The Cannabis Regulations
On June 27, Health Canada provided information on the regulations that will support the newly passed Cannabis Act, as was expected. The four sets of new regulations will be published in Canada Gazette II on July 11, 2018. Trudeau’s government has also announced that the new regulations will come into force on October 17, 2018 – later than expected, but which gives some of the Provinces more time to prepare.
As expected, cannabis will no longer be scheduled as a “narcotic” under the Controlled Drugs and Substances Act (CDSA). In doing so, the CDSA is no longer the empowering Act governing the production and sale of cannabis in Canada; previously, the Access to Cannabis for Medical Purposes Regulations (ACMPR) were the governing regulations and were empowered by other Acts, including the CDSA. Moving forward, the Cannabis Act will now be the empowering Act that governs all matters with respect to cannabis regulation.
The new Cannabis Regulations (we can call them this for now) aren’t available online until they are published in the Canada Gazette II.
The Cannabis Regulations appear to be as restrictive, if not more than, the current ACMPR. While the new regulations introduce a more segmented/tiered approach to facility licensing, the new requirements still place a large regulatory burden on the licence holder. In this way, the regulations are not de-regulating cannabis; rather, cannabis will still be highly regulated and subject to the strongest compliance and enforcement standards seen to date. For some, this may seem like a step backwards from promoting better access to cannabis. However, it remains true to Trudeau’s election promise around keeping cannabis out of the hands of organized crime, and away from minors. In Canada, therefore, cannabis will remain highly regulated in terms of its production, storage, distribution and sales. The difference is that Canadians 19 years and older will soon be able to walk into a licensed retailer and purchase (without prescription) cannabis for “recreational” (non-medical) purposes. No other country (other than Uruguay) has taken these steps at a federal level.
Some of the new changes provide examples of the tighter restrictions. For example, cannabis suppliers will now have to ensure more types of personnel undergo security background checks – including shareholders (above an ownership threshold to be defined), head growers, and directors/officers in parent corporations. Another example is that a Head of Security will now be required for most of the types of facility licences.
Interestingly enough, Health Canada will not only screen Quality Assurance Person qualifications, but they will also do so with the Master Grower (or, Head Grower).
One of the changes that many were surprised to see survive is the allowance for outdoor cultivation, which will be permitted for the first time in Canada. However, clarification is still needed around outdoor growing. Some are interpreting the regulations as only cannabis destined for medical use may be grown outdoors (i.e., adult-use cannabis must be grown indoors). Also, given the security requirements for outdoor cultivation, large-scale operations may turn out to be cost-prohibitive compared to an indoor grow. Also note that some provinces and/or municipalities may choose to ban outdoor cultivation altogether. Over time, we anticipate gaining more clarification from Health Canada around these sections. The devil is always in the details.
Another detail in the regulations is that there is no prescribed limit on THC levels of dried flower; there is only a limit of 1g per pre-rolled joint. This is proposed for both adult-use and medical cannabis.
Perhaps one of the most nail-biting changes was around craft grow. Keeping within the spirit of the original framework proposed by the Task Force, there will now be the allowance of small production centres. In other words, up to 200 square metres of canopy space can be licensed under the so-called “micro cultivation licence”. The security requirements are minimal; a Quality Assurance Person is not required; and the micro processor can supply either directly to a provincial distributor or else to a standard processor (another type of licence). In theory, a small production facility could be managed by a couple of staff, keep their costs down, and supply to the legal market. Given there are many thousands of illegal cannabis suppliers today, the Trudeau Government is hoping this will transition them into the legal market. Cannabis Compliance is already offering entrepreneurs micro production licence applications, which will be ready to submit when the new application process is announced.
Last but not least: genetics. For all new applicants (not existing LP’s), they will be permitted to bring any black-market genetics into their new facility. This will include live plants and seeds. In other words, an illegal grow-op in rural British Columbia could, in theory, apply for a micro production licence, and once the licence is awarded they could bring their own strains and genetics into the new legal production facility. This will be for both micro and standard cultivation licences. Genetics have historically only been available from other licensed producers (or imported from a foreign legal exporter with a special permit, which have been difficult to obtain) – which has meant that for all of the new LP’s hitting the market in the last three years, they pretty much have the same genetics. With the new Cannabis Regulations coming into force this summer, this all changes. (In the first year of the former MMPR regulations which preceded the ACMPR, genetics were permitted in a similar way from designated growers, but this was phased out.) Today, established producers such as Tweed or Aurora, would not be permitted to take in black-market genetics; only new applicants could do this. This will likely mean that existing LP’s will have a very strong interest in either applying for new secondary licences (cooperating with black market growers), or else will have an eye for acquiring unique startup craft operations. If the Cannabis Regulations are indeed passed to allow this (and we expect they will), this will be a massive positive change for the cannabis industry – and will help welcome the black market into the green market.
Cannabis Compliance Inc is the world’s largest cannabis compliance consulting firm, and which is privately owned and based out of Canada. With over 50 full time staff in expertise including cultivation, quality assurance, extraction, finance, sales, recruiting, education and security, our projects span the globe as cannabis regulation is adopted by the international markets. With a 100% success rate in achieving licences since 2004 – and over 60,000 Health Canada applications since 2004 through our founding company NHP Consulting – CCI provides the most efficient and professional compliance solutions on the market today. Contact us to start the conversation.