Canada Gazette, Part I, Volume 155, Number 25: Regulations Amending the Cannabis Regulations (Flavours in Cannabis Extracts)

June 19, 2021

Statutory authority
Cannabis Act 

Sponsoring department
Department of Health

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issues: There has been a rapid rise in youth vaping in Canada. This trend is not unique to nicotine or non-nicotine containing vaping products, and has also been observed in cannabis vaping products and other inhaled cannabis extracts, which are an increasingly popular consumption method for youth (individuals under 18 years of age) and young adults (individuals 18–24 years of age). Health Canada has identified the availability of flavours, despite the current restrictions, as one of the factors that has contributed to the increase in cannabis vaping among these age groups. Inhaled cannabis extracts, such as cannabis vaping products, typically have high concentrations of tetrahydrocannabinol (THC), which can present public health risks and harms associated with frequent and long-term use. These harms are particularly concerning among youth and young adults, who are at a greater risk of harms from cannabis.

Description: The proposed amendments to the Cannabis Regulations would restrict the production, sale, promotion, packaging, or labelling of inhaled cannabis extracts from having a flavour, other than the flavour of cannabis. The proposed amendments would apply equally to inhaled cannabis extracts sold for medical and non-medical purposes.

Rationale: Restricting flavours in inhaled cannabis extracts is expected to make these products less appealing to youth, which would help address the rapid rise in youth vaping. This proposal is consistent with the objective of the Cannabis Act of protecting young persons and others from inducements to use cannabis, and would align with proposed amendments to the Tobacco and Vaping Products Act (TVPA) and the proposed regulations for vaping products.

This proposal will result in a range of benefits, which were unable to be monetized at this time due to data limitations. These benefits include (i) protecting young persons and others from inducements to use inhaled cannabis extracts; (ii) mitigating negative health impacts associated with youth use of inhaled cannabis extracts; and (iii) maintaining alignment with proposed changes under the TVPA to mitigate the risk that users of vaping products begin using inhaled cannabis extracts.

The proposed amendments would generate incremental costs for affected stakeholders (i.e. licensed processors, federally licensed sellers of cannabis for medical purposes, and provincially and territorially authorized distributors and retailers) and for Health Canada. The present value (PV) of the costs are estimated to be $397.19 million over 10 years (or $56.55 million in annualized value). In addition to the costs that are monetized, the proposal would generate incremental costs to licensed processors associated with reformulating existing products and modifying promotional materials and product packaging and labelling, which cannot be quantified at this time due to lack of data.

The small business lens applies. There is no administrative burden on businesses that would result from the proposal; therefore, the one-for-one rule does not apply.

Issues

National survey data shows a rapid rise in youth vaping rates. Data from the 2018–2019 Canadian Student Tobacco, Alcohol and Drugs Survey (CSTADS) indicates that the prevalence of vaping has doubled among students compared to the previous survey in 2016–2017. This trend is not unique to nicotine or non-nicotine containing vaping products (vaping products), and has also been observed in cannabis vaping products, which are an increasingly popular consumption method for youth (individuals under 18 years of age) and young adults (individuals 18–24 years of age). Health Canada has identified the availability of flavours, despite the current restrictions, as one of the factors that has contributed to the increase in cannabis vaping among youth and young adults.

Youth and young adults are at a greater risk of harm from cannabis. Inhaled cannabis extracts tend to have high concentrations of tetrahydrocannabinol (THC), and the frequent and long-term use of inhaled cannabis extracts with high concentrations of THC starting in adolescence can harm brain development and increase the risk of developing mental health issues.footnote 1 footnote 2

To mitigate against the public health risks associated with this trend, Health Canada is proposing targeted amendments to the Cannabis Regulations to restrict the use of flavours in inhaled cannabis extracts. The proposed amendments are consistent with the objective of the Cannabis Act of protecting young persons and others from inducements to use cannabis and protecting the health of young persons by restricting access.

This approach would also align with proposed amendments to the Tobacco and Vaping Products Act (TVPA) and the proposed regulations for vaping products. There is a risk that restricting flavours in nicotine vaping products, without introducing similar restrictions for inhaled cannabis extracts, could increase the appeal and use of flavoured inhaled cannabis extracts among youth and young adults.

Background

Regulatory framework

In the 2015 Speech from the Throne, the Government of Canada committed to legalizing, strictly regulating, and restricting access to cannabis. In June 2016, the Task Force on Cannabis Legalization and Regulation (the Task Force) was established to consult broadly with Canadians and to provide advice on the design of a new legislative and regulatory framework. The Task Force consulted extensively with provinces and territories, Indigenous governments and organizations, and experts in relevant fields, including public health, substance use, criminal justice, law enforcement and industry, as well as with youth. On December 13, 2016, the Task Force published their final report, where they recommended that the government allow the legal sale of a broad range of cannabis product types in order to displace the illegal market and better protect the health of Canadians.

On October 17, 2018, the Cannabis Act (the Act) and Cannabis Regulations came into force, creating a new legal framework for controlling the production, distribution, export, sale, and possession of cannabis in Canada. As set out in section 7, the purpose of the Act is to protect public health and public safety and in particular to

The Cannabis Act permits the sale of seven classes of cannabis: cannabis plants, cannabis plant seeds, dried cannabis, fresh cannabis, edible cannabis, cannabis extracts and cannabis topicals. On October 17, 2019, the Cannabis Regulations were amended to legally permit the sale of cannabis extracts, edible cannabis, and cannabis topicals.

Cannabis extracts represent a broad range of product types and intended uses, including products that are intended to be smoked or inhaled, such as hash or cannabis vaping products, products intended for ingestion, such as tinctures or capsules, and other products, such as suppositories or nasal sprays. Cannabis extracts are produced from cannabis using extraction processing methods or by synthesizing phytocannabinoids (e.g. tetrahydrocannabinol, cannabidiol). See Appendix A for a breakdown of all products considered to be inhaled cannabis extracts.

Inhaled cannabis extracts are typically composed of a highly refined and concentrated cannabis extract that may contain up to 90% phytocannabinoids, which are often mixed with agents for flavour and viscosity control. Terpenes, aldehydes, and ketones — molecules that are responsible for the characteristic flavours of cannabis plants — are examples of flavouring substances that can be derived from the cannabis plant or from other plant sources. These molecules are naturally occurring in cannabis plants and other plant sources, and can individually or collectively impart a range of flavours (e.g. pine, diesel, skunk, cheese, and fruit). Currently, inhaled cannabis extracts may also contain flavouring agents that are derived from other plant sources or that are synthetically produced. Some of these flavouring agents are not naturally found in the cannabis plant and may not represent a flavour typically associated with cannabis (e.g. cotton candy).

Inhaled cannabis extracts are subject to a number of strict regulatory controls under the Cannabis Act and Cannabis Regulations, including

Further information on the Cannabis Regulations is available in the Regulatory Impact Analysis Statement that was published in the Canada Gazette, Part II, on June 26, 2019.

Overview of youth and young adult consumers

Survey data (e.g. CSTADS and Canadian Cannabis Survey) indicates that inhaled cannabis extracts are an increasingly popular consumption method for young cannabis consumers (i.e. those aged 13–25). According to the two most recent CSTADS survey cycles, results demonstrate that, among students in Grades 7–12 (i.e. those aged 13 to 17) who used cannabis, rates of cannabis consumption via vaporizing/vaping increased from 30% in 2016–17 to 42% in 2018–19.footnote 3 Similarly, among the same demographic, dabbingfootnote 4 increased from 22% in 2016–17 to 28% in 2018–19. In 2018–19, cannabis vaping was found to be more common for students who used cannabis in Grades 10–12 (43%) than students in Grades 7–9 (38%). Among all students surveyed in Grades 7–12, no change in overall cannabis use was observed between 2018–19 (18%) and 2016–17 (17%). Among students who used cannabis in 2018–19, smoking was the most commonly reported method of consumption (76%), followed by edibles (45%), and vaporizing/vaping (42%).

According to the 2020 Canadian Cannabis Survey (CCS), cannabis vape pen/cartridge use in the past year, among past 12-month users, was highest among those aged 16–19 (32%) and 20–24 (31%), compared to those over 25 years of age (21%).footnote 5 The proportion of past-year cannabis vape pen/cartridge users in the 16–19 age bracket increased from 27% in 2018 to 33% in 2019, while usage rates across all age groups remained relatively unchanged in 2020 (e.g. 32% for those aged 16–19). The rates of past-year cannabis vape pen/cartridge users in the 20–24 age bracket did not change significantly in 2018 (33%), 2019 (32%) and 2020 (31%). According to the 2020 CCS results, the use of other inhaled cannabis extracts was also highest among respondents in younger age brackets compared to those in older age brackets. For example, cannabis extract (e.g. shatter and budder) use in the past year, among past 12-month users, was highest among those aged 16–19 (19%) and 20–24 (16%), compared to those over 25 years of age (12%). The same trend was observed for hashish and kief; 29% of past 12-month cannabis users between the ages of 16–19 reported using hashish or kief in the past year, compared to 26% of respondents between the ages of 20–24 and 17% of those above 25 years of age.

Public opinion researchfootnote 6 commissioned by Health Canada indicates that flavours are a significant factor that attract youth and young adults to use cannabis vaping products. The objective of the public opinion research was to gather information on the attitudes and behaviours of youth (aged 15 to 17) and young adults (aged 18 to 24) who currently use inhaled cannabis extracts.

A majority of respondents from the public opinion research (approximately 65%) reported that a non-cannabis flavour is one of the main reasons they choose to use cannabis vaping products rather than consume cannabis in other ways. Approximately 61% of respondents vaped cannabis at least one day per week within the last 12 months. Flavours were highly important in respondents' choice to continue to use cannabis vaping products, with the most common flavours being fruit, candy, mint, menthol, dessert, coffee, and soft drinks.

There is also evidence from the vaping context that youth and young adults are more likely to use vaping products because of the flavours, compared to adults over 25.footnote 7 In a separate study, the presence of flavour was also a top reason mentioned by youth for vaping; data from this study indicated that, of youth in Canada aged 16–19 who had vaped in the past 30 days, 40% reported they use vaping products “for the flavour” among their top five reasons.footnote 8 There is also strong evidence to suggest that flavours can affect youth nicotine vaping behaviours. The 2017 Canadian Tobacco, Alcohol and Drugs Survey (CTADS) demonstrates that flavours are a more commonly reported reason for using e-cigarettes among 16–19 (56%) and 20–24 year-olds (70%), compared to adults aged 25 and older (43%).footnote 9

The literature in food consumer science shows that certain flavours are particularly attractive to youth, with youth having a heightened preference for sweet food tastes, and greater rejection of bitter food tastes.footnote 10 In the vaping context, flavoured vaping products are widely appealing to youth. Flavours influence both product perceptions and usage behaviours among youth. According to research from the United States and the United Kingdom, adolescents consider flavoured vaping products (e.g. fruit, candy, menthol flavours) to be less harmful than tobacco-flavoured vaping products.footnote 11

Risks to youth and young adults

Youth and young adults (i.e. those aged 13 to 25) are more likely to experience harm from using cannabis, as brain development continues until the mid-20s. Studies show that the earlier these individuals start using cannabis and the more frequently they use it, the greater the risk of harm.footnote 1 footnote 2 While non-smoking options such as vaping or consuming edible cannabis may be less harmful to lungs, these options are not risk-free.footnote 12 Frequent and prolonged use of cannabis at a young age is known to increase the likelihood of cannabis use disorder. Early and frequent cannabis use is associated with an increased risk of developing mental health disorders (e.g. mood, anxiety, psychotic disorders) or education problems (e.g. by affecting certain aspects of memory).footnote 13 footnote 14 footnote 15

In addition, there is evidence that frequent and prolonged use of cannabis products with a high concentration of THC can spur the development of dependence and may bring on or worsen mental health disorders (e.g. anxiety, depression, psychosis) over time.footnote 16 footnote 17 Inhaled cannabis extracts, including cannabis vaping products, generally have a high THC concentration compared to other classes of cannabis.footnote 18 footnote 19 It is unknown at this time if frequent and prolonged use of cannabis products with high cannabidiol (CBD) content can pose risks to health. However, there are emerging data suggesting CBD may have the potential to interact with other drugs/substances, which could increase the risk of adverse effects.

Objective

The objective of the proposal is to protect young persons and others from inducements to use cannabis by further limiting the appeal of inhaled cannabis extracts in order to discourage youth and young adult uptake. These amendments would also mitigate the negative health impacts associated with the use of inhaled cannabis extracts by youth, including those with a high THC concentration.

These amendments would also maintain regulatory alignment with proposed amendments to the TVPA and the proposed regulations for vaping products, which would mitigate the risk of young adults starting to use flavoured inhaled cannabis extracts once flavoured vaping products are no longer available.

Description

The proposal would amend certain provisions in the Cannabis Regulations. The proposal would restrict licensed processors from producing or packaging and labelling inhaled cannabis extract products with any flavour, other than the flavour of cannabis. It would also restrict the promotion of inhaled cannabis extracts in a manner that could cause a person to believe that the product has a flavour other than one that is typical for cannabis. The proposed amendments would apply to all inhaled cannabis extracts (e.g. cannabis vaping products, hash, shatter) to avoid incentivizing licensed processors to create subsets of flavoured inhaled cannabis products and to deter consumer motivation to substitute cannabis vaping products with other highly concentrated forms of flavoured inhaled cannabis extracts (e.g. shatter, hashish, kief, budder).

More specifically, these amendments would

Transitional provisions

Coming into force

The current framework governing cannabis under the Cannabis Act and its regulations does not distinguish between cannabis products for medical or non-medical use; the same rules apply to all products. The proposed amendments are consistent with this approach and would apply to inhaled cannabis extracts sold for non-medical and medical purposes.

Cannabis is exempt from the application of the Food and Drugs Act (FDA) through the Cannabis Exemption (Food and Drugs Act) Regulations, except under certain conditions (e.g. if the cannabis is represented with a health claim or is a drug authorized for clinical trials). The proposed amendments would not apply to inhaled cannabis extracts that are subject to the FDA.

Regulatory development

Consultation

Consultation: Toward the legalization, regulation and restriction of access to marijuana

The consultation document entitled Toward the legalization, regulation and restriction of access to marijuana was published on June 30, 2016. For a period of 60 days, Canadians were invited to submit their comments.

Over 30 000 submissions were received in response to this consultation, including more than 300 written submissions from organizations representing stakeholder groups or individuals. On the topic of flavours, public health stakeholders recommended the introduction of prohibitions on flavoured cannabis products that appeal to youth.

Consultation: Strict regulation of edible cannabis, extracts and topicals

The consultation on the strict regulation of edible cannabis, extracts and topicals was published on December 20, 2018. For a period of 60 days, Canadians were invited to submit their comments on draft regulations to address the public health and public safety risks posed by edible cannabis, cannabis extracts and cannabis topicals.

During the public comment period, Health Canada received close to 6 800 responses to an online questionnaire and 350 written submissions. Health Canada also held bilateral meetings with all provinces and territories and led targeted consultations with interested stakeholders, including the cannabis and food industries, industry associations, authorized sellers, public health organizations.

Very little feedback was received on flavoured inhaled cannabis extracts as part of this consultation. However, several public health stakeholders recommended the restriction or prohibition of flavoured cannabis products, with a few specifically recommending the prohibition of flavoured inhaled cannabis extracts, in order to reduce the appeal of these products to youth. On the contrary, some cannabis industry stakeholders expressed concern that the restrictions on promoting the flavours listed in Schedule 3 to the TVPA (e.g. confectionery, dessert, soft drink, energy drinks) in cannabis extracts were too broad.

The Cannabis Regulations were designed taking into account a number of key policy principles, including that new requirements be consistent with analogous regulatory frameworks to the extent that they support the Government's public health and public safety objectives. The current restrictions on inhaled cannabis extracts were adapted from the control framework for vaping products. Since the development of the Cannabis Regulations, available data around inhaled cannabis extracts (specifically around youth and vaping) has evolved, which now indicates a need to introduce new restrictions on flavours in inhaled cannabis extracts.

Other consultations related to appeal to youth and flavoured cannabis products

In August 2019, the Health Canada held webinars on several subjects, including on prohibitions related to appeal of cannabis products to young persons. In October 2019, Health Canada consulted with several federal licence holders on the ingredients in their vaping products, in particular on their flavouring agents. These consultations took place in response to the outbreak of vaping-associated lung illness (VALI) in the United States and Canada and involved licence holders known to be producing inhaled cannabis extracts. The Tobacco Control Directorate within Health Canada has also held consultations on reducing the appeal to youth of other vaping products.

Proactive outreach by licence holders in response to the Forward Regulatory Plan: 2020 to 2022

Health Canada has been contacted proactively by some licence holders who have raised concerns about the proposal potentially inhibiting their ability to compete in the market or differentiate their brand.

The information obtained through these consultations informed the development of the proposed amendments.

Modern treaty obligations and Indigenous engagement and consultation

The proposal would affect all Canadians, including Indigenous peoples. It may have an impact on Indigenous-affiliated federal licence holders and on provincially and territorially authorized retailers.

Health Canada has not yet engaged with Indigenous peoples on this proposal. However, the Department did engage with Indigenous governments and organizations during public consultations on the strict regulation of edible cannabis, cannabis extracts and cannabis topicals. This feedback included recommendations to impose strict controls to limit appeal to youth, including flavour restrictions.

The proposal would not have an impact on rights recognized and affirmed in section 35 of the Constitution Act, 1982. For this reason, it would not trigger the Crown's duty to consult.

The assessment of modern treaty implications found that the initiative would apply in all modern treaty areas. It also relates to health, which is a self-government subject matter area. However, modern treaties and self-government agreements do not include regulatory authority over substances regulated under federal law. While the proposed amendments are outside of the authorities of the agreements, the proposal would not impact their ability to consider additional restrictions, such as restrictions on how cannabis is sold in the community, provided they are consistent with the objectives of the Cannabis Act.

The proposed amendments to the Cannabis Regulations would not impact potential or affirmed treaty rights protected by section 35 of the Constitution Act, 1982, modern treaties, or international rights obligations.

Instrument choice

Incorporation by reference

Two documents have been referred to as part of the proposed amendments to the Cannabis Regulations.

The first document is the Food Chemicals Codex, which is a compendium of internationally recognized standards for the identity, purity and quality of food ingredients, published by the United States Pharmacopeia, and amended from time to time. It features over 1 200 monographs, including food ingredients, flavouring agents and vitamins. The Food Chemicals Codex is also referred to as part of the quality requirements in the Food and Drugs Regulations for food additives.

The second document is the Specifications for Flavouring, which is a set of internationally recognized specifications for flavouring agents. It is published by the Joint Food and Agriculture Organization/World Health Organization Expert Committee on Food Additives and published by the Food and Agriculture Organization of the United Nations, and amended from time to time. The Specifications for Flavouring is composed of specifications on the identity and purity of flavouring agents. The online edition of Specifications for Flavouring only contains specifications in English, but the query interface and background information are provided in English and French, among other languages.

The references to the Food Chemicals Codex and Specifications for Flavouring as part of the proposed amendments to the Cannabis Regulations would achieve the regulatory objectives by enabling licence holders to use certain non-cannabis derived flavouring agents in inhaled cannabis extracts, while providing a basis for the verification of the identify and quality of these flavouring agents.

Option 1: Baseline scenario

Under the baseline scenario option, there would be no additional restrictions on flavours in inhaled cannabis extracts. Licence holders could continue to produce and sell these products in accordance with the existing regulatory framework. The prohibited ingredients outlined in Schedule 2 and flavours in Schedule 3 to the TVPA would be reproduced in the Cannabis Regulations.

Licensed sellers and provincially and territorially authorized distributors and retailers could continue to sell flavoured inhaled cannabis extracts.

This option does not address the risk that usage rates of inhaled cannabis extracts may continue to rise among youth and young adults. This approach would not align with the proposed amendments to the TVPA and the proposed regulations for vaping products.

Option 2: Prohibit the promotion of any flavour other than cannabis

This option would expand existing rules under the Cannabis Regulations (i.e. restrictions on flavours under Schedule 3 to the TVPA) to prohibit representations that could create the impression that an inhaled cannabis extract has a flavour, other than the flavour of cannabis. Licensed sellers and provincially and territorially authorized distributors and retailers would be prohibited from promoting a flavour other than the flavour of cannabis.

It would not include any restrictions on flavouring agents that could be used to impart non-cannabis flavours.

Under this option, relevant requirements from the TVPA (i.e. schedules 2 and 3) would be reproduced in the Cannabis Regulations.

Licence holders would still be permitted to produce and sell flavoured inhaled cannabis extracts that may be appealing to youth and young adults (e.g. fruit flavours). This approach would not align with the proposed amendments to schedules 2 and 3 to the TVPA and the proposed regulations for vaping products.

Option 3: Prohibit the promotion of any flavour other than cannabis and prohibit products that have any flavour other than cannabis

This option would include all of the measures outlined in option 2, but would also prohibit inhaled cannabis extracts from having a flavour, other than the flavour of cannabis.

It would not include any restrictions on flavouring agents that could be used to impart non-cannabis flavours.

Under this option, relevant requirements from the TVPA (i.e. schedules 2 and 3) would be reproduced in the Cannabis Regulations.

Licence holders would be prohibited from producing and selling flavoured inhaled cannabis extracts that may appeal to youth, but would have greater flexibility around the use of specific flavouring agents. This could allow licence holders to use non-cannabis derived flavouring agents that give the product flavour notes that would appeal to youth. This approach would not align with the proposed amendments to schedules 2 and 3 to the TVPA and the proposed regulations for vaping products.

Option 4: (Recommended) Comprehensive amendments to limit non-cannabis flavours

This option recommends a comprehensive approach by: (1) prohibiting representations that could create the impression that a cannabis extract for inhalation has a flavour, other than the flavour of cannabis; (2) prescribing sensory attributes for inhaled cannabis extracts; and (3) placing restrictions on permitted flavouring agents. Licensed processors would be required to stop producing any products that impart a flavour, other than the flavour of cannabis.

Licensed sellers and provincially and territorially authorized distributors and retailers would be prohibited from promoting a flavour other than the flavour of cannabis. They would be permitted to sell flavoured inhaled cannabis extracts until they deplete their inventory.

If the proposed amendments to schedules 2 and 3 to the TVPA and its regulations are approved, consumers could not switch to flavoured inhaled cannabis extracts, as flavoured inhaled cannabis extracts regulated under the Cannabis Regulations would no longer be available.

Under this option, relevant requirements from the TVPA (i.e. schedules 2 and 3) would be reproduced in the Cannabis Regulations.

This option provides a comprehensive approach to help protect youth and young adults from inducements to use cannabis. The Public Health Agency of Canada would undertake public education activities targeted at youth and young adults to enhance awareness of the risks of using inhaled cannabis extracts, and support youth in preventing and reducing harms by making informed, evidence-based decisions about cannabis vaping.

Regulatory analysis

Benefits and costs

Summary of cost-benefit analysis

It is projected that the proposed amendments would reduce the profit of licensed processors, holders of a licence for sale for medical purposes (licensed sellers),footnote 22 and provincially and territorially authorized distributors and retailers, associated with the manufacturing and sale of inhaled cannabis extracts. The profit loss is estimated to be $396.11 million in present value (PV) over 10 years (or $56.40 million in annualized value).

It is projected that impacted licensed processors would face incremental testing costs to comply with the proposed new requirements related to the use of flavouring agents. These costs are projected to be $4,450 (PV) over 10 years (or $630 in annualized value). It is also projected that licensed processors would face costs to comply with updated requirements for promotion and product labelling; however, these costs cannot be quantified at this time.

It is expected that some licensed processors would have to reformulate their cannabis-flavoured inhaled cannabis extracts if they use flavouring agents that would be non-compliant with the proposed amendments (i.e. that are not identical to substances produced by, or found in, cannabis plants), assuming they wish to continue operating in this market. These costs cannot be quantified at this time due to data limitations. In addition, some licensed processors may choose to reformulate their flavoured inhaled cannabis extracts. Reformulating these products is a business decision, as it is not a regulatory requirement. This is acknowledged qualitatively in the cost-benefit analysis.

There is a risk that some consumers may turn to the illicit cannabis market to purchase flavoured inhaled cannabis extracts.

To implement the proposed amendments, Health Canada would incur upfront costs to develop a methodology to test the compliance status of inhaled cannabis extracts, including flavouring agents, and to develop guidance for industry and address complaints. In addition, in each year following implementation, Health Canada would invest incremental resources to test the compliance status of inhaled cannabis extract products to enforce the new restrictions and to address questions associated with the proposed amendments. These upfront and ongoing compliance and enforcement costs are expected to be $1.08 million (PV) from 2022 to 2031 (or $153,990 in annualized value).

Despite the cost of the proposed amendments, this proposal will result in a range of benefits, which could not be monetized at this time due to data limitations. These benefits include: (i) protecting young persons and others from inducements to use inhaled cannabis extracts; (ii) mitigating negative health impacts associated with youth use of inhaled cannabis extracts; and (iii) maintaining alignment with proposed changes under the TVPA to mitigate the risk that users of vaping products begin using inhaled cannabis extracts.

Analytical approach

The Cabinet Directive on Regulation requires departments to analyze the costs and benefits of proposed federal regulations. To measure these impacts, the benefits and costs are estimated by comparing the incremental change from the current regulatory framework (i.e. the “baseline scenario”) to what is anticipated to occur under the proposed new regulatory approach (i.e. the “regulatory scenario”).

To evaluate the impacts of the proposed regulatory amendments, a cost-benefit analysis (CBA) was undertaken that identified, and — to the extent possible — quantified and monetized, the incremental costs and benefits. The incremental impacts were evaluated in qualitative terms where quantified and monetized analyses were not possible (due to either a lack of data or difficulties in valuing certain impacts).

Quebec, Newfoundland and Labrador, Prince Edward Island, and Nova Scotia limited or restricted sales of cannabis vaping products on or before January 2020. While there are small quantities of other types of inhaled cannabis extracts that may be sold in these provinces, due to their different baseline scenario, these four provinces were excluded from the scope of this CBA.

The proposed amendments are expected to be registered in 2022. The period of analysis for this CBA covers the 10-year period from 2022 to 2031. This time period is considered sufficient for the incremental impacts to materialize. All monetized estimates are expressed in 2020 constant dollars. A 7% real discount rate is used to estimate the PV of the monetized impacts, and all values are discounted to the year 2022, the year the proposed amendments are expected to be registered.

To validate the assumptions and monetize certain impacts that are discussed qualitatively in this cost-benefit analysis, Health Canada will send a questionnaire to affected industry stakeholders in summer 2021. This information will assist Health Canada in quantifying these costs.

A summary of the CBA is provided herein. A copy of the full CBA report is available upon request from cannabis.consultation@canada.ca.

Key assumptions

The following assumptions were made for this CBA:

Benefits of the proposed amendments
Qualitative benefits

The proposed amendments are expected to primarily benefit youth and young adults by protecting them from inducements to use inhaled cannabis extracts. The proposed amendments are also expected to protect the health of young persons by restricting access to flavoured inhaled cannabis extracts, as these products would no longer be available in the legal market and the likelihood of exposure to promotional material would be reduced. This is expected to contribute to a reduction in the number of young adults who use inhaled cannabis extracts, and potentially mitigate the risks associated with cannabis use, including products with a high concentration of THC, from a young age.

Results from public opinion research commissioned by Health Canada indicate that 61% of youth and young adult respondents who vape cannabis do so on a regular basis (i.e. at least one day per week or more within the last 12 months).footnote 6 When respondents were asked to imagine what they would do if flavoured cannabis products were no longer available for purchase from a legal retailer in Canada, just under half (44%) said they would continue to vape cannabis, while slightly more than one third (36%) thought they would stop vaping cannabis, but would use other cannabis products. A smaller proportion felt they would stop vaping cannabis but use other flavoured vape products (17%). Very few (9%) imagined they would stop using cannabis altogether and would not use other vape products. Therefore, if the results of the public opinion research could be extrapolated beyond the study, it would be anticipated that advantages of the implementation of the proposed amendments could include a proportion of youth and young adults who vape cannabis switching to other, potentially lower potency, cannabis products (e.g. edible cannabis), as well as a small proportion ceasing to use cannabis altogether.

As outlined in the “Risks to youth and young adults” section of this document, initiating use of cannabis at a young age, particularly products with high THC content, such as inhaled cannabis extracts, increases the risks for a variety of adverse health outcomes, including impacts on brain and behavioural development.footnote 26 As a result, the risks and harms associated with cannabis use among young adults would be reduced if inhaled cannabis extracts are less appealing to this demographic group.

Maintaining regulatory alignment with the proposed restrictions on flavours for vaping products regulated under the TVPA is also important to mitigate the risk that users of vaping products would switch to inhaled cannabis extracts.

Costs of the proposed amendments

The regulatory scenario is expected to result in costs for federal licence holders (licensed processors and licensed sellers) that produce and/or sell flavoured inhaled cannabis extracts, provincially and territorially authorized distributors and retailers, consumers of inhaled cannabis extracts for medical and non-medical purposes, and Health Canada.

Quantitative costs
A. Profit loss for licence holders (licensed processors and licensed sellers)

Once the proposed amendments are implemented, these licence holders would be required to stop producing and selling flavoured inhaled cannabis extracts. Assuming that, for each year, the regulatory scenario will result in the sales of inhaled cannabis extracts being 12.7% lower than in the baseline scenario, affected licence holders would experience a revenue loss of $869.20 million over 10 years, which would translate into a profit loss. The analysis accounts for lost profits as the incremental cost on licence holders. Assuming the profit margin of these companies remains constant over time (i.e. 37.7%), it is estimated that the reduction in profit would be $217.81 million (PV) over 10 years (or $31.01 million in annualized value).

However, it is expected that the reduction in sales of inhaled cannabis extracts would be offset by an increase in sales of substitute cannabis products (e.g. dried cannabis). As it is not possible to quantify the value of the resulting increase in sales of substitute cannabis products, these substitution effects were not considered in the calculation of the profit loss. Therefore, it is projected that the actual decline in profit for affected stakeholders would be lower than the estimated quantified amount stated above.

B. Testing costs for licensed processors

Licensed processors that use flavouring agents in the production of inhaled cannabis extracts would need to determine whether their flavouring agents comply with the proposed restrictions. Licensed processors can determine compliance by obtaining information from their suppliers, by testing the flavouring agent themselves, or by sending it to a laboratory for testing. It is estimated that over 90% of licensed processors can obtain this information from suppliers without incurring costs, therefore, the burden to determine compliance with the new requirements (i.e. conduct tests) would affect only a minority of licensed processors. It is assumed that each test would cost approximately $500, and over 10 years, about 12 testsfootnote 27 would have to be conducted. The total cost that companies would incur is estimated to be $4,450 (PV) over 10 years (or $630 in annualized value).

C. Profit loss for private provincially and territorially authorized distributors and retailers

It is assumed that once the proposed amendments take effect, sales of inhaled cannabis extracts will affect private provincially and territorially authorized distributors and retailers at a similar rate (i.e. reduction of 12.7%) as that experienced by licence holders. Over 10 years, the total revenue loss from the sale of inhaled cannabis extracts is estimated to be $494.01 million for provincially and territorially authorized distributors and $739.37 million for authorized retailers. The profit margins of these entities in relation to inhaled cannabis extracts are assumed to be 4.5% and 30.7%, respectively. The analysis accounts for lost profits as the incremental cost. As a result, assuming the profit margins of these companies remain constant over time, it is estimated that their profits would decline by $164.37 million (PV) over 10 years (or an annualized value of $23.40 million).

As discussed in section A of this document, it is expected that the reduction in revenue would be offset by an increase in revenue from other cannabis products. It is projected that the actual decline in profit for impacted provincial and territorially authorized distributors and retailers would be lower than the estimated quantified amount stated above.

D. Profit loss for publicly owned provincially and territorially authorized distributors and retailers

There are eight provincial and territorial distributors and retailers that are owned by their respective province or territory. It is expected that the proposed amendments would affect these publicly owned distributors and retailers in a similar way as discussed in section C of this document. Publicly owned provincial and territorial distributors and retailers would experience a revenue loss of $170.44 million over 10 years. The analysis accounts for lost profits as the incremental cost. It is estimated that their profits would decline by $13.93 million (PV) over 10 years (or an annualized value of $1.98 million).

As discussed in sections A and C of this document, due to the potential increase in sales of substitute products, the actual decline in profit for impacted publicly owned provincially and territorially authorized distributors and retailers may be lower than the estimated amount stated above.

E. Costs to Health Canada

It is projected that Health Canada would incur incremental costs for developing guidance documents and other informational materials to support the implementation of the proposed amendments in the first year.

Health Canada would also develop methods for assessing whether a flavouring agent is compliant with the proposed amendments (i.e. to determine if flavouring agents are identical to substances derived from cannabis or have a flavour other than cannabis), which is an upfront cost. Samples of inhaled cannabis extracts or flavouring agents obtained during inspections, compliance monitoring projects, or compliance verification activities could be tested to verify compliance. Health Canada would also address questions associated with the proposed amendments. These upfront and ongoing activities are expected to cost $1.08 million (PV) over 10 years (or $153,990 in annualized value).footnote 28

Qualitative costs
F. Costs for licensed processors to modify promotional approaches and packaging and labelling

It is expected that some licensed processors are producing inhaled cannabis extracts that would be compliant with the proposed flavouring agent restrictions, but would have non-compliant promotional approaches or packaging and labelling. In this instance, these licensed processors would have to modify their promotional approaches (e.g. brand names), packaging and labelling, or product information wherever they are non-compliant with the proposed amendments. However, due to data limitations, it is not possible to quantify these activities for affected licensed processors at this time.

G. Costs to licensed processors to reformulate products

Currently, licensed processors are permitted to produce inhaled cannabis extracts with any flavour or flavouring agent. When the proposed amendments come into force, it is expected that licensed processors who currently produce cannabis-flavoured inhaled extracts with non-compliant flavouring agents will have to reformulate their products if they choose to continue operating in this market. However, due to data limitations, it is not possible to quantify these activities for affected licensed processors at this time.

For flavoured inhaled cannabis extracts, when the proposed amendments come into force, it is anticipated that affected licensed processors would either need to cease manufacturing these products, reformulate their products, or create new compliant products. The proposed amendments do not require any company to reformulate their existing products. Reformulation of existing products is therefore treated as a business decision and is acknowledged qualitatively in the cost-benefit analysis.

H. Costs to consumers

Currently, inhaled cannabis extracts are available in various flavours. Following the implementation of the proposed amendments, consumers will have access to less variety of flavours. Those who currently consume flavoured inhaled cannabis extracts may lose some enjoyment from their consumption of inhaled cannabis extracts.

It is expected that the proposed amendments would have a minimal impact on individuals who use inhaled cannabis extracts for medical purposes. Health Canada's Cannabis Tracking System data shows that inhaled cannabis extracts make up a relatively small share of total sales of cannabis products in the medical market compared to more popular cannabis products such as dried flowers and ingested cannabis extracts. From January of 2020 to December of 2020, medical sales of inhaled cannabis extracts accounted for 6.69% of total cannabis medical sales, compared to dried flowers, which accounted for 45.82% of total sales, and ingested cannabis extracts, which accounted for 40.44% of total cannabis medical sales.

It is expected that some consumers may begin purchasing flavoured inhaled cannabis extracts from the illegal market. According to public opinion research of youth consumers, 44% of respondents indicated that they would continue to use cannabis vaping products if flavoured vaping products were no longer available. Of these 44% of respondents, 66% stated that they would move to cannabis flavoured vaping products, while just under half (45%) said they would turn towards illegal sources to acquire flavoured vaping products. The Public Health Agency of Canada intends to undertake public education activities targeted at young persons to enhance awareness of the risks associated with using inhaled cannabis extracts, and to support youth and young adults in preventing and reducing harms by making informed, evidence-based decisions about cannabis vaping.

I. Implication of tax losses for federal, provincial and territorial governments

The governments may experience a tax revenue loss as a result of the proposed amendments as flavoured inhaled cannabis extracts would be removed from the market.

Cost-benefit statement
Monetized costs
Impacted stakeholder Description of costs Base year Second year Final year Total (PV) Annualized value
1. Industry
Licensed processors and licensed sellers Profit loss $11,917,879 $25,659,121 $46,274,756 $217,812,207 $31,011,558
Licensed processors Testing costs — to determine compliance status of flavouring agents $1,500 $500 $500 $4,446 $633
Privately owned provincially and territorially authorized distributors and retailers Profit loss $4,614,778 $19,871,177 $35,836,530 $164,367,291 $23,402,204
2. Publicly owned provincially and territorially authorized distributors and retailers Profit loss $391,048 $1,683,846 $3,036,720 $13,928,173 $1,983,058
3. Federal government Compliance and enforcement activities $477,808 $104,290 $104,290 $1,081,572 $153,991
All stakeholders Total costs $17,403,013 $47,318,933 $85,252,796 $397,193,688 $56,551,445
Qualitative impacts

Benefits

Negative impacts

Uncertainty and sensitivity analysis

A sensitivity analysis examined the uncertainty of variables and how they may affect cost results. Three variables were selected for the sensitivity analysis, namely, the discount rate, estimated reduction of sales of inhaled cannabis extracts, and profit margin for federal licence holders.

Discount rate

A sensitivity analysis was conducted to show the estimated net impacts of the proposed amendments at a 3%, 7% and 10% discount rate, respectively (7% was used in this CBA). At a 3% discount rate, the total costs would be $498.71 million (PV) over 10 years ($58.64 million annually), while a 10% discount rate would be $338.98 million (PV) over the 10-year period ($55.17 million annually).

Sensitivity analysis on discount rate
Discount rate Total costs (PV) Annualized value of total costs
3% $ 498,705,829 $ 58,463,537
7% $ 397,193,688 table c2 note a $ 56,551,445 table c2 note a
10% $ 338,984,705 $ 55,168,200

Table c2 note(s)

Table c2 note a

Represents values reported in the CBA statement.

Return to table c2 note a referrer
Reduction of sales

The CBA assumes that the proposed amendments would result in a significant reduction in the sale of inhaled cannabis extracts (approximately 12.7%), based on observations from Washington State. However, it is important to note that Washington State banned the sale of flavoured vaping products following fatalities and hospitalizations due to Vaping-Associated Lung Illness. It is expected that using Washington State's rate of reduction may lead to an overestimation of consumers' reactions in Canada.footnote 29 The sensitivity analysis assumes that the sales of inhaled cannabis extracts may drop at a rate of 10%, the same rate assumed in the sensitivity analysis for vaping products under the proposed amendments to the TVPA. The total quantified cost is estimated to be $312.98 million (PV) [or $44.56 million annually].

Sensitivity analysis on sales reduction rate
Reduction rate Total costs (PV) Annualized value
12.7% $ 397,193,688 table c3 note a $ 56,551,445 table c3 note a
10% $312,981,821 $44,561,570

Table c3 note(s)

Table c3 note a

Represents values reported in the CBA statement.

Return to table c3 note a referrer
Profit margin

Health Canada does not have data to calculate licence holders' profit margin for inhaled cannabis extracts. This CBA assumes that licence holders have a profit margin of 37.7%. This profit margin is derived from publicly available information for the entire cannabis industry. During the comment period, Health Canada would seek to collect information on the profit margin associated with inhaled cannabis extracts to better refine the analysis. The sensitivity analysis assumes that the profit margin may be 25%.footnote 30 The total quantified cost is estimated to be $323.82 million (PV) over 10 years ($46.10 million in annualized value).

Sensitivity analysis on profit margin of licence holders
Profit margin Total costs (PV) Annualized value
37.7% $ 397,193,688 table c4 note a $ 56,551,445 table c4 note a
25% $ 323,819,285 $ 46,104,581

Table c4 note(s)

Table c4 note a

Represents values reported in the CBA statement.

Return to table c4 note a referrer

Small business lens

As of the end of September of 2020, fewer than 10 licence holders and the majority (nearly 90%) of provincially and territorially authorized distributors and retailers were considered “small businesses,” with annual sales revenue of less than $5 million.

Licensed processors may assume compliance costs to meet the proposed requirements. The total testing cost is minor, with a limited number of tests expected to be conducted by small businesses. In addition, data from Health Canada's Cannabis Tracking System indicates that less than 3% of the total inhaled cannabis extracts on the market are supplied by small businesses. Therefore, it is expected that the number of affected products (i.e. inhaled cannabis extracts that would be compliant with the proposed flavouring agent restrictions, but have non-compliant promotional materials, packaging, or labelling) produced by small businesses would be very limited. The costs to small businesses associated with testing and modifying non-compliant promotional material, product packaging and labelling are expected to be minimal.

In addition to compliance costs, licence holders that are considered to be small businesses would experience a profit loss, which is estimated to be $5.09 million (PV) over 10 years (or $724,930).

The potential profit loss would also apply to approximately 530 small provincially and territorially authorized distributors and retailers, and is estimated to be $41.66 million (PV) over 10 years (or $5.93 million annually).

The total costs to small businesses are expected to be at least $46.75 million (PV) over 10 years (or $6.66 million annually). The costs per affected small business are estimated to be $86,414 (PV) over 10 years (or $12,303 annually).

The proposed amendments have been designed to limit burden on all businesses, including small businesses. They would come into force 180 days after they are registered, giving licensed processors time to adjust their production processes, including labelling, and modify promotional materials. To limit the impact on small businesses, the proposal would allow licensed sellers and provincially and territorially authorized distributors and retailers to continue selling flavoured inhaled cannabis extracts to consumers until they deplete their inventory. This would avoid having licensed sellers and provincially and territorially authorized distributors and retailers return the products for destruction, which should help reduce financial losses for businesses.

Small business lens summary

Number of small businesses impacted: 9 federally licensed processors and 532 provincially and territorially authorized distributors and retailers (privately owned)

Financial costs
Activity Annualized value Present value
Profit loss $ 6,656,111 $ 46,749,737
Total cost $ 6,656,111 $ 46,749,737
Cost per small business $ 12,303 $ 86,414

One-for-one rule

The proposal would not result in any administrative burden on businesses; therefore, the one-for-one rule does not apply.

Regulatory cooperation and alignment

Provinces and territories

Across certain provinces, there is some precedent to restrict flavours in vaping products and inhaled cannabis extracts. Quebec, Newfoundland and Labrador, Prince Edward Island (P.E.I.), and Nova Scotia have limited or restricted sales of cannabis vaping products. However, they have continued to allow the sale of other inhaled cannabis extracts, such as kief and hash.

In Newfoundland and Labrador, the sale of cannabis vaping products is also prohibited, effective December of 2019.footnote 31 It is unclear whether or when Newfoundland and Labrador will permit the sale of cannabis vaping products.

As of December of 2019, cannabis vaping products are not available for sale through the P.E.I. Cannabis Management Corporation, the only cannabis retailer on P.E.I.footnote 32

As of January 1, 2020, Quebec restricted the sale of cannabis vaping products.footnote 33 Other cannabis extracts, such as tinctures/oils, are not permitted to have a characteristic flavour or odour, other than cannabis, or contain any colouring agent intended to modify its colour.footnote 34

In Nova Scotia, the sale of flavoured cannabis vaping products was prohibited as of April 1, 2020.footnote 35 Inhaled cannabis extracts are prohibited from containing synthetic flavouring agents, caffeine, colouring agents, sugars, or sweeteners, and cannot have a characterizing scent or flavour, other than that of cannabis.footnote 36 footnote 37 Promotional materials cannot be appealing to youth, and packaging and labelling must not represent cannabis vaping products as having a flavour, other than the flavour of cannabis.

International

The Cannabis Regulations are part of a new and unique approach to controlling the public health and public safety risks associated with cannabis on a national scale. As the non-medical use of cannabis is currently illegal at the national level in other Organisation for Economic Co-operation and Development (OECD) member states, opportunities for regulatory alignment are limited.

Canada is a party to three United Nations drug control conventions: the Single Convention on Narcotic Drugs, 1961 as amended by the 1972 Protocol; the Convention on Psychotropic Substances, 1971; and the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances of 1988. General international trade in cannabis is prohibited by the drug conventions of the United Nations. Therefore, under the Cannabis Act and its regulations, the import and export of cannabis are permitted only for scientific or medical purposes, or in respect of industrial hemp. No changes will be made to the import and export provisions of the Regulations.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus (GBA+)

The policy objectives of these amendments are to protect young persons and others from inducements to use cannabis as well as to maintain regulatory alignment with proposed amendments under the TVPA to restrict flavours for vaping products. There is a risk that restricting flavours in nicotine vaping products, without introducing similar restrictions for inhaled cannabis extracts, could increase the appeal and use of flavoured inhaled cannabis extracts among young persons.

It is anticipated that the proposed regulatory amendments would particularly affect young persons and males. Both of these groups have reported using flavoured cannabis vaping products at higher rates compared to their counterparts and other demographics.

To inform the gender-based analysis plus, Health Canada has drawn from the data in the 2020 Canadian Cannabis Survey (CCS), the 2018–2019 CSTADS and recent (2020) public opinion research commissioned by Health Canada.

Age-related considerations

Canadian surveys measuring trends in cannabis vaping use among cannabis users generally suggest that cannabis vaping use is found to be higher among young persons compared to older age groups.footnote 38 footnote 39 According to the 2020 CCS, cannabis vape pen/cartridge use in the past year was higher among those aged 16–19 (32%) and 20–24 (31%) compared to those over 25 years of age (21%). The same trend was observed for other inhaled cannabis extracts (e.g. dabbing, hashish, kief, budder, and shatter). For example, according to the 2020 CCS, cannabis extract (e.g. shatter and budder) use in the past year, among past 12-month users, was highest among those aged 16–19 (19%) and 20–24 (16%), compared to those over 25 years of age (12%). With respect to hashish and kief, 29% of past 12-month cannabis users between 16 and 19 reported using hashish of kief in the past year, compared to 26% of respondents between 20 and 24 and 17% of those above 25 years of age. The proportion of past-year cannabis vape pen/cartridge users in the 16–19 age bracket increased from 27% in 2018 to 33% in 2019, but did not change significantly in 2020.footnote 40 footnote 38 According to the 2018–2019 CSTADS, cannabis vaping is more common for students in Grades 10–12 (43%) than students in Grades 7–9 (38%).footnote 41

According to public opinion research, respondents between the ages of 15–17 were more likely to report being “frequent” vapers (i.e. using cannabis vapes 1–6 days per week) compared to those aged 18–24. Younger respondents (15–17 years old) were significantly more likely to report that non-cannabis flavours were an important factor influencing their initial interest in vaping and their reason to vape cannabis instead of using other methods of consumption, compared to their 18–24 year old counterparts. The 15–17 years old respondents also reported a higher frequency of use of flavoured cannabis vape products and other flavoured inhaled cannabis extracts than respondents in the 18–24 age group.footnote 39

Gender-related considerations

Canadian surveys suggest that males are more likely to vape cannabis and be more frequent users of cannabis vapes than females.footnote 38,footnote 42 footnote 39 According to the 2020 CCS, males are more likely than females to consume cannabis using cartridges/vape pens (23% vs 20%, respectively).footnote 38Males are more likely than females to consume cannabis by vaping with a vaporizer (15% males vs 9% females), vaping with a vape pen or e-cigarette (25% males vs 21% females), or by dabbing (9% males vs 5% females).footnote 38 Results from the 2018–2019 CSTADS demonstrate that, among Grades 7–12 students who use cannabis, vaping is a more popular method to consume cannabis among male students (46%) than female students (38%).footnote 42

According to public opinion research, males are more likely to report that flavours are either a very or somewhat important factor in their initial interest in vaping cannabis than females (71% vs 61%).footnote 39 This research also demonstrates that frequent cannabis vapers are more likely to be male (75%) than female (47%). In addition, males are significantly more likely to report that flavours were a factor influencing their initial interest in vaping, their reason to vape cannabis instead of other methods of consumption, and driving their selection of a cannabis vape product, compared to their female counterparts. Males also reported a higher frequency of use of flavoured cannabis vape products and other flavoured inhaled cannabis extracts compared to females.footnote 39

Contact: A broader gender-based analysis plus report is available upon request. If interested, please contact cannabis.consultation@canada.ca.

Implementation, compliance and enforcement, and service standards

Implementation

The proposed Regulations would be made pursuant to the authorities of the Cannabis Act. They would come into force 180 days after they are registered.

Compliance promotion and outreach activities aimed at informing processors, licensed sellers, provincially and territorially authorized distributors and retailers of inhaled cannabis extracts would take place to increase awareness of the measures set out in the proposal and to assist parties in achieving compliance.

Communications and guidance

Health Canada is committed to continuing to provide industry, the provinces and territories, and other stakeholders with relevant and timely information. External guidance will be developed and updated to facilitate transition. Key information to enable a smooth transition will be provided to industry as early as possible.

Consistency with other regulatory frameworks

The proposed amendments have been developed taking into consideration existing regulatory frameworks for food additives and vaping products. Health Canada will continue to ensure that the product rules are consistent with those under other frameworks, as appropriate, and remain consistent over time.

Compliance and enforcement

In alignment with the Health Canada Compliance and enforcement policy framework and the Health Canada Compliance and Enforcement Policy for the Cannabis Act, and informed by the circumstances of each case, Health Canada takes a risk-based approach to its enforcement actions and would choose the most appropriate tool to achieve compliance and mitigate risks as circumstances warrant.

Health Canada would issue guidance to industry on the use of flavours in inhaled cannabis extracts, as well as their promotional materials, packaging and labelling. The Notice of New Cannabis Products process could be used to help monitor compliance with the packaging and labelling restrictions (as they pertain to brand name) of the proposed amendments. In addition, inspectors could follow up on complaints by conducting inspections to verify compliance with the proposed requirements. This could include reviewing the product labels and ingredients used in the product's formulation, and reviewing records and laboratory testing.

Health Canada would continue to provide oversight to verify that regulated parties are aware of and adhere to the proposed new regulatory requirements. Health Canada would take timely actions respecting individuals and businesses whose cannabis products or activities with cannabis pose an unacceptable risk to public health and/or public safety or do not comply with the applicable requirements. Health Canada's national compliance and enforcement approach would continue to apply, including promoting and verifying compliance with the Act and its regulations through inspections and other means, and working toward preventing non-compliance.

The enforcement measures under the Cannabis Act and the Cannabis Regulations would continue to be available to Health Canada. These measures would maintain the same delivery approach, ranging from activities intended to educate and prevent non-compliance through compliance promotion, to measures intended to bring a regulated party back into compliance or address a risk to public health or public safety.

Enforcement measures could include, but are not limited to, warnings, product recall, product seizure, placing conditions on a federal licence, suspending or revoking a federal licence or permit, issuing administrative monetary penalties of up to $1 million, ministerial orders, or prosecution. Supported by the provisions in the Cannabis Act related to information disclosure, Health Canada may also disclose relevant information obtained under the Act where the disclosure is necessary to protect public health or public safety.

To support its compliance objectives, Health Canada's Controlled Substances and Cannabis Branch and the Regulatory Operations and Enforcement Branch, which is responsible for inspections, would continue their regular enforcement and compliance activities. Health Canada would also continue to collaborate with other partners, including the provinces and territories.

Contact

John Clare
Director General
Strategic Policy
Controlled Substances and Cannabis Branch
Address Locator: 0302I
Health Canada
Ottawa, Ontario
K1A 0K9
Email: cannabis.consultation@canada.ca

Appendix A

Table A1: Inhaled cannabis extracts
Note: Not all products referenced in Notices for New Cannabis Products submitted to Health Canada by licensed processors will be made available for sale to consumers. As such, some of the cannabis products included in this table are not reflected in the Cannabis Tracking System data.
Subgroup of inhaled cannabis extracts Number of products Share in total number of products
Vaping Liquid 1,701 23.96%
Hash 1,076 15.16%
Rosin 920 12.96%
Resin 755 10.64%
Distillate 698 9.83%
Sauce / HTFSE (High Terpene Full Spectrum Extract) 456 6.42%
Shatter/Pull and Snap 214 3.01%
Kief 206 2.90%
Wax 184 2.59%
Butane Hash Oil / Propane Hash Oil 177 2.49%
Crumble/Honeycomb 153 2.16%
Budder/Batter 136 1.92%
Crystalline 126 1.77%
CO2 Oil 115 1.62%
Compressed Form (Milled) 3 0.04%
Unknown 177 2.49%

PROPOSED REGULATORY TEXT

Notice is given that the Administrator in Council, pursuant to subsection 139(1) of the Cannabis Actfootnote a, proposes to make the annexed Regulations Amending the Cannabis Regulations (Flavours in Cannabis Extracts).

Interested persons may make representations concerning the proposed Regulations within 75 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to John Clare, Director General, Strategic Policy, Cannabis, Controlled Substances and Cannabis Branch, Address Locator: 0302B, Health Canada, Ottawa, Ontario K1A 0K9 (email: cannabis.consultation@canada.ca).

Ottawa, June 10, 2021

Julie Adair
Assistant Clerk of the Privy Council

Regulations Amending the Cannabis Regulations (Flavours in Cannabis Extracts)

Amendments

1 (1) Paragraph 101.3(2)(a) of the Cannabis Regulationsfootnote 43 is replaced by the following:

(2) Subsection 101.3(2) of the Regulations is amended by adding the following after paragraph (b):

TABLE
Item Ingredient
1 Amino acids
2 Colouring agents
3 Essential fatty acids
4 Glucuronolactone
5 Probiotics
6 Taurine
7 Vitamins
8 Mineral nutrients

(3) Section 101.3 of the Regulations is amended by adding the following after subsection (5):

Flavouring agent — inhaled cannabis extract

(5.1) A flavouring agent that is used to produce a cannabis extract referred to in subsection (1) and intended to be consumed by means of inhalation must not contain any substance other than one that is identical to a substance that is produced by, or found in, a part of a cannabis plant that is referred to in item 1 of Schedule 1 to the Act.

Substance in flavouring agent — inhaled cannabis extract

(5.2) A substance referred to in subsection (5.1) must, if it is used in the manufacture of a flavouring agent that is used to produce a cannabis extract referred to in subsection (1) and intended to be consumed by means of inhalation,

2 The Regulations are amended by adding the following after section 101.5:

Inhaled cannabis extract — sensory attributes

101.51 (1) A cannabis extract that is intended to be consumed by means of inhalation and that is a cannabis product — or that is contained in a cannabis accessory that is a cannabis product — or the emissions of such an extract must not have sensory attributes that result in a sensory perception other than one that is typical for cannabis that is referred to in item 1 of Schedule 1 to the Act.

Definitions

(2) The following definitions apply in this section.

emission
means a substance produced when a cannabis extract that is intended to be consumed by means of inhalation and that is a cannabis product is consumed — or when a cannabis accessory that contains such a cannabis extract and that is a cannabis product is used — and that escapes from the cannabis product. (émission)
sensory perception
means perception derived from stimuli to the olfactory, gustatory or trigeminal chemosensory system. (perception sensorielle)

3 Section 104.11 of the Regulations is replaced by the following:

Flavours — cannabis extract

104.11 It is prohibited to promote a cannabis extract — or a cannabis accessory that contains a cannabis extract — under subsections 17(2) to (6) of the Act, in a manner that could cause a person to believe that the cannabis extract or the cannabis accessory has

TABLE
Item Flavour
1 Confectionery
2 Dessert
3 Soft drink
4 Energy drink

4 Subsection 132.13(1) of the Regulations is replaced by the following:

Flavours — cannabis extract

132.13 (1) It is prohibited to display on a cannabis extract that is a cannabis product or on a cannabis accessory that contains a cannabis extract and that is a cannabis product, or on the package of such a cannabis product or on the label or panel of a container in which such a cannabis product is packaged, an indication or illustration, including a brand element, that could cause a person to believe that the cannabis product has

Transitional Provisions

Definition of former Regulations

5 (1) In sections 6 and 7, former Regulations means the Cannabis Regulations as they read immediately before the day on which these Regulations come into force.

Other words and expressions

(2) All other words and expressions used in sections 6 and 7 have the same meaning as in the Cannabis Regulations.

Exemption — sensory attributes of inhaled cannabis extracts

6 A holder of a licence for sale for medical purposes that is authorized to sell a cannabis extract that is intended to be consumed by means of inhalation and that is a cannabis product — or that is contained in a cannabis accessory that is a cannabis product — is, in respect of the sale or distribution of such a cannabis product, exempt from the application of subsections 101.3(5.1) and (5.2) and section 101.51 of the Cannabis Regulations if the cannabis product meets the requirements of section 101.3 of the former Regulations.

Exemption — packaging and labelling

7 (1) A holder of a licence for sale for medical purposes that is authorized to sell a cannabis extract that is intended to be consumed by means of inhalation and that is a cannabis product — or that is contained in a cannabis accessory that is a cannabis product — is, in respect of the sale or distribution of such a cannabis product, exempt from the application of section 132.13 of the Cannabis Regulations if the cannabis product is packaged and labelled in accordance with section 132.13 of the former Regulations.

Exemption — other person

(2) A person, other than a holder of a licence for processing, that is authorized to sell a cannabis extract that is intended to be consumed by means of inhalation and that is a cannabis product — or that is contained in a cannabis accessory that is a cannabis product — is, in respect of the sale of such a cannabis product, exempt from the application of section 25 of the Act if the cannabis product is packaged and labelled in accordance with section 132.13 of the former Regulations.

Coming into Force

8 These Regulations come into force on the 180th day after the day on which they are registered.