From:

To:

Hendricks, Robert

MRA-Legal

Cc:

Johnson, Matthew; Martin, Rodney; Hendricks, Robert; Sheets, Kaitlin; Nimphie, Benjamin; Hajali, Mazen;

Chitwood, Alexandra

Subject:

Date:

Comments on proposed rule revisions

Monday, September 27, 2021 3:28:05 PM

Attachments:

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22355973_1 Proposed MRA Rule Comments (Combined)-c.DOCX

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Marijuana Regulatory Agency

Legal Section

P.O. Box 30205

Lansing, MI 48909

Attached please find our comments on the proposed revised rules.

Thank you for your attention and assistance.

Respectfully yours,

Robert A. Hendricks | Senior Counsel

Warner Norcross + Judd LLP

1500 Warner Building, 150 Ottawa Ave., NW, Grand Rapids, MI 49503

d 616.752.2291 | m 616.302.3480 | rhendricks@wnj.com

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Rule Citation

Rule Title

Page

Comments

Number

MARIHUANA LICENSES

R 420.1(1)(o)

Definitions

3

Rule adds definition of “Limited access area” meaning a “building, room, or other contiguous area of a

marihuana business where marihuana is grown, cultivated, stored, weighed, packaged, sold or processed for sale

and that is under the control of the licensee.”

This definition will add greater clarity of limited access areas for licensees. However, what if the licensee has

multiple licenses operating at the same location and has a limited access area under the licensee’s control, but is

not contiguous to the marijuana business?

R 420.1(1)(dd)

R 420.3(3)

Definitions

4

5

Rule adds definition of a “Restricted access area” meaning a designated and secure area at a marihuana business

where marihuana products are sold, possessed for sale, and displayed for sale.

The definitions do not define “secure area.” I assume this definition adheres to the security requirements in R

420.209, but I would like to see more specific language here, e.g., “secured by four walls and a locking door.”

Rule states that partial applications to obtain prequalification status may be administratively withdrawn if

application was filed and has been pending for more than 1 year. After a partial application has been withdrawn,

the applicant may be required to submit a new application and pay a new nonrefundable application fee.

Application

procedure;

requirements

If an application has been partially completed and the application fee paid prior to withdrawal, it seems excessive

to make the applicant pay another application fee when they resubmit.

R 420.3(4)

Application

requirements;

financial and

criminal

5

Rule states that “an applicant who has been granted prequalification status may have that status revoked by the

agency and a marihuana license denied should the agency determine that the applicant is no longer suitable or no

longer qualifies for licensure under the acts and these rules. An applicant who has had its prequalification status

revoked may request a hearing pursuant to R 420.703.”

background

This rule concerns me. It gives the MRA complete discretion to revoke prequalification status if “the applicant

is no longer suitable.” That is a very vague definition.

R 420.5(1)(d)(vii)

Application

requirements;

complete

8-9

Rule states that the applicant must submit confirmation of municipal compliance, specifically an attestation “that

the applicant will report any changes that occur with municipal ordinances or zoning regulations that relate to the

proposed marihuana facility . . . .”

application

This is very broad—any changes that occur with related municipal ordinances? What if an amendment is made

but it is not publicly posted? Also, many municipal ordinances covering many topics may apply to the

marihuana facility. It seems excessive to expect a licensee to monitor their municipality to report any ordinances

that may apply. The rule should be written more narrowly to only reference “marihuana licensing or zoning

specific” ordinances only.

R 420.11a(5)

Prelicensure

investigation;

proposed

15-16

Rule requires applicant to submit certificate of occupancy to agency for prelicensure inspection. If this

certificate is not available, “the agency may accept alterative documentation from the building authority.”

marihuana

Some of our clients live in small townships without a building authority. I would like this definition to factor

establishment

inspection

that scenario. For example, “from the building authority or other designated municipal official.”

1

Rule Citation

Rule Title

Page

Comments

Number

MARIJUANA LICENSEES

R 420.105a(8)

Class A

7

Rule says “A Class A marihuana microbusiness may purchase or accept a mature plant from an individual,

registered qualifying patient, or registered caregiver.

marihuana

microbusiness

license

What is the statutory authority for authorizing an individual, a registered qualifying patient, or a registered

primary caregiver to sell mature marijuana plants to a Class A marijuana microbusiness?

For clarity, this rule 112a should indicate that the phrase “licensing, management, or other agreement” is as

defined in R420.101(1)(m).

R 420.112a

Licensing,

management, or

other agreements

13-14

It would appear that the purpose of this rule 112a is to identify agreements between a license holder and another

person which are intended to convey the benefits of ownership on the non-license holder, when that non-license

holder has not been vetted by MRA. If this is the actual purpose, the rule might be clearer if that were simply

stated rather than covered by many words which seem to beat around the bush.

MARIHUANA OPERATIONS

R 420.206a

Standing

11

Rule adds requirement for licensees to have up-to-date written standard operating procedures on site at all times.

Operating

Procedures

Contactless and

limited contact

transactions

Why is this required in addition to a facility or establishment plan?

Rule allows licensees to designate area for contactless delivery. Section (4) requires separate standard operating

procedure in addition to R 420.206a.

R 420.207a(4)

15-16

Why can’t the standard operating procedures referenced in R 420.206a cover the contactless delivery? Why

does it need to be a separate document?

R 420.214b

Adverse reactions 24

Rule requires licensees to notify the MRA within 1 business day “of when licensee should have been aware of

any adverse reactions to a marihuana product sold or transferred by any licensee.”

First, the rule does not specify how the licensee should notify the MRA. Will the MRA provide notification

forms? Is an email to enforcement sufficient?

Second, the “should have been aware” language concerns me. If a licensee sells a product to a customer and the

customer has a bad reaction after consuming the product 3 weeks later, how would the licensee even be aware of

that reaction?

MARIJUANA SALE OR TRANSFER

R 420.303(6)

Batch;

identification and

testing

4

Rule allows a cultivator to sell/transfer marihuana products without being tested by a lab to produce live resin,

with agency approval but limits the sales/transfer to a producer under this rule if the package contains more than

1 harvest batch. The next line reads “This does not prohibit a cultivator from transferring multiple harvest

batches for extraction.”

This reads as internally conflicting and does not make sense, that a cultivator cannot use the testing exemption

under the rule if they sell/transfer a package with more than one batch, but still can sell/transfer multiple batches.

2

Rule Citation

Rule Title

Page

Comments

Number

R. 420.305(16)(c)

Testing;

laboratory

requirements

10

Rule prohibits a lab from “Cherry pick, which means testing specific material from a batch. All sample

increments must have the same chances of being selected.”

Practically, how can this even be enforced and it’s unclear what procedures, if any, a lab can put in place to

ensure samples have the same chance of being selected.

MARIJUANA SALE OR TRANSFER

R 420.504(4)

Marijuana product 4-5

sale or transfer;

labeling and

New rule requires that both medical and retail sales location to provide customers with pamphlets that includes

safety information related to marihuana use by minors and the poison control hotline number and that the

pamphlet must substantially conform to the design published on the agency’s website.

packaging

requirements

This new requirement seems duplicative given that the products already have labels with a safety warning. It also

raises numerous practical issues, such as when these pamphlets have to be issued; what information has to be

included in the pamphlets; the added cost which will be passed down to the customer/patient; for sales made

online or via telephone, will this require some sort of digital pamphlet and if the Agency makes changes to the

required information, will that require a whole new set of pamphlets and discarding the old ones?

Rules limit the amount of internal product samples that can be given to an employee within a 30-day period to a

total of 1 ounce of marihuana, a total of 2 grams of marihuana concentrate, and marihuana infused products with

a total THC content of 2000 mgs. Further, R 420.509(7) requires that internal product samples be tested prior to

transfer to its employees.

R 420.508(8) and

R 420.509(6)-(7)

Trade samples

Internal product

samples

8-9

This new limitation and testing requirement seem overbroad and limits the ability of licensee’s to receive

feedback from employees regarding the quality of the product/flower. Also, the testing requirement prior to

transfer would mean that if a licensee is interested in knowing the quality of a product/flower before even

deciding to put it to market, would have to pay the expensive testing requirements and would discourage

product/flower improvement.

MARIHUANA EMPLOYEES

Generally, the changes are stylistic and help make some of the rules with listed requirements easier to read. The substance of most of the rules in this section has not

changed.

R 420.602(1)

Employees;

requirements

2-4

Rule has been modified to require employee training manuals to include detailed explanations for how

employees can monitor and prevent over-intoxication, illegal distribution, etc. Previously, the rule only required

such information to be in the employee manual if applicable.

Generally, this isn’t a major burden for most licensees, but it seems like the previous language should be

considered here, as this seems unnecessary for certain types of cannabis businesses.

The major change is adding this rule, which prohibits employees of one type of licensee from being employees

of another type. For example, employees of cultivators (growers) may not also be employed by transporters or

labs.

R 210.602a

Prohibitions

5

Do we know the reason for this addition? What is MRA trying to do here? The prohibition seems a little silly –

are there similar prohibitions in the alcohol or tobacco industries?

3

Rule Citation

Rule Title

Page

Comments

Number

MARIHUANA HEARINGS

As with Rule 601 et seq. above, most of the changes to these sections are stylistic and for readability purposes

R 420.702(1)(d)

Hearing

The rule adds “the denial of the renewal of a marihuana license” to the situations where the “hearing” rules

apply.

procedures; scope

and construction

of rules

This is an important addition.

R 420.703(3)

Public

investigative

hearing

2-3

4

Rule removes the specific requirements of what public investigators must provide in the contents of their notice

to an applicant of an investigative hearing.

It is unclear how often these public investigative hearings happen when a license is denied, and the degree to

which this removal of specificity will impact applicants.

Rule has been added, which provides a procedure for a marijuana business to contest MRA’s exclusion of a

particular individual from the marijuana business.

R 420.704a

Hearing on

exclusion of

individuals or

employees

The procedures seem reasonable; however, subsection (1) allows the business only 21 days to contest MRA’s

decision to exclude an individual. From our client’s perspective, this is not much time, and I would comment that

maybe 45-60 days would be more helpful for our clients.

MARIJUANA DISCIPLINARY PROCEEDINGS

R 420.802(7)

Notification and

reporting

3

For clarity, R420.802(7) should indicate that the phrase “licensing, management, or other agreement” is as

defined in R420.801(1)(j).

22355973

4

September 27, 2021

VIA E-MAIL

Marijuana Regulatory Agency

ATTN: Legal Section

E: MRA-Legal@michigan.gov

RE: Cannabis Law Section of the State Bar of Michigan’s Special Committee on

Administrative Rules

Public Comments on Proposed Administrative Rules

Disclaimer: The Cannabis Law Section of the State Bar of Michigan (“Cannabis Law Section”)

is not the State Bar of Michigan but rather a section whose membership is voluntary. The position

expressed in this correspondence is that of the Cannabis Law Section’s Special Committee on

Administrative Rules only, and the State Bar of Michigan has no position on this matter. The

Cannabis Law Section has approximately 911 members as of the date of this correspondence. The

Special Committee on Administrative Rules of the Cannabis Law Section consists of six members

of the Cannabis Law Section. All members of the Special Committee voted in favor of the positions

contained in this correspondence.

To Whom It May Concern,

On behalf of the Cannabis Law Section, the undersigned members of its Special Committee on

Administrative Rules had the opportunity to meet and discuss the proposed rule sets at significant

length. Each member of the Special Committee is an attorney whose practice consists primarily

on the focus of legal issues in the cannabis law space. Accordingly, the Special Committee is well

suited to offer practical suggestions to assist the Marijuana Regulatory Agency (“MRA”) as it

navigates through many of the changes proposed in the draft rule sets.

The Special Committee engaged in thorough discussion and debate before reaching consensus on

the comments presented herein. We thank the MRA in advance for its time and consideration of

our comments.

2020-121 LR – Marihuana Licenses Rule Set

 R 420.4(2)(a)(i): The rule retains reference to required disclosure of deposit accounts,

deeds, and other documents that the MRA no longer requires in its application process. The

rule should be modified to be consistent with the MRA’s current application practices and

disclosure requirements.

 R 420.4(3): The revised disclosure requirements are ambiguous. It is unclear whether all

members, shareholders, beneficiaries, etc. of various entities must be disclosed or whether

the 2.5% threshold in the introductory language of this section operates to limit the

disclosure requirements.

 R 420.6(2)(d): This provision disqualifies government employees/elected officials from

holding an MRTMA license. There is no statutory authority within the MRTMA for this

provision. While the MMFLA has such language, it does not exist in the MRTMA. The

MRA should consider whether the preservation of the regulated market requires such a

broad prohibition. For example, is the public health and welfare of the State of Michigan

negatively impacted by denying licensure to an applicant solely because his or her spouse

is a public elementary schoolteacher?

 R 420.6(6): The subject of this particular rule is a matter that is presently being litigated in

a number of jurisdictions throughout the State of Michigan. Given the fact that the language

presented in this rule appears in the MMFLA but does not appear in the MRTMA, the

MRA should allow the judicial process to play out, as there is not clear and expressed

statutory authority for this rule in the MRTMA. To the extent the MRA is concerned about

pledges, loans, or liens against a state operating license, the MRA already has a regulatory

framework that governs transfers of interests in licenses that these proposed transfers

would be subject to.

 R 420.8(2)(b)(viii): Because drive-through transactions were previously prohibited, the

MRA should expressly provide for the allowance of drive-through transactions. In the

absence of express and explicit approval for drive-through transactions, it is possible that

some municipal officials may interpret silence on this issues as the MRA’s decision to

continue the previous status quo of prohibiting drive-through transactions.

 R 420.21(3): The definition of “designated consumption establishment” may be overbroad,

as the current rule, as written, would require licensure for private businesses where

cannabis is privately consumed that is not part of any commercial activity of the business.

For example, if a business owner privately offered a beer to his or her employees to

celebrate a milestone achievement, no license would be required under the Michigan

Liquor Control Code. However, under the present definition, it appears that a designated

consumption establishment license would be required under that same example if

“cannabis” was substituted for “beer.” The MRA should give some consideration to the

breadth of this definition.

 R 420.25(6): This rule should be clarified to make clear that temporary marihuana events

could be held that allow (1) sales, (2) consumption, or (3) both. The present language of

the rule suggests that only temporary events with both sales and consumption are allowed,

which is inconsistent with the definition for “temporary marihuana event license” in the

rules.

 R 420.27a(7): The MRA should re-consider the absolute prohibition on transfers contained

in this rule, as an educational research licensee may develop and wish to license some

unique genetics that have medicinal or other benefits for the general population and the

market. Understanding that federal law and DEA restrictions may be implicated, we would

suggest that the prohibition on transfers be modified to prohibit transfers “without the

express written consent of the MRA.”

 R 420.27a(9): Similarly, with respect to the prohibition on consumption and sampling, the

MRA should consider adding language to prohibit consumption and sampling “without the

express written consent of the MRA.” In the event that federal law or the DEA’s position

changes, this would give the MRA flexibility to respond to any such changes without

having to re-engage the formal rulemaking process.

2020-120 LR – Marihuana Licensees Rule Set

 R 420.101(1)(ii)(m): This provision should only address participation in management, as

the percentage of profits issue is covered in R420.112a. The provision in that latter section

should be clarified that it applies to NET profit, and the rule needs clarification whether

the threshold is particular only to a single license or whether it is to be calculated across

the entire business entity.

 R 420.102(10): Any grower (not just small growers) should be allowed to accept transfer

of plants upon licensure from any applicant for that license. There is no reason to prohibit

licensed growers from obtaining plants, clones or tissue culture from any source, as

genetics may be difficult to obtain and are critical supplies, but MRTMA prohibits sale

unless licensed.

 R 420.103(3) is proposed for removal. This provision allows commonly owned processors

to transfer product inventory between the establishments. There is no apparent justification

for this change.

 R 420.105(a): This provision would allow a Class A Microbusiness to obtain a mature plant

from persons including a registered primary caregiver, while the caregiver is prohibited

from transferring anything to anyone except that caregiver’s registered patients. This

provision conflicts with the MMMA and case law (see McQueen case). All growers should

have the same accessibility to genetics they can secure.

 R 420.105a(1)(c): This allows Class A Microbusinesses (but not regular microbusinesses)

to purchase concentrates and infused products from any processor. This effectively will

convert a microbusiness into a general retail store, but with limited flower availability. It

could be expected that some of these entities will not even grow cannabis, but will use the

license only as a retail store to sell everything else. Class A Microbusiness also would be

prohibited from doing any processing, but allows purchase of processed products from a

licensed processor. There is no reason for this prohibition.

 R 420.107(1)(a)(b)(c): Safety compliance facilities should be authorized to take, test, and

return marijuana to any person or entity. Individuals are allowed to have their own product

tested, but nothing obtained from a licensed business. There is no apparent good reason

for this provision, and it would prevent a patient from having product tested which was

obtained from their caregiver (or anywhere else). Testing prohibitions should be

eliminated unless they can be justified.

2020-122 LR – Marihuana Operations Rule Set



R 420.207a: The concept of “contactless and limited contact transactions” is introduced in

this rule but, as written, the manner in which such sales may be effectuated is not expressly

stated. The open-ended nature of the allowance is appreciated as it will enable the

development of new, creative transaction methods among sales locations. However, it is

presumed that this new rule was particularly drafted to allow for “drive-though” service,

and yet the absence of any express statement to that effect (i.e. “including but not limited

to drive-though service”) is problematic because subsection (1) of the rule conditions the

use of these new transaction methods upon their allowability under an applicable municipal

ordinance. Without question, the lack of additional specificity in the rule will make it

challenging to show municipalities that the MRA now allows “drive-through” service, as

city attorneys will naturally interpret this rule cautiously. MRA should set out some

examples of allowable “contactless and limited contact transactions” – including

specifically drive-through service – to avoid unnecessary rule-parsing between industry

participants and municipalities.

 R 420.206(11): In relevant part, this provision exempts “botanically derived terpenes that

are chemically identical to the terpenes derived from the plant Cannabis Sativa L.” from

the mandate that inactive ingredients be approved for the intended use by the FDA. The

botanical terpene exception is practical and necessary because to date, the FDA has not

approved any substances utilized for a vapor-based inhalable. However, to ensure the

exception works as truly intended, it should be amended to include “flavonoids” and

“terpenoids” – not just terpenes – because all three are naturally occurring in cannabis and

all three contribute to the smell and flavor of cannabis and other botanicals. Restricting

the exemption to only terpenes drastically limits the botanically-based terpen formulations

that are allowable for operators, as most contain at least minute amounts of the other two

categories of organic compounds. It is presumed that many operators are not aware of that

fact or their technical and unintentional violations of this provision relative to, most

particularly, distillate-based inhalable products.

 R 420.206(14): This new subrule directs that “each form of marihuana or marihuana

product [combined to make a new, single marihuana product] must have passing safety

compliance test results in the statewide monitoring system prior to the creation of the new

combined product.” However, the MRA’s August 18, 2021 Bulletin concerning the

creation of “Inhalable Compound Concentrate Products” states that “compound

concentrate products” must be “tested in final form” after they have “been created.”

(Bulletin at Pg. 2). There is tension between those two forms of guidance as the former

new rule does not expressly say that the newly combined products must once again be

tested in final form, and the absence of any such direction implies that, because the separate

forms of marihuana products themselves each passes testing prior to being combined, a

final-form test is not required. The Bulletin itself takes the opposite approach and

commands final form testing in all settings other than “Raw Pre-Rolls without Kief Added”

– which is a useful and supported exception. The MRA should consider building out this

new subrule to incorporate the additional teachings of the Bulletin thereby ensuring that

consistent, harmonized guidance is provided to operators on this important subject.

2020-124 LR – Marihuana Sampling and Testing Rule Set

 R. 420.305 Testing; laboratory requirements.

(3) A laboratory shall conduct the required safety tests specified in subdivisions (a) to (i)

of this subrule on marihuana product that is part of the harvest batch as specified in R

420.303, except as provided in subrule (4) of this rule. The agency may publish minimum

testing portions to be used in compliance testing. After the testing on the harvest batch

is completed, the agency may publish a guide indicating which of the following safety tests

are required based on product type when the marihuana product has changed form:

10) The agency shall publish a list of action limits for the required safety tests in subrule

(3) of this rule, except for potency. A marihuana sample with a value that exceeds the

published action limit is considered to be a failed sample. A marihuana sample that is at

or below the action limit is considered to be a passing sample.

(11) For the purposes of chemical residue testing and target analyte testing, the agency

shall publish a list of quantification levels. Any result that exceeds the action limit is a

failed sample.

The MRA is required to promulgate administrative rules that govern the testing and minimum

action limit standards for safety compliance facilities as opposed to publishing ad hoc guidance.

The current practice of the MRA in this regard violates the Administrative Procedures Act. The

MRA should comply with the formalities of the Administrative Procedures Act, and should not

publish the minimum standards for laboratory testing—giving those publications the force of law.

If and when MRA promulgates new testing rules, orderly operations of the markets dictate that

MRA must allow for a phase-in or sell-through period before the new standards come into force,

so as not to disrupt markets by requiring mass retesting of products, or leave processors or sales

establishments holding significant volumes of products that can’t be sold without additional

testing. MRA should clarify whether the new rules apply to tested and approved product that is

already packaged and labeled for sales establishments, and MRA should articulate a six-month

phase-in period so that all market participants have sufficient time to adjust their operations.

 R420.107(1)(c): Although it is understood that MRA will not condone unlawful or

underage possession or consumption of cannabis products, it is contrary to the interests of

public health for MRA to raise barriers that discourage members of the public from having

products tested. By creating an age bar for testing services, or by requiring testing licensees

to verify age and retain documentation related to the identity of the person who desires to

have product tested, MRA could be discouraging vulnerable Michiganders from accessing

reliable safety and compliance information about marihuana products in their possession.

MRA should make it clear that people in Michigan will not be penalized if they attempt to

get their product tested—regardless of the owner’s age.

2020-119 LR – Marihuana Infused Products and Edible Marihuana Products Rule Set

 R 420.403(7)(b): The rule uses the term “component ingredients,” in subsection b, when

describing the ingredients that must be listed on the label of marijuana-infused products.

The term “component ingredients” is not defined, which could lead to confusion. The term

“inactive ingredients” is defined and used elsewhere in these rules and would be a more

suitable term. Another alternative would be to delete the term “component ingredients,”

entirely, and require all ingredients to be listed on the label.

2020-123 LR – Marihuana Sale or Transfer Rule Set

 R 420.504 (a) and (b) – This rule has resulted in sales establishment licensees attempting

to push all label compliance obligations (and associated liability) upstream to processor

licensees. This creates an operational problem for processors that are expected to satisfy

requirements from multiple sales establishments with different understandings of what

constitutes a compliant label. To promote consistency in the marketplace, MRA should

clarify responsibility as between processor and sales establishment with respect to required

label elements.

 R 420.504 (v) – This requirement specifies that the warning must be in “clearly legible

type” – MRA should consider whether to require legibility for all mandatory label

information.

2021-10 LR – Marihuana Employees Rule Set

 R 420.602 (2)(k) – This rule adopts the MRTMA position (10-year bar on hiring persons

with convictions for sales to minors), but it excludes fewer people than the corresponding

MMFLA prohibition on hiring employees with convictions. MRA should amend this rule

to make it explicit that MRA will allow hiring of employees that would be barred by the

MMFLA but not the MRTMA, without written permission or other additional hurdles, so

long as the conviction is not for sale of a controlled substance to a minor.

 R 420.602 (6) – There is tension between the definition of “employee” in this rule and the

definition of “employee” as provided elsewhere in other rules (for one example, R

420.401(1)(c)). Market participants have come to rely on the definition as it is stated here-

that is, “employee includes, but is not limited to, hourly employees, contract employees,

trainees, or any other person given any type of employee credentials or authorized access

to the marihuana business.” MRA should consider whether to make definitions in other

Rule sections consistent with the definition as it is stated here.

2020-117 LR – Marihuana Disciplinary Proceedings Rule Set

 R 420.808a: The rule as drafted contains substantial ambiguity as to the criteria that

constitutes conduct that could result in being excluded. Notions of due process require that

there be fair notice of the types of conduct that would result in exclusion from the

industry—particularly for conduct that has not resulted in a conviction.

On behalf of the Cannabis Law Section, this Special Committee on Administrative Rules

respectfully submits the comments above to the Marijuana Regulatory Agency. We appreciate the

opportunity to participate in the rulemaking process and are available to discuss should the MRA

have any questions about the comments contained herein.

Sincerely,

Special Committee on Administrative Rules of the

Cannabis Law Section of the State Bar of Michigan

Matthew Abel, John Fraser, Steven Glista, Jordan Rassam, Marc Seyburn, and Benjamin Sobczak

BENJAMIN D. JOFFE PLLC

Attorneys & Counselors

334 E WASHINGTON STREET

ANN ARBOR, MI 48104

(734) 368-8595

BDJ@BENJAMINDJOFFE.COM

September 21, 2021

Marijuana Regulatory Agency

Legal Section

P.O. Box 30205

Lansing, MI 48909

Re: Comments on Proposed Administrative Rule Amendments

To Whom It May Concern,

We are writing to offer comments on the Marijuana Regulatory Agency's ("MRA" or the

"Agency") proposed amendments to the current Administrative Rules, Mich Admin Code R 420.1

et seq. (the "Proposed Amendments") being promulgated under the Medical Marihuana Facilities

Licensing Act ("MMFLA"), and the Michigan Regulation and Taxation of Marihuana Act

("MRTMA").

Our firm has served clients in the cannabis industry since before the MMFLA became law.

We have collaborated extensively with the Agency to navigate the inevitable challenges of

implementing each subsequent set of state regulations, including the current unified

Administrative Rules (the "Rules") for medical and adult use marihuana businesses. Our comments

are based on our collective experience. Pursuant to the rulemaking process and the request for

public comments, please find below our comments and recommendations on the proposed rules.

1. General Global Comments

We appreciate the Proposed Amendments improved clarity and consistency—but believe

additional clarity should be added to eliminate the enduring ambiguities we have encountered in

the existing Rules to the greatest extent practicable. Moreover, we fear that many new provisions

introduced in the Proposed Amendments may compound existing ambiguities. Finally, we believe

many of the Proposed Amendments provide MRA with unfettered discretion to regulate by ad hoc

Bulletin; a current practice of the MRA that at times has generated much consternation for

attorneys, operators, and regulators alike.¹

¹The simple fact that MRA's Proposed Amendments clearly seek to codify the substance of numerous regulatory

issues that were previously only contemplated in Bulletins as guidance or interpretative rules confirms that the

substance of those Bulletins was not merely interpretative guidance but rule making. Two notable examples include

the proposed addition of R 420.112a (regarding licensing, management, and other agreements), and the proposed

changes to R 420.403 (regarding requirements and restrictions on marihuana-infused and edible marihuana

products), each of which are substantively identical to the Bulletins MRA previously published on these topics—

purportedly as mere interpretative guidance. If these prior Bulletins truly only provided interpretative rules or

BDJ PLLC

Comments on Proposed Rule Amendments

The Proposed Amendments suggest that MRA will enjoy vast discretion to continue

regulating Michigan's cannabis industry by Bulletin and bypassing the proper rulemaking

procedures contemplated in the Michigan Administrative Procedures Act (MAPA). For instance,

the Proposed Amendments seek to confer broad discretionary authority to MRA over (1) standard

operating procedures for marihuana businesses,²(3) quality assurance and validation measures for

safety compliance labs,³(4) material that must be distributed at a retail point of sale,⁴and numerous

other matters, that will surely come out in piecemeal communications, analyst decree, and the

aforementioned bulletins; all of which will avoid public review and comment. Rather than

continuing the Agency's current practice of rulemaking by Bulletin we urge MRA to add additional

substance and clarification to the Proposed Rules with the requisite public notice and comment

period. Denying licensees the opportunity to take notice of—and provide feedback on—future

substantive rules could lead to future legal action against the Agency.

We respectfully request that the Agency consider further revising the Proposed

Amendments language to properly limit the scope and extent of discretionary authority MRA can

deploy so the MRA, licensees, and applicants can operate under a concrete and well-defined set of

new Final Rules. The Proposed Amendments could better achieve this objective.

2. Marijuana Licenses – R 420.1 et seq.

R420.1(1)(c)(i)—Definition of "Applicant"

"Indirect ownership interest" should be defined. Despite public comments on the originally

proposed language for this Rule that specifically requested further clarification of the phrase

"indirect ownership interest," the final adopted Rules did not further define or clarify this term.

Countless hours of unnecessary confusion and frustration for both industry participants and

Agency staff alike have resulted from the ambiguity of this undefined term. We accordingly re-

iterate the importance of providing sufficient definitional clarity for critical operative phrases and

terms throughout the Proposed Amendments.⁵

guidance, there would be no need to codify and promulgate them through the rulemaking process, as MRA now

seeks to do.

²See Proposed R 420.206a.

³See Proposed R 420.305a.

⁴See Proposed R 420.504(4).

⁵The concept of an "indirect interest" or "indirect ownership" should also be used consistently both when

determining which individuals or entities within the main applicant's organizational structure also count as

supplemental applicants—and when determining what "other business interests" or "associated business" an

applicant must disclose. However, this raises major administrability concerns—because any applicant who owns a

single share of any exchange traded fund (ETF) that tracks a major stock index (e.g. the S&P 500, or Russell 2000)

technically has an "indirect interest" in all 500 companies in the S&P, or all 2000 companies in the Russell.

Attempting to disclose entire stock indices as "other business interests" or "associated businesses" would be entirely

impracticable for both Agency analysts and applicants—but that is what consistent application of the phrase

"indirect interest" in both the applicant identification and application disclosure contexts would require.

Page 2 of 10

BDJ PLLC

Comments on Proposed Rule Amendments

Other related examples of operational terms or phrases in R 420.1(1)(c) that require further

clarification include, without limitation:

• "exercise control"

o The Michigan Court of Appeals has held that "different percentages of control may

be necessary to direct the management of different corporate entities."⁶To

illustrate, the Court opines that "if an entity requires a supermajority to undertake

an action, a mere majority of common shareholders would not be sufficient" to

establish control thereof.⁷Thus, the Court concluded that "control" of a business

entity depends "on the actual control of business" as structured in the entity’s

governing documents.⁸

o We urge MRA to adopt a formal definition of "control" that is consistent with the

case law cited above.

• "participate in the management of"

o Like the "exercise [of] control"—MRA has never clearly established what

constitutes participation "in the management of" an applicant entity. We urge MRA

to adopt a definition of "management" that is consistent with the case law cited

above.

R420.1(1)(c)(i)(I)—Definition of "Applicant" for a trust

The proposed amendment for a trust application is impractical and potentially

impracticable. The definition of "Applicant" for a trust seeks to add "trustees" and "any individual

or body able to control and direct the affairs of the trust" without offering any further explanation

of how this proposed expansion to the definition of a trust Applicant would apply to institutional

trustees (e.g. large trust companies, financial institutions, law firms, etc.). Institutional trustees

often assist in administrative matters necessary for the operation and maintenance of a trust with

substantial assets—but typically do not make 'managerial' or 'business' decisions for the trust. If

the Proposed Amendment to this Rule is not further revised to provide a safe harbor or other

exemptions for institutional trustees, organizations including national banks—nearly all of which

offer a variety of trust administration and management services⁹—would have to be treated as

Applicants, even if the bank or other comparable institutional trustee does not participate in the

operations or management of the prospective licensee in any conceivable manner.

⁶TRJ & E Props v City of Lansing, 323 Mich App 664, 673 (2018).

⁷Id.

⁸Id.

⁹See e.g. https://privatebank.jpmorgan.com/gl/en/services/trusts-and-estates/us-trust-services;

https://www.privatebank.bankofamerica.com/solutions/individuals-families/trusts-estates.html;

https://www.wellsfargo.com/the-private-bank/solutions/trust-services/;

https://www.city.bank/personal/wealth/trust

Page 3 of 10

BDJ PLLC

Comments on Proposed Rule Amendments

R 420.4—Application requirements; financial and criminal background

• To the extent that MRA no longer requires applicants for licensure under the MMFLA to

provide the financial statements contemplated in RR 420.4(2)(a)(i) and (ii)—these Rules

should be updated or eliminated.

• The phrase "Controls, directly or indirectly" is susceptible to the same ambiguities noted

above for R 420.1(1)(c)(i).

• The current language in R 420.4(2)(b)(ii) is impermissibly broad—insofar as it does not

provide any standard for evaluating whether information is "required by the agency."

• The phrase "ownership interest" in the Proposed Amendment for R 420.4(3) is susceptible

to the same ambiguities noted above for R 420.1(1)(c)(i).

• The Proposed Amendment for R 420.4(3)(b) directly contradicts the general 2.5%

threshold for disclosing ownership interests in an applicant established in R 420.4(3) by

mandating disclosure of "all shareholders"—which presumably includes those who own

less than 2.5% of a private corporation applicant.

• The use of the phrase "shareholders holding a direct or indirect interest" in the Proposed

Amendment for R 420.4(3)(c) requires further clarification. By definition, a "shareholder"

is any entity or individual who owns shares of a corporation. Just as one cannot "indirectly"

hold title to real or personal property—one cannot "indirectly" own shares of a corporation.

Using the phrase "any individual or entity" in place of "shareholders" could eliminate this

ambiguity.

• The Proposed Amendment for R 420.4(3)(f) directly contradicts the general 2.5% threshold

for disclosing ownership interests in an applicant established in R 420.4(3) by mandating

disclosure of "all members"—which presumably includes those whose membership

interests consists of less than 2.5% of an LLC applicant.

R 420.5—Application requirements; complete application

• The Proposed Amendment to R 420.5(1)(c)(ii) directly contradicts the general 2.5%

threshold for disclosing ownership interests in an applicant established in R 420.4(3) by

mandating disclosure of all "persons who have a direct or indirect ownership interest in the

marihuana establishment."

• The phrase "direct or indirect ownership interest" as used in the Proposed Amendment to

R 420.5(1)(c)(ii) is susceptible to the same ambiguities noted above for R 420.1(1)(c)(i).

R 420.14—Notification and reporting

• It is unclear how an applicant could report the "appointment of a court-appointed personal

representative, guardian, conservator, receiver, or trustee of the applicant" before such an

appointment is made. At best, it seems that an applicant could report the possibility of a

court ordering such appointments before they occur—but MRA cannot reasonably expect

applicants to report a court order before the order has been issued.

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BDJ PLLC

Comments on Proposed Rule Amendments

3. Marijuana Licensees – R 420.101 et seq.

R 420.101—Definitions

• All references to "industrial hemp" throughout the Rules and Proposed Amendments

(including the Proposed Amendment to RR 420.101(1)(i) and (j)) should be updated to

include reference to the Industrial Hemp Growers Act.¹⁰

• The phrases "exercise control over" and "participate in the management of" are susceptible

to the same ambiguities noted above for R 420.1(1)(c)(i).

• The definition of "Managerial employee" provided in Proposed Amendment for R

420.101(1)(m) includes ambiguous terms and phrases like "ability to control and direct the

affairs of" and "ability to make policy concerning" a marihuana business that are

susceptible to the same ambiguities noted above for R 420.1(1)(c)(i).

R 420.112a—Licensing, management, or other agreements

• Though we support MRA's decision to formally promulgate substantive rules pertaining to

these agreements, we respectfully re-iterate the concerns noted in our General Global

Comments above regarding MRA's historical practice introducing these regulatory

obligations through Bulletins or other "guidance" documents that it routinely seeks to

enforce as binding legal authority.

• The difference between "gross" and "net" profits is substantial, however, MRA treats them

as equivalent synonyms throughout the Rules and Proposed Amendments (including R

420.112a(4)(ii)).

o "Gross Profit" is traditionally defined as total revenue (sales) minus the cost of

goods sold (COGS).

o "Net Profit" is traditionally defined as Gross Profit minus operating expenses and

all other expenses (e.g. taxes, interest paid on debt, etc.)¹¹

• Proposed R 420.112a(5) would create an unreasonable burden on licensees that seek to use

an assumed name or dba as authorized by another party to a licensing agreement—insofar

as the mechanics of registering the assumed name when it is already registered to another

entity is unduly cumbersome and time consuming. Under the statutory authority referenced

in the Proposed Rule, if an unlicensed Michigan LLC (Entity A) registers the assumed

name "ABC Cannabis" and enters into an agreement with a licensed Michigan entity

(Entity B) that provides non-exclusive rights to use the assumed name "ABC Cannabis"—

Entity A would have to withdraw its original assumed name registration and refile a new

assumed name registration listing itself and Entity B on the registration. If Entity A

subsequently entered into another agreement with licensed Entity C that provides the same

non-exclusive use rights for the assumed name "ABC Cannabis"—it would have to

withdraw the updated assumed name registration (listing Entity A and B) and refile a new

assumed name registration listing Entities A, B, and C. While MRA could reasonably

request copies of the licensing agreement as executed by the parties to verify that a given

licensee has received proper authority from the party holding legal rights to an assumed

¹⁰Public Act 220 of 2020.

¹¹The formula for calculating Net Income is traditionally stated as NI = R – COGS – OE – O – I – T; where NI =

Net Income, R = Revenue, OE = Operating Expenses, O = Other Expenses, I = Interest, and T = Taxes.

Page 5 of 10

BDJ PLLC

Comments on Proposed Rule Amendments

name or dba—there is no rational basis for requiring non-licensees to amend their assumed

name filings every time they execute a new licensing agreement assigning use rights of

their assumed name(s).

4. Marijuana Licensees – R 420.201 et seq.

R 420.201—Definitions

• The definition of "Applicant" provided in R 420.201(d) is inconsistent with the definition

of "Applicant" provided in R420.1(1)(c)(i).

• The definition of "Applicant" for a trust provided in R 420.201(1)(d)(i)(I) is inconsistent

with the definition of "Applicant" for a trust provided in the Proposed Amendment to

R420.1(1)(c)(i)(I).

• The phrase "direct or indirect ownership interest" is susceptible to the same ambiguities

noted above for R 420.1(1)(c)(i).

• The language in RR 420.201(1)(d)(i)(E) and (F) has not been amended to eliminate the

incoherent reference to "indirect stockholders" discussed above in the Proposed

Amendment for R 420.4(3)(c).

R 420.204—Operation at same location

• The phrase "combined space" as used in the Proposed Amendment to R 420.204(4) should

be further clarified or defined.

R 420.206 Marihuana business; general requirements

• We implore MRA to expedite its work with MDARD to develop a pathway for licensed

hemp growers and processors to enter cannabinoid biproducts into METRC.

R 420.206a Standard operating procedures

• This newly proposed Rule seems duplicative of the existing requirements for applicants to

submit a business plan—which licensees must maintain and update with MRA—including

the applicant's plans for maintaining inventory and other business records, staffing and

training employees, securing and otherwise operating the proposed marihuana business,

etc.

• The language proposed in R 420.206a(4) seeks to delegate substantive rulemaking

authority over "standard operating procedure requirements" to MRA, which would likely

be issued in the form of Bulletins or other guidance. Under the MAPA, any new compliance

obligations pertaining to the "standard operating procedures" contemplated throughout this

proposed Rule would likely constitute substantive rulemaking that must be promulgated

with an opportunity for public notice and comment. Since Agency guidance "does not have

the full effect of law,"¹²a licensee could possibly challenge the use of Bulletins or other

¹²See MCL § 24.203(7) (defining "guideline" as "an agency statement or declaration of policy that the agency

intends to follow, that does not have the force or effect of law, and that binds the agency but does not bind any other

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BDJ PLLC

Comments on Proposed Rule Amendments

guidance issued under this proposed Rule in any future enforcement action or

proceedings.¹³

R 420.207 Marihuana delivery; limited circumstances.

• R 420.207(2)'s restriction of delivering medical marihuana product only to a patient "at the

patient's residential address" raises numerous questions and concerns about the measures

medical licensees and their delivery employees must take to prevent mis-delivery to an

address that reasonably appears to be the patient's bona fide residential address but is later

determined not to be the bona fide residential address. We respectfully request further

clarification of this topic.

5. Marijuana Sampling and Testing – R 420.301 et seq.

R 420.304 Sampling; testing

• R 420.304(2)(d) should specifically set forth standards for the "statistically valid sampling

method" that safety compliance licensees must have "approved by the agency." When

MRA's scientific department has been given discretion to issue interpretative guidance—

they have produced new substantive rules that impose unduly draconian standards that are

treated by MRA as binding legal authority.

R 420.305 Testing; laboratory requirements

• Please list the mycotoxins that licensees must test for. MRA's scientific department has had

ample opportunity to develop a list of the mycotoxins that licensees should be required to

test for. Since Agency guidance "does not have the full effect of law," a licensee could

possibly challenge the use of Bulletins or other guidance issued under this proposed Rule

in any future enforcement action or proceedings.¹⁴

• The definition of "Cherry pick" provided in proposed R 420.305(16)(c) should be moved

to the definitions section of this rule set.

R 420.305a—Validations

• Without including clear standards for receiving agency approval of the "validations" and

"validated methodologies" contemplated in this newly proposed Rule, MRA is self-

delegating substantive rulemaking authority. We would request that the approval methods

be included in the rules for public review and comment. Since Agency guidance "does not

have the full effect of law," a licensee could possibly challenge the use of Bulletins or other

person."). Cf. MCL § 24.207(1) (defining "rule" as "an agency regulation, statement, standard, policy, ruling, or

instruction of general applicability that implements or applies law enforced or administered by the agency or that

prescribes the law enforced or administered by the agency.").

13

See AFSCME v Mich Dep't of Mental Health, 452 Mich 1 (1996); Detroit Base Coalition for Human Rights of

Handicapped v Dir, Dep't of Social Servs, 431 Mich 172 (1988).

¹⁴See notes 12 and 13, supra.

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BDJ PLLC

Comments on Proposed Rule Amendments

guidance issued under this proposed Rule in any future enforcement action or

proceedings.¹⁵

6. Marihuana-Infused Products and Edible Marihuana Product–R 420.401 et seq.

R 420.403—Requirements and restrictions on marihuana-infused products

• The phrase "appropriately descriptive" as used in the Proposed Amendment to R

420.403(7)(a) should be further clarified to give licensees adequate notice of their

obligations under the rule.

• The phrase "component ingredients" as used in the Proposed Amendment to R

420.403(7)(b) should be further clarified so licensees can prepare to make the necessary

changes to their current packaging labels.

• The phrase "in charge" as added in the Proposed Amendment to R 420.403(8)(d) should

be further clarified—particularly since this language seems to implicate a form of policy

making authority or "control" of the licensee that could make this employee a "managerial

employee" and thus, an "applicant."

• Insofar as the Proposed Amendments to R 420.403(9) principally introduce new negative

restrictions—the structure of the Rule could be clearer if R 420.403(9) was amended and

reorganized to read "A producer of edible marihuana products may not…"

• The Proposed Amendment to R 420.403(9)(a) should be further clarified to provide a

standard for determining whether the "shape" or "label" of a marihuana product "would

appeal to minors aged 17 or younger." To date, MRA has issued guidance that does not

provide any evidence or explanation for its determination that certain product label or

package designs "appeal to minors"—and used this guidance as binding legal authority to

impose transfer restrictions on products with purportedly non-compliant packaging. These

restrictions could also possibly be challenged as an unconstitutional infringement of

protected commercial speech rights.

• The Proposed Amendment to R 420.403(9)(a) should be further clarified to provide a

standard for determining whether a proposed edible marihuana product "can be easily

confused with a commercially available food product." As written – this language would

appear to prohibit the production of all edible marihuana products, since all edible

marihuana products could arguably be confused with a "commercially available food

product" with some degree of relative ease. Licensees need clarity on what is "easily

confused" and not "easily confused with a commercially available food product."

• The Proposed Amendment to R 420.403(9)(e) could be challenged as an unconstitutional

restriction of licensee's commercial speech rights. In the parallel context of advertising

restrictions for alcoholic beverages, the Federal Trade Commission has properly noted

"[t]he First Amendment provides substantial protections to speech, and thus substantially

limits the government’s ability to regulate truthful, non-deceptive alcohol advertising

based on concerns about underage appeal. For this reason, the Federal Trade Commission

has long encouraged the alcohol industry to adopt and comply with self-regulatory

¹⁵See notes 12 and 13, supra.

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BDJ PLLC

Comments on Proposed Rule Amendments

standards to reduce the extent to which alcohol advertising targets teens, whether by

placement or content."¹⁶

7. Marihuana Sale or Transfer–R 420.501 et seq.

R 420.502—Tracking identification; labeling requirements; general

• The Proposed Amendment to R 420.502(2) seems intended to give MRA the authority to

require licensees distribute informational materials at the point of sale, as contemplated in

proposed Rule 420.504(4). However, by moving the modifier "material" from its original

position after the word "information" to its position before the word "information"¹⁷—the

Proposed Amendment implicates the legal term of art "material information." This term of

art does not refer to physical informational materials—but rather, to information that is

'material' (i.e. important or relevant to) making a particular decision. Further clarification

is requested.

R 420.504—Marihuana product sale or transfer; labeling and packaging requirements

• The proposed addition of R 420.504(4) could possibly be challenged for lacking a rational

relation to MRA's statutorily defined policy objective. Insofar as licensees must already

provide the national poison control hotline number, and express age or patient-status use-

restrictions on the product label under existing rules, it is largely redundant to provide the

same information in the form of 3.5 x 5-inch pamphlet. We respectfully remind MRA that

licensees would principally bear the cost for producing and updating these pamphlets in

accordance with any subsequent changes MRA may later propose as mandatory content

for said pamphlets—which may add unnecessary strain to already tight operating budgets.

Since Agency guidance "does not have the full effect of law," a licensee could possibly

challenge the use of Bulletins or other guidance issued under this proposed Rule in any

future enforcement action or proceedings.¹⁸

R 420.507—Marketing and advertising restrictions

• The Proposed Amendment to R 420.507(2) is narrowly tailored to advance a substantial

government interest in preventing the dissemination of false, deceptive, or misleading

advertising—and is thus a constitutionally permissible restriction on commercial speech.¹⁹

Any restrictions on the packaging or labeling designs of a marihuana product beyond the

prohibition of false, deceptive, or misleading advertising contemplated in this Rule could

possibly be challenged as an unconstitutional restriction of licensees' protected commercial

speech.²⁰

¹⁶https://www.consumer.ftc.gov/articles/0391-alcohol-advertising

¹⁷"require a marihuana business to provide material information or notifications…"

¹⁸See notes 12 and 13, supra.

¹⁹See Cent. Hudson Gas & Elec. Corp. v. Public Serv. Comm'n, 447 U.S. 557 (1980). Cf. R 420.403.

²⁰See e.g. R 420.403.

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Comments on Proposed Rule Amendments

8. Marihuana Hearings–R 420.701 et seq.

R 420.704a—Hearing on exclusion of individuals or employees

• Insofar as the exclusion of an individual or employee from participation in Michigan's

marihuana industry amounts to a restriction of individual liberty—we believe MRA's

burden of proof should be higher than the "preponderance of the evidence" standard

contemplated in proposed R 420.704a(5) as individuals liberty and pursuit of happiness

may include working for a Marijuana establishment or facility and that type of restriction

should not be taken lightly

9. Marihuana Disciplinary Proceedings–R 420.801 et seq.

R 420.802—Notification and Reporting

• The Proposed Amendment to R 420.802(3)(g) implicates the same concerns noted above

in our comments regarding the Proposed Amendment to R 420.14. It is unclear how an

applicant could report the "appointment of a court-appointed personal representative,

guardian, conservator, receiver, or trustee of the applicant" before such an appointment is

made. At best, it seems that an applicant could report the possibility of a court ordering

such appointments before they occur—but MRA cannot reasonably expect applicants to

report a court order before the order has been issued.

• The Proposed tattletale Amendment to R 420.802(4)(c) creates an unrealistic burden for

licensees.

R 420.808a—Exclusion

• The phrase "valid and current exclusion list from another jurisdiction in the United States"

as used in proposed R 420.808a(1)(e) should be further clarified, as it is presently unclear

what "exclusion lists" would potentially implicate this proposed Rule.

Regards,

BENJAMIN D JOFFE, PLLC

Benjamin D Joffe

Ari D Goldstein

Page 10 of 10

September 9, 2021

Samantha K. Balk

Compliance Manager

42 Degrees Processing, LLC

C: 918-779-8192

E: samantha@42-deg.com

To the Marijuana Regulatory Agency:

The following documentation encompasses the comments of myself and some of

my coworkers in the marijuana industry regarding necessary clarifications and/or

suggestions about the ruleset. I have it broken down by each rule.

As the compliance manager at 42 Degrees Processing, LLC, a medical and adult

use processing facility in Kalkaska, MI, my first priority is to protect our licenses by

making sure that our facility is compliant with all requirements set forth by the

MRA. Primarily, that goal is accomplished by a clearly defined set of rules to which

can be adhered. What follows are observations based on the challenges I have

faced as a compliance officer, as well as comments heard in the public. Any

criticism and/or request is my own, but proposed as a means toward the end of

clear rules that we can follow without further requirement for clarification. If any

further clarification on my comments is required, I would be happy to take a phone

call.

My greatest concern is with the areas of potential loopholes. I may also mention

cost, though this is frequently due to the cost of operations, which I must also be

mindful of.

Thank you very much for the time put into clarifying the ruleset and frequently

providing guidance, most especially to me. And thanks to everyone at the MRA for

providing and supporting this industry that I thoroughly enjoy, as it presents

constant challenges that have given me a rewarding and important job here at 42

Degrees.

MARIHUANA DECLARATORY RULINGS

● Definitions

○ Define what is a “declaratory ruling”

○ When would this be used instead of requesting a clarification on the

interpretation of a rule?

EMPLOYEES

● R 420.602 Rule 2 (1) “A licensee shall conduct a criminal history

background check…”

○ Does this mean a state background check, federal background

check, or both?

○ Do subsequent background checks need to be performed after an

employee has been hired? At what interval?

SAMPLING AND TESTING

● Definitions:

○ The definition for a “production batch” needs to be clearer, especially

considering edibles. If you would, please include this clear definition

everywhere a rule discusses production batches.

■ What defines similar conditions? Same operator, same pot,

same tools, same formulation, etc. all should be considered.

■ Is there a batch size limit?

■ The current methodology across the industry as I understand

it, from talking to testing laboratories, is that there are multiple

pots of gummies being formulated in a linear fashion. First

pot, then second pot, then third pot, etc, up until an indefinite

number of pots, ie, 30-40 pots, defining a single production

batch. However, from the standpoint of recipe and

formulation, each pot could vary by a variety of small factors.

One pot may get more color than another. One pot may get

more THC distillate. Even if it is a small amount, it’s still not

exactly the same. Although homogeneity testing is intended to

account for this variation, it is only performed every 6 months

after initial formulation and will not be able to capture if one

pot of 30, 60, 100 (what even is the limit?) is out of sorts.

Essentially, this is the same as considering 30-40 (or more)

tiny single batches of gummies as one uniform batch. This

presents potential safety concerns regarding dosing.

○ The definition for a “production batch” needs to be more clearly

defined for concentrates as well. If you would, please include this

clear definition everywhere a rule discusses production batches.

■ If two different production runs of extracted concentrate are

mixed together, is that acceptable? It seems that it would be

unlikely to mix two batches of concentrate together into a

homogeneous mixture, which could yield a product of an

inconsistent potency. For example, if you produce a

concentrate that is 60% potency and mix it with a concentrate

that is 80% potency, then the resulting product could be

inconsistently mixed with a potency that varies between

60-80%. This would be a more pronounced inconsistency if

two different product consistencies were mixed, such as a

“sugar” and a “sauce” together.

● If this is acceptable, are any parameters needed?

○ The definition for “final form” versus “in packaging” needs to be

crystal clear.

■ In some bulletins and rules, final form further clarifies that it

means “not necessarily in its packaging for sale,” but in the

laboratory testing handbook entitled Sampling and Testing

Technical Guidance for Marijuana Products, it very clearly

states “A sample of marijuana edible product must be in final

form for a laboratory to accept this material for compliance

testing. Laboratories are not permitted to sample product in

bulk without packaging [italics mine] for compliance testing.

Units should be easily distinguishable.”

● We ended up changing around our entire standard

operating procedure to accommodate having to test

gummies in their sale packaging, only to then be

corrected by a customer, who had an email from the

MRA, stating that it was acceptable to test gummies

prior to packaging.

● R 420.306. Guidelines for retesting should be clearer. There were times in

the past when the rule was not clear enough, as it stated that when a

product failed a retest it must be destroyed. However, we found out after we

destroyed it that remediation was allowed. The following clarifications are

needed:

○ Which failed tests can be retested. Please state these specifically

(ie, heavy metals, certain pesticides, etc).

○ How many times a retest can be performed. As written, it is currently

allowable to retest as many times as needed until a passing result is

achieved, which is an irresponsible practice.

○ If retesting is permitted at a different lab than the one that delivered

the failing result, and how that should be submitted if so.

○ Is there a time limit on performing a retest, given that there’s now a

90 day deadline for destruction?

○ Which failed tests can be remediated. Please state these specifically

(ie, heavy metals, certain pesticides, etc).

● R 420.305, 9(h): states that potency should be reported in milligrams. It

should read milligrams per ____.

● R 420.307, Rule 7, 3: states that R&D testing is prohibited after compliance

testing has been completed. This needs further clarification to cover the

following:

○ Continued quality studies, such as how a product might degrade or

change over time.

○ Reserving a subset of a finished product to perform additional small

tests upon it not related to safety, such as terpene composition.

○ It sounds as if the intent of the rule is to not perform R&D testing on

the same production batch number, which historically created a

problem in METRC by reverting Test Passed product into a Testing

in Progress state. But if you pull an amount of and give it its own

production batch number so as not to affect test results, would it be

acceptable to perform R&D testing on this product?

● Requiring safety compliance tests on small batches of new formulations

makes formulating new products prohibitively expensive as the recipe or

methodology might be tweaked several times prior to being finalized. We

would be grateful if alternative rulings could be explored that allows for

more creativity and flexibility as new products are developed.

MARIHUANA SALE OR TRANSFER

● Definitions:

○ Need more clarification on types of transfers.

■ Define what type of transfer should be used for which

purposes. When to use them, which forms are required,

where the forms are located, where to send requests, etc.

● Specifically, we’ve had some trouble with untested WIP

transfers, fresh frozen transfers, infusion transfers.

● Some forms are simply not listed on the MRA’s

website, such as the inventory transfer request form. It

would be very helpful if all of the forms were listed in

one location. Please investigate, and make compliance

easier to do.

● Ensure that METRC and AFS are cohesive for financial audits. The rules

for processors make tracking monetary value back and forth unnecessarily

cumbersome, as it has forced us to assign monetary value to something for

which there was no cost (such as for toll processing, where we charge for

services).

● 420.508 (Trade Samples), Rule 8, 4, and 420.509 (Internal Samples), Rule

9, 3: The rules need to clarify what needs to be recorded in METRC during

sampling. It was clarified to me personally that I should be recording the ID

and employee name for Internal sampling, and I have been recording the

License and Vendor name for trade samples.

○ Is any other information required for tracking purposes?

○ It is possible that there needs to be a lot more definition regarding

trade samples and employee samples in general. This rule has been

the one I’ve been most aggressively questioned on as to what the

MRA’s language allows versus what the MRA’s intent was when

writing the rule.

○ Rules are possibly unclear as to whether or not the Processor

license is allowed to internally sample flower to its employees.

○ The rules have an issue with loopholes regarding trade and internal

samples, as follows:

■ There is a limit on both internal samples and trade samples.

However, when asked, and also provided with intent, the MRA

clarified that they do not regulate sale prices. It is therefore

possible for a processor to sell product to a retailer for a

penny, who can then sell it to the processor’s own employees

for a penny, and thus makes having a rule pertaining to limits

pointless.

● Which means it is also possible to do exactly the same

thing for trade samples, and have either a

representative of a retailer or a sales representative to

purchase products for a penny and offer them for free

to anyone.

● The same could be said of coupons or rebates, or

steep discounts of any kind. If there is the ability to

legally obtain products for virtually nothing, then why

bother with a limit at all?

● Nothing currently prevents employees from giving all of

their samples to someone else outside of work hours,

either, which means that it is also possible for

employees to band together and pool their samples for

a single person, such as sales personnel.

○ I also have concerns about the custody of products after trade

sampling, as follows:

■ It is currently stated that up to a certain limit, anyone may

transport trade samples to a retailer. I do not think it is wise to

allow anyone other than a secure transporter to transport

products. There are a lot of strong relationships between

retailer management and sales personnel, and I think it may

be possible to abuse the trade sample mechanism to funnel

products out of the regulated market in this manner. There is

currently no control over ensuring that the trade sample

actually makes it to the intended recipient in this manner.

What is to stop a sales person from requesting samples for a

retailer and simply never delivering them?

■ We’ve heard that frequently, trade samples go only to retailer

management and never make it into the hands of budtenders

for the purpose of product sampling. I’m not sure that this

would be considered an MRA problem, but wanted to bring it

to your attention anyway, as trade samples handled in this

matter do not bring much value to the processor value

stream.

○ Please clarify how a sample intended for an employee should be

treated if the employee refuses the sample.

■ Should it be destroyed? Does it now need two adjustments

(one to put it back on its tag, and one to destroy it), or can it

just go to destruction, since it has already been removed from

METRC?

● R 420.504 (Labeling and packaging requirements): Compliance stickers

have been unclear for more than a year now. Clarification was promised but

never came. Our customers have been told different things by the MRA

which has now forced us to operate under two different SOPs. Please make

this clearer as to which tags are required on the compliance label.

○ Define that Package ID means the tag that is delivered to a retailer.

■ We maintain that this should not actually be required. A store

that receives the package will have the Source tag ID in their

METRC should an issue with the customer’s product arise,

which makes it easy to search. It is the source that would be

the issue anyway if an adverse reaction was reported. Being

allowed to label all of our products with only the Package’s

Source ID and Testing ID would significantly improve

operational efficiency and greatly reduce the amount of

potential for error. If one batch were to be sent to 100 stores,

this is the difference between being forced to create 100

different compliance labels instead of only one.

○ Define that Source ID is the parent tag of the Package ID regardless

of testing status.

○ Whether or not a Testing ID is required.

■ Define that Testing ID is the tag that was delivered to the

testing facility for the purpose of Safety Compliance Test only.

○ Clarify how to treat a retest for potency when stating potency and

testing facility information on the compliance label

○ Remove “any” test analysis date, replace with “safety compliance”

test analysis date.

○ Release an example scenario or scenarios with an example label to

eliminate all potential confusion.

○ Clarify that the universal symbol must be printed in full color (green).

○ Specify whether or not it is acceptable to say either marijuana or

marihuana on the universal symbol.

■ Basically, whether or not ANY modifications to the universal

symbol are acceptable whatsoever.

○ Specify that the words must be legible/easily read on the compliance

label and universal symbol. Is a size requirement needed? Some of

them are so tiny they cannot be read.

● R 420.505 Rule 5. (1) Transferring needs two Rs.

OPERATIONS

● R 420.206, Rule 6, 14: “When combining more than 1 form of marihuana or

marihuana product into a single marihuana product, each form of

marihuana or marihuana product must have passing safety compliance test

results in the statewide monitoring system prior to the creation of the new

combined product.

○ What defines a “form” of marihuana product?

○ What if products are combined prior to a safety compliance test?

Examples:

■ Mixing a distillate with a high terpene content product, which

will fill cartridges and go to safety compliance testing as a

cartridge.

■ Mixing together two concentrates, ie batter plus batter.

● R 420.214a (Internal analytical testing):

○ For the internal analytical testing area, what defines a “separate”

testing area?

● R 420.214b-c:

○ How does a retailer return defective/undesirable products that are

not involved in an adverse reaction to a processor if they are not

allowed to transfer it back?

■ For example, poor product quality, or if it has been on the

shelf too long and they wish to trade it in.

LICENSES

● Definitions:

○ Please include more clarity on separate areas.

■ Food and marijuana areas are supposed to be kept separate.

● Separation includes walls and a ceiling and a locked

door.

● Define the purpose of hallways, clarify the difference

between a hallway and a room.

○ No food or marijuana in hallways?

○ Storage in hallways

○ Carrying marijuana through the hallways to get

to the next room

○ Carrying food through the hallways to get to the

next room.

○ It was clarified to me that areas of different task types are also

supposed to be maintained separately with a locked door between

them, such as:

■ Laboratory rooms can be connected, but not to packaging or

storage

■ Packaging rooms can be connected, but not to any production

or storage

■ Storage has to be kept separate from packaging and

production.

■ These are not terribly specific. Items will be stored temporarily

in production areas. Does an edibles kitchen need to be

separated from its own packaging operation? Where are the

lines defined?

■ Is this really necessary?

■ Why is further security needed within the building when entry

to the building itself is controlled by secure entry?

○ Provide more specificity regarding the storage of inventory. Access

should be restricted, but if it is behind a locked door and all the staff

has access to the locked door, is it really restricted? So whom

should have access?

LICENSEES

No questions

MARIHUANA-INFUSED PRODUCTS AND EDIBLE MARIHUANA PRODUCTS

● R 420.403, rule 3, 2: The potency variance has been changed to +/- 10%,

not 15%. If this is not the case, there are multiple points throughout the rule

set and bulletins where this variance is not in agreement.

● 420.403, Rule 3, 10(a): There is currently no control expressed in the

guidelines for an expiration date. It’s too arbitrary and does not require a

product to demonstrate quality up until its expiration date. Documentation is

required for shelf stability, but not for an expiration date qualification. This

seems like an oversight.

● 420.403, Rule 3, 9(e): Clarification is needed on what is considered a

“commercially available food product”. This could feasibly eliminate most

forms that an edible product might take, such as:

○ Other types of candies:

■ Chocolates

■ Fudge

■ Peanut butter cups

○ Granola bars

○ Rice krispies treats

○ Brownies

○ Cookies

● 420.403, Rule 3, 9(f): Packaging specifications could use more clarity as

well. “Not produce an edible marihuana product that is associated with or

has cartoons, caricatures, toys, designs, shapes, labels, or packaging that

would appeal to minors.”

○ We’ve ruled out animals and fruit already. But there are other ways

to appeal to children or teenagers. What about such things as:

■ Vehicles such as sailboats, cars, trains, bicycles

■ Color schemes, such as pastels, tie-dyes, bright colors, glitter

■ Other icons, such as moon and stars, clouds, rainbows,

flowers, gem stones.

MARIHUANA HEARINGS

No questions

MARIHUANA DISCIPLINARY PROCEEDINGS

● R 420.805, rule 5, 10-11: The list of excluded individuals is kept by the MRA

and we do not currently have access to it. How are we going to be able to

know that an individual has been excluded from employment or

participation in a marihuana business? Would that come up in the

background check?

○ Also, we’d like to be able to see this list to protect ourselves and the

integrity of the industry.

OTHER QUESTIONS

● With the limitations on names, shapes, and packaging that appeal to

children, will there be further restrictions on the names of strains for

concentrates and/or vapes?

In conclusion,

Thank you very much for your time and consideration in hearing comments from

the public. I fully support clear rules, and greatly appreciate the time and effort that

goes into refining this rule set.

Sincerely,

Samantha K. Balk

Compliance Manager

42 Degrees Processing, LLC

Phone: 918-779-8192

samantha@42-deg.com

To:

Michigan Marijuana Regulatory Agency - Legal Section

VIA Email: Legal@michigan.gov

From:

Date:

Re:

Jennifer L. Domingue, Director of Compliance for Gage Cannabis Company

September 27, 2021

Comments to Proposed Rules

______________________________________________________________________________

To whom it may concern,

Thank you for the opportunity to provide comment on the proposed rules. Below are some of the

proposed rules we have identified as most important to our operations as a vertically-integrated

cannabis company, and to the industry at large.

1.

MARIHUANA DISCIPLINARY PROCEEDINGS

Rule 420.802(3) Notification and reporting

(3) Licensees shall report to the agency any proposed material changes to the marihuana business

before making a material change that may require prior authorization by the agency. A proposed

material change is any action that would result in alterations or changes being made to the

marihuana business to effectuate the desired outcome of a material change. Material changes,

include, but are not limited to, the following:

Comment on Proposed Rule:

•

The proposed language is overly broad and puts an undue burden on licensees to make the

Agency aware of any changes that it is considering even before it has made a decision to

proceed with a material change.

The proposed language is vague.

Rule 420.802(4)(c) Notification and reporting.

(4) A licensee shall notify the agency within 1 business day of becoming aware or within 1 business

day of when the licensee should have been aware of any of the following:

(c) Action by another party in actual or alleged violation of the acts or these rules.

Comment on Proposed Rule:

•

This proposed rule is not limited to the health and safety of the public.

•

It is very difficult to determine when a licensee should have become aware of a violation.

As written, the Agency could levy fines for an extensive length of time based upon its

determination of when a licensee should have been aware of the violation.

When read together with the definition if proposed rule 420.801(e) and (r), every potential

breach of commercial contract could be a reportable event, disrupting routine commercial

activity and potentially involving the MRA in purely commercial matters that are within

the province of the courts or elsewhere.

•

The Agency should more clearly define who will determine when the violation should have

been known by the licensee, and the process for making that determination.

Licensees already have a duty to report matters that are within their control (e.g., employee

theft, diversion, etc.).

Licensees should be given time to investigate alleged violations before bringing them to

the Agency.

The Agency should consider requiring notification to the Agency when the licensee is

aware of an issue of public health and safety (i.e. – presence of glass shards in finished

product, etc.)

Rule 420.802(7) Notification and reporting.

(7) The licensee shall notify the agency within 10 business days of terminating a licensing,

management, or other agreement.

Comment on Proposed Rule:

•

A licensee should not have to notify the Agency every time it cancels a month-to-month

contract with a service provider in the ordinary course of business.

•

This proposed rule goes far beyond matters that affect health and safety or ownership and

control, and should be amended to only apply to management agreements that cause a

material change to the marihuana business.

Rule 420.808a(1)(d) Exclusion.

(8)a (1) A person may be excluded from employment at, or participation in, a marihuana business

upon a finding of any of the following:

… (d) The person has engaged in conduct that could negatively impact public health,

safety, and welfare.

Comment on Proposed Rule:

•

808a(1)(d) is too vague because it relies on arbitrary judgment of MRA hearing officer as

to relevance of time and nature of potentially offending conduct.

•

The rule lacks sufficient definiteness to allow an ordinary person to understand what

conduct it prohibits.

2.

MARIHUANA-INFUSED PRODUCTS AND EDIBLE MARIHUANA PRODUCT

Rule 420.403(7)(a); 420.402(8)(d) Requirements and restrictions on marihuana-infused

products; edible marihuana product.

(7) A producer shall label all marihuana-infused product with all of the following:

(a) The name of the marihuana-infuse product. The name of the product must be an

appropriately descriptive phrase that accurately describes the basic nature of the product.

Comment on Proposed Rule:

•

The Agency should provide clarification on what it means by the “basic nature of the

product.” (e.g., Does that mean that the product should include the words edible, gummy,

mint, etc.?)

•

The fourth point of this proposed rule is vague in that the phrase “in charge” is not defined.

A “managing employee” is already defined and prequalified as a licensee; however, this

appears to expand who must be considered a manager.

Rule 420.403(9) A producer of edible marihuana product shall comply with the following:

(…) (b) Not produce an edible marihuana product that is associated with or has cartoons,

caricatures, toys, designs, shapes, labels, or packaging that would appeal to minors.

(c) Not produce edible marihuana products that can be easily confused with a commercially

available food product. The use of the word candy or candies on the packaging or labeling is

prohibited.

(d) Not produce edible marihuana products in the distinct shape of a human, animal, or fruit, or

a shape that bears the likeness or contains characteristics of a realistic or fictional human, animal,

or fruit, including artistic, caricature, or cartoon renderings. Edible marihuana products that are

geometric shapes and fruit flavored are permissible.

(e) Not package an edible marihuana product in a package that bears the image, likeness, or

contains the characteristics of commercially available food products.

Comment on Proposed Rule:

•

This rule will have significant impact on some current market participants. Clients should

assess costs that may be imposed related to package or product redesign that may be

required to comply with this new rule.

The final prohibited element “Not [produce a] package that […] contains the characteristics

of commercially available food products” is ambiguous and subject to misunderstanding

by licensees and other stakeholders. MRA should specify which characteristics are

objectionable. Peanut butter is commonly sold in glass or plastic jars with screw-on plastic

or metal lids; does the MRA intend to prohibit sales of marihuana products packaged in

glass jars with screw-on lids because such packaging is a “characteristic” shared with a

commercially available food product?

•

In order to minimize economic impact to stakeholders, MRA should allow a “grandfather”

or “sell-through” period or delay implementation of this proposed rule by a reasonable time

period following adoption (e.g. six months) during which time licensees would be

permitted to sell through existing product inventory before new packaging rules take effect.

3.

MARIHUANA LICENSEES

R 420.101 (c, d, k, l, m, x); 420.112a(1-6) Definitions.

(c) “Another party” or “other party” means an individual or company with which a licensee

contracts to use the individual’s or company’s intellectual property or to utilize management or

other services provided by the individual or company.

(c d) “Applicant” means a person who applies for a marihuana license, subject to paragraphs (i)

and (ii) of this subrule:

(k) “Intellectual property” means all original data, findings, or other products of the mind or

intellect commonly associated with claims, interests, and rights that are protected under trade

secret, patent, trademark, copyright, or unfair competition law and includes brands or recipes.

(l) “Licensing agreement” means any understanding or contract concerning the licensing of

intellectual property between a licensee and another party.

(m) “Management or other agreement” means any understanding or contract between a licensee

and another party for the provision of management or other services that would allow the other

party to exercise control over or participate in the management of the licensee or to receive more

than 10% of the gross or net profit from the licensee during any full or partial calendar or fiscal

year.

(x) “Parties” means a licensee and another party pursuant to a licensing or management or other

agreement.

R 420.112a Licensing, management, or other agreements.

(1) A licensee may contract with another party to use the other party’s intellectual property or for

the other party to provide management or other services necessary for the operation of the licensee

pursuant to a licensing, management, or other agreement approved by the agency.

(2) A licensee shall submit a complete, unredacted, signed copy of the licensing, management, or

other agreement to the agency for review and approval prior to performance under the agreement.

Approval by the agency indicates an agency determination that it does not appear based upon the

information provided that the other party meets the definition of applicant.

(3) The agreement must include, but is not limited to, all of the following:

(i) All payment terms between the parties. Licensing

agreements must also include a requirement that all

payments made to the other party pursuant to the

licensing agreement must be made by the license and not

by any other licensee purchasing the marihuana product.

(ii) Terms specifically naming and clearly defining any

service to be performed pursuant to the agreement.

(iii) Terms specifically requiring all business operations

related to the production, sales, invoicing, and payment

for marihuana products sold pursuant to a licensing

agreement must be performed by the licensee.

(iv) A statement indicating that the agreement contains

the entire agreement of the parties

(4) Terms that may indicate the other party meets the definition of applicant and is thereby subject

to application requirements, including, but not limited to, the following:

(i) Any term or condition that would allow the other

party to exercise control over or participate in the

management of the licensee. This does not include

control or terms specific to a licensing agreement such as

production method or packaging requirements.

(ii) Any term or condition that would allow the other

party to receive more than 10% of the gross or net profit

from the licensee during any full or partial calendar or

fiscal year.

(iii) Any term or condition that would result in the other

party obtaining an ownership interest in the marihuana

business or taking possession or ownership of marihuana

product owned by the marihuana business.

(iv) Any term or condition that would require the

licensee to name the other party as a named insured on

any insurance policy required to be maintained as a

condition of a marihuana license.

(5) Any term or condition that would allow the licensee to use an assumed name or doing business

as in the operation of the licensee is not operative unless the licensee has complied with the

requirements of 1907 PA 101, MCL 445.1 to 445.5.

(6) The licensee shall provide any other information requested by the agency that is not

inconsistent with the acts and these rules.

Comment on Proposed Rule:

•

This proposed rule does not affect the health or safety of the public.

The proposed language is vague in that it does not define what constitutes management

authority. We request that the MRA clearly define what services and activities qualify as

management services for the purposes of this rule.

•

This proposed rule has an adverse impact on business, when applied to proposed rule

420.112a, in that it requires prior approval for non-cannabis commercial activity, increases

the costs of each transaction, and would permit the MRA to determine its own, arbitrary

commercial standard.

This proposed rule, when applied to proposed rule 420 112a, sets an arbitrary limit of 10%

of profit to determine that a service provider must apply for a license; MRA lacks the

statutory authority to set this arbitrary percentage cap.

•

This proposed rule should be limited to only considerations of ownership and control of

licensees, and the health and safety of patients and workers.

The enabling statutes – the Medical Marijuana Facilities Licensing Act (“MMFLA”), the

Michigan Medical Marihuana Act (“MMMA”) and the Michigan Regulation and Taxation

of Marihuana Act (“MRTMA”) – do not authorize that level of overreach to the MRA;

•

This rule, when applied to proposed rule 420.112a, may violate the US Constitution’s

Contract Clause (art. I, sec. X, Cl. 1) in that it would purport to allow the MRA to

effectively terminate or re-write existing and enforceable agreements with licensees.

4.

MARIHUANA OPERATIONS

R 420.203(2)(f)(i)(A-I) Marihuana licenses; licensees; operations; general.

(i)

A licensee shall maintain accurate and comprehensive financial records for each

license that clearly documents the licensee’s income and expenses. Applicable

supporting source documentation must be maintained, including, but not limited to, all

of the following:

(A) Cash logs.

(B) Sales records.

(C) Purchase of inventory.

(D)Invoices.

(E) Receipts.

(F) Deposit slips.

(G)Cancelled checks.

(H)Employee compensation records.

(I) Tax records.

Comment on Proposed Rule:

•

There should be timeline set by the Agency dictating how long these records must be kept

by a licensee. Five (5) years is a standard retention time.

R 420.206a(5) Standard operating procedures.

(5) If the agency determines that any standard operating procedure contains inaccurate

information or does not comply with these rules and safe food management guidelines, as

applicable, the licensee may be required to correct and update the standard operating procedures

immediately.

Comment on Proposed Rule:

•

It is unreasonable to ask a licensee to amend an SOP on the spot during an inspection. We

propose that the Agency issue a deficiency notice to the licensee and allow adequate time

for the licensee to make the necessary changes.

R 420.214(b) Adverse reactions.

1. A licensee shall notify the agency within 1 business day of becoming aware of within 1

business day of when the licensee should have been aware of any adverse reactions to a

marihuana product sold or transferred by any licensee.

Comment on Proposed Rule:

•

The Agency does not define an “adverse reaction”, which leads to an overbroad

interpretation, leading to undue burden on licensees.

At this point, an adverse reaction could be interpreted as any complaint or symptoms

reported by consumers regarding any marihuana product, including but not limited to

coughing, a “tickle in their throat”, headaches, sneezing, or tiredness. We propose the

Agency clarify what type of adverse reactions should be reported.

R 420.401(d) Definitions.

(d) “Final package form” means the form a marihuana product is in when its is available for sale

by a marihuana sales location. For marihuana products intended for inhalation, final form means

the marihuana concentrate in the e-cigarette or vaping device.

Comment on Proposed Rule:

•

This proposed rule does not protect the health and safety of the public.

5.

MARIHUANA LICENSES

R 420.6(6) State license under the Michigan regulation and taxation of marihuana act;

issuance; qualifications; ineligibility.

(6) A marihuana license is a revocable privilege granted by the agency and is not a property right.

Granting a marihuana license does not create or vest any right, title, franchise, or other property

interest. A licensee or any other person shall not lease, pledge, borrow, or loan money against a

marihuana license.

Comment on Proposed Rule:

•

With respect to adult-use licenses, this proposed rule seems at odds with the holding in

Brown v. Yousif 445 Mich. 222 (1994) where the court found Michigan liquor licenses to

be a “general intangible” and “personal property” despite an MLCC rule to the contrary—

similar to what MRA is proposing here -- because the MLCC did not have statutory

authority to overrule article 9 of the Michigan UCC. Does MRA have authority where

MLCC did not? See generally https://law.justia.com/cases/michigan/supreme-

court/1994/96311-6.html

•

This proposed rule has the effect of limiting investment and reducing access to capital for

Michigan cannabis licensees. Rather than prohibiting a pledge of the license, MRA should

require disclosure from lenders who take a license as security (similar to the MLCC’s

process for parties that lend to liquor license operators). If a lender who is not an applicant

seeks to foreclose or assume the license, MRA should support an escrow process for such

foreclosed licenses, or facilitate a transfer to a new licensee operator.

R 420.401 Definitions.

(d) “Final package form” means the form a marihuana product is in when it is available for sale

by a marihuana sales location. For marihuana products intended for inhalation, final form

means the marihuana concentrate in the e-cigarette or vaping device.

Comment on Proposed Rule:

•

This proposed rule does not protect the health and safety of the public.

R 420.403 Requirements and restrictions on marihuana-infused products; edible marihuana

product.

Summary of Changes:

1) The Agency seeks to amend the current rule that prohibits producers from producing packaging

or labels that would appeal to minors to include the shape of the edible product.

2) The MRA proposes to expand the prohibition on producing edibles that can be easily confused

with commercially sold candy to include all commercially available food products.

Comment on Proposed Rule:

DW does not have any objection to these proposed rules, but if you, as an operator, believe that

any of these rules are unreasonable and should be challenged, please identify those rules.

Dykema Gossett PLLC

Capitol View

201 Townsend Street, Suite 900

Lansing, MI 48933

WWW.DYKEMA.COM

Tel: (517) 374-9100

R. Lance Boldrey

Direct Dial: (517) 374-9162

Direct Fax: (855) 259-3563

Email: LBoldrey@dykema.com

September 27, 2021

Marijuana Regulatory Agency

Legal Section

P.O. Box 30205

Lansing, MI 48909

Via E-mail: MRA-Legal@michigan.gov

Re:

Proposed Marijuana Regulatory Agency Rules

Dear Marijuana Regulatory Agency Staff:

On behalf of the Michigan Cannabis Manufacturer’s Association (“MCMA”), I write to offer

public comments on the proposed changes to the Marijuana Regulatory Agency’s (“MRA”)

administrative rule sets (the “Draft Rules”). The MCMA is an association of the largest business

stakeholders in Michigan’s cannabis industry. MCMA’s members represent hundreds of millions

of dollars of private investment and employ thousands of Michigan citizens, but the Number One

priority of the MCMA is protecting the health and safety of Michigan citizens. The MCMA

appreciates the opportunity to provide stakeholder feedback on the issues that directly impact the

public and our members, and MRA’s willingness to engage its stakeholders.

By way of introduction, MCMA finds much to praise in MRA’s Draft Rules. In particular, MCMA

believes that the Draft Rules will continue to advance product safety to the benefit of patients and

customers. Revisions to facilitate internal testing, address the potential for the manipulation of

testing results before we see such problems in Michigan (issues that have arisen in other states),

and authorizing testing of homegrown adult-use cannabis are all extremely positive steps. So too

are changes to allow drive-though and curbside service, and to simplify the fee structure to allow

for greater predictability. The addition of a formal process for declaratory rulings is also welcome.

MCMA does nonetheless find some areas of the Draft Rules that could use some additional review

and improvement. As explained in more detail below, the Draft Rules leave important terms and

requirements undefined, and would improperly rely upon guidance and administrative bulletins,

rendering important rule topics vulnerable to legal challenge. MCMA also strongly objects to the

creation of a Class A Microbusiness License, a license that would violate the Michigan Regulation

and Taxation of Marihuana Act (“MRTMA”) and authorize activity that presently constitutes a

felony under the Michigan Medical Marihuana Act (“MMMA”). MCMA also opposes efforts to

118728.000002 4846-8058-6748.2

Marijuana Regulatory Agency, Legal Division

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limit “non-marijuana” cannabinoid sourcing. And MCMA believes that there are a number of

additional areas where the rules should be changed based on lessons learned, most especially with

respect to the operation of co-located grower and processor facilities and the excess grow license.

MCMA’s comments follow.

Utilization of Guidance

As we all well know, the cannabis industry has been evolving at light speed since the first state

licenses were issued just over three years ago. MRA has been evolving too, and we understand

the need for MRA to be flexible and respond to new developments. That said, one significant

over-arching concern for MCMA is MRA’s practice of relying on the issuance of ad hoc advisory

or technical bulletins in lieu of the formal rulemaking process of the Administrative Procedures

Act, 1969 PA 306, MCL 24.201 to 24.328 (“APA”). While understandable in the very early days

of the industry, we are concerned that in many places the Draft Rules appear intended to extend

and expand that practice. By way of example, proposed R 420.304(2)(l) provides that licensees

must comply with to-be-published guidance with respect to chain of custody documentation.

Proposed R 420.206a(4) mandates that licensees have Standard Operating Procedures that “must

comply with any guidance issued by the agency.” There are numerous other instances.

While the objectives of the underlying rules may be laudable, MRA’s reliance on such guidance—

and imposition of that guidance on licensees—violates the APA. The APA defines a “rule” as “an

agency regulation, statement, standard, policy, ruling, or instruction of general applicability that

implements or applies law enforced or administered by the agency, or that prescribes the

organization, procedure, or practice of the agency, including the amendment, suspension, or

rescission of the law enforced or administered by the agency.” MCL 24.207. Relying on a long

line of precedent, the Michigan Court of Claims reiterated this principle earlier this year, ruling

that, “A ‘rule’ not promulgated in accordance with the APA’s procedures is invalid.” Genetski v

Benson, Ct. Claims Docket #20-000261-MM (March 9, 2021) at pp. 7-8, citing MCL 24.243;

MCL 24.245; Pharris v Secretary of State, 117 Mich App 202, 205; 323 NW2d 652 (1982).

As the Genetski decision explains,

An agency must utilize formal APA rulemaking procedures when establishing policies that

“do not merely interpret or explain the statute or rules from which the agency derives its

authority,” but rather “establish the substantive standards implementing the program.”

Faircloth v Family Indep Agency, 232 Mich App 391, 403-404; 591 NW2d 314 (1998).

“[I]n order to reflect the APA’s preference for policy determinations pursuant to rules, the

definition of ‘rule’ is to be broadly construed, while the exceptions are to be narrowly

construed.” AFSCME v Dep’t of Mental Health, 452 Mich 1, 10; 550 NW2d 190 (1996).

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Genetski at 8. Unlike a guideline, which “binds the agency but does not bind any other person”,

MCL 24.203(6), a rule, whether labeled as such or not, must involve notice, a public hearing, and

review by the Legislature’s Joint Committee on Administrative Rules. AFSCME v Dep’t of Mental

Health, 452 Mich at 9.

MCMA certainly appreciates and understands MRA’s desire to be flexible to respond to new

situations as data becomes available or new lessons are learned. MCMA is also thankful that

MRA has regularly sought industry and public input, be it through public meetings or MRA

workgroups and advisory boards. But however receptive to input today’s MRA has been,

enshrining the use of guidance in the rules creates the very real risk that future MRA leadership

will attempt to regulate by fiat. And even more importantly, if MRA guidance is challenged in the

courts, the result could easily be an environment where the regulated industry and market are left

without legal standards on important topics, such as requirements for safety testing.

Accordingly, we recommend that MRA resolve these concerns by removing references to

guidance in the rulesets and instead codifying any technical guidance and bulletins in the

administrative rules themselves. If a new situation arose that required immediate action, the APA

gives MRA the power to promulgate emergency rules to address matters that concern the

preservation of public health, safety, or welfare. MRA has used emergency rules to great success

and effect historically to combat and address matters of urgent public health, such as the Vitamin

E Acetate vaping crisis. MRA should conform to the APA’s requirements.

With respect the various proposed rulesets, the MCMA offers the following comments:

2020-121 LR – Marihuana Licenses Rule Set

 R 420.1(1)(c) – The definition of “Applicant” contains language covering both a direct “or

indirect” ownership interest, yet does not define the terms. In interpreting “indirect

ownership interest,” MRA has looked primarily to the right of a party to receive any share

of revenues or profits. Recently, though, uncertainty has been created by MRA relying on

language in its Statement of Money Lender form to conclude that a lender has an interest

for purposes of the rule prohibiting holding interests in both a safety compliance facility

and other license types. “Indirect ownership interest” should be specifically defined to

provide clarity to the industry as to what types of relationships constitute an “indirect

ownership interest” for purposes of meeting the definition of “applicant.”

 R 420.1(1)(f) – The definition of “common ownership” should be clarified to specify that

“common ownership” includes 2 or more state licenses or 2 or more equivalent licenses

held directly or indirectly by the same legal person, which among other effects would

provide clear authority for transfers between the subsidiaries of a parent company.

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 R 420.1(1)(o) and (dd) – MRA should consider clarifying the definitions of “limited access

area” and “restricted access area” as there is overlap in these definitions—particularly with

respect to marijuana sales locations.

 R 420.1(1)(s) – The definition of “Marihuana establishment” in the Draft Rule (and in the

current rules) is inconsistent with the definition in MRTMA, MCL 333.27953(h).

MRTMA defines an “establishment” as a “business,” not a “location.” While MCMA

understands the desire to harmonize definitions in MRTMA with those in the Medical

Marihuana Facilities Licensing Act (“MMFLA”), the definition of “marihuana

establishment” in the rules should be consistent with the statutory definition.

 R 420.3 – The MCMA supports the changes proposed to provide clear guidance as to when

applications may be administratively withdrawn or for prequalification approvals to be

revoked for subsequent ineligibility.

 R 420.4(2) and (9) – The Draft Rules continue requiring information not requested on

MRA’s current applications, such as financial account statements. MRA progressed in

easing the regulatory burden of the application process and focusing on information that is

truly important for determining applicant suitability. The rule should be amended to

conform to the MRA’s current application disclosure practice, by “required information

includes” with “may include” and making similar revisions elsewhere in R 420.4.

 R 420.4(3) – The proposed language as to who meets the disclosure requirement is

internally inconsistent. It starts with a statement that every person having an interest of

2.5% or greater must be disclosed. It then specifies by entity type who must be disclosed,

varying from the 2.5% threshold. This could be readily clarified by changing the

introductory language as follows: “Each applicant shall disclose the identity of all persons

having an ownership interest in the applicant with respect to which the license is sought as

follows:”. Also, it should be noted that the definition of applicant is proposed to be changed

with respect to trusts, but the disclosure requirement does not reflect that.

 R 420.5(1) – This rule should be modified to conform to the current application

requirements of the MRA. For example, the reference to a business plan in Subsection

(1)(ii) should be modified to reflect a marketing plan, technology, plan, and staffing plan.

 R 420.5(1)(e) – The MCMA applauds and supports the proposed rule change with respect

to MRTMA municipal attestations, as the proposed change conforms to MCL

333.27959(3)(b).

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 R 420.6(2)(d) – This subrule should be either removed or revised. While this prohibition

on holding any governmental office or position of employment appears in the MMFLA,

this statutory prohibition does not appear in the MRTMA. This prohibition should be either

stricken or narrowed to focus on addressing true issues of concern as opposed to importing

the broad exclusion from the MMFLA. The public health, safety, and welfare of the State

of Michigan is unlikely to be implicated if the spouse of a marijuana licensee happens to

be a public elementary schoolteacher or an appointee on the Ski Area Safety Board. If this

rule is maintained, then “regulatory body” should be defined and exclude Boards and

Commissions that do not issue licenses or promulgate regulations governing the activities

of third parties. (Relatedly, MCMA recommends that “regulatory body” also be defined

for MMFLA applications, and that the rules expressly incorporate the bases for license

denial contained in the MMFLA.)

 R 420.6(2)(h) – This rule prohibiting an ownership interest in more than 5 adult-use Class

C Grower licenses is inconsistent with the definition of “marihuana grower” in the

MRTMA. A “marihuana grower” is defined as a “person licensed to cultivate marihuana

and sell or otherwise transfer marihuana to marihuana establishments.” MCL 333.27953(i).

In the context of MCL 333.27959(3)’s prohibition on holding an interest in more than 5

“marihuana growers,” there is not a prohibition on the number of licenses. Instead, the

statute prohibits a “person” from holding an ownership interest in more than 5 different

businesses that hold Grower licenses, as opposed to 5 or more licenses. Accordingly, the

rule should be modified to conform to the statute by prohibiting an applicant from holding

an interest in more than 5 different entities that hold Grower licenses as opposed to

restricting the number of licenses that any individual entity may hold. This change would

not only reflect the actual statutory language, but would also eliminate what has become

an impediment to capital investment.

 R 420.6(6) – This added subsection, which imports for MRTMA licenses the language

from the MMFLA, MCL 333.27409, stating that a license is a revocable privilege and not

a property right should be stricken, as the same statutory language does not appear in

MRTMA. Whether a MRTMA license is a revocable privilege or a property right is the

subject of ongoing litigation. Absent express statutory authority, MRA should not

promulgate a rule to opine on an open question of law. Indeed, the determination of

whether a license is a property right and the definition of the scope of that right is a

legislative determination, not one delegated to the MRA.

 R 420.7 – The MCMA applauds the MRA’s decision to reduce prequalification application

fees and licensing fees across the board. The MCMA also applauds the MRA’s decision to

provide uniform fees for renewals, which gives clarity and certainty to the regulated

industry for purposes of budgeting the costs of licensure.

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 R 420.8 – The MCMA applauds MRA’s decision to allow limited contact and contactless

options for marijuana sales locations. The COVID-19 pandemic has shown that the

industry can safely and securely provide limited contact and contactless options to

customers. While we recognize that the Draft Rule strikes the prohibition on drive-thru

transactions, MCMA recommends that the MRA be explicit in authorizing drive-through,

so that no municipalities are confused and claim that drive-through’s are not allowed

because they are not specifically authorized.

 R 420.12(2)(s) – The denial of a license for failure to pass a pre-licensure inspection should

be clarified to indicate that this means the failure of a MRTMA applicant to pass a pre-

licensure inspection within 60 days of the submission of its establishment license

application. The current proposed language simply states that a failure to initially pass a

pre-licensure inspection could be grounds for denial of the application, which is contrary

to MRA’s practice. It is typical in a pre-licensure inspection for an applicant to add

additional security cameras or make other minor changes to the facility in response to

concerns or direction from the MRA field agent. These types of corrections to ensure

compliance and to respond to the direction of the field agent—even if initially a failing pre-

inspection report is issued—should not be grounds for denial of a license if the applicant

cures any noted deficiencies.

 R 420.12(2)(t) – The proposed rule seeks to give MRA authority to deny an applicant’s

application if they submit an amendment to add an individual or entity that MRA then

determines is not eligible for licensure. It is unclear what issue this rule is seeking to fix,

as the amendment application would be denied if it was determined that an individual or

entity proposed to be added was ineligible or unsuitable. In practical terms, applicants

could be expected to cause any and all individuals or entities they wished to add to

ownership first be separately prequalified. Only then would applicants be able to add new

parties without fear of possibly jeopardizing the original applicant’s status by attempting

to add an unsuitable partner. This would create inefficiencies in the process and inhibit the

ability of applicants to raise capital after they have been prequalified. MCMA proposes

striking this proposed addition to the rules.

 R 420.14 – The reporting requirements for licensees should be consistently changed from

“calendar days” to “business days” to conform with the proposed changes in R 420.802,

which exclusively uses “business days.” The timelines for reporting to the MRA should be

consistent to avoid inconsistency or misunderstandings.

 R 420.18(2) – The MRA should clarify and make explicit the fees that will be required for

a change of location. The current rule uses permissive language by using the word “may”

as to whether additional fees will be required, yet our experience has been that MRA

charges a full new licensure fee or regulatory assessment even when a licensee is moving

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from a facility that has been licensed for a short period of time. MCA recommends that

MRA charge a specific transfer fee limited to MRA’s actual expense in reviewing a new

facility application and inspecting a new location.

 R 420.20 – MCMA wholeheartedly supports MRA reviewing financial records of licensees

for critical compliance matters. Nevertheless, in its application of the MMFLA’s Annual

Financial Statement to MRTMA licensees, MCMA believes that the AFS has metastasized

to become something it was never intended to be. There is nothing to suggest that the

Legislature intended the AFS to be anything other than what is commonly understood to

be financial statements, i.e., a balance sheet, income statement, and a statement of cash

flows. Instead, what MRA has turned into a searching audit takes enormous amounts of

time and expense. For smaller businesses (e.g., stand-alone provisioning centers or

retailers, microbusinesses), the cost is extreme enough that a credible argument can be

made that the AFS constitutes an “unreasonably impracticable” mandate in violation of

MCL 333.27958(3)(d). The MRA should provide definitive clarity as to the breadth and

scope of the AFS mandate, and should strongly reconsider its current practice to focus on

requiring applicants to provide only those financial documents that are necessary for the

MRA to confirm regulatory compliance. Relatedly, MCMA recommends that a rule be

added to define the AFS requirement under the MMFLA.

 R 420.23 – Again, MCMA believes that MRA should conform its definition of “marihuana

grower” in R 420.6(2)(h) to the language of the statute. This would obviate the need for

excess grower licenses. If MRA keeps the excess grow license, MRA should re-evaluate

the ratio of Medical Class C Grower Licenses that are required to secure each excess

grower license. Medical product is now only 25% of the marijuana market and likely to

become an even smaller share. A ratio of 1 medical Class C license to 4 excess grow

licenses would much better reflect the market.

2020-120 LR – Marihuana Licensees Rule Set

 R 420.101(c) – The definition of “another party” becomes unclear in certain contexts, such

as the obligation to report misconduct of “another party” being limited to parties to a

contract rather than other licensees. “Outside party” or “unlicensed third party” may be

preferable.

 R 420.101(1)(m) – The definition of “management or other agreement” should be clarified

to provide clear definitions for the terms “gross profit” and “net profit.” “Gross profit”

should be defined as “Revenue less Cost of Goods Sold.” “Net Profit” should be defined

as “Gross profit less expenses.” These terms would eliminate ambiguity that exists in the

context of licensing agreements today. Additionally, the definition for management or

other agreement states that such an agreement is one by which an outside party either can

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exercise control or receive more than 10% of gross or net profit. Consequently, the other

party would be an applicant under both the statutory definitions and the provisions of

proposed new rule 420.112a(4). That being the case, the management or other agreement

definition should also include the fact that the outside party will be a supplemental

applicant and must be reviewed by MRA as such.

 R 420.102(1) – MCMA recommends that the broader term “cultivate” should be used in

this rule as opposed to the term “grow.” This would mirror the language used in Section

10 of MRTMA, MCL 333.27960(1)(a) and also the language used in R 420.105(1)(a) for

microbusinesses with respect to the authorization to cultivate marijuana plants.

 R 420.102(3) and (5) –The rule allows growers to acquire mature plants, seeds, seedlings,

tissue cultures, and immature plants from other adult-use growers, but does not authorize

acquiring harvested marijuana from another adult-use grower. MRTMA, however,

expressly allows a grower to sell marijuana, broadly defined, to other licensed

establishments. MCL 333.27960(1)(a). The rule should be modified to track the statute

and also allow growers to acquire “marihuana” from other growers.

 R 420.102(9) – By providing that a grower may obtain from another grower “seeds, tissue

cultures and clones that do not meet the definition of marihuana plant,” this subrule

conflicts with subrule (3), which explicitly allows an adult-use grower to transfer mature

plants to another adult-use grower. It also conflicts with MRTMA. To reflect the language

of MRTMA, the subrule should either broadly grant authority to acquire “marihuana” from

another grower, or simply be deleted in favor of reliance upon subrule (3). If the intent of

this subpart is to address the acquisition of seeds, tissue cultures and clones by an adult-

use grower from a medical grower, then the subrule should be limited to such acquisitions.

Finally, the entirety of R 420.109 fails to recognize that MRTMA authorizes adult-use

growers “acquiring marihuana seeds or seedlings from a person who is 21 years of age or

older.” MCL 333.27960(1)(a). In the interests of clarity, this statutory authorization

should be placed into the rule.

 R 420.103 – Subrule (1) allows processors to purchase from or sell to adult-use

establishments, which would obviously include other processors. The proposed rule would

delete subrule (3), which permits a licensee who holds processor licenses at multiple

locations to transfer inventory between locations. This would appear to still be allowed

under subrule (1), but it would be helpful for MRA to confirm that. Furthermore, when

the present rules were adopted, they were for a brief time misinterpreted as allowing

microbusinesses to acquire processed product, which contravenes MRTMA’s requirement

that microbusinesses sell only “marihuana cultivated or processed on the premises.” MCL

333.27960(1)(f). To avoid such a misinterpretation arising again in the future, MCMA

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recommends that subrule (1) expressly exclude microbusinesses from the establishments

to which a processor may sell or transfer marijuana.

 R 420.104 – MCMA’s comments regarding R 420.103 apply to R 420.104 as well.

 R 420.105 – As noted above, R 420.105(7) provides that microbusinesses are subject to all

“applicable” rules that govern the activities of growers, processors and retailers. The rule

also notes the obvious that microbusinesses are subject to the provisions of MRTMA

pertaining to this license type. This includes that activities related to cultivation, processing

and sale of marijuana must take place solely on the premises of the microbusiness. MCL

333.27960(1)(f). Because subrule (7) was for a brief time misinterpreted as allowing

microbusinesses to participate in the full range of activities permitted for growers,

processors, and retailers, MCMA recommends that the rule more clearly incorporate the

limits of MRTMA. This could be accomplished by:

o Inserting “All marijuana must be cultivated solely on the premises” at the end of

subrule (1)(a);

o Inserting the phrase “cultivated on the premises” after the word “marihuana” in

subrule 1(b); and

o Inserting the phrase “cultivated or processed on the premises” after the word

“marihuana” in subrule (1)(c).”

To align the rule with the statutory language, MCMA recommends that proposed subrule

(8) read “A marihuana microbusiness may not purchase or accept a mature plant from

another establishment, an individual, a registered qualifying patient, or a registered primary

caregiver.” (Should pending House Bills 5300 and 5301 be enacted, “specialty medical

grower” should be added to the above, as well as in other applicable rules.)

 R 420.105a – This new proposed license should be stricken entirely from the rule set.

The proposed “Class A microbusinesses” would be the farthest thing from any conception

of a “microbusiness,” and completely disrupt the market and settled expectations of

incumbent businesses at every level. Instead, these so-called microbusinesses would be

full-fledged retailers able to acquire unlimited just-harvested plants from multiple sources

including caregivers and individuals, acquire and sell unlimited amounts of concentrate

and infused product, and to still operate as a grower and retailer, all for a lower license fee.

The suggested authorization to allow mature plants to be acquired from patients,

caregivers, and anyone over the age of 21 would without question lead to microbusinesses

that would be based on mature plants collectively grown by unlicensed individuals, greatly

exacerbating current problems with caregivers and unlicensed individuals functioning as

de facto commercial growers in neighborhoods throughout the state. MRA would

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effectively be blessing and encouraging the movement of cultivation activities outside of

MRA licensed and regulated facilities. Even worse, the conduct that would be authorized

by rule is flat-out illegal and would blatantly violate both MRTMA and the MMMA.

MRTMA is explicit that adults cannot sell marijuana, but can only gift marijuana to

individuals (not businesses). MCL 333.27955(1)(d). Our Supreme Court has ruled that

the only transfers of medical marijuana authorized by the MMMA and that are lawful are

transfers from caregivers to their maximum of five patients connected to them through the

medical marihuana registry. People of the State of Michigan v McQueen, 493 Mich 135

(2013). Indeed, a caregiver or patient selling their marijuana cultivated under the MMMA

is committing a felony. MCL 333.26424(l). Patients and caregivers are authorized only to

transfer or sell marihuana seeds or seedlings to MMFLA growers. MCL 333.26424a(2)(b).

Quite simply, this proposed new license type would facilitate and reward the illicit market

and unregulated actors.

It is also worth noting that this concept originated with MRA’s Racial Equity Workgroup,

yet the proposed rule is not in any way tied to social equity. MCMA has in the past

supported legislative changes to authorize a higher plant count for social equity applicants

(as well as improvements to MRA’s determination of what makes up definition of

“disproportionately impacted communities.”)

 R 420.106 – MCMA recommends that this rule be revised to simply require ongoing

reporting to MRA Compliance of any off-site addresses where vehicles may be stored, not

require these locations to be identified by address in a secure transporter’s staffing plan.

This would alleviate any need for a secure transporter to constantly update a plan that

would need to be sent through MRA Applications.

 R 420.107 – MCMA strongly supports the proposal to allow MRTMA safety compliance

facilities to test marijuana from individuals who are home growing under MRTMA.

 R 420.108 – Unlike MRTMA, the MMFLA does not allow growers to accept returns of

product from processors or provisioning centers. As you know, MRA has taken

disciplinary action against MMFLA licensees for product returns to growers. To parallel

other rules and make the prohibition more clear, MCMA recommends placing that

prohibition in the rule.

 R 420.110 – While the MMFLA limits to whom some license types may transfer product,

this is not the case for secure transporters, who may “transport marihuana and money …

between marihuana facilities.” MCL 333.27503(1). Although a secure transporter’s place

of business is a “facility,” there has been some confusion over whether secure transporter

to secure transporter transfers are permissible. MCMA recommends that the rule expressly

state that such transfers are lawful. As with R 420.106, MCMA also recommends that this

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rule be revised to require ongoing reporting to MRA Compliance of any off-site addresses

where vehicles may be stored, not require these locations to be identified by address in a

staffing plan.

 R 420.112 – This rule today states that safety compliance facilities are authorized to “Take

marihuana from, test marihuana for, and return marihuana to only a marihuana facility.” R

420.112(1)(a) (emphasis added). Although the rule tracks the statutory language of the

MMFLA, it must also account for the fact that the MMMA allows patients and caregivers

to transfer “marihuana for testing to and from a safety compliance facility licensed under

the medical marihuana facilities licensing act.” MCL 333.26424a(2)(c). This provision of

the MMMA was enacted at the same time as the MMFLA, via a tie-barred bill, and was

contingent upon the MMFLA being enacted. The two statutes, therefore, should be

construed in pari materia, and the rule should therefore reflect that safety compliance

facilities may also test patient and caregiver medical marihuana.

 R 420.112a – MCMA appreciates MRA placing the standards for licensing agreements in

the rules and recognizing the need to address management agreements and other similar

agreements. MRA is also pleased that the rule removes the current Advisory Bulletin

requirement that licensing royalties be based on the number of units sold or a monthly rate.

As the Advisory Bulletin provisions are being enshrined in the rules, though, MCMA

believes that there are aspects that should be made more clear.

First, the definition of “other agreement” and the test for whether another party meets the

definition of “applicant” both depend on whether the other party could receive “more than

10% of the gross or net profit from the licensee.” As with proposed R 420.101(1)(m), this

rule should provide clear definitions for the terms “gross profit” and “net profit.”

(“Revenue less Cost of Goods Sold” and “Gross profit less expenses” respectively.)

Second, “profit from the licensee” should be defined as being based on the licensee’s total

revenues, not just the revenues attributable to the products that are the subject of the

licensing agreement. This would then track the statutory definition of applicant. Third, it

should be made clear that the 10% payment cap does not include payments for services,

equipment, packaging, etc. so long as they are provided at fair market value and the contract

shows how that is calculated. (This is MRA’s current practice.)

In addition to these points of clarification, MCMA recommends striking the provision on

how and by whom payments may be made (the second sentence of subrule 3(i)), as payment

flow should not be an issue unless the other party is being given the ability to control or

participate in the management of the licensee. For the same reason, MCMA recommends

striking subrule (3)(iii). Finally, MCMA asks that the rule be applied only prospectively

or to agreements that have not previously been approved by MRA. This would avoid what

would be the unconstitutional impairment of contracts.

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2020-122 LR – Marihuana Operations Rule Set

 R 420.203 – MRTMA prohibits MRA from adopting any rule requiring a “marihuana

retailer to acquire or record personal information about customers other than information

typically required in a retail transaction.” MCL 333.27958(3)(b). In requiring that licensees

maintain sales records and receipts, MRA should make clear, at least for adult-use, that

personal information about customers at the retail level need not be provided to MRA.

 R 420.204 – MCMA supports the accommodation that would permit internal analytical

testing space to be utilized by co-located licensees. Based on the experience MCMA

members have in numerous other jurisdictions, however, MCMA discerns no regulatory

purpose that is being achieved with the artificial separation of grower and processor spaces

within co-located facilities. In other states, no such separation is required, and licensees

are free to design facilities that are far more efficient. MCMA strongly recommends

eliminating the separation requirements altogether, at least as pertains to grower and

processor activities. METRC tags are sufficient to determine if marijuana or marijuana

products that are in progress or finished are associated with the grower license or processor

license, just as with adult-use and medical marijuana and products being in the same grower

or processor space. For co-located growers and processors, MRA should permit inventory,

record keeping, and point of sale operations to be shared, and there is no reason to mandate

that licenses be posted in separate spaces. If MRA does, for some reason, believe that the

separation of these operations is necessary, MRA should at a minimum allow both licenses

to use some areas simultaneously (e.g., shipping and receiving).

 R 420.206(4) – This rule presently provides that MRA is to publish lists of approved and

banned chemicals, but the rule is silent about the use of chemicals that are on neither list.

MRA’s present stance is that if a cultivator wishes to use an unlisted chemical, they must

ask MRA, which will first work with MDARD to determine if use should be allowed. This

should be spelled out in the rule.

 R 420.206(8)(b) – This rule currently provides that when a lab manager leaves and an

interim is designated, that interim must meet the qualifications of a “supervisory analyst.”

These qualifications should be set out in the rule.

 R 420.206(13) – MCMA believes that the ability of licensees to utilize hemp-derived inputs

would be unnecessarily hampered by mandating that all ingredients containing

cannabinoids, whether naturally occurring or synthesized, be sourced from an entity that is

licensed by a governmental authority and entered into METRC. First, there is not presently

any mechanism for MRA licensees to add ingredients to METRC, and there is no METRC

access for hemp producers. Second, the function of protecting patient and customer safety

would be better served by requiring Certificates of Analysis to be provided by all suppliers

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of cannabinoids that do not meet the definition of “marihuana” than by requiring that all

come from licensed sources. Testing of the resulting product then will further confirm

safety.

If MRA is to retain the proposed requirement, at a minimum it should be modified to clearly

provide that the licensing authority is not restricted to MDARD or other Michigan

agencies, as interstate commerce in hemp-derived products is now federally legal. Any

hemp-based ingredients originating from a producer operating under a USDA approved

hemp plan should be acceptable. Additionally, there should be some phase-in of this rule

so that it does not take effect until (1) the necessary functionality is added to METRC, and

(2) MDARD has provided a clear pathway for Michigan hemp growers and processors to

transfer hemp and derivatives to MRA licensees. In the interim, MRA could require that

all COAs and licenses of suppliers be kept on file for inspection, and that they be uploaded

to MRA once MRA creates a way to do this.

 R 420.206a – While requiring written standard operating procedures is appropriate and

welcome, the proposed rule provides no clarity or definition to permit a licensee to identify

the specific processes for which SOP’s are required. The rule lacks any description about

the level of detail that SOP’s must contain. The rule leaves all this and more to “any

guidance issued” by MRA. Again, the use of binding guidance documents rather than

notice and comment rulemaking violates the APA. MRA should also recognize the value

of industry operational experience being considered when developing required parameters

for SOP’s. For both legal and practical reasons, SOP requirements should not be produced

without industry input.

 R 420.207 – MCMA recommends eliminating the current restriction that a delivery

employee may only be employed for one sales location. At a minimum, MRA should allow

drivers to be employed by multiple sales locations if those locations are under common

ownership. It serves no regulatory purpose to require companies that have multiple stores

to have employees be restricted to working at only one location.

 R 420.207a – MCMA is highly supportive of permitting sales locations to designate an

area for contactless or limited contact transactions, unless prohibited at the municipal level.

To avoid uncertainty, MCMA recommends that the rule state explicitly that drive-through

and curbside sales are acceptable. MCMA also recommends that subrule (7), which would

direct that the area for contactless or limited contact transactions meet the security

requirements of R 420.209, be modified to exclude R 420.209(3)’s mandate for locks.

 R 420.208 – Michigan is an outlier, perhaps the only state in the nation, in classifying

marijuana grow facilities as “industrial uses.” The sprinkler systems, minimum aisleway

widths, and other requirements for manufacturing facilities simply make no sense for

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buildings used for the cultivation of marijuana. MCMA recommends that MRA and the

Bureau of Fire Services work with industry to adopt or develop standards that are more

appropriate to the actual use of facilities. Also, as MRA and BFS are no doubt aware, the

National Fire Protection Association is currently developing new standards for cannabis

facilities. MCMA recommends that the rule provide for re-evaluation of fire protection

standards once the NFPA process is complete.

 R 420.212 – MCMA recommends that co-located facilities be permitted to store marijuana

product in a common area.

 R 420.214 – MCMA suggests that “common ownership” be broadly defined such that

transfers among subsidiaries of the same company are more clearly authorized. MCMA

also recommends that the requirements and parameters for transfers be set forth in the rule,

and not by “guidance,” which violates the APA. MCMA also recommends providing clear

authority for transfers of all from expiring licenses that are not being renewed.

 R 420.214a – MCMA is strongly supportive of the express authorization of internal

analytical testing, and suggests only that licensees be allowed to have product from more

than one license in the space the same time.

 R 420.214b – MCMA recommends that the term “adverse reaction” be defined. MCMA

also recommends that the reporting requirement be placed into R 420.14, which contains

all of the other event reporting mandates.

 R 420.214c – MCMA recommends that the term “defective product” be defined.

2020-124 LR – Marihuana Sampling and Testing Rule Set

 R 420.305 – MCMA strongly supports this proposed rule, which would give consumers

and patients (as well as industry) greater confidence in the reliability of safety testing.

 R 420.307 – MCMA recommends striking the mandate that all marijuana businesses must

follow guidance that may be published and instead set forth standards in the rules. By law,

guidance cannot bind those outside of the agency; this rule should be modified to conform

to the requirements of the APA.

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2020-119 LR – Marihuana Infused Products and Edible Marihuana Products Rule Set

 R 420.403(6) – “Inactive ingredients” is defined in the rules in a manner that excludes from

the definition ingredients “not derived from the plant Cannabis sativa L.” R 420.102(1)(e).

By requiring “All non-marihuana inactive ingredients” (emphasis added) to be listed and

approved, ambiguity is introduced. “Inactive ingredients” are by definition “non-

marihuana,” so it is unclear what is accomplished by the addition of “non-marihuana” to

the term. Because of the general interpretive rule that words in a rule should be interpreted

so that they are not surplusage, licensees will be left to attempt to interpret the meaning.

One implication could be that hemp-derived products and compounds (CBD, etc.) fall

within the rule’s ambit. If this is the case, then virtually all such ingredients would be

prohibited, because the FDA has not included them in the FDA Inactive Ingredient

database. MCMA recommends that the words “non-marihuana” be deleted.

 R 420.406(7)(a) – MCMA recommends that MRA not adopt its proposed mandate that

product names “must be an appropriately descriptive phrase that accurately describes the

basic nature of the product.” This significant change seems to imply that products must be

named “gummies” or “chocolate bars” and would undermine the value of branding.

 R 420.406(8)(d) – MCMA recommends that MRA not adopt the addition of “in charge” as

that could be interpreted as requiring the certification of all managerial employees. MCMA

recommends a more targeted requirement that “an employee who is certified as a Food

Protection Manager must supervise the production of edible marihuana product.”

 R 420.406(9)(e) – MCMA recommends that this new proposed provision be deleted, or at

the minimum, made more clear. It is not clear from the text of the rule what prohibiting

edible marijuana packaging from containing “the characteristics of commercially available

food products” means. Would this prohibit packaging like that used for a candy bar?

Clarity should be provided.

2020-123 LR – Marihuana Sale or Transfer Rule Set

 R 420.501 – MCMA recommends that “administrative hold” be expanded to also expressly

encompass “potential health hazards.” Prior to the MRA’s emergency rules during the

EVALI crisis, it was not a violation of either the acts or the rules to produce vape cartridges

containing Vitamin E Acetate (although fortunately, there is no record of such products

being manufactured by MRA licensees). MRA therefore arguably lacked legal authority

at that time to impose an administrative hold. The rule should explicitly give MRA the

authority to do so when public health is in jeopardy.

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 R 420.504(1)(f) – MCMA strongly believes that the requirement that product containers or

bags include net weight in “United States customary” units should not be removed from

the rules. Quantity limitations for products sold to patients and customers are virtually all

expressed in ounces. See MCL 333.2424(c). Ounces and pounds have been customarily

used in reference to cannabis since before the invention of the metric system and are widely

understood by customers and patients.

 R 420.504(4) – By requiring that safety information pamphlets “substantially conform to

the design published on the agency’s website,” MRA is again sidestepping the

requirements of the APA. In addition, this approach violates the Acts. In the MMFLA,

the Legislature mandated that the MRA “promulgate rules” that “must include rules to …

[e]stablish informational pamphlet standards…” MCL 333.27206(u) (emphasis added).

MRTMA also mandates the inclusion of informational pamphlet standards in promulgated

rules. MCL 333.27958(1)(l). MCMA recommends that MRA conform to the requirements

of the APA, MMFLA, and MRTMA and incorporate the pamphlet standards into the rules

themselves. MCMA also recommends that MRA provide lead time for new pamphlet

requirements (which would occur naturally under the framework of the APA).

2021-10 LR – Marihuana Employees Rule Set

 R 420.602(2)(e) – MCMA believes that the requirement for “responsible operations plans”

should be limited to designated consumption establishments, marijuana events,

microbusinesses, and retailers. These are the only license types that deal directly with

customers and patients. While MCMA recognizes that responsible operations plans are

also to detail how employees will prevent underage access to the establishment, illegal sale

of marihuana in the establishment, and potential criminal activity, each of these must be

addressed in the establishment’s security plan. Having duplicative plans invites confusion.

 R 420.602(2)(j)-(k) – MCMA recommends that MRA include the statutory disqualifier for

MMFLA employees, and the ability to obtain a waiver from MRA.

 R 420.602a – MCMA believes that extending to the employment context the prohibition

on holding an interest in a secure transporter or safety compliance facility while holding

an interest in any other license type is unnecessary and over-reaches. MCMA does not

believe that there is an adequate rationale to provide that an employee of a secure

transporter or laboratory may not also be an employee of any other licensee. MCMA is

also concerned that a licensee could face regulatory discipline for unknowingly employing

or continuing to employ someone who also has a job with a prohibited license type.

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2020-118 LR – Marihuana Hearings Rule Set

 R 420.703 – MCMA is pleased to see the specific inclusion of authority for ALJ’s to

subpoena witnesses.

2020-117 LR – Marihuana Disciplinary Proceedings Rule Set

 R 420.801(1)(g) – MCMA recommends that the subrule read that contested case hearings

be conducted “pursuant to the APA, the acts and these rules.”

 R 420.802 – MCMA asks that subrule (4)(c) be clarified to provide that reporting of

violations of “another party” means the defined term “another party.” Otherwise, this rule

could easily be misinterpreted as requiring notification to MRA when a licensee “should

have been aware” of a regulatory violation by any other licensee. (Although MCMA

certainly hopes that licensees who become aware of regulatory concerns will bring those

to MRA’s attention.) MCMA also notes again that this rule would have reporting

requirements measured in business days, while R 420.14 has the same reporting

requirements measured in calendar days. These should be consistent.

 R 420.808a – While beneficial that MRA is adding a rule to implement the statutory

requirement of an exclusion list, portions of the proposed rule should be modified. First,

including individuals on the list for theft, fraud or dishonesty even when a conviction has

not been obtained takes a step too far. Someone who has been acquitted of criminal activity

should not be treated as a criminal. Second, exclusion for “conduct that could negatively

impact public health, safety, and welfare” is far too subjective and broad. Third, the cross-

reference in subrule (3) to R 420.705 should be corrected to cross-reference R 420.704a.

Finally, MCMA is concerned that a hearing under R 420.704a must be requested within 21

days, or else an individual stays on the exclusion list. Those excluded should have other

opportunities to contest their exclusion. Subrule 5(c)’s proviso that exclusions are

permanent if they are for reasons other than conduct (such as having been found ineligible

for licensure at one time) eliminates the opportunity for someone who was denied licensure

to reapply in the future, when they may have matured or circumstances otherwise have

changed. The prospect of rehabilitation should not be foreclosed.

2021-29 LR – Marihuana Declaratory Rulings Rule Set

 R 420.822(1) – MCMA believes that providing for declaratory rulings is a very positive

step forward, and recommends that all declaratory rulings be posted on the MRA website.

MCMA, however, believes that language should be added to this rule to clarify that MRA

will still respond to questions from licensees concerning the application of rules and

provide informal review of product packaging, but MRA’s answers to such questions will

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be non-binding. A simple sentence should be added to the conclusion of R 420.822(1) that

states: “Nothing in this rule is intended to limit or restrict the agency’s ability to respond

to questions or inquiries from licensees or the general public, but any agency response to

such questions or inquiries shall not be binding on the agency.”

 R 420.822(2)(c), (d) – The proposed language limits the scope of a declaratory ruling to

“statutes, rules, or orders” that may apply to the requested declaratory ruling. The MRA

should consider broadening the scope of these rules to also include “constitutional

provisions,” “judicial opinions,” and “ordinances.” The implications of the Michigan

constitution may factor into a declaratory ruling. Similarly, a judicial opinion, particularly

one that constitutes binding legal precedent from the Michigan Court of Appeals or

Michigan Supreme Court, may be implicated in a declaratory ruling. Lastly, both the

MMFLA, MCL 333.27205(1), and MRTMA, MCL 333.27965(2), prohibit local

municipalities from adopting ordinances that conflict with the MMFLA, MRTMA, or rules

promulgated by the MRA. There may be instances in which it may be appropriate for the

MRA to offer a declaratory ruling with respect to whether a local municipal ordinance

conflicts with the MMFLA, MRTMA, or the rules.

 R 420.822(12) – The rule should be slightly modified to make clear that any declaratory

ruling issued by the agency also contain the effective date of the ruling.

In conclusion, MCMA again thanks MRA for the effort already put into the Draft Rules and looks

forward to the number of positive steps proposed. MCMA also appreciates MRA’s consideration

of the comments provided in this letter, and values the collaborative approach of the agency. If

there are any questions with respect to these comments, please contact me.

Regards,

DYKEMA GOSSETT PLLC

R. Lance Boldrey

cc: MCMA Board

118728.000002 4846-8058-6748.2

To: Andrew Brisbo, Executive Director Marijuana Regulatory Agency

From: Nico Pento, VP External Affairs Terrapin

Date: September 27, 2021

Subject: Proposed Cannabis Rule Comments

_____________________________________________________________________________________________

Director Brisbo,

We respectfully submit this public comment on the MRA’s current proposed cannabis rules. We ask that you take

these comments into consideration prior to final approval.

R 420.808a. Rule 8a. Exclusion

This section needs further explanation. It is unclear to us whether or not the licensee is required to determine

employees that should be excluded during the background check or upon discovery that the employee meets

criteria for exclusion, or if only the agency has the authority to determine exclusion. If businesses could be

penalized for not excluding an employee who meets the criteria defined within the rules, further clarification is

necessary to ensure compliance.

R 420.602. Rule 2. Employees; requirements

We agree with including a responsible operations plan in the employee training manual, but much of the

information required in this section does not apply to cultivation or processing labs. We request that the rules are

clarified to apply only to marijuana sales locations.

R 420.602a. Rule 2a. Prohibitions

We agree that employees of a cultivator, producer or sales location should not be an employee of a testing

laboratory. We also agree that owners of processing labs, cultivation facilities or sales locations should not own a

testing lab or possess a transporter license. However, we believe it would be beneficial to permit transporter

employees to also be employees of a producer, cultivation facility or sales location. At present, certain licensees use

contract security that also own a marihuana transporter license. As the rules are currently written, these

employees would be non-compliant. To ensure that licensees can still use such contract security without being

sentenced to noncompliance, we recommend striking the following:

(1) An employee of a cultivator may not also be employed by a marihuana transporter or a laboratory.

(2) An employee of a producer may not also be employed by a marihuana transporter or a laboratory.

(3) An employee of a marihuana sales location may not also be employed by a marihuana transporter or a

laboratory.

(4) An employee of a marihuana transporter may not also be employed by a cultivator, producer,

marihuana sales location, or laboratory.

(5) An employee of a laboratory may not also be employed by a cultivator, producer, or marihuana sales

location. or marihuana transporter.

(6) An employee of a marihuana microbusiness or a class A marihuana microbusiness may not also be

employed by a laboratory. or a marihuana transporter.

R 420.502 Rule 2. Tracking identification; labeling requirements; general

Subrule 4 of this section requires marihuana businesses to destroy expired marihuana products. However, R

420.214c (Product returns) states that “a marihuana retailer may return a marihuana product that is past its

expiration date to the marihuana processor who produced the marihuana product for destruction instead

of destroying the marihuana product.” To maintain consistency, we suggest referencing this rule

in R 420.502 (2)(4).

(4) A marihuana business shall not sell or a transfer marihuana product after the printed

expiration date on the package. An expired marihuana product must be destroyed, either by the retailer or

by being returned to the marihuana processor for destruction, consistent with the provisions in

R420.502(2)(4).

R 420.403. Rule 3. Requirements and restrictions on marihuana-infused products before sale or transfer

To ensure compliance regarding the labeling of marihuana-infused products, we recommend that 7(a) and (b) of

this section include specific definitions for “basic nature” and “component ingredients.” Or at a minimum

additional guidance as to what the department will interpret as “basic nature” and “component ingredients.”

R 420.303. Rule 3 (4). Batch; identification and testing

Subrule 4 of this section is extremely concerning, particularly from an inventory and compliance perspective.

Requiring the destruction of plant tags immediately after a tagged plant is harvested means that plants from

harvest batches, which cannot get a package tag until passing testing, would be without a METRC tag while waiting

for test results. If plants are unaccounted for any length of time, this can cause serious issues with inventory and

create opportunities for diversion, potentially sentencing cultivators to noncompliance. We respectfully request

that the MRA either remove the new proposed rules for R 420.303 (3)(4), or change the language to state that

cultivators may, but are not required to destroy tags immediately after a tagged plant is harvested. Proposed

language is below in red:

(4) After A cultivator shall immediately destroy the individual plant tag once a tagged plant

is harvested, it and is part of a harvest batch so that a sample of the harvest batch can be tested by a

licensed laboratory as provided in R 420.304 and R 420.305. A cultivator shall separate the harvest batch

by product type and quarantine a harvest batch the harvested batch from all other plants or batches

marihuana and marihuana products when the marihuana batch has that have test results pending. A

harvest batch must be easily distinguishable from other harvest batches until the batch is broken down

into packages. A cultivator may not combine harvest batches.

OR

(4) A cultivator shall immediately may, but is not required to, destroy the individual plant tag once a

tagged plant is harvested and is part of a harvest batch so that a sample of the harvest batch can be tested

by a licensed laboratory as provided in R 420.304 and R 420.305.

R 420.303. Rule 3 (6). Batch; identification and testing

Subrule 6 allows cultivators to transfer or sell fresh frozen marihuana to a producer without being tested by a lab,

with agency approval. Since the MRA also allows trim to get transferred to a lab without testing, we recommend

clarifying current language to state that any harvest batches may be transferred to a lab without testing, pending

agency approval

(6) A cultivator may transfer or sell any harvest batches fresh frozen marihuana to a producer without first

being tested by a laboratory in order to produce fresh frozen live resin, or if the marihuana product will be

refined to a concentrate extracted, with agency approval.

R 420.306. Rule 6. Testing marihuana product after failed initial safety testing and remediation.

While we understand that safety testing and remediation for marihuana products is necessary to protect public

health and safety, we believe that products that failed testing for Aspergillus, as indicated in subrule 3 of this

section, should be eligible for remediation. Certain remediation processes, such as x-ray chamber decontamination

and ozone-based decontamination, can effectively destroy contamination while maintaining marihuana’s

biologically active ingredient. Both of these decontamination processes use scientifically proven technology to

destroy the full complement of microbial cells, including aspergillus. This results in a product that has been

successfully remediated, can pass state testing and is safe for human consumption.

(3) Products that failed testing for Aspergillus are ineligible for remediation.

R 420.306. Rule 6. Testing marihuana product after failed initial safety testing and remediation

While we understand the provisions under subrule 4 and 5, we would like more information on failed testing. Since

the threshold for certain medical marihuana products is different from certain adult use marihuana products, we

would like more details and clarity on what constitutes failed testing.

R 420.203. Rule 3. Marihuana licenses; licensees; operations, general

We understand the intention of this rule and agree that licensees should maintain accurate and comprehensive

financial records. However, many licensees have stacked licenses and operate separate businesses at the same

location and as such, their accounting documentation is by entity rather than individual license. Since it is possible

for licensees to meet the requirements of this rule by providing documentation per entity, we suggest removing

“each license” from the language of this rule.

(i) A licensee shall maintain accurate and comprehensive financial records for each

license that clearly documents the licensee’s income and expenses. Applicable supporting source

documentation must be maintained, including, but not limited to, all of the following:

R 420.204. Rule 4. Operation at same location

While we understand and agree with the provisions outlined in R 420.204 and 420.212, we recommend that

licensees with any combination of marihuana licenses who are operating separate businesses at the same location

be permitted to share an on-site storage area for all products in final form. That some marihuana products in final

form are flower based and some are concentrate based offers no inherent reason for displacement and separation

of storage. Since storage areas must be equipped with security features, requiring separate storage areas not only

creates undue burden for marihuana businesses from a financial and operations perspective, but it also creates a

burden for businesses that may not have sufficient space for separate storage areas. Allowing all products in final

form to share a storage area would address these issues. Our proposed language follows below:

4) Operation of marihuana licenses at the same location may include a combined space for the purposes of

complying with R 420.214a.

a. A licensee that has any combination of marihuana licenses and is operating separate marihuana

businesses at the same location may share an on-site storage area for all marihuana products in final form

if the licenses have a stacked licenses, pursuant to Rule 4, 420.204 and share common ownership, as

defined in Rule 1, 420.1f.

R 420.206. Rule 14

We agree with safety compliance testing of marihuana products, but it is unclear whether the test requirements in

this section would apply to intermediary steps in the processing lab. We believe that requiring testing during

intermediary steps is unnecessary and inefficient, as the results of these tests may not be consistent with the final

form of the product. Requiring tests during intermediary steps is also time consuming and increases operating costs

for the licensee, which ultimately trickles down to the patient or consumer. Since cannabis products are already

required to be tested in their final form, which is closest to what the patient or consumer would receive for

consumption, we recommend final form testing throughout the program.

(14) When combining more than 1 form of marihuana or marihuana product into a single marihuana

product, each form of marihuana or marihuana product only the final form of the product must have

passing safety compliance test results in the statewide monitoring system prior to the creation sale or

distribution of the new combined product.

R 420.212. Rule 12. Storage of marihuana product

Consistent with the above comments regarding R 420.204, we recommend that licensees with any combination of

marihuana licenses who are operating separate businesses at the same location be permitted to share an on-site

storage area for all products in final form.

1) All marihuana products must be stored at a marihuana business in a secured limited access area or restricted

access area and must be identified and tracked consistently in the statewide monitoring system under these rules.

a) A licensee that has any combination of marihuana licenses and is operating separate marihuana

businesses at the same location may share an on-site storage area for all marihuana products in final form,

if storage is compliant with the provisions of R 420.212 and the following requirements are met:

i) Licensees have a stacked license pursuant to Rule 4, 420.204; and

ii) Licensees have common ownership, pursuant to Rule 1, 420.1f; and

iii) Local jurisdictions permit shared storage.

Robin Schneider

MiCIA

Executive Director

(517) 974-2265

101 S. Washington Square #820

Lansing, MI 48933

robin@micannabisindustryassociation.org

micannabisindustryassociation.org

MICIA COMMENTS ON DRAFT MARIHUANA RULES

(Rule Sets # 2021-29 LR, 2020-117 LR, 2020-118 LR, 2020-119 LR, 2020-120 LR, 2020-121

LR, 2020-122 LR, 2020-123 LR, and 2020-124 LR)

INTRODUCTION

The Michigan Cannabis Industry Association (MICIA) is the leading voice for Michigan’s

legal cannabis businesses. The association advocates for a responsible and successful medical and

adult-use cannabis industry by promoting sensible laws and regulations and industry best practices

among members. MICIA seeks to create a thriving industry for cannabis businesses in Michigan

by developing opportunities for industry collaboration and partnerships and sharing industry

knowledge and best practices among its membership.

MICIA supports many elements of the proposed rules. But MICIA offers the following

constructive comments with the hopes of developing policies that promote both the growth of the

industry and the establishment of good business practices. Moreover, MICIA seeks to ensure that

the Marijuana Regulatory Agency (MRA) receives adequate stakeholder input prior to the

adoption of its generally applicable policies, standards, and enforcement procedures consistent

with the rule of law and the Michigan Administrative Procedures Act, MCL 24.201 et seq. Lastly,

MICIA notes that, though it has not exhaustively commented on all of the rules, its silence on some

rules should not be understood as either approval or disapproval of those particular provisions.

COMMENTS

I.

RULE SET 2021-29 LR (DECLARATORY RULINGS, R. 420.821 ET SEQ.)

Proposed Rules 420.821 through 420.823 create a procedure through which the MRA may

issue declaratory rulings as to the applicability to an actual state of facts of a statute, rule, final

order, or decision administered, promulgated, or issued by the agency. The MICIA supports the

MRA’s efforts to promulgate rules outlining the declaratory rulings process and offers the

following industry feedback on how those proposed rules may be improved.

The MRA’s Legal Authority for Declaratory Rulings Derives from the APA

The MRA asserts that its legal authority for this Proposed Rule Set is conferred by “section

5 of the Michigan Medical Marihuana Act, 2008 IL 1, MCL 333.26425, section 206 of the medical

marihuana facilities licensing act, 2016 PA 281, MCL 333.27206, sections 7 and 8 of the Michigan

ClarkHill\98902\346090\264189386.v2-9/26/21

Regulation and Taxation of Marihuana Act, 2018 IL 1, MCL 333.27957 and 333.27958, and

Executive Reorganization Order No. 2019-2, MCL 333.27001).”

None of those statutes expressly confer on the MRA the authority to issue declaratory

rulings or issue rules setting the procedure for same. Rather, Section 63 of the Administrative

Procedures Act provides the MRA the authority to prescribe the form and procedure for declaratory

ruling requests, submissions, consideration, and disposition by administrative rule. MCL 24.263.

Specifically, Section 63 states:

On request of an interested person, an agency may issue a declaratory ruling as to

the applicability to an actual state of facts of a statute administered by the agency

or of a rule or order of the agency. An agency shall prescribe by rule the form for

such a request and procedure for its submission, consideration and disposition. A

declaratory ruling is binding on the agency and the person requesting it unless it is

altered or set aside by any court. An agency may not retroactively change a

declaratory ruling, but nothing in this subsection prevents an agency from

prospectively changing a declaratory ruling. A declaratory ruling is subject to

judicial review in the same manner as an agency final decision or order in a

contested case.

As such, the boilerplate “authority” language at the outset of the Proposed Rule should be amended

to reference Section 63 of the APA.

The MRA’s Process Timing is Too Long

Proposed Rule 420.822 affords the MRA 60 days to issue notification to a party seeking a

declaratory ruling as to whether the MRA will issue a declaratory ruling and, if so, another 90 days

to issue the ruling “unless the agency notifies the interested person in writing of the need for

additional time, and the reasons for the additional time.” Consequently, the Proposed Rule would

provide the MRA 150 days to issue a declaratory ruling unless the MRA decides to take longer for

whatever written reason.

The 150-day window with the potential to be extended further is outside of the standard

time frame for a declaratory ruling and inconsistent with best practices. See, e.g., Mich Admin

Code, R 324.81(2)(b) (requiring EGLE declaratory ruling to be issue “[w]ithin 60 days of receipt

of the request” unless additional information is required); MCL 169.215(2) (requiring SOS to issue

a ruling “within 60 business days after a request . . . is received”); Mich Admin Code, R 400.951

(requiring MDHHS ruling “within 60 working days”); Mich Admin Code, R 436.1973(2)(f)

(requiring Liquor Control Commission ruling “within 90 days after the receipt of the initial

request.”). Therefore, the MICIA requests that the MRA consider shortening these timeframes to

45 days and 60 days, respectively, and, rather than grant itself the discretion of unlimited extension,

provide that: “A person requesting a declaratory ruling may waive, in writing, the time limitations

provided by this section.” Timing is often a critical component of regulatory certainty and a more

expedited process similar to those employed by other state agencies would better accomplish that

objective.

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There is a Lack of Public Transparency and Industry Participation

The declaratory ruling process outlined by the Proposed Rules lacks transparency and

precludes industry participation. For example, Proposed Rule 420.822(5) provides, in part, that:

Before the issuance of the declaratory ruling, the agency, in its discretion, may

choose to do 1 or more of the following: (a) Seek consultation, comments, or advice

from legal counsel, experts within or outside the agency, local, state, or federal

governmental agencies, or any other source. (b) Request information or

clarification from other interested parties. (c) Advise the person requesting the

ruling that further clarification of the facts must be provided, or that the agency

requires additional time to conduct a review.

But the Proposed Rule neither provides for public notification of a declaratory ruling request nor

for participation of interested parties in a declaratory ruling request.

Here, as well, the best practice includes the opportunity for interested persons other than

the requestor to participate. See, e.g., MCL 169.215(2) (allowing interested members of the public

to comment); Mich Admin Code, R 432.1715(2)(b) (considering “information from other

interested persons”). Accordingly, the MICIA asks that the MRA consider amending the Proposed

Rule to require the MRA to timely make declaratory ruling requests and decisions open to public

view and to further allow for interested persons to submit comments regarding declaratory ruling

requests. To accomplish that objective, the MRA could amend the Proposed Rule 420.822(5) to

provide that:

A request for a declaratory ruling that is submitted to the agency will be made

available on its website for public inspection within 48 hours after its receipt. An

interested person may submit written comments regarding the request to the agency

within 10 business days after the date the request is made available to the public.

The agency’s notification to a party seeking a declaratory ruling as to whether the

MRA will issue a declaratory ruling will be made available on its website for public

inspection at the time it is issued. If the agency’s notification provides that the

agency will issue a declaratory ruling, an interested person may submit written

comments regarding the subject matter of the declaratory ruling request to the

agency within 10 business days after the notification is made available to the public.

The MICIA further asks that the agency amend the Proposed Rule to provide that “The agency

will make available to the public an annual summary of the declaratory rulings issued under this

rule.” This added transparency and participation will aid the MRA in its mission and lead to more

well-informed decision-making. An assessible compendium of declaratory rulings will also

facilitate the compliance of licensees with applicable laws.

The Substantive Scope of Review is Too Limited

Proposed Rule 420.822(9) provides that “[r]equests regarding enforcement issues are not

a proper subject for a declaratory ruling.” The MICIA asks that the MRA consider deleting or

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altering this Proposed Rule for reason that it unnecessarily narrows the scope of subjects on which

the agency may provide clarity. By its very nature, as a regulatory agency charged with enforcing

the law, a wide swath of the issues that come before the MRA could properly be characterized as

“enforcement issues.” The intent of an agency declaratory ruling, like a declaratory judgment

action within the judiciary, is to provide clarity to affected persons “in order to guide or direct

future conduct . . . .” Cf. UAW v Central Michigan University Trustees, 295 Mich App 486, 495;

815 NW2d 132 (2012). Nowhere is such guidance more crucial than with respect to controversial

matters, where enforcement may become an issue. Further, by limiting the scope of matters that

may be addressed by declaratory ruling in this manner, the Proposed rule is far narrower than the

controlling statute. MCL 24.263. As an alternative, MRA may consider rewriting Proposed Rule

420.822(9) to clarify only that a matter that has already been referred for enforcement cannot be

submitted by that licensee for a declaratory ruling.

There is Judicial Review of Declaratory Rulings

Proposed Rule 420.822(8) provides that “[a] denial or adverse decision of a declaratory

ruling does not entitle a person to a contested case hearing.” This statement may have the

inadvertent effect of chilling a licensee’s exercise of the right to appeal MRA’s decision on a

declaratory ruling. For purposes of clarity, the MRA should consider adding additional language

acknowledging that, under Section 63 of the Administrative Procedures Act, “[a] declaratory

ruling is subject to judicial review in the same manner as an agency final decision or order in a

contested case.” The MRA should further provide that its decision not to issue a declaratory ruling

is subject to judicial review. See Human Rights Party v. Michigan Corrections Commission, 76

Mich App 204; 256 NW2d 439 (1977) (“[W]e find that a refusal to issue a declaratory ruling under

M.C.L.A. s 24.263 is subject to judicial review as an agency final decision or order in a contested

case”).

II.

RULE SET 2020-117 LR (DISCIPLINARY PROCEEDINGS, R. 420.801 ET SEQ.)

This Proposed Rule Set seeks to amend portions of Rule 420.801 through Rule 420.808 to

clarify and/or strengthen the MRA’s disciplinary processes and notification/reporting

requirements. The Proposed Rule Set also seeks to add a new Rule 420.808a which sets forth the

grounds on which, and processes by which, the MRA may exclude a person from employment or

participation in a marihuana business. The MICIA supports the MRA’s efforts to clarify and/or

strengthen its disciplinary processes and further agrees with the MRA that clear and transparent

disciplinary rules facilitate regulatory compliance and the protection of the public health and

safety. The MICIA does, however, highlight that these proposed changes will increase licensee

costs and liability but a detailed cost-benefit analysis has not been provided as required by MCL

24.245(3)(h), (3)(k), (3)(l), (3)(n), (3)(p), (3)(q)–(3)(t), & (3)(bb). The MICIA further offers

industry feedback on how those Proposed Rules may be improved.

Grounds for Exclusion of Employment or Participation in a Marihuana Business

Proposed Rule 420.808a(1)(a)–(1)(f) sets for the grounds on which the MRA may, in its

discretion and pursuant to a contested case hearing if requested, exclude a person from

employment at, or participation in, a marihuana business. The MICIA generally supports the stated

grounds for exclusion with the exception that a previous finding of ineligibility for licensure, as

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stated in Rule 420.808a(1)(c), alone is not a proper basis for exclusion of employment where the

standard for holding a license is and should be higher than the standard for general employment.

Contents of Notice of Exclusion

Proposed Rule 420.808a(2) sets forth the contents of a notice of exclusion filed by the

agency including “(a) The identity of the subject. (b) The nature and scope of the circumstances

or reasons that the person should be placed on the exclusion list. (c) A recommendation as to

whether the exclusion or ejection is permanent.” The MICIA supports these general contents for a

notice of exclusion but submits that the MRA should also provide to the charged person “a detailed

factual statement of the alleged grounds for exclusion accompanied by any supporting

documentation or witness statements.”

Proposed Rule 420.808a(3) states that “[t]he notice shall also inform the person of the

availability of a hearing in compliance with R 420.705.” In light of Proposed Rule Set 2020-118

LR, the MICIA queries whether the proper citation here is R. 420.704a which will address the

hearing process for notices of exclusion.

Service of Notice of Exclusion

Proposed Rule 420.808a(2) provides that the MRA “shall file a notice of exclusion.” It is

unclear what the term “file” in this context means, and the MICIA submits that the notice of

exclusion should be personally served on both the person being excluded and, if applicable, the

licensee employing that person.

Proposed Rule 420.808a(6) provides that “[t]he exclusion list must be a public record made

available to licensees by the agency and must include information deemed necessary by the agency

to facilitate identification of the person placed on the exclusion list.” The MICIA submits that the

phrase “made available to licensees” lacks detail and that, in light of the resulting disciplinary

proceedings that result from employing a person on the exclusion list, the exclusion list should be

periodically mailed to licensees, included into the statewide monitoring system, and/or posted on

the agency’s website. Making this requested change would additionally add clarity to the phrase

“knows or reasonably should know is on the exclusion list” in Proposed Rules 420.808a(8),(9).

Due-Process Concerns Regarding Exclusion List

Proposed Rule 420.808a(4) states that “[i]f a hearing is not requested, then the subject’s

name or excluded person’s name must remain on the exclusion list.” Proposed Rule 420.808a(7)

further clarifies the MRA’s intention and provides that “[a] person who is placed on the exclusion

list or served with a notice of exclusion is prohibited from being employed by or participating in a

marihuana business until a determination by the agency or a court to the contrary.”

The MICIA acknowledges that there may, at times, exist unique circumstances where a

person’s continued involvement in a marihuana business presents an immediate threat to the public

health and safety and, in those circumstances, immediate placement on the exclusion list may be

warranted. However, aside from an immediate threat to public health and safety, the MRA should

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provide basic a higher level of due process to the charged person and that person’s placement on

the exclusion list should occur until after that person has been afforded a hearing pursuant to R.

420.704a.

Notification and Reporting – Material Changes

Proposed Rule 420.802(3) requires reporting of proposed material changes to a marihuana

business and delineates several examples of what constitute a proposed material change. In an

apparent effort to further clarify what constitutes a “proposed material change,” the agency now

provides that “[a] proposed material change is any action that would result in alterations or changes

being made to the marihuana business to effectuate the desired outcome of a material change.”

The MICIA submits that this clarifying language is unnecessary and overbroad and requests that

it be removed or narrowed.

Notification and Reporting – Third-Party Violations

Proposed Rule 420.802(4)(c) requires reporting, within 1 business day, of any “[a]ction by

another party in actual or alleged violation of the acts or these rules.” Proposed Rule 420.801(e)

defines “[a]nother party” or “other party” as “an individual or company with which a licensee

contracts to use the individual or company’s intellectual property or to utilize management or other

services provided by the individual or company.” The Proposed Rule, which is accompanied by

disciplinary action for failure to report, places licensees in an quasi-enforcement role that is

unreasonably impracticable and could potentially subject licensees to substantial costs and liability

including, but not limited to, third-party litigation for defamation and other claims. The MICIA

requests that this aspect of the Proposed Rule be removed or narrowed.

Notification and Reporting – Licensing and Management Agreements

Proposed Rule 420.802(7) provides that “[t]he licensee shall notify the agency within 10

business days of terminating a licensing, management, or other agreement.” Proposed Rule

420.801(i) defines “[l]icensing agreement” as “any understanding or contract concerning the

licensing of intellectual property between a licensee and another party.” And, Proposed Rule

420.801(j) defines “[m]anagement or other agreement” as “any understanding or contract between

a licensee and another party for the provision of management or other services that would allow

the other party to exercise control over or participate in the management of the licensee or to

receive more than 10% of the gross or net profit from the licensee during any full or partial calendar

or fiscal year.”

The MICIA opposes these notification requirements and submits that the agency appears

to lack statutory and/or rulemaking authority for this expansion of the notification and reporting

requirements, which strictly construed are unreasonably impracticable. The MRA has not

articulated a rational basis on which it may justify its exercise of regulatory authority over

“licensing agreements” of intellectual property. Moreover, the term “Management or other

agreement” is overbroad and cuts against the agency’s proposed definition of “employee” which

excludes trade or professional services. At a minimum, if the MRA persists with its notification

requirements with respect to management agreements, MICIA asks that the agency consider

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revising the definition of “management agreement” to mean “any contract between a licensee and

another party for the provision of management services that allows the other party to exercise

control over or participate in the management of the licensee.” Such a definition would more fairly

mirror the statutory term “managerial employee” under MCL 333.27102(c).

Definition of Employee

Proposed Rule 420.801(h) defines “Employee” as “a person performing work or service

for compensation” but “does not include a person providing trade or professional services who is

not normally engaged in the operation of a marihuana business.” The MICIA supports this

common-sense clarification.

III.

RULE SET 2020-118 LR (HEARINGS, R. 420.701 ET SEQ.)

This Proposed Rule Set seeks to amend portions of Rule 420.701 through Rule 420.706 to

clarify and/or strengthen the MRA’s hearing processes and to add a new Rule 420.704a which sets

forth a hearing process by which a person may challenge the agency’s decision to exclude the

person from employment or participation in a marihuana business. The MICIA supports, without

exception, the MRA’s Proposed Rules for hearings.

IV.

RULE SET 2021-10 LR (EMPLOYEES, R. 420.601 ET SEQ.)

This Proposed Rule Set seeks to amend portions of Rule 420.601 through Rule 420.602 to

strengthen the MRA’s requirements for, inter alia, employee training manuals and operational

plans. The Proposed Rule Set also seeks to add a new Rule 420.602a that, inter alia, restricts

employees of a cultivator, producer, marihuana sales location, or microbusiness from also being

employed by a laboratory or transporter. The MICIA generally supports this Proposed Rules Set

and agrees that the changes will facilitate consistency in the hiring and employment practices of

marihuana businesses. The MICIA, however, disagrees with the agency’s assertion that these

changes will not increase compliance costs and submits that the agency’s cost-benefit analysis is

deficient. See MCL 24.245(3)(h), (3)(k), (3)(l), (3)(n), (3)(p), (3)(q)–(3)(t), & (3)(bb). In

particular, MCL 24.245(3)(bb) requires that the MRA identify “the sources the agency relied on

in compiling the regulatory impact statement, including the methodology used in determining the

existence and extent of the impact of a proposed rule and a cost-benefit analysis of the proposed

rule.” This has not been done.

V.

RULE SET 2020-119 LR (MARIHUANA-INFUSED PRODUCTS AND EDIBLE

MARIHUANA PRODUCTS, R. 420.401 ET SEQ.)

This Proposed Rule Set seeks to amend portions of Rule 420.401 through Rule 420.403 to

continue to refine and make consistent requirements for infused and edible marihuana product to

ensure safe handling, production, and labeling. The Rule Set also seeks to update standards

referenced for the handling and production of these products. The MICIA’s supporting and

opposing comments are below.

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Product Labeling Requirements

Proposed Rule 420.403(2) provides that “[m]arihuana-infused products processed under

these rules must be homogenous” and that “[t]he allowable variation for weight and THC and CBD

concentrations between the actual results and the intended serving is to be + or – 15%.” The MICIA

submits that the labeling, homogeneity, and testing variance percentages should be consistent.

Proposed Rule 420.403(7)(a) requires that producers label all marihuana-infused products

with not only the name of the product but also that “[t]he name of the product must be an

appropriately descriptive phrase that accurately describes the basic nature of the product.” The

MICIA supports the agency’s labeling requirements but takes issue with the language

“appropriately descriptive” for reason that it is vague. The MICIA recommends that the sentence

read: “[t]he name of the product must accurately describe the basic nature of the product.”

Proposed Rule 420.403(7)(b) requires that producers label all marihuana-infused products

with not only the ingredients of the product but also the “component ingredients.” MICIA

highlights that the term “component ingredients” is undefined and finds the term to be somewhat

vague in application. The MICIA suggests that the agency consider striking the term and replacing

it with the term “excipients.”

Proposed Rule 420.403(7)(e) requires that producers label all marihuana-infused products

with “[t]he date of the marihuana product was produced.” The MICIA supports this common-sense

requirement.

Proposed Rule 420.403(9)(b)-(e) clarifies product and labelling requirements to ensure that

edible marihuana products are not confused with commercially available food products or

attractive to children. The MICIA supports these clarifications but requests that the agency develop

additional guidance and/or establish a process for issuing timely labelling approvals.

Proposed Rule 420.403(10)(a) clarifies how producers are to set expiration dates for edible

marihuana products and further provides that on the label that the product must be destroyed after

the expiration date. The MICIA supports these changes but submits that the term “marihuana

product” in this section should read “edible marihuana product.”

Inflexible Product Storage Temperature Mandate

Proposed Rule 420.403(8)(a) requires that producers of edible marihuana products comply

with “Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventative

Controls for Human Food, 21 CFR part 117” but that “[a]ny potentially hazardous ingredients used

to process shelf-stable edible marihuana products must be stored at 40 degrees Fahrenheit, 4.4

degrees Celsius, or below.”

The MICIA supports application of the federal reference but asserts that the agency’s

specific storage temperature requirement for hazardous ingredients should be stricken because it

is not appropriate in all contexts and not necessarily consistent with the federal reference. See 21

CFR § 117.80(5). Specifically, the specific storage temperature requirement in R. 420.403(8)(a)

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requires what is defined in 21 CFR § 117.135 as a “Preventive Control,” without offering a licensee

the opportunity to conduct a proper Hazard Analysis according to 21 CFR § 117.130 to see if a

Preventive Control is warranted. Further, the specific storage temperature requirement in R.

420.403(8)(a) applies this Preventive Control to an undefined sub-category of ingredients

(“potentially hazardous ingredients used to process shelf-stable edible marijuana products”)

without identifying the critical product attribute that is affected by storage temperature.

Recordkeeping

Proposed Rule 420.403(8)(b) requires that producers of edible marihuana products keep

formulation records which, inter alia, include “test results for all ingredients used.” The MICIA

suggests that because testing is not required for non-active/excipient ingredients, the Proposed

Rule is overbroad and should be appropriately narrowed.

VI.

RULE SET 2020-120 LR (LICENSING, R. 420.101 ET SEQ.)

This Proposed Rule Set seeks to amend portions of Rule 420.101 through Rule 420.11 to

prohibit and authorize the purchase of caregiver product depending on licensee type; prohibit

certain intra-license product transfers; authorize the provision of marihuana testing for non-

licensee adults; and maintain laboratory accreditation exceptions. The Proposed Rule Set also adds

a new Rule 420.105a which regulates Class A marihuana microbusiness licenses and a new Rule

420.112a which regulates licensing and management agreements. The MICIA’s comments are

below.

Caregiver Product Transfers

Proposed Rule 420.102(12) provides that “[a] marihuana grower [licensed under MRTMA]

may not purchase or accept the transfer of a mature plant from an individual, registered qualifying

patient, or registered primary caregiver.” Proposed Rule 420.105(8) contains the same prohibition

with respect to microbusinesses licensed under MRTMA. Proposed Rule 420.108(10) contains the

same prohibition with respect to growers licensed under the MMFLA.

The MICIA does not take a position on whether grower licensees should be permitted to

purchase or accept mature plants from registered qualifying patients or caregivers but submits that

the various grower license types should be treated uniformly.

Intra-license Transfers

Proposed Rules 420.103(3) and 420.104(4), delete language authorizing marihuana

processors and retailers, respectively, with two or more licenses at different establishments from

transferring inventory between licensed establishments owned by the licensee.

The MICIA opposes this change for reason that such transfers between licensed locations

promote flexibility and help prevent product waste. Moreover, these proposed changes will

increase licensee costs and a detailed cost benefit analysis has not been provided.

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Class A Microbusinesses

Proposed Rule 420.105a generally sets forth the rights and obligations of a Class A

marihuana microbusiness license including, inter alia, the cultivation of not more than 300 mature

plants, packaging of marihuana, purchasing of marihuana concentrate and infused products, sale

of marihuana and marihuana products, and the purchase of seeds, tissue cultures, clones or

marijuana plants from licensed growers.

The MICIA supports these aspects of the Proposed Rules. However, Proposed Rule

420.105a(8) specifically authorizes such license holders to “purchase or accept a mature plant from

an individual, registered qualifying patient, or registered primary caregiver.” The MICIA does not

take a position on whether grower licensees should be permitted to purchase or accept mature

plants from registered qualifying patients or caregivers but submits that the various grower license

types should be treated uniformly.

Adult Marihuana Testing Services

Proposed Rule 420.107(1)(c) provides that a marihuana safety compliance facility license

authorizes the marihuana safety compliance facility to “Receive marihuana from and test

marihuana for an individual 21 years of age or older, if the marihuana was produced by the

individual and not purchased or obtained from a licensed marihuana business. The marihuana

safety compliance facility shall keep documentation for proof of age.”

The MICIA asks that the phrase “if the marihuana was produced by the individual and not

purchased or obtained from a licensed marihuana business” be stricken. The MICIA’s position is

that an adult in legal possession of marijuana should not be limited with respect to testing services

based upon the legal source of the marijuana. Any adult should have access to product safety

testing if they are concerned about the product for any reason, without limitation. When a sample

is presented to a lab for testing that was obtained from a licensed business, the chain of custody

will be broken on the sample and results cannot be used to represent batch quality. This makes the

proposed limiting language unnecessary. Moreover, if a sample is presented to a lab for testing by

an adult, the lab has no way of definitively verifying its source, and neither does the MRA. This

renders the rule practically unenforceable.

Laboratory Accreditation Exceptions are no Longer Needed

Proposed Rule 420.107(2)(c) and 420.112(2) provide that “[a] safety compliance facility

must be accredited by an entity approved by the agency by 1 year after the date the license is issued

or have previously provided drug testing services to this state or this state’s court system and be a

vendor in good standing in regard to those services” that “the agency may grant a variance from

this requirement upon a finding that the variance is necessary to protect and preserve the public

health, safety, or welfare.”

The MICIA submits that these provisions should be amended to read only that “[a]

marijuana safety compliance facility must be accredited by an entity approved by the agency prior

to issuance of a state operating license.” Accreditation protects public health and safety and there

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is no longer any need for post-licensure accreditation nor the issuance of variances for

accreditation. When the MRA was established in 2018, only four labs were operating in the state,

and thus good cause existed for these exceptions to accreditation. Now, almost three years later,

with fifteen licensed and operating testing laboratories, there is no need for the lower bar.

Accreditation ensures that a laboratory has a functional quality system, complete with validated

test methods, to ensure the accuracy of published test results.

Plant Count for MMFLA Grower

Proposed Rule 420.108(2) provides that “[f]or the purposes of this rule, a marihuana plant

that meets the definition of a plant in the MMFLA is included in the plant count in subrule (1) of

this rule.” The MMFLA, however, defines the term “marihuana plant” and “plant” and it is unclear

to which term the agency refers in this language. The MICIA submits that the term “marihuana

plant” is the correct term.

Regulation of Licensing and Management Agreements

Proposed Rule 420.112a creates a new regulatory regime whereby the MRA seeks to

require all “licensing agreements”¹and “management agreements”²of a marihuana licensee to be

submitted to the MRA for review and approval prior to performance thereunder and further

requires those agreements to specify a litany of detailed contractual terms relating to payment,

services, performance, and merger. The Proposed Rule 420.112a(4) further delineates a non-

exclusive set of contract terms that would render the non-licensed party subject to the agency’s

application requirements including: “[a]ny term or condition that would allow the other party to

receive more than 10% of the gross or net profit from the licensee during any full or partial calendar

or fiscal year” and “[a]ny term or condition that would require the licensee to name the other party

as a named insured on any insurance policy required to be maintained as a condition of a marihuana

license.”

The MICIA opposes these new filing and approval requirements and submits that the

agency appears to lack statutory and/or rulemaking authority for this expansion of government

regulation, which strictly construed is unreasonably impracticable, and which may retroactively

impair contracts. These proposed changes will also increase licensee costs and a detailed cost

benefit analysis has not been provided. The MRA has not articulated a rational basis on which it

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Proposed Rule 420.101(l) defines “licensing agreement” as “any understanding or contract

concerning the licensing of intellectual property between a licensee and another party.” Proposed

Rule 420.101(k) defines “intellectual property” as “all original data, findings, or other products of

the mind or intellect commonly associated with claims, interests, and rights that are protected

under trade secret, patent, trademark, copyright, or unfair competition law and includes brands or

recipes.”

²Proposed Rule 420.101(m) defines “management or other agreement” as “any understanding or

contract between a licensee and another party for the provision of management or other services

that would allow the other party to exercise control over or participate in the management of the

licensee or to receive more than 10% of the gross or net profit from the licensee during any full or

partial calendar or fiscal year.”

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may justify its exercise of regulatory authority over “licensing agreements” of intellectual

property. Moreover, the term “Management or other agreement” is overbroad and cuts against the

agency’s proposed definition of “employee” which excludes trade or professional services. At a

minimum, if the MRA persists with its filing and approval requirements with respect to

management agreements, MICIA asks that the agency consider revising the definition of

“management agreement” to mean “any contract between a licensee and another party for the

provision of management services that allows the other party to exercise control over or participate

in the management of the licensee.” Such a definition, albeit broader than the statute, would more

fairly mirror the statutory term “managerial employee” under MCL 333.27102(c).

VII. RULE SET 2020-121 LR (LICENSING, R. 420.1 ET SEQ.)

This Proposed Rule Set seeks to amend portions of Rule 420.1 through Rule 420.27 to,

inter alia, provide for administrative withdrawals of license applications; expand applicant

disclosure requirements; disclaim vested rights in licenses; lower and streamline renewal

application fees; and continue to utilize moral character in licensure determination. The Proposed

Rule Set also adds a new Rule 420.27a also creates a new class of regulated marihuana educational

research licenses. The MICIA’s comments are below.

Administrative Application Withdrawal

Proposed Rules 420.3(3) and (6) authorize the MRA to withdraw applications for

prequalification and licensure and force applicants to reapply in instances where an application

has been pending for over one year. Proposed Rule 420.3(7) further provides that “[t]he agency

may administratively withdraw an amendment to any application or marihuana license if the

applicant or licensee fails to respond or submit documentation to cure all deficiencies within 30

days after notice of the deficiency.”

The MICIA opposes these changes for reason that they are patently unfair. Applicants

should not be forced to reapply and/or pay additional licensure fees where, through no fault of

their own, the MRA has failed to adjudicate a license application in under one year. Moreover, 60

days would be a more reasonable timeframe in which applicants may cure deficiencies.

Expanded Application Disclosure Requirements

Proposed Rule 420.4(3) deletes language providing that “[e]ach applicant shall disclose all

shareholders holding a direct or indirect interest of greater than 5%, officers, and directors in the

proposed marihuana establishment” and adds language providing that “[e]ach applicant shall

disclose the identity of every person having a 2.5% or greater ownership interest in the applicant

with respect to which the license is sought. (a) If the disclosed entity is a trust, the applicant shall

disclose the names and addresses of the beneficiaries. (b) If the disclosed entity is a privately held

corporation, the names and addresses of all shareholders, officers, and directors. (c) If the disclosed

entity is a publicly held corporation, the names and addresses of all shareholders holding a direct

or indirect interest of greater than 5%, officers, and directors. (d) If the disclosed entity is a

partnership or limited liability partnership, the names and addresses of all partners. (e) If the

disclosed entity is a limited partnership or limited liability limited partnership, the names of all

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partners, both general and limited. (f) If the disclosed entity is a limited liability company, the

names and addresses of all members and managers.”

The MICIA opposes this more stringent disclosure requirement for a de minimis ownership

interest. It is unnecessary, will jeopardize licensee funding, is unreasonably impracticable, and

may retroactively impair contracts. The MICIA further submits that the agency appears to lack

statutory and/or rulemaking authority for this expansion of the disclosure requirement beyond the

bounds of MCL 333.27102. These proposed changes will also increase licensee costs and a

detailed cost benefit analysis has not been provided. The MRA has also failed to articulate a

rational basis on which it may justify its increased disclosure requirements.

Vested Rights in Marihuana License

Proposed Rule 420.6(6) asserts that “[a] marihuana license is a revocable privilege granted

by the agency and is not a property right” and that “[g]ranting a marihuana license does not create

or vest any right, title, franchise, or other property interest.”

The MICIA acknowledges that this language tracks and then expands on the language

provided that MCL 333.27409. Nonetheless, the MICIA opposes this language for the reason that

it may be legally incorrect where a license has been issued, substantial investments made, and state

law only authorizes license revocation for cause. Regardless of whether the MRA’s assertions are

legally accurate, it is patently unfair to deny the existence of a property right where substantial

investments are made based on licensure and such licenses may only be revoked for good causes

and pursuant to due process.

Application Fees

Proposed Rule 420.7 lowers initial licensure and renewal fees and abandons the process of

calculating renewal fees based on gross weight transferred for growers, gross retail sales for

retailers and microbusinesses, net weight transported for transporters, and number of tests

completed for laboratories. The MICIA supports these common-sense changes.

Moral Character

Proposed Rule 420.13(1)(a) retains language for requiring license renewals under the

MMFLA to include “information regarding the identification, integrity, moral character,

reputation, relevant business experience, ability, probity, financial experience, and responsibility

of the licensee and each person required to be qualified for renewal of the license under the

MMFLA.” The MICIA opposes the inclusion of such subjective attributes of the licensee such as

moral character and further notes Senate Bill 619, if enacted, would remove language allowing the

MRA to deny a license to any applicant on account of their “moral character” or if they have any

previous marijuana-related offenses. License denials based on hyper-subjective criteria create the

appearance of arbitrary application.

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Marihuana Educational Research License

Proposed Rule 420.21(1)(e) adds marihuana educational research licenses to the list of

special licenses which may be issued by the agency. And, Proposed Rule 420.27a sets forth the

rights and obligations of a person holding a marihuana educational research license. The MICIA

supports these changes.

Excess Grower License Fees

Proposed Rule 420.23(11) provides that “[a]n applicant for an excess grower license is not

required to pay the application fee under these rules.”

The MICIA highlights that this provision benefits the largest growers and that many of the

growers who are not capable of achieving this license type view this fee waiver as inequitable. The

MICIA submits that the various grower license types should be treated uniformly.

VIII. RULE SET 2020-123 LR (MARIHUANA SALE OR TRANSFER, R. 420.501 ET

SEQ)

This Proposed Rule Set seeks to amend portions of Rule 420.501 through Rule 420.510 to,

inter alia, address the transfer and/or destruction of expired products; product warning labels and

advisory pamphlet distribution; and employee limits for internal and trade samples. The Proposed

Rule Set also adds a new Rule 420.503a authorizing the transfer of immature plant batches without

utilization of a transporter. The MICIA’s comments are below.

Definition of Final Form

Proposed Rule 420.501(g) defines “final form” as “the form a marihuana product is in

when it is available for sale by a marihuana sales location. For marihuana products intended for

inhalation, final form means the marihuana concentrate in an e-cigarette or a vaping device.”

The MICIA requests that the agency clarify that prerolls, deli-style bulk flower packaged

by a retailer, and batches of edibles divided into multiple packages, are not required to undergo an

additional level of testing. See also Proposed Rule 420.504(1)(i).

Destruction of Expired Products

Proposed Rule 420.502(4) provides that “[a] marihuana business shall not sell or a [SIC]

transfer marihuana product after the printed expiration date on the package. An expired marihuana

product must be destroyed.” Proposed Rule 420.502(6) provides that “[a] marihuana business shall

destroy all product required to be destroyed for any reason within 90 calendar days of when the

marihuana business became aware of the fact that the product must be destroyed.”

The MICIA supports these proposed changes for public safety purposes and requests that

the agency clarify that expired product may be transferred from a retailer to a processor for

destruction. The MICIA also identifies that this requirement will increase costs and submits that

the agency’s cost-benefit analysis is deficient.

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Transfer of Immature Plant Batches

Proposed Rule 420.503a authorizes approved cultivators to sell or transfer immature plant

batches to a marihuana sales location without using a marihuana transporter and without

conducting testing. The MICIA supports these common-sense regulations.

Labeling Warnings

Proposed Rule 420.504(1)(v) creates the following labelling requirement: “In clearly

legible type and surrounded by a continuous heavy line: “WARNING: USE BY PREGNANT OR

BREASTFEEDING WOMEN, OR BY WOMEN PLANNING TO BECOME PREGNANT,

MAY RESULT IN FETAL INJURY, PRETERM BIRTH, LOW BIRTH WEIGHT, OR

DEVELOPMENTAL PROBLEMS FOR THE CHILD.”

The MICIA supports this labelling requirement which is expressly required by MCL

333.27206. The MICIA nevertheless asserts that this requirement will substantially increase

labeling costs and submits that the agency’s cost-benefit analysis is incorrect in asserting

otherwise.

Advisory Pamphlet

Proposed Rule 420.504(4) creates the following requirement: “Before a marihuana product

is sold or transferred by a marihuana sales location, the sales location shall make available to each

customer a pamphlet measuring at least 3.5 inches by 5 inches, that includes safety information

related to marihuana use by minors and the poison control hotline number. The pamphlet must

substantially conform to the design published on the agency’s website.”

The MICIA supports this advisory requirement which is expressly required by MCL

333.27206. The MICIA nevertheless asserts that this requirement will substantially increase

labeling costs and submits that the agency’s cost-benefit analysis is incorrect in asserting

otherwise.

Employee Transfer Limits for Internal and Trade Samples

Proposed Rule 420.508(8) provides that “[a] producer or marihuana sales location is

limited to transferring a total of 1 ounce of marihuana, a total of 2 grams of marihuana concentrate,

and marihuana infused products with a total THC content of 2000 mgs of internal product samples

to each of its employees in a 30-day period.” Similarly, Proposed Rules 420.509(6) provides that

“[a] marihuana sales location, marihuana microbusiness, and class A marihuana microbusiness are

limited to transferring a total of 1 ounce of marihuana, a total of 2 grams of marihuana concentrate,

and marihuana infused products with a total THC content of 2000 mgs of internal product samples

to each of its employees in a 30-day period.”

The MICIA supports these additional clarifications regarding internal and trade sample

transfers.

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IX.

RULE SET 2020-122 LR (OPERATIONS, R. 420.201 ET SEQ.)

This Proposed Rule Set seeks to amend portions of Rule 420.201 through Rule 420.214 to,

inter alia, require maintenance of certain financial records and provide for the regulation of natural

and synthetic cannabinoid sourcing. The Proposed Rule Set also adds new Rules 420.206a

(standard operating plan), 420.207a (contactless tracing), 420.214a (internal analytical testing),

420.214b (adverse reactions), and 420.214c (product returns). The MICIA’s comments are below.

Financial Records

Proposed Rule 420.204(2) adds new language stating the following: “(i) A licensee shall

maintain accurate and comprehensive financial records for each license that clearly documents the

licensee’s income and expenses. Applicable supporting source documentation must be maintained,

including, but not limited to, all of the following: (A) Cash logs. (B) Sales records. (C) Purchase

of inventory. (D) Invoices. (E) Receipts. (F) Deposit slips. (G) Cancelled checks. (H) Employee

compensation records. (I) Tax records. (ii) Bulk financial deposits or transactions must be traceable

to the individual transactions that comprise the bulk deposit or transaction.”

These new more granular financial recordkeeping requirements will increase costs and the

MRA has failed to engage in any cost-benefit analysis related to the impact of these requirement

on the industry. MCL 24.245(3).

Cannabinoid Sourcing and Synthetically-Derived Cannabinoids

Proposed Rule 420.206(13) adds new language providing that “[a]ll ingredients containing

cannabinoids, whether naturally occurring or synthetically derived, that are added to marihuana or

marihuana products must be from a source licensed to grow, handle, and produce cannabinoids

under a license issued by a governmental authority and entered into the statewide monitoring

system.”

The MICIA submits that the use of the term “cannabinoids” in the Proposed Rule may be

overbroad and may encompass any and all industrial hemp products. MCL 333.7106(2); MCL

286.842(i). The MICIA requests that the MRA add language providing that “a source authorized

to grow, handle, and produce cannabinoids pursuant to an Industrial Hemp Pilot Program created

by state statute or regulation” is also acceptable. The MICIA further cautions against the blanket

authorization of synthetic cannabinoids and synthetic processing where certain synthetic

cannabinoids such as “K2” and “Spice” are extremely dangerous to public health and safety and

synthetic production involves a substantial risk of product adulteration by toxic reagents and/or

byproducts. The MICIA believes that this rule should be revised to explicitly ban all fully or semi-

synthetic cannabinoids from the Michigan marijuana industry, except those produced incidentally

by otherwise non-synthetic processing steps that have been approved by the agency.

Testing for Product Combination

Proposed Rule 420.206(14) adds new language providing that “[w]hen combining more

than 1 form of marihuana or marihuana product into a single marihuana product, each form of

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marihuana or marihuana product must have passing safety compliance test results in the statewide

monitoring system prior to the creation of the new combined product.”

The MICIA flatly opposes this new and non-sensical requirement as both ultra vires and

unreasonably impractical. There is no added health or safety benefit gained by testing the same

product three different times; only three separate testing fees and three separate samples being

destroyed from each batch. These new testing requirements will substantially increase costs and

the MRA has failed to engage in any cost-benefit analysis related to the impact of these

requirement on the industry. MCL 24.245(3).

Standard Operating Plan

Proposed Rule 420.206a adds new language providing that “[a] marihuana business must

have up-to-date written standard operating procedures on site at all times . . . [which] must detail

the marihuana business operations and activities necessary for the marihuana business to comply

with the acts and these rules [and] . . . comply with any guidance issued by the agency.”

While not opposed to standard operating plans, which are beneficial to licensees, the

MICIA opposes government mandates (and associated regulatory enforcement) of such a broad

requirement for licensees to have “up-to-date” and “written” procedures that “detail” compliance

with every single present or future statutory, regulatory, or even informal guidance requirement of

the MRA. That a mandatory SOP detail compliance with informal guidance is plainly at odds with

the APA and this Proposed Rule, as written, is unreasonably impractical. Moreover, this new

requirement will substantially and continually increase costs and the MRA has failed to engage in

any cost-benefit analysis related to the impact of these requirement on the industry. MCL

24.245(3); MCL 243.203(7) (defining a “guideline” as “an agency statement or declaration of

policy that the agency intends to follow, that does not have the force or effect of law,

and that binds the agency but does not bind any other person”).

Contactless and Limited Contact Transactions

Proposed Rule 420.207a adds new language authorizing and regulating the process for

contactless and limited contact transactions (including online orders) “unless prohibited by an

ordinance adopted by the municipality where the marihuana sales location is located.” Such

transactions are authorized during normal business hours provided that “the designated area for

contactless or limited contact transactions [is] identified in the marihuana business location plan,”

the “marihuana sales location [has] a written standard operating procedure in place,” the

“marihuana sales location using a designated area for contactless or limited contact transactions

[has] in place an anti-theft policy, procedure, or automatic capability,” the “designated area for

contactless or limited contact transactions [complies] with R 420.209,” the “contactless and limited

contact transaction [complies] with R 420.505 and R 420.506,” and the “[m]arihuana being

transferred during a contactless or limited contact transaction [is] in an opaque bag and the contents

[are] not be visible to the general public upon pick up.”

The MICIA supports this very necessary Proposed Rule with the exception that any

municipal prohibition on contactless transactions should be both direct and specific. As such, the

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phrase should read “unless DIRECTLY AND SPECIFICALLY prohibited by an ordinance

adopted by the municipality where the marihuana sales location is located.”

Storage of Marihuana Product

Proposed Rule 420.212(3) requires all chemicals or solved to be “stored separately from

marihuana products and kept with a closed lid in locked storage areas.”

The MICIA suggests that the phrase “with a closed lid” be replaced with the phrase “in a

closed container” for reason that not all chemicals and solvents are packaged in a container with a

lid.

Internal Analytical Testing

Proposed Rule 420.214a adds new language authorizing and regulating the process for

internal analytical testing. The MICIA generally supports this Proposed Rule with the following

exceptions:

The MICIA asks for clarification and examples of the meaning of the phrase “fully

partitioned” as used in Proposed Rule 420.214a(1)(a) (i.e., whether a partition includes walls,

dividers, curtains, etc).

The MICIA requests that the MRA strike the requirement in Proposed Rule 420.214a(1)(c)

that the product of only one license may be in co-located internal analytical testing spaces at a

time. The MICIA fails to see the necessity of this requirement where such products are required to

be disposed of, the products cannot return to the licensee, and the results from the testing cannot

be used to release the products to the public.

The MICIA seeks clarification regarding the prohibition in Proposed Rule 420.214a(4) that

“[n]o marihuana or marihuana product may be stored in the internal analytical testing space.” The

MICIA submits that the samples of products being internally tested should be permitted to be

stored in the space.

The MICIA opposes the requirement in Proposed Rule 420.214a(8) that “[a]ny batch of

marihuana or a marihuana product that has undergone internal analytical testing must undergo full

safety compliance testing, with failing test results entered into the statewide monitoring system,

prior to making a request for remediation.” This requirement seems to impose a requirement of

outside finished testing prior to remediation and thus limits the ability of licensees to proactively

remediate products. Such a requirement would mark a significant departure from current practice.

Adverse Reactions

Proposed Rule 420.214b adds new language requiring that “[a] licensee shall notify the

agency within 1 business day of becoming aware or within 1 business day of when the licensee

should have been aware of any adverse reactions to a marihuana product sold or transferred by any

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licensee” and that “[a] licensee shall enter into the statewide monitoring system within 1 business

day of becoming aware of or within 1 business day of when the licensee should have been aware

of any adverse reactions to a marihuana product sold or transferred by any licensee.”

The MICIA asks that the MRA define what constitutes an “adverse reaction” and clarify

whether the phrases “becoming aware” or “should have been aware” encompass only actual

adverse reactions or also customer alleged or perceived adverse reactions. The MICIA further

requests that the agency issue a form or more detailed guidance as to how to submit such

information and identifies that, at present, there is not a method for licensees to upload this

information into METRC.

Product Returns

Proposed Rule 420.214c(1) adds new language applicable to marihuana sales locations that

authorizes “the return of marihuana product that is reported to have caused an adverse reaction or

is determined to be defective.” Proposed Rule 420.214c(2) further requires that “[a] marihuana

sales location must have a written policy for the return of marihuana product that contains, at a

minimum, the following: (a) Product returned to a marihuana sales location must be tracked

consistently in the statewide monitoring system as waste in compliance with R 420.211. (b)

Product returned to a marihuana sales location must be destroyed in compliance with R 420.211

within 90 calendar days of when the marihuana business became aware of the fact that the product

must be destroyed. (c) Product returned to a marihuana sales location cannot be re-sold, re-

packaged, or otherwise transferred to a customer or another marihuana business. (d) Product

returned to a marihuana sales location shall be returned by the customer who purchased the

product. (e) Product returned to a marihuana sales location is prohibited from being returned to the

marihuana sales location by way of a delivery driver. (f) A marihuana sales location that does not

comply with these rules may be subject to disciplinary proceedings. (g) A marihuana retailer may

return a marihuana product that is past its expiration date to the marihuana processor who produced

the marihuana product for destruction instead of destroying the marihuana product.”

The MICIA requests that the agency issue a form or more detailed guidance as to how to

submit such information and identifies that, at present, there is not a method for licensees to upload

this information into METRC. The MICIA further submits that the phrase “reported to have caused

an adverse reaction or is determined to be defective,” is vague and potentially overbroad. The

agency has neither defined the terms “adverse reaction” nor “defective” and the phrase “reported

to have caused,” read literally, could mean “alleged by anyone no matter how far removed.”

Furthermore, the MICIA asks that the agency reconsider the prohibition in Proposed Rule

420.214c(2)(d) that “[p]roduct returned to a marihuana sales location shall be returned by the

customer who purchased the product.” This requirement may be extraordinarily difficult to enforce

and, as set out in the proposed rule, appears to potentially suggest that a marihuana sales location

may be subject to disciplinary proceedings as a result of third-party conduct completely outside

the location’s control.

X.

RULE SET 2020-124 LR (SAMPLING AND TESTING R. 420.301 ET SEQ.)

This Proposed Rule Set seeks to amend portions of Rule 420.301 through Rule 420.307 to,

inter alia, set maximum batch sizes, revise laboratory accreditation requirements and testing

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methodologies, require safety tests on harvest batches, redefine potency analyses, and mandate

laboratory policies for potentially hazardous contaminants. The Proposed Rule Set also adds a new

Rule 420.303a, establishing producer and sales location packaging and testing requirements, and

Rule 420.305a, establishing certain validation requirements. The MICIA’s comments are below.

Batch Identification and Testing

Proposed Rule 420.303(4) provides that “[a] cultivator shall immediately destroy the

individual plant tag once a tagged plant is harvested and is part of a harvest batch so that a sample

of the harvest batch can be tested by a licensed laboratory as provided in R 420.304 and R

420.305.”

The MICIA requests that the agency clarify that the individual plant tags (which are used

to identify the plants during the drying stage) do not need to be destroyed until after the drying

stage is complete.

Proposed Rule 420.303(6) provides that “[a] cultivator may transfer or sell fresh frozen

marihuana to a producer without first being tested by a laboratory in order to produce live resin,

or if the marihuana product will be extracted, with agency approval.”

The MICIA requests that the agency revise the Proposed Rule so that “fresh frozen”

includes “any dried biomass” and to replace the term “live resin” with the term “concentrate.”

Producer and Sales Location Packaging and Testing Requirements

Proposed Rule 420.303a(1) and (2) clarifies that “[a] producer shall give a marihuana

product a new package tag anytime the marihuana product changes form or is incorporated into a

different product,” “[a] producer of a marihuana product in its final form shall have the sample

tested pursuant to R 420.304 and R 420.305,” “[t]he producer shall quarantine products from all

other products when the product has test results pending,” “[t]he producer shall not transfer or sell

a marihuana product to a marihuana sales location until after test results entered into the statewide

monitoring system indicate a passed result for all required safety tests,” and that “[n]othing in this

subsection prohibits a producer from transferring or selling a package in accordance with the

remediation protocol provided by the agency and these rules.” Proposed Rule 420.303a(3) further

clarifies that “[a] marihuana sales location may sell or transfer a marihuana product only to a

marihuana customer under both of the following conditions: (a) The marihuana product has

received passing results for all required safety tests in the statewide monitoring system. (b) The

marihuana product bears the label required under the acts and these rules for retail sale.”

The MICIA supports these proposed clarifications.

Sample Collection

Proposed Rule 420.304(2)(a) provides that “[t]he laboratory shall physically collect the

sample the marijuana product from another business to be tested at the laboratory.”

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MICIA’s only comment is that it appears a typographic error exists; the sentence should

read: “The laboratory shall physically collect the marijuana product sample from another business

to be tested at the laboratory.”

Maximum Batch Size

Proposed Rule 420.304(2)(d) further provides that “[t]he laboratory shall develop a

statistically valid sampling method and have it approved by the agency to collect a representative

sample from each batch of marihuana product. The laboratory shall have access to the entire batch

for the purposes of sampling.”

The MICIA submits that “statistically valid sampling method” is too vague and that

additional guidance should be provided in the proposed rule.

Laboratory Accreditation Requirements

Proposed Rule 420.305(1) provides that “A laboratory shall become fully accredited for all

required safety tests in at least 1 required matrix to the International Organization for

Standardization (ISO), ISO/IEC 17025:2017, by an International Laboratory Accreditation

Corporation (ILAC) recognized accreditation body or by an entity approved by the agency within

1 year after the date the laboratory license is issued and agree to have the inspections, reports, and

all scope documents sent directly to the agency from the accreditation body.”

The MICIA submits that these provisions should be amended to read only that:

A laboratory shall become fully accredited for all required safety tests in all

required matrices to the International Organization for Standardization (ISO),

ISO/IEC 17025:2017, by an International Laboratory Accreditation Corporation

(ILAC) recognized accreditation body or by an entity approved by the agency prior

to and as a condition of license issuance and agree to have the inspections, reports,

and all scope documents sent directly to the agency from the accreditation body.

Accreditation protects public health and safety and there is no longer any need for post-licensure

accreditation nor the issuance of variances for accreditation. When the MRA was established in

2018, only four labs were operating in the state, and thus good cause existed for these exceptions

to accreditation. Now, almost three years later, with fifteen licensed and operating testing

laboratories, there is no need for the lower bar. Accreditation ensures that a laboratory has a

functional quality system, complete with validated test methods, to ensure the accuracy of

published test results.

Laboratory Testing Methodologies

Proposed Rule 420.305(2) provides, in part, that “[a] laboratory shall use analytical testing

methodologies for the required safety tests in subrule (3) of this rule that are validated by an

independent third party and may be monitored on an ongoing basis by the agency. In the absence

of published, peer reviewed, validated cannabis methods, Appendix J or K of Official Methods of

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Analysis authored by the Association of Official Analytical Collaboration (AOAC) International

must be published in full with guidance from published cannabis standard method performance

requirements where available.”

The MICIA submits that the proposed language does not clearly reflect the intent of the

Rule nor the way in which the Rule has been enforced to date. In its place, the MICIA asks the

MRA to consider the following language:

A laboratory shall use analytical testing methodologies for the required safety tests

in subrule (3) of this rule that are based upon published peer-reviewed methods,

have been validated for cannabis testing by an independent third party, may be

monitored on an ongoing basis by the agency, and have been internally verified by

the licensed laboratory according to Appendix K of Official Methods of Analysis

authored by the Association of Official Analytical Collaboration (AOAC)

International, with guidance from published cannabis standard method

performance requirements where available. In the absence of published, peer-

reviewed, validated cannabis methods, method validation requirements of

Appendix K of Official Methods of Analysis must be met in full with guidance

from published cannabis standard method performance requirements where

available.

Safety Tests on Harvest Batches

Proposed Rule 420.305(3) provides, in part, that “[a] laboratory shall conduct the required

safety tests specified in subdivisions (a) through (i) of this subrule on marijuana product that is

part of a harvest batch as specified in R420.303, except as provided in subrule (4) of this rule. The

agency may publish minimum testing portions to be used in compliance testing.”

The MICIA reads this language as limiting safety testing to marijuana product that is part

of a harvest batch (which is only plant material by definition) and thus as excluding testing

requirements for marijuana products that are not part of a harvest batch such as concentrates and

infused products. The agency should clarify its intention in that regard. The MICIA supports the

agency publishing minimum testing portions to be used in compliance testing.

Potency Analysis

Proposed Rule 420.305(3)(a)(i) states that “[i]n the preparation of samples intended for

potency analysis, the laboratory may not adulterate or attempt to manipulate the total potency of

the sample by adding trichomes that were removed during the grinding and homogenization

process.”

The MICIA opposes this prohibition for reason that it leads to results that are not

representative. Simply because a testing lab “damages” or knocks portions off of a licensee’s

product, does not mean that those portions should not be included in the potency test.

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Proposed Rule 420.305(3)(a)(ii) states, in part, that “Kief must not be reintroduced to the

flower sample during the homogenization process.”

The MICIA opposes this prohibition for reason that it leads to results that are not

representative. Kief created during the grinding process is customarily kept and reintroduced by

the average consumer.

Proposed Rule 420.305(3)(a)(iii) defines the list of legally required cannabinoids for

potency testing as: “(A) Total Tetrahydrocannabinol (THC); (B) Tetrahydrocannabinol Acid

(THC-A); (C) Total Cannabidiol (CBD); (D) Cannabidiol Acid (CBDA); [and] (E) Additional

cannabinoids may be tested with approval from the agency.”

The MICIA reads the rule as only requiring potency test results for the four cannabinoids

in items (A) through (D) of the subrule. Consequently, the subrule does not authorize potency

testing of d9-THC or Cannabidiol. By default, these two important compounds fall into optional

analyte category (E). Omitting mandatory reporting of d9-THC and Cannabidiol test results is not

recommended. The MICIA also submits that the correct term for “Tetrahydrocannabinol Acid” is

“Tetrahydrocannabinoic Acid” and the correct term for “Cannabidiol Acid” is “Cannabidiolic

Acid.”

Proposed Rule 420.305(9) further defines the list of legally required cannabinoids for

potency testing and provides that “[p]otency shall include the following cannabinoid

concentrations listed in subdivisions (a) to (f) of this subrule, subject to subdivisions (g) and (h) of

this subrule:

(a) Total THC concentration;

(b) THC-A concentration;

(c) Total THC, which includes Delta 7, Delta 8, Delta 9, Delta 10, and Delta 11

THC and THC-A. The following calculation must be used for calculating Total

THC, where M is the mass or mass fraction of delta-9 THC or delta-9 THC-A: Σ

Delta 7-11 THC + Σ ((Delta 7-11 THCA) x 0.877)=Total THC;

(d) Total CBD concentration;

(e) CBD-A concentration;

(f) Total CBD. The following calculation must be used for calculating Total CBD,

where M is the mass or mass fraction of CBD and CBD-A: M total CBD = M CBD

+ 0.877 x M CBD-A;

(g) For marihuana and marihuana concentrates, total THC and total CBD must be

reported in percentages; [and]

(h) For marihuana infused products, potency must be reported as milligrams of

Delta-9-THC and CBD.”

The MICIA reads the proposed rule as only requiring reporting of test results for items (a)

through (f) of the subrule. As such, this list no longer mandates individually reporting of d9-THC

or Cannabidiol test results. By default, these important compounds fall into optional analyte

category (E). Omitting mandatory reporting of d9-THC and Cannabidiol test results is not

recommended. The MICIA also submits that Rules 420.305(9)(a) and (c) are redundant. The

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agency should change “Total THC concentration” in Rule 420.305(9)(a) to “delta-9 THC

Concentration.”

Furthermore, the definition in Rule 420.305(9)(c) of compounds that comprise “Total

THC” is problematic such that reporting of Total THC results, as defined, cannot be met at this

time where (i) certified analytical reference standards for Delta7-THC (a fully synthetic and non-

psychoactive cannabinoid) may not be fully and commercially available at this time; (ii) certified

reference standards for Delta 10-THC (a fully synthetic cannabinoid) are available for two separate

enantiomers: Delta 10 (6aR, 9S), which is not psychoactive, and Delta 10 (6aR, 9R), which is

psychoactive;³(iii) although there are various forms of nomenclature, the term “Delta 11 THC” is

not a consistently recognized term in current scientific literature;⁴and (iv) the calculation provided

for determining Total THC includes summing the concentrations of “Delta 7-11 THCA.”⁵

Consequently, MICIA recommends that the potency testing requirements be revised to allow the

MRA to publish a list of cannabinoids for mandatory testing and reporting and to update the list

as needed via bulletins separately from the Rules. It is important to address the emergence of

additional THC isomers (like delta-8 THC) without prematurely and unnecessarily complicating

the Proposed Rule.

Residual Solvent Testing as Part of Harvest Batch

Proposed Rule 420.305(3)(f) includes “Residual Solvents” as a required safety test for a

marijuana product that is part of a harvest batch. Because residual solvent testing has not been

required for plant material to date, the MICIA suggests that this subrule be deleted, especially

where subrule 420.305(7) properly addresses residual solvent testing.

Reporting Units for CBD

Proposed Rule 420.305(9)(h) states that “[f]or marijuana infused products, potency must

be reported in milligrams of Delta-9 THC and CBD.”

The MICIA suggests that this language does not adequately define reporting units for CBD.

While the definition provides a magnitude (milligrams), it does not specify the quantity. That is,

the language does not specify whether the quantity be a milliliter of analytical solution, gram of

product, serving, etc. By requiring reporting of individual test results for Delta 9-THC and CBD

for infused products, the subrule also seems to conflict with Proposed Rules 420.305(3)(a)(iii) and

420.305(9) which provide that these analytes are defined as optional.

3

The Proposed Rule should clarify whether both enantiomers or, if only one, which enantiomer

must be quantified.

4

Provided that the term “Delta 11 THC” intends to describe THC with a double bond between

carbon atoms 9 and 11, the MICIA would prefer the nomenclature “exo-THC,” as certified

reference standards are available for “exo-THC.”

5

This requires a laboratory to individually quantify delta 7, delta 8, delta 10, and delta 11 THC

acids. Certified reference standards for these cannabinoic acids do not currently exist in the

literature, and the delta-9 THC acid isomers themselves may not be known compounds at all at

this time.

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Terpene Analysis

Proposed Rule 420.305(18) states that “[a] laboratory may perform terpene analysis on a

marijuana product by a method approved by the agency, and the method must be accredited on the

same frequency as all required safety tests. There are no established safety standards for this

analysis.”

The MICIA recommends that the phrase “[t]here are no established safety standards for

this analysis” be omitted, because safety tests for beverages include a requirement to test for

phytol.

Laboratory Policy for Potentially Hazardous Contaminants

Proposed Rule 420.305(21) states that “[a] laboratory shall have a policy or procedure in

place for handling and reporting any potentially hazardous contaminants that may be encountered

during routine testing. A laboratory shall notify the agency if a test batch is found to contain levels

of a contaminant that could be injurious to human health.”

The MICIA suggests that this requirement is vague and overbroad and should not be

included in the Proposed Rules without further clarification. Licensed laboratories are not

equipped or otherwise required to identify unknown compounds of any type in product samples.

In addition, under the right conditions and without further clarification, just about any compound

fits the terms “potentially hazardous” and “potentially injurious to human health.”

STEC Reporting Deadline

Proposed Rule 420.305(22) states that “[m]arihuana-infused products found to contain

Salmonella spp. or Shiga toxin producing E. coli (STEC) must be reported to the agency

immediately.”

The MICIA submits that it is unclear how immediate reporting for STEC required under

this Proposed Rule fits with Rules 420.305(12) and (13) which requires reporting within three

business days. The MRA should consider omitting or clarifying this Proposed Rule. If the MRA

chooses to clarify this Proposed Rule, the MICIA suggests that the term “immediately” should be

replaced with the phrase “within one business day.”

Validation Protocols

Proposed Rule 420.305a sets forth a litany of new validation protocols and requirements.

The MICIA submits that these new requirements will increase laboratory costs and that the MRA

has failed to engage in any cost-benefit analysis related to the impact of these requirement on the

industry. MCL 24.245(3).

Proposed Rule 420.305a(2)(b) provides that “[v]alidation protocols should perform

inoculation of marihuana matrices with live organisms where feasible to ensure that both extraction

and detection for the assay are tested. To further test the accuracy of the assay, probability of

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detection (POD) analyses, inclusivity, exclusivity, lot-to-lot stability, and robustness studies must

be included in the validation studies.”

The MICIA submits that “lot-to-lot stability” testing is not appropriate as a test method

validation requirement and should be removed from this sub-rule. “Lot-to-lot stability” is a process

validation, typically included in validation of a manufacturing process, and is not appropriately

employed as an element of analytical method validation.

Quality Assurance and Control

Proposed Rule 420.305b creates a quality assurance and quality control monitoring regime

and requires that laboratories adopt and follow detailed written quality assurance measures and

standard operating procedures approved by the agency.

The MICIA is concerned that the quality control acceptance criteria currently published by

the agency exceed the capabilities of established, industry-accepted test methods, and are more

stringent than criteria assigned to those methods by the method authors / innovators. MICIA

submits that while published MRA guidance is essential and appropriate, where available, method

author / innovator quality control acceptance criteria should prevail. The MICIA further submits

that these new requirements are likely to substantially increase laboratory costs and that the MRA

has failed to engage in any cost-benefit analysis related to the impact of these requirement on the

industry. MCL 24.245(3). Abandoning existing, approved and accredited methods simply to meet

tightened MRA specifications without regard to actual existing method capabilities may include

major financial impact, including purchasing expensive new equipment and discarding perfectly

adequate existing equipment.

The MICIA additionally identifies that the phrase “method acceptance criteria is required”

in Rule 420.305b(6) should be revised to “method acceptance criteria are required.”

Aspergillus Remediation

Proposed Rule 420.306(3) provides that “[p]roducts that failed testing for Aspergillus are

ineligible for remediation.”

The MICIA suggests that products which fail testing for Aspergillus should be further

tested and, if applicable, remediated for Mycotoxins. Testing for mycotoxins identifies the

presence of aspergillus which, itself, is ubiquitous. This proposed process is similar to the process

followed by the USDA https://www.ams.usda.gov/publications/content/fgis%E2%80%99s-role-

aflatoxin-testing

Retest Costs

Proposed Rule 420.306(5) provides that “[t]he marihuana business that provided the

sample is responsible for all costs involved in a retest.”

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The MICIA highlights that the various license types have different perspectives on this

provision. The MICIA submits that the MRA should not inflexibly dictate commercial terms but

should instead leave it to the individual businesses to contract amongst themselves for apportioning

such costs.

CONCLUSION

MICIA appreciates the opportunity to comment on the MRA’s proposed rules and the

MRA’s efforts to develop a sound regulatory structure for the cannabis industry. MICIA believes

that with the changes suggested above, greater industry feedback, and more thorough vetting of

the costs and benefits of proposed regulations, Michigan can be a leader both economically and in

its promotion of good business practices for the industry.

Respectfully submitted,

Robin Schneider, Executive Director

Michigan Cannabis Industry Association

www.MICannabisIndustryAssociation.org

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DEPARTMENT OF LICENSING AND REGULATORY AFFAIRS

MARIJUANA REGULATORY AGENCY

MARIHUANA OPERATIONS

Filed with the secretary of state on

These rules take effect immediately upon filing with the secretary of state unless adopted under

section 33, 44, or 45a(6)(9) of the administrative procedures act of 1969, 1969 PA 306, MCL

24.233, 24.244, or 24.245a. Rules adopted under these sections become effective 7 days after

filing with the secretary of state.

(By authority conferred on the executive director of the marijuana regulatory agency by section

206 of the medical marihuana facilities licensing act, 2016 PA 281, MCL 333.27206, sections 7

and 8 of the Michigan Regulation and Taxation of Marihuana Act, 2018 IL 1, MCL 333.27957

and 333.27958, and Executive Reorganization Order No. 2019-2, MCL 333.27001)

R 420.201, R 420.202, R 420.203, R 420.204, R 420.205, R 420.206, R 420.207, R 420.208, R

420.209, R 420.210, R 420.211, R 420.212, R 420.213, and R 420.214 of the Michigan

Administrative Code are amended, and R 420.206a, R 420.207a, R 420.214a, R 420.214b, and R

420.214c are added, as follows:

R 420.201 Definitions.

Rule 1. (1) As used in these rules:

(a) “Acts” refers to the medical marihuana facilities licensing act, 2016 PA 281, MCL

333.27101 to 333.27801, and the Michigan Regulation and Taxation of Marihuana Act, 2018 IL

1, MCL 333.27951 to 333.27967, when applicable.

(b) “Administrative hold” means a status given to marihuana product by the agency during an

investigation into alleged violations of the acts and these rules. This status includes no sale or

transfer of the marihuana product until the hold is lifted.

(c) “Agency” means the marijuana regulatory agency.

(d) "Applicant" means a person who applies for a marihuana license, subject to paragraphs (i)

and (ii) of this subdivision:

(i) For purposes of this definition, an applicant includes a managerial employee of the

applicant, a person holding a direct or indirect ownership interest of more than 10% in the

applicant, and the following for each type of applicant:

(A) For an individual or sole proprietorship: the proprietor and spouse.

(B) For a partnership and limited liability partnership: all partners and their spouses.

(C) For a limited partnership and limited liability limited partnership: all general and limited

partners, not including a limited partner holding a direct or indirect ownership interest of 10% or

less who does not exercise control over or participate in the management of the partnership, and

their spouses.

July 30, 2021

2

(D) For a limited liability company: all members and managers, not including a member

holding a direct or indirect ownership interest of 10% or less who does not exercise control over

or participate in the management of the company, and their spouses.

(E) For a privately held corporation: all corporate officers or persons with equivalent titles

and their spouses, all directors and their spouses, all stockholders, not including those holding a

direct or indirect ownership interest of 10% or less, and their spouses.

(F) For a publicly held corporation: all corporate officers or persons with equivalent titles and

their spouses, all directors and their spouses, all stockholders, not including those holding a

direct or indirect ownership interest of 10% or less, and their spouses.

(G) For a multilevel ownership enterprise: any entity or person that receives or has the right to

receive more than 10% of the gross or net profit from the enterprise during any full or partial

calendar or fiscal year.

(H) For a nonprofit corporation: all individuals and entities with membership or shareholder

rights in accordance with the articles of incorporation or the bylaws and their spouses.

(I) For a trust, any beneficiary who receives or has the right to receive more than 10% of the

gross or net profit of the trust during any full or partial calendar or fiscal year and their spouses.

(ii) For purposes of this definition, an applicant does not include:

(A) A person who provides financing to an applicant or licensee under a bona fide financing

agreement at a reasonable interest rate.

(B) A franchisor who grants a franchise to an applicant, if the franchisor does not have the

right to receive royalties based upon the sale of marihuana or marihuana-infused products by the

applicant who is a franchisee. Nothing in this subrule shall be construed to preclude a franchisor

from charging an applicant who is a franchisee a fixed fee. As used in this definition, the terms

“franchise,” “franchisor,” and “franchisee” have the meanings set forth in section 2 of the

franchise investment law, 1974 PA 269, MCL 445.1502.

(C) A person receiving reasonable payment for rent on a fixed basis under a bona fide lease or

rental obligation.

(D) A person receiving reasonable payment under a licensing agreement or contract approved

by the agency concerning the licensing of intellectual property including, but not limited to,

brands and recipes.

(e) “Batch” means all marihuana product of the same variety that has been processed together

and exposed to substantially similar conditions throughout processing.

(f) “Building” means a combination of materials forming a structure affording a facility, an

establishment, or shelter for use or occupancy by individuals or property. Building includes a

part or parts of the building and all equipment in the building. A building does not include a

building incidental to the use for agricultural purposes of the land on which the building is

located.

(g) “Bureau of fire services” or “BFS” means the bureau of fire services in the department of

licensing and regulatory affairs.

(h) “Common ownership” means 2 or more state licenses or 2 or more equivalent licenses held

by one 1 person under the Michigan rRegulation and tTaxation of mMarihuana aAct.

(i) “Cultivator” refers to both a grower under the medical marihuana facilities licensing act and

a marihuana grower under the Michigan rRegulation and tTaxation of mMarihuana aAct.

(j) “Designated consumption establishment” means a commercial space that is licensed by the

agency and authorized to permit adults 21 years of age and older to consume marihuana products

at the location indicated on the state license.

3

(k) “Employee” means a person performing work or service for compensation. “Employee”

does not include individuals providing trade or professional services who are not normally

engaged in the operation of a marihuana business.

(l) “Equivalent licenses” means any of the following held by a person:

(i) A marihuana grower license of any class issued under the Michigan rRegulation and

tTaxation of mMarihuana aAct and a grower license, of any class, issued under the medical

marihuana facilities licensing act.

(ii) A marihuana processor license issued under the Michigan rRegulation and tTaxation of

mMarihuana aAct and a processor license issued under the medical marihuana facilities licensing

act.

(iii) A marihuana retailer license issued under the Michigan rRegulation and tTaxation of

mMarihuana aAct and a provisioning center license issued under the medical marihuana

facilities licensing act.

(iv) A marihuana secure transporter license issued under the Michigan rRegulation and

tTaxation of mMarihuana aAct and a secure transporter license issued under the medical

marihuana facilities licensing act.

(v) A marihuana safety compliance facility license issued under the Michigan rRegulation and

tTaxation of mMarihuana aAct and a safety compliance facility license issued under the medical

marihuana facilities licensing act.

(m) “Final form” means the form a marihuana product is in when it is available for sale by a

marihuana sales location. For marihuana products intended for inhalation, the marihuana

concentrate in the e-cigarette or vaping device.

(n) "Immature plant” means a nonflowering marihuana plant that is no taller than 8 inches from

the growing or cultivating medium and no wider than 8 inches produced from a cutting, clipping,

tissue culture, or seedling that is in a growing or cultivating medium or in a growing or cultivating

container.

(o) “Inactive ingredients” means binding materials, dyes, preservatives, flavoring agents, and

any other ingredient that is not derived from the plant Cannabis Ssativa L.

(p) “Laboratory” refers to both a safety compliance facility under the medical marihuana

facilities licensing act and a marihuana safety compliance facility under the Michigan

rRegulation and tTaxation of mMarihuana aAct.

(q) “Limited access area” means a building, room, or other contiguous area of a marihuana

business where marihuana is grown, cultivated, stored, weighed, packaged, sold, or processed for

sale and that is under the control of the licensee.

(r) “Marihuana business” refers to both a marihuana facility under the medical marihuana

facilities licensing act and a marihuana establishment under the Michigan rRegulation and

tTaxation of mMarihuana aAct.

(s) “Marihuana business location plan” means a marihuana facility plan under the

medical marihuana facilities licensing act, or a marihuana establishment plan under the

Michigan Regulation and Taxation of Marihuana Act, or both.

(t) “Marihuana customer” refers to a registered qualifying patient or registered primary

caregiver under the medical marihuana facilities licensing act, or an individual 21 years of

age or older under the Michigan Regulation and Taxation of Marihuana Act, or both.

(su) “Marihuana establishment” means a location at which a licensee is licensed to operate a

marihuana grower, marihuana safety compliance facility, marihuana processor, marihuana

microbusiness, class A marihuana microbusiness, marihuana retailer, marihuana secure

4

transporter, or any other type of marihuana-related business licensed to operate by the agency

under the Michigan rRegulation and tTaxation of mMarihuana aAct.

(tv) “Marihuana event organizer” means a person licensed to apply for a temporary marihuana

event license under these rules.

(uw) “Marihuana facility” means a location at which a licensee is licensed to operate under the

medical marihuana facilities licensing act.

(vx) “Marihuana license” means a state operating license issued under the medical marihuana

facilities licensing act, or a state license issued under the Michigan rRegulation and tTaxation of

mMarihuana aAct, or both.

(wy) “Marihuana product” means marihuana or a marihuana-infused product, or both, as those

terms are defined in the acts unless otherwise provided for in these rules.

(xz) “Marihuana sales location” refers to a provisioning center under the medical marihuana

facilities licensing act or a marihuana retailer, or marihuana microbusiness, or class A

marihuana microbusiness under the Michigan rRegulation and tTaxation of mMarihuana aAct,

or both.

(yaa) “Marihuana tracking act” means the marihuana tracking act, 2016 PA 282, MCL

333.27901 to 333.27904.

(zbb) “Marihuana transporter” means a secure transporter under the medical marihuana

facilities licensing act or a marihuana secure transporter under the Michigan rRegulation and

tTaxation of mMarihuana aAct, or both.

(aacc) “Medical marihuana facilities licensing act” or “MMFLA” means the medical

marihuana facilities licensing act, 2016 PA 281, MCL 333.27101 to 333.27801.

(bbdd) “Michigan mMedical mMarihuana aAct” means the Michigan Medical Marihuana Act,

2008 IL 1, MCL 333.26421 to 333.26430.

(ccee) “Michigan rRegulation and tTaxation of mMarihuana aAct” or “MRTMA” means the

Michigan Regulation and Taxation of Marihuana Act, 2018 IL 1, MCL 333.27951 to 333.27967.

(ddff) “Producer” refers to both a processor under the medical marihuana facilities licensing

act and a marihuana processor under the Michigan rRegulation and tTaxation of mMarihuana

aAct.

(eegg) “Proposed marihuana business” means a proposed marihuana establishment under the

Michigan rRegulation and tTaxation of mMarihuana aAct or a proposed marihuana facility

under the medical marihuana facilities licensing act, or both.

(ffhh) “Records of formulation” means the documentation that includes at a minimum: the

ingredients, recipe, processing in order to be shelf stable, Certificates of Analysis for any

ingredient used, and description of the process in which all ingredients are combined to produce

a final form.

(ggii) “Restricted access area” means a designated and secure area at a marihuana business

where marihuana products are sold, possessed for sale, and displayed for sale.

(hhjj) “These rules” means the administrative rules promulgated by the agency under the

authority of the medical marihuana facilities licensing act, the marihuana tracking act, the

Michigan rRegulation and tTaxation of mMarihuana aAct, and Executive Reorganization Order

No. 2019-2, MCL 333.27001.

(iikk) “Same location” means separate marihuana licenses that are issued to multiple

marihuana businesses that are authorized to operate at a single property but with separate

business suites, partitions, or addresses.

5

(ll) “Source documentation” means an original document that contains the details of a

marihuana business transaction.

(jjmm) “Stacked license” means more than 1 marihuana license issued to a single licensee to

operate as a Class C grower as specified in each license at a marihuana business under the

medical marihuana facilities licensing act, or under the Michigan rRegulation and tTaxation of

mMarihuana aAct, or both.

(kknn) “Tag” or “RFID tag” means the unique identification number or Radio Frequency

Identification (RFID) issued to a licensee by the agency statewide monitoring system for

tracking, identifying, and verifying marihuana plants, marihuana products, and packages of

marihuana product in the statewide monitoring system.

(lloo) “Temporary marihuana event license” means a state license held by a marihuana event

organizer under the Michigan rRegulation and tTaxation of mMarihuana aAct, for an event

where the onsite sale or consumption of marihuana products, or both, are authorized at the

location indicated on the state license during the dates indicated on the state license.

(2) Terms defined in the acts have the same meanings when used in these rules unless otherwise

indicated.

R 420.202 Adoption by reference.

Rule 2. (1) The following codes, standards, or regulations of nationally recognized

organizations or associations are adopted by reference in these rules:

(a) National fire protection association (NFPA) standard 1, 201821 edition, entitled “Fire

Code,” is adopted by reference as part of these rules. Copies of the adopted provisions are

available for inspection and distribution from the National Fire Protection Association, 1

Batterymarch Park, P.O. Box 9101, Quincy, Massachusetts, 02169, telephone number 1-800-

344-3555, for the price of $106.00114.50.

(b) National fire protection association (NFPA) standard 58, 2020 edition, entitled “Liquified

Petroleum Gas Code,” is adopted by reference as part of these rules. Copies of the adopted

provisions are available for inspection and distribution from the National Fire Protection

Association, 1 Batterymarch Park, P.O. Box 9101, Quincy, Massachusetts, 02169, telephone

number 1-800-344-3555, for the price of $70.50.

(2) The standards adopted in subrule (1) of this rule are available for inspection and distribution

at the agency, located at 2407 North Grand River Avenue, Lansing, Michigan, 48906. Copies of

these standards may be obtained from the agency at the cost indicated in subrule (1)(a) and (b) of

this rule, plus shipping and handling.

R 420.203 Marihuana licenses; licensees; operations; general.

Rule 3. (1) A marihuana license and a stacked license as described in these rules are limited to

the scope of the marihuana license issued for that type of marihuana business that is located

within the municipal boundaries connected with the marihuana license.

(2) A licensee shall comply with all of the following:

(a) Except as provided in R 420.204 and R 420.205, a marihuana business shall must be

partitioned from any other marihuana business or activity, any other business, or any dwelling.

(b) A marihuana business shall not allow onsite or as part of the marihuana business any of the

following:

6

(i) Sale, consumption, or serving of food except as provided in these rules unless the business

is a designated consumption establishment or a temporary marihuana event that has obtained the

appropriate any required authorizations from other federal, state, or local agencies as

applicable.

(ii) Consumption, use, or inhalation of a marihuana product unless the licensee has been

granted a designated consumption establishment or temporary marihuana event license under the

Michigan regulation and taxation of marihuana actMRTMA, and these rules.

(c) A marihuana business shall must have distinct and identifiable areas with designated

structures that are contiguous and specific to the marihuana license.

(d) A marihuana business shallmust have separate entrances and exits, inventory, record

keeping, and point of sale operations, if applicable.

(e) Access to a marihuana business’s restricted and limited access areas is restricted to the

licensee, employees of the licensee, escorted visitors, and the agency. A marihuana sales

location, or a marihuana microbusiness, or a class A marihuana microbusiness may grant

access as provided in R 420.206(9) to customers to a dedicated point of sale area.

(f) Licensee records must be maintained as follows and made available to the agency upon

request:

(i) A licensee shall maintain accurate and comprehensive financial records for each

license that clearly documents the licensee’s income and expenses. Applicable supporting

source documentation must be maintained, including, but not limited to, all of the

following:

(A) Cash logs.

(B) Sales records.

(C) Purchase of inventory.

(D) Invoices.

(E) Receipts.

(F) Deposit slips.

(G) Cancelled checks.

(H) Employee compensation records.

(I) Tax records.

(ii) Bulk financial deposits or transactions must be traceable to the individual

transactions that comprise the bulk deposit or transaction.

(g) The marihuana business must be at a fixed location. Mobile marihuana businesses and drive

through operations are prohibited. Any sales or transfers of marihuana product by mail order or

on consignment are prohibited.

(h) A marihuana license issued under the acts, after it has been received by the licensee, must

be framed under a transparent material and prominently displayed in the marihuana business.

(3) A marihuana business shall comply with all of the following:

(a) The natural resources and environmental protection act, 1994 PA 451, MCL 324.101 to

324.90106. The agency may publish guidance in cooperation with the department of

environment, great lakes, and energy.

(b) Any other operational measures requested by the agency that are not inconsistent with the

acts and these rules.

R 420.204 Operation at same location.

7

Rule 4. (1) A licensee that has any combination of marihuana licenses may operate separate

marihuana businesses at the same location. For purposes of this rule, a stacked license is

considered a single marihuana business.

(2) To operate at the same location subject to subrule (1) of this rule, a licensee shall meet all of

the following requirements:

(a) The agency has authorized the proposed operation at the same location.

(b) The operation at the same location is not in violation of any local ordinances or regulations.

(c) The operation at the same location does not circumvent a municipal ordinance or zoning

regulation that limits the marihuana businesses under the acts.

(d) The licensee of each marihuana business operating at the same location under this rule shall

do all the following:

(i) Apply for and be granted separate marihuana licenses and pay the required fees for each

marihuana license.

(ii) Have distinct and identifiable areas with designated structures that are on the same parcel

or a contiguous parcel and specific to the marihuana license.

(iii) Have separate inventory, record keeping, and point of sale operations.

(iv) Post each marihuana license on the wall in its distinct area and as provided in these rules.

(v) Obtain any additional inspections and permits required for local or state building

inspection, fire services, and public health standards.

(vi) Comply with the provisions in the acts and these rules.

(3) Operation of a marihuana license at the same location that includes a licensed marihuana

sales location shall must have the entrance and exit to the licensed marihuana sales location and

entire inventory physically separated from any of the other licensed marihuana businesses so that

individuals can clearly identify the sales entrance and exit.

(4) Operation of marihuana licenses at the same location may include a combined space

for the purposes of complying with R 420.214a.

(45) A laboratory may be co-located with an existing accredited laboratory that is not licensed

by the MRA, with agency approval, if the following criteria are met:

(a) The existing laboratory performs analytical scientific testing in a laboratory environment,

and the testing methods are recognized by an accrediting body.

(b) Testing of marihuana product is performed separately from other materials.

(c) All marihuana product is stored separately from any other materials located at the site for

testing.

R 420.205 Equivalent licenses; operation at same location.

Rule 5. (1) A person that holds equivalent licenses with common ownership under the acts may

operate those equivalent licenses at the same location.

(2) To operate equivalent licenses at the same location, all of the following requirements must

be met:

(a) The agency has authorized the proposed operation at the same location.

(b) The operation at the same location is not in violation of any local ordinances or regulations.

(c) The operation at the same location does not circumvent a municipal ordinance or zoning

regulation that limits the marihuana businesses under the acts.

(d) The person operating the equivalent licenses at the same location under this rule shall do all

the following:

8

(i) Apply for and be granted a separate state license and a state operating license and pay the

required fees for each license.

(ii) Post each state license and state operating license on the wall in its distinct area and as

provided in these rules.

(iii) Obtain any additional inspections and permits required for local or state building

inspection, fire services, and public health standards, if applicable.

(iv) Comply with the provisions in the acts and these rules.

(3) A licensee with common ownership of a marihuana retailer and a provisioning center and

operating equivalent licenses at the same location shall physically separate the entire inventories

and the items on display for sale so that individuals may clearly identify medical marihuana

products from adult-use marihuana products.

(4) A licensee with common ownership of a marihuana retailer and a provisioning center and

operating the equivalent licenses at the same location shall not bundle a product subject to the

excise tax in section 13 of the Michigan regulation and taxation of marihuana actMRTMA,

MCL 333.27963, in a single transaction with a product or service that is not subject to the tax

imposed by that section.

(5) A person who holds equivalent licenses with common ownership under the acts and

operates at the same location is not required to have any of the following:

(a) Separate business suites, partitions, or addresses.

(b) Separate entrances and exits.

(c) Distinct and identifiable areas with designated structures that are contiguous and specific to

the state license and the state operating license.

(d) Separate point of sale area and operations.

R 420.206 Marihuana business; general requirements.

Rule 6. (1) A cultivator shall not operate a marihuana business unless either of the following

conditions is met:

(a) The cultivator operations are within a building that meets the security requirements and

passes the inspections in these rules and has a building permit pursuant to R 420.208 and these

rules.

(b) The cultivator operations are within a building, except that cultivation may occur in an

outdoor area, if all of the following conditions are met:

(i) The outdoor area containing the cultivation of marihuana plants is contiguous with the

building, fully enclosed by fences or barriers that ensure that the plants are not visible from a

public place without the use of binoculars, aircraft, or other optical aids, and the fences are

secured and comply with the applicable security measures in these rules, including, but not

limited to, locked entries only accessible to authorized persons or emergency personnel.

(ii) After the marihuana is harvested, all drying, trimming, curing, or packaging of marihuana

occurs inside the building meeting all the requirements under these rules.

(iii) The building meets the security requirements and passes the inspections in these rules and

has a building permit pursuant to R 420.208 and these rules.

(2) A cultivator who has obtained good agricultural collection processes certification may sell

immature plants to a marihuana sales location under the allowances published by the agency.

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(3) The agency shall publish a list of approved chemical residue active ingredients for

cultivators to use in the cultivation and production of marihuana plants and marihuana products

to be sold or transferred in accordance with the acts or these rules.

(4) The agency shall publish a list of banned chemical residue active ingredients that are

prohibited from use in the cultivation and production of marihuana plants and marihuana

products to be sold or transferred in accordance with the acts or these rules.

(5) A marihuana secure transporter under the Michigan regulation and taxation of marihuana

act MRTMA shall have a primary place of business as its marihuana business that operates in a

municipality that has not adopted an ordinance prohibiting marihuana businesses from operating

within its boundaries under section 6 of the MRTMA, MCL 333.27956, and these rules, and its

marihuana business must comply with the requirements prescribed by the MRTMA, these rules,

and any municipal ordinances that meet the requirements of section 6 of the act, MCL

333.27956.

(6) A secure transporter under the medical marihuana facilities licensing act MMFLA shall

have a primary place of business as its marihuana facility that operates in a municipality that has

adopted an ordinance that meets the requirements of section 205 of the act, MCL 333.27205, and

the rules, and its marihuana facility must comply with the requirements prescribed by the

MMFLA and these rules.

(7) A marihuana transporter shall hold a separate license for every marihuana transporter

location. A marihuana transporter may travel through any municipality to transport a marihuana

product. A marihuana transporter shall comply with all of the following:

(a) The marihuana transporter may take physical custody of the marihuana or money, but legal

custody belongs to the transferor or transferee.

(b) A marihuana transporter shall not sell or purchase marihuana products.

(c) A marihuana transporter shall transport any marihuana product in a locked, secured, and

sealed container that is not accessible while in transit. The container must be secured by a locked

closed lid or door. A marihuana transporter of marihuana product from separate marihuana

businesses shall not comingle the marihuana product. All marihuana products must be labeled in

accordance with these rules and kept in separate compartments or containers within the main

locked, secured, and sealed container. If the marihuana transporter transports money associated

with the purchase or sale of marihuana product between businesses, the marihuana transporter

shall lock the money in a sealed container kept separate from the marihuana product and only

accessible to the licensee and its employees.

(d) A marihuana transporter shall log and track all handling of money associated with the

purchase or sale of marihuana between marihuana businesses. These records must be maintained

and made available to the agency upon request.

(e) A marihuana transporter shall have a route plan and manifest available for inspection by the

agency to determine compliance with the acts and these rules. A copy of the route plan and

manifest must be carried with the marihuana transporter during transport between marihuana

businesses. A marihuana transporter is subject to administrative inspection by a law enforcement

officer at any point during the transportation of marihuana product pursuant to these rules. A

marihuana transporter shall carry a copy of a route plan and manifest in the transporting vehicle

and shall present them to a law enforcement officer upon request.

(f) A marihuana transporter shall not possess marihuana product that is not on a manifest.

(g) A marihuana transporter shall follow the manifest.

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(h) A marihuana transporter shall store vehicles at its primary place of business. If a marihuana

transporter stores a vehicle that does not contain marihuana or marihuana product at a location

that is not its primary place of business, it shall indicate that in its business plan.

(i) A marihuana transporter transferring marihuana product to a marihuana business shall

remain onsite until the marihuana product is weighed and accepted or rejected before leaving the

marihuana business.

(j) A marihuana transporter shall not maintain custody of the marihuana product for more than

96 hours unless permission is otherwise sought and granted by the agency, which will be

reviewed on a case-by case basis.

(k) A marihuana transporter shall identify and record all vehicles with the agency and have the

required vehicle registration with the secretary of state as required under state law. A marihuana

transporter’s vehicles are subject to inspection at any time by the agency to determine

compliance with the acts or these rules.

(8) A laboratory shall comply with all of the following:

(a) Provide written notice to the agency within seven7 days of a laboratory manager no longer

being employed at the facility.

(b) Designate an interim laboratory manager within seven 7 days of the laboratory manager’s

departure. At a minimum, the interim laboratory manager must meet the qualifications of a

supervisory analyst. The interim laboratory manager must meet either of the following

requirements:

(i) The interim laboratory manager must meet at least one1 of the qualifications for a

laboratory manager.

(ii) The interim laboratory manager must have, at minimum, a bachelor’s degree in one 1 of

the natural sciences and three 3 years of full-time laboratory experience in a regulated laboratory

environment, performing analytical scientific testing in which the testing methods were

recognized by an accrediting body. A combination of education and experience may substitute

for the three 3 years of full-time laboratory experience.

(c) Hire a permanent laboratory manager within 60 calendar days from the date of the

previous laboratory manager’s departure, unless the laboratory receives a written waiver from

the agency. A laboratory may submit a waiver request to the agency to receive an additional 60

calendar days to hire a permanent laboratory manager if the laboratory submits a detailed

oversight plan along with the waiver request.

(9) A marihuana sales location shall must have a separate room that is dedicated as the point of

sale area for the transfer or sale of marihuana product as provided in the acts and these rules.

The marihuana sales location shall keep marihuana products behind a counter or other barrier to

ensure that a customer does not have direct access to the marihuana products. A marihuana

sales location may also have a designated area for contactless or limited contact

transactions.

(10) A marihuana business shall label all marihuana products with the ingredients of the

product, in descending order of predominance by weight.

(11) All non-marihuana inactive ingredients must be clearly listed on the product label. Inactive

ingredients, other than botanically derived terpenes that are chemically identical to the terpenes

derived from the plant Cannabis Ssativa L., must be approved by the FDA for the intended use,

and the concentration must be less than the maximum concentration listed in the FDA Inactive

Ingredient database for the intended use.

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(12) A marihuana business producing marihuana products shall maintain records of formulation

and make them available to the agency upon request.

(13) All ingredients containing cannabinoids, whether naturally occurring or synthetically

derived, that are added to marihuana or marihuana products must be from a source

licensed to grow, handle, and produce cannabinoids under a license issued by a

governmental authority and entered into the statewide monitoring system.

(14) When combining more than 1 form of marihuana or marihuana product into a single

marihuana product, each form of marihuana or marihuana product must have passing

safety compliance test results in the statewide monitoring system prior to the creation of

the new combined product.

(135) A marihuana business shall comply with random quality assurance compliance checks

upon the request of the agency. The agency or its authorized agents may collect a random

sample of a marihuana product from a marihuana business or designate a laboratory to collect a

random sample of a marihuana product in a secure manner to test that sample for compliance.

(146) The agency may update or issue new standards as necessary to protect the health, safety,

and welfare of consumers and the public. A marihuana business shall comply with all new or

updated standards issued by the agency within 6 months of their adoption by the agency unless

there is an identifiable public health or safety risk.

(157) A marihuana business transferring marihuana product to or receiving marihuana product

from a marihuana transporter shall initiate the procedures to transfer or receive the marihuana

product within 30 minutes of the marihuana transporter’s arrival at the marihuana business.

R 420.206a Standard operating procedures.

Rule 6a. (1) A marihuana business must have up-to-date written standard operating

procedures on site at all times.

(2) Standard operating procedures must be made available to the agency upon request.

(3) Standard operating procedures must detail the marihuana business operations and

activities necessary for the marihuana business to comply with the acts and these rules.

(4) Standard operating procedures must comply with any guidance issued by the agency.

(5) If the agency determines that any standard operating procedure contains inaccurate

information or does not comply with these rules and safe food management guidelines, as

applicable, the licensee may be required to correct and update the standard operating

procedures immediately.

R 420.207 Marihuana delivery; limited circumstances.

Rule 7. (1) A marihuana sales location licensee may engage in the delivery of a marihuana

product for sale or transfer to marihuana customers upon approval by the agency of the

licensee’s delivery procedures.

(2) A marihuana sales location licensed under the medical marihuana facilities licensing act

MMFLA that engages in delivery shall establish procedures as specified in this rule to allow an

employee of the marihuana sales location to deliver a marihuana product to a patient at the

patient’s residential address.

(3) A marihuana sales location licensed under the Michigan regulation and taxation of

marihuana actMRTMA that engages in delivery shall establish procedures as specified in this

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rule to allow an employee of the marihuana sales location to deliver a marihuana product to an

individual 21 years of age or older at a residential address or at the address of a designated

consumption establishment provided at the time the order was placed.

(4) All of the following apply to the marihuana delivery procedures established by a marihuana

sales location:

(a) For the purposes of this rule only, a marihuana sales location may accept an online order

request of a marihuana product and payment for the order that will be delivered only to the

physical residence of the registered qualifying patient as provided in this rule, or to a residential

address or the address of a designated consumption establishment provided by an individual 21

years of age or older as provided in this rule.

(b) The marihuana sales location shall create a marihuana delivery procedure that is subject to

inspection and examination including, but not limited to, record keeping and tracking

requirements. The agency may publish guidelines on the required procedure.

(c) All marihuana delivery employees shall meet the requirements in R 420.602 and are

employees, as defined in R 420.601(1)(d), of the marihuana sales location.

(5) A marihuana sales location that has received authorization under subrule (1) of this rule

shall comply with all of the following:

(a) The marihuana sales location shall verify that the sale or transfer to marihuana customers is

in accordance with these rules.

(b) The marihuana delivery employee may take payment upon delivery and shall deliver the

marihuana product.

(c) The amount of marihuana product that may be delivered is limited to the daily and monthly

purchase limits of the registered qualifying patient as provided in these rules; or to the single

transaction purchase limits for individuals 21 years of age or older as provided in these rules.

(d) The marihuana sales location shall record all transactions in the statewide monitoring

system as required in the acts and these rules.

(e) An employee of the marihuana sales location shall make marihuana deliveries only to 1 of

the following:

(i) Subject to paragraph (ii) of this subdivision, a registered qualifying patient.

(ii) A registered primary caregiver if the registered qualifying patient is a minor. If the

registered qualifying patient is a minor, delivery must be made only to his or her registered

primary caregiver.

(iii) An individual 21 years of age or older.

(f) A marihuana delivery employee shall verify that the person taking delivery is the registered

qualifying patient or the registered primary caregiver of a registered qualifying patient who is a

minor, who has been recorded in the statewide monitoring system, or the individual 21 years of

age or older who placed the order.

(g) The authorization granted to a marihuana sales location pursuant to subrule (1) of this rule

may be denied, suspended, or withdrawn by the agency. The marihuana sales location may be

subject to other sanctions and fines as provided in the acts and these rules.

(6) A marihuana sales location shall maintain records of all of the following that must be made

available to the agency upon request:

(a) For a marihuana sales location licensed under the medical marihuana facilities licensing

actMMFLA, confirmation that the marihuana customer presented his or her valid driver’s

license or government issued identification bearing a photographic image of the marihuana

customer along with his or her marihuana registry card, or temporary marihuana registry card, to

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verify that he or she is the patient or, if the registered qualifying patient is a minor, the registered

primary caregiver.

(b) For a marihuana sales location licensed under the Michigan regulation and taxation of

marihuana actMRTMA, confirmation that the marihuana customer presented his or her valid

driver’s license or government issued identification bearing a photographic image of the

marihuana customer to verify that the marihuana customer is 21 years of age or older at the time

of delivery.

(c) Validation that the address for marihuana delivery of a marihuana product is the residential

address of the registered qualifying patient, or the residential address or address of a designated

consumption establishment provided by the customer at the time the order for the marihuana

product was placed.

(d) Maintenance of the following records for any motor vehicle used for marihuana delivery

and the making of the records available to the agency upon request:

(i) Vehicle make.

(ii) Vehicle model.

(iii) Vehicle color.

(iv) Vehicle identification number.

(v) License plate number.

(vi) Vehicle registration.

(vii) Proof of vehicle insurance.

(e) Documentation that the marihuana customer has consented to the marihuana delivery of the

marihuana product. The consent must include an acknowledgement by the marihuana customer

for the release of information necessary in fulfilling the home delivery.

(f) Verification, by a licensee under the medical marihuana facilities licensing actMMFLA, in

the statewide monitoring system that the registered qualifying patient holds a valid, current,

unexpired, and unrevoked registry identification card as required in these rules.

(7) A marihuana delivery employee shall carry a physical or electronic copy of all of the

following information and shall make these records available to the agency upon request:

(a) The employee identification number required under these rules.

(b) The marihuana sales location licensee license number.

(c) The address of the marihuana sales location licensee.

(d) Contact information of the marihuana sales location licensee.

(e) A copy of the marihuana sales location marihuana delivery log as required in subrule (103)

of this rule.

(8) A marihuana delivery employee shall have access to a secure form of communication with

the marihuana sales location licensee, such as a cellular telephone, at all times in the vehicle or

on his or her person.

(9) To ensure the integrity of the marihuana sales location operation, a A marihuana delivery

employee shall comply with all the following:

(a) During marihuana delivery, the marihuana delivery employee shall maintain a physical or

electronic copy of each marihuana delivery request and shall make the marihuana delivery

request available to the agency upon request.

(b) A marihuana delivery employee shall not leave a marihuana product in an unattended

motor vehicle unless the motor vehicle is locked and equipped with an active vehicle alarm

system.

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(c) A marihuana delivery employee’s vehicle must contain a global positioning system (GPS)

device for identifying the geographic location of the delivery vehicle. The device must be either

permanently or temporarily affixed to the delivery vehicle while the delivery vehicle is in

operation, and the device must remain active and in the possession of the delivery employee at

all times during delivery. At all times, the marihuana sales location must be able to identify the

geographic location of all marihuana delivery vehicles and marihuana delivery employees who

are making marihuana deliveries for the marihuana sales location and shall provide that

information to the agency upon request.

(d) A marihuana delivery employee shall not carry marihuana product in the delivery vehicle

with a value in excess of $5,000.00 at any time. The value of marihuana products carried in the

delivery vehicle for which a delivery order was not received and processed by the licensed

retailer prior to the delivery employee departing from the marihuana sales location may not

exceed $3,000.00. For the purposes of this subrule, the value of marihuana products must be

determined using the current retail price of all marihuana products carried by, or within the

delivery vehicle of, the marihuana delivery employee.

(e) A marihuana delivery employee of a marihuana sales location shall may not be employed

as a marihuana delivery employee for more than one 1 marihuana sales location.

(f) A marihuana delivery employee shall not leave the marihuana sales location with marihuana

products without at least one 1 delivery order that has already been received and processed by

the marihuana sales location.

(g) Before leaving the marihuana sales location, the marihuana delivery employee must have a

delivery inventory ledger, which may be maintained electronically, of all marihuana products

provided to him or her. For each marihuana product, the delivery inventory ledger must include

the following:

(i) The type of marihuana product.

(ii) The brand name.

(iii) The retail value.

(iv) The tag number associated with the product in the statewide monitoring system.

(v) The weight, volume, or other accurate measure of the marihuana product.

(h) All marihuana product prepared for an order that was received and processed by the

marihuana sales location prior to the marihuana delivery driver departing from the marihuana

sales location must be clearly identified on the inventory ledger.

(i) After each delivery, the delivery inventory ledger must be updated to reflect the current

inventory in possession of the marihuana delivery employee.

(j) The marihuana delivery employee shall maintain a log that includes all stops from the time

he or she leaves the marihuana sales location to the time that he or she returns to the marihuana

sales location, and the reason for each stop. The log must be turned in to the marihuana sales

location when the marihuana delivery employee returns to the marihuana sales location. The

marihuana sales location must maintain the log for a minimum of 1 year from the date of

delivery and make it available upon request by the agency. The log may be maintained

electronically.

(k) Immediately upon request by the agency the marihuana delivery employee shall provide all

of the following:

(i) All delivery inventory ledgers from the time the marihuana delivery employee left the

marihuana sales location up to the time of the request.

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(ii) All delivery request receipts for marihuana product carried by the driver, in the delivery

vehicle, or any deliveries that have already been made to customers.

(iii) The log of all stops from the time the marihuana delivery employee left the marihuana

sales location up to the time of the request.

(l) If a marihuana delivery employee does not have any delivery request to be performed for a

30-minute period, the marihuana delivery employee shall not make any additional deliveries and

shall return to the marihuana sales location. Upon returning to the marihuana sales location, all

undelivered marihuana products must be returned to inventory and all necessary inventory and

statewide monitoring system records must be updated as appropriate.

(10) A marihuana retailer licensed under the Michigan regulation and taxation of marihuana

actMRTMA, in making deliveries, shall not transport more than 15 ounces of marihuana or

more than 60 grams of marihuana concentrate at one 1 time pursuant to section 11 of the

MRTMA, MCL 333.27961.

(11) A marihuana sales location shall ensure that marihuana deliveries are completed in a

timely and efficient manner as provided on the marihuana delivery request and log. All

marihuana deliveries must occur within the business hours of the marihuana sales location.

Marihuana product for marihuana delivery must be stored within a secured compartment that is

clearly marked and latched or locked in a manner to keep all contents secured within.

(12) The process of marihuana delivery begins when the marihuana delivery employee leaves

the marihuana sales location’s licensed marihuana business with the marihuana product for

delivery. The process of marihuana delivery ends when the delivery employee returns to the

marihuana sales location’s licensed marihuana business after delivering the marihuana product to

the marihuana customer.

(13) A marihuana sales location shall maintain a record of each delivery of a marihuana product

in a marihuana delivery log, which may be a hard copy or electronic format, and make

the marihuana delivery log available to the agency upon request. For each delivery, the

marihuana delivery log must record all of the following:

(a) The date and time that the delivery began and ended.

(b) The name of the marihuana delivery employee.

(c) The amount of marihuana product allowed to be possessed for delivery.

(d) The tag number of the marihuana product and the name of the strain of that marihuana

product.

(e) The signature of the individual who accepted delivery.

(14) A marihuana sales location shall notify the agency, state police, or local law enforcement

of any theft, loss of marihuana product, or criminal activity as provided in these rules. A

marihuana sales location shall report to the agency and law enforcement, if applicable, any other

event occurring during marihuana delivery that violates the marihuana delivery procedure as

provided in this rule, including marihuana delivery vehicle accidents and diversion of marihuana

product.

R 420.207a Contactless and limited contact transactions.

Rule 7a. (1) A marihuana sales location may designate an area for contactless or limited

contact transactions unless prohibited by an ordinance adopted by the municipality where

the marihuana sales location is located.

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(2) A marihuana sales location may accept online orders for marihuana product and

payment for the order that will be picked up at the marihuana sales location.

(3) The designated area for contactless or limited contact transactions must be identified

in the marihuana business location plan.

(4) A marihuana sales location operating a contactless or limited contact transaction must

have a written standard operating procedure in place and be made available to the agency

upon request.

(5) Contactless or limited contact transactions must be completed during normal business

hours.

(6) A marihuana sales location using a designated area for contactless or limited contact

transactions must have in place an anti-theft policy, procedure, or automatic capability.

(7) The designated area for contactless or limited contact transactions must comply with

R 420.209.

(8) The contactless and limited contact transaction must comply with R 420.505 and R

420.506.

(9) Marihuana being transferred during a contactless or limited contact transaction must

be in an opaque bag and the contents must not be visible to the general public upon pick

up.

R 420.208 Building and fire safety.

Rule 8. (1) An applicant’s proposed marihuana business and a licensee’s marihuana business

are subject to inspection by a state building code official, state fire official, or code enforcement

official to confirm that no health or safety concerns are present.

(2) A state building code official, or his or her authorized designee, may conduct prelicensure

and post-licensure inspections to ensure that applicants and licensees comply with the Stille-

DeRossett-Hale single state construction code act, 1972 PA 230, MCL 125.1501 to 125.1531;

the skilled trades regulation act, 2016 PA 407, MCL 339.5101 to 339.6133; 1967 PA 227, MCL

408.801 to 408.824; and 1976 PA 333, MCL 338.2151 to 338.2160.

(3) An applicant or licensee shall not operate a marihuana business unless a permanent

certificate of occupancy has been issued by the appropriate enforcing agency. A temporary

certificate of occupancy may be accepted, at the discretion of the agency. Before a certificate of

occupancy is issued, work must be completed in accordance with the Stille-DeRossett-Hale

single state construction code act, 1972 PA 230, MCL 125.1501 to 125.1531. An applicant or

licensee shall comply with both of the following:

(a) An applicant or licensee shall obtain a building permit for any building utilized as a

proposed marihuana business or marihuana business as provided in the acts and these rules. The

issuance, enforcement, and inspection of building permits under the acts remains with the

governmental entity having jurisdiction under the Stille-DeRossett-Hale single state construction

code act, 1972 PA 230, MCL 125.1501 to 125.1531.

(b) An applicant or licensee shall obtain a building permit for a change of occupancy for an

existing building to be utilized as a proposed marihuana business or marihuana business as

provided in the acts and these rules.

(4) An applicant or licensee shall not operate a marihuana business unless the proposed

marihuana business or marihuana business has passed the prelicensure fire safety inspection by

the BFS. The state fire marshal, or his or her authorized designee, may conduct prelicensure

17

and post-licensure inspections of a marihuana business. An applicant or licensee shall comply

with the all of the following:

(a) A BFS inspection may be conducted at any reasonable time to ensure fire safety compliance

as provided in this rule and subrule (5) of this rule. A BFS inspection may be annual or biannual

and may result in the required installation of fire suppression devices or other means necessary

for adequate fire safety pursuant to state standards.

(b) The BFS may require a marihuana business to obtain operational permits, including, but not

limited to, any of the following:

(i) Carbon dioxide systems used in beverage dispensing applications, amended for cultivation

use and extraction.

(ii) Compressed gases.

(iii) Combustible fibers.

(iv) Flammable and combustible liquids.

(v) Fumigation and insecticidal fogging.

(vi) Hazardous materials.

(vii) High piled storage (high rack system cultivation).

(viii) Liquefied petroleum (LP) gas.

(c) For specific installation or systems, BFS may require marihuana businesses to obtain

construction permits, including, but not limited to, any of the following:

(i) Building construction.

(ii) Electrical, mechanical, plumbing, boiler, and elevator.

(iii) Compressed gases.

(iv) Flammable and combustible liquids.

(v) Hazardous materials.

(vi) Liquified petroleum (LP) gas.

(vii) Automatic fire extinguishing/suppression systems.

(viii) Fire alarm and detections systems.

(ix) Related equipment found during fire safety inspections.

(5) The state fire marshal, or his or her their authorized designee, may conduct a BFS fire

safety inspection of a marihuana business, at any reasonable time to ensure compliance with the

national fire protection association (NFPA) standard 1, 2018 21 edition, entitled “fire codeFire

Code,” which is adopted by reference in R 420.202. A licensee shall comply with the NFPA 1

as adopted and the following additional requirements:

(a) Ductwork must be installed with in accordance with the Michigan mechanical code, R

408.30901 to R 408.30998.

(b) Suppression systems outlined in NFPA 1 and the Michigan mechanical code, R 408.30901

to R 408.30998, must be installed if required to meet the suppression needs within a marihuana

establishment.

(c) Producers, cultivators, laboratories, and marihuana microbusinesses, and class A

marihuana microbusinesses shall implement appropriate exhaust ventilation systems to

mitigate noxious gasses or other fumes used or created as part of any production process or

operations. Exhaust and ventilation equipment must be appropriate for the hazard involved and

must comply with NFPA 1 and Michigan mechanical code, R 408.30901 to R 408.30998.

(6) In addition to meeting all the requirements in subrules (1) to (5) of this rule, cultivators,

producers, and marihuana microbusinesses, class A marihuana microbusinesses, and

designated consumption establishments shall also comply with all of the following:

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(a) Permit the agency or its authorized agents, or state fire marshal or his or her authorized

designee, to enter and inspect a cultivator, producer, and marihuana microbusiness, class A

marihuana microbusiness, and designated consumption establishments at any reasonable

time.

(b) Have conducted, in addition to any inspections required under the acts and these rules,

Have a fire safety inspections that are required conducted, in addition to any inspections

required under the acts and these rules, if any of the following occur:

(i) Modifications to the grow areas, rooms and storage, extraction equipment and process

rooms, or marihuana-infused product processing equipment within a marihuana business.

(ii) Changes in occupancy.

(iii) Material changes to a new or existing cultivator, producer, or marihuana microbusiness,

class A marihuana microbusiness, or designated consumption establishment including

changes made prelicensure and post-licensure.

(iv) Changes in extraction methods and processing or grow areas and building structures.

(c) Ensure that extractions using compressed gases of varying materials including, but not

limited to, butane, propane, and carbon dioxide that are used in multiple processes in cultivation

or extraction meet all of the following:

(i) Flammable gases of varying materials may be used in multiple processes in cultivation or

extraction and must meet the requirements in NFPA 58 and the international fuel gas code.

(ii) Processes that extract oil from marihuana plants and marihuana products using flammable

gas or flammable liquid must have leak or gas detection measures, or both. All extraction

equipment used in the marihuana business and equipment used in the detection of flammable or

toxic gases, or both, must be approved by the BFS and may require construction permits.

(iii) Marihuana businesses that have exhaust systems must comply with the NFPA 1 and the

Michigan mechanical code, R 408.30901 to R 408.30998.

(7) The requirements of this rule do not apply to a marihuana event organizer applicant or

licenseethe following license types under the Michigan regulation and taxation of marihuana

actMRTMA.:

(a) A marihuana event organizer applicant or licensee.

(b) A temporary marihuana event applicant or licensee.

(8) An applicant for a temporary marihuana event is subject to review and inspection, if

applicable, by BFS, which includes, but is not limited to, all of the following:

(a) A site plan must be provided. BFS shall review the site plan in accordance with the

NFPA 1.

(b) The temporary marihuana event location may be subject to a physical inspection, as

determined by the agency.

R 420.209 Security measures; required plan; video surveillance system.

Rule 9. (1) An applicant for a marihuana license to operate a proposed marihuana business shall

submit a security plan that demonstrates, at a minimum, the ability to meet the requirements of

this rule.

(2) A licensee shall ensure that any person at the marihuana business, except for employees of

the licensee, are escorted at all times by the licensee or an employee of the licensee when in the

limited access areas and restricted access areas at the marihuana business.

19

(3) A licensee shall securely lock the marihuana business, including interior rooms as required

by the agency, windows, and points of entry and exits, with commercial-grade, nonresidential

door locks or other electronic or keypad access. Locks on doors that are required for egress must

meet the requirements of NFPA 1, local fire codes, and the Michigan building code, R

408.30401 to R 408.30499.

(4) A licensee shall maintain an alarm system at the marihuana business. Upon request, a

licensee shall make available to the agency all information related to the alarm system,

monitoring, and alarm activity.

(5) A licensee shall have a video surveillance system that, at a minimum, consists of digital or

network video recorders, cameras capable of meeting the recording requirements in this rule,

video monitors, digital archiving devices, and a color printer capable of delivering still photos.

(6) A licensee shall ensure the video surveillance system does all the following:

(a) Records, at a minimum, the following areas:

(i) Any areas where marihuana products are weighed, packed, stored, loaded, and unloaded for

transportation, prepared, or moved within the marihuana business.

(ii) Limited access areas and security rooms. Transfers between rooms must be recorded.

(iii) Areas storing a surveillance system storage device with not less than 1 camera recording

the access points to the secured surveillance recording area.

(iv) The entrances and exits to the building, which must be recorded from both indoor and

outdoor vantage points.

(v) The areas of entrance and exit between marihuana businesses at the same location if

applicable, including any transfers between marihuana businesses.

(vi) Point of sale areas where marihuana products are sold and displayed for sale.

(vii) Anywhere Areas where marihuana or marihuana products are destroyed.

(b) Records at all times images effectively and efficiently of the area under surveillance with a

minimum of 720p resolution.

(7) A licensee shall install ensure that each camera so that it is permanently mounted and in a

fixed location. Each camera must be placed in a location that allows the camera to clearly record

activity occurring within 20 feet of all points of entry and exit on the marihuana business and

allows for the clear and certain identification of any person, including facial features, and

activities, including sales or transfers, in all areas required to be recorded under these rules.

(8) A licensee shall have sufficient lighting to meet the video surveillance system requirements

of this rule.

(9) A licensee shall have cameras that record when motion is detected at the marihuana

business and record images that clearly and accurately display the time and date.

(10) A licensee shall secure the physical media or storage device on which surveillance

recordings are stored in a manner to protect the recording from tampering or theft.

(11) A licensee shall keep surveillance recordings for a minimum of 30 calendar days, except

in instances of investigation or inspection by the agency in which case the licensee shall retain

the recordings until the time as the agency notifies the licensee that the recordings may be

destroyed.

(12) Surveillance recordings of the licensee are subject to inspection by the agency and must be

kept in a manner that allows the agency to view and obtain copies of the recordings at the

marihuana business immediately upon request. The licensee shall also send or otherwise provide

copies of the recordings to the agency upon request within the time specified by the agency.

20

(13) A licensee shall maintain a video surveillance system equipped with a failure notification

system that provides notification to the licensee of any interruption or failure of the video

surveillance system or video surveillance system storage device.

(14) A licensee shall maintain a log of the recordings, which includes all of the following:

(a) The identitiesy of the employee or employees responsible for monitoring the video

surveillance system.

(b) The identity of the employee who removed the any recording from the video surveillance

system storage device and the time and date removed.

(c) The identity of the employee who destroyed any recording.

(15) The requirements of this rule do not apply to the following license types under the

Michigan regulation and taxation of marihuana actMRTMA:

(a) A designated consumption establishment applicant or licensee.

(b) A marihuana event organizer applicant or licensee.

(c) A temporary marihuana event applicant or licensee.

R 420.210 Prohibitions.

Rule 10. (1) Except for designated consumption establishments or temporary marihuana events

licensed under the Michigan regulation and taxation of marihuana actMRTMA, a marihuana

business must not have marihuana products that are not identified and recorded in the statewide

monitoring system pursuant to these rules. A licensee shall not transfer or sell a marihuana

product that is not identified in the statewide monitoring system pursuant to these rules.

(2) Except for a designated consumption establishment or temporary marihuana event licensed

under the Michigan regulation and taxation of marihuana actMRTMA, a marihuana business

must not have any marihuana product without a batch number or identification tag or label

pursuant to these rules. A licensee shall immediately tag, identify, or record as part of a batch in

the statewide monitoring system any marihuana product as provided in these rules.

(3) A licensee shall not reassign or subsequently assign a tag to another package that has been

associated with a package in the statewide monitoring system.

(4) A licensee shall not allow a physician to conduct a medical examination or issue a medical

certification document at a marihuana business for the purpose of obtaining a registry

identification card.

(5) A violation of these rules may result in sanctions or fines, or both, in accordance with the

acts and these rules.

R 420.211 Marihuana product destruction and waste management.

Rule 11. (1) A marihuana product that is to be destroyed or is considered waste must be

rendered into an unusable and unrecognizable form through grinding or another method as

determined by the agency that incorporates the marihuana product waste with 1 or more of the

following types of non-consumable solid waste specified in subdivisions (a) to (h) of this subrule

so that the resulting mixture is not less than 50% non-marihuana product waste:

(a) Paper waste.

(b) Plastic waste.

(c) Cardboard waste.

(d) Food waste.

21

(e) Grease or other compostable oil waste.

(f) Fermented organic matter or other compost activators.

(g) Soil.

(h) Other waste approved in writing by the agency that will render the marihuana product

waste unusable and unrecognizable.

(2) Marihuana plant waste, including roots, stalks, leaves, and stems that have not been

processed with a solvent must be rendered into an unusable and unrecognizable form through

grinding or another method as determined by the agency that incorporates the marihuana plant

waste with 1 or more of the following types of compostable waste specified in subdivisions (a)

to (d) of this subrule so that the resulting mixture is not less than 50% non-marihuana plant

waste:

(a) Food waste.

(b) Yard waste.

(c) Vegetable based grease or oils.

(d) Other compostable wastes approved by the agency.

(3) A licensee shall manage all waste that is hazardous waste pursuant to part 111 of the natural

resources and environmental protection act, 1994 PA 451, MCL 324.11101 to 324.11153.

(4) A marihuana product rendered unusable and unrecognizable and, therefore, considered

waste, and marihuana plant waste must be recorded in the statewide monitoring system.

(5) A licensee shall not sell marihuana waste, marihuana plant waste, or marihuana products

that are to be destroyed, or that the agency orders destroyed.

(6) A licensee shall dispose of marihuana product waste and marihuana plant waste in a secured

waste receptacle using 1 or more of the following methods that complies with applicable state

and local laws and regulations:

(a) A licensed municipal solid waste landfill.

(b) A registered composting facility that has specific approval under part 115 of the natural

resources and environmental protection act, 1994 PA 451, MCL 324.11501 to 324.11554, to

accept the material.

(c) An anaerobic digester that has specific approval under part 115 of the natural resources and

environmental protection act, 1994 PA 451, MCL 324.11501 to 324.11554, to accept the

material.

(d) An in-state municipal solid waste or hazardous waste incinerator that has been permitted

under part 55 of the natural resources and environmental protection act, 1994 PA 451, MCL

324.5501 to 324.5542.

(7) A licensee shall dispose of wastewater generated during the cultivation of marihuana and

the processing of marihuana products in a manner that complies with applicable state and local

laws and regulations.

(8) A licensee shall maintain accurate and comprehensive records regarding marihuana product

waste, and marihuana plant waste that accounts for, reconciles, and evidences all waste activity

related to the disposal. The agency may publish guidance on marihuana product waste

management.

(9) "As used in this rule, “unrecognizable” means marihuana product rendered indistinguishable

from any other plant material.

(10) Under the Michigan regulation and taxation of marihuana actMRMTA, a licensed

marihuana microbusiness, class A marihuana microbusiness, or marihuana retailer who

participates in a temporary marihuana event shall destroy and dispose of any marihuana product

22

that is considered waste, and any marihuana plant waste, resulting from the licensee’s activities

during the event according to the applicable provisions in this rule.

(11) Except for the marihuana product waste specified in subrule (10) of this rule, a marihuana

event organizer who holds a temporary marihuana event under the Michigan regulation and

taxation of marihuana act MRTMA is responsible for destroying and disposing of any

marihuana product waste and marihuana plant waste that results from the event. All marihuana

waste must be rendered unusable and unrecognizable and disposed of in accordance with this

rule and in compliance with all applicable state and local laws and regulations.

(12) Under the Michigan regulation and taxation of marihuana actMRMTA, a licensed

designated consumption establishment shall destroy and dispose of any marihuana product left at

the establishment that is considered waste and any marihuana plant waste, in accordance with

this rule and in compliance with all applicable state and local laws and regulations. The

designated consumption establishment shall maintain a log of any marihuana product that is

considered waste, and marihuana plant waste, which must include a description of the waste and

the amount and the manner in which it was disposed. The designated consumption establishment

licensee shall make the log available to the agency upon request.

(13) Nothing in these rules prohibits a grower, with agency approval, from disposing of

marihuana plant waste as compost feedstock or in another organic waste method at their

marihuana business in compliance with part 111 of the natural resources and environmental

protection act, 1994 PA 451, MCL 324.11101 to 324.11153.

R 420.212 Storage of marihuana product.

Rule 12. (1) All marihuana products must be stored at a marihuana business in a secured

limited access area or restricted access area and must be identified and tracked consistently in the

statewide monitoring system under these rules.

(2) All containers used to store marihuana products for transfer or sale between marihuana

businesses must be clearly marked, labeled, or tagged, if applicable, and enclosed on all sides in

secured containers. The secured containers must be latched or locked in a manner to keep all

contents secured within. Each secured container must be identified and tracked in accordance

with the acts and these rules.

(3) All chemicals or solvents must be stored separately from marihuana products and kept with

a closed lid in locked storage areas.

(4) Marihuana-infused products, edible marihuana products, or materials used in direct contact

with the marihuana-infused products or edible marihuana products, must have separate storage

areas from toxic or flammable materials.

(5) Marihuana products not in final packaging must be stored separately from other types of

marihuana product in compliance with these rules.

(6) A marihuana sales location shall store all marihuana products for transfer or sale behind a

counter or other barrier separated from stock rooms.

(7) A laboratory shall establish an adequate chain of custody and instructions for sample and

storage requirements.

(8) A licensee shall ensure that any stock or storage room meets the security requirements of

these rules and any other applicable requirements in the acts and these rules.

23

R 420.213 Marihuana microbusiness and class A marihuana microbusiness operation.

Rule 13. As applicable, a marihuana microbusiness and class A marihuana microbusiness

licensee shall operate the corresponding areas of a marihuana microbusiness or class A

marihuana microbusiness in compliance with the operation requirements of a marihuana

retailer, a marihuana grower, or a marihuana processor as provided for in the Michigan

regulation and taxation of marihuana act MRTMA and these rules. A marihuana microbusiness

and class A marihuana microbusiness, if engaging in delivery, shall operate in accordance

with R 420.207.

R 420.214 Transfer of marihuana between equivalent licenses.

Rule 14. (1) To ensure marihuana product is available for customers the The agency may

authorize licensees who hold equivalent licenses under the Michigan regulation and taxation of

marihuana act MRTMA with common ownership to transfer marihuana product between the

inventory of their marihuana facility and the inventory of their marihuana establishment.

(2) The following licensees who hold the following equivalent licenses with common

ownership may accept the transfer of medical marihuana product under subrule (1) of this rule:

(a) Class A marihuana growers;.

(b) Class B marihuana growers;.

(c) Class C marihuana growers;.

(d) Marihuana processors;.

(e) Marihuana retailers.

(3) The agency shall publish a specific start date, end date, and other requirements for the

transfer of marihuana product between equivalent licenses.

(4) A licensee shall transfer marihuana product between equivalent licenses with common

ownership in accordance with these rules and any requirements published by the agency.

(5) A licensee shall track the transfer of product between equivalent licenses with common

ownership in the statewide monitoring system in accordance with these rules and any

requirements published by the agency. Marihuana plants transferred pursuant to this rule count

towards the authorized total amount of marihuana plants for a licensed cultivator.

(6) Marihuana product transferred to an equivalent license with common ownership may only

be sold or transferred in accordance with the acts and these rules.

(7) A licensee in receipt of transferred marihuana product shall track the marihuana product

sold or transferred in accordance with these rules.

R 420.214a Internal analytical testing.

Rule 14a. (1) A licensee may designate a space to perform internal analytical testing on

marihuana or a marihuana product grown or produced by the marihuana business, if all of

the following are met:

(a) The designated internal analytical testing space is fully partitioned from all other

licensed activities at the marihuana business.

(b) The designated internal analytical testing space complies with all of the requirements

of R 420.209.

(c) If a licensee with a designated space for internal analytical testing is co-located with

another licensee, product from only 1 license may be in the designated space at a time.

24

(d) Internal analytical testing may be performed only on a product grown, harvested, or

processed by licensees under common ownership.

(2) All marihuana or a marihuana product used for internal analytical testing must be

identified, recorded, and tracked consistently in the statewide monitoring system.

(3) All marihuana or a marihuana product used for internal analytical testing must have a

batch number or an identification tag or label as assigned by the statewide monitoring

system affixed to it.

(4) No marihuana or marihuana product may be stored in the internal analytical testing

space.

(5) Marihuana or a marihuana product that has undergone internal analytical testing

must be disposed of in compliance with R 420.211.

(6) Results of internal analytical testing may not be entered into the statewide monitoring

system.

(7) Any batch of marihuana or a marihuana product that has undergone internal

analytical testing must undergo full safety compliance testing, with passing test results

entered into the statewide monitoring system, prior to being sold or transferred.

(8) Any batch of marihuana or a marihuana product that has undergone internal

analytical testing must undergo full safety compliance testing, with failing test results

entered into the statewide monitoring system, prior to making a request for remediation.

(9) The results of internal analytical testing may not be used to label a product under R

420.504.

R 420.214b Adverse reactions.

Rule 14b. (1) A licensee shall notify the agency within 1 business day of becoming aware

or within 1 business day of when the licensee should have been aware of any adverse

reactions to a marihuana product sold or transferred by any licensee.

(2) A licensee shall enter into the statewide monitoring system within 1 business day of

becoming aware of or within 1 business day of when the licensee should have been aware of

any adverse reactions to a marihuana product sold or transferred by any licensee.

R 420.214c Product returns.

Rule 14c. (1) A marihuana sales location may accept the return of marihuana product

that is reported to have caused an adverse reaction or is determined to be defective.

(2) A marihuana sales location must have a written policy for the return of marihuana

product that contains, at a minimum, the following:

(a) Product returned to a marihuana sales location must be tracked consistently in the

statewide monitoring system as waste in compliance with R 420.211.

(b) Product returned to a marihuana sales location must be destroyed in compliance with

R 420.211 within 90 calendar days of when the marihuana business became aware of the

fact that the product must be destroyed.

(c) Product returned to a marihuana sales location cannot be re-sold, re-packaged, or

otherwise transferred to a customer or another marihuana business.

(d) Product returned to a marihuana sales location shall be returned by the customer

who purchased the product.

25

(e) Product returned to a marihuana sales location is prohibited from being returned to

the marihuana sales location by way of a delivery driver.

(f) A marihuana sales location that does not comply with these rules may be subject to

disciplinary proceedings.

(g) A marihuana retailer may return a marihuana product that is past its expiration date

to the marihuana processor who produced the marihuana product for destruction instead

of destroying the marihuana product.

From:

To:

Sandy Marcus

MRA-Legal

Subject:

Date:

Request

Monday, September 27, 2021 10:45:51 AM

CAUTION: This is an External email. Please send suspicious emails to

abuse@michigan.gov

Hello,

I’m writing to propose a change to R 420.206 Rule 6 (7)(c), which states in part “ A

marihuana transporter shall transport any marihuana product in a locked, secured, and sealed

container that is not accessible while in transit. The container must be secured by a locked

closed lid or door. A marihuana transporter of marihuana product from separate marihuana

businesses shall not comingle the marihuana product. All marihuana products must be labeled

in accordance with these rules and kept in separate compartments or containers within the

main locked, secured, and sealed container.”

My proposed change is to add a sentence stating that product may be transported by means of

a box or other container and sealed with tamper-proof tape or equivalent. I believe the intent

of the rule makers is to ensure the integrity of all marijuana packages being transported.

Currently, we must place boxes or other packages into sealed containers or zip tie boxes

together, which serve the same purpose as a tamper-proof tape.

The proposed rule change would then read, in full, as follows:

(c) A marihuana transporter shall transport any marihuana product in a locked, secured, and

sealed container that is not accessible while in transit. The container must be secured by a

locked closed lid or door. A box or container sealed by tamper-proof tape or equivalent

will suffice, so long as the means of sealing the product would alert the receiving facility

that the product had been tampered with at some point from the time it departed the

shipping facility. A marihuana transporter of marihuana product from separate marihuana

businesses shall not comingle the marihuana product. All marihuana products must be labeled

in accordance with these rules and kept in separate compartments or containers within the

main locked, secured, and sealed container. If the marihuana transporter transports money

associated with the purchase or sale of marihuana product between businesses, the marihuana

transporter shall lock the money in a sealed container kept separate from the marihuana

product and only accessible to the licensee and its employees.

Thank you for your time and consideration.

---------------------------------

Thank you,

--

Thank You

Sandy Marcus

(586)-850-0449

September 27, 2021

Shryne Group, Inc

728 E. Commercial St

Los Angeles, California 90012

Marijuana Regulatory Agency

Legal Section

P.O. Box 30205

Lansing, MI 48909

MRA-Legal@michigan.gov

Re:

MRA Proposed Rules

To Whom it May Concern:

On August 27, 2021, the Michigan Marijuana Regulatory Agency (MRA) published proposed

rules and regulations which provided clarity and consistency to those working in both the

medical and adult-use markets. We are responding to the MRA’s request for public comments.

Shryne Group Inc. is a Los Angeles-based cannabis holding company with a vertically

integrated asset and license portfolio covering the breadth of California, the largest legal

cannabis market in the world. We have 18 open retail locations across California with five more

locations under construction and plans for 40+ locations open by the end of 2022. We have

Cultivation, Manufacturing, and Distribution facilities in Humboldt County, Los Angeles, Oakland,

and Lompoc. Shryne is composed of 2,200 employees across business lines. While rooted in

California, we also sell products in Arizona, Nevada and Michigan.

Our flagship brand STIIIZY has a passionate following and is inspired by authentic cannabis

culture, with the goal of providing the highest quality cannabis products at affordable prices. The

STIIIZY product line is the #1 selling vape brand nationally, the #1 overall cannabis brand in

California, and the #3 selling cannabis brands overall nationally.

With the foregoing in mind, we respectfully submit the following comments:

R 420.204 Operation at same location.

(3) Operation of a marihuana license at the same location that includes a licensed marihuana

sales location shall must have the entrance and exit to the licensed marihuana sales location

and entire inventory physically separated from any of the other licensed marihuana businesses

so that individuals can clearly identify the sales entrance and exit.

SHRYNE GROUP, INC. | 718-728 E. COMMERCIAL STREET | LOS ANGELES, CALIFORNIA 90012

A CALIFORNIA COMPANY

(3)(a) shared entrances are permissible for co-located licenses that exclude a sales facility on

the same location.

(4) Operation of marihuana licenses at the same location may include a combined space for the

purposes of sharing common use areas, such as a bathroom, breakroom, hallway,

shipping/loading bays, IT security storage or building entrances, in addition to complying with R

420.214a.

Rationale for revision:

We recommend that the agency develop and adopt rules to allow shared common areas of the

property. Co-located or stacked licenses that occupy the same parcel of land should have the

ability to share common use areas, such as bathrooms, breakrooms, hallways, shipping/loading

bays, IT security storage, or building entrances. As it is written currently, the regulations have

not yet adopted a text that permits this activity.

R 420.214c Product returns.

(g) A marihuana retailer may return a marihuana product that is past its expiration date that is

defective or expired to the marihuana processor who produced the marihuana product for

destruction or refund instead of destroying the marihuana product.

(h) A marihuana retailer may return marihuana flower products that are past its expiration date

to a processor for the purposes of extracting the marihuana into marihuana concentrate.

Rationale for revision:

(g) We propose the addition of granting marihuana businesses the ability to return defective

products to the originating marihuana producer. If a product is experiencing issues, such as

malfunctioning hardware, processors should exchange the item for a non-defective version or

grant marihuana businesses an option to exchange the defective product for another item of

equal value.

(h) Marihuana sales facilities should have the ability to send expired marihuana flower products

to a marihuana processor for extraction. Hydrocarbon extraction is an effective way to retrieve

cannabinoids from flower that is dry or otherwise does not meet consumer standards for

freshness.

R 420.214a Internal analytical testing.

(d) Internal analytical testing may be performed only on a product grown, harvested, or

processed by licensees under common ownership. registered under the Acts.

Rationale for revision:

SHRYNE GROUP, INC. | 718-728 E. COMMERCIAL STREET | LOS ANGELES, CALIFORNIA 90012

A CALIFORNIA COMPANY

We propose that this provision be struck from the text and allow licensed entities to conduct

internal analytical testing regardless of ownership. The cost-feasibility and infrastructure needs

pose challenges for all licensees to add this benefitted feature of internal testing into their

operations. Furthermore, since regulatory compliance testing is already a mandatory

requirement that all marihuana products must pass, internal laboratories should have the ability

to perform R&D tests for non-affiliated parties. For this purpose, R 420.112a (1) should apply to

this section, allowing licensees to contract with non-affiliated parties to establish agreements for

internal testing.

R 420.509 Internal product samples.

(7) A licensee shall have ensure internal product samples are tested pursuant to R 420.304 and

R 420.305 before transfer to its employees, if previous testing requirements have not already

been met in R 420.508 (5).

Rationale for revision:

The regulation as currently written is ambiguous in its language. One interpretation of the text

suggests that an internal sample must be tested twice before being transferred to an employee.

Per the regulation definitions, the agency intended that trade samples become internal product

samples upon transfer to another marihuana business. By this logic, the receiving marihuana

license should have already had its internal product samples tested before it was transferred as

a 'trade sample' in the statewide monitoring system. This would imply that all testing

requirements have already been met, as listed in R 420.508 (5). We propose that if a product

was previously tested in its final form and has already met all requirements listed in R 420.508

(5), then the original test results should suffice requiring no additional testing be made from a

receiving licensee. As such, we recommend that R 420.509 (7) be reworded to say that the

licensee must 'ensure' the internal product sample has already passed regulatory compliance

testing.

R 420.504 Marihuana product sale or transfer; labeling and packaging requirements.

(1)(v). In clearly legible type and surrounded by a continuous heavy line: “WARNING: USE BY

PREGNANT OR BREASTFEEDING WOMEN, OR BY WOMEN PLANNING TO BECOME

PREGNANT, MAY RESULT IN FETAL INJURY, PRETERM BIRTH, LOW BIRTH WEIGHT, OR

DEVELOPMENTAL PROBLEMS FOR THE CHILD.”

Rationale for revision:

The addition of this warning will significantly challenge producers’ ability to adequately house all

statements, particularly on smaller packages, such as concentrates in small jars. We agree that

this message should be conveyed to the consumer to further public safety but considering its

length and the other warning statements that must be applied to all cannabis products, it would

be more effective and better housed on the pamphlet described in 420.504 (4) or by granting

SHRYNE GROUP, INC. | 718-728 E. COMMERCIAL STREET | LOS ANGELES, CALIFORNIA 90012

A CALIFORNIA COMPANY

licensees the ability to include supplemental labels including hang tags or inserts affixed to the

package.

R 420.303 Batch; identification and testing.

(6) A cultivator may transfer or sell fresh frozen or whole-plant harvest marihuana to a producer

without first being tested by a laboratory in order to produce live resin, or if the marihuana

product will be extracted, with agency approval.

Rationale for revision:

The agency should expand the language in R 420.303 to include whole-plant harvest cannabis

biomass. Cultivators may choose to utilize whole-plant harvesting techniques without

immediately freezing the crop. The treatment of both fresh-frozen and non-frozen whole-plant

harvested crops should be the same.

R 420.306 Testing marihuana product after failed initial safety testing and remediation.

(3) Marihuana-infused products that failed testing for Aspergillus are ineligible for remediation.

Rationale for revision:

Remediation of Aspergillus from marihuana flower should be permitted if the remediation activity

is hydrocarbon extraction. Technology exists today to successfully remove Aspergillus if

marihuana biomass is extracted into a marihuana concentrate. Remediation using hydrocarbon

extraction is an effective method to remove microbial contaminants from marihuana biomass

and allows the industry to recover lost costs by converting marihuana into a concentrate.

R 420.303 Batch; identification and testing.

(6) A producer that received a package under this rule that has not been processed extracted

may transfer that package to another producer without having the package first tested by a

laboratory to produce live resin or concentrate with agency approval.

Rationale for revision:

In the previous sentence, the word 'processed' was struck from the text and amended to use the

word "extracted". For consistency purposes, the word "extracted" should be used throughout

this subsection.

R 420.403 Requirements and restrictions on marihuana-infused products; edible

marihuana product.

(d) Not produce edible marihuana products in the distinct shape of a human, animal, or fruit, or

a shape that bears the likeness or contains characteristics of a realistic or fictional human,

SHRYNE GROUP, INC. | 718-728 E. COMMERCIAL STREET | LOS ANGELES, CALIFORNIA 90012

A CALIFORNIA COMPANY

animal, or fruit, including artistic, caricature, or cartoon renderings. Edible marihuana products

that are geometric shapes and fruit flavored are permissible.

(e) Not package an edible marihuana product in a package that bears the image, likeness, or

contains the characteristics of commercially available food products. Edible marihuana

packages that depict fruits are permissible.

Rationale for revision:

The prohibition of the depiction of fruit on an edible product’s packaging is inconsistent with a

producer’s ability to create simple fruit-flavored products. Fruit is not inherently attractive to

minors and including it on an edible product’s packaging only serves to better inform the

consumer and strengthen public confidence. The safeguards in place listed in R 420.504 & R

420.403 are robust and restricting the depiction of fruit does not further the deterrence of use by

minors. Based on FDA product standards, it is our assertion that edible cannabis products are

not considered food and are more akin to dietary supplements, which permit the depiction of

food/fruit. Furthermore, the Marijuana-Infused Edibles: Enforcement Guidance advisory bulletin

from August 2, 2021, specifically uses an example of edible packaging that depicts alcohol as

an acceptable package, which is unequivocally more attractive to teenage minors than

strawberries or blueberries. Considering current market conditions and the vast number of

edible products available that depict fruit on their packaging, we respectfully question how this

regulation is effectively enforced and why fruit is specifically listed, leaving producers to interpret

regulations to mean the depiction of other food is permissible.

R 420.403 Requirements and restrictions on marihuana-infused products; edible

marihuana product.

(7)(a) The name of the marihuana-infused product. The name of the product must be an

appropriately descriptive phrase that accurately describes the basic nature of the product. that

includes a product modifier such as "marijuana product", "THC product", or "cannabis product"

using the same or larger font.

Rationale for revision:

In relation to Advisory Bulletin 'Marihuana-Infused Edibles: Enforcement Guide'' published on

August 2, 2021, the agency needs to adopt similar language to state that a name modifier (i.e.

THC, Marihuana, or Cannabis) of equal or greater text size is a mandatory requirement for all

marihuana-infused edible packaging. Adding this addition to the regulations will provide

licensees the necessary information to ensure they are in compliance. Furthermore, it will

reduce the percentage of non-compliant marihuana-infused edible marihuana products that

exist in the market today. Adding this revision will benefit marihuana licensees from having to

repackage, sticker, or destroy non-compliance products as deemed by the agency.

SHRYNE GROUP, INC. | 718-728 E. COMMERCIAL STREET | LOS ANGELES, CALIFORNIA 90012

A CALIFORNIA COMPANY

R 420.403 Requirements and restrictions on marihuana-infused products; edible

marihuana product.

(2) Marihuana-infused products processed under these rules must be homogenous. The

allowable variation for weight and THC and CBD concentrations between the actual results and

the intended serving is to be + or – 15%.

Rationale for revision:

The Allowable Potency Variance in Packaging of Marijuana-Infused Products technical bulletin

from June 22, 2020, is inconsistent with R 420.403 (2). For consistency and clarification

purposes, the bulletin should be revised to align with the allowable 15% variance. This will

reduce the opportunity for confusion amongst procedures, retailers, and the consumer. In

addition, R 420.404 referenced in the bulletin needs to also match the 15% variance, as listed in

R 420.403(2).

R 420.602a Prohibitions.

(2) An employee of a producer may not also be employed by a marihuana transporter or a

laboratory.

Rationale for revision:

Employees who are not exercising direction or control of a license should be authorized to work

for multiple license types. Owners and shareholders are disclosed to the Department and are

correctly scrutinized to ensure they do not have a mutually beneficial relationship in conflicting

license types. Hourly employees are not exercising direction or control of the license and have

zero motivation to perform any illegal actions that would jeopardize the license or their own

employment. The licensee is required to implement strict procedures and controls to prevent

diversion or illicit activity. As such, non-owner employees should be authorized to work for

multiple license types since there is no competing interest.

R 420.4 Application requirements; financial and criminal background.

(3) Each applicant shall disclose all shareholders holding a direct or indirect interest of greater

than 5%, officers, and directors in the proposed marihuana establishment. Each applicant shall

disclose the identity of every person having a 2.5 5% or greater ownership interest in the

applicant with respect to which the license is sought.

Rationale for revision:

The proposed 2.5% in ownership interest is a low threshold and should remain at 5%.

Furthermore, subsection (3)(c) lists 5% for publicly held corporations. The percentage should be

consistent throughout the regulation.

SHRYNE GROUP, INC. | 718-728 E. COMMERCIAL STREET | LOS ANGELES, CALIFORNIA 90012

A CALIFORNIA COMPANY

MRA Bulletins Comment

MRA Bulletins found on the agency’s website are sometimes inconsistent with the regulations.

We acknowledge that advisory and technical bulletins disseminated to the public are important

to further elaborate on informing further detail and clarification regarding the rules. But when

bulletins are used to create new rules, this can easily contradict regulations as written and does

a disservice to all licensees. Significant information can be easily missed if not found, for

example, the bulletin on name modifier requirements for marihuana-infused edible packaging.

The agency’s regulations must clearly be stated to address these requirements, if not this

presents a bigger issue for licensees to remain in compliance. Moreover, it is critical that

bulletins remain consistent with regulations on the rules the agency is enforcing. One example

to note is the maximum THC concentration limits established by the agency which contradict

with the rules set in R 420.403 (2), where the allowable variation for THC concentration is + or -

15%. We ask that the agency work to align all advisory and technical bulletins with the current

and proposed regulations so that licensees are aware of all requirements that need to be met.

Sources:

Public Hearing on Proposed Rules

Marihuana Operations

Marihuana Sale or Transfer

Marihuana Sample and T e sting

Marihuana-Infused Products and Edible Marihuana Product

Marihuana Employees

Marihuana Licenses

Shryne Group appreciates the opportunity to comment publicly on the above and encourages

the MRA to consider the above recommendations. If the MRA has any questions or requires

additional information, please contact Andrew Hopkins (email: andrew@shrynegroup.com,

phone: 480.747.3428).

Sincerely,

Andrew Hopkins, LCB

Director of Compliance

480-747-3428

Andrew@shrynegroup.com

Shryne Group, Inc.

A California Company

www.shrynegroup.com

SHRYNE GROUP, INC. | 718-728 E. COMMERCIAL STREET | LOS ANGELES, CALIFORNIA 90012

A CALIFORNIA COMPANY

Fox, Jessica (LARA)

From:

Sent:

To:

Robert Lavin <RLavin@skymintbrands.com>

Monday, September 27, 2021 2:10 PM

MRA-Legal

Cc:

Retail Compliance

Subject:

Question Regarding Purposed Rule 420.207a

CAUTION: This is an External email. Please send suspicious emails to abuse@michigan.gov

Hello,

My name is Robert Lavin, I work with Green Peak Innovations based out of Dimondale. I have a clarification

question that I would like to ask regarding the purposed rule changes that were discussed today at the public

hearing in Lansing at the Williams building.

Per the purposed rule 420.207a Contactless and limited contact transactions, retail locations are allowed to

take online orders for marijuana products. Would this also allow for telephone orders for marijuana products

to be accepted and processed by retail locations? Are phone orders currently acceptable under the MRTMA

rule set?

Also, would this rule allow for drive‐thru sales to be completed in the near future? If so, will the MRA

specifically define this and all parameters to remain compliant?

Thank you,

Robert Lavin

Retail Compliance Manager

Mobile: (618) 713-7452

Email: RLavin@skymintbrands.com

10070 Harvest Park. Dimondale, Michigan 48821

https://www.skymintbrands.com

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and confidential information solely for the use by the intended recipient. This message is for contact purposes only and does not constitute an

electronic signature or intent to contract unless expressly indicated. If the reader of this message is not the intended recipient, the reader is

notified that any use, dissemination, distribution, or copying of this communication is strictly prohibited. If you have received this communication

in error, please immediately notify SKYMINT BRANDS at info@skymintbrands.com.

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