New government directive stalls cannabis industry anew
By Louella Losinio
Guam voters ratified the legalization of medical cannabis in 2014. Recreational pot use became legal in 2019. In all these years, however, Guam’s cannabis industry has yet to get off the ground.
Marijuana growers on island have been eager to start a legal business that they hope will bring pots of money. But high expectations have been quashed by one hurdle after another.
First, there remains a legal inconsistency between local and federal laws. Marijuana is still a controlled substance under federal law. Second, there is an obstacle posed by banking regulations that restrict financial institutions’ ability to facilitate transactions with marijuana-related businesses. Third, the lack of a proper lab on Guam further stalled the process.
For those seeking to participate in this industry, it seems like an endless obstacle course.
Finally, Guam’s rules and regulations have paved the way for the industry to grow.
Not so fast.
The budding commercial cannabis industry on Guam hit another snag with the release of a directive from the Guam Department of Public Health and Social Services in late August reminding the public about federal and local prohibitions on the commercial storage, preparation, manufacturing, or selling of cannabis-infused foods on Guam.
The products covered by the directive include cannabis-infused beverages and edibles such as gummies and brownies. It also covers infused oils and supplements. Local shops that are planning to order and carry these products have to wait or else face monetary penalties. They could also have their sanitary permits suspended.
Public Health released the directive in the same week as the opening of the commercial license applications for cannabis-related businesses, citing as the basis for the prohibition several provisions under both Guam and U.S. Food, Drug and Cosmetic Acts, Guam Food Code, and the U.S. Food and Drug Administration. The federal and local laws do not recognize CBD, THC, or other cannabis-derived compounds as safe ingredients in food, according to DPHSS..
Guam’s steady but slow progress in developing its recreational cannabis rules and regulations drew comparisons with the Northern Marianas, where the cannabis industry is now in existence.
According to the Department of Revenue and Taxation, the agency is working with Public Health, the Office of the Attorney General and Sen. Clynt Ridgell on proposed legislation to amend the laws and lift the prohibition.
Ridgell confirmed that the legislation will be introduced soon. “Guam’s Food, Drug & Cosmetic Act harkens back to the Federal Food, Drug & Cosmetic Act which doesn’t recognize THC or CBD as an approved food additive, drug, or dietary supplement. I’m working on a bill to amend the Guam Food, Drug & Cosmetic Act to allow for the use of THC and CBD in food products,” he said. “Of course, anyone selling food products with THC in them would still have to go through the process to get a license to sell products containing THC.”
Small business owners and startups that have waited for the opening of commercial license applications would have to wait until current local laws are amended. Without an amendment to the current regulations, Public Health said it will not clear any business license application or issue sanitary permits to those who are applying for a license to manufacture, import, distribute, or sell cannabis-infused foods and supplements.
The first step for a commercial cannabis licensing application, according to DRT, is to apply for a “responsible official cannabis identification card.” This is critical to the process since the responsible official will be held accountable for any intentional or unintentional action done by any person in the company as part of business operations.
As such, the responsible official would have to go through a vetting process by the Cannabis Control Board to ensure that they have no prior convictions on Guam, CNMI, or any state for the manufacturing or delivery of a schedule I or schedule II substance.
The Guam Cannabis Industry Act, which was signed into law in April 2019, legalized recreational pot use and authorized the operation of licensed cannabis-related facilities. The law mandates the Cannabis Control Board to begin processing commercial cannabis license applications “no later than 90 days after the regulations become effective.” The rules and regulations came into effect in the last week of May and DRT began accepting applications for responsible official cannabis identification cards on Aug. 29.
Guam was the first U.S. territory to pass a law that legalized recreational cannabis, but the Northern Mariana Islands was the first to build a commercial cannabis industry, issuing its first cannabis business license in March 2021.
Will Parkinson, former board member of the Cannabis Control Board, said the challenges that delay the full implementation of the industry regulations are not unique to Guam. Other jurisdictions also went through challenges.
“I would like to take a look at the example of Washington. The first year when they had their legalization and when everything was being rolled out, it was a complete mess. There were things that needed to be adjusted and changes that needed to be made to the law. I imagine that these are much the same as here on Guam. The rules are not an endpoint. It is a starting point,” Parkinson said, adding that the “rulemaking process is an ongoing process.”
Some states implement an equity program to promote equitable access to employment and business ownership opportunities. Some of these state programs also hold lotteries to regulate the number of licenses issued to the community. This is the case with Washington, Illinois and several other states.
Guam’s regulations have no limits in terms of licensing applications, according to Parkinson. “As long as you can make the requirements, if you have a dream and you would like to pursue it, then you have a shot. You will not be gated out of the industry just because there is a limited number of licenses. If you have the means, the will and the resources, you can go into this venture,” he said.
The rules and regulations cover several types of cannabis establishment licenses, from cultivation facilities, product manufacturing, testing to retail. A type 1 facility license allows the cultivation of less than or equal to 2,500 sq.ft. of the canopy on a single premise. On the lower end of the scale, a type 4 allows cultivation on a 500 sq.ft. of space. “You don’t need a six-figure starting capital to do business like that,” Parkinson said.
Local business owners also see the potential of the nascent cannabis industry on island.
An economic impact study projected that the recreational cannabis industry on Guam will generate $11.5 million in additional revenue from tourists. Released by the Guam Visitors Bureau in December 2020, the study estimated that the new industry will draw 31,500 new visitors to the island and create 734 additional jobs.
The government intends to use the first $50 million in proceeds from the legal sale of cannabis for the repair of Tumon roads and sewage systems and the improvement of the island’s attraction sites.
“From the last few years since this whole conversation has been developing, with Guam being so small, you really get to hear a lot of views on this whole green industry and you also get to see a lot of hard work with those who are aspiring to go into this industry," said Roman Dela Cruz, founder of Fokai Industries.
Dela Cruz recently opened a community space in Tumon “As a member of the business community, I truly welcome them. Like any business, it’s going to take a lot of work. We are talking about this green gold rush. But like the first people who were mining for gold, it was a long haul to get to those places. For those who are pushing for this industry, I can’t wait for this to happen.”