What’s Up in Weed

Testing, testing: Health Canada mandates pesticide testing for all cannabis destined for sale

• On Friday, Health Canada announced that licensed producers are now required to conduct testing of all cannabis products destined for sale for the presence of unauthorized pesticides.  The regulator confirmed that it would continue to conduct random testing of product samples collected during site inspections as an additional compliance measure.  The announcement follows testing of samples collected from seven licensed production facilities, two of which tested positive for trace samples of unauthorized products. 
• Section 66 of the ACMPR prohibits the treatment of cannabis plants with any product “unless the product is registered for use on marihuana under the Pest Control Products Act”.  A search of the pesticide registry maintained by the Pest Management Regulatory Agency shows that 17 specific pesticides are authorized for use on cannabis.
• While use of those 17 pest control products is permitted, residual levels of those substances must still be lower than the maximum residue limit specified for the product by Health Canada under the Pest Control Products Act. 
• In accordance with their responsibilities under the ACMPR, LPs already submit each lot of cannabis products to a suite of laboratory tests – including tests for microbial and chemical contaminants (such as mould, heavy metals, and bacterial and fungal contamination), and certain pesticides.
• Health Canada indicated that it would provide guidance to LPs in the coming weeks about how to implement mandatory testing.

Bread, milk, and weed: CEO says Loblaws “hasn’t ruled out” selling recreational cannabis

• At its annual general meeting on May 4, Loblaw Companies Limited CEO Galen Weston hinted at an interest in entering the recreational market, saying “you can never predict the future” in response to a question about the company’s interest in selling recreational cannabis.  Weston affirmed, however, that the company remains focused on distributing medical cannabis – in particular, through wholly-owned drugstore chain Shoppers Drug Mart.
• The statement isn’t a shocker to those who have been following Weston’s enthusiasm for the legalized cannabis industry.  Shoppers applied last fall for a licence under the ACMPR to distribute medical cannabis, and more recently, Loblaws announced updates to its benefit plan whereby purchases of medical cannabis by employees for use with certain health conditions would be reimbursed.

Tracking every last gram: Canada can learn from Colorado

• This interesting article suggests that Colorado’s seed-to-sale cannabis tracking system contains loopholes which could allow dispensaries to claim that cannabis is lost, damaged or stolen – and then sell it illegally, pocketing the undeclared proceeds.
• The risk of diversion is one that Canada’s Federal Government has taken to heart in drafting recreational cannabis legislation.  The draft Cannabis Act would permit a federal regulator to establish and maintain a national cannabis tracking system to, among other things, enable the tracking of cannabis and prevent cannabis from being diverted to an illicit market or activity.  This concept is in line with a recommendation of the federal Task Force on Cannabis Legalization and Regulation – which researched the experiences of recreational cannabis jurisdictions such as Colorado – that a recreational cannabis regime include a “seed-to-sale tracking system to prevent diversion”.  The Cannabis Act would also require that any provincial law intended to govern distribution and retail sale of cannabis must obligate vendors to keep appropriate records respecting their activities relating to cannabis, and to take adequate measures to reduce the risk of cannabis that they possess for commercial purposes being diverted to an illicit market or activity.
• Licensed producers must account for all of cannabis they have – down to the leaf – and must provide detailed reports to Health Canada.  Regulatory requirements are so exacting that entire companies have been founded on them.  SkyLaw client Ample Organics Inc., which offers seed-to-sale tracking software designed specifically for the standards of Health Canada and the ACMPR, is one example.

$0: US Department of Justice’s budget to enforce federal law on state medical marijuana laws

• On May 5, the President of the United States issued a statement and signed into law the Consolidated Appropriations Act, 2017 – an omnibus bill authorizing appropriations that fund the operation of the US Federal Government through to September 30, 2017.  The law provides, among other things, that the Department of Justice may not use any funds to prevent implementation of medical marijuana laws by various states and territories.
• This Act’s treatment of state medical marijuana laws is consistent with prior years’ appropriations legislation.  The Consolidated Appropriations Act, 2016 and the Consolidated and Further Continuing Appropriations Act, 2016 contain substantially similar language. 
• Although the 2017 Act offers some comfort to states with medical cannabis regimes, it does not prevent the Department of Justice from using federal funds to enforce federal law – under which cannabis remains a controlled substance unavailable to the general public – on states with recreational cannabis regimes. 
• Colorado’s House of Representatives has endorsed a bill that would allow recreational marijuana dispensaries, manufacturers, and cultivation facilities to reclassify their inventory as medical cannabis due to a change in local, state, or federal law or enforcement policy.

Cheaper over the border: Supreme Court to hear case which could be relevant to the flow of cannabis over provincial borders

• The Supreme Court of Canada will hear an appeal focused on the constitutionality of provincial tariffs that restrict the amount of alcohol an individual may move across a provincial border.  The SCC’s decision could have important ramifications for how cannabis may be traded and transported across provincial borders if recreational cannabis is legalized.
• The appeal, Her Majesty the Queen v. Gerard Comeau, pits the government of New Brunswick against a New Brunswick resident who purchased alcohol (at lower prices) in Quebec in excess of New Brunswick’s import limits and drove it back over the provincial border. Mr. Comeau, a retiree, was charged under the New Brunswick Liquor Control Act for exceeding the limit on alcohol that could be brought into the province. 
• Mr. Comeau has asserted that this restriction is unenforceable because the Constitution Act, 1867 guarantees free trade between provinces: section 121 provides that “All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces”. 
• In contrast, the government of New Brunswick contends that it has the authority to regulate the importation of products over its borders as a principle of federalism, and points to the broad authority of provinces under section 92 of the Constitution Act, 1867 to create laws relating to “Property and Civil Rights in the Province” and “Generally all Matters of a merely local or private Nature in the Province”. The trial judge found in favour of Mr. Comeau and the New Brunswick Court of Appeal refused to hear the province’s appeal. 
• The Economist recently ran a great article discussing the steps provinces are taking to reduce barriers to interprovincial trade – including the Canada Free-Trade Agreement signed on April 7, 2017.
• Although the Comeau appeal arises from a restriction on importing alcohol, its principles could apply to other products that are subject to non-tariff interprovincial trade barriers, possibly eventually including cannabis. 
• The federal ACMPR apply equally in all provinces; cannabis may be produced in any province and shipped to a client in any other without provincially-imposed restrictions.  However, if the draft Cannabis Act is enacted in its current form, provinces will be able to create laws relating to the distribution, sale, and possibly also pricing and taxation of cannabis within their own borders.  While there is evidence of the provinces working together to establish harmonized cannabis legislation, the outcome of Comeau will affect how much negotiating power each province will actually have to restrict the flow of recreational cannabis, if and when it is legalized, over its borders.
• A hearing date for the Comeau appeal before the SCC is tentatively set for December 7, 2017.