WSLCB - Work Group - Traceability 2.0
(March 2, 2021)

Tuesday March 2, 2021 12:30 PM - 2:00 PM Observed
WSLCB Enforcement Logo

The Washington State Liquor and Cannabis Board (WSLCB) Traceability 2.0 Work Group, convened between September 2019 and March 2021, was composed of industry stakeholders and agency staff vetting the next generation of cannabis supply chain transparency in Washington state.

Observations

WSLCB leadership presented a draft road map outlining a new approach to cannabis licensee compliance reporting in the state which incorporated many work group recommendations.

Here are some observations from the Tuesday March 2nd Washington State Liquor and Cannabis Board (WSLCB) Traceability 2.0 Work Group meeting.

My top 3 takeaways:

  • Having last met in October 2020, the Traceability 2.0 Work Group was established to help the WSLCB plan for the future of cannabis supply chain reporting in Washington state.
    • Washington, like other states forging cannabis legalization, turned to technology to assist in the tight regulation of cannabis plants and products circulating within its borders. First contracting with BioTrackTHC to provide a centralized traceability system (the company subsequently became Helix BioTrack then Forian), WSLCB switched to vendor MJ Freeway in early 2018 (which subsequently became a subsidiary of Akerna). The last update to Leaf Data Systems---the software responsible for tracking legal cannabis in the state---was the long-delayed release 1.37.5 in July 2019. The State’s relationship with the technology vendor had been fraught with problems to the extent that planned development was halted to maintain a comparatively stable status quo.
    • In September 2019, a Traceability 2.0 work group was formed as a forward-looking collaboration between WSLCB and stakeholders in order to vet the next generation of cannabis supply chain transparency in Washington state. The last group meeting was in October 2020 as the agency continued to adapt to the COVID-19 pandemic. At that time, Deputy Director Megan Duffy indicated the group would next convene after agency staff developed a timeline on next steps to share with stakeholders.
    • WSLCB staff in attendance:
      • Megan Duffy, Deputy Director
      • Chandra Brady, Director of Enforcement
      • Kendra Hodgson, Cannabis Examiner Manager
      • Mary Mueller, Chief Information Officer (CIO)
        • During the meeting, Mueller shared that she would be leaving the agency at the end of March and the agency would hire a new CIO (audio - <1m).
      • Justin Nordhorn, Director of Policy and External Affairs
      • Amy Lyn Ribera, Executive Assistant to Deputy Director Megan Duffy
    • Work group members in attendance:
    • Duffy framed the conversation by saying, “In our last meeting, we discussed the agency going away and thinking about all that has coalesced around this issue. And I specifically asked Mary [Mueller to]...look at all of the analysis and work that has been done to date around traceability, right? ...And what I asked her to do was specifically look at an approach to traceability...not necessarily the technology that would support it, but how the agency should be approaching traceability” (audio - 5m).
  • Chief Information Officer Mary Mueller reviewed a draft Cannabis Traceability Program Design including specific recommendations which prioritized definition of the agency’s compliance reporting needs ahead of the selection of appropriate technologies (presentation).
    • Objectives and Process (slide, audio - 3m)
      • Mueller sought “to understand stakeholder and operational impacts” as well as “public safety and, importantly, the licensee impacts” in reviewing seven different possible program designs. While the WSLCB internal team was unable to achieve consensus, they arrived at a set of “general recommendations” for review by the work group.
    • Recommendation - Globally Unique Identifiers (GUIDs) and Tagging (slide, audio - 1m)
      • GUIDs would be assigned to lots and batches, rather than individual plants or products. Tagging of individual items would still be required, but generation of unique tracking identifiers would occur at the lot level.
        • Later in the conversation, Oliver registered her members’ opposition to tagging of individual plants (audio - 2m) and Rosellison subsequently asked members to discuss the challenges presented (audio - 4m).
      • GUIDs would not be issued by a central service, but generated dynamically using an approved algorithm by third-party software providers. Provisionally, agency staff intended to “dig more deeply” into the universally unique lexicographically sortable identifier (ULID) algorithm and specification suggested by a work group subcommittee which convened in November 2019.
        • Throughout work group deliberations, members emphasized the problems created by the centralized architectures of first generation cannabis traceability systems. When those technological systems fail---as all technological systems are prone to do---all dependent systems would be impacted and potentially  rendered inoperational. Decentralized provisioning of unique identifiers would alleviate one of those architectural dependencies.
      • New GUIDs would only be generated “at creation and conversion” of products to minimize effort and expense which the work group found provided no traceability benefit.
    • Recommendation - Lot and Batch Size (slide, audio - <1m)
      • Lot weight and batch piece count would be declared by each licensee according to their business needs and risk assessment.
        • This recommendation must achieve compatibility with the Quality Control Testing and Product Requirements rulemaking project, wherein adjustment of the static lot size was one variable which the Policy and Rules Team was considering modifying to decrease anticipated testing costs.
      • However, items within a lot or batch “must have the same biochemical and/or commercial characteristics (strain) and have been processed within 72 hours of all other items within the batch or lot.”
        • Rosellison noted that the agency still used the term ‘strain’ which was “easily manipulated,” and Mueller acknowledged a formal program design would have to distinguish commercial names from cultivar biochemical signatures (audio - 1m).
    • Recommendation - Testing (audio - 1m)
      • Significantly, quality assurance (QA) testing would only be required by the State for end products. However, end products which failed testing would have to be destroyed - and could potentially trigger a cascade of destruction events back to the source flower.
        • The agency encouraged testing and filing certificates of analysis (COAs) for intermediate products, as a valid COA would halt the chain of destruction.
        • The agency remained open to discussion about remediation of products which failed some required tests.
      • Given the flexibility on lot size, samples would be “representative samples” rather than four one-gram samples per batch. What that means in practice would be spelled out in rule - along with all compliance reporting requirements required by the State.
        • Interestingly, the potential for gamesmanship in self-selection of samples had become a troubling issue for both the QC rulemaking project as well as the Cannabis Science Task Force, and was regarded as only slightly out of scope by both endeavors. Foster later pointed out that a necessity to redefine sampling in rule would present an opportunity to reconsider the merits and challenges created by allowing producers and processors to select their own samples (audio - 2m).
    • Recommendation - Technology Controls (slide, audio - 3m)
      • By design, all first generation traceability systems served as a centralized means of communication between licensees, vendors, and the State - shared platforms and protocols, although closed and idiosyncratic. Unfortunately, centralized architectural design also creates a single point of failure. When these systems were offline, communication between licensees, vendors, and the State was significantly disrupted and in some cases halted altogether.
      • These systems of control could be and often were coded to gatekeep certain transactions if they did not meet certain criteria. Taken together with experiences of instability, the agency recommended “Movement of product within the market would no longer be constrained by technology” and Mueller said the agency’s technology platform would no longer serve as “the broker” between third-party software providers.
        • This shift would create perhaps the most substantial change and challenge to the young cannabis market: third-party software providers would be required to develop a means of communicating amongst themselves for transfers and product returns - and all of the surrounding licensee, product, and inventory metadata.
      • Duffy interceded to emphasize “this is not stuff necessarily...written in stone, this is where we’re starting, this is where we think the direction of a program should head.”
    • Recommendation - Manifests (audio - 1m)
      • The State would define required information to be included on manifests but would not dictate their form.
      • “Manifests can be modified mid-trip, to include alternative delivery locations among other changes” but that information would need to be communicated to the agency prior to implementation.
        • The WSLCB shares delivery manifests and driver information with the Washington State Patrol (WSP) to ensure law enforcement entities are aware of cannabis product movement around the state, particularly in the event a driver is pulled over or an accident occurs. This requirement was one of the few circumstances where near real-time communication with the State seemed necessary, whereas a slower activity reporting cadence remained a goal of some work group members.
    • Recommendation - Reporting Ownership (audio - <1m)
      • Third-party software integrators, testing laboratories, and other parties “reporting on behalf of licensees” would have to register with WSLCB.
        • This recommendation builds on work to implement a Data Sharing Agreement (DSA) to verify third-party software providers were authorized by licensees to report on their behalf to the State. The WSLCB convened a small work group beginning in late 2019 to hash out the terms of a DSA, but it had not been implemented at publication time.
        • In the presentation, the agency used the term ‘registered agent’ to describe the reporting relationship, which Rosellison clarified had a pre-existing meaning. Mueller agreed to change the language (audio - 1m).
    • Recommendation - Service Deprecations (slide, audio - <1m)
      • The so-called “free system” provided by Leaf Data Systems would go away, but licensees would be empowered to report compliance data directly to WSLCB.
      • A default manifest would no longer be provided.
    • Recommendation - Workflow (slide, larger image, audio - 2m)
      • Throughout the work group meetings, agency staff developed an example workflow to test assumptions and map out required reporting steps. Mueller presented the latest iteration of this design, which coded blocks green to indicate where interactions with a future traceability program would be necessary.
      • Rosellison asked how the proposed program design would adapt to interstate commerce, and Mueller indicated it was consistently considered but many variables remained at the federal level. Duffy said her “point was real well taken. People need to be able adjust quickly to interstate commerce if/when that happens. So, yeah, that’s gonna be a main driver of ultimately what we end up with” (audio - 3m).
    • Next Steps (slide, audio - 3m)
      • Following the work group presentation and incorporation of feedback, Mueller said the team intended to confer with “the association representatives.” Then, agency leadership planned to present their draft program design to the Board at the March 9th board caucus.
        • Rosellison pointed out that the new Board Chair, David Postman, would begin his six-year term on Monday March 15th and recommended waiting to include him (audio - <1m).
        • On Tuesday March 16th, Mueller and Duffy were allocated 30 minutes to present a “Traceability System Update.”
      • After obtaining Board approval to proceed and incorporating feedback, the internal team would “Finalize [a] proposed approach, resources and schedule” which would include hiring a dedicated Program Manager and a Project Manager.
        • Mueller said, “one of the things that we found as a root cause of some of our problems is that we don’t have a single voice that represents all of the various aspects of the program within the agency.”
        • Oliver made sure that “seasonal sungrower planting and harvest schedules” would be considered as the managers developed the project timeline (audio - 1m).
      • Next, a potentially complicated rulemaking project would be opened to encode the specific data reporting requirements required by the traceability program design. Policy and Rules staff estimated the rulemaking project alone could take twelve months to complete.
        • Agency staff intend for there to be no ambiguity about what compliance data must be reported when, and therefore seek to document those requirements in the Washington Administrative Code (WAC).
        • As well, existing mentions of the traceability system and requirements in the WAC would have to be updated. Mueller shared a version of a Cannabis Traceability Requirement Repository spreadsheet which detailed the agency’s on-going mapping of relevant references in rule and statute which may require modification.
        • It is likely agency request legislation will be required in 2022 to update references in statute.
      • Finally, “Once program requirements are clear and almost codified, begin technology planning.”
  • The Program Design informed a long-term Cannabis Traceability Technology Design which foresaw a transition away from MJ Freeway Leaf Data Systems to a simplified Central Reporting System by June 2022 before solicitation of a trimmed down State reporting platform.
    • In December 2019, the WSLCB entered into a “service contract” with MJ Freeway “based on four six-month extensions, so, in essence, six month chunks where we would renew if we need to.” The contract was first extended in June 2020 and again in the winter. Agency leadership was clear that there were no plans to extend the business relationship with Akerna/MJ Freeway beyond a fourth six-month contract extension, indicating Leaf Data Systems would no longer be in operation in Washington state by June 2022.
    • However, agency staff were acutely aware of the necessity to allocate sufficient time to switch to a new approach after their experience working with MJ Freeway. Therefore it was assumed that an “Interim System” would be necessary “until [a] long-term solution is in place.” Conveniently, the agency built a contingency reporting system to accept compliance reporting data from licensees when Leaf Data Systems failed to launch on time. Rebuilt and rebranded as the “Central Reporting System” (CRS), the interim system would once again accept licensee compliance data beginning on or before June 2022 (slide, audio - 4m).
      • Mueller confirmed the agency learned many lessons during the previous contingency reporting period, and compliance data would only be accepted in well-defined formats which could be dynamically validated by the CRS on receipt.
      • As well, third-party software integrators would be given time and change management help to prepare for the transition to the CRS. Mueller anticipated 26 weeks of preparation time would be necessary inclusive of training and testing.
    • After the replacement of Leaf with CRS, the agency would “Procure or build [the] long-term technology using industry standard processes” (slide, audio - 2m).
    • Wrapping up, Duffy confirmed the Traceability 2.0 work group would remain active and be called upon to help the agency navigate the ambitious---and encouraging---path ahead.

Information Set