Health Canada Announces the Approach to Cost Recovery for the Regulation of Cannabis
Cost recovery to ensure cannabis industry covers the costs of regulating cannabis
October 5, 2018 - Ottawa, ON - Health Canada
The Cannabis Act will come into force on October 17, 2018. The Act aims to keep cannabis out of the hands of Canadian youth and the profits away from criminals and organized crime.
Since it introduced the legislation, the Government of Canada has committed to fully recovering the costs of regulating the cannabis industry. Cost recovery ensures that those who benefit from the new legal market will pay the costs of regulating cannabis, which will reduce the cost to Canadians.
The Ministerial Order authorizing cost recovery for the regulation of cannabis and the new fees will come into force on October 17, 2018, in conjunction with the Cannabis Act.
Over the summer, Health Canada held a 30-day public consultation to solicit public input and views on the proposed approach to cost recovery for the regulation of cannabis. The Department received 108 online submissions, 18 written submissions, and 755 form letters. In addition, Health Canada hosted four online information sessions with industry, including those who are or who have applied to be licensed producers, to explain the proposal and to answer questions. The feedback Health Canada received focused primarily on the timing of implementing the proposed fees, the design of the annual regulatory fee, and the desire for additional service standards.
As a result of the feedback, Health Canada has modified the design of the annual regulatory fee to use previous year’s revenue to calculate the fee rather than forecasted revenue. These measures will help moderate the financial impact on the emerging industry in the early years following coming into force of the Act.
In addition, Health Canada is committing to monitoring its administration of the regulatory program closely to ensure it recovers no more than the regulatory costs and with a view to establishing defined service standards in areas such as the processing of licence amendments. The Department is also committing to create a forum to engage with the cannabis industry on the administration of the fee regime and as it develops additional service standards, supporting predictability and transparency.
To promote a diverse market with both small and large players, Health Canada will scale fees according to the size of the business and apply lower fees for micro-scale licence holders. Some classes of licences—namely those for research, analytical testing and hemp production—will be exempt from fees. To support access to cannabis for medical purposes, those who produce, cultivate and sell cannabis exclusively for medical purposes will be exempt from the annual regulatory fee.
The Ministerial Order will be published in Canada Gazette, Part II, on October 17, 2018.
“Cost recovery is a standard practice across the Government of Canada to support program delivery. It ensures that those who benefit from the new legal market will pay the costs of regulating cannabis, which will reduce the cost to Canadians. We believe that this approach addresses the concerns raised by the cannabis industry, while ensuring that Canadians will not shoulder the costs of cannabis regulation.”
The Honourable Ginette Petitpas Taylor
Minister of Health
“We aim to minimize the costs to Canadians of regulating the cannabis industry without undermining our goal of keeping profits out of the pockets of criminals and organized crime. These fees are reasonable and strike the right balance.”
The Honourable Bill Blair
Minister of Border Security and Organized Crime Reduction
The Government set out its intent to recover the regulatory program costs of the legalization and regulation of cannabis with the introduction of the Cannabis Act in Parliament in April 2017.
The Cannabis Act provides the Minister with the authority to fix fees through a ministerial order for the recovery of federal government costs for services, use of facilities, approvals, authorizations, exemptions or regulatory processes; as well as for products, rights and privileges that are provided under the Act.
Cost recovery will ensure that those who benefit from the new legal market will pay the costs of regulating cannabis, which will reduce the cost to Canadians. It is also a standard practice across the Government of Canada to support program delivery.
In the Fall Economic Statement 2017, the Government announced $546 million over five years to ensure appropriate capacity to license, inspect and enforce all aspects of the Cannabis Act and to undertake robust public education and awareness activities.
The cost-recovery approach is guided by the principle that fees should allow for both larger and smaller players in a diverse market. Through this approach, Health Canada will collect no more than the cost of delivering the regulatory program.
Cost recovery for the regulation of cannabis includes four fees:
- Application screening fee: recovers the costs associated with screening new licence applications ($3,277 for standard licence applicants and $1,638 for micro and nursery licence applicants);
- Security clearance fee: recovers the costs associated with screening, processing, and issuing or refusing security clearances ($1,654);
- Import/export permit fee: recovers the costs associated with screening, processing, and issuing or refusing to issue an import or export permit for medical or scientific purposes ($610); and,
- Annual regulatory fee: recovers the aggregate costs of administering the cannabis regulatory program that are not covered under any of the other fees (2.3% of cannabis revenue for standard licence holders, or $23,000 if cannabis revenue is less than $1 million, and 1% on the first $1 million of cannabis revenue for micro and nursery licence holders or $2,500 in cases where cannabis revenue is less than $250,000).
- Licence holders who produce cannabis exclusively for medical purposes are exempt from the annual regulatory fee.
Health Canada will publish a summary of the comments received in a Regulatory Impact Analysis Statement (RIAS) online on October 17, 2018.
Based on estimates of market size and the number of licensed producers, the fees will allow Health Canada to recover up to 100% of annual regulatory costs as early as 2021‑22.
The proposed fees are designed to recover only the annual costs associated with regulating cannabis, including activities like licensing; compliance, enforcement and inspections; public education; and program management. The fee regime does not include law enforcement costs.
Before it is published in the Canada Gazette, Part II, a copy of the Ministerial Order and the RIAS can be requested by email, phone or mail:
- Cannabis Legalization and Regulation Branch
Address locator 0602E, Health Canada
Office of Ginette Petitpas Taylor
Minister of Health
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