Canada: Framework For The Legalization Of Cannabis In Canada Now Open For Comment

Last Updated: December 4 2017
Article by Anita Nador and Josh Rosen

The Canadian government recently published its proposed excise duty framework for cannabis products and its proposed approach to the regulation of cannabis that will underpin its forthcoming Cannabis Act. The Act is best known for its provisions that will legalize and regulate non-medical cannabis. The consultation papers provide valuable guidance to industry participants on how the Canadian government envisions the new regime. Specific attention is paid to the following key areas: licensing, permits and authorizations; security clearances; cannabis tracking; cannabis products; packaging and labelling; cannabis for medical purposes; and health products and cosmetics containing cannabis. Both proposals are currently in the public consultation stage with comments due on December 7, 2017 and January 18, 2018, respectively.

Gowling WLG Focus

The Cannabis Act has passed third reading in the House of Commons and will now advance to the Senate for review. The Act, intended to come into force in July 2018, provides legal access by adults to non-medical cannabis and sets out provisions to control and regulate its use, production, distribution and sale. This Act is in addition to the existing Access to Cannabis for Medical Purposes Regulations (ACMPR) under the Controlled Drugs and Substances Act, which, subject to some coordinating amendments with the Act, will remain in force. 

In anticipation of the coming into force of the Act, the Canadian government has published guidance on its proposed excise duty framework for cannabis products and its proposed approach to cannabis regulation. Both are currently in the public consultation stage with comments due on December 7, 2017 and January 18, 2018, respectively. 

The guidance from the Canadian government on excise duty and regulation of industry participants provides welcomed insight into how the government envisions the cannabis industry under the new regime. Below we summarize and highlight the more practical implications of the government's points of emphasis.

Proposed Excise Duty Framework

A new excise duty framework on cannabis will be introduced as part of the existing Canada Revenue Agency (CRA) administered legislation that currently applies excise duties on tobacco, wine, and spirits. 

Applicable to all cannabis products

With limited exemptions, the excise duty will apply to all products available for legal purchase, including fresh and dried cannabis, cannabis oils, and seeds or seedlings for home cultivation, and will be in addition to any other taxes for products, for example GST and HST. The federal government intends to coordinate duty rates with federal-provincial-territorial taxation.

The excise duty will also apply to cannabis for medical purposes unless produced by an individual (or a designated person) for the individual's own medical purposes.

Payable by federal licensee

The excise duty will be payable at the time of delivery to the purchaser. The last federal licensee in the supply chain who packaged the cannabis product for final retail sale will be liable to pay the applicable excise duty. Licensees will have monthly reporting obligations.

Additional licences from CRA will be required

Health Canada-licensed cultivators and manufacturers of cannabis and cannabis products will be required to obtain a cannabis licence from the CRA for reporting liability purposes, regardless of whether they have excise duty liability. The licences will be for two years and will not be automatically renewable. A new licence will need to be applied for at least 30 days prior to expiration of an existing licence. Licence requirements include submission of a business plan, proving sufficient financial resources and providing acceptable security to cover one full reporting period, with a minimum of $5,000 and a maximum of $5 million.

CRA stamp will be required on all products

Similar to the tobacco stamping program, all cannabis products that will be removed from the premises of a federal licensee to enter into the Canadian market will be required to be packaged for sale at the retail level and have a CRA-issued stamp affixed to the product. As provincial/territorial duty rates may differ the CRA stamp will be specific for a market and product diversion will be subject to penalties.

Proposed Regulatory Framework under the Cannabis Act

The regulations more specifically outline licensable activities and provide some clarity as to how the government will deal with product approvals and authorizations. The stated goal is to create an industry that can ultimately replace illegal activity with quality-controlled cannabis and accommodate both large and small players. 

Licensing

The proposed framework outlines a licensing system that covers a number of cannabis-related activities: cultivation (standard, micro, industrial hemp and nursery); processing (standard and micro); public sale (medical and non-medical); analytical testing; research; and import/export. All licences will be valid for up to five years. Each licence class sets out requirements related to: notice to local authorities; validity period; location; physical security; personnel security; good production practices; and record keeping and reporting. 

While the government offers important guidance on the licensing regime, it remains silent on timelines for licence approvals and amendments to licences. This is important to ensure continuity of a business especially in the current environment of collaborations and mergers and acquisitions in this industry.

Restrictions on public sale: Public sale includes sales to adults through online, phone, or mail order in provinces and territories that have yet to enact distribution and sale laws. Where provinces and territories have established frameworks, each jurisdiction will oversee its own regime. Ontario, for example, has announced that it will only permit online sales through its control board.

Import and export: Import and export is limited to the import and export of cannabis for medical or scientific purposes, or in respect of industrial hemp.

Indoor/outdoor cultivation: All licence classes will permit indoor and outdoor cultivation. Outdoor growing, while limited by climate, is a new development put forward by the government that could significantly reduce costs for producers and enable smaller growers to participate in the market. Storage and processing must be indoors.

Security: The government will establish physical security standards to mitigate the risk of cannabis being removed or stolen from a licensed site or being diverted during transportation. 

As part of the compliance measures, Health Canada will require licensees to submit copies of standard operating procedures and records relating to age verification and geo-fencing processes.

Personnel security rules will not require the designated "responsible person in charge" or "alternate person in charge" to be present at all times when employees are present in a room with cannabis. Instead of that individual being present at all times, producers will be required to have one individual with security clearance on site during normal business operations. 

The number of individuals requiring identification and security clearance will increase. Anyone in a key position (i.e. a responsible person, the security chief, the master grower and the quality assurance person) or in a position to direct or control the licensed organization (i.e. directors and officers of the organization and any parent company, major shareholders and the owner of the cultivation site) will now need to be identified and hold valid security clearance.

The government will seek consultation on whether to allow individuals with histories of non-violent, lower-risk criminal activity (for example, simple possession or small-scale production) to participate in the industry and obtain security clearance. 

Security clearances will be portable between licensees. This will enhance mobility of personnel who already obtained security clearance within the industry and will benefit both employers and employees.

Tracking 

To prevent diversion into the illegal market, a government-administered national online tracking system will monitor cannabis throughout the supply chain. Any person authorized to conduct activities with cannabis will be required to report into the tracking system. The Minister of Health will have authority to share information with other governmental authorities.

Products

The new framework expands on the range of products currently covered under the ACMPR. It will continue to allow cannabis oil capsules, oral sprays and topical cannabis oil while adding a range of product dosage forms for dried and fresh cannabis, including pre-rolled cannabis and vaporization cartridges containing dried cannabis.

At the outset, the proposed regulations will limit cannabis sales to dried cannabis, cannabis oil, fresh cannabis, cannabis plants and cannabis seeds. The aim is to expand the legislation to include edibles and concentrates within a year of the Cannabis Act coming into force. Among the concentrates slated for legalization in 2018 are vaping solutions. 

Packaging and labelling

The government proposal borrows extensively from tobacco regulations when it comes to packaging and labelling rules for cannabis. Packaging will be required to be tamper-evident and child-resistant, contain prominently displayed health warnings akin to tobacco products and limit the use of colour, graphics and brand elements (including a standard font size for brand elements in line with other information on the package). 

Baseline labelling standards will be uniform for both medical and non-medical cannabis products, with additional client-specific information required for cannabis products intended for medical purposes indicating that the individual is authorized to possess prescribed amounts that may differ from legal limits. 

ACMPR still in force

The existing medical cannabis regulations of the ACMPR remain in place, save for a couple of caveats designed to align the existing legislation with rules for non-medical use, improve patient access and minimize the risk of abuse of the system.

One of the proposed changes to the current legislation introduces the option for patients to request the return or transfer of their medical document from one federally-licensed seller to another. This will be relevant where a patient cancels a registration or wishes to change its supplier and/or where mergers and acquisitions alter the composition of licensed sellers. It is recommended that sellers develop a consent form that permits them to transfer a patient's medical documentation and registration between entities.

In addition to the above, the new framework will do away with the 30-day limitation period for multiple orders that would result in more than a 30-day supply.

Health products and cosmetics with cannabis

Product authorizations: The proposed framework maintains Health Canada's scientific, evidence-based approach to oversight of cannabis health products that are approved with health claims. 

With some modifications, the current regulatory framework for human and veterinary product authorizations will apply to cannabis products, including prescription and non-prescription drugs, natural health products, medical device and cosmetic authorizations.

Products with indications requiring practitioner oversight (for example, if a drug has dependence and/or addiction potential), will be added to the Prescription Drug List (PDL). Substances included on the PDL are limited to sale by prescription only.

Products with low levels of THC and CBD that are deemed safe for effective use without practitioner oversight will be permitted for sale without a prescription. 

Natural health products (NHP): On the coming into force of the Cannabis Act, more products that do not require medical practitioner oversight and do not exceed 10 ppm THC will qualify under the NHP regulatory framework provided they demonstrate safety and efficacy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
16 Jan 2018, Seminar, Birmingham, UK

Join Gowling WLG's pensions team as they explain some of the biggest challenges facing trustees and employers in the coming year and provide practical ways of dealing with them.

23 Jan 2018, Seminar, London, UK

Join Gowling WLG's pensions team as they explain some of the biggest challenges facing trustees and employers in the coming year and provide practical ways of dealing with them.

25 Jan 2018, Seminar, Birmingham, UK

2018 is set to be another big year in employment, with employers set to face new challenges and responsibilities. At our event, looking ahead to next year, we will be discussing four key issues you might face in 2018, providing useful tips and answering your questions.

 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions