Hemp Legal 101 | Legality of Industrial Hemp and CBD
Dr. Jon, Randall Thompson, And Melvin Welch sit down to discuss all that you need to need to know legally on owning a CBD Business. Whether you are a farmer, grower, processor, or investor, they give valuable information on navigating the legal seascape and how to prevent legal losses.
LISTEN to this episode:
(06:38) Cannabis Legal
(06:58) What has happened since the 2014 farm bill passed?
(09:14) 2018 Farm Bill passed
(11:24) Farmer biomass process for the market?
(13:00) Delta Nine THC Vs Acid form THC
(14:33) Legal Disclaimer
(15:00) Regulations from USDA
(16:00) What happens when the crop goes hot?
(17:53) Whats a farmer to do?
(21:24) Processors and crossing state lines?
(24:00) What if I have a hot crop?
(24:57) Word on Testing
(26:11) State of Illinois what can we do about waste?
(30:21)Are there hidden landmines in a Certificate of Analysis (COA)?
(31:15) Compliant label for transportation?
(33:43) Contracts, Contracts, Contracts
(36:34) Key things you need to have in contract?
(41:33) Top three points
(42:05) Shipping Terms
(42:36) What level are you indemnified?
(43:07) In process materials
(46:00) Dilution is the solution to Pollution
(47:56) Cannot codify business expectations of your customers
(49:59) Industrial Program North Dakota
(50:29) Manage expectations
(51:21) Main points on labeling
(53:21) The rabbit hole, Investigational New Drug (IND) and grass
(55:41) Customer review claims
(58:52) Summary on labeling
(1:00:38) Words on Certificate of Analysis (COA)
(1:04:17) Social Network
(1:04:43) Next Episode Intro
(1:06:15) CBD Jam Session
Welcome to extrakTalks with Dr. Jon podcast. Dr. Jon is CEO and president of extraktLAB and United Science an industry leader in hemp, cannabis and the extraction industry. Listen closely as Dr. Jon talks about his experiences, CBD extraction methodology and the ins and outs of owning your own business. Dr. Jon teaches you healthy business practices, how to increase your profits and steps to take your CBD company to a whole new level. Let’s dive in.
Randall Thompson 00:37
Hey guys. Welcome. Welcome. Welcome, welcome. We’re here. Hey, we got Mel here today.
Melvin Welch 00:44
Randall Thompson 00:44
Dr. Jon. Melvin Welch. and then it’s just me who is Hey, you, okay. So we’ll, I’ll just be over here. And we’re leaning in. So we’re sharing a mic today Yeah, it’s gonna be good. So if I givee Mr. JD here, a peck on the cheek, you guys won’t mind, would you?
Melvin Welch 01:06
I won’t mind,
Randall Thompson 01:07
you won’t mind?
Melvin Welch 01:09
Randall Thompson 01:09
Anyway, welcome. This is a great show. Thank you for being here. And if you’re new here, as always, you know, there’s a little red button on the top that says frozen screen, just reconnect. It’s the reconnect button, it doesn’t disengage you at all, just go ahead and push that and it’ll refresh your screen. It’s a fun and safe place here. There are going to be poll questions. Get in the chat, talk to us. That’s why we’re here. We want to hear your questions. Today is hemp legal. 101 and that’s why we have our resident General Counsel, and he’s kind of a scary dude.
Melvin Welch 01:48
Randall Thompson 01:49
you’re a scary dude.Yes. Yes.
Dr. Jon 01:51
Melvin Welch 01:52
Noble savage that’s what I am
Randall Thompson 01:53
Noble Savage. Oh, I like that. That’s good stuff. Okay, sorry. Okay. So also this No Holds Barred questions, anything. Any questions work simple or tough. Join the chat on the questions, invite your friends, there will be a replay there will be a replay there will be a replay. That’s that’s the most often question.
Dr. Jon 02:13
Yeah. Yeah, it is
Randall Thompson 02:14
there, there will be explore our resources live tour CBD jam sessions, and you guys are just popping on the CBD jam session. we’re answering a lot of questions. You guys are awesome. I just want you to know that. We’re learning a lot from you as we go. So thank you.
Dr. Jon 02:30
On that note, yeah, we have basically five pages of unanswered questions still, I mean, and we’ve been kind of going through them. You guys are really hitting that up. And we really appreciate the questions that we get from you guys. So keep on bringing them in. We’re working on producing, you know, like videos around those and then also any kind of written answers for an FAQ s and things like that. And then of course, we’re going to be talking about our answers that we get as we go Go along. So but they’re really helpful. Any any, you know, some of the ways you guys when you ask a question it just as sometimes you’ll have, like five different people ask the same question in different ways. And it’s really helpful to see how people ask them so well
Randall Thompson 03:14
It also allows us to drill down with the right answer.
Dr. Jon 03:17
Right, exactly. Yeah.
Randall Thompson 03:18
And then we can look at it from various vantage points. So good stuff. So yes, those are very welcome. And we’re, we will be adding those to the FAQs on our website. But we’re also talking about how to make a video FAQ kind of thing.
Dr. Jon 03:35
Yeah, there’s a whole bunch of those coming out
Randall Thompson 03:37
Audio and future podcasts. And
Dr. Jon 03:41
how many did we do last week? James? We did eight. Yeah, so we did eight videos last week on you know, just very discrete subjects. On unfortunately. Or you guys I did them but but it was they’re good. They may be a little dry. Okay, but they’re really great.
Randall Thompson 04:00
Whatever I you know, that is surprises me from an analytic chemists PhD. Well, when why would they be dry?
Dr. Jon 04:06
I don’t know
Randall Thompson 04:07
I can’t imagine you’re not a droll individual
Dr. Jon 04:11
but, but the topics you know, whatever.
Randall Thompson 04:16
Yeah, just so you know, these guys have known each other for a long time how long was known each other? Over 20 years for sure
Melvin Welch 04:22
Dr. Jon 04:23
26 Oh my gosh, yeah,
Randall Thompson 04:25
time flies when you’re having fun and when you get old and you don’t remember. Okay, calculator library is coming. We keep promising. It’s there. It’s close. We’re finding the graphics that Dr.Jon is liking. So we’re getting much closer.
Dr. Jon 04:40
I have standards. Okay. That’s it.
Randall Thompson 04:42
And I have no standards, so mini course libraries coming, etc. So we do have Sorry, wrong page. This week’s winner Sean Mueller and that was from our email signup. Cool. Yeah. Well, congratulations. Shawn Mueller. Nice, good job and keep those cards and letters coming
Dr. Jon 05:06
I think Sean Mueller is a UMD guy.
Melvin Welch 05:09
It’s certainly a familiar last name.
Dr. Jon 05:11
Yeah, I think I know Sean Mueller. That’s pretty cool.
Randall Thompson 05:14
Dr. Jon 05:15
Yeah. So I think he had, well, he went to the gym, he went to UMD in the chemistry department. So that’s pretty cool.
Randall Thompson 05:22
Okay, and then you don’t I mean, you guys don’t put out UMD for yourself as Bulldog
Dr. Jon 05:28
Melvin Welch 05:29
Randall Thompson 05:30
Bulldogs. Go dog, Bulldogs. Okay, so good. Congratulations, Shawn. A good job. Come on next week. Apparently we’re talking about everything facilities.
Dr. Jon 05:41
Randall Thompson 05:41
Dr. Jon 05:42
Yeah, it’s it’s it’s a dry topic, but we will not make it dry.
Randall Thompson 05:46
We what we never do.
Dr. Jon 05:47
No, we it’ll be it’ll be a great time. We’re going to talk about, you know, everything related to you know, the different requirements the different occupancies permitting. Yeah, you know, all this stuff that
Randall Thompson 05:59
Oh, see that Good stuff.
Dr. Jon 06:00
Yeah, it’s all the stuff that kind of like, okay, we want to get into the business. Oh, we have to go through all that Oh my word. So we’re gonna try to illuminate you on some of those requirements.
Randall Thompson 06:10
One of the ways that Dr. Jon has mentioned that to me in the past is it’s just about everything that your architects and engineers don’t know that
Dr. Jon 06:21
Yeah, no. They want to buy they want to bother us for so. Oh, let me give give me your watch. Let me tell you what time it is that that is exactly what happens. They’ll be on the phone, and then they’ll they’ll get the owners to call us up and try to you know, get us information. So it’s kind of funny anyway, it happens whenever
Randall Thompson 06:38
it does happen. You’re very familiar with that huh Mel?
Melvin Welch 06:41
Yeah, I’m available for answering questions. You may not get the answer you like or even an answer that’s close to what you asked.
Randall Thompson 06:50
I love it. No, no. And that’s good. So today we’re jumping in hemp legal. We’re already getting questions in so them come in right now. First question right out of the gate. Do you want to do a little intro Mel for who you are? Do you just want to jump in?
Melvin Welch 07:07
I don’t know, Jon what should I do?
Dr. Jon 07:09
Yeah, why don’t we Why don’t we? Why don’t we just do like an overview of the legal situation with hemp? Starting at the farm bill, the nuke bomb that went off when the farm bill passed, signed into law. And then you know what? What has happened? transpired legally since then?
Melvin Welch 07:27
Yeah, all right. Oh, boy. Well try to simplify it. So industrial hemp was previously a scheduled one controlled substance, basically defined under touch wider can touch THC, marijuana tetrahydrocannabinol. And I think it was separately scheduled
Dr. Jon 07:47
wasn’t that wasn’t that under the Controlled Substances Act, right. Yeah, that’s right. That’s where that originally was.
Melvin Welch 07:52
Yep. And so then in 2014, the state’s government passed the 2014 farm bill is It’s all I can’t remember the specific statutory reference at this time. But that opened the doors to states to establish industrial hemp pilot pilot to permit programs whereby if they were growing hemp processing hemp or for educational and research purposes under state regulatory programs that had been validated by the DEA, essentially that an individual who applies for it and receive that permit could grow hemp could process hemp had to work in partnership with a university, or at least in most states, a university other type of a research facility for whatever the particular purpose may be. purposes we’re not specifically we’re not limited it can be very broad. I know that here we’ve done a lot of research on terpenes I know what else what else we’ve been researching on the on the quite a quite a broad listing of different things.
Dr. Jon 08:56
Randall Thompson 08:57
everything. Just I’m going to interrupt you for a second. You talk to the smiley face. Yeah. But if
Melvin Welch 09:04
I look at the camera, I see myself and I this adds a total of 30 to 40 pounds easy. This is ridiculous.
Randall Thompson 09:12
Now is that the disclaimer?
Melvin Welch 09:14
I don’t I’m looking at it
Randall Thompson 09:15
the legal disclaimer.
Dr. Jon 09:17
sucking it in right?
Melvin Welch 09:21
at all. You look good. Well, thank you know, they’ll say I’ve got COVID air going on here. Don’t we all? Yeah. So after 2014 Farm Bill, the 2018 farm bill was passed in signed into law, and that D scheduled industrial hemp from that list of controlled substances. So essentially, it opened the door up to complete legality throughout the United States. Now, there are some caveats that there are different states that had specific restrictions on industrial hemp through their own statutory guidelines. Idaho I always the most immediate one that comes to mind as of right now
Dr. Jon 10:05
I think South Dakota too right?
Melvin Welch 10:06
South Dakota. Right now. I think we’re at 46 or 47 of the 50 states have removed from their scheduled substances do have hemp programs and under the 2018 Farm Bill, there is at least under federally, anyone can get involved in being processed or permitted to process to grow industrial hemp so long as they apply for and receive validation. Did the program under the federal under the federal guidelines is not not finalized. The regulations have recently come out that our interim final rules they’re still still finalizing us final a lot there redundantly, but they’re still finalizing the rules for basically the whole process, the whole process, how you apply for what seeds, what strains can be grown. The definitions are fairly established. Such as you know, what is industrial hemp? What is definition of that? by testing procedures, regulatory requirements for those testing facilities, individuals that can be permitted to process etc those those rules have generally been established, and even where they’re not established by the federal government here, you’re able to go through your specific state program that have had their programs up and running for a number of years and at least for those that have them.
Dr. Jon 11:31
super Hey, so Okay, let’s start off with the farmer. Okay. So you a farmer wants to get in and start making hemp biomass, okay, and they obtain a license from the state and they’re ready to go. They got their field registered with the state. What are the potential legal issues that the farmer might encounter with the grow operation? And then moving their product out into processing or out into the market. How does How did what does that process look like?
Melvin Welch 12:09
Well, first step, obviously applying for filling out the application, getting a proper application from whatever state you’re operating in. Most states have their industrial hemp programs listed usually in the Department of Agriculture website, you can find the proper documentation there to fill out. So, there are differences from state to state, I know that certain states have specified strains that are allowed to be grown other states do not go that far. Everybody is subject to the definition of hemp, which I wrote down here quickly. Let’s use it for reference hemp means the plant species, cannabis sativa L and any parts of that plant, etc, etc, etc. With a Delta nine tetrahydrocannabinol a concentration of not more than 0.3% dry weight basis. So essentially hemp is cannabis sativa l marijuana is also cannabis sativa l the big difference here is that we’re dealing with a THC Delta nine THC level of less than 0.3%. Let’s talk about that. Yeah. Okay. So that we’re skipping over a lot of stuff.
Dr. Jon 13:16
Okay, but but let’s talk about specifically about the Delta nine versus the acid form of, you know, there’s a like, you can have a strain with a high, not a lot of delta nine in it, but a tremendous amount of acid form of THC. Would that be considered a legal strain?
Melvin Welch 13:35
All right. So this is what I understand. In looking at the regulations and having conferred with a number of different regular permitted testing facilities. It’s kind of an equation that determines what the Delta nine content is on that dry weight basis. You send it in your facility, there’s established methods established equipment that’s used to test that test that level and some like I think you take the THC-A level times .877 And you add that to the
Dr. Jon 14:04
Oh, they have any equation though, like that. Okay?
Melvin Welch 14:06
Correct. All right. So you know if you got a Delta nine THC a of say
Dr. Jon 14:13
Wait So what they’re doing is they’re converting essentially every all of the acid back into the Delta nine and they’re getting it so you couldn’t just use, for example a cannabis strain that had a high THC level that had very low Delta nine and a lot of a lot of THC-A because as soon as you send it to the laboratory, they’re going to be converting everything over to delta nine before they test it and your your crop is going to fail. Right? Correct. I think that that is a kind of what we the advice that we would give is just just make sure that you’ve got your strains really well on that right because
Melvin Welch 14:48
since you mentioned the word advice Although I am a lawyer, I am not providing any legal advice to anybody here.
Dr. Jon 14:58
Oh no, boo
Melvin Welch 15:04
Noone here is my client except for United Science
Dr. Jon 15:07
Okay. All right,
Melvin Welch 15:09
with that disclaimer out of the way. See ya a caveat. Yeah. So the regulations at least that were promulgated by the USDA here. They’re testing measure is 0.3 after decarboxylation after that acid has been converted, okay. And on a dry weight basis now, this is this is a testing is not a person, it is fairly precise, but it’s there there is regulation and how it’s being done. So a lot of states have different timing for harvest after the testing. The Federal regs that are coming out are saying, alright, you’re getting your testing done. It’s supposed to be done within about 15 days within 15 days of the harvest because that’s going to be the best measure of when you’re going to be within that compliant.
Dr. Jon 15:59
why don’t you stop there and kind of go back and just explain, you know what, basically, when you plant some hemp, okay, you’re, they’re going to get bigger and bigger and bigger and then they’re going to start to flower. And it’s very important that you make sure that you understand when the flower develops, you know that it’s going to continue to develop the THC in there and the THC level is going to climb and climb and climb, climb. If you just let it go. And you don’t do any testing your your crop may go hot. What happens when your crop goes off?
Melvin Welch 16:33
Dr. Jon 16:33
And so I always in other words, it’s over the .3% limit.
Melvin Welch 16:37
I always come back to this hot term. I’m not comfortable with it. I think it’s a bit of a misnomer. I mean, because you have these regulations in place you’re likely to be within. If you have good compliant material, you’re likely to be within the range that you’re supposed to be. I have to gather my thoughts because I just got sidelined, seeing you listening to them. rambunctious folks outside. So within that 15 day period of time, that’s where they’re measuring that THC content to ensure it’s compliant. If you go over and there is some room here in a range, as its laid out in the federal guidelines, you have about a 5% range for this THC. So if you test and it’s likely to be within this range 5% above or over, you’re okay. And that’s because there’s issues related to testing variance. variance correctly. 5% is the standard error, a standard measure of error. So as long as you’re within that range, you’re fine. If you go over, the feds do refer you back to the state regulations and the state regulations are different, but generally, usually, there’s at least two provisions one an opportunity for retesting within a certain period of time and number two, ultimately, destruction of crops so if you’re, if you have material that’s going to be non compliant, you Have to destroy it. And you have to document that destruction too.
Dr. Jon 18:05
So let’s talk about what what what a farmer needs to do. Okay? I think that at the end of the day, you just got to test early and test often if you start to develop flowers, and you have three or four data points for, you know, do your own testing, find out what the THC level is, make sure that you’re dealing with a tester that has a low detection limit, for example, so you can actually see that, you know, then then you’re able to really understand Okay, I here I can see my THC going and I can call my regulators in and have it tested at the right time and then harvest at the right time, rather than being blindsided by it after testing then they’re they’re looking into like a remediation effort like okay, well what’s you can retest or you can destroy your crop. Yeah, so yeah, I mean, you’re gonna you’re gonna put a lot of money into your, into your crops. So you better Test
Melvin Welch 19:00
that is a sound advice. And, you know, there’s still a lot of discussion going on and how this testing should be done. How the testing is being done now is that the testers are going around they’re taking a bud they’re taking the purest form in the CBD and they’re now that’s not the only product that’s coming off of it and being extracted right to your fan leaf if you’ve got the sticks and stems depending on what process is being used a better method and you can talk to your representatives or talk to the USDA with comments may very well be that you’re sacrificing a whole plant that whole plant is being ground up. And that is the the testing itself because if I test the bud, yeah, I’m gonna have a high level of whatever it is CBD CBG, whatever it is that you’re measuring, I’m gonna have a high level of THC, but that’s not the final product. The final product when I get in product into my facility here and we grind up the bud we grind up the fan leaf. Typically you’re seeing a lower level of CBD You’re seeing a lower level of THC. And that’s a more accurate reading of that content. That’s what’s actually going into the product. But that’s not what’s being tested.
Dr. Jon 20:08
Right. So, okay, so the farmer gets the the crop that he’s done the testing, he starts to put it all together, takes the water out of it chops it up for whatever he’s going to do. And then he gets a fit for commerce certificate. Is that not correct?
Melvin Welch 20:25
It’s up states. Wisconsin does
Dr. Jon 20:26
Oh, Wisconsin does. Okay. So other states would just, there’d be no certificate at all.
Melvin Welch 20:33
Thinking of Colorado, I’m thinking of Oregon here. They’ve been established for a few more years, Oregon, Oregon. So think about that debate. The Oregon Trail?
Dr. Jon 20:43
No, no, it’s the Oregon traill
Melvin Welch 20:44
Oregon. Okay. So in Oregon and Colorado, they don’t necessarily require that the regulator’s come out there and conduct the test. They’ll do a random random testing selection for who they’re getting to. And that’s, there’s a lot of testing that’s got to be done and frankly, a lot of them Don’t have the financial leeway in their different departments to do that kind of testing. So you’re not always going to see a fit for commerce and certificate coming out of particular state, but you should see a letter or some other form of official identification that they have provided testing, the testing has been has gone to an accredited laboratory and that those readings have been received by the state and that it is okay. Right?
Dr. Jon 21:29
So us as a processor, so, we purchase a product or someone’s gonna, you know, total with us for example. Okay, so what are the paperwork then that the legal paperwork that they need in order to transport across state lines, what what is that? Can you can you talk to that?
Melvin Welch 21:48
Sure, at a bare minimum, you’ve got to have the growers permit that they have from their particular state or federal. This was should be the first year coming out with federal permits for a hemp program. But there’s got to be that permit that they have permission from the state to roll that product. Secondly, you’re looking for that fit for commerce is the best example that you can get from a state for that product itself having had the authority to be harvested, it’s all Wisconsin has that it’s very easy. They bring in the permit, they bring in the the certificate, you’re usually good to go any other certificates organic if you’re dealing with organic permit certificates as well. Otherwise, if you don’t have a fit for commerce certificate, then you’re looking for that, that official along as well. So if there’s a somebody bringing biomass, we’re gonna send them our permits that they basically have, where it’s coming from and all the authority to have that material in their possession and where it’s going to and all the authority that they have to receive it. And that usually, we’ve never had a problem not receiving any biomass that way.
Dr. Jon 22:51
Yeah. I mean, if you if you have the paperwork along with, you know, on, on the contract, so if you have but if you have the paperwork on the shipment itself, you know, stuck to it, you know, in an envelope there any if there’s any questions, you know, you have you have the you know, the testing you have your license, you have the the the shippers license and the receivers license all in the packet. So if there’s any inspections that, hey, there’s the paperwork packet for you.
Melvin Welch 23:21
Yeah, the more you can document this, the more you can paper up your your shipment, the better off you’re going to be any time that you might run into a dispute or any other issue, hey, I have authority that have this I have the authority of the harvested here’s the proof that it is what it is, whether it’s a COA a whether it’s write the official letter, and here’s where it’s going, you know, you don’t want to get involved in a dispute with the government. Even if you prevail on that you’re going to be 10s of thousands of dollars and months down the line.
Dr. Jon 23:46
Your quality assurance is going to need that paperwork anyway. So when they when they receive it into your processing facility, they’re going to review all the paperwork. Make sure that the specifications on the purchase order match the specifications. What we purchased or whatever and then put it into quarantine, get testing and and then release it after that. So, I mean, they need that paperwork anyway, right?
Melvin Welch 24:08
Yep, that’s correct. Bang, boom, boom.
Dr. Jon 24:10
All right. All right. So what do you so what are the options for a hot crop? Let’s just kind of go back now back to the farmer. Look, if you if you have a hot crop, you’re pretty much. Yeah, it’s pretty much done. There’s not there’s not a lot of I’ll leave there’s no way you can Yeah, there’s no
Melvin Welch 24:27
there’s one ultimate resolution to that crop, and that is that it’s going in the furnace, at least if you’re in a state that doesn’t have marijuana as legal crop. If you’re in Colorado or another state that has that. You may not be in the same situation, but you’re not going to be able to sell that crop as a hemp as a hemp crop, and you’re certainly not going to be able to transport it across state lines.
Dr. Jon 24:51
Okay, second. Second thing I want to just mention on testing there’s a lot of like testers that are out there that are like infield testers. I would just recommend in that case that you have the proper calibration and limited detection established for that piece of equipment. I’ll tell you why that matters. Because if it goes to the state lab, the state lab is going to have their limited detection. Okay? And you might not have, maybe you’ll be able to measure at this level, but the state is measuring at this level. Okay. And so you would think that, hey, look, I’m measuring with my tool, and it says it’s all okay, right? Because my limit detection is too high. So there are some, you know, like infield testing tools, I would be very cautious on that until you validate your method, just just saying, you could, you could go awry, and you could have your whole crop having to be, you know, torched just on the basis of a poor measurement. So be careful about that.
Melvin Welch 25:56
You know, as you read these regulations, there’s not a whole lot of Yeah, leeway, it’s pretty strict in its final solution, if it’s over the ratings are allowable, It’s done.
Dr. Jon 26:09
So let’s, let’s go back then to the producer, okay. So or the process.
Randall Thompson 26:15
Before we do that, I want to make sure because we also have test testers in this whole process. Okay. So the testers, if they’re testing hot for remediation or analytics or what have you, there, I’ve got a question here from Matt in, in the Chicago area. So Illinois is new to this as of the beginning of the year. So he’s asking, What can he do with his waste material? That is THC or whatever in the state of Illinois, or how does he find out what to do with that?
Dr. Jon 26:50
You mean from a testing facility?
Randall Thompson 26:51
Yeah, from a testing facility.
Dr. Jon 26:54
I think you just would manifest that as waste. So it would be waste management waste, man. So if you have THC, and it’s in your eluent or in your solvents or whatever, you would manifest that as a hazardous waste.
Randall Thompson 27:07
Dr. Jon 27:07
Randall Thompson 27:08
Just like that, if that helps you. And that answers your question. You know, let us know if there’s a follow up question on that. But I think that’s it.
Melvin Welch 27:17
Well, if it’s a testing facility and that they they’re certified under the state as a testing facility, first off, as I understand it, generally speaking, at least is from the federal requirements base level requirements, you got to have an ISO 17025 certification and testing for some type of testing within that lab doesn’t necessarily mean that the entire lab is certified, but it may be one of their several testing methods is certified. If they’re going to be working with a hemp program, they the USDA is requiring a DEA certification as well. So having if a company is going through that they’re going to have a fairly stringent review And audit that’s going to occur in order to get that accreditation. I’m sure there’s going to be one of the questions that is how are you dealing with waste?
Dr. Jon 28:07
Yeah, that’s SOP SOP driven, right. So, yeah, and there’s also like Chain of Custody items in there. Also on that DEA license, so, just want to make sure that, you know, the companies that are actually DEA certified that they have, you know, the processes and procedures there, so, which I’m sure if they have their ISO and DEA, they’re pretty goodon process procedure
Randall Thompson 28:32
Jon mentioned, and also or approval by the DPH. I don’t know what’s DPH is the
Dr. Jon 28:39
Department of Public Health.
Randall Thompson 28:40
Dr. Jon 28:40
I would say I assume that’s the Department of Public Health in Illinois, and they might have a state specific rules related to testing. And I think that like for example, the marijuana testing, oftentimes the the state will choose and approve certain vendors for that. Particular, you know, situation. So you want to make sure that you have a good relationship with the companies that are in your particular state, whether it’s marijuana or hemp. And if you’re going to run a hemp lab, you might as well do marijuana as well. If it’s legal, and it’s if it’s legal in your state and, you know, set your relationships up, because those producers are going to be submitting, you know, at the very beginning of the program, like in Illinois, for example, they’re going to be submitting their here’s, here’s the test lab that they have and here’s the certifications and it’ll kind of help with the approval process. So
Randall Thompson 29:39
okay, so to DPH is good DEA, check out with that. And also then make sure you’ve got your proper ISO certification to check with your regulations as you’re working with getting your testing lab set up that you have all of those requirements and you’re following them, right. Okay. So good. No one other follow Up to what we were talking about earlier in transportation and going through. And that is this the COA itself. We talked about, you know, permits, we talked about other things. And in the testing, the way that testing is manifest is in a COA, correct?
Melvin Welch 30:16
Randall Thompson 30:17
Okay. When we’re looking at these hot levels, or high levels of THC or whatever, is there a proper way to read? Are there any hidden landmines on the COA that our listeners should be aware of?
Melvin Welch 30:32
Well, it’s it’s the first time you deal with the CIA. It’s like, what was your own adventure? Trying to figure out what what what all means?
Dr. Jon 30:40
Yeah, it’s a, it can be. So you look at the C of A. If you have a good interpretation of that Cof A just by someone who a chemist who knows what it means. I think that not all laboratories are equal. That’s been one of the issues that we’ve had. Obviously right where you have test in a does not mean you You know, Match a test in be I don’t think we’ve ever had any issues though with THC level reporting. So that seems to be something everybody can dial in. And yeah, yeah, I think other things, you know, may have may be an issue but but not those things. So. So that seems to be pretty good.
Randall Thompson 31:17
Okay. Looks like we’re into and in the transportation we had the list of all of the things that you need to transport this product, right? And does that include a compliant label?
Melvin Welch 31:31
Dr. Jon 31:32
not in this not in this And that only happens after it’s been processed and then it’s processed into a product and then and then that’s where the compliancy with the label comes in from the FDA and from the state and although we’ve
Melvin Welch 31:45
before we dive in, down this rabbit hole, which it really
Dr. Jon 31:48
we should talk about contracts and stuff first before
Melvin Welch 31:50
okay, but what I would I would want to say is in the transport part, you may need to depending on where you’re located in the States, you may need to speak with local council. Regarding a recommended route by which to transport your hemp, if you’re taking it across the state, for example, from Washington, Oregon, you’re getting it over here to Minnesota, Wisconsin, you’re gonna run into an issue potentially, at least there have been taking it through Idaho. I think we’ve all seen the articles there where, loads of hemp that were seized, and then 7, 8, 9 months later, finally, it’s getting resolved, but not without criminal charges in the middle. Yeah, or even issues related to seizure of the crop and now you’ve got time sensitive crop that’s in a not in a controlled environment, yet all kinds of potential issues. So it may be worthwhile seeking counsel as to what would be a recommended route of Trapper drives.
Dr. Jon 32:42
Anybody go in there and sprinkle THC on it just
Melvin Welch 32:45
Are you asking if I have trust in these institutions that we have assigned to govern ourselves?
Dr. Jon 32:52
plead the fifth man you want to plead the Fifth
Melvin Welch 32:54
watching recent developments. Good god
Dr. Jon 33:00
Take a little that THC out of evidence withholding kind of sprinkle it on the top and then sample it. Oh, I
Melvin Welch 33:06
mean, I have faith with a that’s very cynical, we’re taught it is cynical I’ve worked. I’ve worked in law enforcement officers all my legal career. And there are great fellas and gals out there doing a great service. But that does not mean that there aren’t institutional failings, and I certainly had a fairly successful career as a criminal defense lawyer getting things thrown out of court for violation of constitutional rights. So you know, yeah, cuz and it helps with the it helps with purchasing the house, but it also but yeah, there’s, there’s great people but the institution has failings for sure.
Dr. Jon 33:42
All right. Good deal.
Melvin Welch 33:45
Where are we at? We’re going to talk about contracts.
Dr. Jon 33:47
Oh, yeah. We’re going to talk about contracts or contracts now contracts. There’s the it’s we have social contracts we have. Yeah, we have contracts for for hemp. We have all kinds of different contracts, everything in Life is run by contracts, right? So So, so you want to make sure that you have as a processor, the right contract going to either your farmer or to your white label guy or to whoever you’re providing the products to. Let’s talk about there’s so many different issues here. But let’s talk first about receiving the material into the facility. And I mean, every contract that I’ve seen has to have some sort of specifications on the materials, right?
Melvin Welch 34:32
Dr. Jon 34:32
And and with clear, absolute clear reject criteria. And why do we Why do you do that?
Melvin Welch 34:39
CYA, establish expectations between the parties, right? To establish obligations to establish where remedy are for violations of those obligations, expectations. But CYA is a lot, right. So we’re dealing with industrial hemp. We’re dealing with a product that is strictly regulated from growth. processing, and you certainly don’t want to be opening up your door. Because possession is nine tenths of the law somebody brings in a hot product or a product that they can’t prove where it’s coming from or they’re, you’re accepting a product that you can’t prove where it’s coming from. Now you’ve got an audit, you got an inspection, you have a test that your, your materials being tested, and you are non compliant. And now who’s going to be paying for the destruction that? Are they’re going to be potentially other consequences for having a material in there that is non compliant? A, right. So there are there’s there’s significance, significant consequences I could follow. So you want to have a strictly defined relationship, right? And hey, good fences make good neighbors? Exactly. Right. I mean, it’s an age old adage, but it’s for for a reason, when you know what you’re getting. And you have that defined you have it specified, and the person that’s bringing it to you has an idea of what you’re going to do for them. And that’s it. To find a specified, at least you have a you have a good working relationship to start, you’re right, but you really ship off on,
Dr. Jon 36:05
right. So you two people come together and we, we have a contract. And I have hemp and I know that you have the equipment to process and we’re going to come together, I’m gonna give you my hemp and we’re going to do either one thing either you’re going to pay me for that hemp or we’re going to split, we’re going to have some sort of split some part of the of a toll for toll or barter or whatever. Right. So what are the what are the key top things that you feel have to be in that contract from from a processor standpoint first.
Melvin Welch 36:37
All right. From processor standpoint, well, I want to know the material coming in the door. So I need to know how much I have, what the material is estimated to be for its potency, whatever you’re measuring that potency by whether you’re buying for CBG you’re buying for CBD, or maybe you’re buying for a new cannabinoids, that’s the seasons flavor, that you have a strictly defined rings have expectations of expected potency, that you have a defined purchase amount for that potency. So for example, I want to buy 100 pounds of CBD rich hemp, I’m going to specify my contract that I’m paying X dollars per percentage point of CBD. And then I am ordering this many pounds. So I have an idea that I’m gonna be paying for 100 pounds, I’m gonna pay 10 bucks a pound, 15 bucks, or whatever it is, at $1 a percentage point I know that if I have 10% material, and I have 100 pounds on a pay thousand dollars, right? But that’s not necessarily what the CBD potency is going to be at that material. You have to have it tested. Like I said before, right? If you’re testing the flower, you’re going to have a different measure than if you’re testing the whole of the material or you’re receiving it through your doc right, but you at least have these definitions there that you can go back. You can talk with the other party, you can amend your invoice and it’s an easye of transition and you’re not miring yourself in a dispute right off the bat.
Dr. Jon 38:03
Yeah, look, you got to have the contract because it’s the it’s the, like you said good fences make good neighbors and and just so that you’re agreeing to ahead of time that this is what’s going to happen between you and me in the event of something that we don’t want to happen, okay, and what like for example, we get in a material that doesn’t match the C of A and and it’s hot. There’s been a lot of people will make their own calculations on what the return is, for example, from a crop, they’ll send it to you, and then you’ll do a test and be like, Oh, you know, it’s five percentage or 10 percentage points below. What what you say it is that that that happens, we’ve noticed because the state, you know, samples the flower and then they chop the whole plant. So yeah, so that that’s one thing that we, we know about so but anyway, and that’s where complications come in with the contract because you have you have A certain, you know, level specified on the contract and then the stuff that you receive in doesn’t match it. So you need to have at least a resetting of expectations then based on the material as actually received
Melvin Welch 39:13
and, and you should be able to support it as a processor or you know, you have your SOP for receiving for inspecting for taking random sampling for where you’re gonna have that random sample sent to that you’re gonna have any type of dispute resolution between these percentages. And that makes for an ease of amending the contract as well. It’s a fairly simple process to be sticking an addendum in there that differently identifies the material and another thing that’s important, john, is, uh, what’s the what’s the water weight that’s coming in what so
Dr. Jon 39:45
that’s a big, that’s a big thing.
Melvin Welch 39:46
It’s a big thing because you know, we have a environmentally controlled facility here, but we have specifications that it has to come in, usually under 15%, water by weight, right? we’d like it to be lighter, but one of the reasons for that is It the likelihood of microbial growth or growing mold on that product and affecting that product is much reduced when it meets those material specifications. So I’m not going to get in a really wet product that’s going to mold in my house until I get a chance to process it. Now I’ve got issues right processing, and I’ve got the grower saying, hey, you ruined my product
Dr. Jon 40:20
Plus there’s issues inside of the facility. We’re going to go over all the facility stuff related to how you contain and sequester you know, possible mold within your facility. We’re going to be talking about that in detail next week. But it is a real big deal because you don’t want your you know, you’re hemp material growing mold. Or in really, if you’re doing if you’re paying for material. You also don’t want to be paying for a bunch of water and sticks and stems. You don’t want to be paying for rocks or any other foreign matter and debris.
Melvin Welch 40:53
Randall Thompson 40:54
which we’ve seen and the other thing is pesticides.
Dr. Jon 40:59
Yeah. Right. Well, yeah, so, I mean, on the pesticide side, we that, again is specifications. Right. So that should be in the contract as well. Right.
Melvin Welch 41:09
So yeah, and that it has to be legally compliant material below 0.3%. Right? THC Delta nine THC.
Dr. Jon 41:16
So can you summarize it in top three points?
Melvin Welch 41:19
Dr. Jon 41:22
I forgot. My number one would be fourth was your forces your act of God?
Melvin Welch 41:26
Yeah. How do we define that?
Dr. Jon 41:27
God? Yeah. All right. Oh, yes, it’s gonna be a long time.
Melvin Welch 41:32
So right material specifications, price, and then respect I mean, then you got your terms and conditions. And I mean, your terms and conditions are going to be a long list of, you know, what the relationship who owns who owns this product, at what point is it owned by the processor, in transit to the processor is it owned by the processor when it’s in the warehouse of the processor, who has shipping terms, shipping terms? Insurance insurance liabilities. Yeah, all those.
Dr. Jon 42:03
Exactly. Yeah, I mean,
Melvin Welch 42:05
it was the whole contract. I mean that those are the top three. That’s the whole contract. Yeah.
Dr. Jon 42:09
Okay. I mean, shipping terms are important, you know, as a processor, you don’t want to take liability for, you know, shipping across this the United States. I mean, pretty much, you know, they can own it right at their dock. That’s what I would say, seems to be most reasonable. I mean, because they’re the ones who are, you know, getting, getting the materials,
Melvin Welch 42:29
maybe even more important that this is we’re dealing with a product that’s being processed for eventual consumption.
Dr. Jon 42:36
Melvin Welch 42:36
And so, it may very well behoove a processor to consider to what level they are indemnified or indemnifying. Another who is using that processed material for ingredients in a consumer packaged good or a consumer consumable Good because these are going into tinctures they’re going into foods.
Dr. Jon 43:00
Melvin Welch 43:00
It was a whole nother topic. Right, right. Is this going to the foods? tinctures dietary supplements? What federal regulations?
Dr. Jon 43:06
Melvin Welch 43:06
What are the state regulations? Good God. That’s a that’s a rabbit hole.
Dr. Jon 43:09
Right. So let’s, let’s talk about the topic nobody wants to talk about and that is the in process materials. So Yeah, I know. I know. We got it, we got to talk about it. Okay. So this is where things get a little fuzzy, right? I mean,
Melvin Welch 43:26
Dr. Jon 43:26
Okay, so here’s the deal. So you have a material and you get it in it’s under .3%. It’s ready. It’s fit for commerce, okay. And you extract it in, in the event of extraction, you’re going to be increasing the amount of THC. And so your oil is going to have you know, a larger percent than the .3%. Right. Correct. So, now I want to send that to, to my to my customer back because I’ve done that I’ve done the extraction. What are the options for the processor to send It Back in what’s the in terms of risk? Just put it in the terms of risk?
Melvin Welch 44:06
I’m not sure if I have a good answer for
Dr. Jon 44:08
Okay, let me let me cut. Okay, cuz he’s aware I, I have I have I have a I have a potential potential, you know, advice here. Number one if you send it within the state it’s it’s not a problem. I mean, I I don’t see any issues with sending it state- from processor to processor licensing to licensee within the state as long as it’s marked in process. As soon as you go over state lines. I think you’re still safe there. Mark it in like in process materials, and
Melvin Welch 44:39
if you’re going over state lines and you’re going from permitted processes, a permitted processor, I think you’re in a much better low risk transfer than you would otherwise be.
Dr. Jon 44:50
Yeah, right. Okay. So but if you’re in within state lines, it’s like no, no issues.
Melvin Welch 44:55
Not Not really. I know there’s not a lot of issues or just in Some discussions with, you know, the enforcing enforcement agencies within the states, they’re aware of this as well. And a lot of them have said, Hey, this just isn’t clearly defined? We know that we’ve got an initially compliant product, everybody knows that as you go through the refinement, the levels are obviously going to increase this bulk oil or otherwise that’s created is not a final product. Nobody’s consuming that it’s got to be put into final product. And so they’re not seeing a lot of issues for enforcement there. Right. But that doesn’t mean that somebody goes in there and parses the law and, you know, starts wearing glasses because they’ve read way too many books when say, Oh, I see that there’s something here that I could, you know, get elected to office on
Dr. Jon 45:41
it’s a legal issue that needs to be at least understood. Okay, right. So that’s why I bring it up. And I think that most people, you know, get your paperwork in order, make sure that you’re going Point to Point business to business processor to processor or processor to end it to You know, to an end manufacturer, right? Exactly. And you should be okay. You know, so that that would be my advice. The other thing you can do is you can always dilute it. So, dilution is the solution to pollution. So yeah, if you if you dilute it, you can then have within something that’s easily movable removable. So if it’s a is that is that a weight per weight specification? Well, in the Farm Bill, I like point 3% weight per weight.
Melvin Welch 46:29
Just ask the questions that open up all kinds of branches going on. Because it’s a mixture. Okay. And what is a mixture?
Dr. Jon 46:36
Yeah, what is a mixture?
Melvin Welch 46:37
Well a mixture defined by the 18 USC 944 I think it is. I don’t remember right now, which is controlled substance where you’re looking at marijuana is okay, you’re measuring out of the whole mixture, right. Does it have this level otherwise in a mixture here and I have no reason to think that mixture would not be applied in such a situation. You’d be fine, right? So, because we’re already dealing with mixtures you’re dealing with tinctures right dealing with full spectrum. tinctures are those that have less than 0.3% right Delta nine THC within them, right? They got a whole cannabinoid spectrum that’s being a that’s been in this this product, so I guess that’s where I’d like to.
Dr. Jon 47:24
Okay. Um, some of the ladies want your name so
Melvin Welch 47:31
Hi, Brock. I’m Mel well, oh, okay, Mel, Mel for me.
Dr. Jon 47:35
No, no. Melvin R Welch . Esquire. Yeah.
Melvin Welch 47:41
He the velvet blog. He was
Randall Thompson 47:44
at good boys. Melvin Welch. JD General Counsel at United Science
Dr. Jon 47:49
Yeah, yes. And and general manager at Nemadji. Okay, so we talked about processing contracts. Now and You know, we kind of glossed over a lot, but we hit the hard topics that we did, did we not?
Melvin Welch 48:05
Dr. Jon 48:05
We did, okay. Now,
Melvin Welch 48:06
you know, on contracts though I want to I want to, I want to also talk to processors out there. Listen, you cannot codify business expectations of your customers and that contract, you should avoid that at all costs. Because this is a very complex industry, and it’s a new industry. A lot of the science is being worked out. I mean, at least over here in United science. We’ve been working at this for almost a decade, at this point, and in developing methods and developing extraction and having good science behind the equipment and the processes, but it is still new. There are a lot of variables that are involved in processing and this product, and through that, through that newness and or the novelty of it and really the lack of established expectations. You’ll have business expectations of your customers that are not necessarily reasonable. Not necessarily defensible. And as a processor, you’re going to find yourself squarely in the position of being the one that needs to answer or fix their errors. And so when you’re negotiating
Dr. Jon 49:11
expectations, you’re talking about expectations
Melvin Welch 49:12
about business expectations. That’s correct. You’re not in this processing, to help them meet their business expectations, except insofar as you can offer them a good product with a good process. That is, that is papered supported by evidence supported by science.
Dr. Jon 49:30
Yeah, I get what you’re saying. And it does make sense. I mean, you Yeah, you. You have to manage your own business, your own your own sandbox, right? And it’s really, it’s not it’s, there are some things that fall under the category of not your problem as a processor. So just make sure that those business expectations are well established. Great advice, and that was advice from a legal from a
Melvin Welch 49:52
legal legal is no, it is not advice. No legal advice. But but I think it’s a it’s important especially as you get into these splits agreements. So, Mr. Weaver here is writing in from North Dakota, North Dakota just passed their industrial hemp program last year so they’re getting into it now right so these are these are problems that we have gone through that we’ve seen in other jurisdictions that are stepping into and and a lot of times where these arise are in splits contracts, right basically, instead of the farmer paying you money to process their material they’re paying you in product the barter system that you referred there to their to their job. Right so that’s where you can get these expectations that are that can be an issue right it’s relationship
Dr. Jon 50:38
Yeah, that Yeah, so just manage your expectations. And you know, if you don’t know what the expectations are talk about the fact that you don’t know what the expectation should be. I mean, you got to be just you know, look, if you’re, if you’re just getting into the processing, there’s a whole business and contract side of the of doing business. In he just makes money. That you have the conversation and do a handshake. And then on the other side of that handshake do the right thing. I mean, sometimes we, we’ve definitely had to take it sometimes where we didn’t necessarily want to. And so it is a give and take just to maintain a good relationship. So make sure that is good. Okay. So, um, if I think what we’re going to do is we’re now going to go over the entire process, and we’re going to go into the end product itself. So this would be like a consumer product. And let’s just talk about the main points of things that people have to they have to worry about in terms of labeling, labeling the product properly, to sell it to consumer in and, you know, talk about a little bit about one of the things that has, you know, like liability or product liability C of As, what the documentation is, so, let’s talk about that. We have, we have studied this now. for quite a while years, yeah. And the issue is, is it’s it’s continually evolving. Right. So what advice could we offer our our viewers here on on just labeling?
Melvin Welch 52:13
Dr. Jon 52:14
So let’s talk about that first,
Melvin Welch 52:15
the Code of Federal Regulations title 21. I think it is part 21 that goes into all of your different labeling requirements that you’re looking at for food, for dietary supplements for animal foods, cosmetics, cosmetics, all that type of stuff. Now, this system here, this is the rabbit hole I was talking about to it, right. So before I go into that rabbit hole, so you want to look at the title 21 that’s gonna have these requirements, then you’re gonna also have to check your own state for requirements as well. I think I have an example here. The State of Minnesota has a requirement that every consumer packaged goods CPG and its state has to also have the testing facility identified on the on the label. Not every state requires that but there are different requirements for different states, right. So it’s good to make sure that you know where you’re selling into and assure that you’re compliant at all. It makes for a lot of a lot of work. And that’s why it’s helpful to have an attorney on staff.
Dr. Jon 53:05
Yes. Yes. Or at least on one on your speed dial.
Melvin Welch 53:09
Dr. Jon 53:10
You know, run it past them, right. That’s what you should be doing.
Melvin Welch 53:14
Correct. And in the labeling requirements are very specific, you know, where you’re putting what information in what panel where the nutritional facts panel goes on here, there and otherwise. Now, let’s go down the rabbit hole, shall we?
Dr. Jon 53:25
Maybe I don’t know.
Randall Thompson 53:28
Melvin Welch 53:29
IND and grass.
Dr. Jon 53:30
Oh, I do want to go down that one. Right now?
Melvin Welch 53:34
I want to go very broadly at it very broadly.
Dr. Jon 53:38
Okay, broad stroke now.
Melvin Welch 53:39
Dr. Jon 53:39
Melvin Welch 53:40
There is an intrinsic, intrinsic stress in this industry between federal regulatory, and state regulatory. This all started up in 2014. Feds opened it up to the states jumped on board. And at the same time, you had GW Pharma, yep. That Received IND investigational new drug application status for gamma cannabidiol. And so where you’re seeing nearly all are
Dr. Jon 54:12
for specific indication
Melvin Welch 54:13
for specific indication
Dr. Jon 54:14
and of specific formulation? Yes?
Melvin Welch 54:16
Correct. The feds may not necessarily approach it as, as narrowly as Dr. Thompson does here to their shame but to our pain, and so this is where you’re seeing all that conflict where the feds are saying listen, you are restricted in what you can have CBD in or marketed as, whereas you have states and I as I’ve gone through, my last review was like couple months ago, yeah 33 of the 46 states that have legalized hemp or have programs. They say that CBD is not an adulterant they say that CBD is allowed and food and CBD is allowed for these Purpose
Dr. Jon 55:00
Colorado, for example, I think, right?
Melvin Welch 55:02
Colorado does I mean, I know Minnesota and Wisconsin have specific with Minnesota has a specific statute on it, saying CBD is not an adulterant. Wisconsin has it listed in one of its regulations. But these are in conflict with the state. Now, where does that conflict? End or where is it going? I don’t know. I don’t have the answer for it. But you need to be label compliant either way. So if you’re, if you’re going to put out a dietary supplement, you need to have to ensure that your label your supplemental fact panel, and your information on there is
Dr. Jon 55:37
compliant with a 21 or 111.
Melvin Welch 55:39
Correct you’re gonna have a food out there, you have to have the compliant label. And that that’s just the way it is. You don’t you know, it’s, I don’t know, half a dozen one hand six and the other I mean, it’s kind of that situation.
Dr. Jon 55:52
I mean, you can learn a lot from what is out in the marketplace right now. But I would, I would, I would caution against that because As you know, there are letters being you know, given out. And, you know, people are receiving them because of mislabeling issues, you know, associated with their products. A lot of also, you got to be careful also on on your customers and how they review your products and how those reviews are published. Like for example, if someone took some of your CBD and said, you know, it’s cured my cancer, that would be a red flag, don’t publish that don’t allow that to be published, because it’s a medical claim that that you don’t want associated with your product and your label. So
Melvin Welch 56:37
Structure and function, structure and function
Dr. Jon 56:40
Melvin Welch 56:40
So that these are the issues that when the FDCA or the FDA is looking at potential violations of FDMCA, the Federal Drug and Cosmetic the federal Food, Drug and Cosmetic Act, are they is this product making structural claims is this product making functional claims in other words, making a claim that it affects you the structure or the function or the body in a way that has not been validated by going through the FDA process. And so they they will apply, like you say in review has come in and people have been trying to find a solution for a an inflammation that’s bothered them for 20 years or an infection here or pain there. And there is a lot of anecdotal evidence out there. And not just anecdotal. I mean, if we actually, it’s good, we actually have actual studies showing, hey, there are efficacious benefits to these to this cannabinoid for this specific ailment for this specific person, but but, but the feds are gonna come and they’re gonna knock at the door. Yeah, and you’re gonna, you’re gonna find yourself in the house of pain,
Randall Thompson 57:22
They’re knocking on the door
Dr. Jon 57:47
that was them they’re, here. We gotta go. Hey, so I think what we need to do is one thing that you could do is you a guy could or a gal could go Who those letters and learn a lot? Yeah. Okay. So they’re available online, go to the letters and see, okay. And that will help you and consult your lawyer, get your label on, have a go through legal review so that you don’t get in trouble down down the down the pike don’t make all these wild claims, because you’re just you’re just asking for it.
Melvin Welch 58:21
That was not expected. I mean, as much advice as you can from a lawyer, that they’re always going to take a conservative approach, right, which is, if you step out the door, you might get thrown in prison. That’s, that’s a, that’s an essay. But Heck, you don’t even have to step out your door to get thrown in prison, you know, that, you know, but so there’s, there’s, but you want to have a good assessment, you want to have good understanding of what requirements are of you, and then you got to make a business decision, right, based on your appetite for risk.
Dr. Jon 58:46
Right. Right, right. So that’s the skinny on labeling, and it’s complicated. It’s we’re not going to be able to deal with all of the issues with that, but let me just kind of summarize there. First of all, there are issues you can mislabel, the risk associated with mislabeling is a recall force recall, which was going to cost you a lot of money. So don’t do it, don’t take the risk. If you know that your label is non compliant, switch it, even if you don’t think you can market it as well. Because if if, in fact, we could probably anybody could market a, a CBD tincture or whatever and market it very, very well. But it would be illegal to market very, very well that way because you’d have all these illegal things on it right? So don’t do it. There are a lot of companies out there actually who are who are kind of ruining it for the rest of us who are trying to be compliant. So just make sure that maybe they’re going to get letters
Melvin Welch 59:45
and they have gotten every month every month or every other month, you get a round of a dozen plus letters coming out for the false claims can cost
Dr. Jon 59:51
you a lot of money. It’s gonna cost you a lot of money. Yeah, so you Okay, so you got, you know, 50 to 100 grand into labels and And all of your, all your stuff, you’re getting it out, you’re putting it out into distribution and then you get a letter
Melvin Welch 60:05
you pay, you get paid for all your sales, you got all the expenses going in with cultivating that relationship all the time that’s going into making a product that’s going to be acceptable to this customer.
Dr. Jon 60:14
Melvin Welch 60:14
And now, it’s there. It’s in the store right now. You got to recall a customer relationship. Yeah, now you’re into your attorneys fees while you’re pulling out your product.
Dr. Jon 60:25
Don’t do it, don’t do it. It’s very tempting to to basically try to skirt the rule there. And don’t just don’t do it, because you’re gonna get you’re gonna get whacked
Melvin Welch 60:38
Yeah we’re both Eagle Scouts.
Dr. Jon 60:40
Melvin Welch 60:40
And so we’d like to follow the rules
Dr. Jon 60:42
Melvin Welch 60:43
Don’t do it. Be prepared if you’re not.
Dr. Jon 60:46
Okay, so also, let’s talk about C of As. So with your end product, you have a C of As. Those are typically posted online. Are there any rules associated with that? Or are they just in how How does that really affect affect the legality of your product? Um, well, like for example, products, what if what if I put out a product that had a high THC level in it too high, and then I put out a C of As that was a little bit less that was compliant?
Melvin Welch 61:15
Well, that would be false. That’d be false advertising. I don’t know that it would necessarily be the false advertising, but your ad would be probably some level of misrepresentation in your product. Right. You’ve also got a non compliant product out there if you got over 0.3. And we get into specifics
Dr. Jon 61:32
that just happened recently, right?
Melvin Welch 61:34
I don’t know.
Dr. Jon 61:34
Well, allegedly. Yeah. Well, yeah.
Melvin Welch 61:36
Maybe I didn’t see it was just send me an article on that.
Dr. Jon 61:39
Melvin Welch 61:39
I am sorry.
Dr. Jon 61:40
Melvin Welch 61:41
Sorry, boss. I read everything that you said to me, I must have missed that. So your your C of As Well, first off, you’re dealing with a quality issue. So whenever you’re whenever you have a product that’s going out, you need to have a manufacturing record of that product, and you need to have a quality review of that. Batch record correct.Yeah, I won’t go into all the details batch record, and a C of A that says this, you know, this product is a review. Like I said before certain states have the requirement that even lists where you’re getting tested on the label are running out of time here, it looks like we are now for legalities. I’m, um, I’m looking through my mind here. I don’t know why you would never I don’t know why you wouldn’t test the product.
Dr. Jon 62:26
Yeah, you’d have. Yeah, I don’t know.
Melvin Welch 62:28
I don’t know. I don’t know if I could think of a specific law that says you must, but I don’t know why you never would
Dr. Jon 62:34
You’d always test the product. I feel
Melvin Welch 62:36
Yeah, I wish to be able to put this product out there make any representations.
Dr. Jon 62:39
Melvin Welch 62:40
Dr. Jon 62:41
okay, well, okay, so then there’s no legality, but it’s a matter of a brand promise, and it’s also a matter of, you know, the consumers are expecting to see what’s in there. Yeah, yeah. Okay. Well, that’s fair enough. Um, all right. So I think I think we’re set there are, you know, their product line abilities, things that we could be talking about. Maybe we’ll skip maybe three, four sessions, and then maybe in the middle of summer, we’ll come revisit,
Randall Thompson 63:08
we’ll come back to legal. numerous times we could we could do a whole session on any one of these topics. I mean, that would be easy to do. Yeah, we can do that. So
Melvin Welch 63:20
says the guy that’s not answering the questions.
Randall Thompson 63:27
Hey, we answered a lot of questions. And and I so appreciate your questions coming in. We integrated those into a lot of the conversation we had today. So keep them coming in. We will address them in future episodes and as we go, so thank you for that. So appreciate Mel being here today.
Melvin Welch 63:46
Yeah. Oh, yeah. Jon and I is referred to add our drinking sessions two dorks.
Dr. Jon 63:57
It has something to do with the science. Socrates Narcissus you know, it’s conversations that we typically have narcissistic conversation. Narcissus, which is all narcissists. Yeah. That’s the Greek. Greek god. Okay.
Randall Thompson 64:10
I have been witness to a few of those conversations. All right, and it’s fun when you’re drinking. Okay, thank you for being here. Always, always spoken like like an attorney. Yes. Again, our favorite part of being here live is to answer your questions get you involved. So thank you very much. Subscribe on our YouTube channel. Lots of resources there, calculator libraries coming. Join our conversation on all of our channels, LinkedIn, Facebook, Instagram, Twitter, we’re all there. Next episode again, is everything facilities, so I’m sure we’ll touch on legal issues there as well. But there’s, that’s gonna be good.
Dr. Jon 64:50
That’s gonna be good. Okay, I think it’s gonna be let me give an intro just off the top of my head. I don’t even know what we’re gonna talk about. But this is what’s in my mind. Okay, making sure that your hemp hemp processing facility is a portioned properly so that you’re able to make sure that you’re not getting cross contamination. That’s number one. Number two, we’re going to be talking about occupancy and requirements for occupancy. We’re gonna talk about building types, how that really relates to the amount of maximum amounts of solvent can have in process in use, and also in storage, where you would go about storing your solvents that you would have, you know, how to establish different control areas. We’ll talk about C, one D, two classifications, C, one D, one classifications, solvents, it’s going to be awesome.
Randall Thompson 65:33
That is going to be all one, add into that kind of a little bit of timing. So since we’re talking about where things are stored, and where you were quarantine II, and where we’re putting biomass and where we’re having freezes happening winterization and things can we talk about the timingas as well?
Dr. Jon 65:52
Randall Thompson 65:52
because that would be a whole episode, but there’s there’s a lot of questions that have come in about
Dr. Jon 65:57
Yang issues and I think that would Okay, that’s will no longer really illuminate? That would be awesome.
Randall Thompson 66:02
Good, good. Good. So we will see you next week. Noon central next Thursday. Thank you. Thank you for being here have a fantabulous weekend. And Mel, good to have you here. My pleasure, Dr. Jon. Always fun. Thanks.
Dr. Jon 66:17
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