SUBCHAPTER 6.

COMPLIANCE

Table of Contents

Article 1. Records

§40500. Record Keeping Requirements.

§ 40500 (a) The licensee shall maintain the following documents on the premises at all times and shall make the documents available to the Department upon request:

(1) The valid state license issued by the Department, which shall be prominently displayed;

(2) Any other valid license issued by a state cannabis licensing agency;

(3) The valid license, permit, or other approval issued by the local jurisdiction;

(4) The premises diagram, as specified in Section 40105;

(5) The current standard operating procedures as defined in Section 40275;

(6) Shipping manifests;

(7) Personnel records, including evidence of personnel qualifications and training
procedures and records, as specified in Section 40280;

(8) Contracts with other licensees regarding commercial cannabis activity;

(9) Financial records related to the commercial cannabis activity including, but not
limited to, bank statements, and tax records;

(10) Sales invoices and receipts as described in section 26161 of the Act and
Section 40505 of these regulations; and

(11) Any other record or documentation required to be kept pursuant to this Chapter
or the Act.

§ 40500 (b) The records shall be maintained for a period of seven (7) years. Outdated standard operating procedures shall be maintained such that onsite employees cannot mistakenly access outdated information.

§ 40500 (c) All documentation shall be maintained in English. However, nothing in this subsection prohibits the maintenance of documents in languages in addition to English as needed by the licensee.

Authority: Sections 26012, 26013 and 26130, Business and Professions Code.
Reference: Sections 26011.5 and 26160, Business and Professions Code.

§40505. Sales Invoices and Receipts.

§ 40505 (a) The licensee shall prepare a sales invoice or sales receipt for every sale, transport, or transfer of cannabis products to another licensee. Sales invoices and receipts may be maintained electronically, but shall be readily accessible for examination by the Department and its inspectors and agents.

§ 40505 (b) Each sales invoice or receipt shall include the following information:

(1) Name, address, and license number of the seller;

(2) Name, address, and license number of the purchaser;

(3) Date of sale, transport, or transfer;

(4) Invoice or receipt number;

(5) Kind, quantity, size, and capacity of packages of cannabis or cannabis product sold, transported, or transferred; and

(6) Cost to the purchaser for the cannabis or cannabis product, including any discount or trade allowance applied to the price, which shall be recorded on the invoice.

§ 40505 (c) For purposes of this section, “discount or trade allowance” means any price reduction or allowance of any kind, whether stated or unstated, and includes, without limitation, any price reduction applied to a licensee’s price list. The discounts may be for prompt payment, payment in cash, bulk purchases, related-party transaction, or “preferred-customer” status.

§ 40505 (d) Invoices and receipts for the sale, transport, or transfer of cannabis or cannabis products shall not be comingled with invoices covering other commodities.

Authority: Sections 26012, 26013 and 26130, Business and Professions Code.
Reference: Section 26161, Business and Professions Code.

Article 2. Track-and-Trace System

§40510. Track-and-Trace System General Requirements.

§ 40510 (a) Each applicant or licensee shall identify an owner of the commercial cannabis business to be the track-and-trace system account manager. The account manager shall register for track-and-trace system training provided by the Department of Food and Agriculture or its designee within ten (10) calendar days of receiving notice from the Department of Public Health that their application for licensure has been received.

§ 40510 (b) Applicants approved for an annual license shall not have access to the track-and-trace system until the account manager has completed the track-and-trace system training prescribed by the Department of Food and Agriculture or its designee and proof of completion has been validated by Department of Food and Agriculture or its designee.

§ 40510 (c) The licensee’s track-and-trace system account manager shall be responsible for all the following:

(1) Complete track-and-trace system training provided by the Department of Food and Agriculture or its designee. If the account manager did not complete the track-andtrace system training prior to the licensee receiving their annual license, the account manager will be required to register for the track-and-trace system training provided by the Department of Food and Agriculture or its designee within five (5) calendar days of license issuance;

(2) Designate track-and-trace system users, as needed, and require the designated users to be trained in the proper and lawful use of the track-and-trace system before the users are permitted to access the track-and-trace system;

(3) Maintain an accurate and complete list of all track-and-trace system designated users and update the list immediately when changes occur;

(4) Cancel any track-and-trace designated users from the licensee’s track-and-trace system account if that individual is no longer authorized to represent the licensee;

(5) Correct any data that is entered into the track-and-trace system in error within three (3) calendar days of discovery of the error;

(6) Obtain UID tags from the Department of Food and Agriculture, or its designee, and ensure that a sufficient supply of UIDs is available at all times;

(7) Ensure that all inventory is tagged and entered in the track-and-trace system as required by Section 40512 and 40517;

(8) Monitor all notifications from the track-and-trace system and resolve all issues identified in the notification. The notification shall not be dismissed by an account manager until the issue(s) identified in the notification has been resolved; and

(9) Notify the Department of any loss of access to the track-and-trace system that exceeds 72 hours.

§ 40510 (d) The applicant or licensee is responsible for notifying the Department in writing of any change to the designated track and trace system account manager within 48 hours.

§ 40510 (e) The licensee is responsible for all actions its owners or employees take while logged into the track-and-trace system, or are otherwise performing track-and-trace activities.

§ 40510 (f) No person shall intentionally misrepresent or falsify information entered into the track-and-trace system. The track-and-trace system shall be the system of record. The licensee is responsible for the accuracy and completeness of all data and information entered into the track-and-trace system. Information entered into the track-and-trace system shall be assumed to be accurate and may be used to take enforcement action against the licensee if incorrect information is not corrected.

Authority: Sections 26012, 26013 and 26130, Business and Professions Code.
Reference: Sections 26067 and 26160, Business and Professions Code.

§40512. Track-and-Trace System Reporting Requirements.

§40512 (a) A system account manager or designated user shall record all of the following activities in the track-and-trace system within 24 hours of the activity:

(1) Receipt of cannabis material;

(2) The transfer to or receipt of cannabis products for further manufacturing from another licensed manufacturer; and

(3) All changes in the disposition of cannabis or cannabis products. A change in disposition includes, but is not limited to:

(A) Processing of the cannabis or further processing of the cannabis product; and

(B) Packaging and labeling of the cannabis or cannabis products or repackaging or relabeling of the cannabis or cannabis products.

(4) Use of cannabis or cannabis product for internal quality control testing or product research and development.

(5) Transfer of cannabis products to a distributor.

§40512 (b) The following information shall be recorded for each activity entered into the track-and-trace system:

(1) The licensed entity from which the cannabis material or cannabis product is received, including that entity’s license number, and the licensed entity to which the cannabis product is transferred, including that entity’s license number;

(2) The name and license number of the distributor that transported the cannabis material or cannabis product;

(3) The type of cannabis material or cannabis product received, processed, manufactured, packaged, or transferred;

(4) The weight or count of the cannabis material or cannabis product received, processed, manufactured, packaged, or transferred;

(5) The date and time of receipt, processing, manufacturing, packaging, or transfer;

(6) The UID assigned to the cannabis material or cannabis product;

(7) Any other information required by other relevant licensing authorities.

Authority: Sections 26012, 26013 and 26130, Business and Professions Code.
Reference: Sections 26067 and 26160, Business and Professions Code

§40513. Track-and-Trace System – Loss of Access.

§ 40513 (a) If a licensee loses access to the track-and-trace system for any reason, the licensee shall prepare and maintain comprehensive records detailing all required inventory tracking activities conducted during the loss of access.

§ 40513 (b) Upon restoration of access to the track-and-trace system, all inventory tracking activities that occurred during the loss of access shall be entered into the track-andtrace system within three (3) business days.

§ 40513 (c) A licensee shall document the date and time when access to the track-and-trace system was lost, when it was restored, and the cause for each loss of access.

§ 40513 (d) A licensee shall not transfer cannabis products to another licensee or receive cannabis or cannabis products from another licensee until such time as access to the track-and-trace system is restored and all information is recorded into the track-and-trace system.

Authority: Sections 26012, 26013 and 26130, Business and Professions Code.
Reference: Sections 26067 and 26160, Business and Professions Code

§40515. Track-and-Trace System – Temporary Licenses.

§ 40515 (a) A licensee operating under a temporary license issued pursuant to Section 40126 is not required to record commercial cannabis activity in the track-and-trace system as otherwise required by this article. Temporary licensees shall track all commercial cannabis activities on a paper sales receipt or invoice that includes the following information:

(1) Name, address, and license number of the seller;

(2) Name, address, and license number of the purchaser;

(3) Date of sale or transfer and invoice number;

(4) Description or type of cannabis or cannabis product;

(5) Weight or count of the cannabis or cannabis product sold or transferred;

(6) Cost to the purchaser of the cannabis or cannabis product.

§ 40515 (b) After issuance of an annual license, the licensee may continue to conduct commercial cannabis activities with temporary licensees in accordance with subsection (a). Any commercial cannabis activity conducted between annual license holders shall be recorded in the track-and-trace system.

§ 40515 (c) The provisions of this section shall expire on July 1, 2019.

Authority: Sections 26012, 26013 and 26130, Business and Professions Code.
Reference: Sections 26067, 26160 and 26161, Business and Professions Code.

§40517. Track-and-Trace System – UID Tag Order.

§ 40517 (a) A licensee shall order UID tags within five (5) calendar days of receiving access to the track-and-trace system. The receipt of the UID tags by the licensee shall be recorded in the track-and-trace system within three (3) calendar days of receipt.

§ 40517 (b) Any licensee in operation at the time access to the track-and-trace system is granted shall input all inventory into the track-and-trace system no later than 30 calendar days after receipt of the UID tags. After UID tags have been received, all commercial cannabis activity shall be recorded in the track-and-trace system by the licensee as required by this Article.

Authority: Sections 26012, 26013 and 26130, Business and Professions Code.
Reference: Sections 26067, 26160 and 26161, Business and Professions Code.

Article 3. Advertising and Marketing

§ 40525. Advertising and Marketing.

§ 40525 (a) A licensee shall ensure that all advertising and marketing of its cannabis products meet the requirements of Chapter 15 (commencing with section 26150) of the Act. Any health-related statement shall also meet the requirements of Section 40410.
§ 40525 (b) A licensee shall accurately and legibly include its name and license number on all advertising and marketing for its products.
§ 40525 (c) A licensee shall maintain records and documentation to establish that its advertising and marketing meet the requirements of Chapter 15 (commencing with section 26150) of the Act. The records shall be maintained in accordance with section 26160 of the Act and Section 40500 of this chapter.
§ 40525 (d) A licensee shall remove or discontinue advertising or marketing if the Department determines the advertising or marketing violates the provisions of the Act or these regulations or if the licensee fails to provide records to the Department upon request that establishes the advertising and marketing meets the requirements of the Act and regulations.

Authority: Sections 26012, 26013 and 26130, Business and Professions Code.
Reference: Section 26150, Business and Professions Code.

Article 4. Inspections

§40550. Inspections.

§ 40550 (a) The Department and its inspectors or agents may conduct an on-site inspection prior to issuing a new or renewal license.
§ 40550 (b) The Department and its inspectors or agents shall have access at reasonable times to the manufacturing premises, any area in which the licensee is conducting manufacturing activities, storage areas, records, production processes, labeling and packaging processes, and conveyances used in the manufacture, storage or transportation of cannabis products so that it may determine compliance with the provisions of the Act and these regulations.
§ 40550 (c) The Department may inspect any record or document that has a bearing on whether the labeling, advertising or marketing of a cannabis product complies with the requirements of Chapter 15 (commencing with section 26150) of the Act.
§ 40550 (d) To the extent necessary for the enforcement of the Act and this chapter, the Department may secure any sample or specimen of any cannabis product or ingredient used therein by the manufacturing operation. The Department’s inspector or agent shall leave a receipt for the licensee describing any sample obtained prior to leaving the premises.
§ 40550 (e) The Department may analyze or examine any sample obtained. If an analysis is made of a sample, a copy of the results of the analysis shall be furnished to the licensee by the Department.
§ 40550 (f) The Department may conduct investigations concerning the adulteration, misbranding, false or misleading advertising or marketing, or unlicensed production of any cannabis product, and may enter and inspect any place where any cannabis product is suspected of being manufactured or held in violation of the Act or these regulations.
§ 40550 (g) The Department may collect evidence related to any alleged violation of the Act or the regulations for the purpose of preserving such evidence during the course of investigation and any subsequent enforcement proceedings.
§ 40550 (h) The Department may copy any materials, books, or records of any licensee or their agents pertaining to the commercial cannabis business.
Authority: Sections 26012, 26013 and 26130, Business and Professions Code.
Reference: Sections 26011.5, 26130, 26132, 26133, 26134, 26135 and 26160, Business and Professions Code.

§40551. Notice to Comply.

§ 40551 (a) The Department may issue a notice to comply to a licensee for violation(s) of the
Act or regulations observed during an inspection.

§ 40551 (b) The notice to comply shall be in writing and describe the nature and facts of each violation, including a reference to the statute or regulation violated.

§ 40551 (c) The Department may serve the notice to comply prior to leaving the licensed premises on an owner, manager or other individual on the premises designated by the licensee to accept the notice, or may mail the notice to comply to the licensee within 15 business days of the last date of inspection.

§ 40551 (d) The Department shall specify a reasonable timeframe in the notice to comply for the licensee to correct the violation(s). Within the specified timeframe, the licensee shall notify the Department of the corrective action(s) taken for each violation and describe how compliance was achieved. The Department may require the licensee to provide a corrective action plan for review and approval by the Department on a case by case basis.

§ 40551 (e) Failure to correct the violation(s) in the notice to comply may result in a disciplinary action or additional enforcement action by the Department.

Authority: Sections 26012, 26013 and 26130, Business and Professions Code.
Reference: Sections 26011.5, 26018, 26134, 26135 and 26160, Business and Professions Code.

Article 5. Suspensions and Revocations of a License

§40570. Emergency Decision and Order.

§ 40570 (a) The Department may issue an emergency decision and order for temporary, interim relief to prevent or avoid immediate danger to the public health, safety, or welfare. Such circumstances include, but are not limited to, the following:

(1) The Department determines that a cannabis product manufactured, processed, packed, or held at the licensee’s premises has a reasonable probability of causing serious adverse health consequences or death;

(2) The Department determines that insanitary or other conditions at the licensee’s premises exist that could lead to the adulteration of finished cannabis products, and has a reasonable probability of affecting the safety of finished cannabis products;

(3) The Department observes or has information that conditions at the licensee’s premises exist that present an immediate risk to worker or public health and safety;

(4) Description or type of cannabis or cannabis product;

(5) Weight or count of the cannabis or cannabis product sold or transferred;

(6) Cost to the purchaser of the cannabis or cannabis product.

§ 40570 (b) Temporary, interim relief may include one or more of the following:

(1) The temporary suspension of a license;

(2) An order to segregate or isolate specified cannabis products;

(3) An order prohibiting the movement of cannabis products from the premises or the receipt of cannabis or cannabis products at the premises;

(4) An order to cease some or all manufacturing operations at the premises;

(5) An order prohibiting the sale of specified cannabis products; or

(6) An order for the recall of cannabis products.

§ 40570 (c) The emergency decision and order issued by the Department shall include a brief explanation of the factual and legal basis for the emergency decision that justify the Department’s determination that emergency action is necessary and the specific actions ordered. The emergency decision and order shall be effective when issued or as otherwise provided by the decision and order.

§ 40570 (d) The emergency decision and order for temporary, interim relief shall be issued in accordance with the following procedures:

(1) The Department shall give notice of the emergency decision and order and an opportunity to be heard to the licensee prior to the issuance, or effective date, of the emergency decision and order, if practicable;

(2) Notice and hearing under this section may be oral or written and may be provided by telephone, personal service, mail, facsimile transmission, electronic mail, or other electronic means, as the circumstances permit;

(3) Notice may be given to the licensee, any person meeting the definition of owner for the licensee, or to the manager or other personnel at the licensee’s premises;

(4) Upon receipt of the notice, the licensee may request a hearing within three (3) business days by submitting a written request for hearing to the Department through electronic mail, facsimile transmission, or other written means. The hearing shall commence within five (5) business days of the Department’s receipt of the written request for hearing, unless a later time is agreed upon by the Department and the licensee;

(5) The hearing shall be in the nature of an informal conference before the Department’s Director or his or her designee, and shall permit the licensee and Department personnel to offer written or oral evidence and comments on the issues. The hearing does not require the opportunity for pre-hearing discovery or crossexamination of witnesses; and

(6) Following the hearing, the emergency decision and order shall be affirmed, modified, or set aside as determined appropriate by the Department within five (5) business days of the hearing.

§ 40570 (e) Within ten (10) days of the issuance or effective date of the emergency decision and order for temporary, interim relief, the Department shall commence adjudicative proceedings in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code to resolve the underlying issues giving rise to the temporary, interim relief, notwithstanding the pendency of proceedings for judicial review of the emergency decision as provided in subsection (g).

§ 40570 (f) After formal proceedings pursuant to subsection (e) of this section are held, a licensee aggrieved by a final decision of the Department may appeal the decision to the Cannabis Control Appeals Panel pursuant to section 26043 of the Act.

§ 40570 (g) Notwithstanding administrative proceedings commenced pursuant to subsection (e), the licensee may obtain judicial review of the emergency decision and order pursuant to section 1094.5 of the Code of Civil Procedure in the manner provided in section 11460.80 of the Government Code without exhaustion of administrative remedies.

§ 40570 (h) The Department’s authority in this section is in addition to, and does not preclude the exercise of, the Department’s authority governing the recall of cannabis products in section 26132 of the Act and its authority to embargo cannabis products in section 26133 of the Act. The authority provided by this section may be used in addition to any civil, criminal, or other administrative remedies available to the Department.

Authority: Sections 26012, 26013 and 26130, Business and Professions Code; and Section 11460.30, Government Code.
Reference: Sections 26011.5, 26013, 26131, and 26132, Business and Professions Code; and Sections 11460.10, 11460.20, 11460.30, 11460.40, 11460.50, 11460.60, 11460.70 and 11460.80, Government Code.

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