BOE Talks ‘Track and Trace’ for Cannabis Production

A stakeholder discussion at the State Board of Equalization’s Sacramento headquarters last week on “track and trace” methods for monitoring cannabis products while they are in the supply chain left Sequoyah Hudson with some questions.

A representative of the Humboldt Sun Growers Guild and a board member of the California Growers Association, Hudson spoke during a brief public comment period at the tail end of the two-and-a-half-hour session.

“Lots of producers live in areas [without] power or internet access, so I hope track and trace [will] be flexible and can allow growers to adapt,” Hudson told the gathering, which included Fiona Ma, a former State Assemblymember from San Francisco who is now a BOE board member.

Last week’s meeting was the third in a series held by the BOE on cannabis-related issues. Previous workshops have looked at transportation and banking. It came at a time when specific rules and regulations guiding a new regulatory and licensing program in California have just begun to be developed.

One of the featured speakers was Patrick Vo, chief executive officer of BioTrackTHC, a Florida software technology concern that has developed an inventory program widely used by retailers in the marijuana industry.

The company also created the official system used by the state of Washington to track recreational cannabis products from seed to sale — in other words, from the time a seed is planted until when it’s sold as a product at a dispensary. A 16-digit bar code assigned to individual plants makes that feat possible.

Vo said that for retailers, his firm’s software provides data on sales trends and other matters needed to maintain profitability. It’s also “a signal [to regulators] that I’m willing to be transparent with my inventory.”

For states, the track and trace technology tells the federal government — which still considers marijuana to be illegal — that it’s staying on top of things.

If strong systems of control are in place in the public and private sectors, then “the feds will be hands-off,” Vo said.

A second speaker, John Hudak of The Brookings Institution, called “seed-to-sale tracking the backbone of regulation.”

“States that have robust, effective seed-to-sale inventory tracking systems have the best shot at curbing bad behavior. It ensures regulators have access [to information], buffering the problem of [marijuana] falling into criminal hands.”

“Seed-to-sale tracking systems won’t stop [illegal] diversions,” Hudak went on. “But it allows law enforcement to trace it back quickly to the company that the product came from. If you can do that, you know who the bad actor is. You can trace it back to the company and shut it down.”

Of course, he added: “There could have been a theft. A business could have got broken into.”

In those cases when federal law enforcement does intervene, Hudak said: “The action will look more like an IRS audit and less like a Navy SEAL operation.”

It’ll be “a pencil pusher, a nerd who will pull up an inventory sheet and ask the business owner: ‘Where are these plants?’ If the owner can’t answer, they get shut down.”

Hudak argued that track and trace, by strengthening state regulation of cannabis, would likely have a positive impact in terms of the medical community.

“You can’t convince doctors to prescribe marijuana [to their patients] simply because of track and trace. But it gives them an added level of confidence that the state knows what’s going on.”

“Doctors want [cannabis] heavily regulated, not loosely [regulated],” Hudak continued. If they believe regulation is “run in an effective way, they will be more likely to send patients into the system.”

When it was his turn, Nathan Rix of the Oregon Liquor Control Commission said, “track and trace is not a silver bullet. You need inspections on the ground” by regulators. And growers, or “licensees,” to use Rix’s term, need to do their bit in terms of installing security measures.

“You need video surveillance and alarm systems. You need commercial-grade locks on the door,” Rix said, adding that “there’s not one piece that solves [the] diversion [problem].”

“All licensees [in Oregon] must submit a security plan. All licensees must install video surveillance equipment and digital archiving equipment,” Rix said, adding that indoor production must be fully enclosed and that “a solid wall or fence at least eight feet high” needs to be built around outdoor grows.

While he said that “a licensee can request a security waiver,” he or she must still submit “a security plan for approval that describes alternate safeguards.”

During the public comment section, a Mendocino grower made it clear that growers “want reasonable fees.”

“If the fees with all the different [regulatory] agencies and with track and trace are onerous, people won’t buy in. They’ll keep doing what they’ve done for generations,” the grower warned.

As for Hudson, in an interview after the meeting she reiterated her concern about how a track and trace system would play out in the real world — and in particular whether it would be doable for growers both financially and otherwise.

“Everyone understands there will be track and trace. What we don’t understand is how it will happen, how logistically it will work.”