Canada: Canada Unveils Its Regulations In Support Of The Cannabis Act

Last Updated: July 20 2018
Article by Jean-Raphaël Champagne and Roxanne Hamel-Bouchard

Last week four regulations intended to govern the application of the Cannabis Act have been published in the Canada Gazette.

Less than a month after the passage of Bill C-45 on cannabis legislation, the federal government released regulations that will apply to the production, distribution, sale, import and export of cannabis by federal license holders. The majority of these rules will apply to products sold for adult use as well as those sold for medical purposes, but a specific type of license and particular rules will continue to apply to sales of cannabis for medical purposes.

Next October 17, when the Cannabis Act and its regulations come into force, cannabis will generally become regulated under the Cannabis Act rather than the Controlled Drugs and Substances Act ("CDSA"). In addition, the Access to Cannabis for Medical Purposes Regulations and the Industrial Hemp Regulations, made under the CDSA, will be repealed while four new regulations will take effect, including two which are briefly summarized in this bulletin: the Cannabis Regulations and the new Industrial Hemp Regulations.

Industrial Hemp Regulations

Industrial hemp is distinguished from cannabis by its weaker content in tetrahydrocannabinol ("THC") content. Indeed, to meet the definition of industrial hemp, the flower heads and leaves of the hemp must not contain more than 0.3% THC, in contrast to cannabis, which often contains more than 12% THC1.

The new Industrial Hemp Regulations made pursuant to the Cannabis Act are similar to the previous regulations under CDSA. The requirement to hold a license to conduct certain regulated activities like the production, sale, import and export of industrial hemp is still in place. In addition, cultivators of industrial hemp are still required to grow only hemp varieties obtained from an approved cultivars.

However, some requirements have been relaxed to take into account the lower risks posed by industrial hemp compared to other varieties of cannabis. In this regard, it is worth noting that the sale of industrial hemp plants (flowers, leaves and branches) to cannabis processors will be authorized in order to provide a source of cannabis products with a low THC content and a high cannabidiol (CBD) content.

It is also worth noting that derivatives (products that are made by processing only the grain of industrial hemp) or products made from such derivatives that are imported, exported or wholesaled will remain excluded from the application of the Cannabis Act if the THC concentration of a representative sample of each lot of the derivative or product is not more than 10 μg/g. In this case, the product is not subject to the rules typically applicable to cannabis or industrial hemp, although it may still be regulated by other regulations depending on its nature and related representations.

Cannabis Regulations

The Cannabis Regulations form the cornerstone of the regulations surrounding the legalization of cannabis in Canada. These regulations provide for the issuance of licences required for cultivating and processing cannabis, the sale of cannabis for medical purposes and analytical testing and research in relation to cannabis. These licences will be subject to various general requirements as well as conditions specific to the activities and sub-activities they authorize. The regulations also allow license and permit holders to import and export cannabis for scientific or medical purposes, as well as industrial hemp.

General licensing requirements

As under the current system, persons who wish to apply for a license from the Minister must first notify the fire department, the police force and the municipality of the area where the proposed operating site in the application is located. One new aspect, however, is that the license holder will be required to appoint an individual as head of security, in addition to appointing a responsible person as previously required. Security clearance standards issued by the Minister remain similar.

Security clearance is intended to prevent risks to public health and safety by, among other things, requiring that an individual who holds such a clearance be present on the licensed premises when activities are conducted by other individuals in an operations area or a storage area. The regulations cite, for example, the risk that cannabis could be diverted to an illicit market or activities.

In addition, the new position of head of security is responsible for ensuring compliance with applicable physical security requirements for licenses requiring enhanced security measures regarding cultivation, processing and sales. These requirements include, in particular, the use of a record to maintain the identity of individuals entering and exiting a storage area, constant monitoring of the premises by visual recording and physical barriers that prevent all unauthorized access to operating and storage areas.

Another novel feature is that Health Canada will require the maintenance of a registry containing numerous pieces of information about key investors with interests in corporations holding cultivation, processing or sales licenses. In addition, the licensees will be required to disclose their key investor information via an annual report to the Minister.

Finally, although manufacturers of prescription drugs containing cannabis are primarily subject to the Food and Drugs Act and its regulations, they will also have to meet certain requirements of the Cannabis Regulations when the drug contains cannabis. In this regard, manufacturers will need to obtain a cannabis drug licence under the Cannabis Regulations. They will also be subject to regulatory physical security measures if the quantity of cannabis sold or distributed to them exceeds 600 kg of dried cannabis per year.

Special requirements

Specific regulatory requirements will apply to most activities authorized under a license. In fact, these requirements essentially reflect what had been announced by Health Canada as part of its Proposed Approach to the Regulation of Cannabis and in the March 2018 document titled Summary of Comments Received During the Public Consultation.

By way of illustration, we note that the new standards for labeling and packaging are very strict. For example, product packaging must be plain and comply with specified features, particularly with regard to logos, colours, brand images, mandatory warnings and the Standardized Cannabis Symbol. As under the current system, the immediate container in which a cannabis product is packaged must be equipped with a security features providing reasonable assurance to the consumer that it has not been opened prior to receipt. As for the label on the cannabis packaging container, it must contain mandatory information about the product and the category of product and specific warnings, all in English and in French, as well as the contact information of the holder of the licence for processing that manufactured the product.

Access to Cannabis for Medical Purposes

The Cannabis Regulations also govern the use of cannabis for medical purposes by substantially reiterating the rules found in the Access to Cannabis for Medical Purposes Regulations which will be repealed on October 17, 2018, on the same date as the Cannabis Act comes into force. Therefore, patients who require cannabis for medical purposes will continue to have access either by using their medical document to register as customers of a licensed seller or by cultivating cannabis plants themselves. Registered patients will be allowed to have a maximum of 150 grams of dried cannabis in their possession in a public place, while the Cannabis Act allows up to 30 grams for any adults aged 18 and older. Note, however, that provincial legislation applicable to each jurisdiction may impose, and in most cases have imposed, stricter criteria.

Holders of licenses to sell for medical purposes will be required to provide reports to the Minister on a monthly basis which include, among other matters, information about the number of registered clients, transfers of clients to other license holders and some statistics such as the average daily quantity of dried cannabis mentioned on medical documents as well as information about health care practitioners who provide medical documents.

The general and specific requirements detailed above outline only a few examples of the numerous rules and standards that are found in the more than 200 pages of the new regulations.

Those interested in entering the industry should carefully review the new rules in order to ensure that they understand the limitations on the activities they are contemplating. As for current licensed producers, we recommend that they initiate a vigorous assessment of their current rules and procedures to ensure a seamless transition of their business under the Cannabis Act and its regulations.

Footnote

[1] Gouvernement du Québec, [Government of Quebec] 2018 [Online]

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.

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