The Washington State Liquor and Cannabis Board (“WSLCB”) often moves slow with rulemaking (we’re still waiting on rules for SB 5318, which was signed into law in May and went into effect in July), but occasionally they move fast. As I reported last week, on October 9 the Washington State Department of Health (“DOH”) voted to adopt rules that banned flavored vapor products, which included a rather porous definition of what was being banned.

As I alluded to in my previous post, the definition of “characterizing flavor,” which is central to the definition of “flavored vapor product,” could be reasonably interpreted differently. It could be interpreted as allowing marijuana/hemp-derived compounds (namely, terpenes) while prohibiting compounds derived from other sources, such as fruit or other plants. We at Lane Powell interpreted the rule to emphasize the importance of the taste or aroma of the compound, and whether or not it was a taste or aroma distinguishable from tobacco or marijuana (remember, this rule applies to both tobacco and marijuana). So we believed that the rule did not expressly prohibit non-marijuana/hemp derived terpenes if they provided a taste or aroma of marijuana, though we acknowledged the rule wasn’t explicitly clear on that.

The WSLCB’s Broader Take

Unfortunately, the WSLCB has a markedly different interpretation of ours, and provided further guidance to stakeholders via multiple emails in the evening of October 11. In one of their emails, they directed stakeholders to this webpage on the WSLCB’s website where they provided guidelines that, while their enforceability is questionable, at least provided more clarification than the DOH rule itself. The WSLCB states the following:

Not-Allowed and Allowed Under Emergency Rule
Per the State Board of Health’s emergency rule amending 246-60 WAC and the definition of “characterizing flavor” contained therein:

Not Allowed Allowed
Synthetic terpenes and terpenoids or other synthetic flavoring compounds Terpenes and terpenoid derived directly and solely from marijuana, as defined in RCW 69.50.101(y), or hemp plants that have been grown and tested as required by state law
Botanically-derived terpenes, terpenoids or other botanically-derived flavoring compounds, except if directly derived and solely from marijuana plants tagged within the I-502 system or hemp plants
Any other compounds that impart a “characterizing flavor” that is not specifically excluded

Any licensees wondering about the vagueness of the DOH rules should take the WSLCB’s interpretation into account, and be aware that selling marijuana products with botanically-derived terpenes risk enforcement action from the WSLCB. Licensees should also be aware of the importance of the rulemaking process, a process that the WSLCB has subverted in this case, and that this could weigh heavily if a licensee chose to appeal an enforcement action against them.

Improper Rulemaking Procedures

Like all government agencies, the WSLCB cannot reinterpret or change rules on a whim without proper procedure. The Administrative Procedure Act (“APA”) requires agencies to follow certain procedures, such as providing the public with notice and comment periods, and submitting rules to the Code Reviser’s Office. None of these procedures were followed by the WSLCB’s posting of the above information, so the information is technically not a rule.

It is also important to note here that the WSLCB has authority to enforce its own rules, but it generally should not be enforcing rules of other agencies. For example, if a licensee is delinquent in paying its taxes, the WSLCB can (and does) cooperate with the Department of Revenue to see that those taxes are collected, but the WSLCB does not use its limited resources to have its enforcement officers act as tax collectors. And while the WSLCB may deny issuance or renewal of a license due to unpaid taxes, that’s because they have an administrative rule that explicitly provides for that (see WAC 314-55-050(12)).

This is not the first time that the WSLCB has issued what amounts to rules without following proper rulemaking procedures, nor is it likely the last. For example, the WSLCB periodically issues newsletters highlighting current issues and rules concerning marijuana licensees, often including reinterpretations of rules, not just mere restatements. These newsletters are issued without following notice and comment requirements of the APA, but licensees generally must follow them as if they were rules because, again, to not do so puts them at risk of enforcement action.

This lack of procedure is worth raising on appeal of an enforcement action. But just to get there would require a months-long process at a minimum, often spending tens of thousands of dollars in legal fees. Thus, leading licensees face the uncomfortable decision of whether to follow this guidance despite not being an actual rule. As a practical path-of-least-resistance, we believe following the WSLCB’s guidance is sensible, despite the principal of the matter and lack of proper rulemaking.

Other Important Guidance

In a separate email, the WSLCB directed cannabis licensees to do the following:

  1. Cease Sales of Flavored Vapor Products. The LCB directs all tobacco retailers and vapor licensees to immediately cease sales and/or gifting of flavored vapor products.
  2. Signage. Print and prominently post this warning sign in retail locations. A Spanish version will be available soon.
  3. Cooperate with the ongoing epidemiological investigation. Local, state and federal health agencies are looking into which products have been involved with Washington cases of lung injury. We ask for your cooperation if you are contacted by someone from a state or federal epidemiology team and/or a representative from your local health jurisdiction.

We will be keeping a close eye on this issue and will update matters as they come.