Business Law

New Law Expands California’s Cannabis Geographical Indications and Mandates Terroir-Based Appellations of Origin

By Elizabeth Lance and Richard P. Mendelson

On September 29, 2020, Governor Gavin Newsom signed Senate Bill 67 into law, expanding the range of geographical indications for cannabis to include city of origin and limiting the use of appellations of origin to cannabis grown outdoors and in the ground. DP&F’s client, Origins Council, representing the legacy cannabis producing regions of California, worked tirelessly with legislators to promote and define terroir-based appellations.

The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) required that the California Department of Food and Agriculture (CDFA) establish the standards by which a licensed cultivator may designate a county of origin and an appellation of origin for cannabis. These requirements are codified in Section 26063 of the Business and Professions Code (B&P).

Senate Bill 67, introduced by Senator Mike Maguire, who represents the 2nd Senate District – North Coast / North Bay, modifies the language of B&P Section 26063(a) to include a city, or city and county, of origin for cannabis products. The statute’s advertising, labeling, and marketing provisions were  modified to encompass the city or city and county designation and to prohibit any use of a similar name that is likely to mislead consumers as to the kind of cannabis contained in a product, when the cannabis was not produced in that county, city, or city and county.

Further, the bill prohibits the use of a name of a California county, city, or city and county, including any similar name that would be misleading to consumers, in advertising, labeling, marketing, or packaging of cannabis products unless 100% of the cannabis contained in the product was produced in the named geographic area. These new provisions would, for example, prohibit a licensed cultivator or manufacturer from labeling a product containing 5% cannabis from Riverside with the city or county name of “Mendocino”, even if the product contained 95% cannabis from the city or county of Mendocino.

Under MAUCRSA, CDFA was also tasked with establishing, by January 1, 2021, a process for licensed cultivators to establish appellations of origins which would encompass standards, practices, and cultivars specific to cannabis products from particular geographical areas in California. Currently, CDFA is engaged in rulemaking to develop appellation regulations that will govern the establishment as well as the enforcement of cannabis appellations of origin.

Senate Bill 67 establishes a terroir baseline for cannabis appellations of origin. Specifically, CDFA may not approve an appellation of origin unless the appellation requires that the cannabis is planted “in the ground in the canopy area.” The bill also prohibits the practice of “using structures,” including greenhouses, hoop houses, glasshouses, conservatories, hothouses, or any similar structure, or “any artificial light in the canopy area” to grow cannabis that qualifies for an appellation of origin. The practical impact of Senate Bill 67 is that only licensed outdoor cultivation with plants “in the ground,” flowering under full sun, will be able to establish an appellation of origin.

The bill also expands the advertising and marketing restrictions for appellations of origins to prohibit any use of a similar name that is likely to mislead consumers as to the kind of cannabis in any advertising, labeling, marketing, or packaging of cannabis. If an appellation of origin is used on a package or label, 100% of the cannabis contained in the product must meet the appellation of origin requirements, and 100% of the cannabis must be produced in the designated geographical area.

On October 2, 2020, CDFA announced modifications to the proposed appellations regulations which take into account Senate Bill 67. This is the second public comment period. Written comments on the proposed regulations will be accepted until October 19, 2020. This article was originally prepared by Elizabeth Lance (elance@dpf-law.com) of Dickenson, Peatman & Fogarty, in Santa Rosa, CA and Richard P. Mendelson (rmendelson@dpf-law.com) of Dickenson, Peatman & Fogarty, in Napa, CA, and is republished with permission.

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