The federal government has taken steps towards a second wave of cannabis legalization by announcing a set of proposed rules governing the production and sale of cannabis edibles, extracts, and topical body products, and initiating a 60 day public consultation process, including in particular with respect to Indigenous peoples.

The first wave of legalization came into effect October 17, 2018, and was limited to fresh and dried cannabis, oil, plants, and seeds.  The demand for legal edible and topical cannabis products is expected to be high, presenting major opportunities for well-positioned industry players.  Now until February 20, 2019, is the time to consider the proposed new rules and have your voice heard regarding what is expected to be a significant component of Canada’s cannabis industry.

What’s in the Proposed Rules?

Consistent with the purposes set out in Section 7 of the Cannabis Act, the proposed rules are aimed generally at promoting public safety and displacing the illegal cannabis market.  The government has proposed an amendment to Schedule 4 of the Cannabis Act to include three new classes of cannabis that can be legally sold by federal licence holders and provincially and territorially authorized distributors and retailers. The three new classes would be as follows:

• edible cannabis – products containing cannabis that are intended to be consumed in the same manner as food (i.e. eaten or drunk);
• cannabis extracts – products that are produced using extraction processing methods or by synthesizing phytocannabinoids; and
• cannabis topicals – products that include cannabis as an ingredient and which are intended to be used on external body surfaces (i.e. skin, hair, and nails).

The government has also proposed amending the Cannabis Regulations to establish new regulatory controls including restrictions on product composition and ingredients, tetrahydrocannabinol (“THC”) limits, and new requirements pertaining to packaging and labelling, good production practices, and record keeping.

Some highlights from the proposed regulations:

• THC Limits:
  • Edibles – 10 milligrams of THC per discrete unit and per package.
  • Extracts – 10 milligrams of THC per discrete unit and 1,000 milligrams (1 gram) of THC per single package.
  • Topicals – 1,000 milligrams (1 gram) of THC per package.
• Composition and Ingredients:
  • Must be “shelf stable” and cannot require refrigeration or freezing.
  • Naturally occurring caffeine in items like chocolate, tea, or coffee is permitted, but the use of caffeine as an additive is prohibited.
  • Extracts can contain flavouring agents, but not sugars, sweeteners, or sweetening agents.
  • Use of meat, poultry, or fish products is banned, unless it is dried by someone authorized under provincial or territorial law to do so.
  • Topicals cannot contain any ingredient that may cause injury to the health of the consumer when the product is used as intended.  Producers of topicals are advised to consult Health Canada’s Cosmetic Ingredient Hotlist—a list of substances that are prohibited or restricted in cosmetics.
  • Forms that pose a greater risk to health, such as eye drops, needles, or abrasives will be prohibited.
• Packaging:
  • Plain packaging and labelling requirements currently in place for cannabis products will also apply to edibles, extracts, and topicals.  These requirements include the standard cannabis symbol, a health warning, a listing of THC and cannabidiol (CBD) content, and child-proof packaging.
  • Additional requirements include a list of ingredients, the common name of the cannabis product, an indication of the source of an allergen or gluten or that sulphites have been added, a best-before date (only for edibles expected to deteriorate in 90 days or less), and a cannabis-specific nutrition facts table.
  • Cannot advertise flavours that appeal to youth, such as dessert or confectionery flavours.

Smaller Operations

The government projects that over the next decade, 90% of licence holders in the Canadian cannabis industry will meet the definition of “small business” (defined by the Treasury Board of Canada Secretariat as “any business, including its affiliates, that has fewer than 100 employees or between $30,000 and $5 million in annual gross revenues”). Recognizing the needs of smaller operations, the proposed rules include alternative, less onerous compliance approaches for small producers.  For example, holders of micro-processing licences will be permitted to produce, package, and label edibles, extracts, and topicals while adhering to somewhat reduced physical security requirements as compared to standard processing licence holders.

Smaller operators will want to pay close attention to these alternative compliance frameworks as they will likely reduce necessary up front capital expenditures and facilitate more expedient entry to market.

When Can We Buy?

Folks may have to wait approximately 10 months before they can start munching.  Edible and topical cannabis products are expected to hit the legal retail market no later than October 17, 2019.

What’s Next?

This is just the first step in the process of legalizing edibles and topicals. As noted, there is currently a two-month public consultation period to discuss the proposed rules, led by Health Canada.  Consultation is expected to include bilateral meetings with representatives of all provincial and territorial governments, as well as engagement with Indigenous governments, organizations, and communities across Canada. Members of the public can provide feedback online or by email or mail. Health Canada will also be hosting round  table discussions throughout the country.  The consultation period began December 20, 2018 and will close February 20, 2019.

Want More?

If you have questions about setting up your own business or moving your existing business into the cannabis space, feel free to reach out to one of our Cannabiz Group members: Yvan Guy Larocque, Merle Alexander, Ryley Mennie and James Struthers.