Three Prominent Business Interests With Strong History Take Issue With Proposed Rules
Taxes and Common Locations
Three business interests share strong and logical objections to sections of the LCB’s proposed rules for implementation of I-502, Washington’s recreational cannabis law. Claiming that “the current MMJ Enterprise Participants…operate outside of current Washington MMJ laws and regulations” and that “core (plant quantity) principals are not being followed by the vast majority of MMJ establishment’s whether they are producing or retailing” Charles Marcus of SCG 206 requests the LCB reconsider proposed rules provisions of co-location of recreational growing with MMJ participants, and states that a “vast majority” of present MMJ participants don’t pay taxes.
Truth in Packaging
Tom Leaptrott, President of Quantum Leap Packaging of Poway, California expands the group’s input to the LCB about the rules lacking a procedure to gain and provide confidence to the buying public that the cannabis is actually what retailers claim it is, grown where it is identified, and controlled for in-state use. In his formal response to the proposed rules, Leaptrott states that his suggestions (below) will provide a “greater degree of control, and provide the end consumer some degree of confidence that the packages they buy are from a licensed grower regulated by the State of Washington.”
Security
The third issue discussed in the three part sumittal addresses video security, or security in general. Another issue tied directly to what some are calling federal allowance. Brent Gable, Director of Business Development forwarded his letter to the LCB on Thursday pointing out there “is a need for more detail and clarification to ensure that video surveillance footage is of usable quality across the multitude of licensees. The WSLCB and law enforcement will benefit greatly from having tighter video standards during any incident and/or video surveillance footage.”
Collision or Melding?
The LCB is sitting in an intersection of a decade old established MMJ community and a truck of big cannabis bearing down for a collision. MMJ advocates have all along been leery of the I-502 and its backer’s claims that MMJ would not be harmed. With claims by Charles Marcus, law enforcement and the LCB director himself that Washington’s MMJ platform is “over 90% fraudulent”, the lines are being drawn for anything but a due no harm protocol.
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Editor’s Note
Calls and emails to MMJ community leaders and advocates have yet to produce a response to the claims made by these and other “big cannabis” players. Standby.
Letters to LCB from Business Leader
SCG 206, LP
2234 1st AVE
Seattle, Washington 98121
June 6, 2013
To: WSLCB
From: Marcus Charles
RE: Draft Rules
Thank you for the opportunity to comment on the recently released draft rules.
We are excited for the potential opportunity that this entire social experiment is affording our state, as well as possibly our entire country. The national consciousness is watching us and how we move this industry forward.
Unfortunately, we also have some serious concern that the draft rules, in their current form, appear to overlook. Further requirements should be adopted to create an environment where reputable participants are able to enter (a soon to be legal) cannabis marketplace that effectively (and currently) operates outside of any serious regulation or taxing authority in the form of Medical Marijuana (MMJ).
In our personal opinion, the vast majority of the current “MMJ Enterprise Participants” operate outside of current Washington MMJ laws and regulations.
As you are probably aware, our current law limits any community garden to 45 plants and every access point must have its own designated exclusive community garden from which its supply is sourced. As you have seen firsthand, those two core principals are not being followed by the vast majority of MMJ establishment’s weather they are producing or retailing.
If these types of participants are allowed to enter this new legal market place, they will likely skirt any new regulations in order to maximize profit at the cost of public safety and to avoid paying taxes, in the same matter that they currently ignore existing laws on community gardens.
Ultimately, our concerns center around three main points:
1. Because there is a current MMJ market that operates with such little regulation or tax obligation, there must be a rule that ‘Recreational Cannabis’ cannot be produced either in the same physical location as MMJ or by any true parties of interest currently involved in MMJ production, processing or retailing in Washington State.
Interested parties must choose which set of regulations and by which set of laws that they intend to operate under and be true to them in both spirit and letter for their entire commercial enterprise. It is a simple choice MMJ or Recreational Cannabis.
This is needed to ensure that participants do not “game the system” to the determent of the entire regulated recreational cannabis market and subsequent tax collection for the State.
2. If ‘true parties of interest’ and ‘employees’ must be residents of the State of Washington, so should ‘financiers’. Without this provision, the integrity of financiers will be difficult to determine, even with background checks.
And, most importantly, this difference alone could be the catalyst for a Federal challenge as out of state capital will in fact make the Interstate Commerce Clause of the Federal Government a forefront issue.
3. We are free market capitalists. Any licensable participants willing to operate according to the recreational rules (and also willing to ensure that proper taxes are collected and remitted) should be allowed to participate in this new industry.
Unlike other mature industries that are highly taxed and highly regulated, this industry is in its infancy. Normal practices, yet alone best practices, have not yet been incorporated into the industry as a whole. One participant’s version of tracking and security will be highly different from another’s. And, could in fact be set up intentionally to throw off enforcement audit ability.
So, as function of establishing this new industry, we believe that the WLSCB has a duty to set a robust minimum standard for tracking and security. We would like to point you to the comments of both Tom Leaptrott and Brent Gable included hereafter in both Appendix A & B.
We are not advocating the use of any specific propriety software or hardware, just the most appropriate set up possible to ensure public safety and tax collection.
Again, we appreciate the opportunity to comment. We look forward to working with you to develop rules that will ensure a robust yet reputable market for recreational cannabis.
Thank you for your time,
Marcus Charles
SCG 206, LLC
Appendix A
Executive Summary
Thank you for allowing Quantum Leap Packaging to submit suggestions for the modifications of rules for WAC 314-55 related to the licensing, processing, and packaging of marijuana. We would also like to thank you for taking the time for allowing us to present our power point presentation last month. We hope we gave the commission plenty of possibilities to think about regarding the packaging and tracing of packages through the system.
After reviewing the document we have proposed language we believe would make the program better, give a greater degree of control, and provide the end consumer some degree of confidence that the packages they buy are from a licensed grower regulated by the State of Washington. The concept of our proposal will allow the State to track and trace every step of the process to assure compliance and revenue collection. This will also provide the proper controls to help satisfy potential concerns by the federal authorities and provide a strong deterrent to criminal elements that might otherwise take advantage of a weaker system not capable of authenticating the packaging and process at each step.
Control of the packages by a solid track and trace system that has some level of sophistication is critical to avoid counterfeit product entering the product stream and keeping the stakeholders confident that this program is viable in the long term and the State collects the type of revenue they have forecasted. The rules only note that the package needs to be traced from the seed to the product. No other criteria are mentioned. This leaves multiple interpretations of what is really needed and we try to clarify the requirements.
The track and trace recommendations are probably the most dynamic and will have a huge impact on the success of implementation. We strongly suggest the commission to review these proposed changes. They are designed to make sure the state has a firm level of control, have a high degree of confidence that counterfeit product from in and out of state growers does not make it into the marketplace, and provide the revenue tax enforcement group a level of collection techniques needed for this huge retail business segment. Many of these changes follow the same type of logic that exists from the cigarette tax stamp system while adding new tracing and tamper resistant technologies. The track and trace system we are proposing is a proven technology that can be customized for the State.
We also added specifications to the type of packaging needed taking into account product quality (freshness), shelf life, tamper resistance, and functionality. The minimum thickness helps with quality but also makes it more difficult for children to open packaging and gain access. The rule related to having an open window allows consumers to see what they are actually buying making it more difficult for other materials to be in the package. These rules will allow retailers to decide whether they want packages that are smell proof or that admit odor for product selection depending on the type of materials and thickness of the package. Also mentioned in the changes, is the appropriateness of the advertising being monitored and defined by the WSLCB.
All products should be heat sealed and not allowed to be opened within a retail outlet. It is critical that once a package leaves a processor no other foreign materials can be added, the sealed packaging ensures this is the case. This packaging also provides confidence that the material tested from the growers will be the same as the product purchased at the retail location. It is impossible to reseal a retail product once it has been opened without showing signs of tampering.
Based upon our experience in packaging and track and trace systems we feel these proposed changes are a must. If you would like to meet with our team further to explain the recommendations or ask questions feel free to contact Jessica Bork.
Sincerely
Tom Leaptrott
President
Quantum Leap Packaging
Suggested Changes:
Page 15: (4) Traceability: To prevent diversion and to promote public safety, marijuana licenses must track marijuana from seed to sale. Licensees must provide the required information on a system specified in WAC 314-55-105.
Page 23 WAC 314-55-105
(2) Any container or packaging containing usable marijuana or marijuana products must protect the product from contamination and must not impart any toxic or deleterious substance to the usable marijuana or marijuana product. In order to accomplish this, the packaging must be tamper resistant and have the following requirements:
(a) Lamination (moisture barrier);
(b) Caliber of material not less than 3 mils;
(c) Package is heat sealed and reclosable;
(d) Minimal tensile in Machine Direction and Cross Direction of at least 20 lbs. at break;
(e) Must have a clear window enabling the customer to view the product from the retailer;
(f) Packaging from the grower and processor levels should also have the open window feature so as to prevent any other materials entering the package;
(g) Meet all the labeling requirements specified by the State.
(3) Retail customers must have the ability to access the name of the accredited third party testing lab and results of the required quality assurance test for any useable marijuana or other marijuana product the customer is considering purchasing.
This information must be available to the following:
The Consumer, The Retailer, The Processer, The Producer, and the State Reporting Officials. This can only be accomplished with a system that has 3 distinct features.
(a) A Secure marking on the product packaging. This authentication marker, using covert technology, that once read unlocks encrypted information to the app user. The secure codes will hold all the information required in the document. The secure mark can only be unlocked and read with a State Owned/Sponsored Smart Phone Application (funded as part of the track and trace revenue collection system);
(b) The Smart Phone Application will have four distinct apps for the groups described above and each app will display appropriate information for that group.
Consumer, sees only information he/she needs to establish authentic product, and history.
Retailer, sees only information relevant to him.
Processer, sees only information relevant to him, but he is also responsible for affixing the proper marks to the proper product packaged to be sold to the retailer.
Producer, sees only information relevant to him, but his is also responsible for affixing the proper marks to the proper bulk package out to the processor or direct to the retailer.
The State Reporting Officials will see all information required;
(c) A Secure Portal will be made available for the State Reporting Officials, and whomever they deem necessary. The portal will allow the state to manage, edit, encode, or delete the secure mark codes. Manage personnel activity and access to the system. Allow state to see real time activity through the supply chain.
This ensures that the information is accurate and current, and the product is authentic.
The mark (a secure anti-copy unique I.D.) on the product packaging must be covert technology, meaning it cannot be duplicated, copied or scanned, and is only good for the specific lot of marijuana in question.
(4) Useable marijuana and marijuana products may not be labeled as organic unless certified as organic by the Washington State Department of agriculture. This certification can be independently verified by a consumer via a secure anti-copy unique I.D.
(5) The accredited third party testing lab and required results of the quality assurance test must be included with each lot and disclosed to the customer buying the lot. This certification can be independently verified by a consumer via a secure anti-copy unique I.D. barcode.
(6) A producer must disclose in writing all pesticides, herbicides, and fungicides or other compounds used for pest control or plant disease while producing any marijuana plant in the lot. This certification can be independently verified by a consumer via a secure anti-copy unique I.D. barcode.
ADD point (13) at end or as (7) and shift other points: the secure mark must be incorporated into the packaging in a way that ensures the secure mark is non-transferrable to another package. The secure mark must not have the ability to be reproduced or copied in any way to ensure that the information associated with the secure mark is unique to the marijuana or marijuana product in the package.
ADD point (9) (i) Information in (9)(a)-(d) and (g) can be independently verified by a consumer via a secure anti-copy unique I.D. mark.
ADD point (9)(j) Any branding or optional graphics must be deemed appropriate and defined by the WSLCB.
ADD point (11) (n) Information in (11)(a)-(h) and (j) can be independently verified by a consumer via a secure anti-copy unique I.D. mark
Appendix B
Recommended Changes to Security Requirements for the WSLCB I-502
Overview
After review of the current security requirements outlined in the WSLCB I-502 implementation document, specifically WAC 314-55-083, there is a need for more detail and clarification to ensure that video surveillance footage is of usable quality across the multitude of licensees. The WSLCB and law enforcement will benefit greatly from having tighter video standards during any incident and/or video surveillance footage review.
Additionally, one of the most important factors to consider for video surveillance requirements is integration to third party systems such as a traceability system and Point of Sale (POS) system. This would index video evidence at every bar code scan in the inventory system as well as every sale to the public.
Recommended Video Surveillance Guideline
• Video recording hardware/software solutions
Network video recorder (NVR) to be used in all installations
All recorders must be ONVIF 2.0/Profile S or higher compliant
Cameras to be IP addressable
All cameras must be ONVIF 2.0/Profile S or higher compliant
NVR systems must be connected to the internet and accessible to the WSLCB
Establish a Memorandum of Understanding (MOU) with each licensee to grant WSLCB access to view and backup video
• This will establish a clear procedure for both parties for incident review
• Current example from the Albuquerque Police Department currently in place under a public/private partnership
http://www.smartpolicinginitiative.com/SPIsites/albuquerque-nm
Most NVR systems allow for multiple permission levels
• The WSLCB and/or law enforcement could have access to only cameras covering the areas currently outlined in the existing requirements
• Private camera coverage could be restricted from the WSLCB
Access will be granted to the WSLCB for live and recorded video
Access will be granted to the WSLCB to backup incident based video
• Notification of video backups could be done following ,the video retrieval
NVR systems shall have automated health reporting to a cloud based and independently maintained health monitoring service
The health monitoring service shall automatically notify the licensee and the WSLCB of the following conditions
• NVR failure
• Camera failure
• Hard disk drive failure
• 45 day video storage retention policy not met
The health monitoring service shall automatically send the licensee and the WSLCB a monthly health summary report including a snapshot image from each camera to ensure ongoing image suitability and compliance
• We would recommend that an approved reference image from the original installation be required within this report as an easy point of comparison
This allows for the licensee to be automatically notified if their system is not performing correctly or in working order, and ensures that video evidence will be continually available to the WSLCB and law enforcement
o NVR systems should be limited to a small number of manufacturers
Each manufacturer will have a proprietary software package to view and backup video
The expense/labor required to maintain an unlimited number of software packages would be extremely challenging
• Video quality/recording standards
o Video compression to be ONVIF 2.0/Profile S or higher H.264
o Minimum 7 FPS/IPS/PPS per camera
o Minimum 1.3MP, 720P, or 1280×1024 camera resolution
This will ensure standardized video quality
o All cameras set for 24/7 continuous recording
• Video retention standards
o The WSLCB needs to determine what their incident review time (IRT) would be
Under the current requirement 45 days of video would be recorded which may or may not be enough retention
Some leading questions to determine an accurate IRT
• How long does it take before the WSLCB is notified of an incident requiring video evidence?
• How does the WSLCB notify the licensee?
o Mail
o E-Mail
o Phone
• How long does the licensee have to comply?
• What is the recourse for lack of video evidence?
• Having real time access to the video would streamline this process exponentially
Video Surveillance System Integration Requirements
• Video surveillance system must allow for integration to the traceability system
o NVR system must allow for recording and indexing of bar code scans and asset tagging data entry
Data retention will match video retention
o NVR system must provide a data search for individual bar code scans/entry
A video link would be provided based on individual entries
o NVR system must provide a text overlay on the recorded video showing bar code entry with matching time index
o NVR software package will allow for automated reports via email to the WSLCB
• Video surveillance system must allow for Point of Sale (POS) integration
o NVR system must allow for recording and indexing of all POS transactions to the general public
Data retention will match video retention
o NVR system must provide a data search for individual POS transactions and POS exception codes
A video link would be provided based on individual entries
o NVR system must provide a text overlay on the recorded video showing POS transaction information with matching time index
o NVR system shall provide a tool for tracking key performance indicators based on transaction data across multiple cashiers and locations for the purpose of detecting fraud and or unintentional operational errors.
o NVR software package will allow for automated reports via email to the WSLCB
In closing I would be happy to address any questions, explanations, or clarification for the above content in person or by phone.
Thank you for your consideration
Brent Gable
Director, Business Development
http://www.openeye.net/
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