Tag Archives: Federal

Comparable to Organic: How This California Company Aims to Certify Cannabis

By Aaron G. Biros
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Cannabis that contains more than 0.3% THC is not eligible for USDA organic certification, due to the crop’s Schedule I status. While some hemp farmers are currently on the path to obtain a USDA organic certification, the rest of the cannabis industry is left without that ability.

Growers, producers, manufacturers and dispensaries that utilize the same practices as the national organic program should be able to use that to their advantage in their marketing. Ian Rice, CEO of Envirocann, wants to help cannabis companies tap into that potential with what he likes to call, “comparable to organic.”

Ian Rice, CEO of Envirocann & co-founder of SC Labs

Rice co-founded SC Laboratories in 2010, one of the first cannabis testing labs in the world, and helped develop the cannabis industry’s first testing standards. In 2016, Rice and his partners at SC Labs launched Envirocann, a third-party certification organization, focused on the quality assurance and quality control of cannabis products. Through on-site inspections and lab testing, Envirocann verifies and subsequently certifies that best practices are used to grow and process cannabis, while confirming environmental sustainability and regulatory compliance.

“Our backyard in Santa Cruz and the central coast is the birthplace of the organic movement,” says Rice. California Certified Organic Farms (CCOF), founded in Santa Cruz more than 40 years ago, was one of the first organizations in the early 1990s that helped write the national organic program.

“What we came to realize in the lab testing space and as the cannabis market grew, was that a lot of cannabis companies were making the organic claims on their products,” says Rice. “At the time, only one or two organizations in the cannabis space were making an attempt to qualify best practices or create an organic-type feel of confidence among consumers.” What Rice saw in their lab was not cannabis that could be considered organic: “We saw products being labeled as organic, or with certain claims of best practices, that were regularly failing tests and testing positive for banned chemicals. That really didn’t sit well with us.”

Coastal Sun Farms, Enviroganic-certified

At the time, there was no real pathway to certify cannabis products and qualify best practices. “We met with a few people at the CCOF that were very encouraging for us to adopt the national organic program’s standards for cannabis. We followed their lead in how to adopt the standards and apply a certification, building a vehicle intended to certify cannabis producers.”

Because of their background in lab testing they added the requirement for every crop that gets certified to undergo a site inspection, sampling, as well as a pesticide residue test to confirm no pesticides were used at all during the production cycle. One of their clients is Coastal Sun Farms, a greenhouse and outdoor cannabis producer. “They grow incredible products at a high-level, commercial scale at the Enviroganic standard,” says Rice. “They have been able to prove that organic cannabis is economically viable.”

The Envirocann certification goes a bit beyond the USDA’s organic program in helping their clients with downstream supply chain risk management tools (SCRM). “Because of the rigorous testing of products to get certified and go to market, we are getting way ahead of supply chain or production issues,” says Rice. “That includes greater oversight and transparency, not just for marketing the final product.”

A good example of using SCRM to a client’s advantage is in the extraction business. A common scenario recently in the cannabis market involves flower or trim passing the pesticide tests at the lab. But when that flower makes it down the supply chain to a manufacturer, the extraction process concentrates chemical levels along with cannabinoid levels that might have previously been acceptable for flower. “I’ve witnessed millions and millions of dollars evaporate because flower passed, but the concentrated final product did not,” says Rice. “We’ve introduced a tool to get ahead of that decision-making process, looking beyond just a pass/fail. With our partner labs, we look at the chromatograms in greater detail beyond regulatory requirements, which gives us information on trace levels of chemicals we may be looking for. It’s a really rigorous audit on these sites and it’s all for the benefit of our clients.”

Envirocann has also recently added a processing certification for the manufacturing sector and a retail certification for dispensaries. That retail certification is intended to provide consumers with transparency, truth in labeling and legitimate education. The retail certification includes an assessment and audit of their management plan, which goes into details like procurement and budtender education, as well as basic considerations like energy usage and waste management.

Fog City Farms, Envirocann-certified

While Envirocann has essentially adopted the USDA’s organic program’s set of standards for what qualifies organic producers, which they call “Enviroganic,” they also certify more conventional producers with their “Envirocann” certification. “While these producers might not be considered organic farmers, they use conventional methods of production that are responsible and deserve recognition,” says Rice. “A great example for that tier would be Fog City Farms: They are growing indoor with LED lighting and have multiple levels in their indoor environment to optimize efficiency and minimize their impact with waste and energy usage, including overall considerations for sustainability in their business.”

Looking to the future, Ian Rice is using the term “comparable to organic” very intentionally, preparing for California’s roll out of their own organic cannabis program. The California Department of Food and Agriculture (CDFA) is launching the “OCal Comparable-to-Organic Cannabis Program.” Envirocann is obviously using the same language as the CDFA. That’s because Envirocann aims to be one of the verifying agents under the CDFA’s new program. That program will begin on January 1, 2021.

The Impact of Brexit on the Global Cannabis Industry

By Marguerite Arnold
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HMS Great Britain has now set forth from its European home port for another intriguing and very British escapade on the high seas.

So far the jury is out.

It could be the beginning of the next British Golden Age, Spanish Armada and all that. Or could it could end up (more likely) somewhere up the Khyber Pass (a sordid misadventure of British Imperialism that did not go well in the 19th century with global implications still reverberating to this day). For Netflix fans of The Crown, think “Suez Crisis” as a more recent and apt analogy. Starting with as much as a 6.7% reduction in domestic GDP already on the horizon.

Snarky historical analogies and nostalgia aside, how will Brexit influence and shape a global cannabis industry, starting at home?

The UK Is Not Actually in Regulatory Free Fall

The first thing to realize is that most of the puffery around Brexit was that with the exception of labor conditions, there is little free choice in the world of trade anymore. The players who get export and import licenses, for anything, have to conform to basic equivalency rules, no matter what they are called.

This applies to cannabis in a big way. No matter how the UK market develops domestically in other words, and that is a separate discussion.

Currently, shamefully, the domestic medical guidelines for prescription of cannabis exclude chronic pain patients and a few other obvious groups. The NHS medical market in other words, is a monopoly, set up by the current and previous governments, mainly serving GW Pharmaceutical patients who qualify for Sativex and Epidiolex. Not to mention company shareholders.

Everyone else, including those for whom these drugs do not work well, or work less well than other alternatives, are left in an international trade negotiation in their living rooms as they and or their children suffer.

The import barriers for cannabis – both from Europe and from Canada are absolutely in the room and in a very personal way for the British right now.

How they actually define cannabis, will also clarify. This will be driven now by the UK’s biggest import partners – namely Europe, the United States and Canada (although South Africa and Australia of course, will always be in the picture).

Which regulatory scheme the UK adapts, including for cannabis and of both the THC and CBD variety (not to mention other cannabinoids), in other words, will at minimum have to be broadly equivalent with all of the above. Not the other way around. No matter how much the Food Standards Agency (FSA) wants to fuss and fiddle with “Novel Food.” That alone is a canard.

Cannabis is a plant. It is time to start acting like that. And it is no more “novel” than tomatoes in many, easy-to-understand environments, including commercial ones. Not to mention will increasingly be regulated like commercial food crops – even if those crops are then also bound for dual purpose medical use.

The regulators will eventually get there – but not without a lot of tortuous twists and turns.

A “New” Market? Not So Much…

There is a lot of consultant palaver and baloney in the room right now. There is no more a new market in the UK as there was in Germany (or Canada or Colorado). Local producers are already organizing, and on the hemp front. The big ones are hip to regulations and are getting certified to enter it. Everyone else is being left on the dangerous sharp end of police raids, even with prior local approvals.

GW logoThat said, foreign producers are of course looking at the UK right now, and in a big way. The lock GW Pharmaceuticals has on the domestic market will not hold long. European producers are absolutely in the room (starting with Tilray in Portugal and Alcaliber in Spain). Not to mention what is going on in other places right now, even if of less well-known corporate branding.

Every big Canadian company is already in the room in the UK, and many Americans are now beginning to show up in the market.

However, for the most part, such ventures are doomed outside of conference sponsorships until the regulatory questions are answered if not met.

And that includes federal certifications that are easy to find – there is no one single authority that handles cannabis internationally. And there never will be. Supply chains are already global.

A Perfect Export Market

One of the biggest, so far widely discussed questions is who in Europe will start exporting to the UK (forget Holland for the moment). Not to mention producers in Spain, Greece, Poland if not Macedonia. That conversation is also on the table now. For the first time, so is Germany, and on the medical side.

Pharmaceutical producers in particular who meet international pharma standards may be the best hope yet – although right now policy makers are still looking at cars rather than cannabis to help keep Germany’s trade export quota where it feels “comfortable” domestically.

Image credit: Flickr

That too will change. And fairly quickly. See Greece, if not South Africa.

The political roil of branding and politics afoot in Germany right now makes this new kind of export market idea as a part of economic development, an inevitability.

Not to mention, at least for the present, a reverse trade in regulated British CBD products – if producers are smart about regulations – throughout the continent right now.

Of all countries, outside Switzerland, the UK has the ability to develop a broad and intriguing market in the EU – but only if they are compliant with regulations in Europe.

And this is where the policy makers in Parliament and 10 Downing Street have already misjudged if not broadly misled, not in a regulatory environment of their own, but in fact in a diplomatic “room” where the rules are already set via international standards and certifications, not to mention treaties.

Soapbox

Destination Cannabis Europe: Employment in the Industry

By Marguerite Arnold
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It is obviously not just at conferences but now on the ground in Germany and across Europe that Americans are heading to the industry here. And it is not just the “new” cultivation guys at Demecan in Berlin (currently hiring), or in Guernsey, but in truth, throughout the industry.

Wish you were here? Here is the broad skinny to actually getting (and keeping) a job in the industry in Europe.

Get A Job Before You Come

By far, the easiest and safest way to come to a new country, like Germany (or the UK for that matter) is to have pre-arranged employment. That is also beginning to happen, as large companies set up grow and manufacturing facilities throughout Europe. That said, these are hard to come by (there are many Germans and other natives vying for the same jobs). However so far, certain kinds of experience in the U.S. (or Canada) beats anything that has gotten going here so far from the cultivation side and many other aspects of the biz.

But – and this is a big one – you have to have the kind of experience that counts. Regulated industry participation is a must on your CV if this is your preferred route of travel. Pharmacists in particular, could have a fascinating career path here not open in the United States at all yet. So will doctors – but that certification has to be earned here to practice.

It is also far easier to deal with the paperwork that is required than it used to be ironically – in that there are new qualifications being set out for the same in both the UK and Germany at the moment. Understanding them, however is another matter, and interpretation at the immigration office is not something you want to sign yourself up for. In any language.

european union states
Member states of the EU, pre-Brexit

However, immigration law is just the beginning on the regulation front. Regulations across the cannabis industry are also changing fast – and not just under the heading “cannabis.”

Nothing, really is “easy” about being an expat. You have to want to do this.

There are now starting to be numerous European job postings in the industry on Linked In. It is a great place to start. Having B1 Deutsch (third level, very hard to pass, intensive German language certification) is usually a must for employment (not to mention getting around in the country).

Disclosure: This journalist failed A1 German in Germany (introductory level) twice. Starting from scratch is not recommended, because the rest of your class (usually with previous German training) will kick your butt in numbers bingo by the end of the first week. Learning – including punctuation and spelling 50 new vocabulary words a week is pretty standard. And that is before the grammar. All taught in German too! Four hours a day, five days a week.

Yes, your class will laugh at you, even if they think you are otherwise cool as a North American.

It also helps if you have taken at least one German language course (as in college semester level) before you come. Otherwise you will hit unbelievably intimidating compound words that take up a great deal of space on a page and four different tenses that even native Germans do not really understand by the end of the second week (and it is mind-blowing). You learn to appreciate Mark Twain’s humour about the dratted language very quickly, not to mention that the umlaut is really the only thing you have any freedom of expression with.

Be prepared to sign up for language courses when you land with the local VHS (Volkshochschule) – which is sort of like German community college for anything you want to take classes in. It is also the cheapest deal on language courses around. The private ones are pricey.

That said, master the lingo, even passably, and Germans are super pleased about the same. No matter how badly you mangle the language, they are just happy to hear you try.

Student Visas and the Educational Path

By far, the easiest path to starting your journey overseas, is luck. The second one however, is actually one way to go if you are prepared to work yourself to the bone, and do it while learning German intensively. Plus get a university level or graduate degree along the way.

If Cannabis Europe is your dream job and vocation, you will make it happen. Just don’t expect it to be easy, or just like anywhere else.Go first as a language student. That gets you two years, fairly easily, as long as you have €8k in your bank account at all times, and do not work at a German job. That is verboten. However, as an American, particularly in Germany, you still have the right to come here and learn.

There is also about to be a fairly ground-breaking immigration law that comes into effect as of March in Germany that allows highly skilled foreigners to earn their way to citizenship. There is a list of requirements that go along with this, of course. The path to being able to stay includes getting a higher German degree or special German training. Expect pretty much the same thing from post-Brexit Britain too – just in the same language.

You also have to have health insurance and a lot of other things taken care of. It is not a sudden move or jump. For all the amazing things that come with this, also be prepared to think about looking in the mirror at least a few times and thinking “am I stupid, what on earth have I done?”

Then there is location. A Kreuzburg address may impress the folks back home, but those are not cheap these days, and extremely hard to come by. Rent, in general, and not just in Berlin, is beginning to be a real issue in every German city. Finding an accommodation that you can afford in “starting out” circumstances – is not easy right now anywhere.

But it’s not just about rent or the buzz you might have heard. Don’t just put Berlin on the map (or even Munich, also a growing professional scene). Both cities are far from the center of the cannabis scene in Europe, much less Germany although there is a lot going on all the time there. Dortmund, and the Ruhrgebeit in the former “Rust Belt” of Germany are much cheaper, full of students, and popping with cannabis reform all over. Cologne is also a very interesting city right now. So are Bremen and Stuttgart.

The Differences Are Large Besides the Language

No matter what you think you can expect, the only thing you can rely on is that just about everything will not be the same. Yes, German beer fests and bratwurst are comfortingly familiar to be accepted easily. But when it comes to really immersing yourself in a country well enough to think of it as “home”, let alone understanding the vagaries of this business in particular? Just about everything is different. This ain’t Kansas, (or Colorado, for that matter) Dorothy.

Bottom line? If Cannabis Europe is your dream job and vocation, you will make it happen. Just don’t expect it to be easy, or just like anywhere else.

U.S. Hemp Authority Names FoodChain ID Official Certification Body

By Aaron G. Biros
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According to a press release published last week, the U.S. Hemp Authority (USHA) announced that FoodChain ID, a global leader in food safety, testing and sustainability, is now the exclusive certifying body for the USHA certification seal.

FoodChain ID’s claim to fame is their widely-recognized Non-GMO Project Verification labeling standard, but they also offer services in the food, beverage and ingredient industries, including the entire food supply chain, as well as being a leader in USDA Organic certifications.

The effort to provide quality standards and guidance for best practices in the hemp and CBD markets is led by a coalition of organizations with the same goal: to legitimize the industry and gain consumer trust. The effort is funded by the U.S. Hemp Roundtable and joined by the Hemp Industries Association, the U.S. Hemp Authority, testing laboratories, agronomists, quality assessors and other industry-leading firms.

In order for a hemp company to get the certified seal, they must prove that they can meet strict standards, pass an independent third-party audit as well as enter a licensing agreement. The certification seal is an attempt to provide some legitimacy to the ever-changing hemp and CBD markets in the United States.

Marielle Weintraub, president of the U.S. Hemp Authority, says that through the program’s independent, third-party lab testing, the certification seal provides consumers with truth in labeling and transparency. “The U.S. Hemp Authority Certification Program is our industry’s initiative to provide high standards, best practices, and self-regulation, giving consumers an easy way to identify hemp-derived products that can be trusted,” says Weintraub. “We are striving for ingredient transparency and truth in labeling.”

Just some of the many CBD products on the market today.

According to Weintraub, the standards and best practices for the program are routinely updated and improved. There will be a public session where they discuss those standards and update industry stakeholders on their progress at the Natural Products Expo West on March 2nd.

Mark Dabroski, senior vice president, commercial services at FoodChain ID, says that hemp products are becoming increasingly common in the food, beverage and health and wellness markets. “Hemp seed oil and protein markets have been increasing exponentially over the last decade,” says Dabroski. “With the category’s expected growth at a 46% CAGR to reach $2.8B by 2023, the need for self-regulation and transparency are critical.”

“As consumers increasingly demand to know what is in the foods and products they buy, our suite of testing and verification services helps meet this demand,” says Dabroski.

The Growing Influence of Certified Organic in the European Cannabis Industry

By Marguerite Arnold
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There is a strange, if yet so far undetected, regulatory hum in the air right now in Europe that will begin to increasingly occupy those who are in the certified industry here or looking to get in.

And no, it’s not imminent “recreational,” although it will also have vast impact on the same.

A little understood regulatory structure (so far at least within the cannabis industry) called EU-BIO is now firmly in the room.

What that is and how it will impact the industry is already starting to show up in a few places (see the new announcement by the Swiss that their recreational trial will be organic). This is of course before any dates have even been decided upon for said trial (although others have been set up in the country for about a year).

Beyond this, there are vast implications for every part of the industry, THC or CBD, medical or “lifestyle” focused.

What is EU BIO?

All food in the European Union is regulated on a “federal” level much like in the United States. The difference in Europe however, is that every European “state” or country (like Germany, Spain or Holland) also then has their own regulatory structure which is also equal to the federal standards of the U.S. – including via treaty on both the pharmaceutical and “consumer” side. In general, as a result, regulations, including in all things cannabis space related, are much stricter in Europe.

What this also means, generally, is that all food, cosmetic and human-use lebensmittel (to use the German word for everyday consumer goods like food, cosmetics and lifestyle products) must pass through regulatory agencies that are very much like the USDA and FDA in every country and on a regional European level before being approved on a national sovereign one. Where those are, and who handles what, however, is a patchwork of agencies across the continent. There is no homogenization, in other words, for an organic producer looking for the right agency to get certification from in Germany and Austria.

The European Union’s logo that identifies organic goods.

The distinctive green logo that is omnipresent in particularly German grocery stores also comes with a few high standards of its own. Namely that the logo must appear on all pre-packaged EU food products claiming to be organic within the EU and all member states as well as all imports. Even more importantly, the logo cannot be placed on “transition” projects – namely those which are hoping to fulfil the regulatory standards but are not there yet.

To complicate matters even further, of course all product that ends up as EU GMP must begin life as an organic product. Forget pesticides – radiated product is a hot topic right now as well as its certification in the German medical market.

And that also means, by definition, that all cannabis production in Europe as well as products hoping to be sold via relatively normal channels, must also meet these certifications.

The only other option of course, is what is called “Novel Food.” And even here, thanks to changes in EU BIO on the table for the next couple of years, those who hope to gain access via this kind of labelling, still need to pay attention to organic production. No matter where you are. Or what you want to sell.

Are All “Organics” Made Equal?

Just as in the medical industry and GMP, the strictures of “certified organic” are supposed to be fairly straightforward, but are interpreted by different countries and regions.

european union states
Member states of the EU, pre-Brexit

Generally speaking, however, national or even regional “organics” are not exactly the same. For example, Canadian “organic” is not the same as EU-BIO, starting with the fact that the plants in question are not necessarily of European origin (see the same logic here as behind Novel Food). In other words, there is no automatic equality, starting with the source of the seed. But there are also other issues in the room including processing.

That said, being organic is going to be the watchword of the industry. And in this, a bit surprisingly, the US will also have a lasting impact. Why? Because many countries want to export to the US (far from cannabis) and are required to adopt similar agricultural standards (see Latin America for starters).

Bottom line: it is better to be “green”, through and through, no matter where you are, or where you are from, in the global industry going forward. By the end of 2021, certified organic supply, at every level of the industry, won’t be a “choice” anymore.

Top 3 Ways Cultivation Methods Must Change with Regulations

By David Perkins
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There are obvious upsides and downsides to cannabis regulation. Gone are the days when it was a free for all, for outlaws growing in California’s hills, under the limited protections California’s medical cannabis laws provided. While there is no longer the threat of arrest and incarceration, for the most part, there are also a lot of hoops to jump through, and new rules and standards to contend with. This article highlights three areas in which your cultivation plan must necessarily change due to the new regulations.

1. Integrated Pest Management (IPM) is limited

In the new regulated market, products that were once widely used are now no longer allowed. Prior to regulation, in the days of Prop 215, you could spray your plants with just about anything, since there was no testing mandated for the products that were being sold. However, people unfortunately got sick and experienced negative reactions, with products like Eagle 20, which contains mycobutinol, and Avid, which contains bifenthrin. Accordingly, under new regulations there are thankfully much more stringent standards dictating what pesticides can be used. It’s ironic that for most of the “medical marijuana” era in California there were no mandatory testing requirements for the THC content of your cannabis, let alone testing for toxins, including pesticides, molds or heavy metals.

You need to have a very thorough pest management plan to make sure your bug populations are always in check. Given that there are a small number of allowable products for pest control in the regulated market, this can be tricky. You need to be extremely familiar with what is and isn’t allowed in today’s regulations. You must also make sure that someone who is certified to apply pesticides is applying them.

Photo: Michelle Tribe, Flickr

As a word of caution, there have been instances where approved pesticides were found to have old unused chemicals (that are not approved for use) from the manufacturing process in them. They may have only occurred in very small amounts, but they are harmful to humans and there is no lawful way to dispose of them.

Further, the presence of these harmful chemicals can cause your finished product to fail when undergoing mandated testing.

Rather than using risky chemicals, the best solution for (early detected) control of pests is the use of beneficial insects. Although they may not be the best solution for an infestation, predator bugs like Neoseiulus Californicus can efficiently control small populations of spider mites while ladybugs are good to limit aphids. Strategic planning of your IPM is one of the best ways to keep pest levels in check.

2. Plant size and plant count matter more than ever

Despite widespread legalization in the past few years for both the medical and recreational markets in the United States, the black market is still rampant and most cannabis is still being produced illegally in the US and internationally.

Maximizing plant canopy space is essential to a profitable business in today’s market

Generally speaking, in the black market, the less plants you have the better, as high plant counts lead to longer sentences of incarceration. With the passage of prop 215 in 1996, many growers, especially outdoor, started growing their plants as big as they possibly could because most limitations were based on plant counts. Some outdoor growers were able to cultivate plants that yielded over 10 pounds per plant. These days regulations are based on canopy measurements, meaning you can grow as many plants as you want within a defined, limited square footage area. This is where “light deprivation,” a method used to force plants into flowering, becomes favorable as it allows 2-4 harvests per year instead of just one. It is a much more intensive way of growing when you have tens of thousands of plants. While it is easier to plant, cultivate and harvest a larger number of smaller plants, it also requires a much more detailed level of planning and organization.

In order to achieve 4 harvests per year, you must have a well thought out cultivation plan and an all-star staff, but if you are able to accomplish this, you can increase your revenue significantly. Maximizing plant canopy space is essential to a profitable business in today’s market, and to do that will require more detailed planning, better organization and proper crop management.

3. How you grow and what equipment you use

With regulation comes liability for defects or injury. It is essential that all equipment used is approved for its intended use. Traditionally, cannabis was cultivated in secrecy in the black market. This led to many unsafe grow rooms being built by people who did not have the proper skills to be undertaking projects such as converting a garage into a grow room or handling the electrical and plumbing running into them. Accordingly, there were many instances of damages to property or injuries to people because of this. Now that counties and states permit cannabis cultivation facilities, the infrastructure and labor that is done must meet regulated building codes and general safety requirements. It is therefore imperative to know the codes and regulations and hire a professional that does, to ensure you meet the standards in order to avoid potential liability.

Larger scale cultivation requires bigger and more expensive equipment. Cultivation facilities are more likely to have sophisticated equipment, such as chiller systems, that are designed to control the grow room environment. While very efficient, some are not intended to be used specifically for cannabis cultivation, and can therefore be difficult to control and maintain. They perform very specific functions, and when not properly tuned to your conditions, can malfunction by prioritizing dehumidification over cooling. This can be a real challenge in warmer climates when temperatures rise, requiring cooling, but also necessitate removal of moisture from the cultivation space.

Larger scale cultivation requires bigger and more expensive equipment.

On the other hand, there is new technology that can make a huge difference in the success of your cultivation. I recently worked with two different companies that specialize in root zone heating systems. One manufactured equipment for root zone heating and cooling of 10k sq ft raised beds that had never been used in California previously. The other company specialized in root zone heating using radiant floor heat. They both worked as intended to maintain a constant root zone temperature, which increased plant health, and ultimately increased yield.

Many counties require data collection from your cultivation, requiring you to track the amount of water and nutrients used. Therefore, another useful tool you can use to increase efficiency, is data collection software that will allow you to collect different information about the amount of water and nutrients used, as well as specific information about the conditions in your grow medium. You can also record and display temperature and humidity readings in your grow room, in real time remotely through Wi-Fi, that you can then access from your phone or computer from anywhere in the world. This can be a useful tool when documenting information that your county, state or investors may require from you. Further, the ability to collect and analyze data will allow you to identify areas of inefficiency in order to correct and optimize your grow room’s potential. While you can achieve these same goals with simple in-line water meters, keeping track of nutrients and pesticides is not as easy. Data collection in the most basic form, using a pen and paper, can be an inaccurate and an inefficient use of time, and can easily be misplaced or ruined. Therefore, simple data software collection programs are the best solution to make the process simple and hassle free.

While it is nice to have state of the art equipment, if it does not work properly, or cannot be easily maintained, it will not be worth it in the long run and you will never see a return on your investment. Innovation comes with a price; using equipment that is cutting edge can be risky, but on the flip side, when done properly it can give you a big advantage over your competitors.

In switching from the black market to the regulated market, these three areas have proven to be the biggest areas of change and have presented the biggest challenges. It is important you consider these necessary changes, and make a solid plan before you begin your cultivation. This is where a cultivation consultant can help.

USDA Announces Risk Management Programs for Hemp

By Aaron G. Biros
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According to a press release published earlier this month, the U.S. Department of Agriculture (USDA) announced two new programs available for hemp growers to mitigate their risk.

The first is called Multi-Peril Crop Insurance (MPCI), which is a pilot hemp insurance program designed to cover against “loss of yield because of insurable causes of loss for hemp grown for fiber, grain or Cannabidiol (CBD) oil.” The second plan is Noninsured Crop Disaster Assistance Program, which protects against losses from lower-than-normal yields, destroyed crops or “prevented planting” where permanent crop insurance is not available.

Both of the programs are now accepting applications and the deadline to apply is March 16, 2020. “We are pleased to offer these coverages to hemp producers. Hemp offers new economic opportunities for our farmers, and they are anxious for a way to protect their product in the event of a natural disaster,” says Bill Northey, Farm Production and Conservation Undersecretary.

The MCPI program is available for hemp producers in 21 states, according to the press release. Th program is available in certain counties in Alabama, California, Colorado, Illinois, Indiana, Kansas, Kentucky, Maine, Michigan, Minnesota, Montana, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, Tennessee, Virginia and Wisconsin.

There are a handful of requirements to be eligible for that program, such as having one year of growing under their belt and have contracts in place for the sale of their crops. Hemp growers producing CBD must have at least 5 acres and hemp growers producing fiber must have at least 20 acres cultivated.

In 2021, the press release states, “hemp will be insurable under the Nursery crop insurance program and the Nursery Value Select pilot crop insurance program.” With those programs, hemp crops can be insured if grown in containers and in accordance with federal law.

To apply for any of these programs, hemp growers must have a license and must be totally compliant with state, tribal or federal regulations, or be operating under a state or university research plot from the 2014 Farm Bill. Growers need to report their hemp acreage to the Farm Service Agency, a division of the USDA.

The press release also mentions that if the crops have above 0.3% THC, the crop becomes uninsurable and ineligible for any of the programs.

Dank Until Gone Dark: The State of Corporate Insolvency for Cannabis Businesses

By Aaron L. Hammer, David S. Ruskin, Nathan E. Delman
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Two thirds of all states and the District of Columbia have, to varying degrees, legalized cannabis. With the recent addition of Illinois, eleven states now allow adult recreational use. But cannabis entrepreneurs’ rush of excitement and dreams of cashing in is met with fierce competition and economic risks that makes the dreams, which look so dank at first, end up going dark, or in other words, out of business.

This article discusses the available options for a cannabis business that finds itself on hard times and in need of reorganizing its debts or liquidating altogether. With the federal status of cannabis remaining illegal, cannabis businesses must clear significant hurdles to achieve success. Among the many other pitfalls traditional business owners experience, a cannabis business must navigate limited access to financial institutions and its related security concerns of keeping large amounts of cash on location. Also, they cannot deduct ordinary and necessary business expenses for federal income tax purposes. Turning a profit in legal cannabis can be a big challenge.

The first thought for a business facing insolvency is bankruptcy. However, bankruptcy courts have not been welcoming to cannabis businesses. Bankruptcy courts are courts of federal jurisdiction, and the federal government is represented by the United States Trustee Program (UST), which is the division of the Department of Justice responsible for oversight of Bankruptcy Courts. Since cannabis remains illegal under the Controlled Substances Act of 1970 (CSA) as a Schedule I controlled substance, it is unsurprising that the UST creates roadblocks for those seeking relief. In fact, the UST currently and steadfastly seeks dismissal of cases against cannabis businesses, cannabis employees and landlords of cannabis businesses.

But all hope is not lost. First, a change at the head of the DOJ could have a significant effect on how these cases are handled, even without a reclassification of cannabis. Second, recent caselaw shows a willingness by the courts to forge a path allowing cannabis cases to survive. Finally, if federal bankruptcy protection is not an option, other state remedies may be available to unsuccessful cannabis ventures.

The UST’s prosecutorial discretion has a strong influence in how a bankruptcy case can develop. While still very difficult to predict, a compelling analogy for cannabis cases can be seen in how the UST dealt with same-sex marriages in 2011. Nine years ago, the Defense of Marriage Act (DOMA) governed, and Section 3 of DOMA1 defined marriage as “a legal union between one man and one woman as husband and wife.” In In re Gene Douglas Balas and Carlos A. Morales, a same sex couple filed a Chapter 13 petition in California, and the UST filed a motion to have the case dismissed. The UST sought dismissal of the joint bankruptcy case, arguing the couple did not qualify for a joint petition under 11 USC § 302(a) because they were in a same-sex marriage. The bankruptcy court denied the UST’s motion. The bankruptcy court in Balas based its opinion partially on a letter from then United States Attorney General Eric Holder, with President Obama’s support, reasoning that Section 3 was unconstitutional as it applied to legally married same-sex couples. The UST appealed the case to the Ninth Circuit Court of Appeals, however, the UST did an abrupt about-face and dismissed its appeal. In fact, the UST took a further step by publicly stating it would not seek dismissal of any joint bankruptcy filed by a legally married same-sex couple. Similarly, if today’s executive branch decides not to enforce the CSA in bankruptcy court, cannabis businesses in compliance with state law would have access to bankruptcy courts.

Many businesses have pushed the bankruptcy courts to use a similar public policy approach to allowing cannabis businesses to seek debt relief, but it is proving to be a far stickier issue. Bankruptcy Courts have routinely dismissed cases with both direct and indirect relationships to the cannabis industry. The UST has taken a stance firmly against affording relief with any type of connection to cannabis. In an April 2017 letter to Chapter 7 and Chapter 13 trustees, the Director of the UST put it bluntly: “[i]t is the policy of the United States Trustee Program that United States Trustees shall move to dismiss or object in all cases involving marijuana assets on grounds that such assets may not be administered under the Bankruptcy Code even if trustees or other parties object on the same or different grounds.”

Indeed, one can fairly point out a significant difference between allowing a same-sex couple to file a joint bankruptcy. The practical significance of allowing same-sex couples to file jointly is the loss of a filing fee to the bankruptcy court, whereas a cannabis company’s liquidation creates a situation where a Chapter 7 trustee would have a fiduciary duty to liquidate a controlled substance, effectively violating federal law.

However, the UST shows equal hostility to cases involving downstream cannabis businesses such as landlords and even certain gardening suppliers, where there is no risk of cannabis itself becoming property of a bankruptcy estate. A Colorado District Court affirmed a bankruptcy court’s dismissal of a holding company for purported CSA violations.2 The Court reasoned that since the company owned stock for a large hydroponic gardening company, it willfully aided and abetted criminal activities.

San Francisco’s United States Court of Appeals for the Ninth Circuit
Photo: Ken Lund, Flickr

While the federal executive branch is decidedly opposed to the cannabis debtor, one hope for reform lies with the judicial branch. To this end, the Ninth Circuit handed the biggest victory to date to a downstream cannabis business in Garvin v. Cook. Based on a microscopically close reading of the Bankruptcy Code, the Ninth Circuit held that a reorganization plan which relies partially on money from cannabis does not equate to a plan being “proposed by means forbidden by law” because the statutory text of one section cannot mean “all applicable law” or else the language in a closely related section that “the plan complies with the applicable provisions of this title” would be surplusage.

But this victory has not created much daylight for cannabis ventures seeking to utilize bankruptcy courts. Notably, Garvin could have gone a different direction if the UST had revived a motion to dismiss for gross mismanagement of the estate, which is how most Chapter 11 cannabis cases are dismissed. Indeed, in the weeks following the Garvin decision, two lower courts declined to blaze a new trail, and instead distinguished its cases from Garvin, dismissing debtors with equally indirect ties to cannabis.

Bankruptcy courts have shown significantly more latitude for legal hemp companies. In a promising decision, In re Royalty Properties, LLC, a Northern District of Illinois Bankruptcy Court took no issue with the legality of a debtor growing hemp seeds. The court took pains to distinguish hemp from its psychoactive relative marijuana and based its ruling on the 2018 Farm Bill which effectively legalized hemp. The court even denied as unnecessary an order to approve contracts to grow hemp, stating its approval was not necessary. Ultimately, the reorganization failed for reasons unrelated to growing hemp.  Nevertheless, the case does show a step toward tolerance. Now that CBD giant GenCanna Global has filed a Chapter 11 in Kentucky, the UST’s tolerance will be put on full display.

The United States Trustee Program is a part of the United States Department of Justice

Also, it is worth noting that the unwillingness of bankruptcy courts to take on cannabis cases cuts both ways. Creditors of cannabis businesses, already taking on a certain amount of risk for dealing with borrowers who cannot use depository institutions in a traditional way, also have been prevented from banding together and filing an involuntary bankruptcy against cannabis businesses.

Fortunately, legal cannabis businesses facing insolvency have options aside from federal bankruptcy to deal with debt issues.

An assignment for the benefit of creditors proceeding (ABC) presents one very workable option. In an ABC, a distressed company selects an “assignee” to liquidate the debtor’s assets via state law and distribute the proceeds to the creditor’s benefit. Depending on whether the assets include cannabis, the assignee will likely have to comply with applicable state law to be able to legally liquidate the asset. Nevertheless, an ABC might be the best solution currently available for cannabis companies seeking debt relief.

Another option is a corporate receivership where a disinterested third party, typically an attorney, is appointed to take control of an ailing business. The receiver takes over management of the company and can liquidate the company’s assets. Receiverships present certain advantages over bankruptcy proceedings. They allow for greater flexibility in decision making because the receiver is not bound by the confines of the Bankruptcy Code. Receiverships can be more cost effective, due to less court involvement and administrative expenses. For creditors, there is the advantage of potentially deciding on the receiver. Also, the receiver, unlike a Chapter 7 trustee, does not bear the imprimatur of any government, and is not a public officer within the meaning of a constitutional or statutory provision relating to public officers. Oregon and Washington have both amended their receivership statutes to ensure that cannabis businesses can effectively manage debt without receivers running the risk of violating the law. Ideally, other legal states will follow suit to ensure this remedy is available to cannabis businesses.

Finally, another bankruptcy alternative would be a friendly foreclosure under Article 9 of the Uniform Commercial Code (UCC). Unlike the Bankruptcy Code, the UCC is not federal law, but is adopted individually by each state. Again, considering the secured lender is required to comply with state law, this is another instance where amending state statutes could provide great assistance to a struggling cannabis business and its secured creditors.

Legal options for insolvent cannabis businesses is a new challenge. Society is trending in the direction of a more permissive attitude toward cannabis, so it should follow that the legislatures and courts accept this shift and afford distressed cannabis businesses the same opportunities to reorganize or orderly liquidate just like other legal business entities.

References

  1. DOMA was ruled unconstitutional in 2013 US v. Windsor, 133 S. Ct. 2675 (2013).
  2. See In re Way to Grow, Civil Action No. 18-cv-3245-WJM, 2019 U.S. Dist. LEXIS 207846 (D. Colo. Sep. 18, 2019)
european union states

European Cannabis is the Emerging Market to Attract North American Investment

By Mark Wheeler
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european union states

Europe continues to be the new frontier of medical and wellness developments in the cannabis industry, with various sources predicting that Europe will become the world’s largest legal cannabis market over the next 5 years. Key related statistics, include:

  • A population of over 740 million (over double US and Canada combined)
  • Total cannabis market estimated to be worth up to €123 billion by 2028 (€58bn medical cannabis (47%), €65bn recreational cannabis (53%))
  • Over €500 million has been invested in European cannabis businesses (including significant expenditure in research and development, manufacturing and distribution)

To reiterate this belief, this month, hundreds of industry experts and delegates will be attending Cannabis Europa in Madrid, to discuss the expansion of cannabis across Europe and the challenges facing the industry across the member states of the EU and the UK.

Global mainstream leans to European strength

Since late 2018, major global operators have made substantial moves into the cannabis sector. Anheuser-Busch InBev, the world’s largest beer company and maker of Budweiser, entered into a partnership to research beverages infused with two types of cannabis. Constellation, owner of Corona beer, announced a commitment for $4 billion investment in Canadian cannabis company Canopy Growth. BlackRock Inc, through five actively managed BlackRock funds, has invested into Curaleaf Holdings Inc, a dispensary operator, for a not too insignificant investment sum of $11 million (as at March 2019). Such international investments prove that cannabis has moved from the fringes and into the mainstream.

When considering the impact of mainstream cannabis, it should be recognised that major European countries have approved or are planning on implementing, legalisation of medicinal cannabis. The UK, Germany, Italy and the Netherlands already have legal systems in place for medicinal cannabis and France and Spain are currently reviewing key legislative reform to align themselves with international practices. At present the German market is the third largest cannabis market (in terms of size) behind the US and Canada.

european union states
Member states of the EU, pre-Brexit

In addition to medicinal cannabis, several key European countries have systems in place, or are developing systems, or considering the reform of existing systems, to approve cannabis with THC content at a recreational level. The Netherlands already has a system and Luxembourg’s health minister in August 2019 announced the intention to legalise cannabis for Luxembourg residents. The Luxembourg government is lobbying EU member states to follow suit.

Whilst the EU has a labyrinth of laws in relation to edible CBD (as a novel food) which make the regulatory landscape complex, there has been an explosion of CBD products for vaping and cosmetics. Of course, with each of these products being subject to different local laws (some aligned between EU members states) in relation to vaping and cosmetic related regulations. The Brightfield Group has predicted a 400% increase in the European CBD market (including vaping liquid) from $318m in 2018 to $1.7 billion by 2023. There is also an expansion into applications for CBD with animals with many US manufacturers of CBD-infused pet food.

The European Parliament’s health committee has been calling for properly funded scientific research and there are motions to establish policies to seek to incentivise member states to advance the studies of medical cannabis, with a priority on scientific research and clinical studies – the first step necessary to drafting legislation, designed to better support the industry.

Where does the UK sit within cannabis?

Medicinal cannabis famously saw a legalisation, of sorts, by the then Secretary of State, Sajid Javid, who provided the authorisations for prescriptions for the high profile cases of Billy Caldwell and Alfie Dingley. Subsequently, on 1 November 2018, this was codified into law by an amendment to Schedule 2 of the 2001 Misuse of Drugs Regulations. This allows clinicians to prescribe cannabis as an unlicensed medicine.

There have, of course, been some high profile licensed medicines. The UK company, GW Pharmaceuticals, is the largest exporter of legal medical cannabis in the world, cultivating medical cannabis for production of cannabis-based medicines (e.g. Epidiolex & Sativex). Epidiolex (manufactured by subsidiary Greenwich Biosciences) became the first cannabis-derived medicine approved for use in the US for treatment of seizures caused by Lennox-Gastaut and Dravet syndromes (both severe forms of epilepsy).

When considering the level of research development and investment in the medicinal field, it is no surprise that the UK is the world’s largest producer and exporter of medical cannabis. Research published by the International Narcotics Control Board indicates that the UK produces over 100,000kg a year of medicinal cannabis.

UKflagPrevious guidance from the National Institute for Health and Care Excellence (NICE) indicated that further research is required to demonstrate the benefit of medicinal cannabis, citing its cost versus evidenced benefit. However, there is now renewed confidence in the UK following NICE’s approval of two cannabis-based medicines produced by GW Pharmaceuticals,  Epidiolex (cannabidiol) oral solution and Sativex (nabiximols), for routine reimbursement through the NHS.

Following the re-categorisation of medicinal cannabis in November 2018, a number of clinics have been established where specialised clinicians can start the process of prescribing cannabis based medicinal products (CBMPs). Whilst this route is not fast, and challenges are well documented as to the satisfaction of prescriptions made in the UK, there is momentum behind the development of this as a means for providing genuine and established medical care. A significant step in October 2019, was the CQC registration of one such cannabis clinic, Sapphire Medical Clinics Limited.

In November 2019, a project backed by the Royal College of Psychiatrists was announced with the aim to be the largest trial on the drug’s use in Europe with a target of 20,000 UK patients.

The UK medicinal cannabis sector is establishing a research-based approach to expand usage in the UK and across Europe.

How North America compares to Europe

Canada

Canada, as a first mover within the cannabis sector, has a multitude of large companies which are well-capitalised and have substantial international footprints. The Canadian exchanges have large listed companies looking to Europe with the intention of acquiring or investing into European operations. As of the date of writing, the 10 largest cannabis companies in Canada have an aggregate market cap of over $23.5 billion (and all registered cannabis companies in Canada having an aggregate market cap of over $46.5 billion).

Listed companies have had a tough time over the last 6-12 months with a slowdown in the market as a natural re-balancing occurs – part of which is due to rapid expansion and heavy investment into cultivation by all the major participants in the market. Over the next 6 -12 months we can expect to see management changes (some of which will be voluntary and some of which will be imposed by institutional pressure) to introduce different skill sets at board and senior management level to facilitate the oversight and leadership necessary for large pharmaceutical companies. Many operations have expanded into highly regulated products and complex supply chains whilst still operating with fundamentally the same team that established the operations with entrepreneurial efforts but, perhaps, a lack of experience in these sectors. The recent announcements by Aurora Cannabis and Tilray demonstrate that these restructurings and costs reductions have already commenced. However, with increased experience at board level and an improvement of profitability focused on sustainable business practices, should come new opportunities on a global scale for these North American operations.

The US

The US market, because of the complexity of state and federal laws not being fully aligned, is closer to its infancy than the Canadian market. This is not too dissimilar to the European market. That said, there are a number of well-funded and quite large US enterprises. A limited number of these, such as Tilray, are looking to expand into Europe.

Many of the companies in the US have, and continue to, expand quickly so we can expect to see a number of mergers and acquisitions. We are likely to witness Canadian and US entities merging with one another with the potential for acquisitions for operations within Europe. It is unlikely that the North American companies will risk their capital through organic growth so would be expected to be identifying “turnkey” solutions.

One of the major challenges facing US companies is the complexity of supply and distribution. This is largely a result of the complexities for state and federal laws interacting with one another as well as international importation and exportation with US states.

How you can invest within the UK and Europe

Developments in the fields of research and development are anticipated to add further weight to the lobbying of government and regulatory bodies across Europe.The UK remains, despite the events of Brexit, a major financial hub for Europe. The London market has seen the growth of several investment and operation cannabis companies. This includes private companies such as; EMMAC Life Sciences Limited and the operations formerly trading as European Cannabis Holdings (now demerged into several new entities including NOBL and LYPHE) as well as publicly listed companies; including Sativa Group PLC (the first publically listed cannabis specific company in the UK) and World High Life Plc, both operating on the NEX Exchange.

The Medical Cannabis and Wellness Ucits ETF (CBDX), Europe’s first medical cannabis ETF fund, domiciled in Ireland, and which has been passported for sale in the UK and Italy, has also caused a renewed stir within the market with a further platform for listed investment.

As the regulatory framework evolves further there is an anticipation that more medicinal cannabis and CBD related enterprises should have the opportunity to list on public exchanges, whether in the UK or in European countries.

Conclusion

Despite a period of slow down following the natural rebalancing of the fast-growing North American markets for the cannabis sector, there is renewed confidence in the expansion of the industry. Developments in the fields of research and development are anticipated to add further weight to the lobbying of government and regulatory bodies across Europe.

There is an increased push for a public dialogue and consultation in relation to medicinal and recreational cannabis in the UK, backed by several mainstream media platforms. This is likely to be shaped in some parts by national debates in Luxembourg and other European countries as they consider their own domestic laws.

With European parliaments across the EU (including the UK) hopefully having time freed up to discuss other political matters now that Brexit is progressing, the next 18 months should prove an exciting time within the European cannabis sector.