4 years late: Time to review

Original article can be found here: https://nationalpost.com/news/politics/nearly-four-years-after-cannabis-legalized-mandatory-review-of-the-law-is-months-overdue

With the federal government almost one year late in launching a legally required review of the Cannabis Act, Canada’s legal weed industry says regulatory changes are desperately needed to stay ahead of the country’s still-thriving black market.

Enshrined within the Cannabis Act are rules requiring the health minister to engage in a full review three years after legalization, focusing on issues related to young people, Indigenous communities and allowing cultivation in private homes.

That review should have commenced Oct. 17, 2021 — three years after legalization in 2018 — but as of August 2022, there’s been no indication from Health Canada when the process may begin.

“Everybody anticipated — considering it was called a ‘three-year review’ — that it would launch at or around the third anniversary,” said George Smitherman, president and CEO of the producer advocacy group the Cannabis Council of Canada.

While he concedes delays were understandable considering last year’s snap election and given the subsequent appointment of Jean-Yves Duclos as Health Minister occurred within weeks of legalization’s third anniversary, that leeway has long run out.

“Those excuses pretty much have evaporated now,” he said.

Health Canada did not respond to requests for comment from National Post by press time.

Canada unveiled its legalization framework in stages — with only dried flower, capsules and tinctures initially available on government-run websites and in a handful of retail stores.

The first big change came one year after legalization, when edibles, cannabis-infused drinks and vape cartridges became legal to sell — referred to by industry watchers as “Cannabis 2.0.”

So what should “Cannabis 3.0” look like?

Toronto-area retailer Samuel Gerges would like to see the 10mg THC limit on edibles increased.

“The THC limits on edibles keep the black market thriving and make us uncompetitive with them in that category,” he said.

Gerges owns Mary Jane’s Cannabis, a string of three successful brick-and-mortar Toronto-area cannabis shops and a rare example of an independent weed entrepreneur carving out a niche in an industry flooded with large-scale chain retailers.

He also wants a second look at the government’s taxation framework — one that he says puts government profits ahead of allowing the industry to set down firm roots.

“They need to reduce excise tax significantly, or even get rid of it altogether until the industry can get their feet under it,” he said.

“Producers pay excise tax before they’re paid for the products they sell to OCS.”

OCS, the Ontario Cannabis Store, is the crown corporation acting as exclusive wholesaler to Ontario’s legal brick-and-mortar cannabis retailers.

Smitherman, however, doesn’t see that as a likely outcome.

“Making significant adjustments to excise taxes in this country is kind of like amending the Constitution,” he said.

“We can’t pretend about the urgency of that matter, but we have to reflect upon a series of things that could offer some immediate benefit.”

Smitherman agreed with Gerges that increasing THC limits on edibles is an important early step, describing higher-proof edibles as a potentially lucrative product that’s been completely conceded to the black market.

It took until the second quarter of 2020 for legal cannabis to outpace the black market, Statistics Canada said — with legal sales accounting for 50.5 per cent of Canada’s household cannabis dollar.

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OCS’s most recent report puts Ontario’s legal sales by Q3 2021 at just shy of 59 per cent compared to the province’s illegal market.

Ontario represents 40.8 per cent of all recreational cannabis sales in Canada, followed by Alberta with 17.1 per cent, Quebec with 14.8 per cent, and B.C. at 13.7 per cent.

Once the review begins, legislation obligates the review’s report be delivered to the House of Commons in no more than 18 months.

“Eighteen months to produce a report that goes to two committees that would presumably consider the report, perhaps hold hearings and make some recommendations, then the government gets to decide whether it wants to move forward with any regulatory or legislative changes,” said Smitherman, who served as both Ontario’s health and energy minister during his 11 years in provincial politics.

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“None of that amounts to speedy.”

While the introduction of higher-margin vapes and edibles proved a sales success, Canada’s cannabis market is quickly approaching critical mass as both producers and retailers face market corrections and lower-performing firms are squeezed out by richer and more established players.

“Regulation is supposed to be faster than legislation,” he said, explaining that political will is a reliably quick agent of change for governments truly interested in reform.

“But what we have seen from Health Canada so far is that regulatory change within the context of the cannabis act, even where it’s non-controversial and a correction to a problem, is still very slow.”

Because of that, much-needed change in the industry isn’t happening.

“That’s kind of really the underlying reality we face,” Smitherman said.

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