WSLCB - Webinar - Cannabis Industry Guidance
(May 21, 2020)

Here are some observations from the Thursday May 21st Washington State Liquor and Cannabis Board (WSLCB) Webinar for Cannabis Industry Guidance.

My top 3 takeaways:

• Enforcement Chief Justin Nordhorn led the session which consisted of providing responses to questions received by the agency, many of which were marshaled by cannabis trade associations.
  • The WSLCB had received a myriad of questions since businesses composing the cannabis supply chain were deemed essential during the State’s “Stay Home, Stay Healthy” order responding to Washington’s coronavirus outbreak.
  • Governor Jay Inslee signed proclamations which temporarily waived penalties for deferred tax payments by cannabis retailers and modified the state’s Open Public Meetings Act (OPMA) and Public Records Act (PRA) to mandate remote public meetings rather than in-person events. Board members and staff have connected from remote locations via WebEx for public meetings five times and cancelled 23 regularly scheduled WSLCB public meetings since the Board last convened in person on March 10th.
  • The most recent agency webinar on April 13th focused on retailer concerns and social distancing (guidance, video). Building on that event, the current webinar was organized for all licensees and announced on May 13th.
  • During his introduction, Nordhorn thanked the leadership of several cannabis trade associations for “collecting questions” to be addressed as the “primary audience” was cannabis licensees. 
    • Vicki Christophersen, Washington CannaBusiness Association (WACA) Executive Director and Lobbyist
    • Brooke Davies, WACA Deputy Director and Associate Lobbyist
    • Eric Gaston, Craft Cannabis Coalition (CCC)
    • Crystal Oliver, Washington SunGrowers Industry Association (WSIA) Executive Director
    • Kristin Baldwin, The Cannabis Alliance Executive Director
  • Nordhorn told participants the questions were “not strictly COVID related this time, however, this is not a session for rulemaking and rule development.” He asked that additional questions be submitted via the WebEx chat feature and fielded several over the course of the hour-long event (audio - 3m).
• Nordhorn addressed 22 questions, providing responses for most and assuring attendees there would be follow up on outstanding queries.
  • Question: Checking Identification (audio - 2m). Nordhorn said a question “came up about checking ID of parents with kids in the car and having kids next to them while they’re buying product.” He responded that “it's not a problem to have children in the vehicle” during curbside service from a cannabis shop. But if “the driver who is purchasing is youthful appearing and the rest of the car is all youthful appearing, looking like they’re all teenagers or young 20s, [the retail staff should] be checking everybody’s IDs” in order to avoid “potential liability risks on furnishing cannabis to minors in those situations.” Nordhorn suggested considering “Is [cannabis] going to end up going to potentially everyone in the car,” when evaluating whether to check everyone’s ID.
    • WSLCB issued guidance on this subject prior to the retailer webinar.
  • Question: Enforcement of the Governor's Proclamations (audio - 5m). Nordhorn had been asked if there was “a plan to ticket stores who don’t follow the social distancing policies?” 
    • Nordhorn reported the emergency operations center (EOC) overseen by the Washington State Patrol (WSP) and quartered in the State’s Emergency Management Division (EMD) at Camp Murray had received over 28,000 complaints in relation to the Governor’s numerous coronavirus proclamations. Of those, WSLCB had been responsible for responding to approximately 1,300 complaints, most of which were “liquor related."
    • Enforcement was implementing an “escalating methodology, we’re providing a lot of education to people up front.” Other agencies like the Washington State Department of Labor & Industries (LNI), Department of Licensing (DOL), and Department of Health (DOH) participated as well. Nordhorn acknowledged businesses could see enforcement officers visit to offer education and encourage compliance with social distancing requirements. Following "initial contacts,” issues regarding employer/employee relations were referred to LNI.
    • On Wednesday May 20th, the WSLCB sent an advisory to liquor licensees warning of “increasing enforcement with non-compliance with the Governor’s proclamations” though Nordhorn signaled the enforcement escalation wouldn’t have “as big of an impact in the cannabis industry.” That said, Enforcement officers would be looking for “large scale gatherings” incentivized or facilitated by a licensee such as "a band outside in the parking lot." Those who “do not want to comply” with the proclamations would see “an increase in enforcement.”
  • Question: Requiring Employees to Wear Face Masks (audio - 1m). Following up on earlier inquiries about mandatory use of face masks by staff, Nordhorn said it was currently “recommended,” but not mandated. He expected any public health mandate would come via DOH rather than WSLCB. “We want to make sure that we’re staying in sync with [DOH] on those issues, but we would highly recommend that employees and customers wear those face masks to protect one another.”
  • Question: Product Returns Rather Than Destruction (audio - 2m). “Producers are asking whether or not they can accept product back, versus destroy it.” Nordhorn replied that in WAC 314-55-077 there was an eight day window to return product “that's been ordered in error, but when we’re talking about product that’s been sitting out on the shelf for a long time and people want to return it, that product is still required to be destroyed.” For cannabis products returned within the eight day window, the agency didn’t “have an issue with that being turned around and resold.” Nordhorn qualified that this “could change in future rule issues.” 
  • Question: Licensee Children and Grandchildren On Producer Premises (audio - 2m). Nordhorn confirmed that the practice of permitting licensee’s children and grandchildren “in the restricted portion of a grow, not a retailer” would continue “at least for a short term during the COVID period of time.” He added that staff were noting when temporary policy changes were a “rule issue or a law issue” as law issues would require legislative action to more permanently implement while rule issues could potentially be addressed by WSLCB. This topic had been determined to be a rule issue and, while seen favorably by the industry, Nordhorn signaled “there is a counterpoint and a counter interest on this particular topic." He was uncertain if the policy would be “rolled back” after the coronavirus outbreak had abated as he speculated there might not be “the same level of child care available” for some time.
    • It’s Cannabis Observer’s understanding that WSIA was the original advocate for this temporary policy change, and continued to advocate for more permanent rule change.
  • Question: Canopy Enforcement (audio - 1m). Nordhorn fielded a question regarding “what we plan to do with the canopy figures and are we willing to take action against people who are over canopy.” He indicated the canopy team was housed within the Marijuana Examiners group led by Kendra Hodgson and it was his understanding that they were “trying to strategize” the best follow-up with producers who “had received a measurement.” While the agency was “obviously” seeking compliance with canopy limits, he soft-pedaled the canopy team’s data collection efforts as “more just a general assessment.” Though, “if there [were] any discrepancies there” the agency expected them to be “addressed.”
    • See the agency’s Year One Canopy Report published in March 2019.
  • Question: Home Delivery (audio - 1m). Nordhorn stated WSLCB had been “very public about the issue that we don’t believe home delivery is legal in the state of Washington.” Noting a company promising legal home delivery of cannabis, Pelican Delivery, Nordhorn said WSLCB had “issued violations for the home deliveries” and even “ended up conducting some undercover work." He noted enforcement action “has been taken during this last month on this issue.” He advised retailers against participating in home delivery as Enforcement did “not believe that is a legal approach.”
    • The issue of cannabis home delivery was raised by Board Member Russ Hauge during the November 6th, 2019 Executive Management Team meeting after he’d seen a “billboard for Pelican Delivery Services in Kitsap County.”
    • The agency subsequently addressed home delivery in a bulletin sent on February 26th.
  • Question: Selective Enforcement (audio - 3m). Nordhorn reframed a concern about inconsistency of enforcement as "really a generic question” about enforcement in different parts of the state. He said officers had to consider “the number of complaints that folks have” which was often tied to “the community that they’re in.” Enforcement also looked at “the totality of the circumstances” and tried to “be as fair and consistent across the state as we can.” He encouraged people to “forward” information on licensee violations to WSLCB so they could “address it appropriately.”
  • Question: Flavored Cannabis Vapor Products (audio - 7m). Nordhorn said questions received had led the agency to begin drafting interim guidance on flavored cannabis vapor products.
    • With the Governor’s signature on HB 2826, the WSLCB and DOH were immediately granted increased authority over cannabis products, but rulemaking to implement the new statutes would take time to accomplish. He described the draft guidance as a “stop gap measure” in the interim.
    • Nordhorn reviewed how the agency would look for characterizing flavors which were “in any naturally occurring cannabis strain.” Processors couldn’t add, for example, “a bubblegum flavored terpene.” Terpene percentages in vapor products were expected to correlate to the same percentages naturally occurring in some plant. Enforcement was intending to "create some boundaries so [vapor items] don't become especially appealing to children."
    • The rulemaking project to implement HB 2826 would also include the prohibition of vitamin E acetate as detailed on May 12th.
  • Question: Change Requests (audio - 3m). Asked about businesses with “change requests that were submitted before COVID-19” which hadn’t gotten a response from the agency, Nordhorn noted many floor plan changes had come in relation to rearranging furniture to aid in social distancing. While the agency wouldn’t accept things like “obstructing cameras,” he explained that "as long as you're not compromising the integrity of the security type things" basic changes shouldn't be an issue.
  • Question: Expansion To Facilitate Social Distancing (audio - 1m). Licensees had asked about expanding into space the licensee owned which had not been part of the licensed premises. Nordhorn responded that “if it’s unlicensed you wouldn’t be able to move directly into that,” but businesses could change the layout of currently licensed space and Enforcement would “try to provide some allowances to expand into those areas to create that ability for social distancing.”
  • Question: Inserting Funds Into a Business (audio - 2m). Acknowledging that “licensees may have the need to insert funds into the entity to make payroll, rent, or other needs” Nordhorn reviewed “what requires approval before the funds are available.” He said that new investors would “still need to be vetted,” but “infusing your personal funds or business profits” would not require “the full vetting before those funds are available to be used.” The money would still need to be reported and may be vetted “after the fact.” Large infusions of personal cash would still draw attention from WSLCB.
  • Question: Replacing Defective Products (audio - 3m). A specific question was raised about “replacing a faulty pre-roll” returned to a retailer. Nordhorn said, “If you have faulty product that’s on the market we want to be able to do an easy replacement.” But, if the agency sees “everything being deemed as faulty” to justify returned items “that would be problematic.” Somewhat unsure what constituted a “faulty” pre-roll, Nordhorn said a voluntary recall could be merited if it was a widespread issue.
  • Question: Adding Flavors to Other Cannabis Products (audio - 3m). Nordhorn was asked whether the agency looked at businesses adding “non-cannabis flavorings to pre-roll or flower” products. He explained that businesses were not allowed to add any flavoring to cannabis after the “end product stage” but he was open to including it as a “topic of conversation" during agency rulemaking. “Anything that’s added after testing but before it goes to market...is certainly a risk for the licensees,” particularly if WSLCB conducted any “secret shopper” testing of retail products.
    • Enforcement Marijuana Unit Commander Jennifer Dzubay stated that WSLCB was no longer conducting any secret shopping testing as part of their interagency agreement with the Washington State Department of Agriculture (WSDA) at the February 4th Board Caucus. At that time, Enforcement Property Officer Patrick McMillan said the program was discontinued largely due to fiscal limitations.
  • Question: Turnkey Services (audio - 2m). The agency was asked, “Can you identify any upcoming changes to the funding process relative to entities who provide turnkey or other services to licensees,” and in particular, “those who are not gifting, loaning, or otherwise providing any money to a licensee.” Nordhorn had spoken with WSLCB’s Licensing division which advised “right now, we’re not making any changes to entities that provide turnkey facilities but we’re making a proposed change in WAC 314-55-035” as part of the true party of interest (TPI) rulemaking project. If the “landlord or turnkey entity doesn’t hold a retail license” there wouldn’t be further scrutiny. If they were a retail license holder “we would be looking into any associated funds” to ensure the service provider didn’t have control over the other license as well.
  • Question: Checking IDs With Masks (audio - 2m). Asked about customers who refused to lower their face mask during an ID check, Nordhorn called for “good customer service with those folks” and good judgment about who might be underage. “If they don’t want to lower it, and you believe that they’re youthful appearing” then he encouraged staff to insist on seeing their face from a distance, or by having them hold their breath and briefly lower their mask for staff to validate their identity. Nordhorn noted that “there's not a law to check ID of everybody that comes through, you’re checking to make sure they’re over 21.” People with “grey hair” who were clearly over 21 may not need to lower their mask, “but if you’ve asked for identification and you can see they’ve just turned 21” but refuse to lower their mask at all “I’d be saying ‘well, then I may not be able to sell to you.’” As faces could be evaluated while maintaining social distance, Nordhorn suggested continued refusal be considered a “red flag.”
  • Question: Retailer Returns to Processors (audio - 1m). Asked “how does a Retailer destroy product in the case that the Producer/Processor is no longer in business,” or won’t take it back, Nordhorn advised following existing rules on product destruction. If retailers had “an abundance of products” beyond what they could dispose of, Nordhorn urged them to contact Enforcement to transfer the cannabis to the agency for destruction. He indicated the offer of service would be “evaluated on a case-by-case basis.”
  • Question: Reinvestment of Business Profits (audio - 1m). Nordhorn said there was no vetting of funds when “money remains within the business” bank account. However vetting could be required if a licensee’s profits were transferred to a personal account and then moved back into the business’s account.
  • Question: Adulterating Usable Marijuana (audio - 1m). Responding to a comment that “I thought it was illegal to adulterate usable marijuana with anything,” Nordhorn replied that cannabis products “that people are putting together...I don’t think that it’s illegal for adding some flavoring and that type of thing.” He felt the question was “on the technical side” and would follow up.
  • Question: Retailer Liability for Packaged Goods (audio - 1m). “Will the Retailer be dinged if [WSLCB] secret shop and find an infused pre-roll that is not up to standards?” Nordhorn said retailers shouldn’t modify packaged products to avoid potential liability. He speculated there could be arrangements for a “special request” by a retailer to be sold compromised products - but he admitted “I haven’t really heard of” that practice. Generally, Nordhorn indicated the producer/processor was liable for their products.
  • Question: Packaging and Labeling (PAL) Constraints (audio - 2m). Nordhorn was asked about “stipulations on the film used for flow-wrapped items in regard to color, pattern, or printed design.” Nordhorn answered that he would “circle back with licensing” since they handled PAL approval and get back to the questioner.
  • Question: Lab Result Codes (audio - 2m). Nordhorn deferred a final question on whether “enforcement [was] enforcing that labs not share result codes” to the Marijuana Examiners as “the way that the lab oversight is handled is primarily through our Examiner’s department.” He promised to provide a better answer to stakeholders.
    • Cannabis Observer dug into the simmering topic of shared Lab Result Global Identifiers in the May 18th Week Ahead.
• Nordhorn briefly spoke about some of the agency’s ongoing rulemaking and concluded the event with a promise to "continue to work with those industry representatives that helped facilitate this particular webinar.”
  • The last agency rulemaking update was on May 12th, though more projects were addressed on April 28th. Nordhorn addressed a few rulemaking projects “in the pipeline” relevant to some of the questions raised. He requested that anyone with more specific questions contact rules@lcb.wa.gov  (audio - 3m).
    • Quality Control (QC) Testing and Product Requirements. Policy and Rules Manager Kathy Hoffman indicated that the agency would restart the rulemaking project by filing a fresh CR-102 at the May 27th Board Meeting. According to a “Rules in Progress Table” dated April 27th, Hoffman planned to schedule a public hearing on proposed rules on July 8th (audio - 1m).
    • True Party of Interest (TPI, WSR 18-22-054). Nordhorn announced a “tentative date of June 24th” for filing proposed rules in a CR-102.
      • A virtual listen and learn forum on TPI was held the day before on May 20th.
    • Voluntary Compliance Program (VCP, WSR 19-15-074) had its own listen and learn session scheduled for May 28th with a CR-102 also anticipated by June 24th.
    • Incremental Expansion of Tier 1 Canopy (WSR 20-01-171) and Cannabis Retail Title Certificates (WSR 18-09-117) would see several “stakeholder engagement” sessions in June.
  • Nordhorn thanked everyone for attending the webinar as the agency wanted to “make this as positive of an experience for folks as possible.” To that end, WSLCB planned to send out a survey about the event format itself to ask for “opinions on how this went” and how it could be “improved upon” for future webinars. Lastly, Nordhorn said the agency would "continue to work with those industry representatives that helped facilitate this particular webinar" (audio - 2m).