Canadian Border Closure Effect On Cannabis Companies

As the Covid 19 quarantine measure continue, President Trump tweeted, “We will be, by mutual consent, temporarily closing our northern border with Canada.” He said trade would not be affected. However, many cannabis companies have operations in both countries.

Ryan G. Smith, CEO, and Co-founder of LeafLink said, “The connection between the US and Canadian cannabis communities is strong; however, the reality is that the two markets have been running independently for years due to federal and international restrictions on cannabis trade. This border closure is bound to impact companies with a presence in both, but many teams, like LeafLink, already have provisions in place that allow them to operate remotely and to manage their supply chains virtually. One of the things that makes cannabis unique is our resilience. This global health crisis may be one of the biggest obstacles we’ve faced yet, but if there’s any industry that can get through this, it’s ours.”

Yet many Canadian companies work with financial firms in the U.S. and numerous domestic cannabis companies work with Canadian financial firms. Last year, many cannabis company executives that crossed the border as a normal course of operation found themselves losing those privileges. At the time the U.S. Customs and Border Protection Office released a statement saying, “Consequently, crossing the border or arriving at a U.S. port of entry in violation of this law may result in denied admission, seizure, fines, and apprehension.” This caused many executives to apply for waivers.

Certainly, many of these executives could conduct business via Zoom meetings and by phone. Yet, it still adds another layer of complexity to an already complicated business structure for many.

Cy Scott, a Co-founder at cannabis analytics firm Headset said, “As an organization in the cannabis space with a footprint in both the U.S. and Canada the latest news of the border closure is unsurprising given the current climate and what we’re seeing happening globally. With Headset being an analytics company in the technology space, we’re able to operate relatively effectively with the new limitations, although it will almost certainly impact our partners and customers who are close to the overall supply chain for the industry. With additional closures beyond borders, including shelter in place rules starting to take effect in different regions, we hope the rest of the world follows San Francisco’s lead and allows cannabis retailers and dispensaries to remain open voluntarily lessening overall disruption for patients and consumers.”

Last week there was a major strategic transaction between TerrAscend Corp., a cannabis company with operations in both Canada and the U.S. (OTCQX: TRSSF) and Canopy Growth Corporation (NYSE:CGC) in which Canopy entered into a $59.0 million, senior-secured loan with TerrAscend. Luckily this was planned and transacted prior to the quarantine. Imagine if the company was trying to do this deal now? These types of large deals require many in-person meetings with numerous documents to review and sign. Of course, electronic signatures can be obtained, but there is little doubt that many deals will be postponed until life begins to return to some type of normality.

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