California Cannabis Distributors and Motor Carrier Permits
CaliforniaMedical MarijuanaRecreational MarijuanaUncategorized August 21, 2018 MJ Shareholders
Oftentimes in the marijuana industry, licensees forget or don’t believe that existing federal, state, and local laws apply to their cannabis operations. For example, things like ADA and OSHA compliance get overlooked where the thinking can be, “I’m already violating one federal law, so I don’t have to comply with other, existing federal or state laws.” Of course, that line of thinking is incorrect and is only going to lead to pain and suffering when it comes to legal violations, fines, and penalties.
Our California cannabis business lawyers are seeing many licensees in these early days of legalization continue to ignore existing state and federal laws, though we see that many are also striving to keep up both with the state’s rules and all other existing federal and state laws. On that note, one of the stickiest areas of compliance in California hasn’t really had anything to do with cannabis–it’s been whether distributors, specifically those who self-distribute, need a motor carrier permit (“MCP”) from the Department of Motor Vehicles. And the answer is: It depends.
Generally, California requires any “motor carrier of property” transporting goods with a “commercial motor vehicle” to obtain and maintain a MCP from the state. California’s Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) and the Bureau of Cannabis Control (BCC) regulations specifically provide that “[a]ll vehicles transporting cannabis goods for hire shall be required to have a motor carrier permit pursuant to . . . the Vehicle Code.” What the term “for hire” means is not defined either by MAUCRSA or the BCC (which oversees distributors).
California’s Vehicle Code provides that “a motor carrier of property shall not operate a commercial motor vehicle on any public highway in this state, unless it . . . holds a valid motor carrier permit issued to that motor carrier by the department.” For purposes of that statute: “‘motor carrier of property’ means any person who operates any commercial motor vehicle,” and “‘commercial motor vehicle’ means:
- Motortrucks of three or more axles that are more than 10,000 pounds gross vehicle weight rating;
- Truck tractors;
- Vehicles transporting hazardous materials;
- Any motortruck of two or more axles that is more than 10,000 pounds gross vehicle weight rating; and
- Any other motor vehicle used to transport property for compensation.
Whether a vehicle operator must obtain a MCP basically depends on: (1) the type and size of vehicle, and (2) whether the vehicle is “used to transport property for compensation.”
Distributors transport cannabis in three main scenarios: between licensees before testing, for testing purposes, and between licensees post-testing (including for remediation in the event of a failed cannabis quality assurance test). If a distributor is using vehicles it owns to conduct transport activities that it pays for and that benefit the distributor, with no form of compensation, that distributor will not need a MCP. However, if the distributor, let’s say, hires another distributor to move the cannabis around, that distributor is going to be a “for-hire motor carrier of property,” and the first distributor isn’t responsible for obtaining MCPs because the vehicles in that scenario are not owned by that first distributor. And if a distributor is getting paid for its transportation of cannabis goods, even to cover the costs of transportation, a MCP is in order.
Ultimately, in almost all scenarios, whether a distributor has to get a MCP in California will come down to the transportation terms and conditions between licensees. If a distributor obtains any kind of compensation for transporting products, this triggers the MCP requirements. If the distributor is performing transportation services gratis though, no MCP is necessary.
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