Mexico Medical Cannabis: Fully Legal, But Is It Open?

In our last post, as well as in our Mexico cannabis webinar last month (replay here), we examined the implications, business opportunities and requirements to take advantage of the Medical Regulations that recently entered into force in Mexico.

Yes, medical cannabis is now fully legal in Mexico. However, that does not mean that you are able to do all that is allowed under the Medical Regulations. “Does that mean that there are areas in medical cannabis that are closed to my company?” No, it does NOT. It just means that some areas will be open sooner than others.

For starters, it is important that applicants–particularly foreign investors–keep in mind the difference between publication, entry into force and full implementation of any statute. The Medical Regulations are no exception. Under Mexican Law, every statute contains a final section, of a purely operational character, called Transition Provisions (“Artículos Transitorios”), which provides for:

  1. when the statute is going to enter into force
  2. whether conflicting related laws or regulations are to be harmonized or repealed, and
  3. items of a transitional nature, such as phased implementation of specific provisions.

In the case of the Medical Regulations, Transition Provisions provide for the phased implementation of specific sections– notwithstanding the Medical Regulations as a whole entered into force on January 13, the day after their publication. This was so intended given that there are now several Government agencies in charge of interpreting and applying the Medical Regulations which not only must coordinate with each other, but also update, optimize or streamline their processes to fulfil their new tasks, including servicing and processing cannabis applications.

These agencies must elaborate on the administrative procedures now available for all activities provided for in the Medical Regulations, train their personnel, adapt their structures and develop internal guidelines to issue application formats, fees, etc. The agencies with the heaviest mandate form part of the ministry of agriculture, so much so that they have a specific provision just for them:

FOURTH. The Ministry of Agriculture and Rural Development, including its regulatory agencies, will have 90 working days following entry into force to harmonize its internal guidelines as required thereof, in order to ensure due implementation of these Regulations [translation ours].

What are the implications of what we have said so far? To start, per the provision cited above, you can already apply for any permit/license provided for in the Medical Regulations, so long as they are not related to growing activities, which will open for applications in late May or early June, 2021.

In addition, the fact that Government agencies have to adjust–and some have even a grace period to do so–could mean that provisions governing applications for permits/licenses might not be implemented as written from day one. There are three potential reasons for this.

  1. The Transition Provisions expressly mandate that in implementing the Medical Regulations, all agencies shall operate within their approved budget for the current fiscal year and shall not increase it for subsequent fiscal years. In effect, agencies must handle more work with the same staff and without additional financial resources. Because Mexican federal entities are suffering of one of their largest budget cuts in history, we expect that agencies will struggle to make ends meet in order to service cannabis applications.
  2. There is no fee schedule provided yet for several application procedures set forth in the Medical Regulations. For this to happen, we would have to wait until relevant agencies (notably the Tax Administration Agency and the Ministry of Economy) send proposals to Congress to amend the Federal Fees Law (Ley Federal de Derechos).
  3. Third, against a COVID/low budget backdrop, agencies may fail to issue traceability requirements, application forms, specific implementation requisites or anything in between to apply for each permit/license, the 90-working-day deadline notwithstanding.

Thus, even though medical use is already fully legal, one may not be able to conduct all regulated activities from the outset, even if already provided for and legally effective. Applications for permits/licenses could not be submitted nor processed effectively, which would result in delays in issuance and would necessarily push back deadlines in any market forecast and business plan… unless companies are ready to work around delays.

How do you do that? What to do when there are no procedure guidelines or specific requirements in an activity that should be open under the Medical Regulations and therefore in practice you cannot apply for a particular license or permit? Well, that depends on the situation.

Agencies might receive your application, but never process it and therefore never respond. If no guidelines or specific application requirements are issued, you submit your application with the basic requirements set forth in the Medical Regulations, and the relevant agency will have 90 days to respond. If it fails to do so, you file an amparo action claiming that agency failed to issue a resolution, despite being legally obliged to do so. This would be possible because:

  1. Legally speaking, you are entitled to exercise your right to conduct an activity from the moment the Medical Regulations entered into force, for the basic means to exercise the right (the application) are contained therein; and
  2. Because rights and means are provided for in the Medical Regulations, the fact that the Government is not ready to process applications is irrelevant to exercise such rights. It is worth noting that probabilities of prevailing have increased now that medical cannabis is fully legal.

It could also happen that agencies respond, but do so in a manner that renders any given authorization useless. For example, the Medical Regulations provide that import via mail or parcel services is prohibited; instead, all medical cannabis imports shall pass exclusively through expressly authorized ports of entry. Whenever you receive an import permit, a list of authorized ports of entry will be attached to it.

Now, that list should be jointly drafted by COFEPRIS and the Tax Administration Agency, but there is no list at the moment and no sign that there will be one soon. If you want to import (as U.S. companies have begun to do), and receive an import permit without knowing which ports of entry you may use for your product, you can be proactive and ask for authorization to import through a specific port of entry. If they deny your request, you file an amparo action arguing that they do not give you the means to comply with the Regulations. To that, COFEPRIS and the Tax Administration Agency will have to prove that they did publish a list and made it known to you, which they will be unable to do if they fail to timely draft one. As a result, you could potentially prevail and be able to import through the port of entry of your choice.

Bottom Line: The fact that the Medical Regulations are now in force might not mean an individual or a company can do everything provided for from day one. However, per the examples above, there are ways to work around this and take advantage of the lack of implementing guidelines to apply for medical use permits/licenses effectively.

As of right now, you can apply for any permit license other than those related to growing activities. Businesses and individuals have the rights and the means to exercise those rights under the Medical Regulations. If the authorities are slow in building a structure to service applications, it is in your interest (and indirectly, everyone else’s in the industry) to prompt the Mexican government to fulfill its obligations.

Said another way, if they are taking their time anyway, better to beat the rush. Start applying now!