In Part 1 of this multi-part series, we debunked various false ideas, impressions, and rumors that we hear repeatedly in the Mexican cannabis practice. In this post, we’re going to address five more common misconceptions to help fuel a healthy discussion of the real status of cannabis legalization in Mexico. Do the following misunderstandings ring any bells? Continue reading!
- Now that the medical regulations are official, I can export any type of CBD product to Mexico.
No! We cannot insist enough on this. We have observed that potential American exporters have been misled by potential Mexican traders that with the correct COFEPRIS approval they can bring their products into the country. The reality is that only CBD products that can be qualified as medicinal products (Medicamento) according to the definition in the General Health Act receive a registration for the health of medical devices from COFEPRIS, which is a prerequisite for obtaining an import license. This means that CBD foods, cosmetics, beverages, dietary supplements, etc. cannot currently be exported according to medical regulations. Everyone else is operating in a VERY legal gray area, to say the least.
- Narcos will get on board with legalization and take this opportunity to get legal.
This idea is not necessarily a misunderstanding: it assumes that the illegal market will go away with legalization. While we can only speculate here, we think there will be something for everyone in Mexico.
On the one hand, many in Mexico believe that the government and cartels have been closely linked for decades. When we consider that under a legal framework there will be tight government control (agencies with new powers / conversion of existing powers), it’s not hard to imagine cartels emerging and already planning to become legal. On the other hand, it is known that the main source of income for cartels today is not necessarily narcotics, but rather high impact crimes.
As in the US, not everyone can pay the high cost of licensing (permit / license fees, taxes, social security, etc.) or for a product sold by a legal cannabis company. For willing buyers, there will always be someone who offers to sell unregulated products. It doesn’t have to be someone from a cartel.
Legalization is important, and not just because it creates a regulated, taxable industry that can help reactivate the economy. It also makes it easier for medical, industrial or recreational consumers to have secure access to the consumables and products they need. In our view, this offsets any possible setback in terms of illegal market survival after legalization.
- Cannabis licenses are enough to start growing, processing, etc.
This is not really true, there are a few things important to clear up. To apply for a cannabis permit / license, you must first meet a number of requirements. For example, to obtain a growing license, you must first: a) obtain a COFEPRIS authorized research protocol if you are growing for research purposes, or b) obtain a medical device health registration if you are growing with a view to mass production.
If the seeds you intend to grow are imported, you will also need to provide a properly legalized official document stating that the type / variety of the seed in question is the same as allowed in the country of origin. You will also need to present a phytosanitary certificate and transport license issued by the Department of Agriculture and COFEPRIS, respectively, in order to legally bring your cannabis to your research or manufacturing facilities after harvest. These are just a few examples of the requirements you need to meet before applying for a growing license. Each permit / license has its own requirements that must be met in advance.
Second, the cannabis permits / licenses alone are in no way sufficient to conduct authorized activities: you must also obtain the state or local permits / licenses required to operate like any other business. Of course, these permits / licenses will vary based on your actual location, size, and company. However, you need to register with the tax authorities (the Mexican IRS or SAT in Spanish) for example to submit your tax return on time. If you are a Mexican company invested abroad, you must complete registration requirements with the National Foreign Investment Registry, pay social security fees for your employees, and obtain an operating license. If you intend to sell over the counter, you must be properly licensed to work as a medical product storage facility, pharmacy, or drug store. In the case of a factory or similar facility, you may also need to submit an environmental impact assessment for approval by the Ministry of Environment, etc.
- The cannabis law just passed in the Mexican lower chamber regulates all cannabis use. Hence it is not yet possible to know how “legal” cannabis will become in Mexico.
That is simply not true. We believe that this misunderstanding stems from the fact that even the media sometimes mistakenly equates the legalization of cannabis with the passage of the cannabis law by the Mexican lower chamber last week. In fact, medical cannabis has been fully legal since medical regulations went into effect last January, with only a few aspects left to be implemented (see our post on the subject here). It is, on the other hand, cannabis law that regulates adult and hemp use.
The Cannabis Act regulates the way in which the two acts work together and prescribes a 90-day harmonization period and further deadlines for the creation of guidelines according to which licenses are requested. In practice, with the cannabis law coming into force, we can talk about full legalization of cannabis in Mexico. As of now, one can already conduct medical cannabis activities in accordance with medical regulations that are not covered by the implementation deadline granted to certain agencies (discussed here). or filing an Amparo lawsuit to obtain permission for adult personal use and obtain a license to grow hemp, at least in theory.
Finally, the advice to the domestic and international cannabis business is this: even if the ultimate goal of your Mexico project is adult cannabis, you better focus on medicinal use. In this way, you can develop the necessary infrastructure, market insights, awareness of local laws and regulations, production / distribution chains, etc. to be successful in the adult use market.
- When cannabis is completely legal, my activities automatically become legal too.
Absolutely not! And we have to add that this is a very common misconception, especially among those interested in adult personal use.
First, neither general health law nor medical regulations provide for the ability to engage in cannabis-related activities (or other health-related activities) without proper authorization, authorization, or license. The Cannabis Act equally provides that hemp and adults consume cannabis.
Second, we mentioned earlier that for many types of cannabis use (namely medicine, research, hemp, and adult personal use) the problem is not so much that such users are illegal, but that they remain largely unregulated and thus impede the exercise of rights . This has allowed many people to engage in cannabis activities either thanks to a permit contested by Amparo (i.e., personal cultivation and personal consumption for adults, or in some cases the cultivation or sale of medicinal cannabis) or through a legal gray area (see first misunderstanding in this one Contribution).
Once cannabis is fully legal for all uses, that will have to change. Legalization means that there are certain formalities you must follow if you want to get the permits / licenses that will allow you to continue your cannabis business.
Stay tuned for upcoming posts as we continue to expose misconceptions that cloud the waters as cannabis legalization begins in Mexico. Our goal is to help national and international players make informed decisions and build a responsible, cohesive industry. To find out more, we recommend that you follow us for the next webinar or contact us at [email protected] or [email protected]!