Amendments To Cannabis Regulations Proposed By Health Canada

New changes to Canada's cannabis regulations have been proposed by Health Canada and are subject to consultation and request for comments until July 8, 2024.¹ The amendments come amidst calls from industry and stakeholders to reduce the regulatory administrative burden associated with their participation in the cannabis market. The changes proposed include new requirements for licensing, personnel and physical security measures, production, packaging and labelling, record keeping and reporting.

REGULATORY BACKGROUND

In 2018, Canada's Cannabis Act (the "Act") came into force to govern the production, advertising, distribution, sale, and possession of cannabis in Canada.² The Cannabis Regulations (the "Regulations") created under the Act provide for specific rules in relation to these activities, including requirements regarding licences, packaging and labelling, and physical and personnel security requirements.3 There are also other related regulations and orders governing the cannabis market, including the Industrial Hemp Regulations, the Natural Health Products Regulations, and the Cannabis Exemption (Food and Drugs Act) Regulations.⁴

In December 2022, an expert panel conducted a statutory review of the Act amid rising concerns from industry and stakeholders that the administrative and regulatory requirements under the existing legal framework were too cumbersome. The panel released its final report in March 2024, which recommended that the regulations be streamlined to decrease the administrative burden on cannabis industry participants. In response to the panel's recommendations, Health Canada is proposing a range of regulatory changes in relation to five priority areas, which include licensing, personnel and physical security measures, production, packaging and labelling, and record keeping and reporting.

LICENCES

The Act provides for various classes and subclasses of licenses, such as for cultivation, processing, analytical testing, sale, research, and medical purposes, in order to allow companies to participate in the cannabis market in Canada. Each class and subclass have their own requirements under the Regulations. The federal government is proposing to increase the amount of cannabis that holders of micro-class licenses or nursery licenses could cultivate and process. For micro-class licenses, the permitted processing amount would increase to 2,400 kg of dried cannabis or its equivalent. For nursery licenses, harvesting up to 20 kg of flowering heads would be permitted. Further, proposed amendments would permit the intra-industry sale of cannabis pollen for license holders as a means to promote the development of plant genetics. Health Canada is also proposing to maintain measures introduced during the COVID-19 pandemic, whereby requirements to list the ports of entry and exit on import and export permits were removed. This would afford cannabis and industrial hemp importers more flexibility in using alternate entry or exit ports. Lastly, new enforcement measures have also been proposed under the amendments. Unpaid fees or failing to submit a statement of cannabis revenue for a license as required by the Cannabis Fees Order would serve as grounds for a license suspension.⁵

PERSONNEL AND PHYSICAL SECURITY MEASURES

The Regulations provide for personnel and physical security requirements to prevent against unauthorized access to licensed sites and security breaches. Health Canada is aiming to reduce security-related regulatory burdens by proposing that:

• Visual recording devices and intrusion detection systems would not be required to continually operate and be monitored in indoor and outdoor operations areas where cannabis is not present.
• The requirement to maintain a record of the identity of every individual entering or exiting a storage area be removed.
• Visual recordings of the site perimeter, operations areas, and storage areas need only be stored by the licence holder for a period of at least one year after the day they are made.

PRODUCTION

Two amendments to the Regulations have been proposed regarding production requirements. First, the use of ethyl alcohol would be permitted as an ingredient in certain cannabis products. This includes in inhaled cannabis extracts up to a maximum net weight of 7.5 grams. The proposed amendments provide additional ethyl alcohol quantity requirements for cannabis extracts that are in discrete units and non-discrete units. Additionally, maximum concentrations of 0.5% weight/weight of ethyl alcohol would be permitted in ingested cannabis extracts where the net weight of the cannabis extract exceeds 7.5 grams. Secondly, the proposed amendments would remove the one-gram weight limit requirement for each discrete unit of inhalable dried cannabis products (i.e. pre-rolled cannabis). This would enable license holders to produce a range of sizes of inhalable dried cannabis products.

PACKAGING AND LABELLING

Health Canada is proposing amended requirements for the packaging and labelling of cannabis products packaged for sale at the retail level. First, the lid or cap of a cannabis product container would be permitted to be a different colour from the container itself. This regulatory change is expected to increase the range of cap and container suppliers that licensed processors can obtain materials from, and increase the potential for environmentally friendly packaging product usage. Cut-out windows on the packaging for dried or fresh cannabis products and cannabis seeds would also be permitted under Health Canada's proposal. Additionally, dried or fresh cannabis products, cannabis plants, and cannabis seeds would be permitted to be packaged in transparent containers. Lastly, the government is proposing to remove the 10 mg THC limit for an outermost container of edible cannabis products, so that multiple immediate containers could be packaged together as long as none of them have more than 10 mg of THC each.

The expansion of labelling options is also proposed under the new amendments. Specifically, quick response (QR) codes would be permitted on any container used to package a cannabis product, as well as information inserts and accordion or peel back labels. The QR codes could be used to for any purpose (e.g. product tracking; allowing consumers access to website information, etc.). The font size of cannabinoid and potency information would be increased to as large as the Health Warning Message displayed on cannabis products. Additionally, Health Canada is proposing to remove the potency labelling requirements other than total THC and total CBD for all products. The requirements for equivalency to dried cannabis statements on cannabis product labels and a statement that "no expiry date has been determined" if no stability studies have been conducted on the product are also proposed to be removed. Cumulatively, these changes aim to enable licensed processors to provide greater amounts of information to consumers through their packaging in an accessible and simplified format.

RECORD KEEPING AND REPORTING

Under the existing Regulations and the Cannabis Tracking System Order, a range of record keeping and reporting requirements are set out in relation to the retention of documents and information submissions to the Minister.⁶ To streamline the record keeping and reporting process, licence holders would no longer be required to:

• Record the quantity of any substance that is applied to cannabis, the method of application, or the rationale for the application.
• Submit a notice of new cannabis product to Health Canada for dried cannabis products or fresh cannabis products prior to retail sale.
• Keep records for cannabis cultivation waste or have a qualified individual witness and attest to the destruction of the waste (licence holders would still be required to record the number of whole cannabis plants destroyed, and to have one employee be present and attest to the destruction).
• Provide an annual report to the Ministry detailing the amount of money spent on promotional efforts (licence holders must still retain information related to promotion expenditures for two years).
• Submit information that describes whether any ownership interests or rights held by a key investor were assigned or provided to another individual.

Further, Health Canada is proposing that the requirement for licence holders to report monthly on unpackaged seed be measured by the number of cannabis plant seeds instead of kilograms. The weight of cannabis cultivation waste would also no longer be required to be included in the reporting of the quantity of unpackaged cannabis that ceased to form part of the previous month's inventory process.

OTHER CHANGES TO ASSOCIATED REGULATIONS AND ORDERS

Health Canada is also proposing amendments to Schedule 2 of the Act, the Industrial Hemp Regulations, the Cannabis Exemption (Food and Drugs Act) Regulations, and the Natural Health Products Regulations.⁷ Notably, derivatives made from the processing of plant parts in Schedule 2 or products made from those derivatives would be exempt from the Act's application under the proposals. As a result, derivatives of non-viable cannabis and industrial hemp seeds, roots, and stalks could be commercialized without a licence. The Industrial Hemp Regulations are also proposed to be amended to remove the maximum THC concentration of 10 parts per million for industrial hemp grain derivatives. To align with these changes, the reference to industrial hemp grain derivatives would be removed from the Cannabis Exemption (Food and Drugs Act) Regulations as well as in Schedule 2 of the Natural Health Products Regulations.

NEXT STEPS

The federal government has opened a consultation process on the proposed amendments and is requesting comments by July 8, 2024. Should you have any comments on the proposed amendments and how they may impact your business, you can submit them for consideration.

Footnotes

1 Government of Canada. (2023, June 8). Canada Gazette, Part I, Volume 158, Number 23: Regulations Amending Certain Regulations Concerning Cannabis (Streamlining of Requirements). https://canadagazette.gc.ca/rp-pr/p1/2024/2024-06-08/html/reg2-eng.html

2 Cannabis Act, S.C. 2018, c. 16.

3 Cannabis Regulations, SOR/ 2018-144

4 Industrial Hemp Regulations, SOR/2018-145, Natural Health Products Regulations, SOR/ 2003-196, Cannabis Exemption (Food and Drugs Act) Regulations, SOR/2016-231

5 Cannabis Fees Order, SOR/ 2018-198

6 Cannabis Tracking System Order, SOR 2019-202

7 Cannabis Act, S.C. 2018, c. 16., Industrial Hemp Regulations, SOR/2018-145, Natural Health Products Regulations, SOR/ 2003-196, Cannabis Exemption (Food and Drugs Act) Regulations, SOR/2016-231

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