As the year winds up and everyone is focused on family, staying warm, and postponing major work until January, we thought we would keep this week’s article simple. Read on for a few bite-sized updates about the industry and Higher Origins, no long attention span required!
METRC Changes
Changes to Transfers: Recently, it was announced that the process for approving and creating transfers between businesses is changing. The new change will require the receiving party (and any necessary transporter) to approve a transfer BEFORE it gets created and manifests are generated. These approvals must happen within 48 hours of being created or they will be canceled by the system. Approvals can be set to automatic, which according to METRC is intended to “aid businesses with a history of having previous shipments executed accurately”
We think this is going to be a fairly annoying change that will slow down orders in the near term as people figure out how to work it into their SOP’s. We also think that pretty much everyone is just going to set everything to auto-approve, but only time will tell. The 48 hour window seems short, and means there will be a lot less transfers created on Fridays. In the past, the system allowed transfers to be accepted long after the product was actually transferred, so we can see why this change was made, although we still find the concept of transfer reporting and the majority of the track and trace system to be a needless overreach.
Loss of Colorado tags shows a shift away from METRC’s moneymaker: Earlier this month, Colorado’s Marijuana Enforcement Division announced that they were removing the requirement for RFID tech in tracking tags from any future track and trace contracts (although some kind of tag will still be required). Colorado’s current METRC contract extend until 2026, so nothing will change yet, but it’s just another piece of evidence that governments are beginning to reject METRC’s tag sales scheme. Here in California, Governor Newsom’s signing of SB 622 in October removed the requirement for individual plant tags and opened up the regulations to allow alternative ways of tracking plants. It's worth noting that in Colorado, licensees pay directly for their tags, and in California the State pays for them. One unintended consequence of the CA tag rule change is that if the State stops buying METRC tags but still requires some sort of tracking, businesses will now have to pay for their own tagging solutions. As we’ve written before, METRC’s tags are their main source of income, and it will be interesting to see how they adapt- or don’t adapt, to this trend that hurts their bottom line.
Legislation
Stalling of Ab 766: Earlier this year, AB 766 made waves with its promise to make the DCC take enforcement action against any licensee who didn’t pay invoices in excess of $5,000. The legislation, written by Phil Ting, assemblyman from the Bay Area, was last active in May, when the appropriations committee postponed it. This bill generated a lot of polarized argument, with some claiming it would be too damaging to the industry and others claiming it was exactly what we need to reign in rampant non-payment.
As far as we can tell, the main obstacle to the bill’s progress is its cost. In an analysis of the bill, the DCC claimed that enforcement of delinquent invoices could affect an estimated 40% of licenses and cost around $10 million annually. The DCC isn’t known for rapid or large-scale enforcement of anything, and they simply don’t think they can enforce this without a massive increase in funding. On the other hand, the same appropriations analysis that includes these DCC objections also cites a study estimating the total unpaid debt in the industry at around $600 million. To us, $10 million to potentially recover any meaningful amount of $600 million seems like a good trade, especially when it has the side effect of putting non-payers on notice… but what do we know, we’re not in the government.
At this point, it seems like this bill is stalled. We would like to see this one get further consideration and get revived, especially in the aftermath of debt-driven failures this year like Herbl and GrassDoor. Hopefully, disasters like this on the DCC’s watch might make them rethink the value of invoice enforcement.
Higher Origins News
Development Focus: Currently we are working on expanding the functionality of the Trading Partners feature, so that users can more easily keep track of who they’re working with. Additionally, we’re working on enabling users that provide services such as transportation and manufacturing to list those services on the platform. Our recent focus has been a combination of optimizing our existing features, and expanding our partnerships.
Partnerships: We have recently started working with a new farm, helping them grow into a high-volume nursery. This project is underway and is scheduled to start moving clones early next year. As part of this collaboration our partner Maui Ben will also be onboard, assisting with cultivation and distribution. Keep an eye out for an interview and further announcements about this soon!
That's all for now! Keep an eye out for our End Of Year summary in a few weeks, and if you're in the giving spirit this holiday season, remember that you can always become a Higher Origins supporter and help us support the community.
Happy Holidays to all, and stay on the Nice list or Santa might bring you boring corporate mids!
-The Higher Origins Team