Tag: Israel

The Israeli Government has released its preliminary decision regarding accusations that Canadian cannabis companies are dumping low-cost cannabis products in the Israeli medical cannabis market.

The preliminary findings have determined a fair price and profit margin for Canadian companies selling cannabis into the Israeli market. A final version of the report, with finalized recommendations, is expected later this year.  

The commissioner has decided against imposing a temporary guarantee of any levies and will provide his final recommendations on the matter in the investigation’s final findings.

The investigation was announced in January 2024 by the Commissioner for Trade Levies at the Ministry of Economy and Industry, Danny Tal. 

In the course of the investigation, it was determined that the large volume of cannabis sold into the Israeli medical market from Canada was having a significant impact on both the local market and domestic companies’ ability to compete. 

These products, determined Tal’s report, were sold at lower prices that, he argues, do not reflect the normal course of business and at prices that are lower than production costs or from their prices in the Israeli market, especially given the additional costs of exporting cannabis from Canada. 

Many Israeli cannabis companies told the investigators that they were forced to sell products at or below cost due to competition with lower-priced Canadian cannabis. Producers also said they were forced to destroy large amounts of cannabis they could not sell, in part due to these imports. 

Cannabis Magazine, an online publication in Israel, says that many Israeli medical patients have preferred Canadian cannabis because it is seen as a higher quality than locally-produced products. However, the report also notes that the quality of cannabis from licensed Israeli companies has improved in recent years. 

Israel imported 78,394 kg of cannabis from 2020-2023, with 62,345 kg coming from Canada, or about 80%. Other countries of origin were Portugal, Uruguay, and Uganda. 

The investigation looked into all Canadian cannabis companies selling products into the Israeli market. They specifically visited Organigram, Decibel, and Pure Sunfarms who welcomed investigators to look closer at their facilities and books. 

Once the investigators determined an accepted price and an export price per gram of cannabis, the commissioner calculated overflow rates in the complaint products for each of the three companies that cooperated with the investigation and for the rest of Canada.

Based on these factors, the investigator determined that these companies are entitled to an 8% profit on products sold into their local market. The investigation also determined that a fair price for Canadian cannabis sold into the Israeli market was about $2-8 a gram (in Canadian dollars).

Based on investigations into Canadian production costs, including packaging and shipping, as well as additional export costs, the commissioner recommends a floating levy or tariff of 63% for Decibel, 74% for Pure Sunfarms, 112% for Organigram, and 369% for all other producers.

The preliminary report states that the commission will also submit a report on its findings to the World Trade Organization.

The floating prices exist, explains a notice by the commissioner (Translated), “when the foreign producer exports the goods at prices lower than their production costs or their price in the country of origin. Such imports are defined in the World Trade Organization as “unfair trade” and according to the WTO’s Export Convention, the country may protect its domestic market in such cases by imposing an export levy, which compares the import price to the price that reflects fair competition.”

“Sales at floating prices,” it continues, “may arise in cases where the foreign manufacturer suffers from excess inventory that is not sold in his local market alongside a limited validity of the goods that affects his ability to store unsold production surpluses, or in cases where he wishes to capture market share in the importing country even at the cost of a continuous damage to his profitability due to long-term considerations, range of penetration and establishment of its activity in foreign markets.”

The report found that Organigram exported about 5,000-1,000 kg of cannabis flower to Israel in 2023. The investigator determined that a fair price for their products on the market was NIS$10-20, or about CAD$3.75-$7.50 per gram. NIS is the new Israeli Shekel.

The investigator found an acceptable price for Decibel’s products in the Israeli market was also about NIS$10-20. Pure Sunfarms’ products were determined to be about NIS$5-15 per gram, or CAD$2-6.

Another recent report shows that the use of medical cannabis in Israel has been declining in the last six months. A similar trend has been emerging in Canada.

The report notes that the Israeli market faces similar challenges to the Canadian market and others around the world, dealing with market contraction after an initial rush, over-supply, and other issues.  

Many Canadian companies have touted their export sales to countries like Israel as a way to command a better price than in the domestic market and deal with the large volume of product in their vaults.

Despite the increased costs associated with exports, which include special approvals and certifications, producers can often find better payment terms in the export market than selling into provincial markets, where payments can take weeks or even months.  

Stay tuned to StratCann for more on this issue as it evolves.

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