Guyer & Regules: Cannabis Regulation in Uruguay

 

Authors

Anabela Aldaz

 

Josemaría Motta

 

January 2021

 

Table of Contents
Table of Contents. 2
General legal framework. 3
Permitted Activities. 4
Cannabis Products. 4
Cannabis Licenses. 6
Import/Export Regime. 7
Bank Regulation Situation. 8
Conclusion. 8

 

General legal framework

On January 7th of 2014 through Laws N° 19.172[1], Uruguay became one of first countries of Latin America to allow and regulate the use of recreational cannabis and for medical and research purpose. In this sense the Government create a legal framework for cannabis by creating the Laws N° 19.172 and modifying the Law N° 14.294[2] knows as the Narcotics Law.

These Laws are regulated by three relevant Decrees: Decree No. 120/014[3] that refers to the recreational use of cannabis, Decree No. 372/014[4] that refers to hemp and Decree No. 46/015[5] that refers to medical or research use of cannabis. Two new laws were approved in December 2019, Law 19.845[6] regarding Scientific Investigation of Cannabis and Law 19.847[7] on Medical and Therapeutic Cannabis.

In order to control the compliance with the legal framework, Law Nº 19.172 created the National Institute for the Control and Regulation of Cannabis (hereinafter the “IRCCA”) connected with the Executive Branch and the Public Health Ministry (hereinafter the “MSP”), among other authorities.

IRCCA’s purposes include regulating the activities of planting, cultivation, harvesting, production, processing, collection, distribution and sale of cannabis, in the framework of the provisions of the regulation in force, as well as monitoring its compliance. It is also aimed to promote and propose actions to reduce risks and damages associated with problematic cannabis use, in line with the policies defined by the National Drug Board in coordination with national and municipal authorities.

IRCCA often enacts Resolutions that set guidelines for activities related with cannabis, but these usually regulate specific aspects that are already broadly regulated in the general legal framework which remains unchanged.

 

Permitted Activities

Law No. 14.294 establishes the general prohibition of planting, cultivating, harvesting and distribution of any plant that can be extracted from narcotic drugs and other substances that determine physical or psychological dependence.

However, as an exception the Law allows the use of cannabis in production, storage, industrialization, commercialization, distribution, importation and exportation, for the following purposes: i) Scientific research or for development of therapeutic products for medical use; ii) Psychoactive cannabis; iii) Non-psychoactive cannabis (hemp); iv) Pharmaceutical use; v) Domestic psychoactive cannabis plants for personal or shared use in the home; and vi) Member’s Clubs of psychoactive cannabis plants

All those permitted activities are subject to obtaining the corresponding authorization or license from the competent authorities.

Cannabis Products

The Cannabis legal framework distinguishes between different types of cannabis products (e.g., high or low concentrations of THC, that is, psychoactive and non- psychoactive cannabis respectively). And depending on the use given to cannabis, distinguishes among medical or research use (it can either be psychoactive or non-psychoactive cannabis); recreational use (psychoactive cannabis) and; hemp (non-psychoactive cannabis for other uses different from the previously mentioned).

 

Psychoactive Cannabis is defined as a flowery branch end with or without fruit of the cannabis female plant, excluding the seeds and leaves separated from the stalk, but including oils, extracts, and any preparations with potential pharmaceutical use, which natural THC equals or exceeds 1% of its volume.

 

Non-psychoactive Cannabis (hemp) is defined as plants or parts of plants of the cannabis genus, leaves and flower tips, containing no more than 1% THC, including derivatives of such plants and parts of plants.

 

Pharmaceutical Specialty is defined as any simple drug or compound based on cannabis (psychoactive and non-psychoactive) with a registered name before the MSP of a declared qualitative-quantitative formula, manufactured industrially and with verifiable therapeutic properties, which is commercialized in certain sale units.

 

Vegetable Specialty is defined as “a cannabis herb or cannabis herb mixture (psychoactive and non-psychoactive)” used for medicinal purposes.

 

Scientific Research is defined as those activities directed to the development of research projects that contribute to the knowledge and production of scientific evidence regarding the use of cannabis (psychoactive and non-psychoactive). 

 

As for the type of products that can be elaborated with Cannabis (E.g., edibles, vaping, tinctures, food additives, etc.) the Uruguayan legal framework does not establish any specific prohibition. Therefore, any product properly authorized by the corresponding governing body is allowed. Products that have already been authorized by the authorities, include cosmetics, gels, yerba mate with added non-psychoactive cannabis and medication.

Regarding the retail sales of any cannabis products, they are allowed by the legal framework, but they can be restricted for a specific retail channel depending on the product:

  1. Pharmaceutical specialties or vegetable specialties based on psychoactive cannabis can only be sold by pharmacies of first or second category.
  2. Psychoactive cannabis for personal recreational use can only be sold in first category pharmacies and in community pharmacies, which have obtained the license from IRCCA.
  • Other products, such as yerba mate, have no restrictions as to the establishments in which they may be sold.
  1. Medical products prescribed under master formulas elaborated by Pharmaceutical Chemists can be sold only by duly authorized pharmacies to such effects.

 

Cannabis Licenses

In order to carry out any activity related with cannabis in Uruguay it will be necessary to obtain a license or authorization issued by the corresponding authority. This process can take between six months and one year depending in the type of licenses.

Entities can request the following licenses from IRCCA: i) Cannabis cultivation license for medical use; ii) Cannabis Products Industrialization License; iii) Scientific Research License; iv) License to operate in free zones and other customs areas; and v) Authorization for Cannabinoid Analytical Laboratories

Licenses are not only obtained with the authorization of IRCCA, other state agencies are involved during the authorization process.

In the case of an authorization for activities that involves cannabis for medical use and scientific research, the license will be granted by IRCCA and MSP. Further the National Secretary for the Fight against Money Laundering and the Financing of Terrorism (hereinafter the “SENACLAFT“) will have to issue a resolution for the license to be approved.

For Recreational Cannabis the licenses are controlled by IRCCA and by SENACLAFT (except when it comes to self-cultivation and cannabis clubs).

On the other hand, activities with hemp are controlled by IRCCA, the Ministry of Livestock, Agriculture and Fishery (hereinafter the “MGAP”) and SENACLAFT.

As can be seen, for the majority of licenses, it will be necessary to obtain a favorable decision from SENACLAFT. The main task of SENACLAFT is to monitor compliance with the rules for prevention of money laundering and financing of terrorism, by broad powers of investigation and supervision.

In the matter of cannabis licenses, SENACLAFT will analyze the shareholding structure, senior staff, and origin of the funds of the entity requesting the license.

 

Import/Export Regime

Uruguayan legal framework allows importing and exporting certain cannabis products:

  • Seeds, plants, finished or semi-finished products for medicinal or scientific research purposes;
  • Hemp and seeds; and
  • Seeds or cuttings for the cultivation of psychoactive Cannabis plants for producers of psychoactive Cannabis for Pharmacies, self-growers and Cannabis Clubs.

In all cases, it will be required to obtain a license issued by the competent authorities. Authorizations shall be granted identifying the variety to be exported/imported, the quantity, the THC content, the name and address of the importer/exporter, the number and date of the importation certificate as well as the indication of the competent authority abroad. For the elaboration of therapeutic products, imports require the approval of the MSP.

It is necessary to submit the import certificate issued by the competent authorities of the importer country, whereby it is specifically stated that the importation identified therein has been authorized. The exportation authorization shall expire in 90 days, and the importation authorization shall expire 120 days as from the date of its issuance.

They can be used only once, and they will not allow importation or exportation of quantities or types of cannabis which are not expressly described in the authorization.

In regards with the tax aspects, we consider worth mentioning that the recently approved Law 19.845 empowers the Executive Branch to exempt from any tax or levy the import of laboratory equipment and inputs of any kind for the purpose of cannabis research and not to require the mandatory intervention of the customs broker in the corresponding customs operations, within the limits and under the conditions that shall be established in regulations to be issued.

 

Bank Regulation Situation

As stated, operating with cannabis in Uruguay is legal, provided that the entity complies with all the legal requirement set in the legal framework.

In Uruguay, the “Financial Inclusion Law” No. 19.210 provides that cash handling in most commercial and civil transactions is restricted. In general terms, all transactions over certain thresholds need to be paid through authorized banking mechanisms (for example checks, certified checks, wire transfer) and salaries can be paid by wire transfer or bank deposits.

However, in practice, it has proven almost impossible for companies dealing with cannabis to fully operate with Uruguayan banks. To a large extent, local Banks are subject through their headquarters, to foreign regulations, in particular to the United States Federal Reserve’s prohibition from participating (directly or indirectly) in cannabis-related operations as well as international provisions on money laundering. In order to avoid any potential inconvenience Uruguayan banks have been reluctant to participate in operations of this kind or to open bank accounts for these cannabis companies.

 

Conclusion

Cannabis entities in Uruguay have been growing rapidly and have a very promising future. Despite regulatory difficulties and problems with banks, companies are now exporting cannabis in large quantities to other countries.

From the medical cannabis point of view, Uruguay is geographically well placed to take advantage of the production of cannabis-based medicines. The industry is looking with great interest at Brazil, which has recently authorized the use of medical cannabis, but has not authorized its cultivation.

Therefore, the future of the cannabis industry in Uruguay is very promising. The new government that took office in 2020 intends to improve the regulation of cannabis in order to encourage and incentivize businesses. For those investors in Cannabis, Uruguay should be a place to consider when investing in cannabis.

 

Authors:

Law Firm: Guyer and Regules, Montevideo Uruguay.

Authors:

Anabela Aldaz: aaldaz@guyer.com.uy

Josemaría Motta: jmotta@guyer.com.uy

https://www.guyer.com.uy/home

 

REFERENCES & SOURCES

[1] Law No. 19.172 “Regulación y Control del Cannabis” (https://www.impo.com.uy/bases/leyes/19172-2013 ).

[2] Law No. 14.294 “Narcotics Law” ( https://www.impo.com.uy/bases/decretos-ley/14294-1974 ).

[3] Decree No. 120/014 (https://www.impo.com.uy/bases/decretos/120-2014 ).

[4] Decree No. 372/014 (https://www.impo.com.uy/bases/decretos/372-2014 ).

[5] Decree No. 46/015 (https://www.impo.com.uy/bases/decretos/46-2015 )

[6] Law No. 19.845 “Scientific Investigation of Cannabis” (https://www.impo.com.uy/bases/leyes/19845-2019 )

[7] Law No. 19.847 “Medical and Therapeutic Cannabis” (https://www.impo.com.uy/bases/leyes/19847-2019 )

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