Cannabis Processing: New Regulations Announced

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In an article I wrote in June, I discussed how Thailand’s cannabis legislation was floating amid debates between pro and anti-cannabis parties. After the May elections, the Thai government is introducing new controls on Thailand’s growing cannabis industry.

On August 11, 2023, the Narcotics Control Division of the Thai Food and Drug Administration (FDA) posted Draft Regulation Re: Application for Approval for Manufacture, Importation, Exportation, Distribution or Possession of Narcotics under Category 5 (Extracts from Cannabis or Hemp Plants Only).

This draft regulation marks the beginning of a framework explicitly targeting cannabis extracts in the country. It differs from the enforcement activities carried out by the Department of Thai Traditional and Alternative Medicine (DTTAM) since the Thai FDA now mandates that domestic manufacturers, importers, exporters, and sellers of the plant’s extracts undergo a licensing process.

What are the rules outlined under the draft regulation?

As the authoritative body overseeing cannabis derivatives, the Thai FDA will consider license applications only under the following circumstances:

  1. When the use of cannabis extracts is intended for medical benefits;
  2. When there are clear commercial or industrial benefits associated with the use of such extracts;
  3. When the purpose is to facilitate medical or scientific analysis or research; or
  4. When the government requires cannabis extracts to prevent and suppress narcotics-related offences.

In addition, it imposes a five-year restriction on importing cannabis extracts, limited to categories 3 and 4, as mentioned earlier. It remains unclear whether this restriction is separate from the existing five-year blanket import ban on all cannabis products.

Furthermore, there are significant restrictions if applying for a license. These include:

  1. Obtaining corporate registration under Thai law;
  2. Ensuring that authorized signatories binding the legal entity (authorized directors) are Thai nationals and are at least 20 years of age;
  3. In the case of a limited company, Thai shareholders must hold a minimum of 51% of total shares; for other entities, a minimum of two-thirds of the partners must be Thai nationals (this is a contradictory requirement and clarification is needed); and
  4. Establishing a physical office located in Thailand.

What does this mean for cannabis businesses in Thailand?

These restrictions are anticipated to significantly affect cannabis business operators currently engaged in cannabis extraction and producing CBD and/or THC, both for domestic consumption and export. If the regulation is implemented without modifications, business operators must reevaluate their company’s structure to ensure they can secure the necessary processing licenses. Failure to do so may result in their businesses being forced to close with significant financial penalties and criminal sanctions..

Extracts produced for recreational purposes are strictly prohibited, and there are curbs on foreign control of cannabis processing. What’s intriguing is that this regulation also encompasses CBD and other non-psychoactive compounds derived from cannabis or medical hemp. This underscores the comprehensive nature of the regulatory framework.

Investors and operators in the industry need to consider how to pivot their operations in a more restrictive regime. It seems clear that cannabis extracts will be tightly regulated.

If you’re unsure about compliance issues facing your cannabis business in Thailand, we highly recommend contacting us. Please get in touch with us at [email protected] or using the form provided on this page.

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