Guidance Document for the Requirements and Responsibilities of Licensed Dealers of Class A Precursors

Table of Contents

1. Purpose
2. Background
3. Scope
4. Definitions
5. General Information
6. Security Measures
   • 6.1 Storage
   • 6.2 Transportation
7. Record Keeping
   • 7.1 Location and Availability of Records
   • 7.2 Required Documents
   • 7.3 Maintenance of Records
8. Reporting
   • 8.1 Loss or Theft
   • 8.2 Annual Report
   • 8.3 Notice of Precursor Removal
   • 8.4 Notice of Export
   • 8.5 Notice of Import
   • 8.6 Notice of Transit or Transhipment
9. Destruction
   • 9.1 On-site Destruction
   • 9.2 Off-site Destruction
10. End-use Declarations
11. Return of Documents
    • 11.1 Original Licence
    • 11.2 Other Documents
12. Suspicious Transactions
13. Address

• Appendix A: Schedule to the Precursor Control Regulations and Sample End Use Declaration
• Appendix B: Indicators of Suspicious Activities
• Appendix C: List of RCMP National Chemical Diversion Program Co-ordinators

1. Purpose

This document outlines the responsibilities, and provides guidance to licensed dealers of Class A precursors under the Precursor Control Regulations (PCR), for any Class A precursor as listed in Schedule VI of the Controlled Drugs and Substances Act (CDSA).

2. Background

Precursors are chemicals that are frequently diverted from legitimate activities to the illegal manufacture of drugs. In 1988, the United Nations addressed the problem of the diversion of precursors to illegal markets or uses, by adopting provisions within theConvention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances.Canada signed this convention in 1990, committing itself to controlling the movement of precursors into, out of and within Canada.

In 1997, Canada enacted the CDSA, which allowed for the control of precursors and the development of regulations for their import, export, production and distribution.

The PCR provide a regulatory framework that allows Canada to fulfill its international obligations with respect to the monitoring and control of precursors and other chemicals used in the production of illegal drugs.

Please refer to the document, Application for Class A Precursor Licences, for instructions on the licence application process.

3. Scope

This document was developed as a companion to the PCR to provide guidance in meeting the regulatory requirements of licensed dealers of Class A precursors. It is not intended to replace the PCR. The PCR shall, under all circumstances, take precedence over these guidelines should any apparent confusion or inconsistencies arise.

Many terms used in this document are defined in the CDSA and in the PCR. Please refer to Section 2 of the CDSA and Section 1 of the PCR.

4. Definitions

Many terms used in this document are defined in the CDSA and in the PCR. Please refer to Section 2 of the CDSA and Section 1 of the PCR.

5. General Information

Copies of the CDSA and the PCR can be obtained by visiting the  Justice Canada website.

General information on licence amendments, including those which require prior approval, can be found in the guidance document, Application for Class A Precursor Licences. Copies of guidance documents and application forms can be obtained at the Health Canada website at www.healthcanada.gc.ca/precursors or by contacting the Office of Controlled Substances at (613) 946-1142.

6. Security Measures (Sections 9, 14 and 83 of PCR)

Licensed dealers must take precautions to ensure the safety and security of the precursors at the site and during transportation.

6.1 Storage

1. When storing a Class A Precursor, the licensed dealer must:
   1. restrict access to locations at the licensed site where Class A precursors are kept; and
   2. maintain a daily log that records who has had access to the precursor(s). This log must include the person's name and the date of access.
2. The licensed dealer may consider the following options as a means of enhancing security; however, they are not mandatory:
   1. electronic detection and alarm system;
   2. limiting unsupervised access to the area in which the Class A precursor activity takes place; or
   3. implementing procedures for guests, maintenance personnel and non-employee service personnel.

6.2 Transportation

1. Licensed dealers must ensure:
   1. the safekeeping of the Class A precursors during transportation;
   2. that all steps are taken to prevent the diversion of the precursor to an illicit market or use;
   3. the precursor is accompanied by documentation indicating:
      1. (the name and quantity of the precursor;
      2. the name of the licensed dealer selling or providing the precursor;
      3. the name of the person to whom the precursor is being sent, transported or delivered; and
      4. the date the precursor was sent.
2. The licensed dealer may consider the following options as a means of enhancing security during transportation; however, they are not mandatory:
   1. a Class A precursor could be sealed in a container that will reveal any attempts at tampering;
   2. if a precursor cannot be stored in such container, access to the precursor could be controlled through physical means (i.e., locked in a secure place) or through electronic and human monitoring; or
   3. incorporate a chain of signatures when transporting.

7. Record Keeping (Section 85 of PCR)

The licensed dealer must have internal controls to provide a reasonable assurance that all records pertaining to licensed precursor activities are accurate and reliable.

7.1 Location and Availability of Records

1. All records must be kept at the licensed site, physically or electronically.
2. The records and documents must be made readily available for inspection by an inspector.
3. The licensed dealer must provide copies of any records or documents upon request from the Minister at any time.

7.2 Required Documents

1. Any books, registers or electronic data pertaining to Class A precursor activities.
2. Any records pertaining to Class A precursor activity on the licensed site, including purchasing, receiving, producing, packaging, using for its own purposes, selling, providing, sending, delivering, transporting, importing, exporting, destroying or removing the precursor.
3. All records listed above must include for each precursor:
   1. name;
   2. quantity;
   3. type of activity; and
   4. the date of the activity.
4. In addition, for precursors
   1. purchased or acquired: the name, address and telephone number of the person from whom the precursor was purchased or acquired;
   2. sold or provided, sent, delivered or transported: the name and address of the person to whom the precursor was sold or provided;
   3. imported: the name and address of the exporter, and the name of any country of transit or transhipment; and
   4. exported: the name and address of the importer and the name of any country of transit or transhipment.
5. Access control logs, destruction records, and end-use declarations, which are covered in Sections 6, 9 and 10 respectively.

7.3 Maintenance of Records

1. A record must be kept for at least two years after the information was recorded.
2. An end-use declaration must be kept for at least two years after the calendar year in which it was obtained.

8. Reporting

8.1 Loss or Theft (Section 90 of PCR)

In the case of the theft or an unusal waste or disapperance of a precursor that cannot be explained on the basis of normally accepted business activities, the licensed dealer must provide notice of the occurrence to:

1. the appropriate police authority within 24 hours after becoming aware of the occurrence; and
2. the Office of Controlled Substances, in writing, within 72 hours after becoming aware of the occurrence, including confirmation that the police have been notified.

In the case of the theft or lost of the licence, a registration or authorization certificate, import or export permit, the licensed dealer must provide notice of the occurrence to the Office of Controlled Substances, in writing, within 24 hours after becoming aware of the occurrence.

This information must be submitted to the address stated in Section 13 of this document.

8.2 Annual Report (Sections 87 and 87.1 of PCR)

1. A licensed dealer must provide Health Canada with an annual report within three months after the end of each calendar year, indicating:
   1. the name and total quantity of each Class A precursor purchased, received, produced, used for its own purposes, sold, provided, imported, exported or destroyed during the calendar year;
   2. the quantity of each Class A precursor in physical inventory taken at the site at the end of the calendar year; and
   3. the name and quantity of any Class A precursor that has been lost or wasted in the course of conducting authorized activities during the calendar year.
   The annual report must be sent to the address stated in Section 13 of this document.
   Note: An annual report form is available from the Health Canada website.
2. A licenced dealer must provide Health Canada with an annual report within three months of having their licence expire without being renewed or revoked.

8.3 Notice of Precursor Removal (Section 87.2 of PCR)

A licensed dealer that intends to close a site where a precursor is kept, or to remove all the precursors from the site must notify the Office of Controlled Substances at least 30 days before the closure or removal. The notice must be submitted in writing and include the date of the intended closure or removal, the site to which the precursors will be moved, and the quantity of each precursor to be moved.

8.4 Notice of Export (Sections 35.1 and 72.1 of PCR)

Within 15 days of shipment of precursors is exported, the holder of the permit shall notify the Office of Controlled Substances with a declaration in writing. The declaration will include:

1. The name of the permit holder, the permit number of the shipment, port of exit from Canada, the date of export, the name of the precursor being shipped or a description of the chemical composition (as stated in the permit), and the quantity of precursor being shipped.
2. A statement signed by the responsible person in charge (RPIC) or alternative responsible person in charge (A/RPIC) for the licensed site stating that all the information set out in the declaration is correct and complete to the best of their knowledge.

8.5 Notice of Import (Section 28.1 of PCR)

Within 15 days of shipment of Class A precursors is imported, the holder of the permit shall notify the Office of Controlled Substances with a declaration in writing. The declaration will include:

1. The name of the permit holder, the permit number of the shipment, port of entry into Canada, the date of import, the name of the precursor being shipped or a description of the chemical composition (as stated in the permit), and the quantity of precursor being shipped.
2. A statement signed by the responsible person in charge (RPIC) or alternative responsible person in charge (A/RPIC) for the licensed site stating that all the information set out in the declaration is correct and complete to the best of their knowledge.

8.6 Notice of Transit or Transhipment (Sections 43 of PCR)

Within 15 days of shipment of Class A precursors departs from Canada, the holder of the permit for this transit or transhipment must notify the Office of Controlled Substances in writing of the departure date.

9. Destruction (Section 47 of PCR)

9.1 On-site Destruction

1. Destruction records must show the name and quantity of the precursor, and the date and method of destruction.
2. Destruction must be conducted in accordance with federal, provincial and municipal environmental protection legislation.
3. Two qualified witnesses must be on-hand during the destruction;
   1. One must be the Responsible Person in Charge (RPIC) or Alternate Responsible Person in Charge (A/RPIC); and
   2. The other witness must work for or provide services to the licenced dealer and in that capacity act in a senior position.
4. When the destruction is complete, all parties must print and sign their names, and date a joint declaration certifying that the precursor was completely destroyed.

9.2 Off-site Destruction

1. Appropriate measures must be taken to ensure the security of the precursor during transit to an off-site location.
2. Destruction must be conducted by a business specializing in the destruction of dangerous goods.
3. Destruction must be conducted in accordance with federal, provincial and municipal environmental protection legislation.
4. Once the destruction is complete, the licensed dealer must obtain a declaration from the designated business showing the:
   1. name and signature of the individual carrying out the destruction and the witness;
   2. name and quantity of the precursor destroyed;
   3. method of destruction; and
   4. date of destruction.

10. End-use Declarations (Section 8 of PCR)

Section 8 of the PCR requires that a licensed dealer obtain an end-use declaration (EUD), before entering into the transaction, for the sale of a Class A precursor to a person who is not a licensed dealer in a quantity greater than the maximum quantity listed in column 2 of the schedule to the PCR (Appendix A).

When is an end-use declaration required?

1. A signed and dated EUD is required by a licensed dealer prior to entering into a transaction where...
   1. the quantity or package size is greater than the maximum quantity listed in column 2 of the schedule to the PCR; and
   2. a licensed dealer sells or provides a Class A precursor to a person who is not a licensed dealer; such as the end-user or a person who is exempt under section 5 of the PCR.

A licensed dealer cannot sell a Class A precursor to a person for any licensed activity, unless that person holds the appropriate licence or is exempted under section 5. Licensed activities include export, produce, package, sell and provide. If the purchaser is a licensed dealer, an EUD is not required under section 8 of the PCR.

What type of information is included in an End-Use Declaration?

The underlying principle for the requirement of the EUD is to "Know your client". In accordance with the PCR, licensed dealers are required to take reasonable steps to verify the legitimacy of the purchase and the identity of the person to whom they are providing or selling Class A precursors to.

1. Section 8 requires that the EUD must include:
   1. the name of the licensed dealer including their address, telephone and facsimile number, if any;
   2. the name of the person acquiring the precursor, including the name of company, their address, telephone and facsimile number, if any;
   3. the name of all Class A precursors involved in the transactions and the product name(s), if applicable;
   4. a description of all the uses for each Class A precursor identified in (c); and
   5. be certified by the signatory stating that the person is aquiring the precursor as the end user, for the uses mentioned in the EUD and that the information is correct and complete.

How should subsequent transactions be recorded?

1. An EUD is valid from the date of initial purchase until the end of the calendar year. A valid EUD can be used for subsequent transactions provided they are for the same:
   1. end user;
   2. Class A precursor; and
   3. end-use.
2. If any of the information listed above has changed in a subsequent transaction (i.e. different Class A precursor, different end user or different end-use) a new EUD must be completed.

What are the record keeping requirements?

The EUD must be kept by the licensed dealer at the licensed site for at least two years after the calendar year in which it was obtained and in accordance with all of the record keeping requirements in section 85 of the PCR.

Note: The attached EUD (Appendix A), is a sample document, developed by Health Canada, which can be used either as a guide in developing your own EUD or in its entirety. Please note that this format assumes that there will only be one precursor, as listed in Column 1 of the schedule to the PCR, per form; alternate formats are acceptable.

11. Return of Documents (Sections 14 and 89 of PCR)

11.1 Original Licence

A licensed dealer must return the original licence to OCS in the following circumstances:

1. (As soon as possible after a renewed licence takes effect.
2. Within 30 days after the licence expires without being renewed or is revoked.
3. Attached with the application when applying for an amendment, if there are changes that pertain to the information indicated on the licence. The licensed dealer must keep a copy of the original licence at the site until the amended licence is received.

11.2 Other Documents

A licensed dealer must return the original import or export permit, or if applicable, a permit for transit or transhipment, or authorization certificate to OCS within 30 days after such documents expire or are revoked.

The original documents stated in 11.1 and 11.2 must be sent to the address stated in Section 13 of this document.

12. Suspicious Transactions (Section 86 of PCR)

The licensed dealer is required to record all suspicious transactions, and is encouraged to report any such transactions to Health Canada or to the RCMP National Chemical Diversion Program.

It is critical that licensed dealers take reasonable measures to identify their customers, understand the normal and expected transactions conducted by those customers and, thereby, identify those transactions conducted by their customers that appear suspicious in nature. A list of indicators to assist a licensed dealer in the identification of suspicious transactions can be found in Appendix B.

12.1 Recording Suspicious Transactions

1. A licensed dealer must record every transaction when there are reasonable grounds to suspect that the transaction is related to the diversion of the precursor to an illegal market or use.
2. A suspicious transaction record must include the name, address, telephone number and position (in regard to the licensed dealer) of the individual making the record, as well as:
   1. the identification of the other party to the transaction;
   2. details of the transaction, including date, time and type of transaction, and the name and quantity of the precursor; and
   3. a detailed description of the reasons for suspecting that the transaction involves the diversion of a precursor to an illegal market or use.

12.2 Reporting Suspicious Transactions

1. Health Canada
   1. Health Canada is authorized to receive information provided voluntarily by a licensed dealer, with regard to the recording of suspicious transactions.
   2. Suspicious transactions may be communicated using the contact information stated in Section 13 of this document.
2. RCMP
   1. The RCMP National Chemical Diversion Program continues to be successful due to the extensive participation and cooperation in the program by industry and law enforcement. Voluntary reporting and documentation of suspicious sales and movements of precursors and essential chemicals used in manufacturing of illegal drugs will allow police to continue detecting drug traffickers.
   2. Suspicious transactions may be communicated to one of the national offices listed in Appendix C of this document.

Note: No criminal or civil proceedings will be brought against a licensed dealer for recording or reporting a suspicious transaction in good faith.

13. Address

Chemical Precursors Section
Office of Controlled Substances
Health Canada
A.L. 0300B
Ottawa ON K1A 0K9

Telephone: (613) 946-1142
Fax: (613) 948-3585

Appendix A

End Use Declaration (sample)

Under the provisions of the Controlled Drugs and Substances Act (CDSA) and the Precursor Control Regulations (PCR).

The chemical product(s) being purchased is/are scheduled as a Class A precursor, in Schedule VI, Part I of the CDSA, and could be used in the clandestine production of controlled substances. In accordance with section 8 of the PCR, a licensed dealer must obtain a signed and dated end-use declaration prior to selling or providing a Class A precursor to a person who is not a licensed dealer when the quantity or package size is more than the maximum amount specified in the schedule to the PCR.

Licensed Dealer

• Licensed Dealer Name
• Address
• Telephone Number
• Facsimile number

End User

• Name (including company or institution)
• Address
• Telephone Number
• Facsimile number

Precursor

• Name of Product(s)
• Precursor

Description of End-use(s)

I certify that I am the end user of the chemical product(s) referred to above for the purposes stated in this document. I will not export, resell or provide any amount thereof outside of Canada, or to any other entity within Canada.

OR

I hereby certify that the information provided in this End-Use
Declaration is correct and complete, to the best of my knowledge, and
in accordance with the provisions of the Controlled Drugs and
Substances Act and the Precursor Control Regulations.

• Name
• Signature
• Date

For Licensed Dealer Use Only

• Verification of Identity
• Effective Date
• Date d'expiration
• December 31

It is the responsibility of the licensed dealer to maintain all sales records for the above end user.

The information in this document is confidential and will only be used as authorized in the Precursor Control Regulations.

Appendix B: Indicators of Suspicious Activities

The following list of indicators will assist a licensed dealer to identify suspicious transactions:

1. New customer or identity unknown.
2. Cash payment, even for large purchases.
3. Pick-up of chemicals by own transportation.
4. Readiness to pay a higher price.
5. Ordering of chemicals by persons unlikely to need them.
6. Personal appearance.
7. Request for delivery by air freight.
8. Irregular manners, attitude and behaviour (i.e., "money is no problem").
9. Orders to unknown companies that cannot be easily traced.
10. Using a private house or PO box number as the address from which the order is made.
11. Irregular ordering and quantities.
12. Requests for small packages even if it is indicated for industrial use, or no labels are used.
13. Indications of intended use not consistent with chemical(s) ordered.
14. Delivery by a dubious route.
15. Failure to provide information (i.e., telephone number, address, federal or provincial tax numbers, etc.).
16. Absence of business stationary.
17. Reluctance to supply a written order.
18. Orders for more than one precursor or essential chemical, and orders to several companies to avoid detection.
19. Orders to well-known companies, but delivery is requested to a specific person and alternate address.
20. Orders to companies unable to provide usual business acumen.
21. Orders for chemicals where delivery or routine exceeds costs of products.
22. Exports to countries where there is no manufacturing for the chemicals ordered.
23. Orders from abroad where payment is not consistent with transactions from that part of the world.
24. Delivery by unusual modes of transportation.
25. Dubious countries of destination.
26. Same inquiry after being refused, comes in through another channel or attempts to purchase through a competitor.
27. Insisting on a direct delivery.
28. Ordering by unknown foreign citizens.
29. Assorted inquiries or orders of subject chemicals.
30. Unusual quantities of other products (may be a new synthesis).
31. May set up a phony bank account, answering service, fax, post office box, computer fax modem ordering.
32. Tells chemical company that he/she is making perfume.
33. Will not fill out a company contact information sheet.

There may be legitimate explanations for a purchase that represents one or more of these factors. This list is presented as a guide to assist licensed dealers and their employees as to which transactions may be suspicious.

Appendix C: List of RCMP National Chemical Diversion Program Co-ordinators

Alberta

Royal Canadian Mounted Police
"K" Division
11140-109th St
Edmonton AB T5G 2T4

NCO I/C Chemical Diversion Program
Fax.: (780) 412-5579

British Columbia

Royal Canadian Mounted Police
Drug Enforcement Branch, "E" Division
657 West 37th Ave
Vancouver BC V5Z 1K6

Attn: Cpl. Glen Evans
NCO I/C Chemical Diversion Program
Tel.: (604) 264-3019Fax: (604) 264-3568

Manitoba

Royal Canadian Mounted Police
1091 Portage Ave
Winnipeg MB R3C 3K2

Fax: (204) 983-2976

New Brunswick

Royal Canadian Mounted Police
1445 Regent St
Fredericton NB E3B 4Z8

Attn: Cpl. Marc Robichaud
Tel.: (506) 474-7552
Fax: (506) 474-7570

Nova Scotia

Royal Canadian Mounted Police
1595 Bedford Hwy
Bedford NS B4A 3Y4

Attn: Cpl. Gord Vail
Tel.: (902) 244-4046
Fax: (902) 426-3602

Ontario

Royal Canadian Mounted Police
"O" Division Chemical Diversion Program Coordinator
130 Dufferin Ave
London ON N6A 4K3

Attn: Cpl. Brent Hill
NCO I/C Chemical Diversion Program
Tel.: (905) 876-9848
Cell: (905) 302-0369
Fax: (905) 876-9595

Ottawa (National Capital Region)

Royal Canadian Mounted Police
"A" Division Drug Section
155 McArthur Ave
Ottawa ON K1A 0R4

Attn: Cst. Jean-Louis Rompré
Chemical Diversion Program
Tel.: (613)993-4645
Fax: (613) 993-5705

Québec

Royal Canadian Mounted Police
"C" Division
4225 Dorchester Boul West
Westmount QC H3Z 1V5

Attn: Cpl. Raymond Martel
NCO I/C Chemical Diversion Program
Tel.: (514) 939-8326
Fax: (514) 283-2169

Saskatchewan

Royal Canadian Mounted Police
"F" Division
6101 Dewdney Ave West
Bag Service 2500
Regina SK S4P 3K7

Attn: Cpl. Craig Toffoli
Tel.: (306) 780-5579
Fax: (306) 780-3398

Elsewhere in Canada

Royal Canadian Mounted Police
Drugs and Organized Crime Branch
National Chemical Diversion Program
1200 Vanier Pky
Ottawa ON K1A 0R2

Attn: Sgt. Vianney Tremblay
National Co-ordinator
Tel.: (613) 993-6694
Fax: (613) 993-5454