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The Canadian Cannabis Council (C3) says it continues to be surprised by the allegations of “product dumping” of cannabis from Canada by the Israeli government.
Specifically, C3’s president Paul McCarthy says he still has questions about how investigators for the Israeli government determined the price of Canadian cannabis. Those prices, based on wholesale cannabis prices in Canada, informed the determination that these products were being “Dumped” in the Israel market at allegedly above market rate.
In a recent report, Israel’s Ministry of Economy proposed levies of up to 175% on Canadian cannabis products being sold in the country’s medical cannabis program.
The tax rates are based on the Israeli government’s investigations into cannabis pricing in the Canadian market, as well as different Canadian cannabis companies’ cooperation with the Israeli government investigation process.
The investigation, which was first announced this past January, was around allegations of “product dumping” of Canadian cannabis into the Israeli market. In July, the government agency released its preliminary report on the topic. The newest report was released in November. A final ruling on the proposed levies is still pending.
The Canadian Cannabis Council questions the methodology of this analysis. In their submission to the Israeli government, the organization stated:
“Our members do not export final consumer-ready packaged goods to Israel, but instead export bulk raw material cannabis flower. It is only once that raw material flower has arrived in Israel that local manufacturers process and package the flower for sale to pharmacies in accordance with the Israel Medical Cannabis Authority’s rules and regulations.”
McCarthy says these questions remain unanswered.
“No one can ascertain how any of the decisions were made,” he told StratCann via email. “This includes individual companies who provided much of the information used for these determinations.
“One major question is whether the analysis was able to maintain a proper ‘apples to apples’ comparison throughout. It is quite possible that retail price, wholesale price and/or the application of excise tax and HST, or not, have been used in an inconsistent manner throughout the analysis. Should this prove to be the case, it would mean that calculations are wildly off base.”
According to C3’s submission to the Israeli government, based on data from the Canadian Cannabis Exchange (CCS), the average price in 2023 of cannabis flowers sold in bulk in Canada is only CAD$0.96 a gram.
In the most recent report, Israel’s Ministry of Economy responds to C3’s “apples to apples” argument, saying that this per gram rate is based on “low quality” products that are not comparable to the quality or type of cannabis sold into the Israeli market, stating that “the method of wholesale packaging is not a parameter for comparing the quality of the exported products.”
Although a release of the Israeli government’s final determination is unknown, McCarthy says his understanding is that the final ruling on the matter could come at any time in the next few months. It’s also possible that even if the final report is approved, the country’s Ministry of Finance can choose not to enforce it.
McCarthy also says C3 will support any efforts made by the Canadian government to address what he says is a “clearly a broken process.”
“I know that officials are currently investigating the situation to determine the best path forward.”
One possibility, he says, is a WTO challenge, although he doesn’t see this as a timely remedy.
“Some have wondered whether a WTO challenge would be a potential path,” continues McCarthy. “C3 would certainly support any efforts pursued by the government of Canada, but it’s important to note that a WTO challenge would likely take years to be concluded and wouldn’t undo the harm caused by this today. While this may be an important step to set the record right and to guide future actions, we’d like to concentrate on what we can do right now to rectify this egregious determination.”
Israel’s preliminary report also says that the commission will submit a report on its findings to the World Trade Organization.
The floating price, or tariff, exists, explains a notice by the commissioner (Translated), “when the foreign producer exports the goods at prices lower than their production costs or their price in the country of origin. Such imports are defined in the World Trade Organization as ‘unfair trade,’ and according to the WTO’s Export Convention, the country may protect its domestic market in such cases by imposing an export levy, which compares the import price to the price that reflects fair competition.”
The World Trade Organization defines such imports as “unfair trade.” According to the WTO’s Export Convention, a country may protect its domestic market in such cases by imposing an export levy, which compares the import price to the price that reflects fair competition.
Jean-Pierre J. Godbout, a spokesperson for Global Affairs Canada, tells StratCann that the agency is reviewing the proposal to see if it is in compliance with WTO rules.
“Canada is disappointed with Israel’s Commissioner of Trade Levies’ conclusion that imports of medical cannabis from Canada were dumped into Israel and caused material injury to the Israeli domestic industry. We are reviewing the Commissioner’s decision to assess its compliance with applicable WTO rules and have significant concerns with the Commissioner’s methodological choices and interpretations of the facts in the case. We will continue to closely monitor the development of this case, including the Advisory Committee review and Ministerial approval processes, and intervene alongside the implicated Canadian industry.”
The head of the economy, regulation and innovation at Israel’s Ministry of Health also has concerns about the proposal, saying it will harm Israel’s cannabis industry, questioning the report’s methodology and saying the Ministry of Health will not support the proposal.
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