California’s Mandated Track and Trace System: Is it Helpful or Harmful?

The California Cannabis Track-and-Trace (CCTT) system, which became operational for businesses with full annual licenses in January 2019, is a major milestone to further legitimize our industry. However, the newly mandated regulations have done more to hinder the legal marketplace than boost it. Convoluted daily logistics, lack of complete accountability, as well as the limited availability of the required unique identifying tags are just a few examples of CCTT’s bureaucratic red tape. This has caused companies to incur extra costs and delays in introducing their products to shelves.

It is essential to have a streamlined process for states to record the inventory and movement of cannabis products through the commercial supply chain for safety and quality control, as well as so we can be privy to supply, distribution and demand data that can help licensed companies compete with the illicit market. But there needs to be changes and updates to address the issues plaguing California’s Metrc-powered system. Let’s take a look at the issues and potential solutions:

• Additional Costs: The CCTT’s unique identifiers aka UIDs, tags which must be placed on every single plant and product, often lead to extra expenses for companies: employees may need to be hired and trained to use the new software and to enter data. While this may not be an issue for well-capitalized businesses, start-ups looking to make the jump from temporary to fully annual licenses may have difficulties absorbing the extra expenses. And to add insult to injury, applying UIDs often results in covering information that already exists on packaging. The solution? If we want new businesses to successfully thrive in the marketplace while remaining compliant, there should be opportunities to apply for subsidies as companies transition to the CCTT system.
• Limited UIDs: Cannabis companies are limited in the number of UIDs they can order at any one time and each shipment typically takes three working days. Before a business can order more tags, the UIDs from the first shipment need to be placed on the plants and products, and then entered in the system. Another cause of headaches for cannabis companies is that for any change in packaging, the Bureau of Cannabis Control requires a new round of tags. For companies with large inventories, this can negatively disrupt their workflow and lead to a decrease in profits. It has also led to a new black market of counterfeit UIDs, creating even more confusion for companies just trying to do the right thing and remain compliant. The solution?Loosening restrictions on the number of UIDs businesses can order and providing more efficient options for companies to obtain their tags is a tangible problem that the Bureau of Cannabis Control (BCC) can take immediate steps to solve.
• Implementation Disparities: When the CCTT system became operational in January 2019, only those with provisional or annual licenses were required to implement it. As a result, many of the more than 600 legal companies with temporary business permits have not opted in to the state regulated track and trace program. That means there isn’t full accountability and data on every legal product that makes its way through the supply chain, plus there is an unfair disparity between the annual licensees who have jumped through hoops to adapt to CCTT and the temporary licensees who haven’t been handcuffed by the new mandates. But it’s not the fault of businesses with temporary licenses, as the messaging regarding CCTT system implementation has often been confusing and contradictory. Plus, many of these companies had simply been trying to stay afloat and obtain annual licenses before temporary permits expire at the end of July. The solution? This issue can be solved by due diligence in due time: these implementation disparities will dissipate as long as California is able to efficiently process the outstanding annual license applications. And there is already promising news on this front – on July 1^st California Governor Gavin Newsom signed a bill extending the lifespan of provisional business licenses for cannabis companies until The bill also allows businesses to apply for provisional licenses that can be renewed, a more secure option, without first having to obtain a temporary license.

Most of the regulatory rollouts for California’s responsible adult-use industry have been rocky, and the CCTT system is no different. But now that the crucial issues have been identified, it’s time for our government agencies to band together and introduce solutions, which include relieving burdensome expenses, increasing access to UIDs and ensuring qualified temporary licensees are approved for full annual licenses. Positive change is already underway and we as an industry are hopeful that more is to come so the California market can continue to fulfill its potential.