.”