The State of U.S. and Canadian Cannabis Relations

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The State of the Canadian Cannabis Business Since Legalization

The legal battle for the sale of cannabis in Canada has been a long one, and the day it came into fruition was on October 17, 2018. 

In the first 24 hours after legalization, about 100,0000 orders were made on the Ontario Cannabis Store (OCS) online store. OCS also found that its website had about 1.3 million unique visitors in the first 24 hours. This was in addition to getting 12,000 online orders in the very first hour.

“The OCS has been truly amazed by the volume of sales,” Patrick Ford, the president of OCS, said. “It’s way beyond what we anticipated and we appreciate customers’ patience as this exciting new business gets off the ground.”

Two weeks after the legalization of sales, Statistics Canada found that the total sales of cannabis in stores amounted to $43 million. The popularity of cannabis in Canada was not necessarily a surprise, as prior to the legalization of sales, about $5.7 billion was spent in 2017 on the product. 

This value was based on both the recreational and medical use of cannabis. The parties involved in spending this amount were Canadians between the ages 15 to 64. “This was equivalent to around $1,200 per cannabis consumer,” Statistics Canada added.

In a recent report that was released on October 30, 2019, it was found that seniors are the leading age group when it comes to the growing use of cannabis. This is despite being the age group that uses cannabis the least compared to the other groups. 

For instance, in 2012 alone, 1 per cent of Canadian seniors reported on their usage of cannabis. This is a contrast to 2019, when over 400,000 seniors have used the product in the last three months before October 2019.

According to the information that was collected during quarters two and three, more than one-quarter of Canadian seniors used cannabis for the first time as well. It was also found that the first-time usage of cannabis is affected by age. While seniors in the 45 to 64 age group account for 25 per cent of usage, individuals aged 25 to 44 who used cannabis for the first time account for 10 per cent.  Adding to this, users aged 65 and older makes up for 27 per cent of cannabis usage.

The most common reasoning behind the use of cannabis among seniors pertains to medical needs. While 52 per cent of seniors who are 65 and older use cannabis for medical reasons, 48 per cent of the remaining seniors are evenly split in terms of using cannabis medically and non-medically at 24 per cent each. 

This is in contrast to the 15 to 24 age group, which had about 60 per cent account for using cannabis for non-medical reasons. Users in this age group who use cannabis for both medical and non-medical purposes account for 35 per cent. As for exclusive medical use of cannabis, Statistics Canada stated that, “the youngest age group was rare, making the estimate too unreliable to be published.”

When it comes to obtaining cannabis, seniors are the age group that is the most likely to get it from legal sources. According to the data, 41 per cent of users who are 65 and older noted that they obtained cannabis through legal means. This is a sharp contrast to younger consumers who, depending on their age, account for only 23 per cent to 29 per cent of obtaining cannabis from legal sources.

The Tension Between U.S. and Canadian Cannabis Immigration Policies

The interest in cannabis is not lost to Canadian investors, and some of them have looked to the U.S. for potential growth opportunities. 

However, for interested Canadian investors, it should be noted that there exists contensions when it comes to doing business within the states. 

On November 14, 2018, an individual who requested to remain anonymous received a lifetime entry ban into the U.S. The ban was on the basis of being part of the cannabis industry itself. That is, the investor’s purpose for visiting the states was to attend the Marijuana Business Conference and Expo in Las Vegas. The conference was an event for lenders, lobbyists, cannabis producer executives, investors, and entrepreneurs to network and generate new business leads. 

That was not the only case of an investor being barred for life when it comes to U.S. entry. Prior to the legal sale of cannabis in Canada, another investor was already subjected to the same consequence. 

In May 2018, Vancouver-based investor Sam Znaimer was heavily scrutinized at the Washington border. In an interview, he recalled that he spent about four and a half hours at the border station before being issued the permaban. 

The reason for this was because of U.S. federal laws. Therefore, the connection to the cannabis industry is a risky one for Canadians dealing with U.S. Customs and Border Protection.

“You might as well be doing business with Pablo Escobar, selling cocaine in the U.S.,” Len Saunders, a Canadian immigration lawyer, said. Saunders also noted that cannabis remains a “so-called Schedule 1 substance in the U.S., defined by having no medical use and a high potential for abuse.”

Before the end of 2018, another Canadian was called into question. Roderick Elliot was on his way to the same cannabis conference as the aforementioned anonymous individual when he was subjected to heavy screening. 

Elliot was not an investor, but rather the senior vice-president at the lobbying firm Global Public Affairs. His plan was to depart from Toronto to Las Vegas. In an interview with the Financial Post, Elliot recalled that, “The first border guard asked us specifically why we were going to be in Las Vegas, and when we said we would be dropping by at the Marijuana Business Conference, he said ‘I’m going to need you to come with me.’”

He also recalled that he and his colleagues were sent to a large room with 10 other conference attendees. He said that within the room, they were prohibited from using their mobile phones and talking with each other. 

Elliot noted that in hindsight, he should have thought more about his travel route from Toronto to Las Vegas, as opposed to opting for the direct route. “But I can’t lie at the border, so I had to say I was going for a cannabis conference,” he said.

The Current State of Cannabis Legalization in Canada and U.S. Federal Law

At the time of writing this paper, U.S. Customs and Border Protection continues to enforce its laws regardless of Canada’s legalized sale of cannabis. 

According to the U.S. Embassy and Consulates in Canada, “Although cannabis is decriminalized in several U.S. states, cannabis possession remains against federal law. U.S. Customs and Border Protection enforces federal law at the border.”

It is for this reason that the legalization of cannabis sales in Canada do not affect the legality of the product within the U.S. 

“A Canadian citizen working in or facilitating the proliferation of the legal marijuana industry in Canada, coming to the United States for reasons unrelated to the marijuana industry will generally be admissible to the United States,” the embassy stated. “However, if a traveler is found to be coming to the United States for reasons related to the marijuana industry, they may be deemed inadmissible.”

Due to the strict policies upheld by U.S. Customs and Border Protection, Canadians who wish to get involved in the cannabis business may look within their own country when it comes to investments and sales. 

An inevitable part of selling cannabis within Canada is having a smooth payment process, and Merchant Broker is at the forefront of providing business owners with the best deals and solutions on the market. 

To learn more about Merchant Broker services and rates, as well as get a consultation, contact the team at either info@merchantbroker.com or 1-888-668-0733.

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