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The root system from a cannabis cutting is photographed at the CannTrust Niagara Greenhouse facility in Fenwick, Ont., on June 26, 2018.

Tijana Martin/The Canadian Press

Part of cannabis and investing

The Ontario government’s cannabis wholesaler and online retailer is returning all products from CannTrust Holdings Inc. – valued at roughly $2.9-million – because they do not conform with the terms of its supply deal with the beleaguered cannabis company.

CannTrust said Monday the Ontario Cannabis Store has determined that some of the products it sold to the crown corporation were “non-conforming” under the terms of its master cannabis supply agreement.

“Any product that does not comply with applicable law is considered to be non-conforming product and the OCS may elect to exercise its right, among others, to return such product to the company at the company’s expense,” CannTrust said in a statement.

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CannTrust noted that the Ontario retailer operates independently of Health Canada, which has not ordered a recall on any of the company’s products.

The move by the province’s crown corporation in charge of wholesale distribution and online pot retail is the latest setback for the cannabis producer, which continues to be under investigation by Health Canada.

Last month, CannTrust disclosed the federal regulator’s findings that the company was growing cannabis in unlicensed rooms in its greenhouse in Pelham, Ont.

Health Canada placed a hold on CannTrust’s inventory amounting to approximately 5,200 kilograms of dried cannabis and the company instituted a voluntary hold of approximately 7,500 kg of dried cannabis equivalent.

CannTrust later voluntarily suspended all sales and distribution of its products as a precaution while regulators investigate its manufacturing facility based in Vaughan, Ont.

Last week, the company said Health Canada notified CannTrust that its Vaughan facility was rated as non-compliant as well.

CannTrust also said earlier this month that the Ontario Securities Commission has opened an investigation into issues around the alleged unlicensed growing at its Pelham greenhouse.

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Meanwhile, Health Canada continues its probe, the outcomes of which could include suspension or termination of CannTrust’s cannabis licences, hefty fines and possible destruction of the held-back cannabis products.

While Ontario has decided to return CannTrust’s products to the company, other provinces are awaiting the results of Health Canada’s review before taking any further action.

The BC Liquor Distribution Branch’s position on CannTrust is unchanged, said Viviana Zanocco, its manager of corporate communications and stakeholder relations.

“Until such time as Health Canada issues a recall or other direction, we will continue to supply CannTrust’s product to private and public retail stores,” she said in an e-mailed statement. “We remain in regular communication with Health Canada on this matter.”

Marie-Andrée Bolduc, a spokeswoman for Cannabis NB, said their supply agreement with CannTrust remains unchanged as they wait for review results from the federal regulator.

Manitoba Liquor and Lotteries spokesman Lorne Kletke said retailers in the province remain instructed to hold any CannTrust inventory until further direction.

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Similarly, the Alberta Gaming, Liquor and Cannabis Commission said the affected lots of CannTrust products remain on hold.

“As Health Canada has not issued a recall at this point, AGLC will continue to monitor the situation and respond accordingly once Health Canada releases their findings,” AGLC spokeswoman Heather Holmen said in an e-mailed statement.

The Nova Scotia Liquor Corp. continues to hold all CannTrust products at its distribution centre, which is valued at roughly $215,000, spokeswoman Beverley Ware said.

“At this stage, a decision has not been finalized regarding whether we will return the product,” she said in an e-mailed statement.

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