Israel’s Ministry of Economy has launched an investigation into the importation of medical cannabis from Canada, citing concerns over possible damage to the local industry. The probe follows complaints from Israeli cannabis growers who claim that Canadian companies are selling their products at unfairly low prices in the Israeli market.
What is dumping and why is it harmful?
Dumping is a trade practice where a country or a company exports a product at a price that is lower than the normal value of the product in the domestic market or in a third country. This can harm the domestic producers of the same product, who may lose market share, profits, and jobs. Dumping can also distort the international trade and create unfair competition.
According to the World Trade Organization (WTO), dumping is not prohibited unless it causes or threatens to cause material injury to a domestic industry. In that case, the importing country can impose anti-dumping measures, such as tariffs or quotas, to protect its industry. However, the importing country must follow the WTO rules and procedures to determine whether dumping and injury have occurred, and whether the measures are justified and proportional.
Why is Israel investigating Canadian cannabis imports?
Israel is one of the largest markets for medical cannabis in the world, with an estimated 70,000 patients and a potential value of $1 billion by 2025. The country has a well-established domestic cannabis industry, with dozens of licensed growers and processors, and a reputation for innovation and research.
However, in recent years, Israel has also opened its doors to cannabis imports from other countries, especially Canada, which is the world’s largest producer and exporter of legal cannabis. Canada has exported over 140 tonnes of dried cannabis and 37,000 litres of cannabis oil since October 2020, with Israel being one of the main destinations.
According to a notice on the Israeli Government’s website, dated January 18, 2024, the Commissioner for Trade Levies at the Ministry of Economy and Industry has decided to initiate an investigation on his own initiative into the export-import of cannabis from Canada, after finding that there are special circumstances of actual damage or probability of actual damage to the local manufacturing industry and a causal link between the imported imports and said damage.
The notice is addressed to 10 different Canadian cannabis producers: Village Farms International, Organigram Holdings, Tilray Canada, Hexo Corp (owned by Tilray), The Green Organic Dutchman, Canopy Growth Corporation, SNDL, Cronos Group, Auxly Cannabis Group, Decibel Cannabis, and “all the medical cannabis manufacturers in Canada who export their goods to Israel.”
The notice also contains a questionnaire for importers and exporters, which includes questions about financial statements, ownership structure, product details, prices, THC and CBD levels, shipping terms, payments, and more. The respondents have 30 days to submit their written response to the decision to open an investigation.
What are the implications and reactions of the investigation?
The investigation could have significant implications for both the Israeli and Canadian cannabis industries, as well as for the patients who rely on medical cannabis. If the investigation finds evidence of dumping and injury, Israel could impose anti-dumping measures on Canadian cannabis imports, such as higher tariffs, quotas, or bans. This could reduce the supply and increase the prices of medical cannabis in Israel, affecting the availability and affordability of the product for the patients. It could also affect the competitiveness and profitability of the Canadian cannabis exporters, who may lose access to one of their key markets.
On the other hand, the investigation could also benefit the Israeli cannabis industry, which has been struggling to compete with the cheaper and more abundant Canadian cannabis. The anti-dumping measures could level the playing field and protect the local producers from unfair competition. It could also encourage more investment and innovation in the Israeli cannabis sector, which has been lagging behind in terms of production capacity and product diversity.
The investigation has sparked mixed reactions from the stakeholders involved. The Israeli Cannabis Association, which represents the local growers and processors, welcomed the investigation and said that it was a necessary step to safeguard the industry and the patients. The association claimed that the Canadian cannabis imports were sold at prices that were 30% to 50% lower than the Israeli cannabis, and that they were of inferior quality and safety standards.
However, the Canadian cannabis exporters denied the allegations of dumping and said that they were complying with the Israeli regulations and the WTO rules. They argued that their products were priced competitively and reflected the market conditions and the costs of production and transportation. They also said that their products were of high quality and met the Israeli and international standards for medical cannabis.
The Canadian Embassy in Israel also expressed its concern over the investigation and said that it was in contact with the Israeli authorities and the Canadian companies involved. The embassy said that it hoped that the investigation would be conducted in a fair and transparent manner, and that it would not disrupt the trade and cooperation between the two countries.
What are the next steps and the expected outcomes of the investigation?
The investigation is expected to take several months to complete, depending on the complexity of the case and the cooperation of the parties involved. The Commissioner for Trade Levies will examine the information and evidence provided by the importers, exporters, and other interested parties, and will determine whether dumping and injury have occurred, and whether anti-dumping measures are warranted.
The Commissioner will then issue a preliminary determination, which will be published on the Israeli Government’s website and notified to the parties concerned. The parties will have an opportunity to comment on the preliminary determination and to request a hearing. The Commissioner will then issue a final determination, which will be subject to judicial review by the Israeli courts.
The final outcome of the investigation will depend on the facts and circumstances of the case, and the application of the relevant laws and regulations. The investigation could result in one of the following scenarios:
- No dumping or injury: The investigation could find that there is no evidence of dumping or injury, or that there is no causal link between them. In that case, the investigation will be terminated and no anti-dumping measures will be imposed.
- Dumping and injury, but no measures: The investigation could find that there is evidence of dumping and injury, and that there is a causal link between them. However, the investigation could also find that imposing anti-dumping measures would not be in the public interest, or that the amount of dumping is negligible or de minimis. In that case, the investigation will be terminated and no anti-dumping measures will be imposed.
- Dumping and injury, and measures: The investigation could find that there is evidence of dumping and injury, and that there is a causal link between them. In that case, the investigation will result in the imposition of anti-dumping measures, such as tariffs, quotas, or bans, on the Canadian cannabis imports. The measures will be calculated based on the margin of dumping and the extent of injury, and will be applied for a period of up to five years, with the possibility of extension or review.
The investigation is likely to have a significant impact on the medical cannabis market in Israel and the trade relations between Israel and Canada. It will also set a precedent for other countries that may face similar issues with cannabis imports from Canada or other sources. The investigation will test the application of the WTO rules and the Israeli laws on trade and cannabis, and will raise important questions about the regulation and competition of the medical cannabis industry in the global market.