Guidance Document: Risk Classification Guide for Licensed Dealers of Class A Precursors’ Inspection Observations (CS-GD-019)
Effective Date: 2019/12/09
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
- 4.1 Appendix A - Glossary
- 4.2 Appendix B -Sample observations
- 4.3 Appendix C - References
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.
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.
Important: Key or cautionary information to know.
Information: Supplementary information like citations and legal references.
Tip: Suggestions that can help people comply with the regulations.
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.
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:
An observation that identifies a significant and immediate and/or imminent risk to public health and safety, including risk of diversion, and prevents the detection of diversion, or involves fraud, misrepresentation, or falsification of information. The risk of diversion is immediate/imminent and high.
An observation of activities/procedures that may increase the risk to public health and safety, including risk of diversion, impairs the detection of diversion, or impairs the LD from taking actions to address the potential risk for diversion. The risk of diversion is moderate.
An observation of activities/procedures that could increase the risk of diversion. The LD is generally able to prevent, detect and take actions to address potential risks for diversion. The risk of diversion is low.
Important: Some observations may be upgraded to a greater risk rating depending on the scope, frequency, and severity of the deviation.
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.
Important: Recurring observations that are carried over from a previous inspection may be classified higher than initial observations of a similar nature.
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.
Information: Refer to Appendix B for a list of sample observations Health Canada considers critical, major, and minor. Please note that this list is not exhaustive, and other observations may be added where appropriate.
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:
At the time of the inspection, the regulated party has demonstrated that the activities it conducts are in compliance with the CDSA and its associated regulations. A ‘C’ rating does not mean that there were no observations or corrective actions required.
At the time of the inspection, the regulated party has not demonstrated that the activities it conducts are in compliance with the CDSA and its associated regulations. The observations taken together indicate a situation that would present a significant risk of diversion or a potential risk to public health or safety.
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).
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.
Alternate Responsible Person in Charge
Controlled Drugs and Substances Act
Office of Controlled Substances
Precursor Control Regulations
Royal Canadian Mounted Police
Responsible Person in Charge
Senior Person in Charge
Important: If there is any conflict between a definition in this guide and a definition in the Controlled Drugs and Substances Act and the Precursor Control Regulations, the definition in the Act/Regulations prevails.
Class A Precursor
(a) any substance set out in Part 1 of Schedule VI to the Act; and
(b) any preparation or mixture referred to in Part 3 of Schedule VI to the CDSA that contains a substance referred to in paragraph (a)
a substance included in Schedule I, II, III, IV or V of the CDSA
the transfer of substances listed in the schedules of the CDSA from the licit to illicit market
Monitoring and assessment against the applicable requirements of the Act and its associated regulations. Inspections are routinely conducted based on risk to assess compliance.
Any person designated as an inspector under section 30 of the CDSA
the holder of a licence
A deviation or deficiency (i.e., non-compliance) to the requirements of the regulations noted by an inspector during the inspection that is documented in writing in the inspection report.
any organization that is regulated under the CDSA and can be inspected as per the regulations therein
Important: The following are sample observations inspectors may note during an inspection. This list of sample observations is not intended to be all-inclusive, and inspectors may use other observations where appropriate.
PCR 47(2), 47(3), 47(4)
- 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.
- 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.
- The declaration of the destruction did not contain in printed form, the name of the person who witnessed the destruction.
PCR 83, 85(3), 90(1), 20(1)(b.1), 20(1)(c), 90(2), 90(3)
- 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).
- Persons other than the RPIC and A/RPICs had authorized access to the approved precursor storage areas.
- The licensed dealer failed to notify Health Canada and the police of a loss or theft within the required timelines.
PCR 14(1)(a), 6.1, 7(a-b), 88
- 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.
- The company name used to conduct activities was not the name listed on the dealer’s licence.
- The licensed dealer changed its name but did not submit a licence amendment application to Health Canada.
PCR 8, 85(2), 85(5)
- The licensed dealer did not identify or validate the signature of a new client on the declaration.
- 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.
- An expired end-use declaration was used for a transaction.
- The end-use declaration was missing the licensed dealer’s telephone number
PCR 9(1.1), 9(2)
- The lack of safety measures at the licensed dealer caused a loss of a shipment.
- 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.
- The label on a shipment or package containing a Class A precursor showed the name of the compound contained in them.
PCR 13(2), 13(3), 13(4), 13(5), 20(1)(a-b), 21
- 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.
- 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.
- 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.
PCR 6(3), 7(c-d), 28, 28.1, 35, 35.1, 43
- 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.
- 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.
- The exportation declaration for the export of a Class A precursor was not declared within 15 days of exportation.
PCR 85(1), 85(5), 85(6), 85(7)
- 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 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.
- 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.
- 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.
PCR 86(1), 86(3)
- 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.
- The record of a suspicious transaction of a Class A precursor was incomplete or inaccurate.
- The process to identify suspicious transactions was incomplete.
- The licensed dealer did not prepare an annual report.
- 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.
- 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.
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