PROCEED WITH CAUTION: NAVIGATING CALIFORNIA’S HIGHLY REGULATED CANNABIS SUPPLY CHAIN – PART 2

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PROCEED WITH CAUTION: NAVIGATING CALIFORNIA’S HIGHLY REGULATED CANNABIS SUPPLY CHAIN – PART 2

BY: DAVE MINER: LinkedIn

Required Track-and-Trace, The Metrc System

The Metrc System is now mandatory for ALL Annual and Provisional License holders (See Part 1 for more on the new “Provisional License” designation.) This means all your inventories and commercial transactions, from seed-to-sale, must be entered into and managed in the Metrc System. The transition has been abrupt and while Metrc and supporting software systems are clunky, required financial reporting and inventory track-and-trace is compelling the CEOs of ALL plant-touching medical and adult use cannabis businesses in California to get onboard. This report will give you some background on Metrc and show you how to get started down the road to compliance with this required Track-and-trace Software.

How did we get here?

CAL, or CalCannabis Cultivation from our last blog is the regulatory body tasked with rolling out and managing California Cannabis Track-and-Trace (CCTT) system. “In June 2017, Florida-based Franwell beat out four other software companies to win the contract for California’s track-and-trace system. Franwell hit something of a pot-tracking jackpot, with a contract valued at up to $60 million for the first two years.” (OC Register, Brook Staggs, 2018) Metrc is also the most popular seed-to-sale/track-and-trace system in the United States and is also used in Alaska, Colorado, D.C., Louisiana, Maryland, Massachusetts, Michigan, Montana, Nevada, Ohio, and Oregon. The purpose of the system is to minimize diversion of cannabis from California to other states where it’s not legal and to ensure that no Black-Market cannabis or cannabis products are making onto the shelves of licensed dispensaries.

Moving from paper or Excel is proving to be an abrupt transition and it will only get worse as more-and-more Temporary License holders transition to Annual (or Provisional) License holders. For decades, lawyers had advised their cannabis clients to avoid paper or electronic records as they could be used by the Feds against you and you could end up in jail; now, it’s mandatory. “It’s utter madness,” said Hezekiah Allen, executive director of the California Growers Association, the state’s largest trade group for cannabis cultivators. “We are tracking hundreds of millions of dollars of consumer product by paper in a market that’s never been regulated before.” (OC Register, Brook Staggs, 2018)

Reviews of Metrc:

The biggest complaint about Metrc is that is doesn’t integrate well with other software, including popular Point of Sale (POS) software packages like Greenbits, MJ Freeway, MJIC Compliance, and BioTrack THC. Folks have also had issues integrating with QuickBooks (QB) that many companies use for accounting and required financial reporting. “Due to these issues, many cannabis accounting specialists (including myself) are cobbling together a patchwork system of software until better solutions are available, which is more likely once cannabis is federally legalized.” (Dope CFO, 2018)

“Metrc primarily tracks quantities and must be updated daily by cannabis companies. This software has many problems, and seems to not even be able to track simple quantities moving from one location to another (not to mention cost/retail pricing).  For example, Farm “A” can sell/deliver a pound of weed to Dispensary “B” and then Dispensary “B”

can mistakenly only receive only a gram, instead of a pound. Currently, Metrc doesn’t have controls to prevent this and at end of month when reports are run, often quantities shipped don’t match quantities received.  That said, CEOs have no choice, so they have to make do with this system.” (Dope CFO, 2018)

It’s not all negative, though! Many cannabis business owners are happy to have a system that allows them to finally keep proper books without having to look over their shoulders. “Now that we can actually keep track of everything accurately, and not have to worry about a paper trail and email chain, it’s like a 500-pound gorilla has been lifted off our chests.” (OC Register, Brook Staggs, 2018)

How to get started:

Once your business has applied for and/or obtained an Annual or Provisional License you must designate one or more of your employees for CCTT Account Manager New Business System Training, a 90-minute, pre-recorded presentation with well over 100 Power Point slides. Once you have completed the training, you can order Plant and/or Package UID (unique identification) Tags. Once you receive the tags, you must confirm receipt in the Metrc System. Finally, apply the Plant or Package UID Tags to all cannabis plants or products located on your premises. See the following link for additional instructions: Five Steps for using the Track-and-Trace System

Additional guidance is provided for companies who are either still on a Temporary License or who have Temporary License holders as trading partners during the transition. Please see the following link for assistance: Product Transfer/Transport Documentation for Temporary Licensees. Here is another link with recommended paper documentation for those in transition:  sample sales invoice/shipping manifest.

Other helpful links:

Frequently Asked Questions About the Track-and-Trace System

Metrc Instructional Videos (YouTube)

Stay tuned for Part 3 of our series: Taxes – Local, State, & Federal

Dave Miner writes on behalf of Cannabiz Trusted Advisors

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