Cannabis – How to Invest and Operate in Canada
Now is the time for Cannabis investors in the United States to consider Canadian expansion, given the recent Federal legalization of marijuana in Canada in October 2018. While 47 U.S. states have passed laws legalizing cannabis to varying degrees, federally it remains a Schedule 1 drug and all use, possession, sale or distribution remains a federal crime in the U.S. As the second country in the World (after Uruguay) to legalize marijuana, Canada is benefitting from a “first mover advantage”. Canadian cannabis producers have scored massive million dollar contracts with foreign governments for medical marijuana as early as January 2018 (Germany, Australia, New Zealand, Czech Republic) with demand exploding as more and more countries legalize medical marijuana.
To start business operations in Canada, a license from both the Canada Revenue Agency and Health Canada are required.
1. Health Canada License
The Cannabis Act and its Regulations provide the framework for legal access to cannabis for adults and they control and regulate its production, distribution and sale. Health Canada in its application instructions also suggests becoming familiar with relevant federal and provincial, territorial, municipal and indigenous government legislation depending on where you intend to operate your business. After deciding which type of license to apply for, Health Canada requires licensee applicants to create an account in the Cannabis Tracking and Licensing System (CTLS) to submit their application which includes additional submission criteria.
2. Canada Revenue Agency (CRA) License
In Canada, under the Excise Act, 2001, you must apply for a cannabis license if you are cultivating (growing), producing or packaging cannabis products. Even if you have a Health Canada license, you must apply for a CRA license for both medical and non-medical (recreational) purposes. A number of individuals are excluded from the requirement to apply for a license, for example an individual who cultivates cannabis products for their own personal use, in accordance with the Cannabis Act.
Licenses are valid for two (2) years and do not renew automatically. There are strict deadlines in place to secure a renewal (presently 30 days before expiration). A number of eligibility criteria must be satisfied to obtain the license. Security ranging from a minimum $5000 CAD to $5 million CAD is required for licensees, depending on whether the applicant licensee is cultivating, producing or packaging cannabis products.
Form LC300 is the required Application Form to determine cannabis licensee eligibility, while supplementary documentation and forms may be applicable. Managing a license once it is issued carries additional responsibilities which should be reviewed carefully by interested licensees (ex. calculating duties on cannabis, registering for the cannabis stamping regime etc.). Your license can be suspended or canceled by the CRA if you fail to meet the conditions to be a licensee at any time, while you are required to report changes to the information provided in your application to the CRA.
Jill M. Williamson, Esq. Head Partner of CKR Law in Seattle, represents Cannabis investors in Washington State, U.S.A.
She notes: “Even for entrepreneurs who want to rely upon state legalization, it is still not possible to conduct transactions that cross state lines. This makes it impossible for businesses to scale and necessarily limits investment potential in the U.S. In addition, by definition, Schedule 1 drugs have “no accepted medical use.” This makes it extremely difficult to obtain approvals to conduct research on potential medical applications for cannabis. Canada presents the opportunity to move North, grow a business, conduct research, create new products and stand poised to move into a US market when that becomes available.”
James D. Snyder, Esq. Partner at CKR Law in San Diego, and Strategic Cannabis Business Counsel, adds the following regarding his home State of California and the burgeoning market in Canada:
“Although California’s multibillion dollar cannabis market is attractive to cannabis business entrepreneurs, it makes a lot of sense for businesses to consider markets like Canada given the challenges that U.S. cannabis businesses face at the Federal level. Moreover, in States like California, the complexities in establishing a cannabis business and obtaining appropriate licenses from the State and its municipalities can seem daunting at times. While California has made progress, it is far from a certainty that an entrepreneur can obtain appropriate licenses to establish a Cannabis business in the State and it remains a challenge to establish such a business in a particular part of the State where a business owner may want to do business (the majority of municipalities in California continue to prohibit commercial Cannabis activity). Considering a market like Canada, where the license regime is far simpler and more expedited than a U.S. State like California, can therefore be an effective option for many Cannabis business entrepreneurs to consider as a point of entry into the Cannabis market.”
We highly recommend you consult a legal professional to assist you in applying for both licenses in Canada, as non-compliance carries severe consequences in both countries.
For substantive information regarding applying for a license to the CRA & Health Canada, please see the instruction manual https://www.canada.ca/content/dam/hc-sc/documents/services/publications/drugs-health-products/cannabis-licensing-guide/cannabis-licensing-guide.pdf. Given the novelty of Cannabis legalization in Canada updates may be applicable to the information provided.
DISCLAIMER: This article is not intended to provide legal advice, and no legal or business decision should be made based on its contents.
Canada Strengthens Entry/Exits at Borders
Bill C-21 (“An Act to Amend the Customs Act”) which received Royal Assent on December, 13, 2018, gives Canada the authority to collect basic biographic information on all Canadians who leave the country by land and by air. Previously, this information was only collected as entry requirements. This information will be used for complete travel history information for travelers which will help the Canada Border Services Agency (“CBSA”) and its Federal partners (ex. Public Safety Canada) strengthen Canadian borders. The CBSA stated, “This initiative will help Canada make better, timely decisions on border management, law enforcement, national security, citizenship applications, immigration, and social services.”
At Land Ports of Entry, Canada will receive the biographic information from the United States for travelers entering the US which will create an “exit record.”
At Air ports, Canada will gather exit records that air carriers collect from passenger manifests. This information, however, will not be shared with the U.S.A.
Canada and the U.S.A. have been coordinating an entry-exit information system since 2011. In short, the record of a land entry to one country can be used to establish an exit record from the other country. This system was confirmed successful after a 2013 joint report summarized the findings of four U.S.-Canada land ports which reconciled the biographic entry information of certain travelers from September 30, 2012 to January 15, 2013.
For those interested in applying for Canadian Citizenship and renewing their Permanent Resident cards, there are physical residency requirements to be tracked. For example, 730 days of physical presence must be proven for an applicant to apply for a new Permanent residence in Canada. The new exit record and exit stamps will be used to confirm applicants’ days in and out of Canada.
Concerned about cross border mobility between Canada and the United States? Please contact Partner Véronique Malka, Chair of the Canadian Law Group: email@example.com.
U.S. Department of State’s Report on Child Abduction 2018
Both Canada and the USA adhere to the treaty called the Hague Convention of 25 October 1980 on the Civil Aspects of International Child Abduction (referred to commonly as the “Hague Convention”). CKR Law LLP handles legal cases of a child or children alleged to have been abducted by – most usually – a parent, and taken to another jurisdiction. That jurisdiction may or may not be a member of The Hague Convention, which will determine which course of action is required to secure the return of the child.
When a country joins The Hague Convention, each member country (or “party”) must designate a domestic Central Authority which is the governmental point of contact for parents, other Foreign Central Authorities, and foreign governments that may intervene in an abduction allegation. Once an application is filed requesting the return of the child to their habitual country of residence, The Hague Convention requires a judicial or administrative authority to determine the place of habitual residence of the child(ren). As referenced below, the Convention only applies where it is in force between two countries. The Hague Convention then provides a mechanism, with exceptions, that assists lawyers and courts in securing the prompt return of the children to their habitual residence.
Many member countries produce an Annual Report, tracking the most recent numbers of abductions and returns of children, and reporting on which countries best respect the workings of The Hague Convention. The U.S. Department of State just released its Annual Report, called Annual Report on International Child Abduction, which covers the trends for the year 2017. The U.S. Congress was briefed on the happenings of The Hague in the USA using that report, including the following key facts:
* In 2018, the Convention was in force between the United States and 77 countries;
* In 2017, 215 abducted or wrongfully retained children were returned to U.S.A.;
* 160 of these children were returned from Convention countries;
* 55 of the children were returned from countries with ‘no protocols’ in place as defined by the Convention;
The Department of State also worked on 197 abduction cases where the cases were resolved, for a myriad of reasons, without the child in question being returned to the U.S.A.
It should be noted that parents may seek criminal charges against the abducting parent, in addition to family law remedies, as there is a crime which exists in the United States under the International parental Kidnapping Crime Act. However, criminal charges against the ‘taking’ parent may actually have adverse effects and hinder the successful return of the child, depending on the circumstances. For example, if criminal charges are laid against the foreign national ‘taking’ parent in the U.S., soft preliminary approaches such as mediation and a request for a volunteer return are unlikely to be successful, as the ‘taking’ parent is de-incentivized from physically returning to the U.S. with the child.
The following 12 countries were identified by the U.S. Department of State in 2018 as demonstrating “a pattern of non-compliance” with the principles of the Hague Convention. It should be noted that not all countries are signatories (have ratified) the treaty, and some may have only recently ratified it domestically, contributing to their non-compliance:
- Dominican Republic
- United Arab Emirates
If and when a child is, regretfully, taken to one of the above countries, it is all the more critical to seek timely legal advice from an advocate with experience in Hague Convention matters. This is, more than often, not the same type of lawyer as a family lawyer who handles domestic disputes of divorce and custody. Once foreign countries are involved, a simple family law dispute can quickly escalate into an international matter of huge importance, and new limitation periods and legal interpretations of law will apply. Véronique Malka, Chair of the Canadian Law Group, has intervened in a number of child abduction cases facilitating the safe return of abducted children in countries around the globe. For more information, please contact: firstname.lastname@example.org or sign up for our Newsletters at www.canadianlawgroup.com.