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

DEPARTMENT OF LICENSING AND REGULATORY AFFAIRS

MARIJUANA REGULATORY AGENCY

MARIHUANA EMPLOYEES

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 420.601 and R 420.602 of the Michigan Administrative Code are amended, and R 420.602a is

added, as follows:

R 420.601 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) “Agency” means the marijuana regulatory agency.

(c) “Cultivator” means both a grower under the medical marihuana facilities licensing

act and a marihuana grower under the Michigan Regulation and Taxation of Marihuana

Act.

(cd) “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.

(de) “Employee” means, except as otherwise provided in these rules, 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

establishment.

(f) “Laboratory” means both a safety compliance facility under the medical marihuana

facilities licensing act and a marihuana safety compliance facility under the Michigan

Regulation and Taxation of Marihuana Act.

(eg) “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.

(fh) “Marihuana business” refers to means a marihuana facility under the medical marihuana

facilities licensing act or a marihuana establishment under the Michigan rRegulation and

tTaxation of mMarihuana aAct, or both.

July 19, 2021

2

(gi) “Marihuana customer” refers to means a registered qualifying patient under the medical

marihuana facilities licensing act, a registered primary caregiver under the medical marihuana

facilities licensing act, or an individual 21 years of age or older under the Michigan rRegulation

and tTaxation of mMarihuana aAct, or all 3.

(hj) “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

transporter, marihuana designated consumption establishment, or any other type of marihuana

related business licensed to operate by the agency under the Michigan rRegulation and tTaxation

of mMarihuana aAct.

(ik) “Marihuana event organizer” means a person licensed to apply for a temporary marihuana

event license under these rules.

(jl) “Marihuana facility” means a location at which a licensee is licensed to operate under the

medical marihuana facilities licensing act.

(km) “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.

(ln) “Marihuana sales location” refers to means 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.

(o) “Marihuana tracking act” means the marihuana tracking act, 2016 PA 282, MCL

333.27901 to 333.27904.

(p) “Marihuana transporter” means a secure transporter under the medical marihuana

facilities licensing act or a marihuana secure transporter under the Michigan Regulation

and Taxation of Marihuana Act, or both.

(mq) “Medical marihuana facilities license licensing act” or “MMFLA” means the medical

marihuana facilities licensing act, 2016 PA 281, MCL 333.27101 to 333.27801.

(nr) “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.

(s) “Producer” means both a processor under the medical marihuana facilities licensing

act and a marihuana processor under the Michigan Regulation and Taxation of Marihuana

Act.

(os) “These rules” means the administrative rules promulgated by the Marijuana Regulatory

Agency marijuana regulatory 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.

(pt) “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.

(2) Terms defined in the acts have the same meanings when used in these rules unless otherwise

indicated.

R 420.602 Employees; requirements.

3

Rule 2. (1) A licensee shall conduct a criminal history background check on any prospective

employee before hiring that individual. A licensee shall keep records of the results of the

criminal history background checks for the duration of the employee’s employment with the

licensee. A licensee shall record confirmation of criminal history background checks and make

the confirmation available for inspection upon request by the agency.

(2) A licensee shall comply with all of the following:

(a) Have a policy in place that requires employees to report any new or pending criminal

charges or convictions. If an employee is charged with or convicted of a controlled substance-

related felony or any other felony, the licensee shall immediately report the charge or conviction

to the agency. If an employee of a licensee under the Michigan regulation and taxation of

marihuana act MRTMA is convicted of an offense involving distribution of a controlled

substance to a minor, the licensee shall immediately report the conviction to the agency. The

agency shall maintain a list of excluded employees.

(b) Enter in the statewide monitoring system an employee’s information and level of statewide

monitoring system access within 7 business days of hiring for the system to assign an employee

identification number. The licensee shall update in the statewide monitoring system employee

information and changes in status or access within 7 business days.

(c) Remove an employee’s access and permissions to the marihuana business and the statewide

monitoring system within 7 business days after the employee’s employment with the licensee is

terminated.

(d) Train employees and have an employee training manual that includes, but is not limited to,

employee safety procedures, employee guidelines, security protocol, and educational training,

including, but not limited to, marihuana product information, dosage and purchasing limits if

applicable, and educational materials. Copies of these items must be maintained and made

available to the agency upon request. Train employees in accordance with an employee

training manual. Copies of this manual must be maintained and be made available to the

agency upon request. The employee training manual must include, but is not limited to, all

of the following:

(i) Employee safety procedures.

(ii) Employee guidelines.

(iii) Security protocol.

(iv) Educational training, including, but not limited to, marihuana product information;

dosage and purchasing limits, if applicable; and educational materials.

(e) A licensee under the Michigan regulation and taxation of marihuana act shall, if applicable,

include in the employee training manual a responsible operations plan. A responsible operations

plan must include a detailed explanation of how employees will monitor and prevent over-

intoxication, underage access to the establishment, the illegal sale or distribution of marihuana

or marihuana products within the establishment, and any other potential criminal activity on the

premises, as applicable. Copies of these items must be maintained and made available to the

agency upon request. A licensee under the MRTMA shall include in the employee training

manual a responsible operations plan. Copies of this plan must be maintained and be

available to the agency upon request. A responsible operations plan must include a

detailed explanation of how employees will monitor and prevent all of the following:

(i) Over-intoxication.

(ii) Underage access to the establishment.

4

(iii) The illegal sale or distribution of marihuana or marihuana products within the

establishment.

(iv) Any potential criminal activity on the premises, as applicable.

(f) Establish point of sale or transfer procedures for employees at marihuana sales locations

performing any transfers or sales to marihuana customers. The point of sale or transfer

procedures must include, but are not limited to, training in dosage, marihuana product

information, health or educational materials, point of sale training, purchasing limits,

cannabidiol (CBD) and tetrahydrocannabinol (THC) information, serving size, and consumption

information, including any warnings. Copies of these items must be maintained and made

available to the agency upon request. Establish point of sale or transfer procedures for

employees at marihuana sales locations performing any transfers or sales to marihuana

customers. Copies of these procedures must be maintained and be made available to the

agency upon request. The point of sale or transfer procedures must include, but are not

limited to, all of the following:

(i) Training in dosage.

(ii) Marihuana product information.

(iii) Health or educational materials.

(iv) Point of sale training.

(v) Purchasing limits.

(vi) Cannabidiol (CBD) and tetrahydrocannabinol (THC) information.

(vii) Serving size.

(viii) Consumption information, including any warnings.

(g) Screen prospective employees against a list of excluded employees based on a report or

investigation maintained by the agency in accordance with R 420.808a(6)subdivision (a) of this

subrule.

(h) Ensure that employees handle marihuana product in compliance with cCurrent gGood

mManufacturing pPractice, Hazard Analysis, and Risk Based Preventative Controls for in

manufacturing, packing, or holding hHuman fFood, 21 CFR part 1107, as specified in these rules.

(i) When a registered primary caregiver is hired as an employee of a grower, processor, or

secure transporter licensed under the medical marihuana facilities licensing actMMFLA,

withdraw, or ensure the individual withdraws, the individual's registration as a registered primary

caregiver in a manner established by the agency.

(j) If a A licensee under the Michigan regulation and taxation of marihuana actMRMTA, shall

not allow a person under 21 years of age to volunteer or work for the marihuana establishment

pursuant to section 11 of the MRTMA, MCL 333.27961.

(k) If a A licensee under the Michigan regulation and taxation of marihuana actMRTMA, shall

not employ any individual who has been convicted of an offense involving distribution of a

controlled substance to a minor.

(3) If an individual is present at a marihuana business or in a marihuana transporter vehicle who

is not identified as a licensee or an employee of the licensee in the statewide monitoring system

or is in violation of the acts or these rules, the agency may take any action permitted under the

acts and these rules. This subrule does not apply to authorized escorted visitors at a marihuana

business.

(4) Employee records are subject to inspection or examination by the agency to determine

compliance with the acts and these rules.

5

(5) Consumption of food and beverages by employees or visitors is prohibited where marihuana

product is stored, processed, or packaged or where hazardous materials are used, handled, or

stored. The marihuana business may have a designated area for the consumption of food and

beverages that includes, but is not limited to, a room with floor to ceiling walls and a door that

separates the room from any marihuana product storage, processing, or packaging.

(6) As used in this rule, “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. Trade or professional services providers provided

by individuals not normally engaged in the operation of a marihuana business, except for those

individuals required to have employee credentials under this rule, must be reasonably monitored,

logged in as a visitor, and escorted through any limited access areas.

(7) Nothing in this rule prohibits a licensee from allowing visitors into the marihuana business.,

A licensee shall ensure that if the visitors are reasonably monitored, logged in as a visitor, and

escorted through any limited access areas. Visitors that are not employees or individuals

providing trade or professional services are prohibited where hazardous materials are used,

handled, or stored in the marihuana business.

R 420.602a Prohibitions.

Rule 2a. (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,

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.

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

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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

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