California Regulators Crack Down on K.U.S.H. Collective Amid License Revocation and Embargo

On October 16, 2023, the California Department of Cannabis Control (DCC) issued a significant response in the state’s ongoing battle against non-compliant cannabis operations by revoking the license of K.U.S.H. Collective, a manufacturer known for producing integrated vaporizers and vape cartridges. The DCC deemed the company’s operations inadequate and unable to guarantee compliance with state regulations.

Reason for License Revocation

The regulatory body cited that K.U.S.H. Collective “failed to demonstrate that cannabis products attributed to being manufactured on the licensee’s premises were in fact cultivated, processed, manufactured, packed, or held in a location duly licensed.” Such measures are mandated under the California Medical and Adult Use Cannabis Regulation and Safety Act (MAUCRSA), which was enacted following the approval of Proposition 64 in November 2016.

In California, only licensed adult-use cannabis manufacturers have the authority to obtain cannabis or cannabis extracts sourced from the regulated market overseen by the DCC. All cannabis products are meticulously tracked within the regulated market via unique identifier (UID) tags, which ensure accountability and traceability.

The Embargo and Its Implications

The DCC not only revoked the manufacturer’s license but also issued an embargo on 194 products associated with K.U.S.H. Collective, sold under brand names including Backpackboyz, Circles, Cloud, and Pow Wow, among others. This decision stems from the DCC’s assertion that the products may be adulterated or misbranded, representing a risk to consumer safety.

David and Jimmy Shin, the owners of K.U.S.H. Collective, received notification of the provisional license revocation on October 15, just one day prior to the public embargo announcement. The inspection, conducted on August 30, revealed alarming non-compliance issues, such as the discovery of approximately 122 pounds of fresh, frozen cannabis lacking affixed UID tags, which effectively rendered them untraceable within the system.

Inspection Findings and Compliance Failures

During the August inspection, the DCC staff noted that entry to K.U.S.H. Collective’s premises had been previously denied, which prevented vital inspections of cannabis goods and company records. Notably, employee records, video surveillance data, and batch production records were unavailable—contraventions of state law requirements.

Additionally, K.U.S.H. Collective’s inventory was found not to exist in the state’s track-and-trace system. Alarmingly, David Shin reported that some products had been taken to another licensed facility without the proper protocol for transferring cannabis products, further illustrating systemic compliance failures.

Subletting and Unlicensed Operations

The situation was further complicated by revelations that K.U.S.H. Collective had sublet part of its manufacturing premises to an unlicensed operator, Alex Liu of Supherb. This arrangement was disclosed during the August inspection and raised serious concerns about unauthorized operations under K.U.S.H.’s license.

Shin indicated that Supherb was intended to bring additional business to K.U.S.H. Collective, yet with Supherb not holding a valid cannabis business license in California, this arrangement was inherently problematic.

Confessions and Acknowledgments

Throughout the provisional licensing review, several admissions from David Shin provided insight into the depth of K.U.S.H.’s non-compliance:

• Shin was unable to produce essential Batch Production Records, claiming they were stolen.
• He admitted a lack of awareness regarding the necessary record-keeping for cannabis products.
• Shin expressed intentions to bring new partners into K.U.S.H. Collective and to sell the existing cannabis license to them.
• He acknowledged accountability for the violations leading to the revocation.
• Shin disclosed hiring unlicensed workers from other businesses and operating outside compliance protocols.

Conclusion

The DCC’s robust actions against K.U.S.H. Collective serves as a critical reminder of California’s stringent cannabis regulations. The inability to maintain compliance not only culminates in severe operational ramifications for businesses but also presents risks to public health and safety. As the industry continues to evolve, adherence to these regulations remains paramount to ensure consumer confidence and safety in the cannabis community.