Legal Perspective: Inside Canada’s New Cannabis & Hemp Regulations

Article by Robert Hoban, Cannabis Now

Canadian regulations Cannabis Now Photo ScazonCURRENT EVENTS Legal Perspective: Inside Canada’s New Cannabis & Hemp Regulations As Canada moves towards legalizing cannabis for adult use, the government is in the process of setting up new regulations for adult-use cannabis, medical cannabis and hemp. These regulations are complicated, and they also will impact Canadian cannabis exports and international investment opportunities. Three lawyers explain what you need to know. ByRobert Hoban

Access to medical cannabis in Canada has been permitted since 1999. The current Canadian framework allowing Canadians access to medical cannabis is found in the Access to Cannabis for Medical Purposes Regulations (the “ACMPR”), which has been in place as of Aug. 24, 2016, and sets out the current legal structure of Canada’s evolving medical cannabis framework. Because legislators and regulators in Canada are currently changing the country’s medical cannabis laws, it is worth examining where the industry stands today.

Adult-Use and Medical Cannabis in Canada

Canada’s proposed adult-use law is designed to “keep cannabis out of the hands of children and youth and keep profits out of the hands of organized crime.” In May 2017, Health Canada committed to streamlining the medical license application process to enable increased production for medical purposes, also ensuring supply meets demand once the adult-use legislation is enacted. As of late 2017, approximately 200 applications for a medical license are close to being issued a license. What these measures would suggest is that Health Canada continues to focus on reducing the scale of the illicit cannabis market and aligning its approach with regulations, “the existing evidence of risks to public health and safety, and its approach to other regulated sectors.”

Health Canada is the Canadian federal department responsible for licensing and overseeing the commercial medical cannabis industry, and registering individuals to produce cannabis for their own medical purposes. Under the licensing process, Health Canada can authorize each Licensed Producer (known as an “LP”) to cultivate, process, sell, import/export and other related activities, and Licensed Dealers to test, transport and deliver cannabis as well as sell to authorized persons, among other related activities.

As part of the election promise to legalize cannabis, the Liberal Party of Canada introduced into the House of Commons “Bill C-45” on April 13, 2017, which, once passed, makes cannabis use legal in Canada and amends other related acts, such as the criminal code and the Controlled Drugs and Substances Act with respect to cannabis. Bill C-45 is currently in the Senate for approval, the final review process prior to a bill receiving Royal Assent and becoming law. The intention of the Canadian federal government is that Bill C-45 receive Royal Assent during the summer of 2018.

According to section 158(1) of the proposed law, a Licensed Producer authorized to cultivate, process and sell cannabis under the ACMPR for medical purposes is deemed to be a licensee issued under section 62 of Bill C-45. This means that ACMPR medical cannabis LPs are also automatically permitted to grow and sell non-medical cannabis. In addition, the regulations for the adult-use industry — released in November 2017 — outline a framework to permit smaller scale licenses, known as micro licenses to engage in micro-cultivation, micro-processing, and sales, promoting a craft cannabis market in Canada. Until the final regulations are published, the application process for micro licenses remains unclear, as does the definition of “micro,” with possible defining considerations including canopy space, plant count, square footage of grow space, gross revenue and so on.

Under the proposed regulations, each of Canada’s 13 provinces and territories are tasked with implementing a distribution and retail sale framework for the sale of cannabis for non-medical purposes. If a province or territory has not created the above framework by the time the bill is enacted, the regulations will allow the Canadian federal government to implement a mail order system in that province or territory.

Hemp in Canada

There are many varieties of the cannabis plant, and hemp, also called industrial hemp, refers to the varieties of Cannabis sativa L. which typically contains less than 1 percent tetrahydrocannabinol (or THC). Although cannabis is a controlled substance in Canada, there are exceptions, including medical cannabis use and industrial hemp, under the Industrial Hemp Regulations (IHR).

The IHR defines Industrial Hemp as “the plants and plant parts of the genera Cannabis, the leaves and flowering heads of which do not contain more than 0.3 percent THC”, and permits certain activities with respect to hemp for commercial purposes through a licensing system. However, current licenses granted under the IHR expire in the calendar year they are issued.

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