The CNMI Cannabis Act

The Cannabis Act

On September 21, 2018, Governor Ralph Torres signed into law the Taulamwaar Sensible CNMI Cannabis Act of 2018 (the “Cannabis Act”).¹ The Cannabis Act makes the recreational use of marijuana legal in the CNMI.² A new industry is now starting in the CNMI, and there is lots of interest in what the Cannabis Act means for local businesses and foreign investors. This article will briefly review the Cannabis Act and how this new law will hopefully work.³

About the Cannabis Act

The first thing you need to know is that we don’t know all the details of what the law is yet. Regulations are required. The Governor is putting a commission in place that will have the task of coming up with regulations. The regulations will provide details as to the operation of marijuana businesses that are not present in the Act, and further enforcement provisions that will be critical for businesses to understand.⁴ But in the meantime, this is a summary of the Cannabis Act:

Adult-Use and Possession Limits

The Cannabis Act provides that any person who is 21 years or older may:

• Possess and transport up to one ounce of marijuana, 16 ounces of marijuana products in solid form, 72 ounces of marijuana products in liquid form, five grams of extracts, and six immature plants; and
• Give the above amounts of marijuana or marijuana products to other adults who are 21 years or older.

Homegrown Marijuana

A big question in the CNMI is where will all the marijuana come from? There is already marijuana growing here in the CNMI, but it has a reputation of being weak. The Cannabis Act anticipates an active agriculture business in the CNMI by registered growers, but it does not address where the seeds will come from or how they will be imported into the CNMI when Federal Law still makes marijuana a controlled substance and greatly restricts what can be done with it (you can’t send marijuana seeds through the mail).

Specifically, as to growing marijuana, the Cannabis Act provides:

Registry: The Cannabis Act creates a Homegrown Marijuana Registry. A subsequent piece of legislation will determine the Registry fee.⁵

• The Registry is to be confidential and will only be accessed by CNMI government agencies carrying out the enforcement of the law.
• If the Registry is not created within 120 days of the Cannabis Commission’s organizational meeting, adults may grow marijuana without registering. They must register once the Registry is available.
• Registered adults may also make marijuana extracts using water, glycerin, and non-solvent based extractions.

Homegrown Marijuana Limitations: Registered adults may typically cultivate no more than 6 mature and 12 immature plants per household or cultivation location.

• Patients and their caregivers may exceed the adult-use limitation if their physician confirms larger quantities are “necessary and practical for the effective treatment of the patient.” In that case, they may cultivate no more than 12 mature and 24 immature plants per household.
• No more than eight ounces of marijuana may be possessed per household or cultivation site at a time.
• Cultivation locations may be farms, warehouses, rooms, or containers. Indoor growing may be the trend even though the CNMI has excellent sunlight for agriculture, as indoor growing will protect the plants.
• Cannabis plants may not be in public view, another reason why most of the growing may occur indoors.
• Home growers must take reasonable precautions to secure cannabis plants from access by individuals under 21 years old. This will restrict to some extent who growers can hire (no high school students needing summer jobs).
• The marijuana produced from homegrown plants must be stored in the same secure location where the marijuana was cultivated, or at the cultivator’s home.

Business Regulation and Licensing

The Cannabis Act provides for six (6) different types of regulated marijuana businesses: producers,

• processors,
• retailers,
• wholesalers,
• lounges, and
• testing facilities.

There are two types of lounges: bring-your-own-stash lounges and establishments where marijuana is sold onsite. Lounges may not sell or allow the consumption of alcohol onsite.

Retailers alone may make deliveries to consumers who place orders. Other licensees may not deliver cannabis to consumers.

The number of licenses issued can be limited if to do so is necessary for the safe and effective regulation of marijuana. What may happen is an effort to issue enough licenses to meet the needs of the market, but not so many that there is too much competition, and no one can make a profit. License fees may also be set high enough, but not too high, so that this sort of regulation can occur without the need to actually limit the number of available licenses.

Record Keeping Requirements: Marijuana producers must keep complete and accurate records of all marijuana flowers, marijuana leaves, and marijuana plants and the number of ounces of the same produced. The records must be kept for at least two years, and the Cannabis Commission may inspect the records at any time.

The Cannabis Commission

The Cannabis Act establishes a five-member appointed CNMI “Cannabis Commission” as the regulatory agency for all commercial marijuana distribution and sales.⁶ The Cannabis Commission will hire an executive director, and the executive director may hire a staff. The Cannabis Commission, and its staff, will have the following duties:

• Licensing marijuana businesses;
• Certifying equipment, facilities, utensils, and tools used in the marijuana and hemp businesses;
• Regulating marijuana businesses related to advertising;
• Determining the eligibility for employees to work in marijuana and hemp businesses;
• Imposing civil penalties for violations; and
• Promulgating separate regulations on hemp (which would have under .03% THC).

The Cannabis Commission will have the authority to inspect the licensees’ records and require a laboratory analysis of the products. The Department of Lands and Natural Resources’ Division of Agriculture is directed to assist the Cannabis Commission as needed with the growers. The Commission may deny licenses for reasons including that the applicant is “unsuitable” for licensure (this is a concept used by the Commonwealth Casino Commission in reviewing license applicants for services related to the CNMI’s casino). However, when deciding who to exclude from licensure, the Commission cannot take into consideration convictions for possession of marijuana, nor may it consider a single conviction for manufacturing or delivery if the conviction is 10 years old or more.

Specific Restrictions and Rules for Business Licensees:

• All applicants must have had continued CNMI residency for ten (10) years, unless they left the CNMI for military service or education.
• Marijuana businesses may not be located within 500 feet of a church, hospital, clinic, school building, or youth center at the time of the application.
• Only producers (growers) and micro-producers (those who grow in small quantities) may possess and sell mature plants.
• Licensees may not employ anyone under 21 years of age.
• The same individual may hold multiple licenses, except that micro-producers may only hold one micro-production license, and testing facilities may only hold one marijuana-testing license.
• Licenses are purely personal privilege, and they cease with the death of the licensee. But the Cannabis Commission may allow permits to be transferred, and in the future watch for LLCs being approved as licensees.
• Marijuana products may not include injurious or adulterated ingredients.
• Licensees must comply with labeling and container requirements, including:
  • Tested marijuana products must have a CERTIFIED label, and untested products must have a disclaimer reading UNTESTED PRODUCT.
  • Marijuana products may not be deceptively branded or labeled (the CNMI Consumer Protection Act would also cover this).
  • Marijuana products must also include information on ingredients, allergens, nutritional facts, and the amount of time before the product takes effect.
  • Marijuana products must also include child-resistant packaging.
  • Marijuana products must be identifiable with a standard symbol, when possible.

Enforcement by the Cannabis Commission: The Cannabis Commission may suspend or cancel licenses for multiple reasons, including the licensee’s insolvency, violations of the law, false statements made to the Cannabis Commission, and maintaining an unsafe or unsanitary establishment. Marijuana businesses can expect a fair amount of scrutiny by the Cannabis Commission.⁷

Marijuana Use at Special Events

It will be possible to sell marijuana at concerts and other special events but doing so will be regulated. The Cannabis Commission may issue special events permits for no more than 10 days each per calendar year to private locations where marijuana can be displayed, possessed, used, and sold. With regard to Special Events permits:

• Applicants must have identified plans in their applications for ventilation and odor control, waste disposal, preventing over-consumption and underage consumption, and preventing impaired driving.
• Special events involving marijuana may not be held within 500 feet of a daycare, drug or alcohol treatment facility, or public pool.
• Special events permits may not be issued for events held on public property, held in residential areas, or at events serving alcohol.

Medical Marijuana is Allowed Too

Most states that have legalized recreational marijuana started by first legalizing medical marijuana. Not the CNMI. The CNMI jumped straight ahead and legalized both uses.

Medical marijuana is generally processed in a way that the intoxicating elements of cannabis are not present. Marijuana has many health-related uses and for those who need it, that it is now legal, is a big relief. The key medical marijuana provisions of the Cannabis Act are as follows:

• Doctor’s Recommendations: Patients of any age may use marijuana if they have at least one qualifying medical condition and a doctor’s recommendation. Unless they cultivate marijuana, patients do not have to register.
• Qualifying Conditions: To qualify a patient must have one of a number of conditions recognized to benefit from the medical use of marijuana identified in the Cannabis Act.⁸ However, the Cannabis Commission may approve additional serious medical conditions, in consultation with medical professionals.
• Caregivers: Patients may designate a caregiver to produce and store homegrown marijuana on the patient’s behalf. Caregivers must be 21 years or older.
• Program: The Commission may adopt separate rules for a medical marijuana program.

Hemp

Hemp is defined as plants from the genus cannabis with a concentration of THC of less than 3% on a dry weight basis. Hemp has many uses. Hemp is fibrous and is used in a variety of products including rope, textiles, clothing, shoes, food, paper, bioplastics, insulation, and biofuel. The fibers can be used to make textiles that are 100% hemp, but they are commonly blended with other materials such as cotton and polyester, to make woven fabrics for apparel and furnishings. The inner two fibers of the plant are woodier and have industrial applications, such as mulch, animal bedding, and kitty litter. When dried hemp oil from the seeds becomes solid and can be used to manufacture oil-based paints, in creams as a moisturizing agent, for cooking, and in plastics. Hemp seeds are used in bird feed mix. All these uses are possible for hemp under the Cannabis Act is approved by the Cannabis Commission.⁹

Marijuana is still Very Much Regulated

The Cannabis Act contains a number or prohibitions to protect the public, and essentially rewrites the criminal law with regard to marijuana possession and use. Specific fines and penalties, including jail time, are provided for violations.¹⁰ Here are some of the highlights of what is prohibited:

• Driving Under the Influence: Consuming marijuana while driving or operating a boat or other motorized mode of transportation is punishable by a fine of up to $500 and a six-month suspension of a driver’s license for a first offense. The penalty doubles for a second offense and is in addition to any penalty for driving while under the influence of marijuana.
• Public Consumption: Using marijuana in public or in the presence of someone under the age of 21 is punishable by a fine of $250 for a first offense and up to $1,000 for subsequent violations.
• Underage Possession: Except in the case of patients with a physician’s recommendation, individuals under the age of 21 may not possess or attempt to buy cannabis. For an amount that is no greater than adults’ possession limits, a first offense is a $250 fine. A second offense is a $1,000 fine. In addition to the fines, the court may order 80 to 250 hours of community service. The court shall also suspend driving privileges for up to one year, and it may order substance abuse assessment and treatment. The assessment and treatment are mandatory for a second offense.
• Growing in a Prohibited Location: Except for those with a medical recommendation, cannabis cannot be used or possessed at a government building, on any school property, on college property (except for research), on federal property, or at an establishment that is allowed to serve alcohol. Marijuana may not be possessed or used in correctional facilities, including for medical use. A violation is punishable by a fine of $500 for a first offense and up to $1,000 for subsequent violations. Possessing or using marijuana in correctional facilities is punishable by up to five years of imprisonment and a fine of up to $5,000.
• Marijuana Gift Giveaways: Marijuana items may not be given away as prizes, as part of a lottery, or related to contests, games of chance or skill, or competitions of any kind. A violation is punishable by imprisonment for up to 1 year, or a fine of $1,000, or both.
• No Marijuana Allowed at DOC: No person may possess marijuana in a correctional facility (this will include guards). A violation is punishable by imprisonment for up to 5 years, and a fine of up to $5,000.
• Making Dangerous Extractions: Other than a licensed marijuana processor complying with the Cannabis Commission’s regulations, no one may perform solvent-based extractions using anything other than water or vegetable glycerin. The penalty is up to three years in prison and/or up to a $5,000 fine.
• Over-The-Limit Marijuana Possession: Adults who are 21years or older and who possess up to double their possession limits face up to 30 days imprisonment and/or a fine of up to $1,250. If they possess more than two times the possession limits, and up to four times the limit, they face up to one-year imprisonment and/or a fine of up to $2,500. For more than four times the limit, the punishment is up to five years imprisonment and/or a fine of up to $5,000.
• Dram Shop Act Analogy: Marijuana may not be sold or given to a person who is visibly intoxicated. A violation carries up to one-year imprisonment and/or a fine of up to $1,000.
• Nuisance: Allowing marijuana to be sold, consumed, given away, or bartered in violation of CNMI law can be prosecuted as a common nuisance.
• Other Offenses: The Cannabis Act also includes specific penalties for trafficking, importing and exporting (unless it becomes federally legal and is approved by the Cannabis Commission), the unlawful manufacture in excess of the limits, and unlawful delivery.

Conclusion: Lots of Opportunities, Lots of Rules to Know and a Few Big Unanswered Questions

The passage of the Taulamwaar Sensible CNMI Cannabis Act of 2018 has opened up new business opportunities in the CNMI. Obviously, one opportunity is farming. Less obvious are the business opportunities supporting the farms. Irrigation equipment will need to be brought to the CNMI. Special fertilizers and hydroponic growing media may end up in high demand and importing them is another opportunity. Fencing will be in demand as marijuana farms must be screened from public view. Supplying marijuana farms may become a niche industry.

Retail shops will of course open and someone will need to supply those retailers with the paraphernalia used by those who consume marijuana. Pipes and rolling papers will need to be brought to island as well as all the bottling or packaging equipment needed to make edibles and to process marijuana in its other forms.

Hemp clothing and shoes are popular in the United States and could be manufactured in the CNMI. Hemp oils also have many uses. Unfortunately, unless the Cannabis Act is amended, they cannot be exported. But hopefully provisions will be made in the regulations to at least allow hemp clothing and shoes to be sold to tourists to take home if their home countries allow possession of hemp clothing and shoes.

Finally, there will also be a new opportunity for those involved in tourism. In Asia, the penalties for drug trafficking have always been extremely severe, and consuming marijuana was very risky. Now there is a place on the doorstep of Asia where tourists can go to safely and freely try marijuana in a lounge. Saipan could become the next Amsterdam.

Bright entrepreneurs will certainly come up with lots of ideas for new businesses. There are, however, problems. Marijuana is still illegal under federal law. What this means is that FDIC banks will likely not do business with those in the marijuana industry. The limitation on the access to banking has created problems in the mainland states that have legalized marijuana. Payroll and taxes may have to be paid in cash. Accounting is difficult without bank statements to reconcile. CNMI has two banks that are not FDIC and they may see a big increase in their business as a result of the Cannabis Act.

The Federal Government’s criminalization of marijuana will also make it hard for newer strains of the plants to make it to the CNMI. As mentioned above, the marijuana that has been growing in the islands is not very strong and may not be that appealing to consumers. However, importing marijuana products (such as seeds) into the CNMI is illegal under the Cannabis Act unless the Attorney General certifies that the importation will not violate Federal Law.¹¹

Even if the Attorney General allows seeds to be Imported, getting them here could be a problem. The United States Post Office does not allow marijuana seeds to be mailed because under Federal Law marijuana is a controlled substance. US Postal Inspectors search for drugs being sent through the mail and are part of the US Government’s effort to prevent drug trafficking.

Private carriers like DHL, FedEx, and UPS can refuse to ship marijuana seeds. These carriers can, by contract, restrict what they accept, and they reserve the right to search what you ship with them.¹²

Eventually, the Federal Government will decriminalize marijuana (it is inevitable as more and more states legalize recreational use). Until then it will be difficult for CNMI growers and businesses to fully take advantage of the Cannabis Act. For that reason, we end this article with our usual advice: for your specific situation, see an attorney. Our office and other attorneys in the CNMI will be happy to help entrepreneurs navigate the Cannabis Act and Federal Law.

Michael has been practicing law for more than 25 years. He has taken and passed bar exams in California, Hawaii, and the Commonwealth of the Northern Mariana Islands. He has appeared in courts in California, Guam, the Republic of Palau, Texas, Louisiana, and actively practices and appears in the Commonwealth.

¹ The Governor explains here.
² The full text of the Taulamwaar Sensible CNMI Cannabis Act of 2018 can be found here. 
³ As with all the articles we post on our website, reading an article is no substitute for meeting with an attorney to discuss your particular situation.
⁴ We plan to update this article once the regulations are published.
⁵ Gov. Ralph DLG Torres line-item vetoed a $5 annual fee, stating it was too low. At the time of this writing legislation has been introduced to increase the fee but it has not yet been passed.
⁶ The local legislative delegations will also have a role as they may enact marijuana regulation laws within their senatorial districts. They may include time, place, and manner regulations and civil penalties for violations. They may also include local registration fees.
⁷ The Cannabis Act was modeled on the laws of Oregon and other state laws. The CNMI courts are authorized by the Cannabis Act to look at Oregon law in interrupting the requirement of the CNMI law. Section 176.
⁸ These conditions include cancer, glaucoma, HIV/AIDS, hepatitis C, amyotrophic lateral sclerosis, Crohn’s disease, ulcerative colitis, agitation of Alzheimer’s disease, post-traumatic stress disorder (PTSD), or a chronic or debilitating disease or medical condition (or its treatment) that produces: stroke; diabetes; Parkinson’s disease; Wilson’s disease; traumatic brain injury; ADD/ADHD; muscular dystrophy; cerebral palsy; asthma; other types of immune-modulated inflammatory diseases; cachexia or wasting syndrome; severe, debilitating pain; severe nausea; seizures; neurological disorders; or severe and persistent muscle spasms.
⁹ See, Wikipedia, https://en.wikipedia.org/wiki/Hemp
¹⁰ Violations of the law or regulations, where a specific penalty is not specified in the bill, carries up to one-year imprisonment and a fine of up to $2,500.
¹¹ Section 145(b).
¹² There are seed banks in Europe, and it is possible that seeds could come there to the CNMI but how to get seeds here is beyond the scope of this article.