A Regulated Cannabis Industry for Jamaica A Regulated Cannabis Industry for Jamaica

Steven Davenport and Bryce Pardo

September 14, 2015 The following people were responsible for interviewing participants, documenting their on-site observations, researching countless laws, regulations, and reports and tirelessly editing this report. Without their work, the preferences and realities of Jamaica’s cannabis stakeholders and others could not have been captured in this report.

Interviewers and Analysts: Steven Davenport Bryce Pardo

Authors: Steven Davenport Bryce Pardo

External Reviewers: Jonathan Caulkins Victoria Greenfield Beau Kilmer Jill Lamoureux David Lampach Peter Reuter Luigi Zamarra Samantha Walsh

Editorial Review/Advisors: Mark A.R. Kleiman Lowry Heussler

Special Thanks: BOTEC’s research team would like to extend our profound gratitude to all of our research participants. Dozens of people in Jamaica gave generously of their time to share their lived experience with us. We thank them for their time, honesty, and insight. Many participants told us as we left that they hoped the research would have a positive impact on Jamaica. We especially would like to thank JAMPRO and its staff for housing BOTEC while on island and coordinating countless meetings and schedules. A Regulated Cannabis Industry for Jamaica

CONTENTS

EXECUTIVE SUMMARY...... 6 CONSIDERATIONS

GOALS & DIRECTIONS...... 6 PERTINENT TO CURRENT REALITIES IN JAMAICA...... 17 ISSUING AND ALLOCATING CONCERNS ABOUT INTERNATIONAL LICENSES...... 7 OBLIGATIONS WILL DICTATE FOCUS ON SHORT-TERM SUCCESS INDUSTRY STRUCTURE...... 17 AND PHASING IN POLICY...... 8 THE NEW INDUSTRY CONSISTS BUILD A STRONG OF THREE SUB-MARKETS...... 18 REGULATORY BODY...... 8 DEMAND IN THE NEW MARKET THROUGHOUT, MANAGE IS TOO SMALL TO INCORPORATE EXPECTATIONS & MAINTAIN ALL ILLICIT GROWERS...... 20 CLEAR COMMUNICATIONS...... 9 EXPORT MARKETS ARE UNCERTAIN, SCARCE, AND INTRODUCTION...... 10 DIFFICULT TO PENETRATE...... 21 CURRENT POLITICAL AND CANNABIS PREVALENCE REMAINS POLICY ENVIRONMENT...... 10 LOW DESPITE TOLERANT NORMS TOWARDS USE...... 22 GOALS...... 14 LIMITED REGULATORY CAPACITY, STRENGTHEN THE ECONOMY...... 14 MIXED JURISDICTIONS, AND COLLECT GOVERNMENT UNCLEAR COMMITMENT...... 23 REVENUE...... 15 UNCERTAIN LAND RIGHTS, INFORMAL WATER USE, AND SHRINK THE ILLICIT MARKET...... 15 COMPLIANCE WITH ZONING...... 26 MINIMIZE PROBLEMATIC CANNABIS COMPETITIVE ADVANTAGES USE AMONG JAMAICAN CITIZENS, AND FALLING PRICES IN ESPECIALLY YOUTH...... 15 THE LONG TERM...... 26 LEGITIMIZE HISTORICALLY MARGINALIZED PEOPLE POLICY OPTIONS AND AND PRACTICES...... 15 RECOMMENDATIONS...... 28 SATISFY INTERNATIONAL LICENSING AND INDUSTRY OBLIGATIONS...... 15 STRUCTURE...... 28

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CANNABIS RETAIL...... 28 DATA COLLECTION AND

SUPPLYING CANNABIS...... 30 FURTHER STUDY...... 52

INDUSTRY STRUCTURE...... 33 DATA COLLECTION...... 52 LAW ENFORCEMENT AND OUTREACH AND EDUCATION...... 53 ENSURING SUFFICIENT PUBLIC EDUCATION...... 53 CONTROL OVER LICENSEES...... 35 PROMOTE INDUSTRY COMPLIANCE WITH REGULATIONS AND TOURISM...... 53 AND DETERRING DIVERSION...... 36 TOURISM PROMOTION...... 54 ILLICIT MARKET ENFORCEMENT...... 38 FOREIGN TRADE AND INDUSTRY PUBLIC SAFETY...... 38 PROMOTION AND PROTECTION...... 55 ALLOCATING LICENSES: LICENSE QUANTITIES, PRODUCTION CAPS, APPENDIX...... 57 AND DISBURSAL METHODS...... 39 PROTECTING JAMAICA’S CULTURAL DETERMINE THE QUANTITY AND HERITAGE: INTELLECTUAL SIZE OF CULTIVATION LICENSES...... 39 PROPERTY RIGHTS AND

ASPECTS OF LICENSING...... 41 GEOGRAPHICAL INDICATIONS...... 57

RETAIL AND ACCESS...... 42 DESCRIPTION...... 57 CONSUMER SAFETY RELEVANCE/ASSESSMENT...... 58 REGULATIONS...... 42 CHALLENGES...... 58 ACCESS TO MEDICAL LESSONS AND PRACTICES CANNABIS PRESCRIPTIONS FROM OTHER JURISDICTIONS...... 59 AND RECOMMENDATIONS...... 45 BACKGROUND...... 59 TAXATION AND REVENUES...... 47 CANADA...... 60 FEE STRUCTURE...... 48 UNITED STATES OF AMERICA...... 60 REVENUE SHARING URUGUAY...... 63 AND EARMARKS...... 49 ISRAEL...... 64 INTER-AGENCY COORDI­NATION, BUREAUCRATIC PLANNING, US HEMP REGULATIONS BY STATE..... 64 AND STAFFING...... 50 FEDERAL ACTION...... 64

ORGANIZATIONAL STRUCTURE...... 50 STATE ACTION...... 64

INTER-AGENCY COORDINATION...... 51 STATE STATUTES...... 65

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EXECUTIVE SUMMARY

In April 2015, the Government of Jamaica fieldwork in Jamaica. Inevitably,­ there are some amended the Dangerous Drugs Act (DDA), to areas where the Government of Jamaica has decriminalize cannabis possession, legalize more relevant expertise and experience – for home cultivation for medicinal and spiritual and instance, regarding­ the capacities of certain sacramental use, and create a new, licensed agencies or intricacies of Jamaican law and industry for medical cannabis and hemp. regulations. There are also areas without a “right” answer, which require Jamaican policymakers to The Amendment makes many changes to the make decisions and act according to subjective existing drug laws, but most importantly it: values or political judgments. For all these „„decriminalizes possession of up to two reasons and others, the Cannabis Licensing ounces of cannabis while prohibiting non- Authority may well find valid reasons to disagree authorized public consumption, imposing a with these recommendations and implement modest fine that carries no criminal record; different policies.

„„allows cannabis to be used by individuals for This report is intended to guide the Cannabis religious, medical, scientific and therapeutic Licensing Authority and other relevant agencies purposes, effectively permitting anyone to and ministries as they conceptualize, discuss, cultivate up to five plants by automatically and eventually manifest in law a policy for classifying any grow operation with five or creating a licensed industry in medical cannabis fewer plants as medical or therapeutic; and industrial hemp. We have sought to offer „„establishes a regulated and licensed as much detail regarding procedure and cannabis industry (under the auspices implementation as possible. of the Cannabis Licensing Authority) to However, not every policy component or idea can produce and distribute the drug for medical, be fleshed out with complete details, especially therapeutic and scientific purposes. where the Cannabis Licensing Authority has The Cannabis Licensing Authority (CLA) has several options at stake and has yet to commit been tasked under the amendment to draft to a single policy direction; in those cases, it will and enforce regulations governing the licensed necessarily be up to the Cannabis Licensing production, processing and distribution of Authority to sort out the fine details regarding the cannabis for medical and industrial purposes. To implementation of that decision. that end, the Ministry of Industry, Investment and Commerce hired BOTEC Analysis to conduct GOALS & DIRECTIONS research and make recommendations regarding Ultimately, Jamaica should not copy rules regulations for medical cannabis and industrial from other jurisdictions; rather it should craft hemp to help promote Jamaican economic policies according to local goals, needs, and development, investment, and local job growth capacities, just as other jurisdictions have. No while protecting public health and safety. one has enough experience with legal cannabis to establish anything resembling the ideal The analysis and recommendations in this docu­ model, if ever such a thing exists. ment should not be seen as exhaustive, nor as a “to do” list that could immediately be translated The people we talked with expect the new into effective regulation. They express our current licensed industry in medical cannabis and views, based on experience elsewhere and our industrial hemp to serve many functions, but

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principally they want it to bring a substantial the regulations will emphasize the “medical” positive economic impact to the island, component. Medical cannabis regimes are not particularly via exports and increases in tourism. the same everywhere. Some are more medical In considering regulations on the industry, than others. Some are more protective of public Jamaican policymakers should attend to the health and the prevention of harmful cannabis effects of proposed policies on those goals, use, making it expensive to produce cannabis without losing sight of important public-health and difficult to access it. Other systems of and public-safety considerations. threadbare regulations intended to minimize friction along the supply chain and between However, the anticipated economic impact of seller and prospective buyer. the new industry should not be exaggerated or oversold. Predicting the size of new markets Perhaps the best route to recommend to is always difficult, and any estimates will Jamaica would be to market to tourists but necessarily carry a degree of uncertainty, but only in safe and relatively uncontroversial ways. that problem is compounded with the cannabis Export markets are worth exploring, but may industry given the complex and rapidly yield scant return. changing legal and economic environment. There are significant obstacles to fostering a ISSUING AND ALLOCATING thriving export trade in cannabis products: few LICENSES countries allow imports of medical cannabis, Another set of questions pertains to how and even then, those markets are limited in size Jamaica should license firms to produce, and often require extensive political lobbying process, and sell cannabis, including to whom and impressive demonstrations of product they should issue licenses, by which method, quality before they can be opened. Even if and which rules should apply. Jamaica’s cannabis industry were to one day There is a clear popular desire for the new grow to a very large size, it might take years or industry to be widely accessible and inclusive even decades to develop. If expectations are of small entrepreneurs. But the supply of not carefully managed, even a quite successful licenses will necessarily be scarce compared implementation might be seen by the public as to the demand, given the substantial numbers a disappointment and a failure. of Jamaicans already involved in the production Further, Jamaican policymakers will have to of illicit cannabis for export and the relatively balance two competing goals: satisfying inter­ small size of the domestic market that the DDA national obligations and refraining from over- Amendment legalizes and regulates. From a regulating. Satisfying international obligations political standpoint, the general public and requires certain levels of oversight and moni­ potential applicants need to understand the toring over licensed actors – but that, if done to constraints on the number of licenses. excess, might lead to an overly complex set of Allocations should be fair and effective, perhaps rules that are difficult to comply with and difficult using some combination of qualifying require­ to enforce. That risks both raising the prices ments for eligibility, lotteries, auctions, and of medical cannabis to uneconomical levels specific allocations set to different parishes. (Each and fostering a culture of non-compliance and of these has advantages and disadvantages: corruption. lotteries may be fair but nonetheless perceived Further, though the DDA Amendment clearly as “rigged”; auctions are helpful to taxpayers, legalizes only medical cannabis, there who reap the benefits, but for the same reason remains significant leeway as to how strictly disliked by industry participants.)

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Cultivation licenses should be offered in at least rules, when implemented effectively, can lead two tiers. Further, some protections should be to better outcomes than a perfectly-designed afforded to smaller producers, who face inherent regulation that suffers from bad implementation. disadvantages relative to larger firms. Doing so The creation of a licensed medical cannabis would be essential to satisfying political expect­ industry requires a strong regulatory authority ations and to maintaining artisanal varieties. to write and enforce rules and to monitor Because trust in government is scarce, perhaps and control behavior of licensees. It would especially on the issue of cannabis, it will be perhaps be simplest to give that authority to an critical to issue licenses in as fair and transparent existing agency, which has already assembled a way as possible, while reserving a reasonable competent staff, operating procedures, and share of licenses for traditional growers. funding. Currently, however, there does not appear to be any agency in the Jamaican FOCUS ON SHORT-TERM government that is clearly willing and able to SUCCESS AND PHASING add to its existing duties a responsibility to IN POLICY monitor cannabis licensees and enforce the Establishing a regime for medical cannabis accompanying rules. cannot be done in one fell swoop, but rather Instead, the Cannabis Licensing Authority will with multiple iterations of detailed regulations, likely have to scale up its operations. Currently enacted over the course of years. The set of without a single paid employee, it will have to policies advisable in the short run may not hire a range of staff. In the short run, there will reflect the eventual matured policy. be needed people to write its initial policies, to There exists inherent uncertainty in the “right” communicate with the public, to coordinate with number of licenses to allocate. But it is always external agencies, and to solicit and evaluate easier to issue more licenses when there are too applications for licenses and issue them to few than to revoke licenses if there are too many. winning entities. In the medium term, it will need So it is advisable to “start low and go slow”. a host of field agents and auditors to monitor the behavior of licensed firms, conduct inspections Edibles and concentrates might be ruled out and investigations into malfeasance, and issue during the early stages, while other wrinkles in sanctions when rules are broken. That will the licensing system are ironed out. There are require not just hiring staff, but also training and limits on the availability of the government to the purchase, renting, or sharing of required monitor and control licensee behavior, and also equipment such as automobiles, office space, on the skills and practices of firms, as well as and testing equipment. users’ behaviors. This presumes that the CLA can secure a Finally, those changes to the regulatory regime consistent and sufficient source of revenue. should be made according to an established, In the long term, it seems possible that CLA consistent, and transparent process to avoid operations can be funded through the collection the appearance as well as the reality of corrupt of fees and taxes collected in the new industry influence and to help anticipate and adjust to — particularly if medical cannabis tourists are future policy changes. charged a substantial fee and a substantial portion of those revenues are directed to the BUILD A STRONG CLA. That is a big if. Pegging CLA funding to REGULATORY BODY the revenues raised in the new industry will Implementation is critical. Even a poor set of ensure that regulatory capacity scales up along

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with industry size, and further that the agency of medical cannabis. Many see this industry responsible for issuing permits and collecting as an opportunity for those who have been fees and taxes is incentivized to ensure historically underserved or unjustly punished to compliance. In the short run, until fees and taxes get comeuppance, and for the “little man” to come on line, the CLA will need up-front funding. solidify a place as a licit and tax-paying business owner. Many expect the industry to bring a large The CLA will also need to be afforded suffi­ economic windfall to the island, via exports cient time to do its job properly and fairly. This of Jamaican cannabis or the development of has been troublesome in other jurisdictions, Jamaican pharmacological and/or medicinal including Washington State, where regulators products. These expectations are dangerously underestimated the number of license appli­ high, but nonetheless common, having been cations and so arguably under-hired associated encouraged both by statements to the press staff and fell months behind its intended time­ made by entrepreneurs and advocates and lines. Likewise, Colorado’s Marijuana Enforce­ remarks made by government officials. ment Division suffered from shortages of manpower and resources, letting some bad Those high expectations are both a tool to actors fall through the cracks. be used to the benefit of the CLA and an important source of risk and danger. They can But the CLA cannot do all this alone, and so be marshalled as rhetorical arguments for the it will be critical to consistently coordinate with CLA to command sufficient funding, be allowed partner agencies. In particular, the Ministry of sufficient discretion, and solicit compromises Health has a large role, but other counterpart from partner agencies. agencies such as the Bureau of Standards should be consulted and involved at some But they should also be walked down. If actors point in the supply chain. perceive a license to produce cannabis as an automatic ticket to fortune, they will press THROUGHOUT, MANAGE ever harder for those licenses to be issued EXPECTATIONS & MAINTAIN immediately, in large quantities, and to specific CLEAR COMMUNICATIONS actors. Downplaying the possible economic A final important point is that many residents benefits might make the public more patient of Jamaica have high hopes for the legalization and reasonable.

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INTRODUCTION

CURRENT POLITICAL AND were first limited to reducing sanctions for POLICY ENVIRONMENT possession, but later included medical access In April 2015, the Government of Jamaica to cannabis in certain states. In some countries amended its drug law, the Dangerous Drugs Act in Europe, new policies allowed access to (DDA), to decriminalize cannabis possession, cannabis for non-medical purposes, but only legalize home cultivation of up to five plants with restrictions on that access. Perhaps the for medicinal and sacramental use, and create best-known European cases are the Dutch a new, licensed industry for medical cannabis coffeeshops and Spanish cannabis clubs. and hemp. However, these policies are limited in their design, in the Netherlands to sales of 5 grams This is a major change in policy. In Jamaica, or less, in Spain to non-commercial trade within the unauthorized production, distribution and closed groups of individuals. use of cannabis have been criminally prohibited for nearly a century. Convictions for violating Since the 1970s, the Dutch policy has been these prohibitions sometimes carried severe characterized as de facto legalization of retail penalties: according to earlier statutes, simple sale, but not of production or wholesale trade. possession could warrant years in prison. Cannabis retail and use is permitted for practical Recently, however, some magistrates in the purposes under certain guidelines, but remains Jamaican criminal justice system have started illegal as required by international conventions. to find innovative ways to reduce such harsh Within a licensed coffeeshop, individuals 18 punishments. Now, under the 2015 Amendment and older are allowed to acquire, possess and to the DDA, possession of up to two ounces is use a personal amount of cannabis (limited to 5 not a criminally prosecutable offense. Individuals grams). Advertising is restricted. Furthermore, found to possess less than two ounces without cultivation, processing, and wholesale is strictly authorization can be ticketed. prohibited and enforced as per national law. Jamaica produces a substantial amount of illicit This paradox has been called the “backdoor cannabis. The bulk of that product has been problem,” where cannabis is virtually legal for exported to markets in the United States, United purchase at retail when one steps through the Kingdom, Central America and neighboring front door of the coffeeshop, but illegal when Caribbean islands. A fraction has remained on the wholesale transaction occurs at the back the island, for use by Jamaican residents and door. This policy, while contradictory, has tourists. been successful in maintaining high prices and separating the so-called “soft” and “hard” drug Events take place in the context of policies and markets. activities elsewhere. Since the post-World War II era there has been a near-global prohibition The Spanish cannabis club is another oft- on cannabis, which, outside the Netherlands, cited European example. Cannabis clubs owe only recently began to be relaxed in certain their origin to a series of Spanish Supreme jurisdictions. Cannabis control policies have Court rulings, which since 2002 have created undergone several waves of liberalization, a legal gray area for cannabis cultivation and moving away from the criminal penalties non-commercial distribution. It has even been dictated by the international drug control argued that this activity may be permitted under framework. Changes in the United States international law, per Article 3, paragraph 2 of

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the United Nations Convention Against Illicit punishing violations, and evolving that system Traffic in Narcotic Drugs and Psychotropic in response to changing circumstances. The Substances, which stipulates that the criminal­ track record of regulating cannabis production ization of cultivation and possession for and distribution is uneven. Consider California, personal consumption of substances are which in 1996 became the first US state “subject to constitutional principles and the to legalize cannabis for medical purposes. basic concepts of [a country’s] legal system.” Though many local jurisdictions now have in It has been argued under Spanish law and place regulations governing some or all of the jurisprudence that the private use of a drug cannabis trade, the state did not put in place or the collective cultivation of cannabis for any formal regulatory structure for several years personal use should not be punished. thereafter, and when it did, that system largely failed to confine production and distribution to Although no national regulations are in place to genuine medical use, to prevent exports across govern these clubs, the court rulings give some state borders, to collect meaningful taxes, or to delineation of what is and is not legal. Members deal effectively with local siting issues raised by of cannabis clubs are allowed to grow cannabis its thousands of medical dispensaries. for themselves and other members, and also to use cannabis on club premises. Membership is Furthermore, the objectives and expectations supposed to be limited to a certain number of surrounding Jamaica’s actions are very different registered, paying adults; however, each club from those elsewhere. The Netherlands sought may establish its own criteria for membership, primarily to separate its soft and hard drug prices, and procedures. Members are not markets; for it, drug tourism is a problem to allowed to sell or share with non-members. be minimized, whereas some in Jamaica view drug tourism as a principal upside feature of its Though the Spanish model is messy, it is not legal reform. Uruguay’s reform was motivated without advantages. Perhaps the best that can primarily by hopes of de-escalating violence be said about the policy is that it effectively surrounding its domestic drug markets; that allows cannabis use while also restricting has not been a predominant theme in the increases in supply, price competition, and discourse in Jamaica. The motivations in the commercialization—each of which would risk United States are diverse, but primarily pertain triggering increases in cannabis use and abuse. to individual and civil rights, mixing a libertarian These are two leading examples of innovative notion of personal freedom and a reaction policy reforms, but they are essentially policies against racial disparities in enforcement of concerning the absence of state action. The the old cannabis laws, coupled with a sense Netherlands refrains from enforcing drug that too much money was being wasted on trafficking laws against coffeeshops, however drug enforcement, and that cannabis profits local restrictions and ordinances still apply; should be directed to state coffers rather than Spain refrains from enforcing its laws against criminal actors. Others saw a financial benefit cannabis clubs. in legitimizing and taxing the production and trade of cannabis. Again, those are not the However, policymakers who are charged with predominant themes in Jamaica, where there is actually regulating cannabis activity—such as much more attention to the economic develop­ the Cannabis Licensing Authority (CLA)—face ment aspects of the legalization. a very different task. Regulation requires putting into place both a set of rules and a well-designed Importantly in this regard, in the Netherlands, system for issuing licenses, identifying and Spain, Uruguay and the United States, the

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cannabis policy reforms were primarily domestic the factors that make the island nation different endeavors. Jamaica’s context is inherently from Washington, Colorado, and Uruguay, or more international, inasmuch as Jamaica is a any other jurisdiction that has begun to regulate major cannabis exporter (at least in per capita cannabis. terms) and considerations of access, use, and Although recreational cannabis remains illegal tax collections from international tourists are a under international law, it is permitted to use prominent consideration. And Jamaica should cannabis for medical, scientific, and industrial understand that its actions will be viewed purposes. In keeping with Section 9A(2)(b) of through that lens. the Dangerous Drugs Act, as amended by the Colorado, Washington, and Uruguay are at the Amendment of 2015, Jamaica has unequivocally forefront of cannabis liberalization. The three emphasized its international obligations with go beyond earlier cases by legitimizing the respect to the three foundational drug treaties: production, distribution, and use of cannabis the Single Convention on Narcotic Drugs for adults for non-medical purposes. Their of 1961, the Convention on Psychotropic successes and failures will be a source of great Substances of 1971, and the United Nations information for researchers and policymakers. Convention Against Illicit Traffic in Narcotic Jamaica should learn from them. Drugs and Psychotropic Substances of 1988.

Colorado and Washington passed initiatives To grossly simplify, nations can adopt one of legalizing the production, distribution, and four stances with respect to these international possession of cannabis in 2012; Uruguay did treaties. The first is to comply with their letter the same via national legalization in 2013. In and spirit; that is what most nations do with Colorado and Washington voters made the respect to most substances. The second is to decision via popular initiative, while Uruguay issue a reservation upon signing the treaty; that changed its law through the legislative process. is what the Netherlands has done with respect to low-level cannabis. The third is to withdraw Colorado and Washington (as well as Alaska and re-accede with a reservation, as Bolivia has and Oregon, which legalized cannabis for non- done more recently with respect to coca. The medical purposes in 2014) follow a licensed fourth is to abide by the letter but not the spirit, commercial model, which was advertised as a saving face by presenting some argument for way to replicate the policies applied to alcohol why its actions are not technically in violation, in the United States. State regulators license and depending on the absence of any mean­ the production, processing, and distribution of ingful enforcement mechanisms to shield the cannabis and establish certain rules govern­ nation from being punished for actions that a ing who can use the substance and where. dispassionate observer would view as falling In Uruguay, the state has taken a different short of international expectations. approach. Under the law, adult residents who want to obtain cannabis must register with the However, the narrowness of that legality limits the government and choose one of the three means options for Jamaican regulations.1 If Jamaican of access: 1) growing a limited amount at home; policymakers want to maintain the appearance 2) joining a cannabis social club; or 3) signing of complying with international law, then the up to buy at licensed pharmacies (although the island will have to make some good faith efforts third option has not yet been implemented). to enforce those regulations, and perhaps—as

In Jamaica, policymakers will have to be sensitive 1. At least for as long as these conventions remain in both to international law and expectations and to place unmodified.

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a show of goodwill—also make efforts to cut end of the spectrum are certain western US down on the already substantial export trade states, such as California and Colorado, where in black-market cannabis. The International physicians allowed to recommend medical Narcotics Control Board is eager to assess the cannabis do so at their own discretion, without facts on the ground in Jamaica to determine if any limitations. But only in those liberal states the country is violating the conventions. has the medical cannabis industry generated significant profits and had a large economic A final point of emphasis is that “medical impact. cannabis” regimes are not all alike. Only some jurisdictions take the word “medical” seriously. A variety of options remain for Jamaica. The For instance, in the Netherlands and some US CLA should learn from those who have taken states, such as New Jersey, patients seeking a similar path, adopting and adapting good medical cannabis must meet strict requirements practices while avoiding pitfalls—for instance, as to demonstrating their medical need and by keeping “medical” cannabis truly medical, the types of products that qualify as medical and by striking a balance in the complexity of cannabis; as a result, there are relatively few regulations, somewhere between California’s patients and the associated industry remains free-for-all and Uruguay’s tight command-and- small and not lucratively profitable. On the other control system of government oversight.

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GOALS

The goals of the Amendment to the DDA are broad, and sometimes varying from one pers­ pective to another. In a speech to the Parliament in support of the bill on February 24, 2015, by Minister Hylton cited a range of goals focusing on economic outcomes. He proposed diversifying the economic base, making the country resistant to economic cycles and external shocks, in­ creasing foreign exchange earnings, creating employment­ opportunities from agriculture to manufacturing,­ and improving the wellbeing of all persons involved, particularly the youth Gordon House. population. shrinking the black market. It is important This is a tall order, and it immediately raises that the CLA take these competing goals into sensitive issues concerning international law. consideration. Simply put, if Jamaica’s new legal markets only serve Jamaican citizens, it will not have a STRENGTHEN THE ECONOMY macroeconomic impact commensurate with Many hope that the regulated production and the Minister’s rhetoric. Conversely, for the sale of Jamaican cannabis will boost economic reforms to achieve the Minister’s goals, it will growth, create licit jobs, and improve trade necessitate sales to citizens of other countries, balances. There are three distinct proposed which may become problematic to international supply mechanisms for licit cannabis, one tech­ relations in a way that Uruguay’s reforms, for nically feasible but diplomatically touchy; the example, have not. other more defensible but largely speculative. The treaties’ exception for “medical” use might Lofty ambitions have been projected onto the provide a rhetorical fig leaf that can disguise export sector, including non-psychoactive this tension for those who wish to be willfully “nutra­­ceuticals,” pharmaceutical-grade drugs, oblivious, but no one should imagine that and the traditional herbal product. Yet at present sophisticated observers will not immediately these markets are largely hypothetical. Perhaps see through that pretense. they will be boons for Jamaica; perhaps other countries will outcompete Jamaica in the long Other ministries and the larger population run; perhaps they will be eclipsed if and when have interests including correcting decades international trade in recreational cannabis is of perceived excessive punishments for small normalized. cannabis crimes, collecting tax revenues, and reducing corruption and violence associated The second mechanism is export of recreational with the black market. These, in contrast to cannabis after a hypothetical but not implausible the economic development aspirations, are regime change that legalizes such trade. Again, essentially domestic priorities. Yet in some it is very hard to predict at this time whether cases, they can conflict with each other. For such a market will materialize, let alone when example, maximizing tax revenue by levying or what Jamaica’s competitive position in that high excises may conflict with the goal of industry will be.

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The most tangible mechanism is bolstering the MINIMIZE PROBLEMATIC tourism sector, which already constitutes 30% CANNABIS USE AMONG of Jamaican GDP, but the policies which make JAMAICAN CITIZENS, Jamaica’s tourist destinations differentially ESPECIALLY YOUTH appealing to cannabis users are exactly the When loosening restrictions on access to policies that those tourists’ home countries marijuana, the obvious health concern is a may see as undermining the goals of their drug jump in consumption. That said, preventing policies. a negative effect requires more than merely tracking prevalence of use. An increase in the COLLECT GOVERNMENT amount of casual or frequent adult users may REVENUE not be worrisome compared with an increase The sale of cannabis, either at retail or through in the number of daily users, whose frequency various steps of the supply chain, can generate and intensity are correlated with dependency. taxable income. In addition, fees used to license Further, great attention should be directed to the production, processing, sale and use of preventing increased access by youth whose cannabis can also generate state revenues. brains are still developing. These revenues can pay for the operation of any future regulatory program as well as serve as a LEGITIMIZE HISTORICALLY modest stream of funds that the state can use MARGINALIZED PEOPLE AND for other purposes. However, it seems probable PRACTICES that the biggest potential source of government There exists a widespread empathy for those revenue, and perhaps even the vast majority, Jamaicans who persisted in using or cultivating would be from fees charged to tourists for cannabis, and suffered the consequences of defying prohibition. Rastafarians, in particular, obtaining medical cannabis permits.2 elicit some sympathy for historic injustices dealt SHRINK THE ILLICIT MARKET by Jamaican security forces. The decriminal­ ization of minor possession and legalization of The existing illicit market generates substan­ sacramental use, coupled with the opportunity tial negative externalities, including corruption, to obtain a license in the licit cannabis market, violence, foregone tax revenues, and damaged are seen as a form of restorative justice and an international reputation. Creation of the licensed economic boost to cannabis growers working cannabis market could either reduce or exacer­ near subsistence levels. bate the scope of the illicit market and its associated problems, depending on what poli­ SATISFY INTERNATIONAL cies are promoted in the new laws and how those OBLIGATIONS laws are enforced. However, the illicit market At the highest political levels, the Jamaican should not be expected to shrink automatically government ought to strive for compliance in response to the creation of a licensed market, with the letter of the international drug treaties. because the black market exists primarily to Were the island nation to be seen as violating serve customers who live outside of Jamaica, the conventions, or as a willing sponsor of where use will continue to be prohibited. illicit drug trafficking, Jamaica would risk international condemnation or retaliatory acts 2. This assumes that a substantial fee (e.g., $50 US) is from the individual countries or international charged to tourists seeking medical cannabis permits, and that tourists comply with that law at a reasonable bodies such as the INCB. Ultimately, however, rate (e.g., 50%). For more detail, see the attached there are fundamental tensions between the spreadsheet. actions that would completely fulfill international

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obligations and those that would maximize by pursuing a policy that is “good enough” on economic benefits. Accordingly, Jamaican international obligations, instead of adhering to policymakers may wish to hedge their bets them slavishly.

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CONSIDERATIONS PERTINENT TO CURRENT REALITIES IN JAMAICA

Given the rollout of medical and recreational the Attorney General Chamber have argued licensing regimes in the United States, there that this could allow for the licensing of private might be some temptation to mimic those actors to act on behalf of the state agency, policies. After all, Washington State and provided that the number is limited and they are Colorado have managed to earn tens of millions subject to rigorous monitoring.3 For instance, if of dollars in tax revenue (though these earnings the Cannabis Licensing Authority licensed only pale in comparison to state budgets) in addition a single firm to cultivate, process, and distribute to some revenues from tourism and private cannabis, that would render a credible argu­ investment, all while avoiding prosecution by ment for Jamaican policymakers who seek to the United States Federal government and any defend the new policy to international partners. crippling public scandals. However, as the number of licenses increase However, regulation does not take place in a and state monitoring relaxes, that argument vacuum or only within the context of international becomes less credible. laws and precedent. Rather, it is imperative that Ultimately, Jamaican policymakers must make Jamaican policymakers consider the unique their own assessment of what would satisfy realities that the island must confront. international obligations, and further how they value that goal relative to others, such as economic CONCERNS ABOUT development or inclusion of traditional actors. If INTERNATIONAL satisfying international obligations is decided to OBLIGATIONS WILL DICTATE be the top priority, then the Cannabis Licensing INDUSTRY STRUCTURE Authority should seek to minimize the number Perhaps the most fundamental decision facing of licensees and maximize accompanying the Cannabis Licensing Authority is defining monitoring and enforcement. But that decision the role, if any, to be played by government would come with additional regulatory costs agencies or authorities in the industry itself. and burdens. That said, if the intention of the That role might range from merely providing DDA Amendment was to prioritize compliance quality control testing services to acting as with international obligations, lawmakers would wholesaler. arguably have mandated a more simple design On this point, Jamaican policymakers are of tighter control via a state monopoly rather constrained by existing international conventions than a licensed system of private actors tasked and the text of the DDA Amendment. First, the with cultivation and distribution. DDA clearly commands the CLA to enable the new industry via the issuance for licenses, It seems the decision has already been made in presumably to for-profit commercial actors. the court of public opinion. BOTEC researchers Further, the UN Single Convention on Narcotic held dozens of meetings with stakeholders in Drugs asserts “the [state] agency shall purchase government and private sector, and nearly all and take physical possession as soon as of them presumed that the Cannabis Licensing possible […] after the end of harvest.” Authority would issue quite a few licenses, and

It is unclear exactly what purchasing and 3. BOTEC defers to that opinion and does not offer its physical possession will entail. Officials from own legal opinion on the matter.

17 A Regulated Cannabis Industry for Jamaica

would let the private sector and free markets of a prescription or recommendation by a play a pivotal role in developing the new certified medical practitioner licensed to industry. On multiple occasions, Minister Hylton practice in the jurisdiction in which they has declared that the new cannabis industry are ordinarily resident and pay a fee for a would be “market-led and standards-driven.” medical permit; see section 7D(10).

That does not preclude the Cannabis Licensing 3) Exports are allowed subject to international Authority from giving the state a more powerful convention and laws of importing countries. role in controlling production and distribution, We distinguish between Jamaican residents and or intervening in ways that inhibit the operations tourists to Jamaica because they are treated of a “free market,” for instance by limiting differently under the DDA Amendment. Before competition among actors or mandating certain obtaining medical cannabis, Jamaican residents modes of production. However, doing so might are required to secure a recommendation or appear inconsistent with previous statements prescription from a physician or licensed health made by the Ministry of Industry, Investment, practitioner in Jamaica. That need not be and Commerce, and so if market control is much of a hurdle: take the case of California, pursued, it should be accompanied by a clear where a large number of physicians now and consistent public relations strategy. limit their practices almost exclusively to the recommendation of medical cannabis, and THE NEW INDUSTRY CONSISTS usually require little to no evidence of medical OF THREE SUB-MARKETS need. On the other hand, in Jamaica this might By legislative design, the Amendment to the be a legitimate obstacle, given that influential DDA defines different methods of access to actors in the health sphere are anticipated different cannabis products.4 The licensing to take a conservative approach to medical regime created by the DDA Amendment cannabis (e.g., the Ministry of Health, the enables three distinct sources of demand for Medical Association of Jamaica, and individual medical cannabis:5 doctors). As a result, it might be that residents 1) Jamaican residents can procure and medically certified to use medical cannabis will possess medical cannabis, provided they likely be restricted to cannabis-derived products obtain a prescription or recommendation that are made specifically for medicinal or from a certified medical practitioner or other therapeutic uses, such as psychoactive extracts health practitioner or class of practitioners and nutraceuticals, rather than the traditional approved for that purpose by the Minister herbal form of cannabis. with responsibility for health; see section 7C(2)(b).

2) Tourists to Jamaica can procure and possess medical cannabis, provided they declare their medical need on the basis

4. This analysis does not include the market for industrial hemp, which we treat as entirely separate. 5. The DDA Amendment also legalizes home cultivation (up to five plants) and cultivation and possession for Rastafarian sacramental reasons. Nonetheless, buying and selling of that cannabis remains illegal and outside Medical marijuana in California, USA. the scope of the licensed regime. Photo: Twitter Photo Section

18 A Regulated Cannabis Industry for Jamaica

In contrast, tourists to Jamaica will not have as regulations are implemented, while others to be approved by Jamaican doctors before will take years if not decades to reach their obtaining medical cannabis. Without this long-term potential, if at all. For instance, in limitation, and since many tourists to Jamaica the long run there may be a very large market arrive with open minds (if not an explicit desire) in exporting cannabis-derived products to to recreational use of cannabis, it is possible foreign countries, but it will likely take years for that many tourists eligible to purchase medical Jamaican firms to develop those products, to cannabis will nonetheless seek product forms find partners in distribution and importation, that are geared towards recreational use, and to navigate legal restrictions. Therefore e.g., herbal cannabis and perhaps some that market should be expected to be very psychoactive extracts or edibles. small in size (i.e., volume of sales and/or the volume of cannabis required as inputs) in the Those markets are expected to take on near future, even if it might be large in the long different characteristics and product varieties, term. On the other hand, it may be simpler and as demonstrated below in Table 1. This quicker for firms to produce and sell products reflects BOTEC’s expectations of volumes and to individuals already within Jamaican borders, types of demand from the different markets. so relative to exports, those markets will likely Some markets will mature quickly as soon be larger at first even if not in the long run.

Table 1. Possible Characteristics of Different Regulated Markets Enabled by the DDA Amendment

Source Point Expected Contingency Expected Expected of of Products Initial Size in Demand Sale Size the Long Term Jamaican Buy from a Psychoactive Decisions Small Medium Residents pharmacy, Extracts, by MoH and provided Nutraceuticals doctors whether prescription/ to allow or recommendation prescribe herbal product Tourists Buy from a Mainly Herbal, A temporary Small Medium pharmacy or Perhaps Some ban on extracts “teahouse”, Extracts and and edibles after obtaining a Edibles medical permit. Exports Foreign and Pharmaceutical, Existence of Very Small Small International Law Psychoactive foreign markets to Very Extracts, and that allow Large Nutraceuticals import

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Table 2. Expected by Market Characteristics by Product Variety

Product Variety Contains Expected Key Significant Buyers Obstacles THC? Herbal Yes Tourists to Jamaica None for tourists. Exports seem unlikely given foreign laws. Psychoactive Yes Jamaican residents, Regulating product content Extract tourists if allowed and safety. Pharmaceutical Perhaps Foreign markets Time and capacity for research. Earning FDA approval. Trade laws. Nutraceutical No Jamaican residents, Local firms must find buyers foreign markets abroad. Trade laws.

Another useful distinction is across product would still represent much more cannabis than varieties rather than sources of demand Jamaican residents could feasibly consume. (Table 2). Even if every Jamaican adult consumed at an average rate of 100 grams per year that would We find these sub-markets to be a useful only work out to about 200 MT. Clearly, the analytical tool for thinking about how the new existing black-market production does not market for legal cannabis might function. exist primarily to serve Jamaican residents. A Regulations already have and can continue corollary of that observation is that even if every to target specific sub-markets, for instance by selectively restricting products, restricting Jamaican user switched entirely to licensed, access, or levying more rigorous controls on regulated supply, it might have no meaningful quality or safety. Further, the size of these effect on the size or operation of Jamaica’s markets can be estimated independently of black-market production. one another, as discussed below. In other jurisdictions with substantial volumes of black-market production, such as Washington DEMAND IN THE NEW and Colorado, some advocates and state MARKET IS TOO SMALL TO regulators argued that by moving cannabis INCORPORATE ALL ILLICIT consumers and producers into the new legal GROWERS system, they could substantially shrink the The Jamaican black market for cannabis reach of black-market activity. Raising the risk production is undeniably large, and will easily of enforcement on illegal actors, they argued, provide for domestic demand. It is impossible would give a competitive advantage to actors to estimate its size with precision, but if one choosing to conduct business in a legal manner. takes at face value the INCSR estimate for Indeed, in those jurisdictions it seems plausible 37,000 acres of cultivation area, then cannabis that in the long run, the emergence of a legal production would be perhaps as much as market for recreational cannabis could help 25,000 metric tons (MT). That is hard to shrink the amount of cannabis illegally produced, imagine, as it is several times the size of the though it will likely never eliminate it entirely. entire United States cannabis market. Even if the real volume of black-market production is However, this logic – which would assert black- much smaller, perhaps a few thousand MT, that market enforcement as a top priority for the

20 A Regulated Cannabis Industry for Jamaica

success of the new, licensed market—may comprised of the currently illicit recreational not operate in Jamaica under the new medical cannabis market. Therefore, it is unlikely that cannabis regime. What makes Jamaica differ­ Jamaica, or any other licit exporter for that ent is that its black market primarily serves matter, could capture much of the market at demand in other countries. currently illicit prices. Further, if the international conventions are revised or abandoned at some This has an important consequence. Even point in the future, it is likely that the value of if every gram of cannabis consumed on the this market will fall substantially even in the face island of Jamaica was sourced from legal, of increased consumption. licensed supply—an aggressively optimistic and unrealistic assumption6—there would In the short run, however, the creation of a viable remain significant profit opportunities for illicit industry of value-added exports may not come production and export of cannabis. easily. Achieving that requires overcoming three principal difficulties or uncertainties: 1) currently, So, while it would certainly be a pleasant out­ export markets are limited by international and come if there were a substantial reduction in foreign laws; 2) in the long run, the size of the Jamaica’s black-market cannabis production, it future international market in cannabis-derived should neither be taken for granted nor perhaps products is unclear; and 3) even if those markets considered a primary goal. Even in the best-case develop as some expect, Jamaican firms may not scenario for the licensed cannabis regime, the easily compete with other producer countries. new legal market would in all likelihood coexist alongside a much larger illicit export industry. Regarding the exportation of pharmaceutical- grade products, Jamaican firms will not have an EXPORT MARKETS ARE easy time winning the approval of organizations UNCERTAIN, SCARCE, AND such as the United States Food and Drug DIFFICULT TO PENETRATE Administration. Even if firms were to secure FDA approval for a new cannabis-derived In keeping with Jamaica’s broader strategy for pharmaceutical, that achievement ought not to industry development, the manufacture and be expected at least before 2025, given how export of value-added products in the licensed long it can take for research and clinical trials. cannabis industry has received a great deal of attention. Indeed, given Jamaica’s small size Regarding exports of non-psychoactive but relative to potential markets abroad, the appeal cannabis-derived nutraceuticals or products, of an export market is obvious. Further, since there is both undeniable potential and risk. This estimates of today’s global cannabis market is a nascent market with high growth potential expenditures are upwards of $100 billion, it but many uncertainties. Nutraceutical products would be very good economic news to Jamaica are not subject to rigorous proof of medical if the country could capture just a small part efficacy, and so it can be difficult to distinguish of that market. However, we caution that the passing fads from perennial favorites. Those $100 billion figure is misleading; it is largely who are bullish on these prospects cite the high value of CBD (cannabidiol, one of the major 6. Under the DDA Amendment, only users of “medical” cannabinoids found in cannabis) per ounce; cannabis can access licensed supply. Presumably only however, there is no guarantee that CBD a fraction of current users qualify under that definition. keeps its current value as countries around Further, people who grow cannabis for medical or sacramental purposes can legally acquire cannabis the world continue to liberalize cannabis laws, outside of the licensed system, reducing demand for and well capitalized, large corporations enter licit product sold in stores. the industry. Further, even if there is to be a

21 A Regulated Cannabis Industry for Jamaica

valuable global market for cannabis-derived optimism on the part of those wishing for such nutraceuticals, in which product is traded freely change. One theory is that if and when the across nations uninterrupted by prohibitions international controls are amended, superseded, on cannabis products, it is not certain that or abandoned, then Jamaica may be well Jamaican producers will secure a significant positioned to export cannabis and cannabis- portion of that market. Other nations, such based products. Again, the ceiling on the size as China and Canada, are already reported and value of this market is anyone’s guess, as is to be globally exporting CBD-based products the extent of any “first-mover” advantage. One (though they source the CBD from hemp rather speculation is that Jamaica’s brand as a source than cannabis—a legal distinction that varies of desirable cannabis could give local producers from one jurisdiction to another). a considerable advantage. Furthermore, learn­ ing from the tea industry, sometimes the rents Further, export markets are limited by inter­ created by powerful brands accrue to the brand national law. Countries such as the Netherlands, owners, not the producers. It is difficult make Germany, Uruguay, and Canada allow for reliable projections at this time, but an end to import specifically within their cannabis control prohibition may cause dramatic price declines laws. However, we cannot find a precedent in consumer markets. And cost pressures could of trade in cannabis at this time. Any trade of be even stronger at the wholesale and producer the drug would be governed by international level. It might well be that once cannabis is agreements to which Jamaica is party. These traded internationally like other commodities, it agreements would limit the amount of psycho­ will provide incomes to producers that are like active cannabis that could be exported, based those offered by other agricultural commodities, on the demand statistics provided to the INCB which is to say, it may trade at prices utterly by the receiving country. unlike those artificially created now by the drug’s Even Canada, which has been identified as a illegal status. potential export market that recognizes medical cannabis and allows imports under the law, is CANNABIS PREVALENCE far from a sure bet. Though it is legal, there is REMAINS LOW DESPITE little if any precedent of the country importing TOLERANT NORMS medical cannabis products. It is possible that TOWARDS USE the few Canadian firms licensed to produce Jamaican society offers the interesting combi­ cannabis would prefer to work with cannabis nation of a widespread tolerance of cannabis material that they themselves have produced, use—especially for medicinal, therapeutic, and rather than importing raw material or value- sacramental purposes—alongside relative low added products from firms abroad, in countries rates of cannabis use. Although there is scarce such as Jamaica. Further, the market is of national data on cannabis prevalence rates, modest size, with roughly 50,000 patients (and data from secondary school surveys suggest growing) at the time of writing. that Jamaica has levels of use lower than other English-speaking Caribbean countries and However, many speculate that anything can drastically lower than the United States and happen in the global cannabis market, since Canada. there are a great many moving parts and few precedents that could support reliable prediction. There is some uncertainty as to how cannabis Some, including Minister Mark Golding, are use is distributed among Jamaicans. Informal pushing for a debate as soon as the UNGASS interviews suggest that the drug is more 2016 meetings are held, although that may be popular among lower socioeconomic classes,

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and more strongly looked down upon by advantage of inheriting an existing regulatory Jamaicans with more wealth and/or education. apparatus (in the case of Washington, the Liquor Control Board; for Colorado, the Medical Extremist fears regarding cannabis use appear Marijuana Enforcement Division). relatively rare among the Jamaican population. It has been a common experience among If Jamaica is to create an effective regulatory Jamaicans to be treated in childhood with a apparatus for medical cannabis, it will have to traditional medicine made by grandmothers proceed in two steps. First, Jamaica must build by soaking the cannabis flower in white rum. out the capacity of the Cannabis Licensing Further, there is a widespread recognition that Authority, which currently has no budget for better or worse, cannabis is a unique part of and no direct full-time staff. Second, it must the Jamaican identity that the country may be collaborate with other agencies with whom able to leverage for economic gain. it shares jurisdiction or at least benefits from So Jamaica has a rich history of medicinal cooperation, potentially including the Bureau of use of cannabis, while in some states in the Standards, the Trade Board, the Chief Medical United States “medical cannabis” is largely a Officer and others. term invented for legal and political purposes. Building the capacity of the CLA will entail some It could be possible to develop a “true” medical complications. Its standard for performance cannabis system in which the product and will be high, given the restrictions laid out by delivery mechanism is intended to treat an international agreements. The regulatory task ailment or eliminate pain and suffering, arguably facing the CLA is further compounded by in contrast to the regimes in the western United several concerns: States jurisdictions that have received the most attention (and made the biggest economic „„Not clear which regulatory body will act impacts). with full authority7

Attitudes towards punishments for cannabis „„Overlap and confusion in regulatory develop­ possession and use are also liberalizing. Even ment, implementation and enforcement illegal cannabis cultivation is seen by some as „„No existing domestic regulatory model a morally acceptable act of self-preservation. from which to adapt Fewer people support expenditure of scarce enforcement resources to stop these actions. „„No dedicated personnel This issue returned to the forefront in the last „„Lack of budget or funds to pay for start-up year after several high profile cases of police enforcement abuse that ended in the deaths of Mario Deane and Oshane Dothlyn over cannabis possession. „„Context of poor compliance

LIMITED REGULATORY There must be a clear role for the Bureau of CAPACITY, MIXED Standards (BSJ), and that role should suit the JURISDICTIONS, AND BSJ’s known strengths and current operations. UNCLEAR COMMITMENT BSJ is already in the practice of enforcing regulations pertaining to consumer protection, To keep the licensed medical cannabis industry fair, clean, and effective, there must be a 7. We have come to understand that the CLA has the single, strong regulatory authority. This is not legal mandate under the DDA Amendment, but that the easy to achieve. Colorado and Washington, Bureau of Standards of Jamaica is nominally tasked with regards to recreational cannabis, had the with drafting its own set of supply regulations.

23 A Regulated Cannabis Industry for Jamaica

and particularly labeling. The BSJ can likely been either distracting or detrimental, resulting in take a similar role with regards to the medical confusion both among agencies in government cannabis industry, given that it reportedly has and members of the public. Although the Bureau access to high-quality laboratories. Specifically, of Standards has claimed to have conducted its the BSJ may be asked to verify that cannabis work with a spirit of transparency, and to have firms comply with packaging rules and that repeatedly circulated its drafts to members of any advertised product contents (e.g., THC the CLA, many CLA members were left in the content) are accurate. However, interviewees dark regarding the Bureau’s plans and without have mentioned that BSJ’s rules are largely access to their drafts, though they desired to voluntary. This could be a problem with the see them. The schematic drafted by the Bureau cannabis industry, since some packaging and was drafted without adequate consultation labeling rules need to be mandatory rather than with the proper government stakeholders and aspirational. Further, even with the BSJ there perhaps with too much consultation with foreign are concerns about the capacity for testing for-profit firms. We believe their schematic cannabis; given that, it appears that batch would be extraordinarily difficult and costly to sampling would be the most feasible manner by implement, and that certain components, such which to reduce risk of contaminated products as the reliance on a complex traceability system being sold or exported. and the collection of taxes at no less than four points in the supply chain, should be removed It is important to emphasize that role for the entirely rather than “tweaked” or modified. Bureau of Standards, given the language of the DDA Amendment and how medical Instead, the Bureau of Standards can play an cannabis markets function and are regulated, important role largely specializing in enforcing is not reflected in the Bureau’s recent activity. compliance with labeling regulations. That may Recently, the Bureau of Standards has been include operating “secret shopper” programs developing a draft schematic that encompasses that pull product from the shelves and run tests nearly the entire scope of regulation, including to audit whether the true chemical content the types of licenses, requirements for testing is accurately reflected by the product label. and security, points (but not levels) of taxation, It may also include issuing aspirational best and perhaps most notably, a traceability practices to cannabis firms, and particularly to system that was planned with the assistance processors, and other measures that would be of Franwell, a company that operates the characteristic of the “market-led and standards- traceability system for the state of Colorado. driven” approach as is often repeated by MIIC This schematic has been circulated to the and the Bureau of Standards. press on several occasions, having appeared in Another body that has been prominently outline form on the Jamaica Gleaner and, more mentioned, including in the August 13 press recently, circulated at Minister Hylton’s August conference, is the “Cannabis Advisory Business 13th press conference, at which it generated Council” (CABC), which, according to statements quite a few questions from reporters pressing made in that press conference, “advises the for more details. Ministry on the policy and development issues From our conversations with stakeholders and that are critical to the regulation of the industry.” our independent assessment of the task ahead This could be a good idea. Interviewees have for Jamaica, it seems that only a fraction of the found that the CLA is in dire need of such advice, Bureau’s work on cannabis has been helpful to given that its members are playing a critical role the CLA’s mission, and other parts of the work has in the policymaking process but many have not

24 A Regulated Cannabis Industry for Jamaica

had the opportunity to become well educated standards for product that is exported rather about technical matters of the business or issues than consumed domestically. Whichever specific to regulating cannabis. However, there is agency handles this task will need to have the no sign of any contact between the CABC and relevant equipment, training, and support staff. the CLA, except insofar as some individuals sit If the Cannabis Licensing Authority can satisfy on both bodies. In other jurisdictions, business those requirements, it may take on that task groups (which are comprised of individuals from on its own. If not, however, it may be desirable the private sector) largely lobby policymakers to delegate that activity to the Trade Board, or advise regulators as to the specific technical which already works to guarantee the origin of aspects related to the supply of cannabis. In product bound for export. other cases, these groups operate to stream­ Perhaps the single most important partner line regulations (at best), or at worst, water in government is the Chief Medical Officer. them down. The CMO has the authority to write policy in Private industry groups, such as the CABC, are critical areas, including the issuance of medical important as they provide helpful feedback for cannabis permits to tourists, the fee attached regulators as to the operation and burden of to that issuance, and the types of products rules, and perhaps provide additional vigilance that may be prescribed to cannabis patients. when detecting and reporting bad actors. Decisions by the CMO could single-handedly However, the CLA should be careful not to shut down the vast majority of the licensed cozy up to these business groups. Industry industry planned by MIIC, for instance, if the regulatory capture is a real worry in some CMO requires the same standards for medical jurisdictions like Colorado. It’s best to think of cannabis prescriptions as are generally applied the CABC as a necessary group, but one that to approving pharmaceutical drugs, which should be kept at arm’s length. must demonstrate a compelling evidence base for medical use and safety. If there are substantive policy discussions offered by the CABC to the Ministry, they No less important is how the CMO assigns a should be shared with the CLA. Members of fee to the medical cannabis permit: we recom­ each body should understand the roles played mend something on the order of $50 US, and by each and how they intersect. Unfortunately, estimate that this fee could bring in perhaps there is a regrettable amount of confusion and $10 million US in government revenues, and so perhaps even distortion about the CABC’s the if the CMO were to impose a much smaller role, culminating in disagreements about which or larger fee, that would have transformational body would ultimately have drafting power over consequences for the amount of revenue the recommendations that would be signed by brought in by the new medical cannabis regime. the Minister and sent to the Chief Parliamentary It is a worrisome sign that in our meeting with Council. BOTEC remains uncertain as to how the Ministry of Health, as recently as August 21, that tension will be resolved, and we encourage the parties in attendance were not fully aware the Ministry to be clear and transparent as to of this role and its incumbent responsibilities, how those bodies intersect. nor did it appear that either MIIC or the CLA had ever reached out to them on this issue. The approval of product for export represents another opportunity for cooperating with As a holdover from the era of colonial adminis­ other agencies. Such a role would be crucial tration, the regulatory scheme that Jamaica in the new cannabis industry, particularly if designs may be inherently complex and over­ the CLA decides to impose a higher set of lapping, with many different agencies acting

25 A Regulated Cannabis Industry for Jamaica

within their own domain, tangential to the wells. Issues with zoning and compliance with production, processing, distribution or use other local laws may be difficult. Finally, it is of cannabis. The need to establish rules and reported that many people currently producing procedures that align with good governance cannabis for the black market have never been and business is imperative; however, sometimes issued a TRN (Taxpayer Registration Number), too many rules can be just as problematic as and so would have difficulties paying taxes and too few. The bad implementation of a good being included in a highly monitored licensee strategy might not work as well as the smart system. implementation of an inferior strategy. These types of issues have caused considerable If the Bureau of Standards or any other inter­ delays to the rollout of the recreational cannabis secting agencies encounter any difficulties in regimes in Washington State and Colorado. enforcing rules or implementing critical com­ There, licensing authorities insisted that ap­ ponents, the entire policy regime may be plicants demonstrate compliance to rules weakened and/or delayed. So it will be important overseen by other state and local governmental to ensure that these agencies have clearly bodies. Meanwhile, those authorities were often articulated roles and resources sufficient to carry unprepared or unwilling to adjust their existing them out. The CLA will have to review these policies to allow for firms operating in cannabis. functions and roles in part with other agencies That made compliance extremely difficult for lest it create inter-agency friction and perhaps even the best intentioned cannabis firms. duplicate design or waste time and resources. Take the case of local permits, for instance, which levied broad restrictions on locations UNCERTAIN LAND RIGHTS, for cannabis firms. Even if a firm found a way INFORMAL WATER USE, AND to comply with all ancillary rules, it might have COMPLIANCE WITH ZONING taken months for municipal and state agencies Ensuring legal compliance in the new industry to do the necessary investigations and is should be a top priority. The Cannabis paperwork, including site visits, environmental Licensing Authority will likely have its hands full impact reviews, and legal reviews. in monitoring and enforcing adherence to the rules for cannabis licenses. But those are not COMPETITIVE ADVANTAGES the only rules that cannabis firms will have to AND FALLING PRICES IN follow. Licensees will also need to comply with THE LONG TERM rules administered by other agencies. Since economic benefits (e.g., exports and foreign investment) are a primary objective Already, many small businesses operate inform­ of the DDA Amendment, and these can ally, and often in violation or at least outside arrive differently in the short and long term, the scope of laws and regulations. Jamaica’s expectations about the economic benefits of system for land ownership suffers from poor the cannabis industry should explicitly consider documentation and property lines that, not just today’s trade environment but also how while understood among local residents, are that might change in the future. nonetheless undefined or contradicted in formal legal documents. It is unclear what plans the In the short term, the near-global prohibition has National Land Agency has for rectifying these a complex effect on the value of cannabis. At issues. Additionally, many small businesses are perhaps $10 per gram, cannabis is tremendously reported to source water from illegal supply, valuable in the United States and other wealthy tapping into existing supply lines or using illegal countries, at least when compared to similar

26 A Regulated Cannabis Industry for Jamaica

agricultural products (e.g., food crops, fibers, mirage. As the legal cannabis industry in the tea, coffee). But prohibition is the principal reason United States continues to mature, the cost for that high price. By one estimate, if the United of cannabis production and the price paid by States were to legalize cannabis and allow a well- consumers will fall. (There is some evidence that capitalized, licit industry to enter, pre-tax prices United States legal prices are falling already.) As would fall to less than one fifth the current level that happens, Jamaican cannabis exports— (See Altered State? Assessing How Marijuana legal or illegal—will command less markup when Legalization in California Could Influence intended for sale in the United States. Marijuana Consumption and Public Budgets, So United States prohibition is in some sense 2010 by RAND). Compared to the current a blessing and a curse. The near-global high price point, black-market producers have prohibition on cannabis is the primary reason room to make substantial profits in producing why the Jamaican cannabis exports are so and distributing cannabis even with relatively valuable, but the same international laws disorganized and inefficient business practices. prevent Jamaica from capturing that value That holds true for black-market production (except indirectly through illicit export). If and in the United States, and doubly so for black- when the United States and other countries market producers in Jamaica, who have the lift their prohibition, opening the gates to legal additional advantage of very cheap inputs (e.g., Jamaican cannabis exports, by that time land, water, labor). The same math will apply the legal cannabis industry in Washington, to cannabis produced in Jamaica’s licensed Colorado, and Oregon (and perhaps California) medical sector. Once implemented, Jamaican might have matured sufficiently as to drop their medical cannabis may be substantially cheaper costs of production at or near the current level than cannabis sold in stores in Washington or seen on the Jamaican black market. Surely, Colorado, giving the impression of a competitive some global demand for Jamaican cannabis will advantage to Jamaica. persist, but that might be largely for “artisanal” But, to some extent, Jamaica’s competitive varieties, which occupy just one niche in the advantage over United States producers is a larger market.

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POLICY OPTIONS AND RECOMMENDATIONS

Understanding the goals and constraints facing strike that balance, and which actions or policies Jamaica allow greater clarity when thinking would be required in order to adequately satisfy about the specifics of a regulated cannabis international obligations. Our recommendations industry. Below we describe various options herein are intended to permit adjustment around and recommendations organized by 11 over­ the fringes, so that they could accommodate arching themes. different priorities regarding security versus elegance, or regulation versus the free market. LICENSING AND INDUSTRY To the extent that the CLA wishes to make STRUCTURE such adjustments to these recommendations, There are many different ways to structure we generally advise they refer to the regulations the cannabis industry. Other researchers already written in other jurisdictions, including have discussed a range of options for the Colorado, Washington State, and Uruguay. supply and distribution of cannabis, including Although those regulations have certainly not state monopolies, public authorities, non- been designed with Jamaica’s unique needs in profit dispensaries, cannabis clubs, retail-only mind, they provide a comprehensive, detailed points of sale, and commercial models (for example of a monitored cannabis regime. more information, see Considering Marijuana However, Minister Hylton has already stated Legalization Insights for Vermont and Other on multiple occasions that the new cannabis Jurisdictions, 2015 by RAND). industry will be “market-led and standards- If those policies were mapped onto a simple driven.” In keeping with those public statements,­ continuous spectrum with “free market oper­ the following section specifies an industry design ation” on one end and “government mono­ that fundamentally involves issuing licenses to a poly” on the other, then it could be said that number of private actors. the goal of satisfying international obligations The following four guiding principles should would be more government control, while shape the industry: the goal of maximizing economic impacts would be a more loosely regulated market. 1) Reserve cultivation licenses for both small Presumably Jamaican policymakers want to and large cultivators and assuring some find a spot somewhere in the middle. Leaning portion of the market to small cultivators. too far towards government control might limit 2) Allow for different means of supply to economic opportunities and betray public different sub-markets. expectation. Regulations that are excessively laissez faire might backfire completely, either 3) Maintain and documenting state-licensed by becoming impossible to implement, custody throughout the supply chain. triggering retaliation from foreign bodies, 4) Minimize regulatory complexity to reduce or doing substantial damage to Jamaica’s mistakes or opportunities for corruption. reputation.

Ultimately, it will be left to the Cannabis CANNABIS RETAIL Licensing Authority and other policymakers in It is important that regulations allow medical the Government of Jamaica to decide how to cannabis to be sold in a way that is convenient

28 A Regulated Cannabis Industry for Jamaica

to the buyer—failing that, customers might markets enabled by the DDA Amendment (see prefer to purchase on the black market instead Table 1 earlier), there ought to be a distinct (or in the case of tourists, perhaps never come point of sale for each anticipated product to Jamaica at all). In this case, given the distinct variety (Table 3).

Table 3. Points of Sale for Medical Cannabis

Retailer Market Anticipated Appropriate Type Demographic Product Variety Regulatory Rigor “Teahouse” Mainly tourists, with some Herbal and traditional Low residents infusions Pharmacy Mainly residents with Extracts Medium prescriptions Store (OTC) Residents with or without Nutraceuticals Medium prescriptions Exporter Foreign markets Nutraceuticals High (possibly extracts)

In the simplest model, both tourists with medical tourist or resident—provided they have a permits and Jamaican residents with the recommendation, prescription, or permit to proper medical authorization would purchase use medical cannabis—where they could from the same place. The two populations purchase whatever type of cannabis products have somewhat different needs, which might are allowed based on their legal authorization. be best served within two different purchasing Another type of venue would be tailored environments (as discussed above in the towards patients who value a recreational and section “The New Industry Consist of Three perhaps social component of their cannabis Sub-Markets”). use. These “teahouses” would have more restrictive requirements for entry, allowing While Jamaican residents will most likely be anyone with a medical permit but only certain prescribed only non-smokeable varieties to types of recommendations or prescriptions. consume at home, tourists are most likely seeking herbal marijuana and a place to use Since both the prescription regime (type of it. However, there will likely be some overlap products, qualified ailments, dosage, etc.) and within those groups: some tourists will come certification of other qualified health practitioners strictly for medical use, and some residents is the ambit of the Ministry of Health, it is difficult with recommendations or prescriptions will to make any specific recommendations at nonetheless seek to use for recreation. In this time as to how or if residents can access teahouses. It may be that more liberal physicians short, some medical cannabis patients will will write prescriptions in vacation spots like be seeking to fulfill legitimate medical needs, Negril or Ocho Rios, allowing residents the without any concern for recreational value—for proper authorization to purchase licit cannabis in other patients, the opposite will be true. the teahouse system seemingly for recreational Perhaps the best way to cater to both demo­ purposes. However, this scenario is unlikely graphics is to offer two separate environ­ given the ubiquity and low price of recreational ments. Pharmacies would be open to any cannabis on the island.

29 A Regulated Cannabis Industry for Jamaica

Teahouses would have special operating to foreign markets ought to come under rules, similar to the Dutch coffeeshop model. extra scrutiny with regard to quality control, Only on-site consumption would be allowed origin, potency testing and labeling, as and cannabis sales would be limited to small well as health and safety regulations. While quantities, perhaps no more than 5 grams per those requirements might be unrealistic and buyer. This has dual benefits: 1) tourists can excessive for firms that sell domestically, they use cannabis in a relaxed and social setting and should be more easily attainable for exporting 2) tourists are discouraged from buying excess firms, which already seek to comply with the cannabis and taking it home in a suitcase. health and safety laws of foreign countries and (Further, for the sake of simplicity, teahouses to demonstrate to their international buyers should be eligible for processor licenses, which that they have a reputable, consistent, and are described in the following section, so they high-quality product. Without such controls, can easily buy wholesale from cultivators and the reputation of Jamaica’s brand is at risk. process on-site.) SUPPLYING CANNABIS Whether to allow edible forms of cannabis in Producing herbal cannabis is relatively simple teahouses is an important decision. Edibles (see Figure 1 for more detail on the three-step are difficult to regulate, particularly for potency. process of cannabis supply). First, cannabis Because of technical reasons pertaining to how is cultivated at the farm. The crop is sown, edibles are made and tested, it is difficult to tended, and harvested over a three to four accurately test them for potency, which often month period. Once harvested, the crop is varies wildly from, say, one corner of a brownie dried or cured. After curing, the product is to another and also one brownie from the next. processed for consumption. At a minimum, Further, because THC consumed orally has this includes trimming flowers from the stalk delayed intoxication effects, edibles often lead to and stem. (Technically, at this point, cannabis is accidental overdose, which is not a direct danger ready to be consumed for instance by grinding to health but can lead to erratic and sometimes and rolling into a spliff.) dangerous behavior. For those reasons, it might be desirable to prohibit teahouses from selling Extra steps are required to make cannabis edible varieties to tourists. An exception might extracts or infused products. This starts with be made for “traditional” forms of infusions, such as cannabis tea, provided that they are low dose and can be produced safely and consistently.

Another distinction should be drawn between pharmacies and general stores. This follows from the fact that, under the Food and Drug Act, some cannabis-derived products (i.e., those that are non-intoxicating or low risk, such as nutraceuticals) will be classified as food rather than drug. They will therefore not be confined to the licensed system for medical cannabis, not require a medical prescription, and so could be sold less restrictively.

Exporters of medical cannabis will have to follow special procedures. Product exported Cockpit Country farmer.

30 A Regulated Cannabis Industry for Jamaica

the cannabis “trim,” which can include the dried cannabis producers, those disturbances should flower that has been removed from the stem be minimized. This principle helps to keep regu­ or the remaining trim or “sweet leaves” which lations simple and practical. contain less psychoactive material. Processors As the product moves through the supply chain use a solvent and/or extraction method to from cultivator to processor to vendor, it must isolate the desired cannabinoids, resulting in oils be monitored and tracked. One method is and concentrates. These extracts may then be to use an official bag, similar to a tax stamp, further processed into infused products such intended for wholesale transport. Any cannabis as edibles, vaporizable substances, tinctures, or cannabis products found outside of such a or topical products. bag and not on the premises of a licensed firm Just as rules regarding retail should be conven­ would by definition be illegal. The bag should ient to the consumer, rules for how cannabis be labeled with unique identifiers, including is supplied should be convenient to existing with the license number of the cultivator and methods of production. Though compliance processor (if any), a unique lot number, and the with some rules will require extra effort from results of any potency or safety tests (if any).

Figure 1. Domestic Supply Chain of Cannabis

Again, in a simple regime, cultivation, processing, wish to integrate vertically by taking on the role and even retail could be done by the same of processor and/or cultivator, and perhaps firm. We recommend that firms be allowed to this should be allowed. The need to establish do so if they wish, but ultimately the activities government control over harvested crop may should be covered by three separate licenses. be accomplished by the use of special bags “Cultivator” licenses allow for cultivation through as harvested cannabis leaves the cultivator and curing, while “processor” licenses allow for heads to the processor. All cannabis sealed the manufacture of ready to use smokeable in these bags is therefore accounted for and products and extracts and the packaging of controlled by the state. For vertically integrated product. Firms licensed to sell cannabis (either firms, the CLA should consider additional risk- as a teahouse or as a pharmacy) may also management tools, such as requiring firms to

31 A Regulated Cannabis Industry for Jamaica

report their harvest and the amount of product interacting heavily with the product as it moves processed from said harvest, weighing these through the supply chain. It is better for the against the licensee’s allotted production cap CLA to act as a referee, only intervening when as established by yield. Anything beyond a there is a problem or when the reported figures certain margin of error would necessitate an do not make sense. Once a violation has been investigation. established, sanctions should be swift and certain (this is especially true early on). By There must also be a stage for product testing. establishing its power as a watchful guardian of Testing generally occurs immediately before the the rules that govern the cannabis industry, the product is transferred from one part of the supply CLA will earn the trust and respect of players. chain to another; for instance, when a cultivator is selling cannabis “trim” to a processor for further For reasons of equity, licenses for cultivation extraction, and also immediately before sale, should be allocated to a combination of small such as when cannabis products are packaged and large cultivators. One way to operationalize for distribution to pharmacies. Special licenses this is to create two distinct subclasses of can be issued for testing cannabis. cultivation licenses separated by either the An additional complication is that cannabis amount of acreage, the number of plants, or must be transported from one licensed actor to production quantity allowed. We refer to the the next. One response is to grant that capacity license for the smaller farmer as a “traditional” to those private firms, such that a processor or Tier 1 cultivation license and the larger would drive to the site of the cultivator when farmer as a “non-traditional” or Tier 2 cultivation purchasing raw material, and when the product license. is finished, personally deliver the product to the Because cannabis cultivation has important retailer. Transport would be monitored through economies of scale, smaller cultivators are inhe­ the use of invoices and manifests, or a more rently at a disadvantage. It would be expected high tech system such as GPS tracking devices. for them to have higher costs of production. All such information should be recorded and Further, because they are selling less volume, transmitted to the CLA for assessment. they will have fewer revenues and diminished Another option is to establish specific licenses ability to comply with complex regulations. for transport itself. There are costs and benefits As a result, if they are to compete with larger to both models. A transport-specific license producers, they will need some protection. adds complexity to the industry structure, but Under the spirit of medical cannabis established also makes it easier for authorities to monitor under the law and international conventions, we the flow of product through the supply chain. therefore suggest that “traditional” cultivators Tested samples of products should be obtained be exclusively allowed to supply to teahouses by a licensed lab, preferably in the private (see Figure 2). This has the added benefit of sector. Under this scheme, labs should be able offering tourists a wide variety of artisanal to obtain representative samples of cannabis blends produced by small farmers, for which and cannabis products from processors and they may be willing to pay a premium. Traditional transport it back to their facility for examination. cultivators would still be required to report their In order to avoid pitfalls of over regulation yields and list of buyers and amounts to the and corruption, the government should avoid CLA for risk management assessment.

32 A Regulated Cannabis Industry for Jamaica

Figure 2. Regulated “Teahouse” System

In the schemes proposed above, many elements standard. The licensing of a few larger firms for follow precedent set in other jurisdictions. For commercial production for the supply of raw instance, regulators in Oregon, Colorado, and material for the nutraceutical, pharmaceutical Washington State allow for the same three or medical cannabis market would help deter main license types (Producer, Processor, and product diversion and make it easier for the CLA Retailer), and also divide cultivator licenses by to regulate such activity and players. size. Some of those jurisdictions also issue 3. Create a “teahouse” license required to licenses for sampling and testing cannabis. source from traditional cannabis farmers. Uruguay licenses producers and proces­ We expect tourists to contribute a significant sors, overseeing how product moves along the supply chain, until it is sold in licensed portion of the market value and tax revenues pharmacies. in the licensed medical industry. The licensing structure should allow for business ventures Industry structure primarily (but not exclusively) aimed at the 1. Develop a list of license definitions that tourists market, including farm tours (similar to are clear and concise. “wine tours” in California’s wine country) and Regulations should include a rigorous set of places for on-premise consumption. According definitions defining all aspects of the market, to the “wine tour” model, tourists should be able including licenses, products, acts of trade, etc. to visit a cannabis farm where they can see first- 2. Allow for tiered cultivator licenses for hand the cultivation process and the curing and small and large facilities, each with different trimming stage, and perhaps buy and consume license requirements and rules. the product on-premise. Such a special license Tier 1 licensees could operate under less onerous class would help attract foreign investment regulations, given their reduced capacities to and greater numbers of tourists, who come to comply with complex rules and also the lower Jamaica in pursuit of its “natural” environment. risk of diversion from their farms. Conversely, Additionally, the CLA may want to consider larger farms should be held to a higher certain limitations for teahouse licenses.

33 A Regulated Cannabis Industry for Jamaica

The CLA should also consider some additional prohibits smokeable product from being sold in factors regarding the teahouse system and stores, than the issue is largely moot. supply to tourists. Some have expressed However, the CLA should exempt the teahouse concern that big hotels and resorts may system, allowing some Tier 1 producers the obtain exclusive access to these licenses, ability to obtain teahouse licenses. shutting out other establishments. Distribution of these licenses should be equitable. Lastly, 6. Allow for different rules, privileges, and as a reminder, consider seasonality of tourist application processes for different license economy to ensure that periods of feast and types. famine average out. For instance, Jamaica could consider imposing smaller fees for smaller licenses and/or issuing 4. Promote certain actors to police each some licenses by means of an auction and other, especially between farmers and others by other means. In order to supply the teahouse licensees. tourist market with processed artisanal ganja The rigorous security measures envisioned products, consider permitting Tier 1 cultivators for larger Tier 2 farms would arguably be too the ability to obtain a limited processor license burdensome for traditional (Tier 1) growers. for the production of homemade nutraceutical Therefore, aligning incentives within this products which can be sold in teahouses or system ensures some measure of checks: by other licensed retailers. These homemade for example, by holding teahouse licensees products should be able to meet minimum responsible for diversion of product found to safety standards that are required from the be grown by an approved supplier. Teahouses BSJ (we have been told that some BSJ’s should also be required to report their receipts standards are voluntary). Again, the quantity of of product purchased, allowing the CLA to homemade products sold should be kept small, verify the amount sold by Tier 1 cultivators. In thus reducing the risk of mass contamination; some cases, teahouse licensees may vertically anything beyond a certain threshold would not integrate, further aligning incentives. be considered artisanal and would probably 5. Allow individuals and firms to obtain require greater safety and health scrutiny. multiple licenses in different stages of the 7. Consider issuing cultivation super- supply chain (e.g., cultivator and processor licenses to farmers’ organizations. licenses). Those organizations, functioning as co-ops or Vertical integration of earlier stages of the collective gardens, may merit a special role as supply chain (cultivator and processor licenses) holders of super-licenses if they demonstrate allows for economies of scale and efficiency. proper procedures, capability, and financing. Further, it increases the risk factor for firms That scheme would enable beneficial as they become more lucrative and invested, economies of scale and skill diffusion while also which promotes compliance. However, the reducing the number of licenses to be directly CLA may want to consider limitations on monitored by the CLA. integration of retail licensees from obtaining cultivator or processor licenses as a means to 8. Pass interim regulations, especially to avoid the problem of product promotion and establish rules to allow for transportation. aggressive marketing. This largely depends This would close the currently existing legal on what type of products are sold in the final void that burdens universities who have stages and what restriction the government research licenses and legal sources of cannabis puts on advertising. If the Ministry of Health but lack legal means to transport cannabis

34 A Regulated Cannabis Industry for Jamaica

from the farm to the research lab. Additional record shipments via transport manifests interim regulations would help establish the and invoices, which should be audited by CLA’s authority when it comes to regulating frequently regulators (either randomly or on the cultivation, processing and research of a regular basis). High-tech solutions such as cannabis. Rules should be drafted to govern GPS tracking devices could also be required some limited cultivation and processing for for conveyance vehicles. Regulations should research. Consider licensing a small number establish that only pre-determined routes are of trustworthy firms who have clear business allowed and that drivers and other courier staff plans and are owned and operated by reputable are properly screened. individuals or companies. 10. Enable the sale of cannabis clones However, the CLA should not develop expan­ and seeds from the National Germplasm, sive or detailed interim regulations nor issue managed either by the Scientific Research many interim licenses. Issuing interim licenses Council or some other actor. complicates the process later of requiring firms We propose that the National Germplasm to meet minimum standards or reapply for offers its services to 1) receive cannabis licenses. The CLA should draft some rough rules, strains submitted to them, both for purposes but only allow a small number of new entrants of scientific record and for reproduction and 2) into the market. Revoking interim licenses is sell cannabis clones and/or seeds to licensed troublesome and politically unpalatable. cultivators. The National Germplasm already offers these services for most other agricultural 9. Consider establishing transportation crops, and appears willing and able to do the guidelines within the regulations to allow same for cannabis. This should be offered as for the transportation of cannabis. an optional service to those licensees who Products, herbal or value-added, will need want to participate. Additionally, these activities to move from cultivators to processors to can be contracted out to private companies if vendors, and so from the physical premises and and when that demand is established. jurisdictional custody of one licensee to another. This activity, like all others, must be licensed. LAW ENFORCEMENT AND Two approaches are available: 1) issue a specific ENSURING SUFFICIENT license for transportation activities, and allow CONTROL OVER LICENSEES firms to acquire that license either individually As discussed in previous sections, international or in combination with other license types; and obligations demand that the Government 2) fold transportation activities into the list of of Jamaica control the supply of medical activities covered under some other license cannabis—at a minimum, this entails requiring type, e.g., cultivators, processors, retailers, or firms operating in cannabis to obtain licenses. some combination of each. Each option has If the Cannabis Licensing Authority issues its advantages. Issuing a separate license for licenses to private firms, then there will be transportation arguably adds complexity, but it pressure to make the argument that there will can also make it easier for regulators to monitor be sufficiently rigorous regulations in place as supply chain activity. to satisfy international obligations, or at least We recommend that the CLA include trans­ defend against accusations that Jamaica is portation into the list of activities undertaken in breach of those obligations. To support by processors. But with that privilege should such an argument, in this section we provide come additional responsibilities: they must recommendations that would enable the

35 A Regulated Cannabis Industry for Jamaica

Cannabis Licensing Authority could supervise of yield). Suspicious amounts (beyond a licensee behavior. These rules should be reasonable margin of error) should warrant enforced rigorously from day one, rather than further investigation. Transport activities should beginning with laxity and then tightening. be subject to frequent auditing of delivery logs and routes. Regular site visits by CLA agents However, the existing black market cannot be throughout the year are a necessary tool to ignored. Cutting down on Jamaica’s black- measure acreage and ensure compliance of market production and exports might mollify other security and bookkeeping rules as well the concerns of other countries (e.g., the United as rules placed on processors (e.g., food and States) regarding the new, licensed industry, medicine safety regulations). In addition, the and help to prevent cannabis produced by CLA should conduct unannounced visits from licensed actors from being diverted for illegal time to time to ensure compliance. sale. But reducing the scale of Jamaica’s illicit cannabis production—or even preventing its 12. Establish clear sets of supply control further growth—would require attention and rules that are reasonable and deter resources. The black market will not, as some diversion to black market. seem to hope, dissipate automatically as the All licensees must prove that they meet the new licensed industry comes online. Even if minimum qualifications established by regu­ the new licensing regime is successfully imple­ lation to prevent diversion to the illicit market, mented and completely satisfies the demand but these regulations should be less strict from Jamaicans and tourists, the opportunity for traditional Tier 1 cultivators who supply for profitable illicit production for smuggling teahouse licenses. Regulations should not abroad will remain. overburden these smaller firms, since they Below we 1) identify measures by which the CLA lack much of the capital necessary to invest in could monitor and control licensee behavior, chain link fence, barbed wire, cameras, record as expected by its international obligations; 2) keeping, electronic seed-to-sale tracking or discuss aspects of controlling black-market indoor or enclosed structures. At a minimum activity; and 3) consider policies targeted at Tier 1 cultivators should be tax compliant, be individual users in order to protect the public able to pass a background check (this could health and safety. extend to farmhands and other laborers as well), establish a physical location of their farm, Compliance with regulations and which should include GPS coordinates, be deterring diversion limited as to how much they can cultivate and to 11. Employ metrics, risk assessment and whom they can sell. Licensees that supply the routine and unannounced investigations medicinal or export market (generally Tier 2) are to control supply of cannabis. likely to be larger firms who can readily supply Licensing fewer firms makes the CLA’s job more consistent and higher quality products for easier in terms of monitoring actors involved, commercial interests. Therefore, rules on these but smart regulations should include a robust larger firms ought to be more rigorous and can metrics system to estimate crop yields and include some security measures. amount of value-added goods produced and sold. For cultivation, processor, and vendor 13. Consider use of a “tax stamp” via licenses, the CLA should collect and audit all counterfeit-proof, single-use packaging to reports of yield (or sales), balancing them with identify licit product. reports from associated buyers/suppliers and Arguably, many firms will not be able to comply known limits (e.g., acreage or bulk weight with more expensive and complex systems of

36 A Regulated Cannabis Industry for Jamaica

supply control, including electronic seed-to- 15. Be cautious about requiring security sale tracking. Packaging cannabis produced by measures, such as video cameras. cultivators in government-designed counterfeit- Washington State and Colorado have both proof bags, sealed and stamped with the required security cameras throughout the licensee’s number, ensures a degree of supply premises of licensed cannabis firms, such as at control that is easy to enforce. Cannabis ready points of entry and exit. However, that level of for consumption or processing that is not regulatory intrusion is already being left out of the packaged in these non-reusable bags would be regulations of newly legalized jurisdictions such considered untaxed and illegal. as Oregon. The same requirement imposed in Jamaica might be both ineffective and very costly 14. Consider monitoring cultivators by to adopt and enforce, particularly for cultivators product sold rather than (or in addition to) in remote areas. We advise the CLA to review acreage licensed. Colorado and Washington State’s regulations In this system, monitoring and enforcement for better understanding of security systems hinges on a “tax stamp.” When a licensed required, but not to adopt them wholesale. cultivator finishes a harvest, perhaps including curing and trimming the product (i.e., if he is 16. Include a set of enforceable adminis­ trative fines for violations by licensees. an integrated cultivator-processor specializing Fines should vary with the severity of the violation. in herbal product), he then must call a licensed We recommend that firms’ licenses be suspended processor and put in an order for pick-up. To for a certain period of time if violations­ continue do so, the cultivator will specify how much or compliance is not established. Mechanisms product he’d like to sell (by weight), provide for license revocation should also be included in his cultivator license number, the buyer, and regulations after a certain number of violations the license number of the vendor (whether that have occurred within 12 consecutive months. be a pharmacy, a “teahouse”, processor, or an Regulations in Colorado and Washington State exporter). This information will be logged by the provide examples of tiered-fine systems. CLA, and the cultivator’s harvest subtracted from his quarterly (or annual) quota. Upon arrival 17. Include an appeal and arbitration process at the cultivation site, the processor delivers for fines, license denials, suspensions and the correct number of tax-stamped bags to the revocations. cultivator, who packs the product in bags and Section 9A(7) of the DDA Amendment estab­ then seals the bag. CLA agents could witness lishes that an appeal tribunal must be constituted the bagging of harvest. Processors would be in accordance with regulations made under forbidden from picking up from or delivering section 29. Therefore, the CLA will need to draft to any site that is not a licensed cannabis firm clear rules to that end. The appeals process and required to submit travel logs to the CLA. guarantees that firms are not unfairly targeted Tax-stamp bags should be designed to thwart and allows for some manner of explanation. The imitations, and to have tamper-proof seals. At CLA board should adjudicate any dispute through internal procedures consistent with Jamaica’s least two versions of the bag must be designed: administrative law. These arbitration mechanisms one for wholesale processing able to envelope should also be written clearly into the regulations. cannabis trim and another for final retail sale. Once the proper fee for the tax stamp has 18. Consider reasonable disqualifying been set, that amount can be charged to the factors for licensees. cultivator or processor (or withheld from the Individuals who have a recent prior criminal final sales total) upon packing. history for certain cannabis-related offenses

37 A Regulated Cannabis Industry for Jamaica

should be disqualified, especially those with a takes time and resources, Rastafarian felony conviction of drug trafficking within the cultivators sell to other Rastafarians as a means last several years. Others with a violent criminal to recoup their costs. If the current law stands, background or tax delinquencies should also be police might enforce the law arbitrarily and disqualified. But if the goal is to include currently selectively, opening the opportunity for unjust illicit cultivators, then the CLA should consider enforcement practices. We recommend that the not making disqualifying factors too onerous CLA, working with the Ministry of Justice, the on individuals with prior history. Certainly Ministry of National Security, and Parliament, each disqualifying offense should have a work to either amend the law to allow for the corresponding limitation on the lookback period. sale of small amounts of low-cost cannabis within the Rastafarian community or change law 19. Conduct background checks and enforcement policy to deal with the issue fairly. financial investigation for licensees at every stage of the supply chain. 22. Continue working with international All of those seeking a license, and their financial partners. backers, ought to undergo a criminal history The public image of compliance with inter­national check through JCF as well as a financial investi­ obligations serves an important, albeit foreign, gation by the Financial Investigation Division to constituency. Many are watching how Jamaica ensure that individuals and their partners are will regulate its nascent cannabis industry. The not criminally involved or linked to organized appearance of diversion to the black market crime. License transfers, if allowed, must be or a loose medical system may cause concern subject to these requirements. abroad. It is important to invite the INCB for a mission sooner rather than later as regulations are 20. Require licensees to destroy unused not yet in place and the market is still in transition. or unwanted stock through a verifiable Working with the United States in areas of drug procedure. eradication and interdiction may be a difficult sell Claimed destruction of unused or unwanted politically. However, satellite imagery from the cannabis (as well as product that fails testing) is United States may serve a useful purpose for a fertile area for fraud. Regulations should define efficient recognition of outdoor cultivation sites. permissible methods to dispose of product This would broaden the reach of the JDF, whose and require accounting against a licensee’s resources are limited, to eradicate unlicensed production cap and inventory. Ideally, all growers. destruction should be done in front of witnesses at law enforcement facilities using incineration or Furthermore, Jamaica should confer with the other methods used for illegal drugs. government of Uruguay, which has already undergone this review and still maintains a Illicit market enforcement positive working relationship with the INCB. 21. Suggest that the Ministry of Justice Contacts might be facilitated through the Inter- close the “Rasta-to-Rasta” trade loophole, American Drug Abuse Control Commission of or else announce a clear and consistent the Organization of American States. enforcement policy. Rastafarians are currently allowed to cultivate, Public safety possess, and consume cannabis for sacra­ 23. Establish much tougher penalties mental purposes, but are prohibited from buying for drivers using alcohol and cannabis in or selling unless licensed to do so under the combination than for those using cannabis broader medical cannabis-licensing regime. This or alcohol alone. is unenforceable, and since cannabis cultivation Though there are disputes about the relative

38 A Regulated Cannabis Industry for Jamaica

dangers of driving under the influence of alcohol tons (MT). This estimate is almost certainly versus cannabis, it is clear that driving under the too high.8 It is more likely that only a small influence of both substances at once is more fraction—perhaps less than one percent—of dangerous than either alone. that space would need to be licensed for licit medical cultivation. We anticipate roughly 5 MT 24. Increase funding for Drug Treatment of demand each from tourists and Jamaicans Courts, but limit their use to individuals with medical prescriptions.9 We calculate that who have committed non-drug related Jamaica could meet that demand with as offenses and suffer from substance use few as 5 or as many as 30 acres licensed for disorder. cultivation.10 Those calculations are imprecise, Under the DDA Amendment, possession but perhaps a reasonable target for licensed of cannabis is not an offense for which one production would be towards the middle of that can be submitted to a Drug Treatment Court. range, e.g., 20 acres. However, any increase in problematic use might be better reduced through a DTC Yet 20 acres of licensed cultivation space is not framework. A small portion of taxes could necessarily the correct number: if one is bullish be used to scale up or increase the court’s on the prospects of a nutraceutical export capacity to hear cases. However, Jamaica’s sector, or on the portion of current Jamaican DTCs should be limited to those found cannabis users who will switch to the medical committing other non-drug-related offenses sector, then perhaps that number needs to such as domestic violence, drugged driving, be increased. This number may again have to larceny, robbery, etc. due to their cannabis- increase in future years, if one expects growth related intoxication or dependency. in tourism, or resident demand for medical cannabis, or exports from the nutraceutical ALLOCATING LICENSES: sector. That suggests a system of loosening LICENSE QUANTITIES, limits over time. PRODUCTION CAPS, AND Moreover, the maximum cultivation target could DISBURSAL METHODS be measured in bulk weight of product or net Even after the issue of determining the quantity of THC rather than acreage. This would industry structure is settled, there remain some require establishing some conversion formula principally important questions: How many for acreage yield, but might be easier to monitor licenses of each type should be issued? What and enforce (perhaps in conjunction with a tax limits on production should be required for stamp system). cultivation licensees? How should those scarce licenses be disbursed? Further, ultimately the CLA will also have to consider whether it will be preferable to under- Determine the Quantity and Size or over-shoot the “proper” amount of cultivation of Cultivation Licenses space. Under-licensing space will make licensed Our calculations suggest that the size of the market to be regulated by the CLA is 8. Authors’ calculations, citing INCSR and data from in- dramatically smaller than what many seem to person interviews. See attached to the report. expect. It has been difficult to estimate the size 9. (Estimating the needs of the nutraceutical sector is of the current illicit market production. We have more difficult, though certainly in the early years it may be very low, e.g., 1 MT.) used the United States government’s INCSR 10. That estimate is contingent on expected yield per square estimate for 37,000 acres of cultivation area, foot of cannabis canopy, involving both yield per square which would produce as much as 25,000 metric foot per harvest and number of harvests per year.

39 A Regulated Cannabis Industry for Jamaica

cannabis scarce and therefore more valuable, Facing the fact that there will likely be few giving additional incentives for licensed cultivators licenses issued in the first years, the CLA will to follow the rules rather than risk having their have to make some tough choices. Whatever license suspended or revoked. It would also the decision, it should be representative in raise prices to consumers, whether tourists, terms of issuing licenses to both small and Jamaican patients, or processors looking to large producers. For political concerns, wealthy export cannabis-derived products abroad. On or foreign interests cannot be the only winners. the other hand, over-licensing production space Determine the number and size of pro­ risks causing an excess of licit cannabis on the market, perhaps leading to price collapses, cessor and retail licenses which in turn would provide great profit incentive This is a much easier task, for a variety of for diversion to the black market. Therefore, reasons. Since cultivators are the first and it seems advisable that the CLA attempt to foremost drivers of the quantity of supply, there “undershoot” the correct amount of licensed is no need to enforce a market cap at the level cultivation area, and then react in future years of processors and retailers. However, there are by gradually issuing new licenses or raising other reasons to limit supply. cultivation caps per each license type. We anticipate retail licenses going exclusively Twenty licensed acres might be handled by a to existing pharmacies. Nonetheless, perhaps small number of licensees. The precise number the CLA would like to restrict the number of will depend on the distribution of large, small, licenses, i.e., to 50, as to make it easier to and perhaps micro cultivators. Below it is enforce against license violations. shown that the CLA issues “Tier 1” licensees with a half-acre maximum on canopy space and Compared to cultivator licenses, processor “Tier 2” licenses with a full 5 acres of canopy licenses are expected to go to more capital- space. In Table 4 below outlines 3 scenarios, intensive and higher-skilled firms. So it would be demonstrating that this volume of demand reasonable allocate licenses to larger producers. could be produced by as few as 4 and as many Perhaps the CLA would like to issue no more as 40 licensees.11 than, say, 10 processor licenses when the market first enters. We do not see the need for any cap 11. This simple model assumes away some of the com­ on the size of a business operating in processing. plications of the proposed license scheme, in that there are no teahouse licenses, which would complicate the Methods for allocating scarce licenses picture. Further, recall that if cultivation super-licenses are issued to farmers’ associations, that perhaps each If there were an unlimited number of licenses, super-license would constitute a Tier 2 license. the CLA could simply issue a license to every

Table 4.

Scenario 1 Scenario 2 Scenario 3 Only Big Firms Mixed Firms Only Small Firms # Tier 1 (half acre) Licenses 0 20 40 # Tier 2 (5 acre) Licenses 4 2 0 Total Acreage 20 20 20 Total # Licenses 4 22 40

40 A Regulated Cannabis Industry for Jamaica

applicant who met baseline qualifications. That 26. Consider allowing for the resale of would also be appropriate in the less-extreme existing licenses. scenario in which there are fewer applicants This allows for a greater efficiency (in the for a given license type than the number of economic sense) of licenses, since licensees licenses that the CLA would like to issue— will be able to transfer their license to another which may well be the case for processing actor if they find it in their own economic and retail licenses. However, given the large interest. If licenses may be resold, we strongly number of Jamaicans who currently farm advise against any method vulnerable to the cannabis (perhaps tens of thousands) and the appearance of political patronage. Purchasers widespread perception that the industry can be of a resold license must be able to meet the profitable to even small farmers or individuals minimum requirements established by the who are allowed to cultivate up to five plants on regulations, including any checks regarding their property, there will surely be many more background, criminal history, and financing. applicants for cultivation licenses than available The CLA should hold funds in escrow until the licenses, unless the choice is made to use a fee buyer has met qualifications. system rather than the license system to limit 27. Impose caps on licensed cultivation. production volume. Due to the large numbers of Jamaican entre­ Unless a license is issued to every qualified preneurs reportedly interested in obtaining applicant, the CLA will have to adopt some a license to cultivate cannabis and the rela­ method of allocating scarce licenses. That tively small amount of cannabis consumed method should be effective, fair, and transparent, domestically or exported to be exported in the whether it involves a lottery, an auction, or merit initial years of the industry, we recommend that selection based on a point system. the Cannabis Licensing Authority calculate a market-wide cap for either for the amount of Aspects of Licensing material produced or canopy area. Managing the 25. Design an effective, fair, and trans­ level of production in this fashion can reduce the parent method to award initial licenses. risk of licitly produced cannabis being diverted Consider strenuous qualifying requirements to black markets. By restricting the number of in combination with a primary method for licensees, it might also prevent the CLA from issuance, including lottery, ad hoc selection, being overwhelmed by a regulatory burden dis­ or auction. Auctions of public goods or spaces proportionate to its funding and capacities. is not uncommon and are most preferable to Cultivation licenses should be issued with the state as they allow the CLA to earn seed respect to that market-wide cap, taking into revenue while raising the price of each license. consideration both the number of cultivation On the other hand, auctions can be politically licenses to be issued and the amount of product unpalatable because they give advantage to the that each is allowed to produce. The market-wide wealthiest applicants unless special provisions cap might be adjusted in future years according are made to let cash-constrained applicants to demand estimates and observations of price pay in arrears, out of sales revenue, rather trends: increasing or “too high” prices suggest than in advance. That said, auctions should that the market is under-supplied, and low be reserved for larger Tier 2 licenses as it is prices would suggest the opposite. unlikely that traditional Tier 1 growers will be able to buy a license. Another consideration of It is less important to restrict the issuance of fair allocation includes distributing the amount licenses for processing or retail, both because of licenses by parish. it is likely that a smaller pool of firms who

41 A Regulated Cannabis Industry for Jamaica

are interested in and qualified to seek those needs an operationally clear definition. We have licenses and because those firms are more yet to find a reliable definition of a cannabis- likely to comply with regulations and easier to based “nutraceutical” and recommend the monitor. CLA establish, perhaps with the Ministry of Health, what types of cannabis or cannabis- 28. Zone licensees appropriately. derived products would qualify based on Restricting licensees to certain areas of opera­ cannabinoid profile or psychoactive/intoxicative tion help to reduce diversion and make the effects. It might be best to delineate different regulator’s job easier. Further, outdoor cultivation products based on potency or intended effect; centers may require greater distances from each nonetheless, clear definitions need to be other as a way to reduce cross-fertilization from established to prevent firms from finding creative neighboring growers, especially with regard to workarounds to the law. hemp. Established pharmacies that are already licensed by the state should be grandfathered 30. Consider limiting the range of products into the system if the regulations require pharm­ available for retail, including banning edibles, acy sale of psychoactive product, yet the CLA at least temporarily. should avoid over-licensing retail stores in any Edibles pose additional health hazards, includ­ one area to avoid market saturation. This will ing their attractiveness to young children. require limiting the number of vendor licenses. Washington and Colorado have both experi­ The CLA will need to measure market demand enced difficulty in regulating them with respect for psychoactive product. In the end, the demand to accurate and consistent dosing. Unlike those for products to treat cancer or glaucoma may be jurisdictions, Jamaica does not now have a very small. substantial trade in cannabis edibles. In the early years, we recommend banning edible products. RETAIL AND ACCESS Rather than include edibles at the initial stage, The new industry requires clear rules about Jamaica should first see how the market reacts how patients become eligible to obtain medical to medical cannabis. (Note that consumers with cannabis, where and how that cannabis is a strong desire for, e.g., cannabis brownies can sold, and which products are eligible for sale. always make their own.) Regulators should Under a “medical cannabis” framework, the revisit this issue in the future. government may want to restrict each class of 31. Establish reasonable, yet differentiated, individuals to specific product types. quality control and safety rules for cannabis Consumer safety regulations and cannabis products. Protecting the consumer—by ensuring that he/ Testing cannabis and cannabis-derived pro­ she is purchasing a product of known purity, ducts for agrochemicals and contaminants will quantity, and cannabinoid profile, which has help ensure that a safe and reliable product been tested and which is properly packaged reaches consumers. Rules to that end, including and labeled—helps protect both consumer acceptable limits of chemicals in consumer health and the reputation of Jamaica’s products, restrictions on the use of certain nutraceutical and medical cannabis industries. cancer causing agrochemicals, and sample testing should be included in regulations. 29. Define cannabis and cannabis-derived products within the regulations. However, testing is expensive and so it should Each type of cannabis as listed in the DDA not be reflexively required in all cases. Herbal Amendment, including cannabis for medical, cannabis is less likely to contain hazardous therapeutic, industrial and spiritual purposes, chemicals or to vary wildly in intoxicative potential.

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As a result, herbal cannabis, which should be with health and safety requirements can be destined for teahouses, could be exempted more effective than relying on regulation alone. from rigorous testing within the supply chain. If That approach allows for the government to there is to be required testing, perhaps it should set a reasonable minimal standard to protect be carried out with less expensive forms of consumer health and the integrity of the industry, testing including near infrared (NIR) technology, and another, higher standard that would signal which can measure potency and moisture with superior quality and reliability to consumers who a reasonable precision. In combination, the CLA are willing to pay more for that assurance. or BSJ might also want to operate “mystery 34. Require clear health and warning labels shopper” operations that pull product from store with nondescript packaging for end-user shelves, audit their label claims, and test for products. dangerous impurities. Products should not appear attractive to youth Cannabis-derived products represent additional or make false health claims. Further, the user hazard, both because they are more variable in needs to know the approximate dose as well as potency and because they may contain residual cannabinoid profile, potency and instructions. hazardous substances from extraction and/or Packaging should not be colorful or attractive. infusion. Other jurisdictions impose more stringent Prominent warning labels should be required forms of testing for these products, using tests for all products and inform the user that the for residual solvents and contaminants such as product may be habit forming and to avoid chemicals and microbiological matter. Colorado driving or operating heavy machinery. and Washington State regulations provide lists 35. Use child resistant packaging for pro­ of prohibited chemicals and extraction solvents. ducts. It seems reasonable for Jamaica to follow this Preventing accidental ingestion by children is an model. However, consideration will have to be important and necessary tool to protect public given to the role of the Chief Medical Officer and health. Childproofing bottles, containers, bags, the Food and Drug Act. and other packages should be included in the 32. Consider more rigorous standards for final rules. If edible products are allowed for exports. sale—especially sweetened edibles—special As suggested earlier, products intended for attention would be required to preventing their export merit a higher degree of control with accidental ingestion by young children unaware regards to quality and safety. Consider requiring of their psychoactivity. advanced methods for testing those products 36. Consider limiting sales hours. (including using chromatography to test for Limiting sale hours of some of the more potency) while allowing less precise methods intoxicating cannabis-derived products (e.g., (e.g., near infrared (NIR)) for domestic product. high-THC products) could promote public safety. Jamaican residents who are willing to pay for Many jurisdictions restrict the sale of alcohol or additional assurance regarding product quality cannabis during late night hours. We advise a could seek to purchase from companies with similar scheme, but with exemptions for some better brand names or who have secured certain teahouses, which may want to operate later for voluntary certifications or standards. tourists who use on-site. Even if this were not 33. Facilitate the creation of voluntary implemented for pharmacies, where cannabis standards for a higher standard of product can be only sold but not used, it might still be quality and best practices. implemented for teahouses, where late-night Using voluntary standards in combination use might be seen as more problematic.

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37. Establish mechanisms for product In the other direction, it would be unreasonable tracing, lot number and issuance of recalls. to limit processed nutraceutical and medical This is especially true for processed, value- products (especially those that are not added products such as tinctures and extracts. intoxicating) to a hard 2 ounces if the product’s Regulations establishing a chain of custody net weight is more. Certain types of creams, can help to ensure that tainted products ointments, edibles, etc. can weigh more than can be recalled from store shelves. Other 2 ounces, therefore we recommend setting jurisdictions have established certain lot sizes some type of equivalency standard. This ob­ based on weight of cured cannabis material. viously would not apply to non-intoxicating We recommend that each tax stamp bag products that contain less than 1% THC. double as a typical lot. It should be somewhere One conceptually simple but operationally between five and twenty pounds. demanding approach would be to set all 38. Establish 10mg of THC as the standard quantity limits in terms of net THC content. “dose.” 40. Establish a procedure to accredit or That quantity has become a standard, and certify labs to test cannabis for potency, appears on labels and such, but in Colorado profile and contaminants. and Washington State it has been described as If labs are to test cannabis, someone has to a “serving size”. That term has the connotation test the labs and certify their competence. In of treating cannabis as a food product rather the long run, testing is best left to the private than as a drug. We advise against that language, sector rather than government or academia, but favor 10mg of THC as a standard as used and that has been the precedent set in in other jurisdictions. other jurisdictions. However, in the short run, 39. Establish equivalency standards for Jamaica will need to make best use of where non-herbal products to standardize trans­ expertise on the island is today. Because action limits. the University of the West Indies reportedly Implicitly the law establishes a transaction has the best equipment and training on the ceiling by allowing for the possession of up to island, perhaps it should be given a lead role in 2 ounces of cannabis for medical purposes. certifying laboratories or setting the standards That appears to mean 2 ounces of dried flower, for certification. but cannabis products, such as concentrates, 41. Establish a trustworthy system of ob­ can take many forms. For example, roughly taining samples from cultivators. 2 ounces of cannabis concentrate (assuming A characteristic problem of using private 70% THC) could be equivalent in number of testing laboratories is that cultivators and doses and price to 3 pounds of dried bud. It other market participants get to choose the is important to consider reasonable purchasing labs they use. This creates a conflict of interest limits for processed cannabis products. The when a lab detects a dangerous impurity, or state of Colorado has completed some recent merely finds that the product is of low potency rules and scientific studies on equivalency. and therefore limited commercial value. There We suggest reviewing a report compiled by have been accusations in Washington State the Marijuana Policy Group titled “Marijuana and Colorado the market participants put Equivalency in Portion and Dosage.” We economic pressure on laboratory operators recommend that the CLA consider these rules to fudge the results, and that some operators and studies once the restrictions on types of comply. The “mystery shopper” approach, cannabis products have been established. where tested product is bought at retail

44 A Regulated Cannabis Industry for Jamaica

and sent for retesting to a lab operated or cannabis on the grounds that smoking anything employed by the government, puts a check on is not good for health. But if that preference such behavior. Labs whose results are found were adopted as policy, a substantial tourist to be false on retest should be cautioned, and market might never emerge. The same would if their performance does not improve should be true if the government insisted on a narrow lose their testing licenses. range of conditions qualifying for medical use, or on full pharmaceutical-style product testing to 42. Require that testing results be recorded establish safety and efficacy for each indication with the CLA as well as the licensee. in each patient population. In order to ensure that cannabis sold for con­ sumption has passed testing, the CLA should We understand the concerns of restricting access keep records of all lots tested to ensure that pro­ to products that have yet to show any clinical cessors destroy material that does not pass. results. However, under the spirit and letter of the law, the CLA should work with the Ministry 43. Fees should be collected from cannabis to allow for those with terminal and chronic licensees when they submit products for illnesses to access, under doctor supervision, testing. either whole plant material or cannabis-based If all product sold must be tested, and if products. An increasing amount of jurisdictions, there are a limited number of licensed testing absent scientific studies, are accepting the facilities, the point of testing could serve as the use of cannabis to treat a growing amount of point of tax and fee collection. That approach maladies or to alleviate pain. We recommend is especially relevant if the tax or fee is based that Jamaica not restrict medical cannabis to on THC content, since the testing facility will a narrow interpretation of products that show provide that measurement. results after clinical testing.

Access to medical cannabis 45. Establish medical conditions for prescriptions and recommendations which cannabis is an allowed treatment Medical cannabis regulations need to be as well as reasonable guidelines to issue sufficiently strong to protect and promote the prescriptions and recommendations. health and wellbeing of users. Novice users will Health agencies and officials, including the require some minimal degree of oversight by Ministry of Health, the Chief Medical Officer, healthcare professionals. the Medical Association of Jamaica, and the 44. Refrain from overly restricting the Pharmaceuticals Council play important roles in determining access to and content of medical prescribing or recommending of cannabis cannabis. Regulations should work with other or intoxicating cannabis-based products. government bodies to establish a list of medical Under the Dangerous Drugs Act and its most conditions for which cannabis can be used as a recent amendment, the Ministry of Health treatment (though allowing for some degree of decides what medical or nutraceutical products discretion by doctors). The list should be subject are available and to whom. The CLA needs to change as more research may expand or to work with the Ministry to ensure that an contract the number of ailments on that list. appropriate range of products is available to consumers. It is important to strike a balance We recommend that Ministry of Health issue between a loose medical cannabis regime, as prescribing or recommending guidelines, espe­ seen in California, and one that is too restrictive, cially if other health professionals (beyond as seen in New York. Some health-care pro­ just doctors) are allowed to prescribe certain fessionals would prefer a ban on smokeable cannabis products.

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46. Utilize the prescription system for the seeking to attract foreigners into teahouses. Even vending of final products at pharmacies by then, marketing and promotion should be kept trained pharmacists. to within reasonable standards and practices It would be unnecessary and costly to require so as not to offend or disrupt already existing stores that sell only cannabis and nothing else, tourist operators who run family establishments. as has been done in Oregon, Washington, Consider a Dutch coffeeshop model whereby and Colorado. Using existing pharmacies and advertisements are externally limited to storefront pharmacists to distribute the drug will be more signs but less restricted within the confines of cost effective, reduce regulatory burden, and the establishment. Conversely, vendors might protect the public health. be required to provide drug abuse prevention information at the point of sale. 47. Advise the Ministry of Health to list highly psychoactive forms of cannabis as 51. Advise the Ministry of Health not to “List 4”, and mildly psychoactive forms as certify additional health practitioners for “List 2”. prescription/recommendation privileges. That puts intoxicating material (e.g., herbal During the initial stage of the cannabis market, cannabis and extracts with significant quantities it would be prudent to restrict prescriptions of THC) behind the counter but allows for easier or recommendations of cannabis to doctors. purchase of high-CBD/low-THC products, which This restriction should be reevaluated within are not intoxicating. a reasonable amount of time to determine if other health practitioners could be trained in 48. Establish age restrictions. recommending more mild forms of cannabis The law does not establish a minimum age for (e.g., high CBD products). medical cannabis. We recommend that children under 18 be restricted, but not prohibited, from 52. Implement rules and monitoring sys­ accessing medical cannabis. Depending on tems to police potential “kush doctors” the type of product (e.g. potency and profile), who abuse prescription privileges. minors who need or could benefit from medical Consider working with the Medical Association cannabis should undergo a more rigorous of Jamaica to self-police physician behavior. screening process Options would include a Consider placing annual maximums on the requirement for parental consent or for a second number of prescriptions or recommendations medical opinion. that a health professional is allowed to write, and forbidding them from charging for that service. 49. Prohibit the use of vending machines. 53. Allow for different categories of vendors Use of vending machines should be prohibited. catering to different styles of consumption. Few psychoactive substances, at least in We anticipate that some patients will seek the Western World, are so readily offered by medical cannabis strictly to treat real medical vending machines which could allow intoxi­ needs, while others will merely use the medical cated individuals or youth easy access. cannabis system as a means to access the 50. Ban all forms of marketing and pro­ drug for recreational purposes. That possibility motion, especially for smokeable products is practically guaranteed by the text of the available at points of vending. DDA Amendment, which imposes only a Neither vendors nor processors should be able minimal burden of proof on tourists of medical to aggressively advertise their products directly need before the issuance of medical permits. to consumers other than at point of sale. There Jamaican residents, on the other hand, will need should be exemptions for tour operators who are to secure a prescription or recommendation from

46 A Regulated Cannabis Industry for Jamaica

a Jamaican medical professional; as a result, (e.g., alcohol is taxed at higher rates by volume many of them will truly seek medical cannabis of ethanol). Though technically more complex, for its medical or therapeutic value rather than taxing by potency is superior to taxing by its intoxicating properties. If the Jamaican weight or price as it correlates better to government would like to maximize sales, then intoxication. If Jamaica can overcome technical both styles of use should be accommodated issues of finding a representative sample, then for by regulations. Perhaps the most important this scheme allows regulators to better shape way to do so is to establish a vendor class the market as consumers generally seek out (which we call “teahouses”) that allows for on- products with greater intoxicative effects. In site consumption and a wider range of products this case, taxing by potency is perhaps the than is available at pharmacies. most “market driven” option. This approach equalizes taxes across products of different TAXATION AND REVENUES potencies. Further, fee per gram of THC An integral aspect of ensuring that regulations produced—which could be collected after are correctly written, revised, and implemented sale, rather than before production, to ease life regards taxation and the collection of revenues. for smaller producers—obviates the need to The Cannabis Licensing Authority will bear the control production by, e.g., limiting the number primary burden of implementing regulations on of plants to be grown or the growing area. the new industry, and therefore needs a reliable This last point is critical. If one of Jamaica’s source of adequate funding. principal concerns is to establish clear oversight Tax base and points of collection on cultivators in an environment of no or little compliance, then taxing on potency, coupled Taxation of cannabis can take place at different with regular monitoring and reporting, is the points within the supply chain, based on best mechanism to ensure that licit product different elements. For example, tax can be is not diverted to the black market. Each levied at each point of sale (from cultivator to licensed cultivator would essentially set his own processor to vendor to end user). Further, the production cap, growing as much cannabis as CLA could base the tax rate on the price of the he can afford to given the tax rate. If a farmer good sold, by weight, or by potency (e.g., per grew more than he could afford or if his yield unit of THC). Most other jurisdictions levy taxes turned out to be more potent, then any surplus on the price of the good sold, sometimes at would be destroyed. each point of sale. Few tax by weight; none so far tax by potency. The step by step procedure for establishing a potency base for taxation would first require a That said, we recommend that Jamaica consider price per unit of THC. Again, no other jurisdiction a simple excise tax for domestic goods sold on has attempted such a tax base (though in 2014 the island—taxing at final point of sale based on Massachusetts state considered a tax of $1000 a percentage of price. Given that tax compliance per ounce of THC). Establishing this price point on the island is low, the simplest scheme will is critical and may need further adjustment as reduce the administrative and financial burden it limits the overall quantity of product in the on firms and the CLA. However, Jamaica should market. However, Jamaica should consider consider a reasonable approach to taxing by different rates for different products and perhaps potency as a means to better shape the market. in different markets (i.e., taxing products sold in In many other jurisdictions, precedent exists teahouses more as tourists are used to paying for taxing psychoactive substances by potency more for cannabis).

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At a minimum, establishing potency would testing or are highly psychoactive or products require THC potency testing of representative destined for the tourist market. samples of cannabis trim prior to processing. 56. Consider imposing a Special Consump­ For example, a 10 gram sample of herbal can­ tion Tax (SCT) on cannabis, which would nabis trim is found to contain 6 percent THC, enable revenues to feed directly to the CLA. establishing a potency base of 0.6 grams of Consider ways to tax purchases by tourists THC. This scheme can be even more complex if with a medical permit more than taxing medical regulators decide to include other cannabinoids, cannabis for locals. If levying an SCT is not with higher taxes on cannabis found to have less feasible, then consider applying higher licensing CBD relative to THC. To illustrate the effective fees for teahouses. tax, assuming a potency of 6% THC, then a tax of $600JD/gram of THC would raise current 57. If tax is collected within the supply black-market retail prices about 75%, from chain, consider imposing tax withholdings roughly $50JD to about $90JD per gram of as a means to increase and facilitate com­ cannabis. This rate is not a recommendation, pliance. but is useful from an illustrative point of view. This would only apply to those who cannot readily collect or file tax receipts. 54. Consider using a tax base of potency to best shape the market. 58. Consider import taxes for cannabis Taxing by potency is complex, but allows and cannabis-derived products. Jamaica to best shape supply and demand Jamaica is not currently an importer of in a “market driven” manner. If the technical cannabis, but might become one if some other challenges of testing and sampling as well as jurisdiction legalized at a low price and allowed finding a reasonable price per unit of THC, exports. Subject to existing international trade then cultivators would grow up to the amount obligations, the Ministry of Finance might want they can afford and users would consume as to discourage such activity to protect the young much of the intoxicant as they could afford. In domestic industry. short, taxing by potency standardizes the entire Fee structure market with the added benefit of reducing Generating fees from tourist permits is the need to set production caps and monitor perhaps the easiest and most reliable way compliance with them. to collect revenues for the CLA and other 55. Refrain from implementing complex earmarked programs. We estimate that tourist permits might generate as much as $5-20 schemes for tax collection, which are easy million USD per year, depending on tourist to evade and difficult to monitor. volumes, interesting in medical cannabis and Rather, consider collecting taxes at fewer compliance. This is not a substantial amount of points. The use of tax stamps in the form of revenue compared to the national budget. But special bags is to establish production limits it could provide a steady stream of funding for and some degree of supply control; they the Cannabis Licensing Authority. should not be used to generate revenue but pay for the cost of the bags. Consider instead 59. Index fees, and taxes not based on a a retail tax based on a percentage of the final percentage of the final price, to inflation. sale as a means to generate revenues for the The utility of taxes and fees erode over time CLA. Additionally, the CLA could consider a tax as inflation deflates the real value of any taxes. and fee schedule for different products, levying Therefore, all taxes and fees should be indexed higher excises on products that require more to inflation. This only needs to be considered

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for specific or per unit taxes. Products destined 63. Deliver adequate funding for the for the tourist market may want to index on NCDA (up-front and ongoing) for baseline foreign currency, such as the dollar, in order to measures of cannabis use. maintain price for non-residents. Current and future evaluations of cannabis use will require data collection and analysis. 60. Levy licensing and renewal fees. Save for the lack of resources, the NCDA is Licensing firms will take time and resources capable of conducting rapid assessments and from the CLA, therefore licensing should households surveys. be paid for by application fees, or revenues generated by revenues if the CLA decides to 64. Earmark adequate funding for the auction licenses. Annual renewal fees should NCDA to handle increased amounts of also be applied to licensees. assessments of problematic or dependent use. 61. Impose substantial up-front fees on It is impossible to forecast how much increased tourists upon the issuance of a medical prevalence will lead to increased problematic permit. use. However, the NCDA should submit Given that Jamaica sees between two and budgetary requests related to screening and three million tourists, and a substantial portion treatment on an annual basis to the CLA and of those seek to use cannabis on the island, this the Ministry of Finance. can be an important source of revenue. A $50 US fee might be appropriate; a higher fee might 65. Consider writing “earmarks” into the bring in more revenue but at the expense of regulations so that revenues fund specific attracting fewer tourists. We also recommend activities within an agency (e.g., data indexing this fee to the US dollar. collection by NCDA). In order to avoid revenue capture by the state 62. Direct fees from tourist medical can­ or mismanagement by agencies, earmarks nabis permit to the Cannabis Licensing should be used to ensure that some of the Authority. taxes generated by the sale and consumption This is likely to be the single largest and most of cannabis go to partner agencies for specific reliable source of revenues, especially in the purposes. short-term, and so is easily the simplest and safest method by which to fund CLA operations 66. Consider using tax and fee revenues both now and in the future. But this requires to fund enforcement efforts against illicit the Ministry of Finance to specifically allocate production and export. those fees to the CLA. It might be desirable to Jamaica’s large black market in cannabis modify the law to guarantee those funds in the production and export will continue to exist. long term. Any means to coerce illicit operators to comply with the law benefits the state via tax revenues. Revenue sharing and earmarks Revenues earned from taxes and fees must 67. Consider sharing tax revenues with be shared with other relevant agencies. For local enforcement authorities (e.g., tourist example, NCDA will need funds to increase police) to ensure their cooperation in usher­ its capacity to conduct rapid assessments ing sales from the black market to the licit of individuals who may need some form of medical sector. treatment; JCF will need funds to continue For instance, in tourist areas, this would to enforce the current DDA which prohibits motivate tourist police to focus on keeping unlicensed cultivation or public use of cannabis. tourists away from black-market dealers.

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INTER-AGENCY COORDI­ 69. Assign an Executive Secretariat, includ­ NATION, BUREAUCRATIC ing a cannabis czar, within the CLA to act PLANNING, AND STAFFING as executor of the regulations. Jamaica has a complex set of state agencies Other jurisdictions have assigned a full-time staff with different levels of institutional capacity. A as well as single administrator when it comes smooth regulatory structure will require inter- to executing or acting as a single authority. By agency coordination matched by strong regu­ assigning the task of a cannabis czar to a single latory capacity within the CLA. individual, he/she can coordinate among the diverse stakeholders of the CLA and industry. Though the CLA has the legal authority as the Right now, no single individual is acting with principal regulatory body in matters of cannabis this power, complicating matters of design and under the DDA Amendment, it has yet to assert agency coordination. that authority. The CLA needs to design internal rules and procedures, design a budget, and hire 70. Ensure long-term funding for the staff, and to write a clear and comprehensive Authority, particularly by securing a portion modus operandi and a terms of reference. On a of fees from the issuance of medical per­ higher level, we advise that the CLA make clear mits to tourists. that it has jurisdiction over all aspects of licensing The CLA will require regular annual funds. It’s cannabis firms and monitoring the behavior likely that the collection of fees from tourists permitted by those licenses. Indeed, these are for medical permits will be the largest potential multiple roles rolled into one. When working to revenue stream. In order to ensure proper and write industry regulations, the CLA should seek consistent regulation, it will be imperative for the to be transparent, fair, and deliberative. When CLA to secure a portion of that revenue stream. reviewing license applications, it should aspire Other sources of revenue should also be tapped towards consistency. When monitoring and into, including license fees and perhaps special sanctioning licensee behavior, it should strive to consumption taxes. immediately establish a culture of compliance, backed by frequent audits or inspections and 71. Provide substantial up-front funding meaningful penalties. The CLA should not to the Authority, as to help with the initial take it as a role to advocate on behalf of any review of license applications and ensure specific firm within the industry, nor to lobby adequate enforcement from day one. on behalf of the industry as a whole, though it Much of the cost of regulation is borne before should generally seek to operate in a way that revenues can begin to be collected. The CLA does not unnecessarily inhibit the operations of will require substantial investments in staff and the industry. equipment so that it can write policy, conduct public outreach, and solicit and review license Organizational structure applications. Providing that funding to the CLA 68. Designate a single regulatory authority will help ensure a smooth and problem-free with a clear mission goal, sufficient enforce­ implementation. ment capacity, and continual budget. Having multiple overlapping agencies cover 72. Establish an Enforcement Division the same scope of work makes compliance under the CLA, with well-paid field officers and enforcement harder. Hybridization of who are regularly rotated from one parish enforcement officers is one way to alleviate to another. this concern, but at the end of the day one These stipulations help prevent corruption. It is agency should be in charge. This will require a important that enforcement over the licensed substantial scaling-up of the CLA. market is of high quality and integrity, especially

50 A Regulated Cannabis Industry for Jamaica in the industry’s early days. The number of Inter-agency coordination officers should be proportional to the number In order to ensure a smooth rollout of regulations of licenses issued so as not to overwhelm and license firms, the CLA will need to work officers. with several other agencies and regulatory authorities in order to ensure compliance and 73. Estimate the total costs of regulating good business practices. the new licensed system, and ensure that incoming revenues will be sufficient to at 76. Immediately confer with Ministry of least make the system revenue neutral. Health to establish the scope of the future Estimates of costs would allow for more licit market, including what products will planning prior to the issuance of licenses or the be available and to whom. operation of the market. Right now, estimates The Ministry of Health has the power to regulate are difficult to make as data are scarce. The all food and drugs, as well as dangerous drugs, CLA, in its current form, needs to think seriously under the Food and Drugs Act as well as the about the total costs of regulation and how Dangerous Drugs Act. If the Ministry were to much taxes would be needed to cover those prohibit the sale of herbal products and only costs of operation. allow clinically-proven products to be restrictively obtained via prescription, then fewer suppliers 74. Determine credible estimates for the will be needed. Even less suppliers would be number of applications expected for each licensed if the Ministry prohibited the sale of license type. herbal cannabis to tourists who are allowed to Market forecasting would allow the CLA to access the drug with a medical permit issued reliably shape the size of the market. Over by the Ministry. Therefore, the CLA must work licensing points of vending or cultivation may closely, at least during the initial stages, to cause distortions in the market that are hard to discuss a reasonable scheme that is not too reverse, at least initially. restrictive yet protects public health. 75. Consider flexibility by using sunrise 77. Coordinate with ancillary regulatory and sunset clauses in order to phase in agencies to ensure licensee compliance. and out rules. For instance, work with National Land Agency Many other jurisdictions have phased in and out to lease out public land currently occupied by rules via sunrise or sunset clauses within the qualified growers (perhaps via the Ministry of regulations. If this option is legally available to Agriculture and Fisheries). Officers from the the CLA under Jamaican law and custom, then Trade Board should also coordinate with CLA it should consider phasing in and out certain officials with regard to issuing export licenses. rules and procedures as need be. Foreseeably, many firms will not be able to comply with 78. Consider use of hybrid officers from many detailed rules during the initial stages of the CLA. regulation. Finding flexibility in the application Training CLA officials in rules and procedures of certain rules helps firms adjust and ease into of other agencies, such as export licenses, complying with the regulatory burden placed will avoid delays in getting product to market. upon them. This would be especially helpful Likewise, the CLA should train or inform PICA for traditional growers associations who may or officials from the Ministry of Health at points need some extra time and investment in order of entry on how to issue medical permits for to comply with all the rules. non-residents.

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79. Facilitate training of BSJ, Ministry of be expected to exclude certain populations, Finance, Trade Board, NEPA and RADA staff. particularly those with low literacy or access Allow visits to currently illegal cannabis farms by to telecommunications, but would nonetheless the National Environmental Protection Agency help policymakers track trends in cannabis use. and the Rural Agricultural Development Agency, 81. Track access and use of non-herbal so they can, respectively, write codes of forms of cannabis, including edibles and practices and issue advice to licensed farmers. portable vaporizers. If those activities are not undertaken in advance Survey methodology should be adapted to of licenses, that might cause additional delays. reflect different behaviors and attitudes regarding The Ministry of National Security should issue cannabis use. Further, surveys may help reaffirm some policy guideline of non-enforcement to sales figures or find discrepancies in sales that effect, so that neither the farmers nor the data (e.g. survey results indicate much higher government workers would be placed at risk of consumption of vaporizable products than what arrest by participating in the training sessions. is recorded at point of sale).

DATA COLLECTION AND 82. Put in place measures to estimate the FURTHER STUDY size of Jamaica’s black-market cannabis Currently, our estimates have been constrained production. by the lack of reliable data. It is of utmost Measuring this metric will determine if one importance that the CLA establish some base­ of the principal goals—to reduce the black line and projection measurements. In order for market—is being met. This includes reliable a licensing agency to properly license firms, data on number of illicit farmers, average yield it must first assess the viability of one more per harvest, number of harvests per year, entrant into the market. This is especially true average size of area under cultivation, etc. for the first few years. Furthermore, Jamaica will 83. Periodically report the total sales and need to gauge the effects of this new cannabis tax revenues from the licensed medical market, including prevalence rates, change system, alongside other statistics. in number of illicit producers, public health This ensures transparency. Washington State effects, shift to new routes of administration, has implemented an online dashboard updated etc. Collecting and analyzing these metrics daily. Colorado issues monthly reports, along better allow the government to establish if the with numbers of patients and the different law is meeting the established goals. medical problems they report upon applying Data collection for medical access. 80. As soon as possible, undertake efforts 84. Cooperate with RADA to collect to establish baseline measures of cannabis data on the number and size of cannabis use in Jamaica. growers in touch with RADA staff. Currently, household surveys are infrequent Staff from RADA work directly with smaller and expensive; secondary school surveys are farmers and are better suited to measuring the easier but neglect the adult population. In order size and yield of licensed cultivator. Quantitative to collect inexpensive and high-frequency information collected by RADA could provide measurements, it may be more pragmatic another method of verification. RADA should to administer non-representative surveys to work with local growers to make an estimate “convenience samples”, perhaps via online of expected yield per acre, so that enforcement or text message survey. Such surveys would authorities can more easily detect licensed necessarily be non-representative, and would cultivators diverting product.

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OUTREACH AND EDUCATION education awareness campaigns in light of this Political expectations are very high, and the paradigm shift. Public health and awareness people of Jamaica should come to recognize messaging cannot use scare tactics and the internal and external challenges involved in rhetoric of previous campaigns when cannabis the cannabis market. Otherwise even a relatively was prohibited. Rather, campaigns should successful outcome will look like a failure inform the public about the responsible use of because it does not achieve the impossible. cannabis by providing reasoned and balanced In addition many citizens have only limited information. Campaigns should target vulnerable and imprecise understandings of the new law, populations, including youth whose brains are including what is allowed, where it is allowed still developing and heavy users who are likely and who is allowed to do what. A smooth rollout to slip into dependency. However, messaging depends on adequate public information. aimed at the general population is also needed (e.g., don’t operate a vehicle after consuming Public education cannabis, don’t use cannabis if you’re pregnant, 85. Moderate expectations with regard to do not mix cannabis and alcohol, etc.). Jamaica outcomes. may want to adapt from other jurisdictions who It is important that the general public understand have altered their prevention campaigns. the realities on the ground. This includes keep­ ing expectations and goals attainable, and 88. Consider public hearings and outreach emphasizing that a limited number of licenses events to gauge local stakeholder feed­ will be issued, at least at the beginning. Starting back on draft regulations. low and slow will allow for scaling up when Opening up the process of drafting regulations needed; moving too fast could create a chaotic to the public can be messy, it does have rollout period, putting excessive pressure on its benefits. Several jurisdictions, including regulators and other government agencies. Colorado, Washington, and Uruguay, have sought public input during the final draft 86. Spend funds ahead of time to educate stages through public hearings and town hall the general population on the change in the meetings. It would be wise to reach out to the law and the framework of the regulations. public to obtain some buy-in and create some It is important to educate all sectors of the dialogue, as the Chevannes Commission did. population in the details of the law and regula­ tions, including who can obtain a license to PROMOTE INDUSTRY AND supply the market as well as who can access TOURISM and use cannabis. This includes public informa­ Many Jamaicans expect the new medical tion campaigns for rural growers, tour operators, cannabis industry to bring more jobs and foreign those likely to obtain medical cannabis and investment to the island, and the CLA and other tourists. Users, including tourists, should be edu­ government agencies to enact policies that will cated on the restrictions of public use; increasing enhance that economic potential. Indeed— enforcement to that end is recommended. even though the actual economic impact of the 87. Adopt new prevention and education medical cannabis industry will probably be far campaigns to protect public health and smaller than the press has suggested—it will promote responsible medical or therapeutic be important for the new regulations to promote use of cannabis. industry and tourism. They can do so in two Because cannabis and cannabis products are ways: 1) by attracting a greater number of tourists permitted for medical and therapeutic purposes, or enticing them to spend more money per trip, the NCDA should adopt new prevention and and 2) by supporting firms that export medical

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cannabis, and especially non-psychoactive recommendations with respect to increasing varieties, e.g., high-CBD products, which face government revenues. It is likely that there will less restrictive trade barriers. be substantial demand by tourists for medical cannabis permits, but only if they are made A third option would be to promote the use of easy and inconspicuous to acquire. That way, cannabis-derived products by Jamaicans with tourists will be more likely to stay within the medical prescriptions, and so increase domestic teahouse system, buying taxable products. demand. However, that is of dubious benefit. Likewise, locate additional permit stations in For one, such a policy risks also promoting key tourist centers, e.g., Negril, Montego Bay, rates of cannabis intoxication and use. Further, it and Ocho Rios. seems likely that many Jamaicans will continue to access cannabis illegally, or at least outside 90. Train PICA officers or officials from the the licensed system. Instead, they may continue Ministry of Health to help tourists obtain to buy cannabis on the black market, or else medical permits at point of entry. legally “home grow” up to five plants. Providing training to certain officers from the Passport Immigration and Customs Agency In any case, the benefits of policies promoting or the Ministry of Health that issue medical industry and tourism are two-fold. On the permits will ensure easier collection of fees. one hand, greater revenues from tourism and Though there may already be Ministry of Health exports directly spell more money coming to officers station at airports, it may be necessary the island. But the other benefit is less obvious: to train additional officers. greater demand for licensed, medical cannabis creates new opportunities for issuing licenses 91. In tourism areas, work with local busi­ to cultivators, and further greater potential nesses to discourage tourists from buying to “migrate” today’s black-market cannabis black market-cannabis. producers into the legal, licensed system. Alongside lower barriers to entry into the licit medical tourist system, Jamaica should Export markets are uncertain: though there are discourage black-market access through edu­ countries whose laws might allow cannabis- cation campaigns at hotels and increased derived imports from Jamaica, there is no police presence in high volume tourist areas. guarantee that they will do so in practice, and Tourists should be dissuaded from buying any further to do so in substantial volumes. Therefore, cannabis outside of official, tax-paid packaging. we advise the Jamaican government to assist 92. Consider rules that would advantage private firms as they seek to maximize exports local hoteliers rather than large, foreign- of cannabis, whether in herbal, nutraceutical, or owned, often “all-inclusive” varieties. pharmaceutical form. There is a wide range of This recommendation pertains to trade-offs candidate policies, and we defer to JAMPRO between efficiency and equity. Large, often and other trade promotion agencies as to which foreign-owned hotels and tour companies would be most appropriate, but credible options help bring many tourists to Jamaica, but include fiscal incentives, Special Economic Zones nonetheless they are often accused of sending (SEZs), and diplomatic and lobbying efforts. much of those revenues offshore to foreign Tourism promotion interests rather than allowing them to be 89. Locate “permit stations” at airports distributed more diffusely to Jamaican residents and points of entry so that tourists can and business owners. If that issue concerns easily acquire medical permits. Jamaican policymakers, they should consider This may be one of the most important policies that would advantage smaller and/or

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locally-owned hotels and tour companies. For general form of those regulations. But, as a rule, instance, one policy might require large hotels the best way forward would be for Jamaica to to source from small-scale (“tier 1”) cultivators. establish regulations that are very business However, any policies should consider existing friendly (i.e., not burdensome). International WTO rules and Bilateral International Treaty restrictions placed on hemp are much less than obligations, and should investigate whether those for psychoactive cannabis. those rules allow for exceptions with regard to There are two primary challenges facing the cannabis trade. Jamaica with regard to hemp: 1) the lack of a 93. Deter tourists, non-permanent resi­ comparative advantage vis-à-vis major hemp dents, and Jamaicans from exporting producers such as China and Canada; and 2) cannabis via personal travel on airplanes cross pollination with psychoactive cannabis and cruise ships, using a combination of crops, damaging the quality of psychoactive public education and security checks at cannabis grown on the island. If Jamaica ports of exit. is considering developing a hemp industry, Given the significant differential in retail cannabis then it should streamline regulations, making prices between the U.S. and Jamaica, there it easy for firms by lowering administrative are incentives for export even of legal, licensed burdens, keeping costs down, and getting cannabis product. Further, the more than 2 product to market. See the discussion of other million visitors to Jamaica per year could carry jurisdictions’ hemp regulations in the Appendix. back a substantial volume of cannabis. Unless The only practical restrictions should be those that incentive is counterbalanced, Jamaica that prevent cross pollination. Hemp farms may acquire a reputation as a likely source of should be relegated to parishes far away from cannabis trafficking, even from tourists who licensed cannabis cultivators. otherwise do not currently face much suspicion 95. Apply the same standards and rigor for from U.S. customs officials. If so, U.S. customs clinical pharmaceutical trials to medicines may begin to make it an unpleasant experience for export. for U.S. tourists to return to their home country Clinical trials are expensive and time con­ from Jamaica, subjecting them to additional suming. Many trials are governed by national delays and scrutiny. By the same token, if laws and regulations or international norms and individual Jamaicans try to exploit the price standards. It would be unwise for Jamaica to difference by carrying cannabis abroad, they establish its own set of regulations undermining are likely to face addition scrutiny at foreign those already in place for comparable sub­ customs stations. To prevent this, it would be stances. In any case, products looking for wise to station drug dogs and other methods markets outside Jamaica may need to meet of detection and dissuasion at points of exit. standards established in other jurisdictions, Foreign trade and industry such as those of the US Food and Drug promotion and protection Administration. 94. Further develop and implement the 96. Investigate trade opportunities over­ hemp regulations drafted by JAMPRO seas as a means to expand the market for Several stakeholders were eager to build licit products. a national hemp industry. A proposed set Because Jamaica is a relatively small market, of regulations has already been drafted by any hopes of growing a very large market in JAMPRO, and after review, we endorse the Jamaican cannabis production rests on selling

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products to residents of other countries, either 98. Protect Jamaica’s brand and image via tourism or exports. But currently, few using intelligent intellectual property countries allow for imports of medical cannabis, protec­tions and obtaining geographical and even those (e.g., Israel and Canada) indicators (see Assessment in Appendix have complex rules on which products may for greater detail). be imported and under what circumstances. This is an important issue for many stakeholders, Entering those markets is not impossible but with diverging interests. Protecting certain ima­ will be difficult. Lobbying or trade promotion ges, practices, technologies, and brands are efforts would be beneficial, and could be done well within the scope of existing national and either by Jamaican government (e.g. JAMPRO) international law. The Jamaican Intellectual or private associations. Property Office (JIPO) seems fully competent to handle these issues. JIPO already has in place 97. Consider, if possible, residency require­ mechanisms to issue trademarks, patents, and ments or limits on foreign investment and GIs for products relating to cannabis. However, involvement. there is reason to doubt the full potential of these Foreign investment and skills can be a mixed protections, at least in the short term; both more blessing—they may help launch a young research and work with international bodies will industry, but alternately they might push be needed. The attached Assessment in the out local firms and instead deliver industry Appendix contains more information for further profits to foreign interests. The CLA should consideration. consider policies that balance these issues. One possibility would be to require licensees 99. Consider limiting export agreements to demonstrate that majority stakeholders are to prevent biopiracy and diversion to the Jamaican residents or citizens. There are myriad black market. ways of requirements that could operationalize Export licenses should be granted to companies that principle, e.g., up-to-date tax compliance, or individuals who are reputable buyers that having a TRN, demonstrating history of tax won’t divert Jamaican products or raw material payments on land, proof of residency, etc. into markets where cannabis is illegal. When However, on this point, Jamaican policymakers possible, agreements with foreign-based com­ are restricted by the terms of their Bilateral panies who wish to study Jamaican cannabis Investment Treaties (BITs). Restrictions would should be contingent on the final ownership of have to be carefully worded with respect to discoveries specific to the quality or particularities those treaties, and perhaps justified on the of Jamaican cannabis, ensuring access and basis of relating to security concerns. benefit sharing.

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APPENDIX

PROTECTING JAMAICA’S CULTURAL HERITAGE: INTELLECTUAL PROPERTY RIGHTS AND GEOGRAPHICAL INDICATIONS Description One topic that has been stressed by many stakeholders12 is the issue of establishing Intellectual Property (IP) and/or Geographical Indications (GI) for strains, seeds, DNA struc­ tures, extraction methods, breeding processes, trademarks and images, traditional knowledge, and cannabis-based products.

Targets roughly fall into three different categories of possible IP protection:

1) patentable and trademarkable (brands, images, nutraceuticals, pharmaceuticals, extraction techniques, technologies, etc.); Rastafarian. Photo: TKlaus-J. Kahle 2) possibly patentable (breeding processes, cultural practices); and Jamaica a first mover advantage that might help it become a recognized global authority. 3) questionably patentable (strains, seeds, More ambitiously, a strain registry might also plant matter). provide supporting evidence for IP claims, by Additionally, some stakeholders wish to establish which individuals could claim ownership of a a seed/strain registry, perhaps in cooperation strain: for instance, if it were to qualify under with the Scientific Research Council’s National the Plant Variety Protection Law (currently a bill Germplasm. If this had only modest ambitions, in parliament, and modeled after a major U.S. it would aim to simply catalog strain varieties law), it should be demonstrated to be distinctive, on the island—and perhaps elsewhere around uniform, and stable. Establishing IP rights over the world—solely for scientific and historical cannabis strains would benefit individuals who purposes. The Svalbard Global Seed Vault currently claim ownership of strains, but would (SGSV) in Norway is perhaps the only global also protect and incentivize cannabis breeders seed repository. Currently the SGSV stores seeking to develop new strains. nearly 25,000 cannabis seeds (unknown Ganja has been deeply tied to mainstream how many different strains) from around the Jamaican and Rastafarian culture. The Rasta­ world, but it is not dedicated to cannabis nor farian community is very concerned about the does it provide additional services such as loss of its cultural heritage and religious symbols strain mapping. If properly designed, a global as companies, especially from overseas, cannabis seed vault or strain registry may offer develop or sell Jamaican ganja products. The most frightening evidence of this fear coming 12. As of the writing of this report, we have not been able to meet with experts at UWI who are conducting research true is when last year the Marley family sold into genetic mapping and strain profiles. the rights to use the image and name Marley

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to Privateer Holdings.13 As regards the claims which IP over cannabis strains might be quite to protecting Rastafarian heritage, it is clear valuable. In that scenario, there might be fierce that JIPO intends to prevent non-Rastafarians dispute over IP claims, and presumably those from making use of Rastafarian symbols and claimants who can demonstrate the earliest language, such as lions of Judah and the red- claim would have an advantage in whichever yellow-green color scheme. court would hear the case. Relevance/Assessment Given the cutting edge nature of this issue, we We believe these issues are capably handled see this as an innovative issue for Jamaica. By by the Jamaican Intellectual Property Office getting out in front of this issue, Jamaica could (JIPO) and are outside the scope of the gain substantial inroads into strain mapping, Cannabis Licensing Authority’s (CLA) mandate. technology, research and development, product JIPO already has in place mechanisms to issue lines, breeding techniques, nutraceuticals, trademarks, patents, and GIs for products pharmaceuticals, etc. Furthermore, the creation relating to cannabis. of an international seed registry could also generate user fees from international clients. It Unfortunately, there is little precedent for IP may take several years for growers to establish rights applied to cannabis strains and breeding a GI certification, but the reward may outweigh processes. However, among non-cannabis the risk in the future. plants, there exist frameworks for patenting plant material and breeding practices, under Challenges several international conventions14 and United Fundamentally, because cannabis has been States Federal Laws.15 News sources suggest prohibited for so long in so many countries that the U.S. Patent Trademark Office (PTO) has and under international law, there is scarce yet to issue patents for cannabis strains due to precedent for associated IP rights. prohibition. It might be the case that Jamaica Even in non-Cannabis products, questions can feasibly establish and police IP within the remain as to Jamaican firms’ ability to enforce country (by JIPO and GIs) but be powerless IP/GI. In one interview we gathered that when it comes to enforcing globally. Jamaica has only one registered GI (Jamaican This does not mean that Jamaica should not Jerk). However, the issue remains as to how pursue GIs—rather, that they should be viewed companies with limited resources might enforce as an uncertain but low-risk and high-ceiling any brands, trademarks or GI overseas. investment, payable only in the long-term. If certain treaties are amended or prohibitions are In the short term, it will be difficult to enforce relaxed, there might be a large global market in IP and GIs outside of Jamaica. Some areas cannabis (easily exceeding $100 billion U.S.) in grant reciprocity in trademarks and other forms of IP, and so in those areas (e.g., CARICOM) 13. Another disputed case is the rapper Snoop Dogg’s enforcement is more plausible. The U.S. is appropriation of the appellation “Snoop Lion”, after another story. For instance, if Colorado firms visiting Jamaica and announcing a conversion to misappropriated Jamaican strains or seeds, Rastafarianism. what would be the means of redress? Who 14. E.g., Union Internationale pour la Protection des Obtentions Végétales’s International Convention for would arbitrate the case given that the material the Protection of New Varieties of Plants and the World is prohibited under federal law? Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Further, Article 27 of TRIPS does permit 15. The Plant Patent Act of 1930 and the Plant Variety countries to exclude from patentability products Protection Act of 1970. in order to protect the public order or morality.

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One useful analogy might be to ask about the Jamaica but rather to the Indian subcontinent. patentability of ivory, ivory polishing/carving Therefore, any claims to origination of a strain machines, or breeds of elephants that are in Jamaica will be difficult to verify and perhaps known for their thick tusks. On the other hand, fundamentally subjective. Factors such as if one makes the contestable assumption that genetic drift and hybridization only compound cannabis prohibition is in its dying years, then that difficulty. this too will be only a short-term obstacle. Efforts are likely to be time-consuming, and Another concern is that some strains currently controversial. In the worst-case scenario, they grown in Jamaica have in fact recently originated will both be expensive to the state and divisive from Holland or the United States. If there to farmer/breeder communities. JIPO and the ever were a true “Jamaican” variety of ganja, SRC may need additional resources in order it may have been lost or at least substantially to handle those claims in a speedy, just, and diluted. Going further back in the historical transparent manner, including vetting the origin record, cannabis is not native to the island of of strains or other breeding inputs.

LESSONS AND PRACTICES FROM OTHER JURISDICTIONS Background Canada, Health Canada regulated all activities In order for the Cannabis Licensing Authority related to the production and provision of to consider the best practices framework in cannabis for medicinal purposes. In Jamaica, the Appendix, We would first like to provide we have been unable to identify any comparable some important background and contextual enforcement and regulatory authority that could information organized by jurisdiction. Regula­ easily add medical cannabis control to its existing tions are constantly changing, and the table portfolio. Instead, the CLA will have to build from provided in the accompanying document is only the ground up its own organizational structure, a snapshot of a dynamic process. It behooves hire skilled personnel, internal processes, and the CLA to understand that goals and constraints budget. Further, Jamaica’s existing enforcement facing each jurisdiction, rather than taking their capacity and tax compliance in other comparable rules at face value and without context. industries is limited at best.

In any case, it is clear that Jamaica should adapt, Importantly, because regulations are constantly but not simply copy, the rules and procedures in flux, the CLA must be able to do adapt to from those other jurisdictions. It is important to changing circumstances. Many adjustments understand in which ways Jamaica is in a funda­ will be required,16 and the better they be mentally different position. decided fairly, transparently, and quickly. Those processes ought to be decided early, in Jamaica is at an important disadvantage relative the initial regulatory structure recommended by to many other jurisdictions evaluated herein, the CLA, however flexibility is key. where those bodies charged with regulating the cannabis market already had in place the Further, though all of these jurisdictions had a appropriate bureaucratic structure. For instance, robust illicit market, they could realistically aim in Washington, it was the Liquor Control Board that was given control over cannabis; in 16. Other jurisdictions have adjusted, for instance, the overall market cap, the number and size of licenses, Colorado, the Marijuana Enforcement Division tax rates, detailed regulations governing new products could simply expand the activities underway in such as edibles, and responses to clever ways that the its Medical Marijuana Enforcement Division; in industry will attempt to evade existing regulations.

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to wholly incorporate that black market into in violation of the current law and regulations. In the new licit, licensed regime. In Jamaica, this response to concerns from stakeholders that would be a fantasy scenario. The bulk of black- system governed by the MMAR was open to market production in Jamaica is exported abuse, and after extensive consultations, the illegally, whereas in Colorado it was merely to Government of Canada introduced the new meet domestic demand. The DDA Amendment Marihuana for Medical Purposes Regulations creates three licit commercial sectors of demand: (MMPR) in 2013 to further restrict and regulate psychoactive and non-psychoactive exports, the market. medical access by Jamaican residents, and There was a period of about a year wherein tourists coming from abroad. Even if those areas the government phased in the new regulatory were entirely provided for by licensed suppliers, framework that exists today. The biggest changes the resulting licit market may still be dwarfed include removal of personal-use production and relative to the quantity of production intended designated production. All licit medical canna­ for black-market export. This fact should shape bis comes from licensed producers who then future regulations by limiting licit supply to meet distribute the product directly to consumer via the future medical demand of locals and tourists the postal system. as well as the primary inputs for any developing United States of America nutraceutical or pharmaceutical industry, scaling The current situation of medical cannabis up as need be. Start low and slow. regimes in the United States is incredibly Canada complex—too complex to cover entirely in just a few pages. Instead, we provide an overview Canada’s medical cannabis law has recently of some of the most well-known systems been changed by the federal government. among the currently 23 jurisdictions within the Prior to its current law, in 2001 Canada had United States that permit medical cannabis enacted enabling legislation via the Controlled in some form. Regulations vary in regulatory Drug and Substances Act to permit individuals framework, including executing agency, limits with qualifying illnesses (which were listed by on production, licensing, permissible ailments, regulation) to obtain medical cannabis. Individuals types of products, and more. were allowed to obtain the substance by three different means: 1) apply under the Marihuana However, all of these laws remain in conflict with Medical Access Regulations (MMAR) to access Federal law. In short, the Constitution guarantees Health Canada’s supply of dried marihuana; 2) certain sovereign rights to each of the fifty states apply for a personal-use production license; or (under the 10th Amendment). The Federal 3) designate someone to cultivate on their behalf government has enacted Federal law through with a designated-person production license. the Controlled Substances Act to criminally prohibit the unauthorized cultivation, distribution Given the historical context of early medical and use of cannabis. The federal government cannabis laws in North America, Canada’s initial has scheduled cannabis as Schedule I and regulatory framework was loose, encouraging does not consider it to have any medical value. many individuals and firms to enter the market However, since 2009 the Federal government under personal-use production and designated- has issued new prosecutorial guidelines person production. The most egregious violations within the Department of Justice to reduce of the spirit of the law took place within the enforcement of the Controlled Substances Act, designated-person system, which enabled for conditional on adherence to certain guidelines. the existence of cannabis dispensaries. In fact, It remains to be seen how future Administrations several dispensaries still exist in western Canada will enforce the Federal law.

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California Gregoire, they “provide[d] additional state law Starting in 1996, California passed a popular protections. Qualifying patients or their desig­ referendum to allow individuals suffering from nated providers may grow cannabis for the terminal illness to use cannabis. The law patient’s use or participate in a collective garden generally provides an affirmative defense for without fear of state law criminal prosecutions. individuals using cannabis for medical purposes. Qualifying patients or their designated providers California was the first jurisdiction in the Western are also protected from certain state civil law Hemisphere to legalize medical marijuana in consequences.” some form. California’s system, though the first However, even in 2011, production and retail and perhaps the most well-known, is one of was severely constrained. The law did not the least regulated. The state law only permits established “medical marijuana dispensaries” for medical production and use, but does not but rather “collective gardens”, which were establish any regulatory mechanism to that end. limited to 10 members at a time, each of whom Instead, counties and local jurisdictions have had to “share responsibility for acquiring and passed their own local laws to shape the market, supplying the resources required to produce or prohibit it outright, within their jurisdiction. and process cannabis”. If implemented, that In effect, there are over 50 different regulatory would have lead to a fairly conservative system schemes within California alone. Yet, the trade of supply. is booming and is considered an industry leader. But the law was implemented and re-inter­ Washington preted in ways that were arguably contrary to Washington State passed medical cannabis the legislators’ initial intent. This applies both by popular referendum in 1998. However, to limits on the size of collective gardens and the system established in 1998—if it can be the ways in which patients were required to called a “system”—bears scarce resemblance contribute. Due to pressure from the Federal to the medical regime today. To some extent, government, Governor Gregoire vetoed certain it has been a runaway regulatory system, in key components of the 2011 law including the which unintended consequences have been registry of producers and processors. As a given ample time to play themselves out, and result, the 10 member limit for collective gardens in response policymakers have had to pass was no longer enforceable, and instead, further laws and regulations as to enforce order through the process of a court decision, was to the resulting chaos. reinterpreted to essentially mean “no more than In 1998, in the words of former Governor 10 members in the store at any given time”, Gregoire, “Washington voters made the com­ effectively abolishing the patient limit. Further, passionate choice to remove the fear of state it later became admissible for members of a criminal prosecution for patients who use collective garden could contribute via financial medical cannabis for debilitating or terminal payments, i.e., purchases, rather than the in- conditions. The voters also provided patients’ kind payments such as labor and equipment physicians and caregivers with defenses to which were specifically mentioned in the law. state law prosecutions.” That is, the law made It was only in 2012 that voters approved no statements about the supply of cannabis Initiative 502 (I-502), which clearly legalized but merely provided patients with an affirmative the production, distribution, and sale of can­ defense. nabis, established restrictions and taxes, and Only later, in 2011, was the issue of supply assigned licensing and regulatory authority to finally addressed. Again, according to Governor the Washington State Liquor Control Board

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(LCB). Incidentally, the LCB recently privatized referendum to amend the state constitution to the state’s alcohol distribution monopoly, allow for medical cannabis use for those with as required by an earlier voter initiative. This qualifying illnesses (this definition is very broad allowed the Board to build similar internal, as Colorado includes undiagnosable disorders thematic teams of research and area experts to including pain). Many patients would declare write the rules that would govern the new legal an individual caretaker to provide medical cannabis industry. It was at this point that the cannabis, limited to production of no more than LCB hired BOTEC Analysis as a consultant to six plants per patient. advise them on implementation, specifically on This legal regime was relatively unregulated with issues such as market sizing, license rules, and a few exceptions, such as user registry, covered tax rates. Initially, the “25/25/25” tax system by a fee, and certain plant count limits. With the affects roughly a 45% tax rate, though this publication of new federal guidelines in 2009, has since been down-revised to approximately the market radically shifted toward larger firms. 37%. Refer to the Table for more information. The number of medical users jumped nine- A first draft of regulations was filed in July 2013. fold from 11,094 in July 2009 to 99,902 in July Over the next two months the Board conducted 2010—since then it has remained stable around a series of 13 public hearings across the state 100,000 (85,000-127,000). May 2010, the State and met with over 6,000 citizens. After taking brought in a regulatory system for the medical into account public input, new rules were filed in cannabis business. The new law mandated September 2013 and adopted a month later. The the Colorado Department of Revenue (CDR) to LCB began to accept applications for producer, regulate the nascent industry. processor, and distributor licenses in December 2013; licenses will be issued in the first half of Since 2010, the regulations have undergone 2014; and stores opened in July 2014, a full several changes, but has changed a great deal 20 months after the passage of the law. in recent months to try to shape it to match existing rules that govern the competing In the first 12 months, Washington saw $260M recreational market. in sales and $65M in excise tax revenues. But daily sales continue to increase, and for FY In November 2012, Amendment 64 to the 2016, Washington might collect twice that Colorado State Constitution legalized the figure. Currently, the Washington system is in production, distribution, and sale of cannabis, tremendous flux as the LCB works to tighten necessitating further statutory changes by the regulations on the untaxed medical market State Assembly. Additionally, it established and merge the two systems into one. It took restrictions and taxes, requiring the Colorado regulators over a year to finalize regulations Department of Revenue to license and regulate after the law’s passage, but challenges with the industry. Governor John Hickenlooper aligning the competing medical market with the formed a Task Force to study requisite legal recreational market. changes and the processes for developing effective laws and regulations that allow for Colorado adult access to cannabis, monitoring the Recently, Colorado has garnered tremendous impacts, and designing new methodologies for attention for being the first jurisdiction in the cannabis-specific prevention programs. world to allow for recreational cannabis (i.e. full adult non-medical use). However, medical The Colorado Department of Revenue drafted cannabis predated this most recent legal initial rules in July 2013, using three years of prior change. In 2000, Colorado passed a popular experience regulating the medical cannabis

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industry. This knowledge was adapted and structure that governs the new recreational expanded to suit a legal, non-medical cannabis market. For instance, as a temporary stopgap, industry. Initial rules were further amended after as of July 2015 and until the passage of public input over the summer of 2013, and final regulations governing the new recreational rules were adopted in September of 2013. system, Oregon medical dispensaries will for Starting in November 2013, the CDR began the first time be allowed to sell to all Oregon accepting applications for producer, processor, residents including those without a medical and distributor licenses. Licenses were issued cannabis recommendation. Once regulations and the legal, non-medical cannabis system are passed that privilege will be revoked, and began distribution in January 2014. existing medical businesses will be encouraged to transition into the recreational market. It took Colorado approximately fourteen months to develop regulations, which are still Uruguay undergoing adjustments, including labeling, The case of Uruguay has three distinct features. potency tests, and serving sizes. Legal First, Uruguay will become the first and only cannabis was a $700 million dollar industry in state party to the international drug control Colorado in the first year of legal sales (January- regime to legalize the production, distribution, December 2014). That year Colorado retailers and use of cannabis for non-medical or non- sold $386 million of medical cannabis and scientific purposes. Second, regulatory reform $313 million for purely recreational purposes. is a government-led initiative, not a public The two segments of the market generated referendum. According to polls, the public $63 million in tax revenue, with an additional is not in favor of this policy change. Lastly, $13 million collected in licenses and fees. no existing regulatory body predated the law. Unlike Colorado and Washington, which Oregon had the Colorado Department of Revenue Oregon, like Washington, had a very loosely and the Washington State Liquor Control regulated medical cannabis system in place Board, Uruguay must establish the Institute of prior to the legalization of cannabis for Regulation and Control of Cannabis (IRCCA). recreational purposes in November 2014. (Oregon’s voters narrowly voted down a similar The law allows for the access of cannabis but looser legalization bill in 2012.) The law through three supply mechanisms: personal gives regulatory authority to the Oregon Liquor home grow, cannabis clubs (registered Control Commission (OLCC), against mirroring collectives that can grow up to a certain limit), the Washington approach. The details of the and pharmacy sale for recreational cannabis. Oregon law is a mix of that seen in Washington Medical cannabis can be accessed through the and Colorado. Like the two other states, the pharmacy sale as well. All producers and users legal industry is based on licenses at various of cannabis in any form have to be registered levels. Residents are allowed to grow four with the government and limited to a 40 gram plants and possess up to 1 ounce in public. per month maximum. Taxes were originally set to be collected at the The executive branch delivered regulations producer level ($50 per ounce) but have been approximately four months after the passing of shifted to point of retail sale, where they instead the law. The Executive Secretary of the National incur a 17% tax rate. Drug Board had suggested that a legal industry However the Oregon law is very much in flux, will be functional by September 2014. To date, due to the necessity of merging Oregon’s IRCCA has issued several sets of regulations unregulated medical market into the tighter to govern the medical, hemp, and recreational

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markets. However, serious staffing issues, lack they can only be obtained in Hebrew. However, of resources and political will has plagued the using news sources and other English-language rollout of much of the market. Today, only two material we are able to detail some of the key of the three legal sources of recreational can­ points within the law. nabis are up and running—home grow and Since the early to mid-1990s Israel has permitted cannabis clubs. However, several news outlets the use of cannabis for certain qualifying illnesses. have criticized the rollout as limited at best. The regulations and law have changed over the Regulators seem to suggest that the pharmacy decades. Currently there is a bill in parliament retail market may be available to consumers by to standardize the prescription method with the end of 2015. To date, it has been almost two which patients can obtain medical cannabis. years since Uruguay passed its cannabis reform This is supposed to allow more doctors to issue and the pharmacy system is still not in place. prescriptions for qualifying medical conditions. Israel Licensed producers will continue to cultivate, Unfortunately, we are unable to assess the details but the end product will be sold in the existing of the Israeli medical cannabis regulations as pharmacy system.

US HEMP REGULATIONS BY STATE Federal Action 1) Establish commercial industrial hemp A provision in the 2014 federal Farm Bill opened programs. the door for universities and state departments 2) Establish industrial hemp research pro­ of agriculture to begin cultivating industrial hemp grams. for limited purposes. Specifically, the law allows universities and state departments of agriculture 3) Enact studies of industrial hemp or the to grow or cultivate industrial hemp if: industrial hemp industry.

“(1) the industrial hemp is grown or cultivated Elements of state industrial hemp laws can for purposes of research conducted under include: an agricultural pilot program or other agri­ „„Defines industrial hemp. Most state laws cultural or academic research; and require hemp to have THC concentrations (2) the growing or cultivating of industrial of not more than 0.3 percent by weight, but hemp is allowed under the laws of the State at least one state (West Virginia) requires in which such institution of higher education the crop have less than 1 percent THC or State department of agriculture is located concentrations. and such research occurs.” The law also „„Provide that industrial hemp is an agri­ requires that the grow sites be certified by— cultural crop in the state. and registered with—their state. „„Establish licensing or registration programs The law also requires that the sites used by for growers. Such programs often require universities and agriculture department be registrants to provide information on the certified by—and registered with—their state. type of industrial hemp that will be grown, State Action the grow area, and how the harvested crop Twenty-two states have enacted state laws will be used. Programs often also require relating to industrial hemp. Generally, states growers to submit to criminal background have taken three approaches: checks.

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„„Provide for inspections and establish test­ „„Prohibits the possession of resin, flowering ing standards for seeds and crops. tops or leaves removed from the hemp plant.

„„Authorize fees to support the program. Some „„Establishes registration and renewal fees states have authorized specific industrial for commercial growers of industrial hemp. hemp funds. Some states also specifically „„Organizes a five year review of industrial authorize the state to collect funding from hemp’s economic impact. foundations and private sources to support the industrial hemp program. While legislation adding this section was enacted in 2013, the law specifies that its „„Establishing an affirmative defense for provisions do not become operative unless regis­tered industrial hemp growers from authorized by federal law. prosecution under state controlled sub­ stances laws. Colorado „„Setting penalties for violations of the C.R.S.A. § 35-61-101 to 35-61-109- industrial hemp law. „„Permits growing and possessing industrial „„Creation of an advisory board to advise hemp by registered persons for commercial regulators on the development of regula­ or research and development purposes. tions, enforcement, and budgetary matters. „„Establishes an industrial hemp committee „„Defining industrial hemp based on the per­ to work with the Department of Agriculture centage of tetrahydrocannabinol it contains. to establish an industrial hemp registration „„Authorizing the growing and possessing of program and a seed certification program. industrial hemp. „„Establishes an industrial hemp grant „„Requiring state licensing of industrial hemp research program for state institutions growers. of higher education to conduct research to develop or recreate strains of indus­ „„Promoting research and development of trial hemp best suited for industrial markets for industrial hemp. applications. „„Excluding industrial hemp from the defini­ tion of controlled substances under state law. Connecticut Public Act No.14-191 (Enacted June 12, 2014; „„Establishing a defense to criminal prose­ goes into effect on October 1, 2014) cution under drug possession or cultivation „„Legalizes a feasibility study on industrial Note that some states laws establishing com­ hemp. mercial industrial hemp programs require a change in federal law or waivers from the „„Commissioners of Agriculture, Consumer U.S. Drug Enforcement Agency before those Protection and Economic and Community programs can be implemented by the state. Development shall study the feasibility of legalizing the production, possession, and State Statutes sale of industrial hemp, respectively. California „„By Jan. 1, 2015, a report will be made to CA FOOD & AG §81000-81010 the legislature regarding “[…]said com­ „„Requires industrial hemp growers to be missioners’ recommendations on estab­ registered with the state. lishing a statutory definition of “industrial

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hemp”, based on the percentage of propo­ industrial hemp; and (3) any site used sed tetrahydrocannabinol in such industrial for the growing or cultivating of industrial hemp, as distinguished from marijuana, (2) hemp is certified by, and registered with, amending the general statutes to exclude the Department of Agriculture. industrial hemp from the definition of „„Before conducting industrial hemp research, “controlled substance” in section 21a-240 the Department of Agriculture and local law of the general statutes, and (3) establishing enforcement must be informed in writing. a licensing system for industrial hemp growers and sellers.” „„Institutions of higher education must provide quarterly and annual reports to the Delaware Department of agriculture and are subject Del. Code Ann. tit. 3, ch. 28, §2800-2803 to inspection. The annual report is due on „„Authorizes the state and higher education or before October 1. institutions to grow or cultivate industrial „„Allows the Department of Agriculture to hemp for agricultural or academic research. adopt rules to comply with federal rules or to adopt emergency rules deemed necessary Hawaii to public interest safety and welfare. S.B. 2175 „„Defines industrial hemp. „„“Authorizes the dean of the College of Tropical Agriculture and Human Resources Indiana at the University of Hawaii at Manoa to IC 15-15-13-1 to 15-15-13-16 establish an industrial hemp remediation and biofuel crop research program; „„Authorizes the production of, possession of, scientific study of, and commerce in „„requires a report on the rate of contami­ industrial hemp in Indiana by license holders. nation uptake and efficient uptake from soil and water, the rate of carbon fixation in the „„“Industrial hemp is an agricultural product Calvin cycle and the viability of industrial that is subject to regulation by the state hemp as a biofuel feedstock; seed commissioner.”

„„clarifies that the term industrial hemp „„The state seed commissioner adopts rules means the plant Cannabis Sativa L; and oversees licensing, production, and management of industrial hemp and agri­ „„provides criminal and civil immunity.” cultural hemp seed. Illinois „„Sets the standards for application for hemp 720 ILCS 550/15.2 license and registration.

„„ Authorize the state and higher education Kentucky institutions to grow or cultivate industrial KRS § 260.850-.869 hemp if: (1) the industrial hemp is grown or cultivated for purposes of research „„Establishes an industrial hemp commission conducted under an agricultural pilot to promote the research and development program or other agricultural or academic of industrial hemp, and commercial markets research; (2) the pilot program studies for Kentucky industrial hemp and hemp the growth, cultivation, or marketing of products.

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„„Establishes a five year industrial hemp an agricultural pilot program or other research program, to be directly managed agricultural or academic research project. by the University of Kentucky Agricultural „„Establishes an industrial hemp research Experiment Station to conduct research on fund to support research into growing or industrial hemp for a variety purposes. cultivating, or both, industrial hemp and „„Establishes an industrial hemp licensing grants to colleges or universities in this program. state to conduct research into growing or cultivating, or both, industrial hemp. „„Includes language that “Kentucky shall adopt the federal rules and regulations that Montana are currently enacted regarding industrial Mont. Code Anno., § 80-18-101 to 80-18-111 hemp and any subsequent changes thereto.” „„States that industrial hemp that does Note: On Feb. 19, 2014, Kentucky announced not contain more than 0.3% tetrahydro­ five pilot hemp projects that would be used cannabinol is an agricultural product. across the state, including one project that „„ would research whether industrial hemp could “…an individual in this state may plant, grow, harvest, possess, process, sell, be used to remediate tainted soil. or buy industrial hemp if the industrial Maine hemp does not contain more than 0.3% tetrahydrocannabinol.” 7 M.R.S.A. § 2231 „„Requires industrial hemp growers be „„Permits a person to “plant, grow, harvest, licensed by the state. possess, process, sell and buy industrial hemp” if that person holds a license. „„Creates an affirmative defense to prose­ cution under criminal code for marijuana „„Prohibits the state from issuing a license possession or cultivation. unless “The United States Congress ex­ cludes industrial hemp from the definition Nebraska of “marihuana” for the purpose of the Neb.Rev.St. § 2-5701 Controlled Substances Act, 21 United States Code, Section 802(16); or…the „„Permits a postsecondary institution or United States Department of Justice, Drug the Department of Agriculture to grow or Enforcement Administration takes affirma­ cultivate industrial hemp for purposes of tive steps towards issuing a permit under 21 research conducted under an agricultural United States Code, Chapter 13, Subchapter­ pilot program or other agricultural or 1, Part C to a person holding a license issued academic research. Requires certification by a state to grow industrial hemp.” and registration of industrial hemp sites.

Michigan New Hampshire 2014 HB 153 M.C.L.A. 286.841 to 286.844 „„This bill establishes a committee to study „„Authorizes the state department of agri­ the growth and sale of industrial hemp in culture and rural development and colleges New Hampshire. and universities in the state to grow or cultivate, or both, industrial hemp for „„The study must report their findings by purposes of research conducted under Nov. 1, 2014.

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New York „„Allows for the center to collect feral hemp McKinney’s Agriculture and Markets Law § 505 seed stock and develop appropriate adapted strains of industrial hemp which contain less „„Authorizes up to ten sites for the growing than three-tenths of one percent THC. or cultivating of industrial hemp as part of an agricultural pilot program conducted „„Requires the state agriculture commis­ by the department and/or an institution of sioner to monitor the collection of feral higher education to study the growth and hemp seed stock and industrial hemp cultivation of such hemp provided that strain development and certify appropriate the sites used for growing or cultivating stocks for licensed commercial cultivation. industrial hemp are certified by, and registered with, the department. Oregon O.R.S. § 571.300 to .315 „„Prohibits the sale, distribution or export of industrial hemp grown or cultivated „„Requires industrial hemp growers be pursuant to this article. licensed by the state. „„Authorizes “industrial hemp production and North Dakota possession, and commerce in industrial N.D. Cent. Code, § 4-41-01 to 4-41-03 hemp commodities and products.” „„States that industrial hemp that does not contain more than 0.3 percent is considered South Carolina an oilseed. S. 839

„„“…any person in this state may plant, „„“Adds chapter 55 concerning industrial grow, harvest, possess, process, sell, and hemp; provides that it is lawful to grow buy industrial hemp (cannabis sativa l.) industrial hemp in this state; having no more than .03 percent tetra­ „„clarifies that industrial hemp is excluded hydrocannabinol.” from the definition of marijuana;

„„Requires industrial hemp growers be „„prohibits growing industrial hemp and mari­ licensed by the state. juana on the same property or otherwise growing marijuana in close proximity to in­ „„“North Dakota State University and any dustrial hemp to disguise the marijuana other person licensed under this chapter growth.” may import and resell industrial hemp seed that has been certified as having no more Tennessee than .03 percent tetrahydrocannabinol.” TN AG Code 916 N.D. Cent. Code, § 4-05.1-05 „„“Authorizes growing of industrial hemp „„Permits the North Dakota state university subject to regulation by the Department of main research center to conduct baseline Agriculture; research, including production and pro­ „„provides for license fees; cessing in conjunction with the research and extension centers of the state, regarding „„provides that industrial hemp is not mari­ industrial hemp and other alternative indust­ juana but can be categorized as a controlled rial use crops. substance under specified circumstances;

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„„Provides that the department has the right than 0.3 percent tetrahydrocannabinol, to inspect the hemp crop for compliance.” whether growing or not, that are cultivated or possessed by a licensed grower in Utah compliance with this chapter.” UT H 105 „„“Industrial hemp is an agricultural product „„Permits the Department of Agriculture and which may be grown, produced, possessed, a certified higher education institution to and commercially traded in Vermont …” grow industrial hemp for education. „„Requires industrial hemp growers to be „„Exempts an individual with intractable licensed by the state. epilepsy who uses or possesses hemp extract or an individual who administers West Virginia hemp extract to a minor with intractable W. Va. Code § 19-12E-1 to 19-12E-9 epilepsy. „„“Industrial hemp that has not more than 1 „„Provides for a hemp extract registration percent tetrahydrocannabinol is considered card; requires maintenance of neurologist an agricultural crop in this state if grown medical records and a database of neuro­ for…purposes authorized…” logist evaluations. „„Requires industrial hemp growers be Vermont licensed by the state. 6 V.S.A. § 561 to 566 „„Creates a complete defense to prosecu­ „„“Industrial hemp means varieties of the tion under criminal code for marijuana plant cannabis sativa having no more possession or cultivation.

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