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On March 23, the California Department of Public Health’s Manufactured Cannabis Safety Branch (DPH) published proposed emergency regulations allowing smaller cannabis manufacturers to operate in shared-use facilities. The proposed emergency regulations were approved and went into effect on April 13, 2018.

Under the new regulations, a Primary Licensee can apply for a Type 7, Type 6 or Type N manufacturing license and then register its facility as a shared-use facility. Thereafter, other manufacturers may apply for the new Type S license and share the shared-use facility. Once the local and state agencies approve applications, the Primary Licensee and the other Type S Licensees can take turns using the common-use areas and equipment of the shared-use facility.

The new Type S license is a major victory for small and artisan manufacturers that do not have the funds to cover the extensive overhead costs of a large property but still want to get their products to market and develop their brands. The shared-use facility offers Type S licensees to share the rent, equipment, insurance, utilities and security costs. Being able to split the costs amongst the Primary Licensee and the Type S licensees would allow manufacturers to potentially operate in more expensive areas throughout the state.

The Type S licensees are limited to the following cannabis manufacturing activities: (1) infusions, (2) packaging and labeling, (3) and extractions with butter or food-grade oils, however, the extract or concentrate may only be used in the Type S licensee’s infused product and cannot be sold to third party licensees.

There are several requirements and restrictions placed upon the Type S licensee. First, the Type S licensee can only make a maximum revenue of $500,000 a year. Second, The Primary Licensee and the Type S licensees must agree upon a schedule that limits each licensee to using the shared space during a specific date and time. Only one licensee can use shared space at a time. Finally, the Type S licensee must designate a unique, locked, and secured storage area to keep their product and materials separate from their co-tenants.

The DPH certainly deserves applause for listening to the input of the cannabis industry and making the needed adjustments to accommodate small businesses. The new Type S license allows for the small manufacturers to limit their expenses and invest that money into growing their companies.

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