Guidance Document: Risk Classification Guide for Licensed Dealers of Class A Precursors’ Inspection Observations (CS-GD-019)

Effective Date: 2019/12/09

Foreword

Guidance documents are meant to provide assistance to industry and health care professionals on how to comply with governing laws and Regulations. Guidance documents also provide assistance to staff within Health Canada to ensure laws and regulations are administered in a manner that is fair, consistent, and effective.

Guidance documents are administrative instruments not having force of law and, as such, allow for flexibility in approach. Alternate approaches to the principles and practices described in this document may be acceptable provided they are supported by adequate justification. Alternate approaches should be discussed in advance with the relevant programme area to avoid the possible finding that applicable statutory or regulatory requirements have not been met.

It is important to note that Health Canada reserves the right to request information or material, or define conditions not specifically described in this document, in order to allow the Department to adequately assess the safety and security of controlled substances and precursors. Health Canada is committed to ensuring that such requests are justifiable and that decisions are clearly documented.

Table of Contents

1. Purpose
2. Scope
3. Overview
   • 3.1 Assignment of the Risk to an Observation
   • 3.2 Assignment of the Inspection Rating
   • 3.3 Additional Guidance
4. Appendices
   • 4.1 Appendix A - Glossary
     • Acronyms
     • Terms
   • 4.2 Appendix B -Sample observations
     • 4.2.1 Destruction
     • 4.2.2 Security and Loss/Theft
     • 4.2.3 Dealer's Licence
     • 4.2.4 End-Use Declaration (EUD)
     • 4.2.5 Transportation
     • 4.2.6 Personnel
     • 4.2.7 Importation and Exportation
     • 4.2.8 Record Keeping
     • 4.2.9 Suspicious Transactions
     • 4.2.10 Annual Report
   • 4.3 Appendix C - References
     • Laws and Regulations
     • Related Documents
     • Websites

1. Purpose

This guidance document is intended to help licensed dealers understand:

• the classification of observations noted during inspection according to risk;
• the assignment of an overall compliance rating to an inspection;
• how to comply with regulations; and
• situations that Health Canada considers unacceptable and that may result in a non-compliant rating (NC) and/or compliance and enforcement actions (Appendix B).

This document helps to ensure consistency among Health Canada inspectors during inspections of licensed dealers of Class A precursors so that the regulations are administered in a fair, consistent and effective way across Canada.

2. Scope

These guidelines apply to inspections that are conducted under section 31 of the Controlled Drugs and Substances Act (CDSA) to assess compliance with the Precursor Control Regulations (PCR).

This guide covers licensed dealers of Class A precursors, which are subject to inspections.

The following table shows the three types of icons used in this document, and the way they are intended to be used.

3. Overview

Under the authority of section 31 of the CDSA, Health Canada inspects licensed dealers that conduct regulated activities, such as produce, package, import, export, sell or provide Class A precursors to assess their compliance with the PCR. This activity verifies that appropriate safety measures are in place to minimize the risk of diversion of Class A precursors to illicit markets.

During an inspection, an inspector notes deviations from the regulatory requirements found in the PCR. These deviations appear as observations in the inspection report provided to the establishment.

3.1 Assignment of the Risk to an Observation

Inspectors make observations when they note areas where the licensed dealer is not adequately meeting its regulatory requirements. Observations are classified as minor, major or critical according to the risk:

Findings are communicated to the licensed dealer during the course of the inspection. It may be possible for the licensed dealer to correct the deviations during the inspection itself; if not, they must take corrective actions after the inspection to address the observations. When a critical observation is noted during an inspection, the inspector will bring this to the immediate attention of the licensed dealer and the Office of Controlled Substances (OCS). The inspector will inform the licensed dealer that the seriousness of the observation may result in the inspection being assigned a Non-Compliant (NC) rating.

All observations recorded in the Inspection Report indicate a contravention of the CDSA and its associated regulations and thus require corrective action, regardless of the overall inspection rating attributed to the inspection. Observations requiring immediate or expedited corrective actions will be identified for the licensed dealer.

3.2 Assignment of the Inspection Rating

After the inspection, the number and severity of the observations noted by the inspector informs the assignment of an overall inspection rating.

The overall rating indicates whether the licensed dealer is compliant or non-compliant with the requirements of the CDSA and PCR.

The possible inspection ratings are:

Generally, a C rating will be assigned in situations where:

• few major observations focused on isolated issues are noted; or
• only minor observations are noted.

Generally, an NC rating will be assigned in situations where:

• a critical observation is noted during an inspection;
• numerous major observations are noted during an inspection, indicating that the company does not have adequate systems in place to minimize the risk of diversion; or
• major or minor observations noted during previous inspections have been repeated, indicating that the company did not:
  • implement the corrective actions submitted following the previous inspection; and/or
  • put in place adequate preventative actions in a timely manner to avoid recurrence of such deviations.

An NC rating may result in compliance and enforcement actions. If further enforcement actions are considered (such as licence suspension), the licensed dealer will be given the opportunity to be heard. The process to be followed will be outlined in the letter communicating the decision.

A follow-up inspection may be required to verify the implementation of corrective actions.

For more information on compliance and enforcement, please refer to the Compliance and enforcement policy framework and Compliance and Enforcement Policy for Controlled Substances and Precursors (CS-POL-001).

3.3 Additional Guidance

For more information on the overview of Health Canada inspections, please refer to A Guide to Health Canada Inspections which outlines the rights and responsibilities of regulated parties in relation to Health Canada inspections.

4. Appendices

4.1 Appendix A - Glossary

Acronyms

Terms

4.2 Appendix B -Sample observations

4.2.1 Destruction

PCR 47(2), 47(3), 47(4)

Critical Observation

• No records of destruction were kept by the licensed dealer.
• The licensed dealer did not obtain a declaration from the waste management company.
• The declaration obtained from an off-site destruction company was missing key information such as the name and quantity of the precursors.

Major Observation

• No records/attestations of off-site destructions were made or obtained from a destruction company.
• The destruction method used was non-compliant with provincial, municipal, and environmental legislations, and may have posed a health risk.
• An unsuitable method of destruction was used by the licensed dealer that did not completely destroy the substances.
• Records of destruction were missing the method or date of destruction, and names of persons who destroyed or witnessed the destruction, including their signatures.
• Products containing a precursor were destroyed as a regular product.

Minor Observation

• The declaration of the destruction did not contain in printed form, the name of the person who witnessed the destruction.

4.2.2 Security and Loss/Theft

PCR 83, 85(3), 90(1), 20(1)(b.1), 20(1)(c), 90(2), 90(3)

Critical Observation

• Class A precursors were stored in an area accessible to the public.
• The licensed dealer had an unexplained loss of a substantial quantity or a series of unexplained losses of precursors (potential security, internal control or access issues).

Major Observation

• Persons other than the RPIC and A/RPICs had authorized access to the approved precursor storage areas.

Minor Observation

• The licensed dealer failed to notify Health Canada and the police of a loss or theft within the required timelines.

4.2.3 Dealer's Licence

PCR 14(1)(a), 6.1, 7(a-b), 88

Critical Observation

• The licensed dealer conducted activities with Class A precursors that are not listed on the dealer's license.
• The licensed dealer falsified their import permit to allow for the importation of a higher quantity of precursors.

Major Observation

• The company name used to conduct activities was not the name listed on the dealer's licence.

Minor Observation

• The licensed dealer changed its name but did not submit a licence amendment application to Health Canada.

4.2.4 End-Use Declaration (EUD)

PCR 8, 85(2), 85(5)

Critical Observation

• The licensed dealer did not identify or validate the signature of a new client on the declaration.

Major Observation

• An end-use declaration was not obtained for each transaction with an end-user.
• The licensed dealer did not obtain a separate end-use declaration for a transaction involving a different Class A precursor or a different end-use.
• The end-use declaration was missing the correct name and address of the person obtaining the Class A precursor.
• The signature on the end-use declaration of the person obtaining the Class A precursor was not verified.
• The intended use of the Class A precursor was not indicated on the end-use declaration.
• End-use declaration records were not maintained at the site of the license.

Minor Observation

• An expired end-use declaration was used for a transaction.
• The end-use declaration was missing the licensed dealer's telephone number

4.2.5 Transportation

PCR 9(1.1), 9(2)

Critical Observation

• The lack of safety measures at the licensed dealer caused a loss of a shipment.

Major Observation

• No records on transportation were available for Class A precursors set out in column 1 of the schedule in a quantity greater than the maximum quantity, expressed as an absolute quantity or per package, specified for the precursor in column 2 of the schedule.
• There was no trace of shipping or delivery made by the licensed dealer.

Minor Observation

• The label on a shipment or package containing a Class A precursor showed the name of the compound contained in them.

4.2.6 Personnel

PCR 13(2), 13(3), 13(4), 13(5), 20(1)(a-b), 21

Critical Observation

• The licensed dealer was performing regulated activities with a Class A precursor outside the working hours of a RPIC or A/RPIC, or when no RPIC or A/RPIC was physically onsite at the premises.
• There were no records available to show that non-designated staff was supervised while working in the restricted areas outside of normal RPIC and A/RPIC work hours.
• The person in charge was unaware of their requirements under the CDSA and PCR resulting in suspected diversion or loss.

Major Observation

• The RPIC or A/RPIC was not supervising the licensed dealer's Class A precursor activities at the site.
• The licensed dealer failed to obtain Health Canada's approval prior to hiring a new RPIC or A/RPIC, who is conducting duties of a RPIC or A/RPIC at the premises.
• There was a lack of designated personnel to supervise all regulated activities at the site.

Minor Observation

• The licensed dealer did not notify Health Canada within 10 days of changes to the designated personnel.
• The SPIC, RPIC or A/RPIC ceased to act in that capacity but notification to Health Canada was not provided that someone else replaced them.

4.2.7 Importation and Exportation

PCR 6(3), 7(c-d), 28, 28.1, 35, 35.1, 43

Critical Observation

• The licensed dealer imported a Class A precursor authorized on its licence without the issuance of an import permit.
• The licensed dealer exported a Class A precursor authorized on its licence without the issuance of an export permit.
• The quantity imported or exported exceeded the amount on the permit.

Major Observation

• The importer listed on the shipping records on an importation was not a licensed dealer and did not match with the address identified on the Class A import permit.

Minor Observation

• The exportation declaration for the export of a Class A precursor was not declared within 15 days of exportation.

4.2.8 Record Keeping

PCR 85(1), 85(5), 85(6), 85(7)

Critical Observation

• The licensed dealer made adjustments to records with no explanation with deliberate record falsification.
• The licensed dealer did not maintain records of Class A precursors made or assembled at the site.
• The licensed dealer did not maintain records for Class A precursors received at the site.
• The licensed dealer did not maintain records for an activity pertaining to a Class A precursor at the site.
• The licensed dealer did not maintain records to show that the perpetual inventory of Class A precursors was completed.
• The licensed dealer did not maintain records for the import/export of Class A precursors.

Major Observation

• The access log did not capture the names of all individuals accessing the storage area such as those involved in product receiving and inventory control.
• The supplier's name, address and telephone number was not indicated on the receiving record.

Minor Observation

• Some transaction records were missing within the past 2 years.
• The address of the provider of Class A precursors was missing or was inaccurate on the receiving records.

4.2.9 Suspicious Transactions

PCR 86(1), 86(3)

Critical Observation

• The licensed dealer did not have a procedure in place to record and investigate a suspicious transaction involving a Class A precursor.
• No records of suspicious transactions of a Class A precursor were maintained.

Major Observation

• The record of a suspicious transaction of a Class A precursor was incomplete or inaccurate.

Minor Observation

• The process to identify suspicious transactions was incomplete.

4.2.10 Annual Report

PCR 87

Critical Observation

• The licensed dealer did not prepare an annual report.

Major Observation

• The licensed dealer failed to submit an annual report to Health Canada regarding Class A precursors within three months after the end of each calendar year.
• The year end annual report submitted by the licensed dealer was not based on a physical inventory of Class A precursors.

Minor Observation

• The licensed dealer inaccurately reported the quantity of a Class A precursor on its annual report.
• A loss was not reported in the annual report.
• The physical inventory of Class A precursors was not completed on the last calendar day of the year that the licensed dealer conducted regulated activities.

4.3 Appendix C - References

Laws and Regulations

Controlled Drugs and Substances Act

Precursor Control Regulations

Related Documents

Compliance and enforcement policy framework

Compliance and Enforcement Policy for Controlled Substances and Precursors (CS-POL-001)

Guidance Document for the Requirements and Responsibilities of Licensed Dealers of Class A Precursors

Inspection Strategy for Licensed Dealers of Controlled Substances and Class A Precursors (CS-POL-002)

Websites

A Guide to Health Canada Inspections

Precursor Chemicals

Regulating Controlled Substances and Precursors

Reporting Loss or Theft of Controlled Substances and Precursors