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Cannabis regulations: Health Canada’s solution to support the Cannabis Act

cannabis regulationsCanada is set to legalize cannabis on October 17, 2018, when the Cannabis Act and its supporting newly-released regulations come into force. At that time, cannabis will cease to be regulated under Controlled Drugs and Substances Act, instead being regulated under the Cannabis Act. Moreover, the Access to Cannabis for Medical Purposes Regulations (the “ACMPR”) and the current Industrial Hemp Regulations will be repealed in favour of the Cannabis Regulations and the new Industrial Hemp Regulations, discussed in more detail below.

The Cannabis Act will provide a comprehensive national framework for restricted access to regulated cannabis—including industrial hemp, as well as health products and cosmetics containing cannabis—and control its production, distribution, sale, importation, exportation, and possession.

Within that framework, new sets of regulations were published on July 11, 2018, that spell out the rules and standards for authorized cannabis production, distribution, sale, importation, and exportation; regulate cannabis products (dried and fresh cannabis, cannabis oil, as well as cannabis plants and seeds); maintain a distinct medical access framework; and set out rules for prescription drugs and medical devices containing cannabis or to be used with cannabis. The Cannabis Regulations deal with access to cannabis for medical purposes, while the new Industrial Hemp Regulations will replace the old regulations currently in place to govern industrial hemp.

Some key aspects of the regulations and the upcoming legal framework are highlighted below.

Licences, permits, and authorizations

The Cannabis Regulations will create six classes of licences that will authorize specific activities with cannabis, both in terms of type and scale. These licence classes are cultivation, processing, sale, analytical testing, research, and cannabis drug licences.

A cultivation licence, for instance, would permit the licence holder not only to cultivate, propagate and harvest cannabis plants but also to sell cannabis to other licence holders and conduct some testing on the cannabis.

There will also be licence subcategories for cultivation and processing activities depending on the scale of the operation. The cultivation subcategories will be standard cultivation, micro-cultivation, and nursery cultivation, while the processing subcategories will be standard processing and micro-processing. While a standard cultivation licence sets no size limit, a micro-cultivation licence will authorize cultivation of an area no more than 200 square metres based on a plant canopy area, and a nursery licence will authorize the cultivation of juvenile plants, and will limit the cultivation of budding or flowering cannabis within a clearly delineated area of no more than 50 square metres, and only for the purposes of seed production. The threshold limit for holding a micro-processing licence is processing of no more than 600 kilograms of dried cannabis per year (or its equivalent as specified in the Cannabis Regulations).

The new Industrial Hemp Regulations set out the requirements for cultivators of industrial hemp, which is cannabis that contains 0.3% tetrahydrocannabinol (THC) or less in the flowering heads and leaves. The new Industrial Hemp Regulations will cover licensing requirements and authorizations. Those who hold an appropriate licence will also require permits to authorize the importation or exportation of cannabis for medical or scientific purposes or in respect of industrial hemp.

Security clearances

Security clearances will be required under the Cannabis Regulations for individual licence holders, directors and officers of the licence holder and any organization that controls the licence holder, as well as those holding key positions identified by licence class (e.g. master grower for cultivation licence holders, quality assurance person for processing licence holders, head of security for all licences holders except research and analytical testing licences). Such clearances will only be granted if the Minister of Health is satisfied that the applicant does not pose an unacceptable risk to public health or safety, including the risk of cannabis being diverted to an illicit market or activity. The regulations will also authorize the Minister to conduct checks on those applying for or holding a security clearance, including after a security clearance has been granted.

General security clearance requirements will apply to all cultivation, processing, and federal sale for medical purposes licence holders. With respect to all licences issued under the Cannabis Act, the Minister will have the discretion to require any individual or occupant of a position to hold a clearance, depending on the activities being undertaken and the potential risks posed to public health and safety.

Cannabis tracking system

As set out in the Regulatory Impact Analysis Statement accompanying the regulations, Canada will implement a Cannabis Tracking System to enable industry and departmental staff to efficiently process and monitor the status of applications. The performance data collected through the system will help inform the establishment of relevant service standards, and will support the objectives set out in the Cannabis Act of preventing diversion by monitoring inventory across the supply chain.

Product standards

Federal license holders will be required to meet certain standards of production and handling to control the quality of dried and fresh cannabis products, cannabis oil, as well as cannabis plants and seeds.

Importantly, the Cannabis Regulations will control the maximum levels of THC—one of the compounds in cannabis responsible for the psychoactive effects—permitted per discrete unit of cannabis based on how the product is intended to be consumed. A maximum of 10 milligrams of THC will permitted in one unit of a cannabis product intended for oral ingestion (including those comprised of dried cannabis, fresh cannabis, or cannabis oil). With respect to dried cannabis products intended for inhalation, whether by smoking or by vapourization, each unit of these product forms must not exceed 1 gram of dried cannabis. Cannabis oil, whether as a product or contained in a cannabis accessory, will be subject to a 30 milligram per millilitre limit on THC concentration.

The legal sale of cannabis edible products and concentrates will be the subject of separate and specific regulations—to be released by October 2019—that will address issues such as quality control, THC limits, portion sizes, and specific packaging and labelling requirements. In other words, these particular forms will not be legalized in October of 2018.

Packaging and labelling

The regulations establish packaging and labelling requirements for what can and must be displayed on the labels of cannabis that will be distributed and sold in Canada, or exported for medical or scientific purposes. With respect to cannabis sold and distributed between licence holders or exported for medical or scientific purposes, basic information requirements will need to be met to allow for the identification of the seller or distributor.

At the retail level, the labels must include safety features and plain packaging requirements: all cannabis products, except cannabis plants and seeds, will need to be packaged in an opaque or translucent immediate container that is tamper-evident, child-resistant, prevents contamination, and in the case of dried cannabis, keeps it dry. The maximum amount of cannabis permitted in a single package will be 30 grams of dried cannabis, or the equivalent in accordance with subsection 2(4) of the Cannabis Act. The regulations are aimed at reducing the appeal of cannabis products for youth and to reduce the risk of accidental consumption of cannabis, all while providing adults with access to quality-controlled cannabis products of known potency.

Cannabis for medical purposes

The new Cannabis Regulations continue to maintain a distinct medical access framework and substantially incorporate the current regulations for access to cannabis for medical purposes under the Access to Cannabis for Medical Purposes Regulations. Individuals who have been prescribed the use of cannabis for medical purposes are authorized to possess and, in some cases, produce cannabis.

Health products and cosmetics containing cannabis

Under the new Cannabis Regulations, prescription drugs with cannabis will remain subject to the requirements of the Food and Drugs Act and Food and Drugs Regulations and will not be subject to the packaging and labelling requirements for cannabis products under the Cannabis Regulations. However, prescription drugs with cannabis will be subject to certain prohibitions in the Cannabis Act related to packaging, labelling, and promotion, which takes into consideration the need for promotional controls for the types of products that may fall within the scope of the Cannabis Regulations.

Medical devices intended for use to consume cannabis and prescription drugs containing cannabis will be subject to restrictions related to cannabis accessories under the Cannabis Act. From a practical perspective, this means that combination products can only be provided to a young person by prescription. The Cannabis Regulations also clarify how devices combined with, or for use with, prescription drugs will be overseen by Health Canada.

By Geoffrey D. Mowatt, Noam Goodman and Cristina Mihalceanu, DLA Piper

Occasional Contributors

In addition to our regular guest bloggers, Inside Internal Controls blog published by First Reference, provides occasional guest post opportunities from various subject matter experts on the topics of risk management and best practices in finance and accounting, information technology, environmental issues, corporate governance, sales/marketing and operations, not-for-profits and business related issues in Canada. If you are a subject matter expert and would like to become an occasional blogger, please contact Yosie Saint-Cyr at editor@firstreference.com. If you liked this post and would like to subscribe to Inside Internal Controls blog click here.
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