Existing law, the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA), an initiative measure approved as Proposition 64 at the November 8, 2016, statewide general election, authorizes a person who obtains a state license under AUMA to engage in commercial adult-use cannabis activity pursuant to that license and applicable local ordinances. Existing law, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities.

Existing law establishes the Department of Cannabis Control within the Business, Consumer Services, and Housing Agency. Under existing law, the department is under the supervision and control of a director who is appointed by the Governor, subject to confirmation by the Senate.

AUMA authorizes the Legislature to amend by majority vote certain provisions of the act to implement specified substantive provisions, provided that the amendments are consistent with and further the purposes and intent of AUMA.

Existing law authorizes the department to issue a mandatory recall order and to require the licensee to immediately cease distribution of cannabis or a cannabis product and recall the cannabis or cannabis product, as specified. MAUCRSA prohibits cannabis and cannabis products from being sold unless a representative sample of specified batches has been tested by a licensed testing laboratory. Existing law subjects cannabis batches to quality assurance standards and testing prior to sale at a retailer, microbusiness, or nonprofit licensed as specified.

This bill would require the department to maintain on its internet website a record of all recall orders issued, as specified. The bill would require a testing laboratory to be subject to blind proficiency testing to ensure consistency of results across laboratories and would require the department, on or before January 1, 2025, to establish a standard laboratory blind proficiency test method, including standardized operating procedures, to be utilized by all testing laboratories. make specified changes to the testing standards, including requiring testing for cannabigerolic acid and heavy metals. The bill would also subject testing laboratories to biennial, in-person audits by the department at least once every 2 years and would require the results of those audits to be posted on the departments internet website. The bill would require the department, on or before January 1, 2025, July 1, 2026, to establish standard operating procedures for conducting audits, including frequency, manner, and notification requirements. This bill would require the department, on or before January 1, 2025, to establish quality assurance standards and testing procedures for products available for retail sale, as specified, to ensure consistency with presale laboratory testing, and would authorize inspections of licensed retail premises for these purposes. authorize a quality assurance compliance monitor to conduct random quality assurance reviews at a retailers or a microbusinesss licensed premises to ensure the labeling and packaging of the cannabis and cannabis products conform to specified requirements.

Existing law, the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA), an initiative measure approved as Proposition 64 at the November 8, 2016, statewide general election, authorizes a person who obtains a state license under AUMA to engage in commercial adult-use cannabis activity pursuant to that license and applicable local ordinances. Existing law, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities.

Existing law establishes the Department of Cannabis Control within the Business, Consumer Services, and Housing Agency. Under existing law, the department is under the supervision and control of a director who is appointed by the Governor, subject to confirmation by the Senate.

AUMA authorizes the Legislature to amend by majority vote certain provisions of the act to implement specified substantive provisions, provided that the amendments are consistent with and further the purposes and intent of AUMA.

Existing law authorizes the department to issue a mandatory recall order and to require the licensee to immediately cease distribution of cannabis or a cannabis product and recall the cannabis or cannabis product, as specified. MAUCRSA prohibits cannabis and cannabis products from being sold unless a representative sample of specified batches has been tested by a licensed testing laboratory. Existing law subjects cannabis batches to quality assurance standards and testing prior to sale at a retailer, microbusiness, or nonprofit licensed as specified.

This bill would require the department to maintain on its internet website a record of all recall orders issued, as specified. The bill would require a testing laboratory to be subject to blind proficiency testing to ensure consistency of results across laboratories and would require the department, on or before January 1, 2025, to establish a standard laboratory blind proficiency test method, including standardized operating procedures, to be utilized by all testing laboratories. The bill would also subject testing laboratories to annual biennial, in-person audits by the department and would require the results of those audits to be posted on the departments internet website, as specified. website. The bill would require the department, on or before January 1, 2025, to establish standard operating procedures for conducting audits, including frequency, manner, and notification requirements. This bill would require the department, on or before January 1, 2025, to establish quality assurance standards and testing procedures for products available for retail sale, as specified, to ensure consistency with presale laboratory testing. testing, and would authorize inspections of licensed retail premises for these purposes.

Existing law, the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA), an initiative measure approved as Proposition 64 at the November 8, 2016, statewide general election, authorizes a person who obtains a state license under AUMA to engage in commercial adult-use cannabis activity pursuant to that license and applicable local ordinances. Existing law, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities.

Existing law establishes the Department of Cannabis Control within the Business, Consumer Services, and Housing Agency. Under existing law, the department is under the supervision and control of a director who is appointed by the Governor, subject to confirmation by the Senate.

Existing law, the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA), an initiative measure approved as Proposition 64 at the November 8, 2016, statewide general election, authorizes a person who obtains a state license under AUMA to engage in commercial adult-use cannabis activity pursuant to that license and applicable local ordinances. Existing law, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities.

Existing law establishes the Department of Cannabis Control within the Business, Consumer Services, and Housing Agency. Under existing law, the department is under the supervision and control of a director who is appointed by the Governor, subject to confirmation by the Senate.

Existing law authorizes the director to employ and appoint all employees necessary to properly administer the work of the department, as prescribed. Existing law authorizes the Governor to appoint other deputy directors of the department. Existing law provides that these deputy directors serve under the direction and supervision of the director and hold office at the pleasure of the Governor.

This bill would make nonsubstantive changes to those provisions.

SENATE COMMITTEE ON

BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT

Senator Richard Roth, Chair

2023 - 2024 Regular

Bill No: AB 1610 Hearing Date: June 24, 2024

Subject: Cannabis: Department of Cannabis Control

SUMMARY:

Subjects testing laboratories under the jurisdiction of the Department of Cannabis Control (DCC) to specified in-person audits, at least once every two years; requires the DCC to authorize a compliance monitor to conduct quality assurance reviews to ensure compliance with packaging and labeling standards, as specified, and includes testing for heavy metals and cannabigerolic acid.

Existing law:

1. Establishes the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to regulate the cultivation, distribution, transport, storage, manufacturing, processing, and sale of both medicinal cannabis and adult-use cannabis. (Business and Professions Code (BPC) § 26000)
   
2. Establishes the DCC, under the jurisdiction, of the Business, Consumer Services, and Housing Agency, to administer and regulate provisions of MAUCRSA. (BPC § 26010)
   
3. Requires the DCC to establish a scale of application, licensing, and renewal fees, based upon the cost of enforcing the provisions of MAUCRSA, as specified. (BPC § 26180)
   
4. Establishes twenty licensure classifications for the regulation of cannabis, including a Type 8 testing laboratory license and specifies that licenses are available for 12-months from the date of issuance. (BPC § 26050)
   
5. Prohibits a cannabis or cannabis product from being sold unless a representative sample of the cannabis or cannabis product has been tested by a licensed testing laboratory. (BPC § 26100(a))
   
6. Requires the DCC to develop criteria to determine which batches are to be tested and all sample testing must be performed on the final form of the cannabis or cannabis product and testing of batches may only be conducted by a licensed testing laboratory. (BPC §26100(b)(c))
   
7. Requires a licensed testing laboratory in performing activities concerning cannabis and cannabis products to comply with the requirements set forth in applicable law and regulations and further requires the DCC to develop procedures to ensure that testing is conducted prior to distribution, specify how often licensees test cannabis and cannabis products, as specified, and ensure that a testing laboratory employee takes the sample of cannabis or cannabis products from the distributor’s premises for testing required and that the testing laboratory employee transports the sample to the testing laboratory. (BPC §26104(a)(b))
   
8. Requires the DCC to establish a standard cannabinoids test method, including standardized operating procedures, to be utilized by all testing laboratories, and may establish more than one method for use be testing laboratories and these standards may be developed through a reference laboratory. (BPC § 26100(f)(2))
   
9. Subjects cannabis batches to quality assurance standards and testing prior to sale at a retailer, microbusiness, or nonprofit except for immature cannabis plants and seeds, as specified. (BPC § 26110(a))
   
10. Requires a quality assurance compliance monitor who is an employee or contractor of the DCC who does not hold a license in any category or own or have an ownership interest in a licensee or the premises of a licensee, and the quality assurance compliance monitor must conduct random quality assurance reviews at a distributor’s licensed premises before distribution to ensure labeling and packaging of the cannabis and cannabis products, as specified. (BPC § 26110(f)(1)(2))
    
11. Authorizes after testing, all cannabis or cannabis products fir for sale, to be transported only from the distributor’s premises to the premises of another licensed distributor for further distribution, or to a licensed retailer, microbusiness or nonprofit for sale. (BPC § 26110(g))
    

Current regulations:

1. Requires a licensed laboratory to maintain ISO/IEC 17025 accreditation for the testing of the following:
   
2. Cannabinoids;
   
3. Heavy metal;
   
4. Microbial impurities;
   
5. Mycotoxins;
   
6. Residual pesticides;
   
7. Residual solvents and processing chemicals; and
   
8. If tested, terpenoids. (Title 4, California Code of Regulations (CCR) § 15701(a))
   
9. Requires a licensed laboratory to retain and make available to the DCC upon request, all records associated with the licensee’s ISO/IEC 17025 certificate of accreditation.
   
10. Requires a licensed laboratory shall develop and implement a sampling standard operating procedure that describes the laboratory’s method for obtaining representative samples of cannabis or cannabis products. (4, CCR § 15704(a))
    
11. Requires the licensed laboratory to obtain and analyze only those samples from cannabis product batches that are in final form. (4, CCR § 15705(b))
12. Requires each licensed laboratory to develop, implement, and validate test methods for the analyses of samples, as required and must conform to specified guidelines. (4, CCR § 15712)
    
13. Requires the testing laboratory to develop, implement, and validate test methods for the analyses of samples as specified, and requires to the extent practicable, the laboratory test methods comport with the following guidelines:
14. US Food and Drug Administration’s Bacterial Analytical Manual, 2016;
    
15. AOAC International’s Official Methods of Analysis for Contaminant Testing of AOAC International, 20th Edition, 2016; and
    
16. United States Pharmacopeia and the National Formulary’s Methods of Analysis for Contaminant Testing, 2016. (4, CCR § 17512)

This bill:

1. Requires the DCC to maintain on its internet website a record of all recall orders it has issued, which must include for each instance the following information: the date, location, licensee name and license number, and whether the recall was voluntary or mandatory.
   
2. Adds heavy metals, including, but not limited to lead, cadmium, arsenic and mercury to the list of contaminants for purposes of required cannabis batch testing.
   
3. Authorizes a testing laboratory to deviate from the standard test method if they can demonstrate outcomes consistent with those required under existing law.
   
4. Additionally requires a cannabis-testing laboratory to destroy the remains of samples after the required retention time, as specified.
   
5. Requires a testing laboratory to be subject to in-person audits by the DCC, at least once every two years.
   
6. Requires the DCC, on or before July 1, 2026, to establish standard operating procedures for conducting audits, including frequency, manner, and notification requirements and the DCC must make the results of the audit, including any record of violation on the DCC’s website.
   
7. Authorizes a quality assurance compliance monitor to also conduct random quality assurance reviews at a retailer or microbusiness-licensed premises, as specified.
   
8. Makes other technical and conforming changes.
   

FISCAL EFFECT:

According to the Assembly Committee on Appropriations,

DCC estimates costs of at least $3.7 million for the first year and $3.2 million ongoing for laboratory, legal, and administrative staff to implement this bill. Staff will be responsible for developing blind proficiency testing standardized operating procedures for use by all testing labs and for reviewing completed proficiency tests, establishing quality assurance standards and testing procedures for products available at retail, performing annual audits for all licensed laboratories, as well as handling post laboratory and product inspection activities and actions.

COMMENTS:

1. Purpose. Cal NORML is the sponsor of this bill. According to the author, “Widespread cannabis testing fraud is harming Californians and hampering the growth of its legal cannabis market. In 2016, Californians voted for legalization in large part to eliminate the illicit need, ensure safety, and generate revenue; however, the state is falling short of each of those goals. More than half of California’s estimated cannabis sales still take place in illegal markets, and new evidence of testing fraud is uncovered every day.

Limited regulations and enforcement have resulted in persistent testing fraud, a risk to patients and consumers, and inadequate tax collection. California requires cannabis products to be tested by a state-licensed lab to ensure they do not exceed specified limits on pesticides, heavy metals, microbiological, and other contaminants, and to assure that their cannabinoid content is accurately labeled. Unfortunately, there is evidence that bad actors in the cannabis industry are breaking the rules by failing to report excessive levels of harmful pesticides and other contaminants, and by fraudulently inflating the THC content of tested samples.

For instance, a recent sample of 150 randomly chosen CA products found that 87% had inaccurately high tetrahydrocannabinol (THC) potency labels after retesting. As such, brands and labels are fraudulently inflating stated levels of THC by working with labs known to give artificially high results, as higher THC levels are proven to yield higher prices

Fraudulent testing and inaccurate labeling create safety risks for the estimated 2 million medical marijuana patients who depend on it for treatment. Product recalls are increasing daily for issues such as pesticides and mold. Evidence from states such as Arizona, Colorado, Florida, Michigan, Minnesota, Nevada, Oklahoma, Oregon, Vermont, and Washington indicates that California residents are likely exposed to other contaminants such as yeast, E. coli, and salmonella.

According to a recent report by the California League of Cities, roughly 55% of all cannabis sales within the state are in the illegal market. Consequently, the $5.2 billion in revenues received by the California Department of Tax and Fee Administration in 2021 could more than double if the illicit market is eradicated.”

1. Background.

Cannabis. In 2021, DCC was formally established with both licensing, regulatory and enforcement authority. DCC was designed to centralize and align critical licensing, compliance and enforcement responsibilities to help build a sustainable and successful legal cannabis market by creating a single point of contact for cannabis applicants, licensees and local governments. Currently, the DCC is responsible for the oversight of the licensing and regulatory framework of cannabis regulation in California. Prop 64 created the framework for the regulation of non-medical cannabis and specified parameters for all aspects of cannabis in California including cultivation, selling, manufacturing, testing, and distributing.

A separate license is required for every corner of the cannabis market, including growing cannabis, transporting cannabis, making cannabis products, testing cannabis products, selling cannabis, and holding a temporary event where cannabis is sold and displayed. Each license type is distinct and must be approved before operating any type of cannabis business or operation. Cannabis testing laboratories are Type-8 licenses.

Cannabis Testing and Testing Laboratories. MAUCRSA requires cannabis in its final form to be laboratory tested prior to sale. Cannabis testing laboratories are required to evaluate the levels of contaminants of cannabis samples, including residual solvent, processing chemicals, moisture content and water activity, foreign material (such as hair and insects) and microbiological impurities. Testing also determines the concentrations of active chemicals and to ensure compliance with safety standards. Licensed testing laboratories report results on a “Certificate of Analysis” (COA), which states whether the batch passes or fails testing for each substance. Licensed labs can only issue COAs and results after they finish all tests. Labs cannot change them after they are issued without permission from DCC.

In addition to information pertaining to the product’s chemical profiles and contaminants, the COA documents administrative information about the laboratory, the distributor or microbusiness, dates and signatures, and other non-testing data, which can be subject to simple data entry mistakes. Testing laboratories must obtain and maintain ISO/ISE 17025 accreditation. This bill would specifically add to statute specified heavy metals to the list of items for which a cannabis product must be tested. Although current regulations, 4 CCR § 15723 already specifies these items to be tested.

In 2021, the Legislature passed and the Governor signed, SB 544 (Laird), Chapter 547, Statutes of 2021, which required DCC to establish standardized cannabinoid test methods to be used by all testing laboratories by January 1, 2023. Effective January 1, 2024, state licensed laboratories are required to use the DCC standardized cannabinoids test method and standardized operating procedures for testing dried flower, including non-infused pre-rolls.

As provided in current regulations, (4, CCR § 15735), licensed laboratories are required to conduct an internal audit at least once per year or in accordance with the ISO/IEC 17025 accrediting body’s requirement, whichever is more frequent. However, these are internal audits, not by the DCC. This bill would require in-person audits by the DCC at least once every two years and would require the DCC to establish standard operating procedures for those audits no later than July 1, 2026.

Current law provides the DCC with the power, duty, purpose, responsibility, and jurisdiction to regulate commercial cannabis activity. Further the DCC may undertake and investigation as it deems necessary to carry out its functions. However, there is nothing specified in statute that requires the DCC to conduct audits or inspections of licensed testing laboratories, although the DCC is not prevented from undertaking such evaluations. Although the testing laboratories are licenses by the DCC and subject to the DCC’s oversight, this bill aims to ensure that testing laboratories are subject to greater oversight and routine audits.

Recalls. Per BPC § 26039.1, the DCC is authorized to issue a mandatory recall if it determines it is necessary for a product. There is nothing in current law that requires a recall notice to be posted on the DCC’s website for any length of time. According to the DCC, the cannabis recall process plays an important role in ensuring defective or potentially unsafe products are removed from the commercial market. There are two types of recalls: mandatory recalls, which are ordered by the DCC, and voluntary recalls, which are conducted by the cannabis business. Currently, the DCC lists the recall status of a product on its internet website. This bill would explicitly require the DCC to make all recall notices available on its website in perpetuity, and include detailed information about the recall including whether it is voluntary or mandatory and pertinent licensee information. Currently, the DCC has 30 recall notices listed on its website the earliest being from 01/06/22 and most recent 6/12/24.

Labeling and Packaging. In addition to the robust licensing, transporting, testing, cultivating and enforcement provisions of MAUCRSA, there are very strict labeling and packaging requirements for cannabis and cannabis products. Under current law, all cannabis product labels must display the following statement in bold print:

GOVERNMENT WARNING: THIS PRODUCT CONTAINS CANNABIS, A SCHEDULE I CONTROLLED SUBSTANCE. KEEP OUT OF REACH OF CHILDREN AND ANIMALS. CANNABIS PRODUCTS MAY ONLY BE POSSESSED OR CONSUMED BY PERSONS 21 YEARS OF AGE OR OLDER UNLESS THE PERSON IS A QUALIFIED PATIENT. THE INTOXICATING EFFECTS OF CANNABIS PRODUCTS MAY BE DELAYED UP TO TWO HOURS. CANNABIS USE WHILE PREGNANT OR BREASTFEEDING MAY BE HARMFUL. CONSUMPTION OF CANNABIS PRODUCTS IMPAIRS YOUR ABILITY TO DRIVE AND OPERATE MACHINERY. PLEASE USE EXTREME CAUTION.

In addition to the above statement, MAUCRSA requires certain information about the product’s ingredients and contents to be listed, as well as information associated with a unique identifier for purposes of tracking the cannabis goods. MAUCRSA also authorizes the DCC to set its own additional requirements for cannabis packaging and labeling. Regulations promulgated by the DCC and its predecessors have incorporated additional labeling standards. For example, all labels must be “unobstructed and conspicuous” in at least 6 point type size, and must be written in English. If the cannabis product is edible, the regulations require specific information about potential allergens in the product, the names of any artificial colorings, and any sugar, carbohydrates, and total fat per serving.

The DCC’s regulations specifically prohibit the labels of cannabis goods from containing content that is attractive to individuals under the age of 21, using the same criteria as provided in the DCC’s regulations pertaining to advertising restrictions. This includes a ban on labeling that uses depictions of minors, cartoons, candy packaging, or other images popularly used to advertise to children. In addition, cannabis products must be marked with a universal symbol, established by the DCC through regulations. This bill would subsequently authorize a quality assurance compliance monitor to conduct random quality assurance reviews at a retailer’s or a microbusiness’s licensed premises to ensure the labeling and packaging of the cannabis and cannabis products conform to specified requirements.

1. Related Legislation. AB 623 (Chen, Chapter 267, Statutes of 2023) requires the Department of Cannabis Control (DCC) to establish regulations to adjust testing variances for edible cannabis products that include less than five milligrams of tetrahydrocannabinol (THC) in total.

SB 544 (Laird, Chapter 547, Statutes of 2021), required DCC to, by January 1, 2023, establish standardized cannabinoid test methods to be used by all testing laboratories.

AB 2749 (Stone of 2020) would have required the Bureau of Cannabis Control (BCC) to: set specific testing standards for all specified cannabis compounds and components on or before January 1, 2022; post a notification on its website when a licensed testing laboratory is prohibited from issuing certificates of analysis (COAs) for more than 45 days; and remove that notification immediately when the licensed testing laboratory’s authorization to issue COAs is reinstated, as specified. This bill was held in the Senate Committee on Appropriations.

1. Arguments in Support. The California Cannabis Industry Association and the California Cannabis Manufacturers Association writes in support and note, “we urge your support for AB 1610 to ensure the integrity and safety of cannabis testing in California.”
   

SUPPORT AND OPPOSITION:

Support:

California Cannabis Industry Association

California Cannabis Manufacturers Association

Opposition:

None received.

-- END --

SENATE COMMITTEE ON

Senator Anna Caballero, Chair

2023 - 2024 Regular Session

AB 1610 (Jones-Sawyer) - Cannabis: Department of Cannabis Control

Bill Summary:

AB 1610 subjects testing laboratories under the jurisdiction of the Department of Cannabis Control (DCC) to specified in-person audits at least once every two years; requires DCC to maintain a record of all recall orders it has issued on its website; requires DCC to authorize a compliance monitor to conduct quality assurance reviews, as specified; and includes heavy metals and Cannabigerolic Acid for purposes of required cannabis batch testing.

Fiscal Impact:

The DCC reports costs of approximately $1.8 million in the first year and $1.6 million ongoing for additional laboratory, legal, and administrative staff resources, as well as equipment (General Fund and special fund). Staff workload includes undertaking full in-person audits every two years for all licensed laboratories and for post-audit activities such as conducting additional inspections and other enforcement activities. Other staff workload includes developing quality assurance standards and testing procedures.

Background:

MAUCRSA requires cannabis in its final form to be laboratory tested prior to sale. Cannabis testing laboratories are required to evaluate the levels of contaminants of cannabis samples, including residual solvent, processing chemicals, moisture content and water activity, foreign material (such as hair and insects) and microbiological impurities. Testing also determines the concentrations of active chemicals and to ensure compliance with safety standards. Licensed testing laboratories report results on a “Certificate of Analysis” (COA), which states whether the batch passes or fails testing for each substance. Licensed labs can only issue COAs and results after they finish all tests. Labs cannot change them after they are issued without permission from DCC.

In addition to information pertaining to the product’s chemical profiles and contaminants, the COA documents administrative information about the laboratory, the distributor or microbusiness, dates and signatures, and other non-testing data, which can be subject to simple data entry mistakes. Testing laboratories must obtain and maintain ISO/ISE 17025 accreditation.

Proposed Law:

• Requires the DCC to maintain on its internet website a record of all recall orders it has issued, including for each instance the following information: the date, location, licensee name and license number, and whether the recall was voluntary or mandatory.
• For purposes of required cannabis batch testing:
  • Adds Cannabigerolic Acid to the list of compounds, if in the chemical profile of a sample, be reflected in the labeled content of compounds of that sample.
  • Adds heavy metals, including, but not limited to lead, cadmium, arsenic and mercury to the list of contaminants.
• Authorizes a testing laboratory to deviate from the standard test method if they can demonstrate outcomes consistent with those required under existing law.
• Additionally requires a cannabis-testing laboratory to destroy the remains of samples after the required retention time, as specified.
• Requires a testing laboratory to be subject to in-person audits by the DCC, at least once every two years.
  • Requires the DCC, on or before July 1, 2026, to establish standard operating procedures for conducting audits, including frequency, manner, and notification requirements.
  • Requires the DCC to must make the results of the audit, including any record of violation, available on its website.
• Authorizes a quality assurance compliance monitor to also conduct random quality assurance reviews at a retailer or microbusiness-licensed premises, as specified.
• Makes other technical and conforming changes.

-- END --

SENATE COMMITTEE ON

BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT

Senator Richard Roth, Chair

2023 - 2024 Regular

Bill No: Hearing Date: June 24, 2024

Subject:

SUMMARY:

Subjects testing laboratories under the jurisdiction of the Department of Cannabis Control (DCC) to specified in-person audits, at least once every two years; requires the DCC to authorize a compliance monitor to conduct quality assurance reviews to ensure compliance with packaging and labeling standards, as specified, and includes testing for heavy medals and cannabigerolic acid.

Existing law:

1. Establishes the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to regulate the cultivation, distribution, transport, storage, manufacturing, processing, and sale of both medicinal cannabis and adult-use cannabis. (Business and Professions Code (BPC) § 26000)
   
2. Establishes the DCC, under the jurisdiction, of the Business, Consumer Services, and Housing Agency, to administer and regulate provisions of MAUCRSA. (BPC § 26010)
   
3. Requires the DCC to establish a scale of application, licensing, and renewal fees, based upon the cost of enforcing the provisions of MAUCRSA, as specified. (BPC § 26180)
   
4. Establishes twenty licensure classifications for the regulation of cannabis, including a Type 8 testing laboratory license and specifies that licenses are available for 12-months from the date of issuance. (BPC § 26050)
   
5. Prohibits a cannabis or cannabis product from being sold unless a representative sample of the cannabis or cannabis product has been tested by a licensed testing laboratory. (BPC § 26100(a))
   
6. Requires the DCC to develop criteria to determine which batches are to be tested and all sample testing must be performed on the final form of the cannabis or cannabis product and testing of batches may only be conducted by a licensed testing laboratory. (BPC §26100(b)(c))
   
7. Requires a licensed testing laboratory in performing activities concerning cannabis and cannabis products to comply with the requirements set forth in applicable law and regulations and further requires the DCC to develop procedures to ensure that testing is conducted prior to distribution, specify how often licensees test cannabis and cannabis products, as specified, and ensure that a testing laboratory employee takes the sample of cannabis or cannabis products from the distributor’s premises for testing required and that the testing laboratory employee transports the sample to the testing laboratory. (BPC §26104(a)(b))
   
8. Requires the DCC to establish a standard cannabinoids test method, including standardized operating procedures, to be utilized by all testing laboratories, and may establish more than one method for use be testing laboratories and these standards may be developed through a reference laboratory. (BPC § 26100(f)(2))
   
9. Subjects cannabis batches to quality assurance standards and testing prior to sale at a retailer, microbusiness, or nonprofit except for immature cannabis plants and seeds, as specified. (BPC § 26110(a))
   
10. Requires a quality assurance compliance monitor who is an employee or contractor of the DCC who does not hold a license in any category or own or have an ownership interest in a licensee or the premises of a licensee, and the quality assurance compliance monitor must conduct random quality assurance reviews at a distributor’s licensed premises before distribution to ensure labeling and packaging of the cannabis and cannabis products, as specified. (BPC § 26110(f)(1)(2))
    
11. Authorizes after testing, all cannabis or cannabis products fir for sale, to be transported only from the distributor’s premises to the premises of another licensed distributor for further distribution, or to a licensed retailer, microbusiness or nonprofit for sale. (BPC § 26110(g))
    

Current regulations:

1. Requires a licensed laboratory to maintain ISO/IEC 17025 accreditation for the testing of the following:
   
2. Cannabinoids;
   
3. Heavy metal;
   
4. Microbial impurities;
   
5. Mycotoxins;
   
6. Residual pesticides;
   
7. Residual solvents and processing chemicals; and
   
8. If tested, terpenoids. (Title 4, California Code of Regulations (CCR) § 15701(a))
   
9. Requires a licensed laboratory to retain and make available to the DCC upon request, all records associated with the licensee’s ISO/IEC 17025 certificate of accreditation.
   
10. Requires a licensed laboratory shall develop and implement a sampling standard operating procedure that describes the laboratory’s method for obtaining representative samples of cannabis or cannabis products. (4, CCR § 15704(a))
    
11. Requires the licensed laboratory to obtain and analyze only those samples from cannabis product batches that are in final form. (4, CCR § 15705(b))
12. Requires each licensed laboratory to develop, implement, and validate test methods for the analyses of samples, as required and must conform to specified guidelines. (4, CCR § 15712)
    
13. Requires the testing laboratory to develop, implement, and validate test methods for the analyses of samples as specified, and requires to the extent practicable, the laboratory test methods comport with the following guidelines:
14. US Food and Drug Administration’s Bacterial Analytical Manual, 2016;
    
15. AOAC International’s Official Methods of Analysis for Contaminant Testing of AOAC International, 20th Edition, 2016; and
    
16. United States Pharmacopeia and the National Formulary’s Methods of Analysis for Contaminant Testing, 2016. (4, CCR § 17512)

This bill:

1. Requires the DCC to maintain on its internet website a record of all recall orders it has issued, which must include for each instance the following information: the date, location, licensee name and license number, and whether the recall was voluntary or mandatory.
   
2. Adds heavy metals, including, but not limited to lead, cadmium, arsenic and mercury to the list of contaminants for purposes of required cannabis batch testing.
   
3. Authorizes a testing laboratory to deviate from the standard test method if they can demonstrate outcomes consistent with those required under existing law.
   
4. Additionally requires a cannabis-testing laboratory to destroy the remains of samples after the required retention time, as specified.
   
5. Requires a testing laboratory to be subject to in-person audits by the DCC, at least once every two years.
   
6. Requires the DCC, on or before July 1, 2026, to establish standard operating procedures for conducting audits, including frequency, manner, and notification requirements and the DCC must make the results of the audit, including any record of violation on the DCC’s website.
   
7. Authorizes a quality assurance compliance monitor to also conduct random quality assurance reviews at a retailer or microbusiness-licensed premises, as specified.
   
8. Makes other technical and conforming changes.
   

FISCAL EFFECT:

According to the Assembly Committee on Appropriations,

DCC estimates costs of at least $3.7 million for the first year and $3.2 million ongoing for laboratory, legal, and administrative staff to implement this bill. Staff will be responsible for developing blind proficiency testing standardized operating procedures for use by all testing labs and for reviewing completed proficiency tests, establishing quality assurance standards and testing procedures for products available at retail, performing annual audits for all licensed laboratories, as well as handling post laboratory and product inspection activities and actions.

COMMENTS:

1. Purpose. Cal NORML is the sponsor of this bill. According to the author, “Widespread cannabis testing fraud is harming Californians and hampering the growth of its legal cannabis market. In 2016, Californians voted for legalization in large part to eliminate the illicit need, ensure safety, and generate revenue; however, the state is falling short of each of those goals. More than half of California’s estimated cannabis sales still take place in illegal markets, and new evidence of testing fraud is uncovered every day.

Limited regulations and enforcement have resulted in persistent testing fraud, a risk to patients and consumers, and inadequate tax collection. California requires cannabis products to be tested by a state-licensed lab to ensure they do not exceed specified limits on pesticides, heavy metals, microbiological, and other contaminants, and to assure that their cannabinoid content is accurately labeled. Unfortunately, there is evidence that bad actors in the cannabis industry are breaking the rules by failing to report excessive levels of harmful pesticides and other contaminants, and by fraudulently inflating the THC content of tested samples.

For instance, a recent sample of 150 randomly chosen CA products found that 87% had inaccurately high tetrahydrocannabinol (THC) potency labels after retesting. As such, brands and labels are fraudulently inflating stated levels of THC by working with labs known to give artificially high results, as higher THC levels are proven to yield higher prices

Fraudulent testing and inaccurate labeling create safety risks for the estimated 2 million medical marijuana patients who depend on it for treatment. Product recalls are increasing daily for issues such as pesticides and mold. Evidence from states such as Arizona, Colorado, Florida, Michigan, Minnesota, Nevada, Oklahoma, Oregon, Vermont, and Washington indicates that California residents are likely exposed to other contaminants such as yeast, E. coli, and salmonella.

According to a recent report by the California League of Cities, roughly 55% of all cannabis sales within the state are in the illegal market. Consequently, the $5.2 billion in revenues received by the California Department of Tax and Fee Administration in 2021 could more than double if the illicit market is eradicated.”

1. Background.

Cannabis. In 2021, DCC was formally established with both licensing, regulatory and enforcement authority. DCC was designed to centralize and align critical licensing, compliance and enforcement responsibilities to help build a sustainable and successful legal cannabis market by creating a single point of contact for cannabis applicants, licensees and local governments. Currently, the DCC is responsible for the oversight of the licensing and regulatory framework of cannabis regulation in California. Prop 64 created the framework for the regulation of non-medical cannabis and specified parameters for all aspects of cannabis in California including cultivation, selling, manufacturing, testing, and distributing.

A separate license is required for every corner of the cannabis market, including growing cannabis, transporting cannabis, making cannabis products, testing cannabis products, selling cannabis, and holding a temporary event where cannabis is sold and displayed. Each license type is distinct and must be approved before operating any type of cannabis business or operation. Cannabis testing laboratories are Type-8 licenses.

Cannabis Testing and Testing Laboratories. MAUCRSA requires cannabis in its final form to be laboratory tested prior to sale. Cannabis testing laboratories are required to evaluate the levels of contaminants of cannabis samples, including residual solvent, processing chemicals, moisture content and water activity, foreign material (such as hair and insects) and microbiological impurities. Testing also determines the concentrations of active chemicals and to ensure compliance with safety standards. Licensed testing laboratories report results on a “Certificate of Analysis” (COA), which states whether the batch passes or fails testing for each substance. Licensed labs can only issue COAs and results after they finish all tests. Labs cannot change them after they are issued without permission from DCC.

In addition to information pertaining to the product’s chemical profiles and contaminants, the COA documents administrative information about the laboratory, the distributor or microbusiness, dates and signatures, and other non-testing data, which can be subject to simple data entry mistakes. Testing laboratories must obtain and maintain ISO/ISE 17025 accreditation. This bill would specifically add to statute specified heavy metals to the list of items for which a cannabis product must be tested. Although current regulations, 4 CCR § 15723 already specifies these items to be tested.

In 2021, the Legislature passed and the Governor signed, SB 544 (Laird), Chapter 547, Statutes of 2021, which required DCC to establish standardized cannabinoid test methods to be used by all testing laboratories by January 1, 2023. Effective January 1, 2024, state licensed laboratories are required to use the DCC standardized cannabinoids test method and standardized operating procedures for testing dried flower, including non-infused pre-rolls.

As provided in current regulations, (4, CCR § 15735), licensed laboratories are required to conduct an internal audit at least once per year or in accordance with the ISO/IEC 17025 accrediting body’s requirement, whichever is more frequent. However, these are internal audits, not by the DCC. This bill would require in-person audits by the DCC at least once every two years and would require the DCC to establish standard operating procedures for those audits no later than July 1, 2026.

Current law provides the DCC with the power, duty, purpose, responsibility, and jurisdiction to regulate commercial cannabis activity. Further the DCC may undertake and investigation as it deems necessary to carry out its functions. However, there is nothing specified in statute that requires the DCC to conduct audits or inspections of licensed testing laboratories, although the DCC is not prevented from undertaking such evaluations. Although the testing laboratories are licenses by the DCC and subject to the DCC’s oversight, this bill aims to ensure that testing laboratories are subject to greater oversight and routine audits.

Recalls. Per BPC § 26039.1, the DCC is authorized to issue a mandatory recall if it determines it is necessary for a product. There is nothing in current law that requires a recall notice to be posted on the DCC’s website for any length of time. According to the DCC, the cannabis recall process plays an important role in ensuring defective or potentially unsafe products are removed from the commercial market. There are two types of recalls: mandatory recalls, which are ordered by the DCC, and voluntary recalls, which are conducted by the cannabis business. Currently, the DCC lists the recall status of a product on its internet website. This bill would explicitly require the DCC to make all recall notices available on its website in perpetuity, and include detailed information about the recall including whether it is voluntary or mandatory and pertinent licensee information. Currently, the DCC has 30 recall notices listed on its website the earliest being from 01/06/22 and most recent 6/12/24.

Labeling and Packaging. In addition to the robust licensing, transporting, testing, cultivating and enforcement provisions of MAUCRSA, there are very strict labeling and packaging requirements for cannabis and cannabis products. Under current law, all cannabis product labels must display the following statement in bold print:

GOVERNMENT WARNING: THIS PRODUCT CONTAINS CANNABIS, A SCHEDULE I CONTROLLED SUBSTANCE. KEEP OUT OF REACH OF CHILDREN AND ANIMALS. CANNABIS PRODUCTS MAY ONLY BE POSSESSED OR CONSUMED BY PERSONS 21 YEARS OF AGE OR OLDER UNLESS THE PERSON IS A QUALIFIED PATIENT. THE INTOXICATING EFFECTS OF CANNABIS PRODUCTS MAY BE DELAYED UP TO TWO HOURS. CANNABIS USE WHILE PREGNANT OR BREASTFEEDING MAY BE HARMFUL. CONSUMPTION OF CANNABIS PRODUCTS IMPAIRS YOUR ABILITY TO DRIVE AND OPERATE MACHINERY. PLEASE USE EXTREME CAUTION.

In addition to the above statement, MAUCRSA requires certain information about the product’s ingredients and contents to be listed, as well as information associated with a unique identifier for purposes of tracking the cannabis goods. MAUCRSA also authorizes the DCC to set its own additional requirements for cannabis packaging and labeling. Regulations promulgated by the DCC and its predecessors have incorporated additional labeling standards. For example, all labels must be “unobstructed and conspicuous” in at least 6 point type size, and must be written in English. If the cannabis product is edible, the regulations require specific information about potential allergens in the product, the names of any artificial colorings, and any sugar, carbohydrates, and total fat per serving.

The DCC’s regulations specifically prohibit the labels of cannabis goods from containing content that is attractive to individuals under the age of 21, using the same criteria as provided in the DCC’s regulations pertaining to advertising restrictions. This includes a ban on labeling that uses depictions of minors, cartoons, candy packaging, or other images popularly used to advertise to children. In addition, cannabis products must be marked with a universal symbol, established by the DCC through regulations. This bill would subsequently authorize a quality assurance compliance monitor to conduct random quality assurance reviews at a retailer’s or a microbusiness’s licensed premises to ensure the labeling and packaging of the cannabis and cannabis products conform to specified requirements.

1. Related Legislation. AB 623 (Chen, Chapter 267, Statutes of 2023) requires the Department of Cannabis Control (DCC) to establish regulations to adjust testing variances for edible cannabis products that include less than five milligrams of tetrahydrocannabinol (THC) in total.

SB 544 (Laird, Chapter 547, Statutes of 2021), required DCC to, by January 1, 2023, establish standardized cannabinoid test methods to be used by all testing laboratories.

AB 2749 (Stone of 2020) would have required the Bureau of Cannabis Control (BCC) to: set specific testing standards for all specified cannabis compounds and components on or before January 1, 2022; post a notification on its website when a licensed testing laboratory is prohibited from issuing certificates of analysis (COAs) for more than 45 days; and remove that notification immediately when the licensed testing laboratory’s authorization to issue COAs is reinstated, as specified. This bill was held in the Senate Committee on Appropriations.

1. Arguments in Support. The California Cannabis Industry Association and the California Cannabis Manufacturers Association writes in support and note, “we urge your support for AB 1610 to ensure the integrity and safety of cannabis testing in California.”
   

SUPPORT AND OPPOSITION:

Support:

California Cannabis Industry Association

California Cannabis Manufacturers Association

Opposition:

None received.

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 1610

Author:(Jones-Sawyer)

As Amended Ver:March 23, 2023

Majority vote

SUMMARY

Subjects cannabis testing laboratories to blind proficiency testing and annual audits to ensure consistency of results across laboratories, and requires the Department of Cannabis Control (DCC) to establish standards for laboratory tests and audits, as well as quality assurance standards for retail products, and to maintain on its website a record of recall orders.

Major Provisions

1. Requires DCC to maintain on its website a record of recall orders issued in an unspecified number of preceding years.
2. Requires the record of a recall to include the date, location, licensee name and license number, and whether the recall was voluntary or mandatory.
3. Subjects testing laboratories to blind proficiency testing to ensure consistency of results across laboratories.
4. Requires DCC, on or before January 1, 2025, to establish a standard laboratory blind proficiency test method, including standardized operating procedures that must be utilized by all testing laboratories.
5. Subjects testing laboratories to annual audits by DCC.
6. Requires DCC, on or before January 1, 2025, to establish standard operating procedures for conducting audits, including frequency, manner, and notification requirements.
7. Requires the results of the audit, including any record of violation, to be made available on DCC's website for an unspecified number of years.
8. Requires DCC, on or before January 1, 2025, to establish quality assurance standards and testing procedures for products available for retail sale.
9. Specifies that the quality assurance and testing procedures must include, but are not limited to, laboratory testing of products that are available for retail sale to ensure consistency with presale laboratory testing.

COMMENTS

Department of Cannabis Control. Since July 1, 2021, DCC has been the single entity responsible for administering and enforcing the majority of California's cannabis laws, collectively known as MAUCRSA. DCC is additionally responsible for licensing and regulating commercial cannabis business, including the cultivation, manufacture, testing, transportation, labeling, and sale of cannabis and cannabis products in this state.

Cannabis testing. Cannabis products are required to be tested before they can be sold to ensure that they are free of contaminants (e.g. pesticides) and labeled with accurate amounts of cannabinoids and terpenes. Results are reported on a Certificate of Analysis (COA), which is required to be uploaded to DCC's track and trace system and emailed directly to DCC. If any cannabis or cannabis products fail testing, the entire batch of goods must be destroyed by the distributor or remediated by a manufacturer. Remediation is the process of removing contaminants from a product and must be approved by DCC in advance. After remediation, the cannabis or cannabis goods are re-tested. If they pass, then the goods can be sold.

Cannabis testing laboratories must be licensed by DCC, maintain accreditation by the International Organization for Standardization, use standardized operating procedures, develop a laboratory quality assurance program, and participate in a proficiency testing program.

Laboratory Shopping and THC Inflation. According to this bill's sponsor and supporters, consumers are generally willing to pay more for cannabis and cannabis products with higher levels of THC. As a result, they allege that there is an incentive to shop around for the testing laboratory that will report the highest potency rates for their products. Unscrupulous testing laboratories, they assert, will artificially inflate THC levels by using unscientific methods or by committing fraud. As reported by the Cannabis Industry Journal, a handful of laboratories in 2021 collectively purchased and tested over 150 cannabis products from licensed retailers (i.e. dispensaries). They found that 87% of the samples contained less THC than advertised.

This committee is currently aware of one lawsuit related to THC inflation. In Christian Ayala et al vs Central Coast Agriculture, Inc., the plaintiffs accuse the defendant of false and misleading labeling and marketing of the THC quantity in Raw Garden Infused Joints. This case is pending in the Santa Clara County Superior Court.

In 2021, the Legislature passed and the Governor signed, SB 544 (Laird), Chapter 547, Statutes of 2021, which required DCC to establish standardized cannabinoid test methods to be used by all testing laboratories by January 1, 2023. DCC is in the process of finalizing those regulations. This bill would go further by requiring DCC, by January 1, 2025, to establish a standard laboratory blind proficiency test method for use by all testing laboratories. This bill also requires DCC, by January 1, 2025, to establish quality assurance standards and testing procedures for products available for retail sale. Additionally, this bill would require DCC to audit testing laboratories annually and post the results, including any record of a violation, on its website for an unspecified number of years. The sponsor of this bill, SC Labs, says that its testing laboratory in Santa Cruz has been operating since 2010 on a provisional license and has never been inspected in person.

Recalls. DCC has the authority to issue mandatory recalls for cannabis products that present an immediate or serious threat to consumers and other remedies would cause an unreasonable delay. When DCC issues a mandatory recall, it notifies the licensees who have the affected product such as a dispensary. At the time of this writing, DCC has one mandatory recall listed on its website dating back to January 26, 2022. DCC currently lists three voluntary recalls on its website, with the oldest dating back to September 28, 2022. Voluntary recalls are initiated by licensees that have been contaminated or misbranded. Although the number of recalls listed on DCC's website may reflect the total number of recalls that have occurred since DCC's formation in 2021, this bill would ensure that DCC to maintain on its website a record of recall orders issued in an unspecified number of preceding years.

According to the Author

"When Californians voted to approve cannabis use, they did so with trust in the marketplace. Unfortunately, bad actors have violated that trust with improperly labeled products and artificially inflated prices. As the cannabis industry continues to grow in California, [this bill] will help protect consumers and the legal cannabis market by ensuring products are accurately labeled and providing greater transparency in product testing. This bill, with the ability to conduct testing and product reviews, improves accountability and gives regulators the tools to restore consumer trust."

Arguments in Support

The sponsor of this bill, SC Labs, writes in support:

Every consumer market is based on trust that a product's label accurately describes its contents. Right now, bad actors in California's legal cannabis industry are breaking that trust by artificially inflating THC on product labels through fraudulent testing results. For example, one recent public test of over 150 random products found that 87% illegally overstated their THC content and that a number of products also contained harmful levels of pesticides. This fraud is motivated by profit, and current market incentives make cheating a financially sound strategy. Consumers' have demonstrated a willingness to pay higher prices for products with more THC, so higher THC labels means more revenue. As a result, bad-actor labs intentionally inflate THC levels through unscientific methods or outright fraud that puts consumers at risk. This dynamic creates a race to the bottom as market participants feel the need to keep up with ever-increasing potency numbers while labs who refuse to inflate results lose market share. Without greater enforcement and transparency in the market, this dynamic will continue to weaken confidence in the legalized market and harm industry groups that operate with integrity.

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Assembly Appropriations Committee:

DCC estimates costs of at least $3.7 million for the first year and $3.2 million ongoing for laboratory, legal, and administrative staff to implement this bill (Cannabis Control Fund). Staff will be responsible for developing blind proficiency testing standardized operating procedures for use by all testing labs and for reviewing completed proficiency tests, establishing quality assurance standards and testing procedures for products available at retail, performing annual audits for all licensed laboratories, as well as handling post laboratory and product inspection activities and actions.

VOTES

ASM BUSINESS AND PROFESSIONS: 17-0-1

YES: Berman, Flora, Alanis, Alvarez, Bonta, Chen, Dixon, Gipson, Grayson, Irwin, Jackson, Lee, Lowenthal, McKinnor, Stephanie Nguyen, Joe Patterson, Ting

ABS, ABST OR NV: McCarty

ASM APPROPRIATIONS: 15-0-1

YES: Holden, Megan Dahle, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Hart, Lowenthal, Mathis, Papan, Pellerin, Sanchez, Weber, Ortega

ABS, ABST OR NV: Robert Rivas

UPDATED

VERSION: March 23, 2023

CONSULTANT: Kaitlin Curry / B. & P. / (916) 319-3301 FN: 0000531

Date of Hearing: May 10, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 1610

Author:(Jones-Sawyer) – As Amended Ver:March 23, 2023

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill subjects cannabis testing laboratories to blind proficiency testing and annual audits to ensure consistency of results across laboratories. The bill also requires the Department of Cannabis Control (DCC) to establish standards for laboratory tests and audits, as well as quality assurance standards for products, and to maintain on its website a record of recall orders.

FISCAL EFFECT:

DCC estimates costs of at least $3.7 million for the first year and $3.2 million ongoing for laboratory, legal, and administrative staff to implement this bill (Cannabis Control Fund). Staff will be responsible for developing blind proficiency testing standardized operating procedures for use by all testing labs and for reviewing completed proficiency tests, establishing quality assurance standards and testing procedures for products available at retail, performing annual audits for all licensed laboratories, as well as handling post laboratory and product inspection activities and actions. 

COMMENTS:

1. Purpose. This bill is sponsored by SC Labs, which writes:

Right now, bad actors in California’s legal cannabis industry are…artificially inflating [tetrahydrocannabinol (THC)] on product labels through fraudulent testing results…[C]urrent market incentives make cheating a financially sound strategy. Consumers have demonstrated a willingness to pay higher prices for products with more THC…[so] bad-actor labs intentionally inflate THC levels through unscientific methods or outright fraud that puts consumers at risk…[M]arket participants feel the need to keep up with ever-increasing potency numbers while labs who refuse to inflate results lose market share. Without greater enforcement and transparency in the market, this dynamic will continue to weaken confidence in the legalized market and harm industry groups that operate with integrity.

1. Background.
   
   Department of Cannabis Control. Since July 1, 2021, DCC has been responsible for administering and enforcing the majority of California’s cannabis laws, collectively known as the Medicinal and Adult Use Cannabis Regulation and Safety Act (MAUCRSA). DCC licenses and regulates cannabis businesses that cultivate, manufacture, test, transport, label, and sell cannabis and cannabis products in this state.
   
   Cannabis Testing. Cannabis distributors, before transporting cannabis products to a retailer, must arrange for laboratory testing to ensure the cannabis products are free of contaminants and labeled with accurate amounts of cannabinoids and terpenes. Laboratories report results on a Certificate of Analysis (COA), which they upload to DCC’s track and trace system and email directly to DCC. If any cannabis or cannabis products fail testing, the distributor must destroy the entire batch of goods or the manufacturer must remediate the goods and have them re-tested. Cannabis testing laboratories must be licensed by DCC, maintain accreditation by the International Organization for Standardization, use standardized operating procedures, develop a laboratory quality assurance program, and participate in a proficiency testing program.
   
   Laboratory Shopping and THC Inflation. According to this bill’s sponsor and supporters, consumers are generally willing to pay more for cannabis and cannabis products with higher levels of THC. As a result, they allege that there is an incentive for cannabis distributors to shop around for the testing laboratory that will report the highest potency rates for their products. In 2021, the Cannabis Industry Journal reported a handful of laboratories collectively purchased and tested over 150 cannabis products from licensed retailers and found 87% of the samples had THC levels that deviated more than 10% from the label, and 53% had THC levels that deviated more than 20% form the label. The report also states the labs found multiple cases of unreported category 1 (highly or extremely toxic) pesticides at multiple times the legal limit.

Recalls. DCC has the authority to issue mandatory recalls for cannabis products that present an immediate or serious threat to consumers. When DCC issues a mandatory recall, it notifies the licensees who have the affected product. At the time of this writing, DCC has one mandatory recall, from January 26, 2022, and voluntary recalls on its website. Voluntary recalls are initiated by licensees when a product is contaminated or misbranded.

1. Related Legislation. AB 623 (Chen) requires DCC to establish regulations to adjust testing variances for edible cannabis products that include less than five milligrams of THC in total.
   
2. Prior Legislation. SB 544 (Laird), Chapter 547, Statutes of 2021, required DCC, by January 1, 2023, to establish standardized cannabinoid test methods to be used by all testing laboratories.

Analysis Prepared by: Allegra Kim / APPR. / (916) 319-2081

Date of Hearing: April 18, 2023

ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS

Marc Berman, Chair

ABPCA Bill Id:AB 1610

Author:(Jones-Sawyer) – As Amended Ver:March 23, 2023

SUBJECT: Cannabis: Department of Cannabis Control.

SUMMARY: Subjects cannabis testing laboratories to blind proficiency testing and annual audits to ensure consistency of results across laboratories.

EXISTING LAW:

1. Enacts the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to provide for a comprehensive regulatory framework for the cultivation, distribution, transport, storage, manufacturing, processing, and sale of medicinal and adult-use cannabis. (Business and Professions Code (BPC) §§ 26000-26325)
2. Establishes the Department of Cannabis Control (DCC) within the Business, Consumer Services, and Housing Agency for purposes of administering and enforcing MAUCRSA. (BPC § 26010)
3. Requires licensed sellers of cannabis or cannabis products to have a representative sample tested by a licensed testing laboratory. (BPC § 26100(a))
4. Requires DCC to develop criteria to determine which batches shall be tested, where all testing of the samples shall be performed on the final form in which the cannabis or cannabis product will be consumed or used. (BPC § 26100(b))
5. Requires a testing laboratory to issue a certificate of analysis (COA) where the chemical profile of the sample conforms to the labeled content of specified compounds, and where the presence of contaminants does not exceed the level established by DCC, as specified. (BPC § 26100(d))
6. Specifies that for edible cannabis products, the milligrams of THC per serving shall not deviate from 10 milligrams by more than 10 percent. (BPC § 26100(d)(3).
7. Allows a testing laboratory to amend a COA to correct minor errors, as defined by DCC. (BPC § 26100(e)
8. Requires DCC, on or before January 1, 2023, to establish one or more standard cannabinoid test methods, including standardized operating procedures that must be used by all testing laboratories. (BPC § 26100(f)(2))
9. Requires the testing laboratory to conduct all testing in a manner consistent with general requirements for the competence of testing and calibration activities, including sampling and using verified methods. (BPC § 26100(g))
10. Requires all testing laboratories performing tests to obtain and maintain ISO/IEC 17025 accreditation as required by DCC in regulation. (BPC § 26100(h))
11. Specifies that if a test result falls outside the specifications authorized by law or regulation, the testing laboratory shall follow a standard operating procedure to confirm or refute the original result. (BPC § 26100(i)(1))
12. Authorizes a testing laboratory to retest the sample if both the testing laboratory notifies DCC in writing that the test was compromised due to equipment malfunction, staff error, or other circumstances allowed by DCC and DCC authorizes the testing laboratory to retest the sample. (BPC § 26100(i)(2))
13. Requires a testing laboratory to destroy the remains of the sample of cannabis or cannabis product upon completion of the analysis, as determined by DCC through regulations. (BPC § 26100(j))
14. Prohibits a testing laboratory from being licensed by DCC unless the laboratory meets all of the following:
    1. Complies with any other requirements specified by DCC.
    2. Notifies DCC within one business day after the receipt of notice of any kind that its accreditation has been denied, suspended, or revoked.
    3. Has established standard operating procedures that provide for adequate chain of custody controls for samples transferred to the testing laboratory for testing. (BPC § 26102)
15. Prohibits, except as provided, a testing laboratory from acquiring or receiving cannabis or cannabis products except from a licensee or from distributing, selling, or dispensing cannabis or cannabis products from the licensed premises from which the cannabis or cannabis products were acquired or received. (BPC § 26104(c))
16. Subjects batches of cannabis to quality assurance standards and testing prior to sale. (BPC § 26110(a))
17. Requires a distributor to arrange for a testing laboratory to obtain a representative sample of each cannabis batch at the distributor’s licensed premises. After obtaining the sample, the testing laboratory representative is required to maintain custody of the sample and transport it to the testing laboratory. (BPC § 26110(d))
18. Specifies that upon issuance of a certificate of analysis(COA) by the testing laboratory that the cannabis batch has passed the testing requirements, the distributor must conduct a quality assurance review before distribution to ensure the labeling and packaging of the cannabis and cannabis products are appropriate. (BPC § 26110(e))
19. Requires DCC to employ or contract with a quality assurance compliance monitor who does not hold a license or own or have any ownership interest in a licensee or the premises of a licensee. (BPC § 26110(f)(1))
20. Requires the quality assurance compliance monitor to conduct random quality assurance reviews at a distributor’s licensed premises before distribution to ensure the labeling and packaging of the cannabis and cannabis products are appropriate. (BPC § 26110(f)(2))
21. Authorizes the quality assurance compliance monitor to have access to all records and test results required of a licensee by law in order to conduct quality assurance analysis and to confirm test results. (BPC § 26110(f)(3))

THIS BILL:

1. Requires DCC to maintain on its website a record of recall orders issued in an unspecified number of preceding years.
2. Requires the record of a recall to include the date, location, licensee name and license number, and whether the recall was voluntary or mandatory.
3. Subjects testing laboratories to blind proficiency testing to ensure consistency of results across laboratories.
4. Requires DCC, on or before January 1, 2025, to establish a standard laboratory blind proficiency test method, including standardized operating procedures that must be utilized by all testing laboratories.
5. Subjects testing laboratories to annual audits by DCC.
6. Requires DCC, on or before January 1, 2025, to establish standard operating procedures for conducting audits, including frequency, manner, and notification requirements.
7. Requires the results of the audit, including any record of violation, to be made available on DCC’s website for an unspecified number of years.
8. Requires DCC, on or before January 1, 2025, to establish quality assurance standards and testing procedures for products available for retail sale.
9. Specifies that the quality assurance and testing procedures must include, but are not limited to, laboratory testing of products that are available for retail sale to ensure consistency with presale laboratory testing.

FISCAL EFFECT: Unknown. This bill is keyed fiscal by Legislative Counsel.

COMMENTS:

Purpose. This bill is sponsored by SC Labs. According to the author:

When Californians voted to approve cannabis use, they did so with trust in the marketplace. Unfortunately, bad actors have violated that trust with improperly labeled products and artificially inflated prices. As the cannabis industry continues to grow in California, [this bill] will help protect consumers and the legal cannabis market by ensuring products are accurately labeled and providing greater transparency in product testing. This bill, with the ability to conduct testing and product reviews, improves accountability and gives regulators the tools to restore consumer trust.

Background.

Department of Cannabis Control. Since July 1, 2021, DCC has been the single entity responsible for administering and enforcing the majority of California’s cannabis laws, collectively known as MAUCRSA. DCC is additionally responsible for licensing and regulating cannabis businesses, including the cultivation, manufacture, testing, transportation, labeling, and sale of cannabis and cannabis products in this state.^[1]

Cannabis testing. Cannabis products are required to be tested before they can be sold to ensure that they are free of contaminants (e.g., pesticides) and labeled with accurate amounts of cannabinoids and terpenes.^[2] Results are reported on a Certificate of Analysis (COA), which is required to be uploaded to DCC’s track and trace system and emailed directly to DCC^[3]. If any cannabis or cannabis products fail testing, the entire batch of goods must be destroyed by the distributor or remediated by a manufacturer.^[4] Remediation is the process of removing contaminants from a product and must be approved by DCC in advance.^[5] After remediation, the cannabis or cannabis goods are re-tested. If they pass, then the goods can be sold.^[6]

Cannabis testing laboratories must be licensed by DCC, maintain ISO accreditation, use standardized operating procedures, develop a laboratory quality assurance program, and participate in a proficiency testing program.^[7]

Laboratory Shopping and THC Inflation. According to this bill’s sponsor and supporters, consumers are generally willing to pay more for cannabis and cannabis products with higher levels of THC. As a result, they allege that there is an incentive to shop around for the testing laboratory that will report the highest potency rates for their products. Unscrupulous testing laboratories, they assert, will artificially inflate THC levels by using unscientific methods or by committing fraud. As reported by the Cannabis Industry Journal, in 2021, a handful of laboratories collectively purchased and tested over 150 cannabis products from licensed retailers (i.e. dispensaries).^[8] They found that 87 percent of the samples contained less THC than advertised.^[9]

This committee is currently aware of one lawsuit related to THC inflation. In Christian Ayala et al vs Central Coast Agriculture, Inc., the plaintiffs accuse the defendant of false and misleading labeling and marketing of the THC quantity in Raw Garden Infused Joints.^[10] This case is pending in the Santa Clara County Superior Court.

In 2021, the Legislature passed and the Governor signed, SB 544 (Laird), Chapter 547, Statutes of 2021, which required DCC to establish standardized cannabinoid test methods to be used by all testing laboratories by January 1, 2023. DCC is in the process of finalizing those regulations. This bill would go further by requiring DCC by January 1, 2025, to establish a standard laboratory blind proficiency test method for use by all testing laboratories and to establish quality assurance standards and testing procedures for products available for retail sale. Additionally, this bill would require DCC to annually audit testing laboratories. The sponsor of this bill, SC Labs, says that its testing laboratory in Santa Cruz has been operating since 2010 on a provisional license and has never been inspected in person.

Recalls. DCC has the authority to issue mandatory recalls for cannabis products that present an immediate or serious threat to consumers and other remedies would cause an unreasonable delay.^[11] When DCC issues a mandatory recall, it notifies the licensees who have the affected product such as a dispensary.^[12] At the time of this writing, DCC has one mandatory recall listed on its website dating back to January 26, 2022.^[13] DCC currently lists three voluntary recalls on its website, with the oldest dating back to September 28, 2022.^[14] Voluntary recalls are initiated by licensees that have been contaminated or misbranded.^[15]

The cannabis regulatory entities in the states of Washington and Colorado list recalls on their websites dating back to 2016.^{[16] [17]} Similarly, in Oregon, Michigan, and Nevada, recalls are listed dating back to 2017, 2019, and 2020, respectively.^{[18] [19] [20]} Although the number of recalls listed on DCC’s website may reflect the total number of recalls that have occurred since DCC’s formation in 2021, this bill would ensure that DCC posts every recall dating back to an unspecified year.

Current Related Legislation.

AB 623 (Chen) would require DCC to establish regulations to adjust testing variances for edible cannabis products that include less than five milligrams of THC in total.

Prior Related Legislation.

SB 544 (Laird), Chapter 547, Statutes of 2021, required DCC to, by January 1, 2023, establish standardized cannabinoid test methods to be used by all testing laboratories.

ARGUMENTS IN SUPPORT:

SC Labs, the sponsor of this bill, writes in support:

Every consumer market is based on trust that a product’s label accurately describes its contents. Right now, bad actors in California’s legal cannabis industry are breaking that trust by artificially inflating THC on product labels through fraudulent testing results. For example, one recent public test of over 150 random products found that 87% illegally overstated their THC content and that a number of products also contained harmful levels of pesticides.

This fraud is motivated by profit, and current market incentives make cheating a financially sound strategy. Consumers’ have demonstrated a willingness to pay higher prices for products with more THC, so higher THC labels means more revenue. As a result, bad-actor labs intentionally inflate THC levels through unscientific methods or outright fraud that puts consumers at risk. This dynamic creates a race to the bottom as market participants feel the need to keep up with ever-increasing potency numbers while labs who refuse to inflate results lose market share. Without greater enforcement and transparency in the market, this dynamic will continue to weaken confidence in the legalized market and harm industry groups that operate with integrity.

[…]

[This bill] will help strengthen the legal market by eliminating testing fraud, promoting transparency, and restoring trust in the legal market. Measures like blind proficiency testing, annual in-person auditing of labs, allowing the randomized testing of shelf products, and public sharing of all past recalls will let consumers know the cannabis they’re buying is safe, reliable, and accurately dosed.

ARGUMENTS IN OPPOSITION:

None on file.

POLICY ISSUE(S) FOR CONSIDERATION:

Random Shelf Testing. This bill would require DCC to establish quality assurance standards and testing procedures for cannabis and cannabis products available for sale at dispensaries. However, existing law already requires DCC to employ or contract with a quality assurance compliance monitor to conduct random quality assurance reviews at a distributor’s licensed premises before distribution to ensure the labeling and packaging of the cannabis and cannabis products are appropriate. The quality assurance compliance monitor is authorized to access all records and test results required of a licensee by law in order to verify those test results. The author may wish to consider working within the existing framework to ensure that cannabis and cannabis products for sale are reviewed for quality assurance.

Public Disclosure of Violations. This bill would require DCC to annually audit testing laboratories and to post the results of the audit, including any record of violation, for a certain number of years. The author may wish to consider the utility in disclosing a violation, even after a violation has been remedied, when determining the number of years to place into the bill.

IMPLEMENTATION ISSUE(S) FOR CONSIDERATION:

Audits. Although the author intends for this bill to require DCC to conduct annual audits of testing laboratories in-person, this bill does not explicitly require them to. The author may wish to specify that annual audits are to be performed in person. At the time of this writing, there are 43 active commercial testing laboratory licensees. The author may wish to consider the feasibility for DCC to audit each laboratory in-person on an annual basis.

Details Outstanding. This bill currently requires DCC to post on its website every mandatory recall that has occurred dating back to an unspecified year. Similarly, the bill currently requires DCC to post audit results on its website for an unspecified number of years. The author should amend the bill to include a specific year and number of years, respectively.

REGISTERED SUPPORT:

SC Labs (sponsor)

Anresco Laboratories

Cannabis Chamber of Commerce

Emerald Scientific

Infinite Chemical Analysis Labs

REGISTERED OPPOSITION:

None on file.

Analysis Prepared by: Kaitlin Curry / B. & P. / (916) 319-3301

1. Department of Cannabis Control. (n.d.). About the Department of Cannabis Control. Department of Cannabis Control. Retrieved April 6, 2023, from https://cannabis.ca.gov/about-us/about-dcc/ ↑

2. Department of Cannabis Control. (n.d.). Testing laboratories. Department of Cannabis Control. Retrieved April 12, 2023, from https://cannabis.ca.gov/licensees/testing-laboratories/ ↑

3. Ibid. ↑

4. Ibid. ↑

5. Ibid. ↑

6. Ibid. ↑

7. Ibid. ↑

8. Paulson, E., Swider , J., & Eisenberg, Z. (2022, July 28). The inflated THC crisis plaguing California Cannabis. Cannabis Industry Journal. Retrieved April 13, 2023, from https://cannabisindustryjournal.com/feature_article/the-inflated-thc-crisis-plaguing-california-cannabis/ ↑

9. Ibid. ↑

10. Christian Ayala et al. vs Central Coast Agriculture, Inc. (Superior Court for the State of California County of Santa Clara November 21, 2022). Retrieved April 13, 2023, from https://milberg.com/wp-content/uploads/sites/2/2023/01/2022.11.21-Complaint-CentralCoastAgriculture.pdf ↑

11. Department of Cannabis Control. (n.d.). Cannabis recalls and safety notices. Department of Cannabis Control. Retrieved April 13, 2023, from https://cannabis.ca.gov/resources/cannabis-recalls-and-safety-notices/ ↑

12. Ibid. ↑

13. Ibid. ↑

14. Ibid. ↑

15. Ibid. ↑

16. Washington State Liquor and Cannabis Board. (n.d.). Notice of Recalls. Notice of Recalls | Washington State Liquor and Cannabis Board. Retrieved April 14, 2023, from https://lcb.wa.gov/marj/notice_of_recalls ↑

17. Colorado Department of Revenue. (n.d.). MED Health and Safety Advisories. Colorado Department of Revenue. Retrieved April 14, 2023, from https://sbg.colorado.gov/med/health-and-safety-advisories ↑

18. Oregon Liquor and Cannabis Commission. (n.d.). Product Recall Notices. Oregon Liquor and Cannabis Commission. Retrieved April 14, 2023, from https://www.oregon.gov/olcc/Pages/product-recalls.aspx ↑

19. Michigan Cannabis Regulatory Agency. (n.d.). MRA Bulletins. Michigan Cannabis Regulatory Agency. Retrieved April 14, 2023, from https://www.michigan.gov/cra/bulletins ↑

20. Public Health and Safety Advisories. Nevada Cannabis Compliance Board. (n.d.). Retrieved April 14, 2023, from https://ccb.nv.gov/guidance/#item-1 ↑