LEX CANNA

Proposed Regulations for the Appellations of Origin for Cannabis

Background of Establishment of Appellations for Cannabis in California

The California Department of Food and Agriculture (“CDFA”) describes an appellation of origin as a protected designation that identifies the geographical origin of cannabis and how that cannabis was produced.  Business and Professions Code Section 26063(3) requires that by January 1, 2021, CDFA develop a process for licensed cultivators to establish appellations of standards, practices, and cultivars applicable to cannabis grown in certain geographical areas in California. CDFA’s goal is to promote regional cannabis products and local businesses, prevent the misrepresentation of a cannabis product’s origin, and support consumer confidence about a cannabis product’s origin and characteristics.

In September 2018, CDFA held six public outreach sessions to obtain feedback from the industry and stakeholders to assist in the development of the appellation regulations.  Dickenson, Peatman & Fogarty attorneys Richard Mendelson, assisted by Elizabeth Lance, were retained as experts to the Appellations Working Group which held a series of ad hoc meetings with industry groups and CDFA officials for fact-finding, information-gathering, and discussion of the the protected designations of geographical origin and their application to California commercial cannabis. CDFA used the information from the public outreach and working group meetings to develop the proposed Cannabis Appellations Program.

Proposed Regulations for Cannabis Appellations in California

On February 20, 2020, CDFA released the proposed regulations for cannabis appellations of origin. The regulations establish a petition process and specific evidentiary standards for licensed cannabis cultivators to establish appellations of origin for their cannabis and non-manufactured cannabis products. The proposed regulations modify the existing cannabis cultivation regulations and add a new chapter entitled “Cannabis Appellations Program.”

Establishing a New Appellation of Origin

To establish a new appellation of origin, a group of three or more licensed cultivators must submit a petition to CDFA. Each petitioning organization will designate a primary contact for the petition.  The required nonrefundable fee to establish an appellation is $20,880, and there is a nonrefundable fee of $10,440 to amend an appellation of origin.

The Petition to Establish a New Appellation of Origin

Proposed regulation Section 9102 requires that the petition include the contact information and license numbers for the petitioner and the others in the petitioning organization; a general description and location of the proposed geographical area (for example, total acreage of area, total canopy acreage within the area that is currently used for licensed cannabis cultivation, and estimated cannabis canopy acreage eligible to use the proposed appellation of origin); evidence of name use; a description and documentation of the boundary of the proposed appellation of origin; a description and evidence of the distinctive geographical features affecting cannabis cultivation in the boundary of the proposed appellation; identification and definition of all standard, practice, and cultivar requirements of the proposed appellation of origin; a description of the legacy, history, and economic importance of the cannabis cultivation area; if the proposed appellation of origin is located within the geographical area of another appellation, an explanation of how the proposed appellation of origin is distinct the existing appellation of origin; and a list of cultivator license types (for example, mixed light, indoor, and outdoor) which are prohibited from using the appellation of origin. Several of these requirements are discussed in more detail below.

i. Evidence of Name Use – Proposed Section 9104

The regulations require that the petition provide the name and history of the proposed appellation of origin. This should include an explanation of how the name has been used in the geographical area and an explanation of the relationship of the name and boundary of the proposed appellation.

ii. Maps and Boundary Description –Proposed Section 9105

The petition must describe the area and boundary of the proposed appellation of origin and include a topographical map and a detailed narrative description of the proposed boundary.

iii. Geographical Features – Proposed Section 9106

The petition must include a description of each distinctive geographical feature, including cultural factors, that affects cannabis cultivation in the geographical area of the proposed appellation of origin.  A narrative describing the climate, geological information, physical features, cultural features, and elevations must be included in the petition. The petition also must include evidence showing that the geographical area is distinctive when compared to areas outside the proposed boundary and when compared to other areas which produce cannabis for sale in the marketplace. Finally, the petition should identify at least one specific standard, practice, or cultivar requirement which acts to preserve the distinctiveness of the geographical features.

iv. Standard, Practice and Cultivar Requirements – Proposed Section 9107

Under the proposed regulations, the same geographical area may contain several appellations, so long as each appellation has its own defining standards, practices, and cultivars. The petition must identify and define at least one standard, practice, or cultivar for the appellation of origin. If the petition identifies a particular standard such as a product quality standard, it should be composed of limits of measurable or scorable characteristics or program-level certificates. If a practice is identified in the petition, it must include a description of the practice requirement and cannot use any term likely to mislead consumers. Prohibited practices also can be specified. Likewise, cultivars can be required or prohibited for any particular appellation. The identified cultivars require procedures for genetic testing, seed or plant specimen preservation, or cultivar identity certification.  For each standard, practice or cultivar, the petitioners must describe the mandatory mechanisms by which compliance with the requirements will be documented.

Petition Review Process – Proposed Section 9200.

CDFA will review the petition to determine whether it meets all the regulatory requirements. A petition is deemed to be received when it is submitted to CDFA by email or mail, and the petition fee is paid in full. If CDFA determines that the petition is incomplete or that additional information is needed, CDFA will notify the petitioner by email of what information is outstanding. If petitioner does not respond within specified time limits, CDFA will treat the petition as abandoned, and it will no longer be considered.

Once the petition is deemed complete, CDFA will notify the petitioner by email, request that the a new voluntary seven person Petition Review Panel review the petition and CDFA with a recommendation for approval or denial, and issue a notice of proposed action on the petition. CDFA will provide public notice of the proposed action, which would include weblinks to the completed petition, a map of the area described by the petition, and the standards, practices and cultivars identified in the petition. The public will have 30 days to provide comments on the proposal.

The proposed regulations do not specify a deadline or time frame for CDFA review. CDFA will notify petitioner by email of the final decision to establish amend, deny or cancel the appellation of origin.

Effective Dates and Trademark Considerations

An appellation of origin is considered established and protected against misuse as of the date identified in the notice of final decision. Similarly, an appellation of origin shall cease to exist on the date identified in any notice to cancel the appellation of origin.

The use of trademarks containing words or phrases which are part of or similar to an appellation of origin in advertising, labeling, marketing, or packaging will not be considered mis-branding or false-advertising for three years from the date the appellation is established so long as the following conditions are met: the trademark was registered with the California Secretary of State prior to the establishment of the appellation; the trademark was used in the California cannabis marketplace prior to the establishment of the appellation; documentation of registration and use is retained by the trademark owner and provided to CDFA upon request; and the use of the trademark is accompanied by a county or origin or appellation of origin applicable to the cannabis and clearly indicated as its geographical origin. In other words, licensees who do not meet all of these requirements cannot use their trademarks that contain the words or phrases which are part of or similar to an appellation in its advertising, labeling, marketing, or packaging unless the cannabis originates in that appellation.

Advertising, Labeling, & Marketing

The proposed regulations attempt to clarify advertising, marketing, labeling, and packaging requirements applicable to cannabis and non-manufactured cannabis products with respect to the appellation of origin and county of origin. Proposed Section 8212(a) amends existing regulations to prescribe that cannabis cannot be advertised or marketed using any statement, design, device, or representation which tends to create the impression that the cannabis originated from a particular county or appellation of origin, unless the label of the advertised product bears that county or origin or appellation of origin.

A county or origin or appellation of origin, “or any similar name,” can only be used in the labeling of cannabis if 100% of the cannabis was produced in the named county or appellation of origin; the licensee has retained records demonstrating that 100% of the cannabis of the cannabis was produced in the county or appellation, and within 30 days of the use of an appellation of origin files a Notice of Use (discussed below) with CDFA. See Proposed Section 8212(5).

For each appellation of origin used in advertising, labeling, marketing, or packaging of cannabis, licensees must keep records on its premises for at least seven years demonstrating that the cannabis was produced in the “geographical area of the appellation of origin and according to all standard, practice, and cultivar requirements of the appellation of origin.” See Proposed Section 8400(d)(14). According to proposed Section 8212(a)(6), cannabis is produced in a county or appellation of origin if all cultivation, starting from the time the cannabis plants were taller or wider than 18 inches, was conducted within the county or appellation of origin and according to any applicable standard, practice, and cultivar requirements. Proposed Section 8601 provides that violations of any of the above mentioned sections would be classified as minor, resulting in a fine of between $100 to $500.

Notice of Use – Proposed Section 8212.1

If licensees wish to use an appellation of origin, they must submit a “Notice of Use” by email to CDFA at least 30 days prior to use. The Notice of Use is effective for three years; however, if CDFA does not receive a Notice of Use of a specific appellation of origin a during a five year period, it may issue a notice of initial decision and cancel the appellation.

Public Comment

Written comments on the proposed regulations are due April 6, 2020 and may be submitted via email to CDFA.CalCannabis_Appellations@cdfa.ca.gov or by mail to:

California Department of Food and Agriculture
Attention: Kristi Armstrong
CalCannabis Cultivation Licensing
Proposed Appellations Regulations
P.O. Box 942871
Sacramento, CA 94271

Statements or oral arguments regarding the proposed regulations may also be given at the public hearing on April 14, 2020 at the CDFA Auditorium in Sacramento.

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