In January, the state of California kicked off an online rollout of its marijuana inventory tracking system. At a glance, marijuana businesses across the Golden State appear to be successfully reporting product inventory each day, via the California Cannabis Track-and-Trace (CCTT) system. But not without some growing pains.
To start, the idea of tracking marijuana traveling throughout the supply chain sounds simple enough. In theory, all cannabis products would be given unique identification numbers, noting from which ‘batch’ or ‘lot’ they were born. Products would then be sent to labs for testing. Next, approved products would be passed from producer to distributor, and finally to retailers for sale. At each step, the state should be able to track each piece of marijuana as it moves through the chain, making sure nothing is being redirected out of state, and ensuring everybody is paying their required taxes.
But in practice, a few hiccups quickly come to light. First up, only businesses holding ‘provisional’ or ‘annual’ licenses are required to subscribe to the track-and-trace system. And until last month, there were more than 600 marijuana businesses operating on ‘temporary licenses,’ who would not have had to track-and-trace. This means, there was no way regulators could comprehensively account for every legal product moving about the state.
While those 600 temporary cannabis business licenses all expired at the end of July, and many of those cannabis business owners await approvals on provisional or annual license applications (another story in and of itself), Lori Ajax, State Bureau of Cannabis Control (BCC) chief, recently said it’s a priority of the bureau to get all temporary licenses transitioned onto either provisional or annual licenses, as quickly as possible, so those businesses won’t have to halt their operations.
It’s true that when the provisional or annual licenses are approved, those marijuana business owners are immediately required to begin tracking-and-tracing. And as the CCTT is quite complicated, many companies already required to track-and-trace are hiring full-time employees to traverse the system.
Tagging Products Has Proven a Challenge
One common complaint from marijuana retailers holding provisional or annual licenses, is that they must apply unique identification tags to all products. And because until very recently, many holders of temporary licenses weren’t held to those same standards, products would reach stores without said tags, leaving retailers having to sticker and tag products, at their own extra labor costs.
But the problem doesn’t stop there. Now with 600 odd businesses in line waiting for the state to approve their new license applications, and often a need to continue earning a living in the meantime, many are generating lots of paperwork for companies adhering to CCTT requirements while trading with businesses not yet in the system.
On the use of CCTT throughout the marketplace, Josh Drayton, communications director for the California Cannabis Industry Association (CCIA) says it’s a patchwork at present. “We’re not seeing it work it’s way all the way through the supply chain, which ultimately means it’s kind of a broken system at the moment,” he said.
Software Compatibility Also a Hurdle
Another shared grievance is that CCTT is not properly set up to work smoothly with a common point-of-sale software system used by retailers. CCTT also does not account for businesses like growers or manufacturers awaiting provisional or annual licenses, who may have missing data. As a result, some retailers using that software are forced to simply ‘create’ information in order to move through to the next step within the CCTT platform.
So Was Track-and-Trace Just a Sweetener?
One of the promises California’s 2016 Proposition 64 made, was that the state would always be able to locate every piece of marijuana sold, all the way ‘from seed to sale.’ Creating a tracking system then, was always going to be necessary to meet this promise.
Helping to prevent cannabis flowing out onto the black market was another reason. But so far, activity on the illicit market has shown little signs of slowing. One analyst estimates the underground cannabis market in California totals $3.7 billion per year, which outdoes the legal market fourfold.
Some believe the track-and-trace system was only offered up as a way of getting legalized marijuana over the line.
The Burden of Compliance
Others believe that requiring compliance with an inventory control system places a needless burden on legal cannabis businesses committed to operating within the law. Amid the many opinions on the matter, one thing is certain, a slow transition to the new system has brought with it a whole lot of new red tape. And manufacturers and vendors may just have to prepare for further hiccups and delays as the industry presses ahead.
Legal Implications Thus Far
Thankfully, marijuana businesses still getting up to speed with CCTT have been afforded some leeway. The BCC seems to understand this is a process, and hasn’t made an example of anyone as yet. But there are no assurances from the authorities that this is in fact the case. Most affected by this issue are businesses either moving to, or waiting on their, provisional and annual licenses following the expiration of their initial temporary licenses, as well as any new cannabis business operators coming into the fold. As a result, all industry stakeholders will watch carefully to see just how effective the CCTT system can be as it becomes more widely embraced in the coming months.
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California’s Cannabis Track and Trace (CCTT) System