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Feds say cost recovery will minimize cannabis price for consumers

The cost recovery and the Cannabis Act will go into effect on Oct. 17; the same day recreational use of marijuana is legalized in Canada. The release states the act aims to keep marijuana out of the hands of youth and the profits away from criminals and organized crime.

“Cost recovery is a standard practice across the Government of Canada to support program delivery,” Minister of Health Ginette Petitpas Taylor said in the release. “It ensures that those who benefit from the new legal market will pay the costs of regulating cannabis, which will reduce the cost to Canadians. We believe that this approach addresses the concerns raised by the cannabis industry, while ensuring that Canadians will not shoulder the costs of cannabis regulation.”

Health Canada said the cost recovery approach will allow for both larger and smaller players in a diverse market, adding it will ensure the recovery fees do not exceed regulatory costs and will scale fees according to the size of a business and apply lower fees for micro-scale licence holders.

“We aim to minimize the costs to Canadians of regulating the cannabis industry without undermining our goal of keeping profits out of the pockets of criminals and organized crime,” Minister of Border Security and Organized Crime Reduction Bill Blair said in the release. “These fees are reasonable and strike the right balance.” 

Health Canada collected public input on the cost recovery approach which resulted in changing the design of the annual regulatory fee to use the previous year’s revenue rather than forecasted revenue.

Cost recovery for the regulation of cannabis includes four fees:

• Application screening fee: recovers the costs associated with screening new licence applications ($3,277 for standard licence applicants and $1,638 for micro and nursery licence applicants);

• Security clearance fee: recovers the costs associated with screening, processing, and issuing or refusing security clearances ($1,654);

• Import/export permit fee: recovers the costs associated with screening, processing, and issuing or refusing to issue an import or export permit for medical or scientific purposes ($610); and,

• Annual regulatory fee: recovers the aggregate costs of administering the cannabis regulatory program that are not covered under any of the other fees (2.3 per cent of cannabis revenue for standard licence holders, or $23,000 if cannabis revenue is less than $1 million, and one per cent on the first $1 million of cannabis revenue for micro and nursery licence holders or $2,500 in cases where cannabis revenue is less than $250,000).

Research, analytical testing and hemp production license are exempt from the fees and producers, cultivators and sellers of medical marijuana will be exempt from the annual regulatory fee, Health Canada stated in the release.