As we have blogged about here, in the world of “natural health products” (“NHPs”), the ability to import unlicensed products into Canada for personal use — colloquially known in the industry as “Not for Resale” (“NFR”) — is a hot topic for direct sellers.  Businesses need to understand the specific and narrow administrative policies which allow for these importations, so they do not draw the ire, and enforcement actions, of Health Canada!

Background

Health Canada does not use the term “NFR”, but instead refers to these transactions as imports under its “Personal Use Importation Policy” (“PUIP”).  In general terms, the PUIP allows Canadian residents to import unlicensed NHPs for personal or immediate family use.  In practice, Canada Border Services Agency (“CBSA”) will allow importations under the PUIP provided the following conditions are met:

1. The importer is an individual who is a Canadian resident or a visitor to Canada;
2. The NHP must be imported for personal use.  Although Health Canada and CBSA have discretion when determining whether a shipment is for “personal use”, this is generally considered to be no more than a 90-day supply; and
3. The product must be in the retail package or have the original label attached to it, clearly stating what the product is and what it contains.

No “Commerciality”

Most crucially, the PUIP is not intended to allow someone to carry on a commercial enterprise in Canada with respect to unlicensed NHPs.

Health Canada has indicated that there cannot be any “commerciality” with respect to the personally-imported NHPs — which means that the circumstances of the importation cannot be tied to the deliberate commercial activity of a business.  For example, (1) multiple shipments of the same product which, when combined, exceeds the 90-day supply; (2) shipments accompanied by or associated with materials to be used for advertising/promotion; and (3) any online advertising or marketing directed to Canadians to purchase products under such a program.

Proper Structuring and Crackdowns

That said, some direct sellers have been able to carefully structure their sales transaction such that Canadian purchasers can lawfully purchase and then self-import under the PUIP.   While this has worked for some, many structures have either been structured improperly or implemented improperly, and are currently drawing significant enforcement action from Health Canada.

Some hallmarks of offside structures will include:  direct or indirect payments to Canadian distributors for the marketing or distribution or sale of these “PUIP importations”;  Canadian-based marketing activities involving Canadian distributors in phone calls or social media situations promoting PUIP products.  

Takeaways

PUIP structures cannot be commercialized, but can be employed to afford Canadians the ability to access unlicensed product, from a foreign jurisdiction for their own self-import – provided in full conformity with Health Canada’s current administrative policies described generally above.

Direct sellers looking to take advantage of the PUIP in their businesses usually require sound legal advice.  Proceeding without sound planning and advice will usually involve significant Health Canada enforcement action should their structures be found to be offside.

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