The constant buzzing of email after email sent Angelica Sanchez into a whirlwind.
The senior director of government affairs and compliance at the Perfect Union—a cannabis retailer with eight dispensary locations in Northern California—had her inbox ambushed by an unrelenting chain of embargo notices placing various products on administrative hold in Metrc, the state’s track-and-trace provider.
Angelica Sanchez, Senior Director, Government Affairs & Compliance at Perfect Union
Not knowing the genesis of the Oct. 16 embargo notices from the California Department of Cannabis Control (DCC), and not knowing when those buzzing emails would stop, Sanchez said she went into a state of unease: Each of those 4,166 units represented a $10,000 fine from the DCC if sold after the embargo notices went out.
“I was like, ‘Oh my, God,’ I have to make sure that we get these off the sales floor immediately because our stores stay really busy and this is active inventory—it’s on the sales floor,” Sanchez said. “It could have been in someone’s cart; someone could have been picking it up on an express order today. So, in order to get that all out, I sent a mass email, and I was like, ‘Hey, pull every product from this brand,’ because it was very brand-specific [for our stores].”
While the embargo dealt with 12 brands, only one brand had products available at the Perfect Union.
Sanchez said she immediately called each general manager at the eight dispensaries, instructing them to err on the side of caution and not sell any of the brand’s products until they found out more.
“It was just one of those [12] brands, but it was a brand that we work closely with,” she said. “It’s a brand that we’ve had on the shelves for a year and that our customers do like. So, we were really surprised by the embargo notice. But honestly, the brand was also surprised, too, because they found out along with us that their products were going to be subject to an embargo.”
The DCC distributed the email barrage to hundreds of dispensaries statewide, creating a compliance nightmare during normal business hours on a Wednesday, when the department placed products manufactured by KUSH (Kinder Understanding Sensitive Healing) Collective under embargo.
The previous day, DCC regulators notified KUSH owners David Shin and Jimmy Shin of their license revocation for the company’s manufacturing facility in Van Nuys, Calif., after learning the Shins had sublet a portion of the facility to an unlicensed cannabis business, according to a department report released on Oct. 16.
The DCC also listed a host of other violations related to noncompliant practices in the report, claiming KUSH could not guarantee its operations were within the realm of the regulated market and that department officials had probable cause to believe that the products manufactured by the company may be adulterated or misbranded, posing a potential risk to consumers.
RELATED: California Cannabis Regulators Revoke KUSH’s License, Embargo All Company’s Products
One of Perfect Union's eight cannabis dispensaries in California.Courtesy of Perfect Union
“It’s really interesting: The brand that was embargoed was using KUSH to white-label manufacturer only about half their products,” she said. “Only about half the products from this brand were subject to the embargo. So, it was working that out with the staff, like, ‘Hey, it’s this UID that we can’t sell, but this other UID—similar strain, similar everything—we can sell because it was manufactured by somebody else that didn’t get their license revoked from the Department of Cannabis Control.”
The DCC’s embargo listed 194 product batches from 12 brands, including 71 Cure Injoy integrated vaporizer products, 28 Backpackboyz integrated vaporizer products, 28 Circles vape cartridge products and 20 Supherb vape cartridge products, among others.
Each product batch potentially represented thousands of active inventory units for California dispensaries to remove from their shelves. This process of identifying and quarantining specific units can be overwhelming without efficient compliance procedures in place.
For example, two different products from one brand could look the same but are differentiated by strain or manufacturing date. That’s where the UID numbers come into play.
“We pulled the entire brand right off of the sales floor, and we put that in one of our back inventory rooms,” Sanchez said. “And then through the administrative hold filter in Metrc, I was able to decipher what products from this brand were subject to the embargo and which ones weren’t. So, essentially, we just divided all of that out. The entire process probably took us about three days.”
The DCC gave retailers four days to provide the department with an inventory count for the embargoed products and to send photos of the product batches in quarantine with the UID numbers facing outward on the packaging.
At the Perfect Union, instead of sorting through hundreds of Metrc emails and individual DCC embargo notices, the team saved valuable time by utilizing Metrc’s “administrative hold” filter. This feature quickly flags embargoed products, allowing Sanchez and her team to take immediate action to safeguard their dispensaries against hefty fines.
The administrative hold filter in Metrc also came in handy because while companies throughout California received the DCC’s embargo notice on Oct. 16, the product list was only current through Oct. 4, Sanchez said. Through the track-and-trace filter, Sanchez said she identified another 14 products that were placed under embargo as of Oct. 16—208 products total.
“We had received products after their embargo notice that were subject to it, and that’s when I hopped in Metrc and I was able to see what it was by filtering through administrative hold, which is probably one of the most useful features in Metrc, because then I was really able to refine what products from this brand were subject to embargo,” she said.
The sales floor of one of Perfect Union's eight cannabis dispensaries in California.Courtesy of Perfect Union
In addition, the Perfect Union team took additional steps by removing the products in question from the company’s point-of-sale system, Treez, to ensure they weren’t accidentally sold by their budtenders.
“If they did find a product, they wouldn’t be able to scan it out, just in case there was something somebody had placed in a different section of the store and they went out to check out,” Sanchez said. “Treez wouldn’t recognize that product because we had removed it from the inventory. … That was just another safeguard that we put in place to make sure if there was any lingering product on the floor that it wouldn’t be sold.”
Unlike a recall—where a product may have failed a laboratory test for mold or the presence of a banned pesticide, and therefore is ordered to be destroyed or remediated—an embargo calls for dispensaries to hold onto a product until further notice. Depending on further investigation by the DCC, the product(s) in question could later be ordered for destruction or, conversely, given the thumbs up to return to the sales floor.
Based on past recalls, Sanchez said she speculates that it could take two to three months, or longer, before the DCC provides clarification to retailers on the next steps for the embargoed products manufactured by KUSH. Until then, these products represent potential revenue losses from many California dispensaries or their partner brands.
For example, if the average vape cartridge commands $25 at retail in California, then 4,000 embargoed units represent $100,000 in lost revenue. The Perfect Union, however, doesn’t expect this hypothetical to materialize, Sanchez said.
“We’re lucky that this brand has another manufacturing facility, and so they’ve assured us that they will reimburse us for this product through the manufacturing facility whose license was not suspended that is also manufacturing their brand,” she said. “So, in essence, we will be made whole, but I know that a lot of other retailers aren’t going to be so lucky, just depending on the operations of the brand they were working with.”
