WSLCB – Traceability Advisory Committee
(August 8, 2019)

The WSLCB was open to new approaches to regulating Washington state’s cannabis supply chain besides “seed-to-sale” traceability.

Here are some observations from the Thursday August 8th Washington State Liquor and Cannabis Board (WSLCB) Traceability Advisory Committee meeting.

My top 3 takeaways:

  • The Committee reviewed the unsettling month since the release of version 1.37.5 of MJ Freeway’s Leaf Data Systems.
    • Committee members last convened on June 13th shortly after release 1.37.5 was rescheduled for launch on Tuesday July 16th. Members had planned to meet on the Thursday after the July deployment, but that meeting was “cancelled to allow the LCB team to focus on the Leaf software.”
    • In a marked change from prior meetings, no representatives from MJ Freeway were present. Deputy Director Megan Duffy confirmed this was intentional “in part” and it was “unknown at this point in time” if the vendor would be present at future meetings of the committee (audio – 1m).
    • Deputy Project Manager Neil Smith provided a quick overview (audio – 1m) and Cannabis Examiners Manager Kendra Hodgson provided more context about the primary challenges encountered after the release (audio – 4m).
    • On Saturday July 13th at 11pm PT, Leaf Data Systems was taken offline to enable deployment of release 1.37.5 along with an atypically lengthy data migration and validation process. Washington state’s seed-to-sale traceability system was initially offline for 56 hours – according to plan.
    • On Tuesday July 16th at 7am PT, Leaf Data Systems was brought back online and unanticipated problems soon surfaced. The system was shut down again at 1:30pm PT, and was not successfully patched before Wednesday morning July 17th at 6am PT.
    • Additional patches and data fixes were applied by the vendor, in most cases resulting in unintentional side effects.
      • Third-party software providers may want to review the committee’s discussion about issues with the agency’s licensee file and MJ Freeway’s modification of global identifiers, a primary cause of concern voiced during the August 13th Integrator Work Session (audio – 4m).
    • The third-party software providers directly serving Washington state licensees suffered through their reliance on MJ Freeway’s Application Programming Interface (API) and struggled to bring the agency and its vendor’s attention to business-halting issues in Leaf Data Systems. During the July 23rd WSLCB Board Caucus, Chair Jane Rushford and Deputy Director Duffy recognized the software integrators for “their innumerable extra hours and expertise.
    • Business-to-business (B2B) commerce in the regulated marketplace was obstructed in many cases causing the Board to adopt an interim policy allowing licensees to implement their own workarounds for issues with manifests and lab results – and without requiring the agency to approve the workarounds. Previously, over 50 workarounds for problems caused by Leaf Data Systems had been formally reviewed and approved by the WSLCB.
    • Testing labs were particularly hard hit, especially those reliant upon the “free” web interface the WSLCB required MJ Freeway to provide and support. Transportation companies were also impacted as the flow of manifested product slowed between licensees. Supply side producers and processors lost business. Some retailers couldn’t receive scheduled deliveries, but stockpiled sufficient product in advance of the MJ Freeway “upgrade.”
    • At the beginning of August, an eighth contract amendment was necessary to grant MJ Freeway even more time to deliver the functionality it agreed to in July 2017.
    • However, the WSLCB proscribed the scope of work MJ Freeway could undertake:
      • During the period of this extension, Contractor shall limit its efforts to performing additional stabilization of the System and routine and/or needed Corrections, if any, specific to Release 1.37.5.
  • The future of Leaf Data Systems in Washington state and the WSLCB’s relationship with MJ Freeway appeared increasingly uncertain.
    • Neil Smith said the target dates for any future release of Leaf Data Systems had been removed (audio – 1m). The agency previously projected dates for two subsequent releases, versions 1.40 and 1.41.
    • Release 1.37.6 was not deployed in parallel with release 1.37.5 as planned (audio – 2m). The minor release would have enabled WSLCB staff to access the Qlik data analytics platform – but that was apparently not the final piece required to initiate the agency’s long-contemplated system of automated alerts. We learned the agency is still dependent on MJ Freeway to implement reporting functionality in Leaf Data Systems release 1.40 to enable alerts.
    • Liquidated damages will not be applied…for now (audio – 2m). Asked if the WSLCB had begun the process of negotiating the $3750 daily fine applied to MJ Freeway since its failure to deliver release 1.37.5 in November 2018, Deputy Director Megan Duffy said “those specific negotiations are not occurring at this point in time.” She added, “generally [liquidated damages] result once a contract is terminated and is to reimburse the agency or the aggrieved party—whatever term you want to use—for the costs incurred during that timeframe.”
  • The WSLCB was open to new approaches to regulating Washington state’s cannabis supply chain (audio – 22m).
    • I asked the committee, “How would you like to work with the regulated community to gather ideas, to gather proposals for different ways to approach [traceability]?”
    • Deputy Director Megan Duffy emphasized the agency’s need to evaluate traceability as one “approach” to regulating the marketplace before consideration of particular technical systems or solutions.
      • Duffy: “…the Board has started the Cannabis 2.0 conversation, right? So – five years in, what’s the landscape, what do we want it to look like, kind of question. And you’ve raised this on prior occasions with regard to being ready for interstate commerce, being ready for international trade, et cetera, right? And so part of that, I think, scan of the landscape and consideration of where we are is just traceability as an approach, right? So trying to rise up out of the questions and the mire of the system and more about the approach.”
    • Duffy acknowledged the open letter authored by The Cannabis Alliance “got at that question” of whether the “approach is right, approach is completely off base, approach is probably a right mixture of a couple different things.” Once the approach to regulating the cannabis supply chain had been re-evaluated and re-identified, then the agency would ask “what do you need in place to support that? And that begins to get at the, quote unquote, system.”
    • The agency had begun the process of “internally asking the question of ourselves: as a regulating agency, what things do you need to have in place in order to make this function the way that it supports our regulatory obligations.” Lara Kaminsky, Executive Director of the Cannabis Alliance, pressed the agency to identify its minimum data reporting requirements.
    • I asked if the agency had participated in discussions about traceability at the Regulators Roundtable (audio – 2m). Although the subject wasn’t mentioned during the agency’s August 7th Executive Management Team meeting review of the event, Enforcement Deputy Chief Steve Johnson confirmed the subject “did come up” and offered to follow up by email.
      • Johnson wrote: “I was able to talk [to Enforcement] Chief [Justin] Nordhorn today about the traceability conversation in Alaska at the Regulator’s Roundtable. I confirmed Kathy [Hoffman] didn’t attend that session. In short, Metric[sic], Bio-Track, and MJ Freeway were brought up by states that use those products. The facilitator came from a state that used Metric and focused the conversation on that vendor. The relevant information included what a traceability application should be able to track address:
        • Potency reports
        • Tax obligations
        • Pesticide use
        • Diversion eradication
        • Product recall”
    • The agency did not have a formal process worked out for soliciting input from the regulated community and other interested parties, “but you can be certain that it is gonna be engaging licensees, it’s gonna be engaging the universe of stakeholders that we work with, so that we have that input and information.” In response to committee member dithering about whether the Traceability Advisory Committee saw sufficient industry participation to host discussions about alternative approaches to traceability, former Cannabis Alliance Board President Danielle Rosellison conveyed widely held sentiment that industry participation was suppressed because licensees historically do not feel heard by the WSLCB. The agency may convene a new workgroup with a different composition of agency representatives and stakeholders.
    • Kaminsky asked for near-term timelines. Hodgson emphasized the need to be thoughtful about the overall timeline to avoid repeating mistakes, an allusion to the three months MJ Freeway claimed would be sufficient to implement Leaf Data Systems in Washington state by November 1st, 2017. Kaminsky reiterated her request for the agency to set a deadline for its own internal review, and Duffy and Hodgson committed to declaring that deadline within the next few weeks.
    • I asked Director of Legislative Relations Chris Thompson to confirm that traceability was rarely mentioned in statute and it was almost entirely within the WSLCB’s authority to rewrite relevant sections of the Washington Administrative Code (WAC) (audio – 2m).
      • Thompson confirmed RCW 69.50.342(1)(b) granted the agency broad authority to adopt rules regarding “The books and records to be created and maintained by licensees, the reports to be made thereon to the state liquor and cannabis board, and inspection of the books and records.”
      • He pointed out an additional statute on medical cooperatives, RCW 69.51A.250(8)(b), encoded the only explicit mention of traceability in law.
      • Hodgson confirmed 17 mentions of traceability in the WAC.
    • At my urging, the Traceability Advisory Committee planned to meet early next month in advance of the expiration of the agency’s latest contract amendment with MJ Freeway on September 30th.
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