Canada Gazette, Part I, Volume 158, Number 16: Canadian Industrial Hemp Promotion-Research Agency Proclamation

April 20, 2024

Statutory authority
Farm Products Agencies Act

Sponsoring agency
Farm Products Council of Canada

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Proclamation.)

Issues

The Industrial Hemp Regulations (IHR) defines industrial hemp (hemp) as a cannabis plant, or any part of the plant, in which the concentration of delta-9-tetrahydrocannabinol (THC, the psychoactive compound) is 0.3% or less in the flowering heads and leaves. As hemp has only been legal since 1998, there are significant gaps in research and consumer knowledge on the wide variety of its uses and benefits. Given that the sector is at an early stage of development, there is a need for a coordinated national approach to funding research and marketing activities on projects that are priorities for the hemp value chain actors and build on current Canadian expertise and resources. Moreover, the developing hemp sector requires financial support and investment to be able to grow and improve its competitiveness in the domestic market and the international market.

The creation of the Canadian Industrial Hemp Promotion-Research Agency (PRA) is ideal for the Canadian hemp sector, as it would be able to efficiently coordinate the use of funds for promotion and research activities to advance competitiveness in domestic and international markets. The PRA would further aim to strengthen the hemp sector by addressing complex issues impacting the hemp sector and encouraging new market opportunities. This, in turn, would contribute to the rural economy and diversification of the Canadian agricultural sector.

Background

The production of hemp is regulated by Health Canada (HC) through a licensing system that requires producers to obtain a cultivation license issued by HC. Licence holders can only cultivate using HC-approved pedigree seed, which produce hemp plants that are low in THC.

Production of hemp has trended upwards since legalization in 1998. Seeded area of hemp stands at 55 400 acres in 2023.^{footnote 1} The move of the licensing of hemp cultivation under the IHR to the Cannabis Act permits hemp producers, for the first time, to sell hemp leaves, flowers and stems to licensed cannabis processors. Although over 90% of the current industry is based in Alberta, Saskatchewan and Manitoba, production has been increasing in Ontario, Quebec and New Brunswick. The number of Canadian industrial hemp licences grew from 542 in 2018 to over 900 in 2022.^{footnote 2} Sales of hemp in Canada were estimated at $525 million in 2022,^{footnote 3} with $84.2 million in exports (over 90% went to the United States) and $2.9 million^{footnote 4} in imports (mostly seed and oil from the United States).

To support the expansion of the hemp sector and to ensure that it remains competitive, the Producer Industrial Hemp PRA Committee (Hemp Producers Committee) submitted to the Farm Products Council of Canada (FPCC), in October 2017, a proposal for the creation of a PRA under Part III of the Farm Products Agencies Act (FPAA). As per the FPAA, upon receipt of a request from a group of producers of farm products, FPCC is mandated to inquire into the merits of establishing a PRA; to ensure that the required level of support from producers and importers is demonstrated; and to report its recommendation to the Minister of Agriculture and Agri-Food.

FPCC implemented a thorough process to review the proposal. The process included appointing a panel of two FPCC members to inquire into the merits of establishing the proposed PRA and conducting a public hearing in Winnipeg, Manitoba, in January 2019. The panel presented to FPCC, through the submission of a panel report, its findings into the merits of establishing a PRA. FPCC was satisfied that the Hemp Producers Committee met the requirements under the FPAA and recommended to the Minister of Agriculture and Agri-Food approval of the establishment of the PRA. On August 6, 2021, the Minister of Agriculture and Agri-Food approved FPCC’s recommendation to establish a PRA under Part III of the FPAA.

The Canadian Industrial Hemp Promotion-Research Agency Proclamation (Proclamation) will provide the PRA with the authority to develop a levies order; establish and collect a levy on interprovincial, imported and exported farm products; research and improve production methods and product quality; and advertise and promote consumption of farm products in both domestic and international markets. FPCC, as an oversight body, will be responsible for providing guidance; overseeing the PRA’s operations; reviewing its business plans, reviewing and approving levies orders and amendments; and attending all open Board meetings.

The financial viability of the PRA is based on the notion that the levy collected will be sufficient for the PRA to be self-sustaining. Subsequent to the PRA being proclaimed, the PRA will submit a levies order to FPCC for its approval. Following thorough analysis, the Hemp Producers Committee consulted with hemp producers and importers through surveys and proposed to initially set the levy rate at 0.5% on the value of sales of primary hemp products, and imported primary and processed hemp products listed in the annexed schedule of the Proclamation. Along with supporting the establishment of the PRA, the majority of hemp producers and importers also agreed through the voting process to initially set the levy rate at 0.5%. Any proposal to amend the levy rate following the establishment of the PRA will be based on a decision by the PRA Board of directors, which will be composed of members representing hemp producers and importers from the hemp-producing provinces. The amended levy rate is subject to approval by FPCC.

Levy contributions will be collected from buyers of primary hemp products from licensed hemp cultivators and importers of primary and processed hemp products. The concept of a PRA levy is already known to Canadian hemp growers through the current 0.5% voluntary checkoff paid to the Canadian Hemp Trade Alliance (CHTA). The CHTA is a national industry association that promotes Canadian hemp and hemp products domestically and globally. The Hemp Producers Committee’s plan, as supported by the CHTA, hemp producers and hemp importers, is to turn the checkoff paid to the CHTA into a levy to be paid to the PRA. Once the collection of domestic levies is well established, the PRA intends to collect import levies. All levies must be approved by FPCC before they can be collected.

The Hemp Producers Committee has estimated, through consultation with industry experts, that the projected PRA revenue would be mostly generated from domestic levies. Based on past data on the production and price levels of conventional and organic hemp seed, the initial levy revenue is forecasted to be around $200,000. The Hemp Producers Committee has also estimated, based on overall hectarage growth, production, and pricing patterns, that the levy revenue could increase to over $400,000 in the long run. Some of the forecasted expenses will include research activities, business development and promotions, and general administrative expenditures. The investment in promotion and research activities is expected to increase proportionally with the increase in levy revenue, while the increase of administrative expenditures will be based on inflation.

Objective

The objective of this regulatory proposal is to create the PRA that would

• (a) promote the consumption of hemp products in the Canadian market;
• (b) coordinate a national approach to funding research and marketing activities;
• (c) enhance the competitiveness of the Canadian hemp industry;
• (d) develop export markets for Canadian hemp; and
• (e) contribute to opening new market opportunities.

Description

The Proclamation establishes a national PRA, to be known as the Canadian Industrial Hemp Promotion-Research Agency, which will enable the PRA to submit a levies order for approval by FPCC. The PRA will consist of nine members appointed in the manner and for the terms set out in the annexed schedule of the Proclamation. The annexed schedule also sets out the manner in which the chair and vice-chair of the PRA are to be designated; the manner of appointment and term of temporary substitute members; the place within Canada where the PRA head office is to be situated; the primary and processed hemp products subject to the PRA’s powers; and the terms of the promotion and research plan that the PRA is empowered to implement.

Regulatory development

Consultation

FPCC’s consultation process involved engaging with several stakeholders, including the Hemp Producers Committee and the CHTA.

FPCC consulted with the CHTA during the process of reviewing the PRA proposal. The CHTA comprises over 350 national and international members active in the production, processing, research, retail, breeding, government and academic sectors related to hemp. FPCC gathered the feedback expressed by CHTA members and their support for the establishment of the PRA during the inquiry process.

FPCC published the notice of the public hearing for the PRA in the Canada Gazette, Part I, on October 13, 2018, and in various newspapers and journals across the country in order to reach a wide audience. FPCC took into consideration the 33 letters submitted in response to the notice and noted that all the comments were in support of the establishment of the PRA. Letters of support for the PRA were also provided by the provincial governments of Alberta, Saskatchewan and Manitoba, which accounted for 84% of cultivation licenses over the 2013–2017 period.

In accordance with section 8 of the FPAA, FPCC conducted a public hearing on the proposed PRA in Winnipeg, Manitoba, on January 29, 2019. There were presentations by the CHTA, Marshall Farms, Hemp Genetics International Inc., Logistik Unicorp (Eco-terre inc.), Fresh Hemp Foods Ltd., and Rowland Farms. They all spoke in support of establishing the PRA for a stronger hemp sector.

Interveners at the public hearing expressed that farmers’ contributions are key to the successful growth and development of the hemp industry, and that farmers need to play a role in how the Canadian industry secures and extends its current global leadership position in hemp for food. It was also reported that in 2018 millions of dollars were spent on wages and capital to support the industry’s production and sales. As the industry grows, it will continue to make contributions to the Canadian economy by creating jobs, investing in capital, increasing seeded hectarage, and devoting funds to research and development.

To demonstrate that the majority of the aggregate of the producers and importers of hemp and hemp products is in favour of the establishment of the PRA, as required in Section 39 of the FPAA, the Hemp Producers Committee circulated a survey to licensed producers and importers across Canada to assess their support or opposition for the establishment of a PRA. FPCC worked closely with Statistics Canada to analyze and validate the survey results presented by the Hemp Producers Committee. The survey responses from these hemp producers and importers showed a strong majority of support for the establishment of the PRA, which exceeded the threshold majority of 50% plus one, as required by the FPAA.

Although industry consultations and the public hearing occurred prior to the global COVID-19 pandemic, FPCC and the Hemp Producers Committee remain of the view that the establishment of the PRA would be beneficial for the sector.

Modern treaty obligations and Indigenous engagement and consultation

This proposal will have no disproportionate impact on Indigenous peoples.

The proposed PRA will be national in scope, with a mandate to advance the hemp sector’s competitiveness in domestic and international markets and, therefore, any benefits to the sector are intended to apply to all hemp producers, including those who self-identify as Indigenous.

As required by the Cabinet Directive on the Federal Approach to Modern Treaty Implementation, Agriculture and Agri-Food Canada (AAFC) conducted an assessment of modern treaty implications on the proposal. The assessment did not identify any modern treaty implications or obligations. As of March 2022, there were 33 Indigenous owned or affiliated hemp licence holders across Canada.^{footnote 5} While conducting consultations, the Hemp Producers Committee circulated a survey to licensed producers and importers, including to Indigenous owned or affiliated hemp license holders, to assess their support or opposition for the establishment of a PRA. The consultation process provided Indigenous stakeholders the opportunity to express their support or opposition for the PRA through the survey, written submissions to FPCC, or at the public hearing.

Although all licensed hemp producers and importers will be subject to the levy collection, including individuals in modern treaty areas, it is not anticipated that this initiative will require the federal government to address employment, procurement or other economic development rights or provisions in modern treaty areas. It is not anticipated that the proposed PRA and its activities will adversely impact the rights of any Indigenous groups or communities, resulting in a duty to consult. The proposed PRA does not alter any existing statutes or regulations, which would require an assessment to determine consistency with the United Nations Declaration on the Rights of Indigenous Peoples Act, nor does it suggest any amendments or new provisions in land claim agreements, self-government agreements or consultation agreements.

Instrument choice

Based on the findings outlined in its panel report, FPCC has determined that proclaiming the PRA under Part III of the FPAA, and subsequently establishing a levies order, is the best approach to support promotion and research activities in the hemp sector.

Prior to determining that the Proclamation establishing the PRA is the instrument of choice, FPCC went through a thorough review of the proposal submitted by the Hemp Producers Committee. As part of the review process, FPCC held a public hearing, consulted with stakeholders, conducted research and analysis, took into consideration the survey results from hemp producers and importers supporting the proposed PRA, and submitted the panel report highlighting the findings of the inquiry to the Minister of Agriculture and Agri-Food for approval to establish the proposed PRA.

FPCC’s review process concluded that the current system, involving voluntary checkoff paid to the CHTA to support the promotion and research activities within the hemp sector, and hemp businesses self-managed research activities are inefficient and ineffective to help the hemp sector grow and reach its full potential. The increasing complexity of the issues impacting the hemp sector, the need to expand markets, as well as the escalating costs involved in research and promotion activities require a more strategic, coordinated and national approach, which can be facilitated through the creation of the PRA.

Regulatory analysis

Benefits and costs

The proposed Proclamation would allow for the creation of the Canadian Industrial Hemp Promotion-Research Agency and enable it to submit a levies order. The PRA would be expected to carry out promotion and research activities, including distribution of information to producers, market actors and consumers, to generate higher sales, greater productivity, enhance marketability and to strengthen confidence and trust in the hemp sector. Increased research activities would contribute to improved production efficiency, economic returns, and the competitiveness of hemp in domestic and foreign markets.

The PRA would support promotion campaigns and better align research projects to improve the industry’s long-term sustainability and contribution to the Canadian economy. Hemp consumers would benefit from education and information programs; increased awareness of the nutritional value of hemp-based food products and ingredients; access to credible and trusted sources of information on the hemp industry.

The Proclamation would not result in costs for the Government of Canada. The PRA’s activities and costs would be recovered through the subsequent levies order. Administration of levy collection would have minimal costs for the businesses since the PRA, or a third party acting on its behalf, would invoice and collect the levy from them. The PRA, or a third party, would collect the proposed 0.5% levy from hemp producers on the value of the sales of primary hemp products initially and eventually from hemp importers on the value of imported primary and processed hemp products, as identified in the annexed schedule of the Proclamation. It is anticipated that the levy would have a negligible impact on consumer prices of hemp products, producers’ overall production levels and production systems, processing sectors and trade flows.

Small business lens

Analysis determined that the proposed levy would impact small businesses. The establishment of the PRA will have minimal implications for both small producers and small importers of hemp products. First, there would be no compliance or administrative costs for the businesses since the PRA, or a third party acting on their behalf, would invoice and collect the levy from them. Second, the levy will have a negligible impact on producers’ overall production levels and production systems, processing sectors and trade flows. However, any anticipated costs will be offset by the benefits of funding promotion and research activities through the PRA. As the PRA matures and accomplishes its goals, hemp production would most likely increase, and thus, positively impact the productivity levels of small hemp production facilities.

One-for-one rule

The one-for-one rule does not apply as there is no incremental change in the administrative burden on business.

Regulatory cooperation and alignment

The Proclamation allows the PRA to develop a levies order, and to collect a levy on interprovincial, imported and exported farm products. Such orders are subject to FPCC’s approval and oversight.

In accordance with subsection 42(2) of the FPAA, the PRA may seek memoranda of understanding (MOUs) with each hemp-producing province to collect intraprovincial levies. Once established, the PRA will initially focus on obtaining MOUs from the provinces it has already received provincial ministries’ support for the establishment of the PRA; notably Alberta, Saskatchewan and Manitoba. The PRA will then gradually seek MOUs from the remaining hemp-producing provinces.

Although there is currently only one provincial hemp association, the Alberta Hemp Alliance, the PRA does not intend to initially work with the provincial hemp association to collect the levy. Rather, the PRA will at first either contract the services of a third-party service provider to collect the levy or will collect it itself. If additional provincial hemp associations are created, the PRA will then consider working with them to facilitate levy collection. Furthermore, the PRA Board of directors will be composed of members representing hemp-producing provinces. Therefore, they will represent hemp producers from their respective province on the PRA Board.

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

No gender-based analysis plus (GBA+) impacts have been identified for this proposal.

Implementation, compliance and enforcement, and service standards

Implementation

This Proclamation will come into force upon registration.

Within three months of being proclaimed, an interim board for the PRA, set up by the Hemp Producers Committee, will nominate the PRA first Board of directors, as per the requirements of its Proclamation.

The PRA will develop its business plan and budget for its first year of activities, which will be submitted to FPCC for review. The PRA will then need to file a request to FPCC for development and approval of the levies order and subsequent collection of the levy to fund its planned activities. FPCC members, who are all Governor in Council appointees, will vote on the proposed levies order. A vote of approval will lead to the levies order being published in the Canada Gazette, Part II, thus rendering it effective.

Pursuant to section 27 of the FPAA, the PRA must conduct its operations on a self-sustaining financial basis. In addition to hiring an auditor for a mandatory yearly financial audit, the PRA will continue to present its business plan including a budget and report on its activities to FPCC every year.

The PRA will prepare and sign MOUs, or other appropriate agreements, with the hemp-producing provinces to cover terms and obligations for levy collection and promotion and research activities at the provincial level.

Pursuant to paragraph 7(1)f) of the FPAA, stakeholders affected by the actions of the PRA may file a complaint with FPCC.

Contact

Carole Gendron
Director of Regulatory and Sectoral Affairs
Farm Products Council of Canada
Central Experimental Farm, Building 59
960 Carling Avenue
Ottawa, Ontario
K1A 0C6
Email: aafc.fpcc-cpac.aac@agr.gc.ca

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, under subsection 39(1)^{footnote a} of the Farm Products Agencies Act ^{footnote b}, proposes to direct that the Canadian Industrial Hemp Promotion-Research Agency Proclamation be issued in accordance with the annexed schedule.

Interested persons may make representations concerning the proposed Proclamation within 30 days after the date of publication of this notice. They are strongly encouraged to use the online commenting feature that is available on the Canada Gazette website but if they use email, mail or any other means, the representations should cite the Canada Gazette, Part I, and the date of publication of this notice, and be sent to Carole Gendron, Director, Regulatory and Sectoral Affairs, Farm Products Council of Canada, Central Experimental Farm, Building 59, 960 Carling Avenue, Ottawa, Ontario K1A 0C6 (email: aafc.fpcc-cpac.aac@agr.gc.ca).

Ottawa, April 11, 2024

Wendy Nixon
Assistant Clerk of the Privy Council

Canadian Industrial Hemp Promotion-Research Agency Proclamation

SCHEDULE

Definitions

1 The following definitions apply in this schedule.

Act

means the Farm Products Agencies Act. (Loi)

Agency

means the Canadian Industrial Hemp Promotion-Research Agency established by this Proclamation. (Office)

derivative

has the same meaning as in subsection 2(3) of the Industrial Hemp Regulations. (dérivé)

industrial hemp

has the same meaning as in subsection 1(2) of the Industrial Hemp Regulations. (chanvre industriel)

industrial hemp product

means industrial hemp and anything set out in Schedule 2 to the Cannabis Act. (produit de chanvre industriel)

marketing

in relation to an industrial hemp product or a derivative, means selling and offering for sale and buying, pricing, assembling, packing, processing, transporting, storing and any other act necessary to prepare the product or derivative in a form or to make it available at a place and time for purchase for consumption or use. (commercialisation)

plan

means the promotion and research plan the terms of which are set out in Part 2. (plan)

PART 1
Agency

2 (1) The nine members of the Agency are to be elected at the Agency’s Annual General Meeting in the following manner:

• (a) for each of the following provinces, one member is to be elected by the industrial hemp producers of that province from among the persons who have notified the Agency of their candidacy, hold a licence that, under the Industrial Hemp Regulations, authorizes the cultivation of industrial hemp and have cultivated industrial hemp in that province in the calendar year of the election or the previous two calendar years:
  • (i) Ontario,
  • (ii) Quebec,
  • (iii) Manitoba,
  • (iv) British Columbia,
  • (v) Saskatchewan, and
  • (vi) Alberta;
• (b) one member, to represent industrial hemp producers in the Atlantic provinces of Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland and Labrador, is to be elected by the industrial hemp producers of those provinces from among the persons who have notified the Agency of their candidacy, hold a licence that, under the Industrial Hemp Regulations, authorizes the cultivation of industrial hemp and have cultivated industrial hemp in any of those provinces in the calendar year of the election or the previous two calendar years;
• (c) one member, to represent industrial hemp importers, is to be elected by the industrial hemp importers from among the persons who have notified the Agency of their candidacy and have imported industrial hemp products or derivatives in the calendar year of the election or the previous two calendar years; and
• (d) one member is to be elected by the members elected under paragraphs (a) to (c) from among the persons who have notified the Agency of their candidacy and are involved in the supply chain for industrial hemp.

(2) Despite subsection (1), if there is no candidate for an election under any of paragraphs (1)(a) to (d), the Agency may appoint the member.

3 A member holds office for a two-year term beginning on the last day of the Annual General Meeting at which the member is elected or appointed.

4 If a member is unable to act for the remainder of their term or ceases to hold office, the Agency must appoint a temporary substitute member to hold that office until the next Annual General Meeting.

5 (1) The members of the Agency are, at their first meeting and subsequently at their first meeting after each Annual General Meeting, to elect from among themselves a chair and a vice-chair.

(2) If the chair or the vice chair is unable to act for the remainder of their term or ceases to hold office, the members of the Agency must elect from among themselves a new chair or vice-chair, as the case may be, to hold that office for the balance of the term.

6 The head office of the Agency is to be situated in the city of Calgary in the Province of Alberta.

PART 2
Terms of the Plan

Promotion and Research

7 The Agency is authorized to

• (a) promote the marketing and production of industrial hemp products and derivatives for the purposes of interprovincial, export and import trade; and
• (b) conduct and promote research activities related to those products and derivatives.

Budget and Business Program

8 The Agency must annually submit to the Council a budget that sets out the costs of the proposed business and activities of the Agency for a 12-month period, a business program that sets out a detailed description of that business and those activities and all relevant information to enable the Council to determine if

• (a) the proposed business and activities of the Agency are consistent with section 7 and with the object of the Agency as described in section 41 of the Act; and
• (b) any existing or proposed orders referred to in subsection 9(1) are necessary for the implementation or the administration of the plan.

Levies and Charges

9 (1) For the purpose of the implementation or administration of the plan, the Agency may, by order, impose levies or charges on persons engaged in

• (a) the marketing of industrial hemp products in interprovincial or export trade; and
• (b) the importation of industrial hemp products or derivatives.

(2) An order may group persons into classes, specify the levies or charges, if any, that are payable by the persons in each of those classes and provide for the manner of collection of the levies or charges.

(3) The Agency must retain in a separate account the moneys received from the levies or charges that are imposed on persons engaged in the importation of industrial hemp products or derivatives.

(4) Levies or charges that are imposed by an order of the Agency that are unpaid 30 days after the day on which they were due constitute a debt payable to the Agency.

(5) The Agency may appoint a person to collect on the Agency’s behalf the levies or charges that are imposed by any order.

(6) Levies or charges that are imposed must be fixed at levels that will ensure returns to the Agency that are sufficient to defray its estimated administrative and business program costs each year.

Cooperation

10 The Agency must take all reasonable steps to promote a high degree of cooperation among its members, and producers and importers of industrial hemp products and derivatives.

Review of the Plan

11 (1) The Agency must hold a meeting within five years after the day on which this Proclamation comes into force, and every five years after that, for the purpose of reviewing the terms and effectiveness of the plan and determining whether any modifications are required to facilitate the carrying out of the Agency’s object as described in section 41 of the Act.

(2) Within three months after the day on which a meeting referred to in subsection (1) takes place, the Agency must file with the Council a written report of its review and any recommendations for modifications.

Section 42 of the Act — Powers

12 Nothing in this Part affects the vesting in the Agency of the powers set out in section 42 of the Act.

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