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The Growth of Canadian Licence Holders in International Trade

Written by Vanessa Bairos | Project Manager, CannDelta | May 28, 2020

Here is what you need to know about the international trade of cannabis, including import/export laws in Canada, and the opportunity for licence holders.

For cannabis licence holders (LHs) in Canada, the inability to get product to market is a looming reality, which is due to both an over-supply issue and the slow roll-out of the provinces’ retail programs nationwide. This has prompted Canadian LHs to seek opportunities in the global marketplace to move more of their product faster. However, the international trade of cannabis is permitted in very few countries but as medical cannabis. Australia, Columbia, Germany, Israel, and South Africa are ramping up their import/export activity of medicinal cannabis as a legal framework of regulation and international trade begins to develop worldwide. Globally, the medical cannabis market has a projected worth $44 billion USD by 2024. Canadian cannabis producers have a long head start on capturing that potentially multi-billion-dollar market share, but the international competition may be gaining on Canada’s legalization advantage. Canadian companies that have been able to export medical cannabis internationally they have waited typically 90 days or more to be issued either directly or through subsidiaries used as an avenue to enter the global marketplace. Import and Export Permits The international movement of cannabis products falls under the umbrella of three United Nations drug conventions. Importing and exporting cannabis restrictions in Canada are set out by the Cannabis Regulations. Licence holders may import and export cannabis only for medical or scientific purposes. Importing and exporting cannabis for medical or scientific purposes requires a permit from Health Canada for each shipment that is tied to the port of entry. Each application is assessed on its merit, and Health Canada’s general policy is to issue import and export permits in limited circumstances, such as:
  • Importing starting materials (e.g., seeds, plants) for a new licence holder;
  • Exporting cannabis products to another country that has a legal regime for access to cannabis for medical purposes; or
  • Importing or exporting small quantities of cannabis for scientific purposes (e.g., research or testing).
Before issuing an import or export permit, Health Canada considers the following:
  • Canada’s obligations under international treaties;
  • Whether the application is consistent with the relevant provisions in the Cannabis Act and its regulations;
  • Whether the import or export will be used solely for medical or scientific purposes;
  • In the case of exports, whether the country of final destination has issued an import permit;
  • Whether there are risks to public health given that imported products are not subject to the same strict production standards or Health Canada inspections;
  • Whether there are risks to public safety and security, including the risks of diversion; and
  • For the import or export of drugs containing cannabis, whether import/export requirements of the Food and Drugs Act and its regulations have been met.
Canada’s Position on Importing/Exporting Health Canada issued 17 import permits with a 30.7 kg total quantity of CBD imported to Canada, in 2017. That rose slightly to 44.9 kg from 30 import permits in 2018. To put things in perspective, Germany imported 6700 kg of cannabis flowers for medicinal purposes in 2019. The combination of minimal import activity and there being no commercial imports for THC or CBD products for medicinal purposes, there is a perception that Canada’s federal government is protectionist against allowing mass imports and exports. However, Co-Founder and CEO at Materia, Deepak Anand “think[s] that the regulator [Health Canada] is just being cautious. When the regulator starts to see creative plans and companies that are licensed in jurisdictions around the world that might not have a robust regulatory framework in place, it puts the regulator in a position of extreme degree of uncomfortability.” In addition to protecting the health and safety of Canadians, Health Canada’s goal as the regulating authority includes preventing the diversion of cannabis into the illicit market, however with the number of licence holders approaching 400, the combination of oversupply and shortage of market demand could lead to diversion into the illicit market from the legal medical to international recreational channels. This can occur due to international treaties limiting any imports or exports if it contains tetrahydrocannabinol (THC), emphasizing that THC must remain in the medical channel. This would ensure the regulators are cautious in their approval of import permits. Canada’s legalized cannabis industry is largely made up of recreational consumers, with a limited medical cannabis program in comparison, which begs the questions: what and why are you importing? Unlike in Canada, there is no domestic cultivation in Germany yet causing its current market to rely heavily on imports. Canadian companies who chose to import would need to strongly articulate their need for the import to the regulator, along with a robust plan for the prevention of diversion and exploitation of cannabis. Exports of medical cannabis from Canada in 2018 soared as Canada’s largest licensed cannabis companies continued to establish footing in the global marketplace. Shipments of dried cannabis nearly tripled from 500 kg to 1460 kg in 2018. Exports of medical cannabis oil more than doubled in 2018 to 920 litres from 430 litres in 2017, ranking Canada third in global exports and first in cannabis flower. Since Canada is a signatory to three international treaties that prohibit movement of recreational cannabis, Health Canada has the obligation to restrict movement of cannabis between countries for medical and scientific purposes. The United Nations (UN) has a conservative stance on drugs and until the UN or the World Health Organization (WHO) reclassify cannabis and THC-containing products outside of the international treaties scope, trade on cannabis will be limited. As the global leader in the cannabis industry, Canada needs to support their LHs in establishing global partnerships with aiming to serve the medical markets, encouraging the UN and WHO to revisit their stance on diluting controls on cannabis. Nonetheless, Canadian LHs are positioning themselves for international trade by securing Good Manufacturing Practices (GMP) certification recognized in the European union (EU-GMP), largely recognized as the global gold standard for Good Manufacturing Practices.  This allows our Canadian LHs to stand at the forefront of the industry and continue to be a global leader on a larger playing field. Canadian Licensed Holders with EU-GMP Have A Huge Advantage In order to become a major player in the global marketplace, Canadian licence holders are adding international credibility by achieving one of the highest levels of quality certification to gain leverage over their competitors. To date, only a handful of licence holders have secured EU-GMP certification in Canada with the most recent being Tweed Inc. (Canopy Growth Corp.), Natural MedCo Ltd., Northern Green Canada Ltd., Tilray Canada Ltd., Aphria Inc. and MedReleaf Corp. Obtaining this high level of certification gives these companies a massive competitive advantage in exporting medical cannabis to European destinations such as Germany. Other Canadian LHs such as The Valens Company are on the verge of international deals as the team early this month entered a five-year distribution agreement with Australia’s largest medicinal cannabis distributor Cannvalate Pty Ltd. Many countries who come onboard with medical cannabis laws are accepting the EU-GMP standard as it is the same standard used for pharmaceutical grade medicine. Canadian LHs see EU-GMP certification as their ticket into the global marketplace, such as Aleafia Health. Aleafia Health Inc.’s subsidiary, Emblem Germany GmbH submitted its application to German regulators for EU-GMP certification on May 7, 2020.  Aleafia Health’s CEO, Geoff Benic considers the EU-GMP application submission as a chance for their “vertically integrated health and wellness company to be on the forefront of medical with no higher standard than EU-GMP.” Aleafia Health, like other LHs, is breaking into the German cannabis market as it is the leading player in the EU. Medicinal cannabis has been allowed in Germany since 2017, but due to a lack of domestic cultivation Germany leans heavily on imported cannabis, mainly from Canada.  The market for medicinal cannabis in Germany could be worth roughly €7.7 billion ($11.7 billion CAD) by 2028 and €58 billion ($88 billion CAD) for all of Europe. As the global leader and first G7 nation to legalize cannabis federally, Canada can maintain its global footing by ensuring mass export to other global marketplaces. While the US will certainly represent stiff competition in the coming years, Canada also needs to position itself in a stronger position than other countries such as Portugal and Australia, who are gearing up to become cannabis production powerhouses serving the EU. Since Portugal and Australia’s climate are ideal for outdoor cultivation, Canadian LHs such as Aleafia Health are seeking to export cannabis extracts such as oils, capsules, tinctures and vapes as opposed to strictly cannabis flower to stay competitive. Deepak Anand, Co-Founder and CEO of Materia Ventures, agrees. “Germany is probably one of the few countries that has a medical cannabis market within Europe that still currently remains heavily skewed towards flower in terms of sales although we have begun to see a change in recent months based on latest data. Some newer European countries coming online are moving away from dried flower and jumping straight into extracts.” – Deepak Anand, Materia Besides the cost factor associated with EU-GMP certification, Canadian LHs need to determine the rationale behind their motivation for certification. “EU-GMP is often viewed as the holy grail however it is only the first step in entering certain markets. Stability is another area companies looking to sell into these markets need to very quickly familiarize themselves with.” – Deepak Anand, Materia By entering trade with European countries, there is another layer of regulatory landscape that they will need to abide by in order to serve those international markets. With Canada’s cannabis regulations and compliance led by Health Canada, health and safety is a main priority with efforts that should be commended. “To control, regulate and manage like Health Canada does, is a massive undertaking and I’m not sure that there’s any other government out there yet to take a controlled substance, legalize it and manage it like the Canadian government has.” – Geoff Benic, Aleafia Health Canadian LHs who are positioned or are in the process of positioning themselves for mass export, specifically with EU-GMP certification will have a competitive advantage in the cannabis global marketplace. With the review of the Cannabis Act coming up in October of this year, hopes of discussion and changes around international trade laws continue. However, as this government has positioned itself with a hands-off approach regarding foreign trade and with Trade Commissioner Services only available to medical cannabis companies on a case-by-case basis, changes or relaxation around cannabis international trade are still in the far future.

CannDelta is Here to Help

If you are a licence holder looking for support in import/export, and/or GMP certification, contact CannDelta for a free consultation on how best to navigate the Health Canada framework to access international markets. CannDelta is a Toronto-based regulatory cannabis consulting company that can be reached at info@canndeltav2:8890 or (416) 535-1935 & toll free at 1 (877) 274-6777.

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