Awesome. Great. Well, my name is James Pepper. I'm the chair of the Vermont Cannabis Control Board. Today is March 21st, 2022. It's 11 a.m. and I call this meeting to order. I guess first things first, we are streaming on YouTube. And so anyone that wants to kind of go back and watch our meetings kind of instantaneously, you can do that now, which is great. Thank you, Nelly. Just a quick update on pre-qualification. So we opened our pre-qualification application window last Wednesday. As of this morning, we have a total of 253 pre-qualification applications that have been submitted. And we haven't started to review them individually. However, as soon as we do and certainly when we start issuing approvals, the plan is to have a tracker on our website that will display the number and the type of each pre-qualification application that we have approved, which I think will be kind of helpful, this business information for other folks that are seeking licenses. So we'll be doing that as soon as we kind of catch our breaths and start to review these. I want to remind everyone that pre-qualification is a voluntary process. It's not required to get an operational license. There are certainly some benefits both to the board and to the applicant, but there's also some downsides. Primarily that you'll have to get your fingerprints done twice, pay a fee each time with those fingerprints. And also there's the nonrefundable application fee for pre-qualification, and it's nonrefundable even if you are a social equity applicant or even if you end up being disqualified. On payment on the fee, our staff is working on setting up the payment portal through our website and a process for receiving checks and things of that nature. As soon as we're ready to accept fees and we have the authority to do so, the staff will notify all of the pre-qualified applicants directly and kind of walk you through the payment process. Also, just once you've been pre-qualified, there's no need to update your pre-qualification application as you add more principals or financiers or owners to your leadership team. Any new additions to really come through your final licensing process. So I know that folks continue to have a lot of questions about pre-qualification. You know, the best place to start with any questions is to look at our website. We've really been trying to kind of modify the information that's on there in response to people's questions. So go to ccb.vermont.gov forward slash pre-qualify. And if you don't see your answer there, you know, you can email the board at ccb.info at vermont.gov. That's kind of the next good step to take. And then of course, we do have a phone number here. You can always call<PHONE_NUMBER>. And then it's option zero for the adult rec market. And you can always leave a message and we'll try our best to get back to you properly. I guess just a reminder also that we have filed rules two, three, and four as emergency rules last week, meaning that they have been, that they are currently in effect. We've spoken to the staff of the dispensaries. They all kind of understand what the rules do. We're working on guidance for patients and caregivers and the dispensaries that explains kind of the program as it exists under rule three and the new statutes. And that guidance will be posted to our website by the end of the week. Finally, we have a social equity and economic empowerment networking event on Thursday, this Thursday, March 24th from five to seven p.m. We're still operating under the kind of updated public meeting laws, temporary public meeting laws. So this is going to be an all remote meeting, no in-person attendance. The link to RSVP is available on our website. And Brenna, I was wondering maybe if you wanted to just briefly describe what the event agenda is going to look like. Yep, sure. So we're going to be doing, David and I will be there and we will be doing a high level review of rules one and two. And the purpose will really be to assist people in figuring out what they need to have ready for their full license application. So the focus is going to be on what the license application will require and we'll also go over what the pre-qualification application requires too in case people are interested in that. That will be followed by a Q&A session on the applications, both pre-qualification and full license application. And we'll set out some notes at the beginning of the session, but there will be some limits on what questions we can answer. So we really can't offer an opinion on whether a person or an entity will be granted a license by the board. So we're not going to be able to answer specific questions about individual or business, individual business scenarios, but we will be answering sort of general questions about how to interpret the rules and what the application a license will require. Great. So again, that's this Thursday, March 24th from 5 to 7 p.m. And again, we don't record those. We don't post them. These are not open meetings. There isn't a form of the board there. And really the idea behind that is to encourage participation, encourage open dialogue, encourage open communication. So please try and join if you can. The link to our CPS on our website. Other than that, we just need to approve the minutes from March 14th, our last meeting. Kyle and Julia, if you had a chance to review those. Yep. Yes. Great. Well, I would take a motion to approve. Move to approve the minutes of the last meeting. Seconded. All right. All in favor? Hi. Hi. Great. Well, why don't we turn to the agenda? Today we've all been kind of looking at some of our packaging rules and we've been developing guidance on them. I have some slides. Julia, I don't know if you have anything you wanted to prepare. I'm happy to kind of take your lead if you want to go first or second or third. Give any preference? I don't have a preference and I do have slides. I have some slides. Why don't I get started? I've got some stuff. I've got some slides just on the material side of things with the packaging materials need to be. And so why don't I get started? And Kyle can fight it out for who goes next. Okay. Packaging guidance. So this is just a recap of what we said about packaging in rule 2.2.9. So the following requirements apply to all cannabis and cannabis product packaging. So this is really about those kind of cross references are really about labeling but also clearly identifying the package content. Contents be free from false or misleading statements, not using objects that essentially appeal to minors or people under the age of 21. And then this second part is the kind of operative part of my slides is that packaging that is intended for consumer purchase at a retail location shall be reusable and shall not be plastic. So I've got some kind of guidance on that piece of things. So we don't have a definition of packaging in our rules. I thought it'd be helpful only because we now are starting to see a difference between, we're starting to identify a difference between packaging that's meant for consumer sale versus interest supply chain transferring of products between licensees. So I just wanted to make that clear in our guidance that packaging really means when we talk about packaging and non-plastic reusable or really talking about anything that's intended for consumer sale, it really doesn't mean the kind of shipping containers or vacuum sealed kind of plastic bags that licensees may use within the supply chain. So in general, I mean, I think it's important that packages are designed to protect the product from contamination and shouldn't expose the cannabis or cannabis products to toxics or harmful substances and that the packaging not appeal to people under the age of 21. I know this is directly in our rules, but I think it's good to kind of, if we have a standalone guidance document just to remind people of these things. So the language under B here that uses objects such as toys, inflatable movie characters, cartoon characters, et cetera, that is straight out of our rules. There's a document that a group, like a cannabis association put together, it involves kind of some of our consultants as well that has model definitions. There is a kind of model definition of a cartoon character that we could look at. I didn't include it here, but I think that's where things get a little bit fuzzy on this considering a lot of what we see in the craft beer industry does actually use what could be characterized as cartoon characters. But I don't know if we want to get that descriptive or not here in our guidance. Do you have any thoughts on that or Kyle? I do. I think the part of this that I covered was kind of like that look like what is a cartoon and what isn't. So we can talk about it more, although I would like to, I didn't find the the cartoon character definition. So that would be probably a good thing to continue to talk about. I think the way I framed it was things that are generally marketed to children or generally marketed to youth at the age of 21. Well, when we transition to your slides, really, I'll pull up the kind of model definition that this organization put forward. Yeah, that'd be good. So I'm envisioning a product registration process. We do have a product registration fee. And so I think the kind of product registration process will give us the opportunity to review whether something is in compliance with our guidance and our rules on packaging.  One thing that a lot of other adult youth states do, including Oregon and Massachusetts, is they maintain a list on their websites of all packaging that's been approved. And so, you know, if you don't want to kind of have any questions about whether your packaging is okay or not, you can go to this list and see all the packaging that the board is approved. And you can use that, you know, if we apply a certain waiver and I have a waiver provision later on, if we grant a waiver for a product packaging that includes a de minimis amount of plastic, for instance, that packaging will be approved for the entire industry. So I think that that, you know, this, that's the kind of vision that I'm laying out here is kind of central to this. So just a reminder that there is under current law require that all packaging be opaque and child resistant. You know, I think H548, which passed the House last week, eliminates the need for cannabis, which would include the seeds and immature plants from being an opaque child resistant packaging. So I think in our guidance, this, you know, we should be clear about that. But, you know, obviously it's dependent on whether 548 actually passes. So that first line is kind of up in the air currently. But certainly for cannabis products, they must be opaque and in child resistant packaging. And then, you know, another kind of model, you know, guidance or rule is that if an edible, for instance, contains multiple servings, that the child resistant packaging must be capable of being resealed and the child resistance must be kind of sustainable at least as many times as the number of units in that product.  And then here's just some, again, from that model document, those model definitions, some definitions of opaque. The child resistant packaging actually just comes from our statute. That was defined in Act 164. So, but opaque just means that the contents can't be seen in an unopened container and that, you know, it could be just the specific properties of the container or it could be put a sticker over it. And then child resistant packaging, this very closely mirrors the federal definition of child resistant packaging. But it's essentially it's difficult, not impossible but difficult for a child under five, whereas it's not people above that can still, but kind of not difficult for normal adults to use properly. So getting to the prohibition on plastic and non-reusable packaging. So just reiterating that packaging that is tended for consumer purchase at a retail location shall be reusable and shall not be plastic. That's in our rules 2.2.9. I just threw in a quick definition of reusable. Reusable means packaging that's capable of repeated recovery, inspection, sanitation, repair if necessary, and reuse in the supply chain. I guess I should get rid of a reissue for reuse. Plastic, that's just the definition of plastic from our rules, from Rule 2. And then I think, you know, I think it's going to be important for us to kind of push people in certain directions here as to kind of reusable non-plastic. So, you know, glass, tin, cardboard, and bamboo, we could say also just as a catch all anything that's been approved pursuant to our product registration process or packaging registration process. And then glass, tin, cardboard, and bamboo just by the way are the most commonly non-plastic.  So, just recognizing that, you know, plastic in some form might be necessary for certain reasons. We have kind of talked about having a case-by-case waiver process. So, this is kind of, and this is obviously out for debate. This is something that we need to figure out and kind of understand the kind of actual demands of the market. But this is my first attempt at this. So, a licensee may seek a waiver to the plastic prohibition if the licensee can demonstrate hardship in securing non-plastic packaging. And then I list the three reasons why that we would accept as a reasonable kind of hardship. So, one is the unavailability of non-plastic packaging, which I have heard certain products just, you know, they require a certain amount of plastic and there's no viable alternatives currently. Two would be an inability to achieve child resistance without some amount of plastic. And then third would be it's necessary to preserve shelf life stability, prevent contamination of cannabis or cannabis products. And then finally avoid exposure of cannabis and cannabis products to toxic or harmful substances. So, through the product registration process, we would expect licensees to kind of submit a waiver petition essentially for their specific packaging. And I'll come back to this slide in a second, but just moving on because the waiver petition would also need to include a packaging alternative that uses de minimis plastic. And de minimis plastic for the purposes of this kind of waiver is only the amount of plastic that's reasonably needed to overcome the hardship that they've identified through their kind of initial waiver. And then in addition, you know, the licensee should propose packaging alternatives that prioritize certain types of plastic. First, plant-based recyclable plastic or reclaimed plastic. And finally, you know, the licensee must submit a plan for complying with the non-plastic reusable packaging requirements. So, how are you going to try and phase out this plastic? How are you going to try and come into compliance with rule 2.2.9? You want me to quickly just talk about the conundrum of bioplastics and recyclable bioplastics versus compostable bioplastics? You know, that packaging alternatives that prioritize certain types of plastic. I don't know the right, yeah. Yeah. I used to work with bioplastics in DC, so I'm a little bit ahead of the curve when it comes to understanding nuance, because I think a lot of folks have come to us or, you know, at least or packages in this industry have started moving towards a bio-based alternative as it relates to plastic usage, recognizing that, you know, a lot of folks want to see plastic move out of the industry, but it's understanding where the industry currently is. I think a problem unique to Vermont, I mean, it makes this elsewhere, is we don't currently have any composters in-state willing to accept bioplastics that are compostable. Essentially, when you're, when we think of bioplastics, people automatically think biodegradable and compostable. That's not always the case. There's kind of two routes that bioplastics take in mimicking traditional petroleum-based polymers. There's the PET route, which is recyclable plastic. Coca-Cola had a plant bottle out for a number of years. You might have seen it. It was the green Coca-Cola label. That was recyclable plastic. It was bio-PET. So it was not compostable under industrial composting, you know, standards. You still had to recycle it through a recycler. PLA, which is a very common polymer, does compost under a specific set of conditions at an industrial level. Composers in this state have just decided that the infrastructure with which they're currently operating, it really messes up what they're trying to accomplish while composting. And you can kind of equate it to, you know, if anybody has any small engines at their house, whether it's a snowblower or a rototiller or a marine engine, if you put high ethanol fuel into those, it really gunks up the system. And think about it in the same type of context. We just, the industry isn't there to accept, you know, high amounts of bio-based PLA or something along those lines because it kind of messes up everything else they're trying to accomplish from a more organic matter perspective. So, you know, in thinking about the non-plastic alternatives to bio, or to petroleum-based plastics when we were having these conversations, you know, I think it would be great if we could move in a certain direction with, in relation to hemp plastic or bioplastic, but recognizing if we set people up to buy those products and put them into a stream of commerce and they just get landfilled anyways, then what was really the point. So, I don't necessarily know what kind of bio-PET, bio-based recyclable products there are for this industry. I haven't done a wide net search. I'm sure that they're out there. I know a lot of hemp plastics are the PLA route. And so they would just end up getting landfilled if we use them in this context anyways. So, I just want folks to recognize that, you know, we know a little bit about a lot of things, not everything about this, but when we get the question on bio-based packaging, it's because other folks in the state won't accept those at their compost facilities. And now, you know, I think the last one sunsetted their ability to take plastics on December 30, or bioplastics on December 31st. So, that's why recyclable plant-based products are in here and not, you know, the way we more naturally think about bioproducts, which is in a biodegradable fashion. Does that make sense? It does. So, is plant-based the right terminology to use? Yeah. There's a lot of corn-based and other kind of more commodity crop-oriented PET types of plastic that service markets generally speaking. I just don't know from a cannabis industry perspective, are there bio-companies making PET for packaging for cannabis? That, I can't answer that question, but there are major companies out there making PET recyclable bioplastics. And then there's other ones making compostable ones that are more of the PLA Ralph. And then just one other question, like, because I obviously have been going back and forth in my head whether to include some terminology around biodegradable and or compostable. And I hear what you're saying, but I'm just curious if those compostable or biodegradable products end up in the landfill anyway, is there any benefit to having a biodegradable, something that's biodegradable in the landfill versus something that's non-biodegradable? No. Yeah. And I understand that question. And I think it's more nuanced than that. And I think we'd have to talk to folks that operate those businesses here because I don't know what type of landfill setup they have because biodegradable or compostable bioplastics, they're not like a banana peel that you throw out. And it degrades under the set of weather circumstances that we have in our natural environment. It needs to be under very specific conditions, whether it's aerobic or anaerobic digestion that really suck the oxygen out of what's going on and allow it to break down in a different way. And I just don't know how we're set up from a landfilling perspective, recognizing I think we have one landfill in the state if they are set up in a way for those products, even if they do end up in the landfill to break down as we think organic matter does break down. And this is the push and pull between whether bioplastics are really worth it to some environmentalists or not. You know what I mean? So that to me seems like the right language then. Prioritized plant-based recyclable of a reclaimed plastic. Yeah, I think so. I think there's a lot of, I know that there's companies in this industry that are using reclaimed ocean plastic to formulate containers, whatever you want to call it for this industry. I think if a retailer is looking to do that, you know, that's different than a single-use petroleum-based plastic and we can provide special accommodation or through the waiver process or whatever the case may be, because there is a lot of companies moving in that direction in addition to the biobased plastic direction. That's not included here though, Pepper. Is it reclaimed ocean plastic would not? That's not included here. Well, I say packaging alternatives that prioritize the plant-based recyclable or reclaimed plastic. But yeah, I mean it's still plastic.  But then again, it's like what's your definition of single-use and we'll get to this in some of my slides when it comes to, you know, the collection and reuse of consumer packaging waste. But is that single-use plastic at the point, thinking about the life of that plastic or single-use in the context of its use in this industry? And so it gets a little convoluted and wonky. But, you know, it's again still a step in the right direction, I think. Julie, do you have any thoughts about this slide? I don't. I have the same question as you about that. If it goes to a landfill, as does it still break down? So thank you for answering, Kyle. The answer is it depends. That's my lawyer answer for the day. But then this is the other kind of like the big one, which is just the three reasons why you could seek a waiver. We feel like these are sufficient to kind of cover the potential need. Yeah. I mean, from my perspective, you know, I think we're a little bit ahead of the curve from an industry perspective on trying to move plastics out of the retailer supply chain. And I think two of those major reasons are shelf life stability and child-resistant packaging.  And to an extent, it does the same thing for shelf life stability. I think that's really where, you know, plastic for better or worse does a really good job of maintaining moisture content and making sure that that product is a marketable product throughout its actual life as a cannabis product. And it doesn't degrade because of the packaging itself. And do you think, I mean, I know we had this conversation, but that ability for retailers to package for consumers, I think? I think that helps there. I think we might see, you know, some lids that have a seal on it or some films that go over the entire packaging, we might get waivers, depending on the product for that. And we can have that conversation when the time comes.  And, you know, those are like, for me, would be a de minimis amount of plastic. So it's just kind of recognizing, I think people and regulators and industry professionals that I've talked to about this issue recognize what we're trying to do and think it's a cool direction to move in. But we need to recognize where the industry currently is and packages are not going to, you know, redo their entire supply chains to meet a market as small as Vermont. But, you know, again, it's like these cool ideas happen in small state laboratories and, you know, spread once it's successful, hopefully. Great. Well, I think this is the process that will work. And again, I think the idea is, you know, if someone goes through this waiver provision and we have an approved kind of package, you know, that that package could be used by other people that want to use it. So, all right. Well, that's all that I had on packaging.  I have collection and reuse of consumer packaging waste, Julie. So if you think that's a natural step, you can go. That seems like the direction we're going, yes. Okay. So, yeah, this is, you know, one of the schemes that we put into our regulations. And the first two slides are kind of what is mentioned in our regulations. And we're, we're picking backing off of predominantly what Colorado is attempting to do. And in my conversations with the regulators in Colorado, they don't have a lot of guidance on this, because it's fairly new for them as well, and trying to figure out certain things. But, and we did leave out some stuff that Colorado has like a locked container, you know, in the facility, we just thought that was a little, a little much. I don't think people will be, you know, trying to hit the bargain bin and reaching it and trying to take out plastics or containers that have a very, you know, dusting of cannabis product inside them. Maybe they had better reasons, but who knows. So this is what's in our regulations, retail cannabis establishment, may collect, reuse, recycle cannabis packaging, waste, only retail cannabis establishments may collect consumer packaging waste for recycling. They need to collect consumer packaging waste from consumers or from other licensees. They should be located in the cannabis establishment such they are subject to the same security measures as the rest of the establishment reasonably supervised by a licensee to ensure any consumer packaging waste is only removed by a licensee. The receptacles need to be labeled, clearly stating that it's consumer packaging waste, and, you know, you can include additional waste if you so want to. It's a little bit more about what was in our rules. This is where I start to kind of conceptualize, you know, what requirements apply for actually trying to do this. Obviously, the major one that comes to mind is sanitizing and disinfecting. So who can sanitize? You know, I'm proposing that the retail cannabis establishment can set SOPs up to do this themselves or hire a third party to do so. And, you know, I think with that we would like to see certain information be made available to us or other state officials upon request or inspection, no matter if you're looking to stand up and do this in-house. Contracts and receipts related to collection and a third party helping you out here. But I know Colorado allows for third parties to do, you know, this to service this industry and I think it would be proper for us to do as well. I think really here, good business records and SOPs are what's really going to help drive this. I think it, you know, this needs to be standardized across retailers and their employees making sure that they're doing this in a correct manner. And what I've really done and kind of looked through is the proto-safety rule with the Agency of Agriculture, how you clean certain receptacles as it relates to an ag product. And I've perused the health department's website for similar language. It's a little harder to find on the health website because there's other topics that dominate, given the state of the world, that website. But I'm still, this is a starting point, we can kind of further define this moving forward. You know, I think within your SOPs, they need to be posted clear nearby for employees that are looking to do this, you know, restock cleaning supplies like brushes, detergents and sanitizers that are labeled for use, dedicated locations for clean and dirty items, a cleaning log might be helpful as well. And I'm thinking these SOPs don't need to be, you know, we don't need to have these on file per se, but I think in the course of inspection or if we do receive a complaint, these need to be kept and given to us on request or the health department upon request. That's why I put other state officials in here in case that there is a problem through the course of this, this part of the program. So child resistant containers, again, you know. How can I ask a quick question about the SOPs? And let me think about how to frame this. So, you know, if we had to stop sale on something, how would we, how would we know if it's from the content of the package or because the package wasn't clean? Like if there was an issue, and this, I don't know that this is a guidance question or something that we just need to think about for a future conversation, but how would we know if there was an issue with a product in the package or if the package itself hadn't been properly cleaned? I don't know if I know the answer to that question off the top of my head. I think whenever we get a compliance and enforcement staff in-house, I'm hopeful that, you know, when we do get those questions, we can develop our own SOPs that start eliminating, you know, factors that might go into understanding what really is the root of the problem, you know. I don't know if that's a an answer that's helpful right now. No, well, it's just something that came up as you were in my mind as you were talking and that we probably need to think about. I mean, yeah, it could be the product, it could be the packaging itself, it could be insufficient cleaning of that package. And I mean, Julie, one thing, I, you know, when Kyle talks about the third party, when I was looking at this question, I did notice there are a number of third party companies, not necessarily in Vermont, that specialize in collecting and sanitizing cannabis consumer waste for reuse. And so they certainly have their kind of, you know, SOPs worked out and maybe it's either we rely on those companies and how they do it or we rely on their procedures and our guidance for how to do this. Yeah, no, I think that's a good point. I think retailers that want to do this, we're not reinventing the wheel. There is, you know, opportunities to connect with those third parties they've likely, unless they have a presence in Vermont, you can't ship your waste out of state. But I'd imagine there are going to be some lancelary businesses that might pop up to service this part of the market.  Yeah, okay. Thank you. I don't have all the answers right now. We'll get them all eventually.  But the container visual inspection requirement rings true for others as well. Should not be brittle or have chips, cracks or other imperfections that could compromise CR or shelf life stability, or throw a pet up or pose a threat to a public harm. You know, if, depending on certain things happening, if a mason jar is allowed, you know, for cannabis flower and it has a crack in it and you can cut yourself on that. It seems like that one should just be retired instead of reused, you know, just a little bit of common sense. But, you know, I think one of the challenges that I know Colorado and and Packagers have encountered with these take back programs that you clean, the way that these are cleaned and disinfected, a lot of Packagers will not certify that the CR requirement will will hold beyond the first use or the, you know, the first retail use of these packaging. So there's got to be some some type of standard operating procedures for identifying, you know, certain things depending on if your Packager, your relationship with that Packager as a retailer, you know, they might not certify that CR beyond the first use. And how do we dispose of certain items that might not be able to qualify moving forward. And then I would I would submit that A&R DEC I know is working on lithium ion battery waste issues and rules and guidance for those batteries as they become more prevalent in our everyday life. So I mean, if you have a big cartridge with a battery attached to it, I mean, you can't resell those batteries that falls outside of our jurisdiction and those need to be separated in the process. As of right now, that's that's really all I've got. That's great. No. And, you know, one thing that this whole conversation kind of brings to mind is we recognize that this is a voluntary take, you know, program that we're talking about this kind of retailers being able to collect, sanitize and reuse. I'm wondering if we could tie this into our positive impact criteria that this is one of those things if you do this, if you kind of I think it would it would be easy to, you know, because we have the environmental right, you know, criteria already. And quite honestly, between our views on plastic here, potential child resistance, packaging changing in the take back scheme, this could this could be one of the most forward thinking retailer packaging regimes in the country, if not the right, you know, most forward thinking one. Yeah, I'm noticing California where they have programs like this.  Yeah, I mean, I think retailer tailors will get creative here. And that's really where good innovation is is meets, you know, where, you know, forward thinking regulation can really meet business from an innovation perspective and really see market dynamics start to change, you know, that being said, I think we're all again, cognizant that, you know, we're a little bit ahead of where the industry is. But that's why we have waiver provisions to kind of meet people where things are now, hoping that we can get to a certain place in the future. That's my perspective. These are great. Any questions, Julie? No, this looks great, Kyle. Thank you. Great.  We can see that. Okay, perfect. So I don't need to go through the rule again. Thank you for pepper for setting the table for us. And that I did. In the guidance that I started working on I did break down what a false or misleading statement might include. And then also what, you know, sort of the toys and cartoons might include. So for false or misleading statements, they said, you know, physical or psychological effect that associates cannabis consumption with improving a lifestyle hobby or activity.  And that, you know, promising something like that or promising a curative effect of the product would be a false or misleading statement. And then for the not using the objects that appeal to minors, I think I said, and we were talking about this before pepper, avoid images or language popular with youth under 21 such as cartoon catchphrases or general design that resembles characters popular with youths. You know, we could also stay. And then the next one talks about images of food, candy or other items that are commonly marketed to children. So that seems pretty clear. What was the definition that you had pepper for a cartoon character? Yeah, here, I'll pull it up, you know, mine. Should I just do that quickly? Yeah, because I thought back to the last conversation that we had about this in November, and I do remember talking about, you know, one of the local breweries in their can and I suspect this will be a little bit subjective because some of it is cartoony, but not necessarily in a way that would appeal to children. Right. So that is sort of a gray area. So this is this is one that this is kind of a model definition that this group of industry experts came up with with respect to cannabis. I'm not saying that this is the best definition. It's just there is a working group that specifically looked at this. And so again, it's kind of comically exaggerated features, attribution of human characteristics to animals, plants or objects, and then the attribution of unnatural or extra human abilities, such as imperviousness, pain or injury, extra vision, high tunneling at high speeds or transformation. You know, I'm fine with whatever. However we land on this, honestly, it's whether we need a definition of a cartoon or we kind of know when we see it, you know, I don't know if that like again, even with the definition, this is very subjective, you know, comically exaggerated features. Well, that depends on the that's in the eyes of the beholder. So but anyway, I figured I just came across this, I thought it might be helpful for the conversation, because again, cartoon, yeah, like any Lawson's can looks a little cartoonish to me. But for any kind of alchemy alchemist can, you know, so great, but does that appeal to children is the question, right? So like, I would say like the alchemist can, the one I'm thinking of, like, it's a cartoon, but it's, I think it would be scary to young children, right? You know what I mean? Like a different toy story. Yeah, and trying to kind of characterize is something that appeals to someone who is under 21 versus over 21 is very challenging. Or 21 versus five, right? So right, exactly. There's a huge, you know, what's a cartoon that appeals to a five year old or 21 year old? There's a huge array there. So yes, I agree. Okay, well, I just figured this is somewhat relevant. I don't, I'm not suggesting we adopt this, but I figured I'd throw it up there for you to see. So and I think we can work in some of those pieces to this. I think that would be helpful. So then sort of based on that conversation, I tried to find some things that we could put in guidance that were clearly unacceptable. And some things that were clearly acceptable. So I think what's helpful to this conversation is, do we all agree on that? Like, you know, given that this is so subjective and we're going to have to approve eventually advertising, you know, I think we would probably agree that all of these on this slide are generally not acceptable. They definitely like, there's one that sort of looks like a Disney Mickey. So that would definitely be advertised towards children. You know, there's one that sort of adopts another book of another candy that's typically advertised towards children. So I think, do you all agree that these are things that would be generally not acceptable based on our guidance and rules? Yes. Okay. And so then I tried to find some that were acceptable, like not that we would necessarily use these specific images in our guidance, but I think all these would be acceptable. The one that I think is sort of like maybe on the line and sort of like what we're talking about with the beer cans is the shipyard, THC Elixir. Like that's a little cartoony.  I just want to make it clear also that we're not allowed to have THC infused drinks, but I know that this is just a model. Yeah. That's not, there's no actual, that's not alcohol. It's only a THC Elixir. So there's no alcohol on that particular item, although it is made by a brewer. Yeah. I mean, for the most part, these look pretty, yeah, pretty standard. It's a blurry line. It's, you know, right. So again, it's hard to set procedures necessarily in place.  So then if we all are comfortable with that, so I think I'll use some examples in the guidance based on that. And then just as a reminder, these are our warning labels and symbols. I think I tried to get these as pretty close to like actual size, so they'll look smaller to you all on the screen than they typically do, but based on what's written in our rules, this is pretty close to the size that we require. And then the other policy point that we probably should talk about is the warning labels. We've left a lot of flexibility in our rule in terms of how this could be a fix to a product. So in our guidance, I think we can say things like, you know, it could certainly be directly printed on the package or secured with a sticker. So I'm thinking of sometimes you get a something from the pharmacy where the sticker is almost like a tag on a package. So I think that could potentially be acceptable.  And that we want to say that the warning label is clearly readable on the package somewhere, whether it's peeled away and you can clearly read it or a fix with a sticker and you can read it. Are you both comfortable with those as guidance for how folks can put the warning label on the packaging? I'm fine with the sticker, but as far as the contains THC, can you go back one slide? Yeah, contains THC and not safe for kids. I don't think that that can be obscured in any way. No, I know. Yeah, this would just be this warning label, this longer, you know, is not this section here, this warning label. These other things do have to be clear, clearly placed on the packaging where it can be seen when you pick the packaging up. In my opinion, I think that's kind of consistent with what we've talked about throughout, but it was just this larger warning label that I thought we could have some flexibility on. Yeah, that's fine with me, especially just recognizing that some packaging is going to be so small that the notion of trying to like put that warning label on it without having some sort of accommodation is going to be quite challenging. Yeah, and then the last piece I'll just share with you is a guidance checklist. So this came out of the Public Health subcommittee from back in the fall when we were talking about the warning labels and symbols in general. And so this was kind of like the last piece that NACB shared with us. It doesn't, what they shared with us doesn't look exactly like this. I separated it out to kind of match our rules. And this is a draft, so there are probably some spelling errors in it, but it is a draft and we'll have a checklist in our guidance so that people can kind of go through and say, okay, I've met all these things before they submit anything. That's good. That was it for me. That's great. I guess, you know, just looking at the agenda, that's kind of the main item. We have public comment next. So I'm happy to open this up to public comment. Again, we will start as we usually do with people that joined by the link. Please raise your virtual hand. We'll go in the order that you raise your hand and then we will move to folks that joined on the phone. So Nellie, maybe you could help us out with the order. Amelia is up first. Hey everybody. So I do packaging design for a living. I do branding, I do marketing, all of that stuff.  They look like this. They're glass on the bottom, plastic on the top. You pinch here and that's how they open. They have a plastic lid. So my thought and I know a lot of growers that are using this exact concentrate jar right now. My thought there is maybe prohibiting plastic altogether right out the gate is putting the car ahead of the horse. And while I want to, and I've obviously advocated for this already, while I want to see us go fully recyclable, compostable, sustainable packaging, I think at first if you give maybe a percentage of packaging that can be plastic, that we can then lower through the next like two to three years. So this would be fine if you said that your packaging can't be more than 30% plastic. But if you're saying that none of this can be plastic, then every single person who's bought 5,000 of these in anticipation for the market, I know they shouldn't have done that because the packaging requirements haven't come out yet. But people are doing their best right now. The people that have bought 5, 10,000 of these, it's going to waste now. I think that as far as, you know, I've already said as far as child proof packaging goes, it's not accessible to people with disabilities. I know that you guys can't do much about needing child proof packaging. I know it's in statute and you have to do it. It's not accessible to people with disabilities, to people with arthritis, to people with mobile disorders. And as far as, you know, alternatives, sustainable alternatives that are also child proof, we're going to see a lot of the same packaging on shelves from different companies, and it's going to be hard to differentiate between each company's product if everybody's using the same two or three companies for their packaging. And then as far as the actual graphics are concerned, I would take a look at Burlington Beer Company and the cans that they put out, because I've got their website open right now, and they have wizards, they have cartoon monkeys, they have cartoon clouds, they've got pedal prophecy, which is this really pretty can that's like purple and it's got all these cartoons. Like I think that again, and I know that I say this a lot and I'm sorry to beat it at horse, but the CCB's job is not to parent children. And you can only do so much to keep cannabis out of the hands of kids. And as far as packaging goes, I agree, don't use licensed cartoon characters, you know, or licensed anything. That's a lawsuit waiting to happen regardless of whether it's being advertised to children or not. But when you get down to is this specific facet of the packaging design advertising to people over the age of 21, you are splitting so many hairs there. I think that there is a level of common sense that can be used here. And there's also a level of parental responsibility that the CCB should not be having to take on. It is not your responsibility to make sure that individual children are not getting into their parents cannabis is parents responsibilities to ensure that they are storing their cannabis in a way that the children can't get a hold of it. And that's that's really the biggest thing I wanted to say. I have a graphic designer. So looking at the warning labels and looking at all of these requirements like damn, damn, I would I would not want to be the person designing a lot of this packaging right now. And I know a lot of other graphic designers who specifically do cannabis packaging who are worried right now that they're going to have to turn their focus to other areas because of the restrictions that are going to be placed on them in terms of design. Yeah. So those are my two biggest things right now that there is a way to slowly go into, you know, a sustainable waste-free plant-based packaging while also keeping in mind that a lot of people have started buying their packaging. Because all of this is coming up really quick. Growers have not gotten a lot of final information and so they're just doing the best they can right now so that when they can finally open up their businesses, they can compete with the dispensaries that have had the head start above them. I think that as far as design goes and what is or is not advertising to children, there's a level of common sense there. And I also think that there are other companies that are in the alcohol space that are not nearly as restrictive as a lot of what is being placed on cannabis specifically in Berlin. And just one last thing, and I'll turn it over, in the warning label, what we've got not safe or do not use if you are breastfeeding. And the science on that is still up in the air. And you all know Jesse Lin, she just went to Israel to speak in an international conference about how cannabis is safe for breastfeeding and chestfeeding parents. And internationally, I just can't see how we're putting warnings on this when the science isn't there to support them. The science isn't there to support a lot of the claims that we're making because this isn't federally funded, so we don't have federally funded studies. But we do have international studies that we can look to to see whether or not the information that we're putting on these warning labels is actually factual. Yeah, so that's my rant. I'm sorry to take up so much time, but thank you for letting me speak. Thanks, Amelia. Ebo. Good afternoon, everyone. I love the way things are going. I just wanted to, a few things, on the recycled packaging, which I'm really excited to be able to do that, you know, of planning and opening a dispensary. But it seems to me that it would make more sense for the manufacturers to somehow get that packaging back versus the retail stores, right? Like, if I'm selling Mr. Z's flower, I think it would make sense for those jars to be able to go back to them somehow and then use them to repackage. I mean, unless I'm not understanding things correctly, we're not packaging stuff at the dispensary level anyway. So, you know, for us to be to have all these jars or whatever, which is pretty much the only thing you're going to be able to reuse, I would think, somehow that needs to be able to get back to the manufacturer so they can put their product back in it, I think would be smart, especially if people have like branded jars or whatever, you know. So, it's really better for them to get them back than for me to get them back and try to figure out what to do with them. Also, yeah, the cartoon thing is crazy, right? Illustrated logos have been around forever. You know, I think not using cartoons, similar to what the last speaker was saying, that's a licensed cartoon or a kid's cartoon is great. But, you know, let people represent their brand the way they want to represent it and, you know, however creative that may be or whatever, you know, it's just that gives you true brand identity and I think that's really important for our space. That's it. Thank you. Thanks, Ibo. Miguel Lopez. Hey, good afternoon, CCB. I just have a quick question. Just doing the straight cultivating, I just was wondering what am I required to, like if I wanted to package my flower into glass jars, take it to the retailer and then just once he's done with that, then just pick them back up and kind of do the recycle program. What, what, how do I have to package it in order to get it to the retailer? Right, thanks for the comment. Again, we don't generally answer questions directly during the public comment period, but we will note that question and I think our guidance will be very clear on that. Okay, no, thank you. I just had just my one concern was just wondering how I need to prepare it for what my options are just so I can get it to the retailer. Yeah, so again, I think packaging describes what's going to the consumer, not to other licensees. And so all of the restrictions that you're hearing about packaging really apply not to cultivators unless you're packaging for consumer sale. Okay. Well, in that sense, then going with like, I know that the Vermont growers, they get thinking up about on the smallest tiers about them being able to do direct sales too. I know it's not nothing in place, but how is that going to hash out, I guess, to where can someone with like a tier one, is there going to be anything in place where we can go directly sales direct to the consumer? Oh, yeah. Thanks. Thanks for the comment.  Keep tuning in to our meetings. And if you have any direct questions like that, you can always email csinfo.ccv.atvermont.co. And ccv.info. Ccv.info. I always, I always forget it though. Thank you for your question. Thank you. Yeah. Thank you. Tito. Hi, everybody. Happy Monday. I want to say that I agree with Amelia. She made a ton of great points. Also great point by Evo there as well. Feels like, you know, since the growers need to do the packaging anyway, unless they have a wholesale license, getting them the jars back seems like something we want to figure out.  And on that note, I think making an exception from the beginning for the lid and the label seems to solve a lot of problems. So as long as the package itself isn't plastic, you know, that seems to solve the child proof problem. And, you know, as well as the possibility just to find this packaging, which clearly isn't going to be a challenge. So the lid and the label, if we can make an exception there, it feels like it would open up a lot of packaging to start off and then maybe we can improve that over time. I definitely feel the same way as Evo with the logos to you know, and what Kyle was saying, it's kind of hard to define, but you know when you see it, I feel like there's a ton of hand-drawn stuff that is definitely not appealing to kids. And lastly, I want to just talk, I know it's not today's subject, but I think the single biggest problem right now that's going to be holding up craft growers and possibly everyone really is just local zoning. I know through my journey through this process, local zoning has definitely seems like it's going to be the single thing that's going to slow me down the most. My local zoning board just doesn't really know anything of what's going on. Maybe some kind of more extensive reach out on behalf of the CCB to local zoning boards. And, you know, it feels like a lot of them just want to really slow the process down, which clearly is going to be a serious problem if we want to have cannabis come up to it. So thank you all and hopefully you're having a great day. Thanks, Hito. Fair. Fair at Island Pond Cannabis. Can you guys hear me? Yes. Hello. All right, we can hear you. Hey, I lost you guys for a second. Can you hear me? Yes, we can hear you. Sorry about that. It wasn't letting me unclick it. Hi, Hito. Thanks for everything you guys are doing, by the way. Really appreciate it. Just a couple things I wanted to mention that might or might not be helpful as I've been talking to all of my manufacturers in great depth. You have a broad blanket and speaking to and if I'm getting something wrong that I haven't read correctly, I apologize in advance. So the caps that we are looking at are, you have this broad wording of plastic and I'm not sure if that applies to as a blanket rule like no plastic or recyclable plastic because I have gone into great detail finding out what the plastic is made of and if it's recyclable. So I am just wondering if that's something that wants to be addressed if you're going to be speaking to that based after this conversation with everyone, but the caps are PE and PP and they are recyclable that we are doing. And also I don't know if this is ever going to be an option. I know in the beginning there was discussion about whether or not the flower had to be in child resistant packaging or not and then this marries with the discussion of reusing packaging. So there's a company in Los Angeles called Rose Los Angeles and just this past year they started doing home compostable refill pouches so it gets rid of single use plastic and I'm happy to email it over if anyone wants to see it or reach out but basically it's a brown paper packaging it's not the most exciting packaging but I do think it is interesting rather than creating more plastic top waste but again it's a it's not the most beautiful thing but I do think it's interesting it's just not necessarily child proof and that would be for flower only. So they're just things I kind of wanted to throw out if that would have any wiggle room if you're really trying to be sustainable how we can do that moving forward in a very environmental way because I do agree it's you know the industry produces so much packaging and waste and it's hard to get around it with the caps and everything so just things to consider and that's about it but thank you for everything. Thank you. Next we have David Nathan. Thank you very much my name is David Nathan I'm the founder of doctors for cannabis regulation I'm also the co-designer of the international intoxicating cannabinoid product symbol you folks I had to miss the first few minutes because I was seeing a patient so I may have missed your vote but I believe you may have voted on rules one and two in which case you have adopted the IICPS using the colors red white and black and if I'm correct on that then I'd like to say thank you very much for adopting it I'd also just like to add that as you may know the IICPS was designed in yellow and black the idea being that it's a true caution sign and conforming with existing voluntary consensus standards and as you may also know it the IICPS itself is now a consensus standard internationally through ASTM international one of the main standards organizations it's also been adopted by the state of Montana in yellow and black the state of New Jersey has incorporated it in yellow and black and the state of Alaska is now looking at a proposal to use the IICPS and the only color they're considering is yellow and black I understand that you guys wanted to have some color similarity to the states of Maine and Massachusetts and that's why you chose those colors and you know I myself had kind of experimented with different colors early on before seeing that we really do need to go with consensus standards because once cannabis is legalized at the federal level the ASTM standard in yellow and black will be the federal symbol because of the National Technology Transfer and Advancement Act NTA, N-T-T-A-A yes that requires the government to use consensus standards where they exist something you should also know other than the fact that eventually you're going to need to change the color to yellow and black which will not go over well with industry if they're already telling you you know giving you pushback about some of the things that might disrupt existing packaging inventories something else you should know is that one of those two states and I can't tell you which one but between Maine and Massachusetts one of those states is now looking at changing their symbol to the the IICPS so if you think you're doing it to align with existing New England states you might get left behind on that and the other consideration is that you know there is now data showing the efficacy of the IICPS in actual consumer testing and the yellow and black was thought to do well with showing caution so I'm happy to share that information with you if that would be helpful I imagine this is kind of a done deal but I would suggest that you guys reconsider and thank you for your time and your work thank you David Ron hi can everybody hear me yes uh sorry about that if anyone can hear me right now please let me know I'm having a slight issue how about that is that better we can hear you yeah perfect yeah so this is Ronald Williams from Mr Z craft cannabis uh first I want to say uh really appreciate everyone's comments and all the work that you guys are doing um especially appreciate Evo and Amelia's comments um they I think really speak to you know certain things that are very important as we move forward towards the you know market open as it relates to design um so I do all of our design and I am working on sourcing all of our packaging and it's really really difficult uh with these parameters you know I understand the intention of that but for example finding glass opaque child resistant packaging as far as I've seen as near impossible um there's a lot of hemp plastic uh post consumer hemp plastic packaging that achieves both of those things um and I understand you know what Kyle is saying about the current recycle infrastructure in the state but um I would just like I guess the state to reconsider that because you know it's going to be a very difficult source um and that might also create bottlenecks around that as a result given how limited uh you know that type of packaging is um and then also you know one last thing uh related to uh the warning labels and such you know it is very interesting to see uh constantly reprinted that it's not safe for children for example because again uh it's not necessarily a scientific fact um so you know those a couple things to consider uh from the ccb perspective um because especially as you know a cultivator of you know three young men who've had to raise their money from our friends and family exclusively uh you know it's kind of hard to uh observe these things while also trying to build a business for the first time so really appreciate everybody considering this and thank you thanks Ron so I don't oh Sean yeah I just wanted to uh kind of touch on the whole issue of uh packaging from a graphic standpoint and like know it when you see it uh it's essentially kind of turning into the FCC and George Carlin bit of the seven dirty words the FCC guidelines let's say that a violation occurs if a broadcaster has violated the standards of the community there's no list of words it's just when someone happens to be offended and submits a complaint to the FCC so either y'all would need to create a very exhaustive list of what graphics will be prohibited be it color font or types of characters or just drop the issue entirely or that it would need to be updated or reviewed annually after a number of complaints have come in but is that to that particular company is it towards that graphic style in general and where do you all get tied up in that same kind of issue of the FCC of just being beholden to the standards of the community rather than an actual bullet point list of approved graphics and non-approved graphics so I just I wish you luck with that it's murky waters yeah thanks thank you for that um so anyone who's joined via phone um you can make a public comment you star six to unmute yourself hello hi we have a couple of folks that have unmuted themselves um so i'll just kind of move us through that let's start with the uh phone number ending in four three three four thank you nely hi everybody this has been hervis am I coming through all right on the phone yeah we can hear you Ben great thank you um kyle I just wanted to uh acknowledge and appreciate something that you said about the fact that these packaging standards really have the potential to join uh some of the highest standards in the country if not set them uh coming from the Vermont public health world where we also set some really incredible precedent and policy uh it's just nice to see that continue with vermonters um and brought cannabis and then to build on the comments from my uh piers Evo Amelia Ronald um I just wanted to talk about the I wanted to draw the connection that I think a lot of what they're asking is that for this first year to two years um that we just see more qualifications added to the waiver list essentially whether it is that somebody has already made the investment or that something you know I believe from what we've heard today the waivers are going to be a case by case basis and you seem to be very understanding to the multitude of reasons that someone might request one um but just you know acknowledging that list or maybe when we see if that will be written in the guidance that would just be very helpful to see you know the prevention of waste that's something that's happened in california with packaging is that you know in order to to achieve even a sustainable packaging rate you have to order such a large quantity and so something changes on packaging that affects that that packaging's argument purchase that creates the problem um and then additionally you know I'm not sure if this is already laid out in rule I believe it is uh having to do with the how products arrive at retailers from wholesalers product manufacturers that I believe that already has to be child resistant but I just want to urge or publicly comment for all of our industry peers to really look at that and look at the fact that we're talking about reusable solutions here and so if a manufacturer is able to recoup packaging from retailers that may not just apply to the immediate packaging for the product but it can also apply to child resistant options um another thing that we've seen in developed markets are exit bags that are reusable so that essentially uh any product that's sold that's not any child resistant package immediately can then be placed inside of a child resistant exit package to things to look at lots of examples to follow and that's my comment thank you so much thanks dad all right next we have the phone number ending in 7034 uh yes hello everybody my name's Kevin hi Kevin hey um um mostly I just want to reiterate what my uh fellow commenters have mentioned um doing a quick search on on a child truth or is it a child resistant they're advertised both ways the majority of what I see in fact all of what I see are a plastic of some kind uh so I just want to reinforce the fact that maybe we need to pick the jumping off point that isn't uh so far out and allow some of those those packaging um mason tops is the one brand I was looking at it's a child resistant cover that goes on a glass mason jar um sounds like a no-brainer but with a no plastics uh criteria that's that's kind of a non-starter so I'd like to think that we could re-look at that and and make that happen and um just thank everybody for all their efforts um and that I'm not the only one with some of these viewpoints thank you thank you anyone else from the phone you can hit star six to unmute yourself all right um well then we'll close the public comment period um I just have a few just you know responses here I mean I guess first off you know this pat day on packaging is not a new concept we've taken extensive public comment since we first proposed this months ago um and no one mentioned it um and so really you know we were moving forward in a way that we thought was kind of the best way to do it um and we recognize that there is going to be some hardship and adjusting to this we spent the first half of today's meeting discussing how you can get a waiver to this plastic prohibition and it's not based on a percentage of the plastic it's based on you know you demonstrating that you need a certain amount of plastic um and so um the waiver follows the product not the person requesting the waiver that's right so exactly so once a waiver has been granted that that packaging can apply to anyone in the industry can use that packaging uh just um a note that we have there's a bill that looks like it's moving um it certainly is cleared a very important hurdle that um eliminates the need for child resistant packaging or cannabis flour and I know a lot of the plastic lids that people are talking about with child resistant packaging are required because of that child resistance however if we eliminate that need for flour then um you know that in one kind of fell swoop eliminates a lot of the need for plastic in packaging of flour it also eliminates the opaque requirement for flour and retailers in that bill can package yeah um essentially uh you know those are the comments I had around plastics and then just to kind of David's point about the yellow and black symbol um you know when we decided on our symbol it was um in looking at every other state um at the time the the this the yellow and black symbol got voted on um in the kind of waning days of us approving our regulations it was just a few weeks ago I did send the yellow and black symbol to the health department um you know they went through a very robust process of approving not only the health warning but also the symbol and they didn't have time to reopen that process in the kind of the last at the last minute I do agree uh with the commenter that the yellow and black certainly seems like it's going to be the standard symbol in the United States and internationally and we will very likely have to adopt it at some point but we just didn't have you know our agency partners didn't have the bandwidth to re um open their process um on that on that symbol but um so at least for year one and the immediate future the white red and black symbol is the one that we're going to use and I guess that's all the comments I had anything else come to mind in response to some of the comments that we've heard I would just reiterate that that much of the discussion today centered around retailer focused packaging to consumers so in the situation where a cultivator wants to get their product ready to get to in within the supply chain to a retailer these requirements do not apply unless your cultivator like white labeling doing your own packaging for that retail establishment and consumer use then they would apply right just want to make that clear this doesn't I don't think CR package I think Ben had mentioned something about CR requirements for bulk packaging and I don't think that that's a necessity right and to add the um the packaging that cannot appeal to people under the age of 21 is a legislative charge so we're trying to meet that legislative charge fully appreciate there's a lot of really good artists out there that can get creative like this but as with a lot of things we're we're trying to meet everybody in the middle so we employee to meet us there too well there's nothing left on the agenda so we'll adjourn for today um again there is a social equity economic empowerment networking event on Thursday five to seven that is a kind of open question and answer situation and so you know instead of kind of doing this dance that we do during public comment period um you know brane and david um our executive director and our general council will be on the line answering people's questions um directly so a great opportunity to kind of think about um what's going on uh in the industry um kind of the direction that the board is heading timelines all those kind of questions that you might have um so uh with that I'll just adjourn the meeting thank you all for attending thanks kyle and julie and um see you next week


Hello and welcome to this session. This is Professor Farhad. In this session I will discuss introduction to cost allocation and this topic is covered in a typical cost accounting or sometime managerial accounting course and it's definitely covered on the CPA as well as the CMA exam and for more lectures you can always go to my website farhadlectures.com and you can look up the any documents that I post under cost accounting course. So I'm going to go ahead and start to discuss this topic cost allocation. What is cost allocation and what's the issue with cost allocation? So let's go back and talk about something we called factory overhead. If you remember the factory overhead is one of the three cost component which is direct labor, direct material and factory overhead. So factory overhead the issue with factory overhead it's not easily traceable to the product it's not directly traceable. So when we started to talk about factory overhead but we said he said okay let's assume we have one product and what we do is we're going to assign the overhead by establishing a rate some some sort of a rate so we establish a rate then we allocate the overhead the money here to the product directly. Okay and this is what we call this formula it's a single plant-wide overhead. So for all our overhead cost we use that single rate and we allocate it directly to the product. What we discussed earlier here is a simple explanation of allocating factory overhead. In the real world what we have we do have factory overhead but what's going to happen we're going to have more than one department more than one product so on and so forth. So rather than establishing one rate a plant-wide overhead rate for all for for all the company what we do is we're going to allocate the overhead and we learn about this earlier to certain departments so we're going to allocate some overhead to this department to this production department let's call it production one and we're going to allocate other overhead to production department two then from this department what we're going to do we're going to establish a rate for a production department one so we're going to do so we allocated some money here we're going to divide this money by some activity and we're going to divide this money by some activity that's related to that production department, maybe production department A uses machine hours, more machinery, it's machine intensive, and production in department two is more labor intensive. So what we did is for department one, it's more machine driven, department two labor driven. And what's going to happen by doing so, by having two rates rather than just simply one rate, we enhance the allocation of the overhead. What does that mean? It means now we have a better pricing, we have better pricing model, now we are pricing our product better. Also our inventory, remember, our inventory is a better reflective for financial accounting purposes, we have a better number. Also our cost of goods sold is truly reflective of our effort.  So you had three advantages. But to make things more complicated is this. What's going to happen is some of the overhead, it's going to be allocated to service department, we're going to have service department one, and maybe service department two. So some of the overhead pool and the money that's in this pool, some of it will be allocated not directly to the production department, but to other service department. And this is going to make this a little bit messier. Why? Because the service department don't touch the product. So in the production department, we're going to touch the product. So the money from here will be allocated to the product that we are selling. It will be allocated to the product that we are selling. But the service department, they don't touch the product. So what's going to happen is this. To make, to make matter worse, what's going to happen is the service department, it's going to allocate some of the costs to production one, some of the costs to production two. And sometime the service department one might allocate the product to service department two. And to kind of make little this little bit more realistic is for example, service department one could be the IT support. So the IT support would support production one and production two and will support service department two. Or this could be maybe HR or maintenance. It doesn't matter. Some, some sort of a service department that service the company. And this S2 might service S1, will service P1 and service P2. So the question becomes, how should we allocate those service costs that don't touch the product directly? Well, what we do is we have three methods, we can learn about three methods. I'm going to list them in this session, but we're going to work examples to illustrate how those three methods work. The first method is the direct method. And this is the simplest method. And how does it work? It allocate the overhead directly to the production department. So it goes from the S to the P directly. So we skip there's so the service department don't allocate money to another service department goes right from the service department to the P department. Okay. That's the first one, only to the production. So this is one, one of three, two is the is the step method. And obviously the step method is a little bit more complicated, a little bit more complicated than the direct method. Again, it's one way. Okay. But what's going to happen is the S, the service department could allocate money to the other service department, and then the money could be allocated to the production department. Okay. So what's going to happen is it's a one way. So it's it goes only one way. It doesn't go no interaction in between service department. Okay. And the third method is called the reciprocal method. And this is basically what it assumes the service department will allocate money to the production department, but also the service department allocate money among themselves, then they allocate it to the production department. So this is more complicated from an accounting perspective, but you would say this is going to be the most accurate. I'll say this is the least accurate or least reflective of reality and the step method is someplace in between. So those are the three methods that we're going to be working with. And obviously the best way to illustrate this is to actually work with actual numbers. So in the next session, I will go ahead and work an example, show you how those three methods work. If you have any questions, any comments by all, by all means email me or see me in class or if you're studying for your CPA exam, all means study hard.