DCC METRC Discrepancies and Cannabis Embargoes: Can Inventory Be Saved?

A mismatch between physical cannabis inventory and California’s track-and-trace records can lead to an investigation, a notice to comply, or an embargo. But a discrepancy is not a diagnosis. The key questions are what the records actually show, whether the products have a lawful source, and whether the problem can be documented and corrected under the applicable rule.

Why do METRC discrepancies matter?

Track-and-trace records are used to account for the movement of cannabis through the regulated supply chain. Inaccurate identifiers, unrecorded transfers, mother-plant and clone histories, or errors in package conversions can create legitimate regulatory concerns. They can also create confusing records that require reconstruction rather than speculation.

The legal consequences depend on the particular failure. Under title 4, section 17801.5(a), an embargo may be imposed on probable cause that goods are adulterated, misbranded, or otherwise cannot lawfully be sold. A notice should identify the affected items and the asserted legal basis. The licensee should resist treating every inconsistent entry as proof that every plant or product is unlawful.

How should a licensee reconstruct inventory?

Start with a physical count and a preservation snapshot of existing records. For each affected identifier, assemble source manifests, transfer dates, package histories, mother-plant and clone records where applicable, waste entries, photographs, and employees’ firsthand explanations. Prepare an item-level reconciliation table that links the agency’s disputed entry to the best available source documents.

The objective is to make the explanation independently verifiable. A general statement that “METRC was wrong” is much less persuasive than a dated audit trail showing which entries diverged, why, and what contemporaneous evidence supports the correction.

Can a corrective plan lift the embargo?

Section 17801.5(d) allows a written plan addressing the embargoed goods and underlying issues. Approval requires the DCC to determine that the plan resolves the issue and applicable rules can be satisfied. A useful plan states which records can be reconciled, which goods remain disputed, what operational controls will change, and how the DCC can verify completion.

However, the rule forbids unilateral correction or destruction while the embargo remains in place. Obtain the required written approvals before altering affected goods, labels, tags, or disposition. A separate remediation process under section 17305 may be relevant to some failed product batches, but it is not a substitute for an embargo-specific authorization.

When is a reconciliation not enough?

Section 17801.5(i) creates a critical limit: cannabis from an unlicensed location or an unlicensed source cannot be corrected and must be destroyed. This makes source documentation central. A licensee who can reconstruct a lawful chain of custody may be confronting a different issue from a licensee unable to establish lawful origin. The records—not just the labels attached to an allegation—must drive that analysis.

What does a durable compliance fix look like?

A good response goes beyond correcting past entries. Adopt defined responsibilities for entry review, daily reconciliation, exception escalation, tag control, and training. Preserve evidence of implementation. Those measures can help address the agency’s concern about recurrence, though the DCC decides whether a particular corrective plan satisfies the embargo rule.

Frequently asked questions

Does every METRC mismatch require destruction?

No. Outcomes depend on the legal basis, actual sourcing, and whether a compliant correction is available. Some unlicensed-source or location findings require destruction.

May employees move goods under embargo to perform an audit?

Do not assume so. Movement and other actions remain subject to the embargo restrictions and necessary written authorization.

What is the most important attachment to an embargo response?

Often it is an accurate, comprehensible inventory reconciliation with the underlying primary records—not an unsupported narrative.

Building an auditable record

A discrepancy case is won or lost in the detail: affected IDs, provenance, timelines, and credible corrective steps. Build an auditable record before proposing a remedy.

Primary authorities: Cal. Code Regs., tit. 4, §§17801.5, 17305.

Related reading: California Cannabis Inventory Audits: How a Metrc Discrepancy Becomes an Enforcement Case and DCC embargoes and destruction hearings.

About Baghoomian Law: Baghoomian Law represents California cannabis businesses in licensing disputes, DCC and DCR enforcement actions, and administrative litigation. This article provides general information, not legal advice. Legal outcomes depend on the facts and the law in effect at the time.