Canadian Government Releases Proposed Approach to Cannabis Cost Recovery

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On July 12, 2018, the Government of Canada released its Proposed Approach to Cost Recovery for the Regulation of Cannabis (the “Consultation Paper”).

The purpose of the Consultation Paper is to set out the Government’s proposed approach to recovering federal government costs under the new cannabis framework and to solicit public input and views on that proposed approach.

The Government notes that the implementation of such a cost recovery regime under the Cannabis Act is based on the principle that the public should not bear the costs of government activities when private parties derive the primary benefit from those government activities and services.  As further noted in the Consultation Paper, the Government undertakes cost recovery in a number of areas, including pharmaceuticals, staying in national parks and granting citizenship.

The proposed fees will apply to those cannabis license holders whose activities, in the Government’s opinion, will create the greatest need for public expenditures and who will benefit most from the new regulatory regime.   Specifically, the Government proposes that the proposed fees will only apply to holders of nursery, cultivation, processing and sales licenses.

The chart below sets out the description, proposed cost and proposed administrative service standard to be set for the Application Screening Fee, Import/Export Permit Fee and Security Screening Fee.  The chart also sets out to whom the fees are applicable.

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As seen in the chart, certain discounts are proposed for some fees for nurseries, micro-cultivators and micro-producers, in addition to exemptions for licensed holders who sell exclusively for medical purposes.  The Government has indicated that it is trying to balance full cost recovery against two important policy objectives; the first being support for a diverse, national cannabis industry that includes smaller entities and the second being to continue to ensure that individuals who have authorization of their healthcare practitioner have access to cannabis for medical purposes.

In addition to these specific fees, Health Canada is also proposing to implement an Annual Regulatory Fee (the “ARF”) to recover the costs of the cannabis regulator program that are not covered under one of the previously described fees.  Details of the ARF are set out in the chart below.

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The ARF will have to be paid in full each year before activities can commence or continue.  It is proposed that the calculation of the ARF (which uses gross revenue) will be verified against data submitted by the licensee to the Canada Revenue Agency.  Any over-charges or under-charges will be corrected via an adjustment to the fee in the following year.

In addition to the fees themselves, also noteworthy from the Consultation Paper is the fact that the Government has indicated that it does not intend to limit the number of market participants (licensees) and expects that it will process approximately 200 licenses per year.

Consultations on the proposed fee regime will be held from July 12, 2018 to August 13, 2018.  This will be the only window for public input before the fees are implemented through a ministerial order which will be published in the Canada Gazette Part II shortly after the coming into force of the Cannabis Act and its regulations.

If you wish to submit feedback it can be done via an online consultation portal at https://www.canada.ca/en/health-canada/programs/consultation-proposed-approach-cost-recovery-cannabis.html.

Submissions can also be made in Microsoft Word or Adobe PDF format and emailed to cannabis@canada.ca  or mailed to

Cannabis Legalization and Regulation Branch
Health Canada
Address locator 0602E
Ottawa, Ontario K1A 0K9

A full copy of the Consultation Paper can be found here.

 

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