Buy/Sell Medical Equipment/Devices (with Canada)

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The legal dynamics of buying and selling medical equipment (and medical devices) with Canadian-based enterprises (incl. hospitals, health care facilities, retailers, distributors) presents very specific legal and contractually demands that can vary substantively as to other commercial engagements. These highly specific requirements demand knowledgeable and experienced legal counsel such that the purchase or sale of the medical equipment (or medical devices) is undertaken in compliance with the applicable regulatory requirements, tax obligations and other legal demands.

Medical Equipment / Medical Device Sales to Canada

Selling medical equipment and medical devices into Canada is governed by the Food and Drugs Act and the Medical Devices Regulations (MDR), which are enforced by Health Canada. The legal challenges primarily revolve around compliance with these stringent regulations, which are designed to ensure the safety, effectiveness, and quality of devices sold in the Canadian market.

1. Device and Establishment Licensing Requirements

The most critical legal challenge is obtaining the necessary licenses from Health Canada, which vary based on the risk classification of your medical device.

A. Medical Device License (MDL) - Product Approval

Requirement: Manufacturers of Class II, III, and IV medical devices must obtain a Medical Device License (MDL) for the product itself before it can be legally sold in Canada.
- Class I (Lowest Risk): Generally exempt from the MDL requirement, but must still comply with all other safety and regulatory requirements.
- Classes II, III, and IV (Moderate to Highest Risk): Require an MDL application with supporting documentation to demonstrate safety and effectiveness (e.g., design, testing data, and clinical studies for higher classes).
Challenge: The MDL application process for higher-risk devices (Classes III and IV) is rigorous and time-consuming, requiring extensive documentation and a detailed review by Health Canada.

B. Medical Device Establishment Licence (MDEL) - Company Authorization

Requirement: In general, any company that imports or distributes medical devices (all classes) in Canada for sale must hold a Medical Device Establishment Licence (MDEL).
- Foreign Manufacturers (Direct Selling): If a foreign manufacturer of a Class I device sells directly into Canada without a Canadian importer/distributor, they must obtain an MDEL.
- Foreign Manufacturers (Using a Canadian Importer): If a foreign manufacturer uses a Canadian importer or distributor, the Canadian entity is legally required to hold the MDEL. Foreign companies must partner with an MDEL-licensed importer to market their devices.
Challenge: Foreign companies must either establish a compliant Canadian entity to hold the MDEL, or rely on a third-party distributor, adding an extra layer of complexity to their sales and distribution strategy. The MDEL must also be renewed annually.

2. Quality Management System (QMS) Certification

Requirement: To obtain an MDL for Class II, III, and IV medical devices, the foreign manufacturer's quality management system must be certified under the Medical Device Single Audit Program (MDSAP).
Challenge: Companies must demonstrate that their QMS is compliant with ISO 13485:2016 and the specific requirements of the Canadian Medical Devices Regulations. This often requires an independent audit by an MDSAP-recognized Auditing Organization, which can be a significant undertaking.

3. Post-Market Surveillance and Reporting

Health Canada enforces strict post-market requirements to monitor device safety after sale.

Adverse Event Reporting: Manufacturers, importers, and distributors must report any incidents involving a medical device that led to, or could have led to, a serious injury or death.
Recalls: Companies must have procedures in place to quickly and effectively conduct a recall if a device is found to be unsafe or defective.
Foreign Risk Notification (FRN): Holders of Canadian authorizations (MDL/MDEL) for Class II to IV devices must notify Health Canada about significant regulatory actions or safety concerns taken in certain foreign jurisdictions (e.g., a recall or withdrawal in the US or EU).
Challenge: Foreign manufacturers must ensure continuous compliance with Canadian regulations and have robust systems for monitoring, record-keeping, and reporting post-market incidents, even for incidents occurring outside of Canada.

4. Labelling and Language Requirements

Bilingual Labelling: Certain information on the device label and in the directions for use must be supplied in both English and French, as per Canada's official language policy. This includes:
- The name of the device.
- Name and address of the manufacturer.
- Device identifiers (e.g., model number).
- Safety information and directions for use.
Metric System: Temperature-sensitive devices must provide storage requirements with temperatures listed in degrees Celsius.
Challenge: Relabelling inventory and creating new packaging/user manuals in two languages adds to cost and logistics, and non-compliance can lead to detention by the Canada Border Services Agency (CBSA). However, in certain circumstances, relabelling may be permitted after importation but prior to sale.

5. Importation and Customs Compliance

The Canada Border Services Agency (CBSA) works with Health Canada to prevent the importation of non-compliant devices.

Customs Documentation Accuracy: Incomplete, inaccurate, or missing paperwork is a primary cause of delays and potential seizures.
Importer of Record: The party designated as the Importer of Record is legally responsible for the accuracy of the import declaration and the payment of duties and taxes, requiring a well-defined logistics strategy.
Tariff Classification: Accurately classifying the product with the correct 10-digit tariff classification number is essential for determining the applicable duties and taxes.
Challenge: Non-compliance with customs regulations can result in delays, fines, or seizure of the shipment by the CBSA.

Medical Equipment / Medical Device Sales from Canada

Selling medical equipment or medical devices from Canada to a foreign purchaser involves navigating a complex web of regulations from both the Canadian government and the destination country. The key legal challenges primarily revolve around regulatory compliance in the foreign market, Canadian export requirements, and liability/contractual risks.

1. Compliance with the Foreign Purchaser's Country's Regulations

This is often the most significant challenge, as medical device regulations vary substantially across countries. The Canadian seller must ensure their product is legally authorized for sale in the importing country.

Foreign Market Authorization/Registration: The medical device must meet the safety, effectiveness, and quality standards of the foreign regulatory authority (e.g., FDA in the U.S., CE Mark in the European Union). The seller or the foreign purchaser will typically need to complete a full submission and registration process.
Labeling and Language Requirements: Labels, instructions for use, and any associated marketing materials must comply with the foreign country's language, formatting, and content rules. Failure to comply can result in border seizure or fines.
Import Restrictions and Bans: Some countries, particularly for used or refurbished medical equipment, impose strict regulatory boundaries or outright prohibit the importation of certain products to protect hygiene, safety, and the environment.
Local Technical Standards: The device must comply with the local country's electrical, power, and other technical standards.

2. Canadian Export Compliance

While Canada's regulations primarily focus on the sale of devices in Canada, there are still Canadian requirements that must be met for export.

Export Controls: Most medical devices are generally not subject to "controlled goods" restrictions under Canada's Export and Import Permits Act. However, if the medical equipment contains sophisticated technology or "dual-use" components (items that can have both civilian and military applications), an export permit from Global Affairs Canada might be required.
Manufacturer's Certificate to Export (MCE): While not legally required by Health Canada for export, many foreign regulatory bodies require an official certificate to attest that the device is manufactured in compliance with Canadian standards and is "freely sold" in Canada (or an equivalent market). The manufacturer must hold a Medical Device Establishment Licence (MDEL) or a Medical Device Licence (MDL) for their device to be eligible for an MCE from Health Canada.
Prohibited Sales in Canada: If a medical device has been refused a license by Health Canada or is otherwise prohibited from being sold in Canada, the exporter must still ensure they comply with the requirements of the Export Certificate for Medical Devices (Schedule 3 of the Medical Devices Regulations). This certificate requires a declaration that the device is not being sold for consumption in Canada and does not contravene the known laws of the consignee's country.

3. Contractual and Commercial Risks

International sales introduce additional legal complexity compared to domestic sales.

Jurisdiction and Governing Law: The contract must clearly define which country's laws will govern the agreement (e.g., Canada, the foreign country, or a neutral jurisdiction) and where any legal disputes will be settled (arbitration or court).
Customs and Tariffs: The seller and buyer need to agree on who is responsible for customs clearance, duties, and taxes in the destination country (often defined using Incoterms like Ex Works or DDP). Mistakes can lead to shipment delays or unanticipated costs.
Product Liability: While the foreign purchaser is responsible for compliance in their own country, the Canadian seller may still face product liability claims if the device causes injury or harm due to a manufacturing defect or inadequate warnings. Proper insurance and clear contractual limitation of liability are crucial.
Intellectual Property: Ensuring that the sale and use of the device in the foreign country do not infringe on local patents or trademarks is an important consideration.

4. Special Considerations for Used or Refurbished Equipment

The sale of used medical devices carries heightened risks:

Verification and Documentation: There is a major challenge in providing verifiable documentation to the foreign purchaser that the refurbished or used equipment adheres to current safety, operational, and ethical benchmarks.
Liability: Proving that any subsequent failure or patient injury is not due to the seller's initial condition report or refurbishment work can be a significant legal challenge.
Ethical Concerns: Selling older or lower-technology medical equipment to developing healthcare systems can raise ethical questions, particularly if the facility lacks the capability for proper maintenance and servicing.

As such, when you are looking to sell medical equipment / medical devices into Canada, or selling medical equipment / medical devices from Canada to a foreign-based purchaser, for knowledgeable and expericed legal counsel, contact our law firm to schedule a confidential initial consultation at 403-400-4092 or Chris@NeufeldLegal.com.

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