Raw Material or Finished NHP? The Test That Decides Your Site Licence

One classification decision quietly sets the cost and the legal exposure of an entire natural health product operation. Is the substance you make, import or sell a raw material, or is it a finished natural health product? Get it right and you licence only what the law actually requires. Get it wrong and you either carry the cost of a site licence you never needed, or you operate without one that you did. Both are expensive, and the second can shut a shipment or a site down.

In May 2026, Health Canada replaced its 2006 guidance with an updated Natural Health Product Raw Material Policy. The revised policy sharpens the boundary between a raw material and a finished NHP and, for the first time, gives industry a structured test to apply. This article walks through that test, shows the licensing outcome for each common scenario, and flags the traps that catch importers and practitioners most often.

The short answer

Health Canada decides whether a substance is a raw material or a finished NHP primarily on its intended purpose of use, judged from a combination of factors rather than any single one. A raw material is a substance intended to be used in manufacturing to produce a finished NHP of a different composition or form for sale. A finished NHP is a product that has undergone all stages of manufacturing, whether or not it is packaged and labelled. If it is a finished NHP for sale, you need a product licence to sell it and a site licence to manufacture, package, label or import it. If it is a raw material for further manufacturing, those licences do not apply to that activity.

Why the classification matters

The classification is not academic. It decides whether an activity sits inside or outside the site licence perimeter, and that in turn decides whether Part 3 good manufacturing practices apply to it. A company that treats a finished NHP as a raw material may import and sell without the product and site licences the law requires, which is an enforcement risk at the border and at inspection. A company that treats a raw material as a finished NHP may spend months and significant fees licensing an activity that never needed it. The updated policy exists to remove that guesswork, but only if you apply the test it sets out.

One scoping point first. The policy applies to substances listed under Schedule 1 of the Natural Health Products Regulations, the included NHP substances. It does not apply to Schedule 2 excluded substances, which are handled under other frameworks. If your ingredient is not a Schedule 1 substance, this test is not the one to use.

Raw material, finished NHP and compounded product defined

Three definitions do most of the work. A raw material feeds manufacturing. A finished NHP is ready to be sold as is. A compounded product is prepared by a practitioner for one patient. The table below sets out each term and its licensing consequence.

Term	What it is	Licensing consequence
Raw material	A substance intended to be used in manufacturing to produce a finished NHP of a different composition or form for sale	No product licence or site licence to import it for further manufacturing, but Part 3 GMP applies when it is used to manufacture an NHP
Finished NHP	A product that has undergone all stages of manufacturing, whether or not packaged and labelled	Product licence to sell, and a site licence to manufacture, package, label or import
Compounded product	A product a practitioner prepares, combines or modifies for a specific patient within a practitioner-patient relationship	No product licence and no site licence; the practitioner is responsible for its safety and quality

A helpful worked example from Health Canada: freshly harvested ginger root is a raw material, while encapsulated ginger that is packaged and labelled for the consumer is a finished NHP. The substance is the same plant. What changed is the intended purpose and the stage of manufacturing.

The test: intended purpose and the seven criteria

Health Canada does not look at one feature in isolation. It weighs a combination of criteria to decide, on the balance of evidence, whether a substance is manufactured, sold or represented for use as a finished NHP. The seven criteria in the policy are set out below. Read them together, not one at a time.

#	Criterion	What Health Canada looks at
1	Nature of the substance	Whether it meets the substance component of the Regulations under Schedule 1, and its historic use as a therapeutic product or as food
2	Form of the substance	Whether it is in a final dosage form that can be consumed as is
3	Packaging and labelling	Information on the container or outer box, including any legend, directions for use, dose or sub-population claims
4	Accompanying information or advertising	Manuals, pamphlets, advertising and website content that speak to use and purpose
5	Sender or supplier	The type of products the supplier usually provides, single ingredient or finished NHP, and the customer profile
6	Recipient	Whether the buyer is a consumer, a practitioner, a manufacturer, a packager or labeller, or a retailer
7	How it will be used or sold	Whether it will be further manufactured or compounded, sold as is, or packaged and labelled, and whether a practitioner-patient relationship exists

The single most decisive theme running through all seven is representation. If a substance is presented to a consumer with a use, a dose and directions, it is behaving like a finished NHP no matter what the invoice calls it. If it is supplied to a manufacturer as an input, in bulk, without consumer-facing claims, it behaves like a raw material.

Licensing outcomes by scenario

Once the classification is settled, the licensing outcome follows a clear pattern. The table below reproduces the common scenarios from the policy. Note the recurring rule: repackaging or relabelling a substance for sale as an NHP, without further manufacturing, still makes it a finished NHP that needs both licences.

Scenario	Classification	Site licence	Product licence
Import a substance for further manufacturing	Raw material	No	No
Import a finished NHP for further manufacturing	Finished NHP	Yes	Yes
Import a finished NHP with no further manufacturing	Finished NHP	Yes	Yes
Distribute a finished NHP	Finished NHP	No	Yes
Import a finished NHP that is repackaged or relabelled for sale	Finished NHP	Yes	Yes
Import a substance or finished NHP by a practitioner for compounding	Raw material	No	No
Import or distribute a finished NHP by a third party to a practitioner or manufacturer	Finished NHP	Yes	Yes

Two patterns are worth committing to memory. First, distribution and storage of a finished NHP are not licensable activities, so they do not require a site licence, but a product licence is still needed and Part 3 storage requirements still apply. Second, where a shipment could serve more than one purpose, Health Canada applies the highest regulatory requirement. Ambiguity is resolved against the lighter classification, not in favour of it.

Where compounding fits

Compounding sits outside the licensing regime, and this is where the raw material rule becomes most generous. Under the NHP Compounding Policy, a health care practitioner who prepares, combines or modifies a product for a specific patient within a practitioner-patient relationship does not need a site licence to do so, and the compounded product does not need a product licence to be sold to that patient. The practitioner assumes responsibility for the safety, efficacy and quality of the compounded product. A finished NHP that a practitioner further customizes for a patient is treated as a raw material for that purpose.

The boundary is the practitioner-patient relationship. Preparing product in advance for a specific patient inside that relationship is still compounding. Making product for distribution or sale outside that relationship, or in commercial volumes, is manufacturing, and manufacturing needs a site licence and, for the product, a product licence. Practitioners who scale a popular compounded formula into a product line cross that boundary without noticing, and that is a common enforcement trigger.

Importation: the trap for importers

Importers carry the highest risk of getting this wrong, because the same physical shipment can be a raw material or a finished NHP depending only on intended purpose. The policy sets out clear rules:

Importing a substance that requires further manufacturing does not require a site licence or product licence for that importation, because it is a raw material
Importing a substance that requires no further manufacturing, for sale as an NHP, requires both a site licence and a product licence
Importing a substance that is only repackaged or relabelled and then sold as an NHP still requires both licences, because repackaging and relabelling are not further manufacturing
Importing a substance or finished NHP by a practitioner for compounding within a practitioner-patient relationship does not require a site licence or product licence

To help border decisions, Health Canada recommends that each shipment carry the material identity, supplier details, lot numbers, expiry date, storage requirements, intended use and, where they exist, the product and site licence numbers. For a substance imported for compounding, the label should clearly state that it is intended for compounding NHPs, with the practitioner name, licence or registration number, address and governing body. Missing this information is the fastest way to have a raw material reclassified as a finished NHP at the border.

Compliance checklist

Use this checklist to confirm each substance in your operation is correctly classified and correctly licensed.

Every substance is confirmed as a Schedule 1 included substance before the policy is applied
Each substance is classified as raw material or finished NHP using all seven criteria, not one
The classification decision is documented with the reasoning, so it can be defended at the border or at inspection
Repackaging and relabelling activities are recognized as finished NHP activities that need both licences
Raw materials used to manufacture an NHP meet Part 3 GMP, with identity verified before use
Import shipments carry identity, supplier, lot, expiry, storage, intended use and licence numbers
Substances imported for compounding are labelled for compounding NHPs with practitioner details
Any compounding scaled beyond a single patient relationship is reviewed as potential manufacturing
Where a shipment has multiple possible uses, the highest regulatory requirement is applied

Common mistakes

Letting the invoice decide. Calling something a raw material on paperwork does not make it one. Representation and intended purpose govern, not the label on the purchase order.
Assuming repackaging is not manufacturing enough to matter. Repackaging or relabelling a bulk substance for sale as an NHP still requires a site licence and a product licence.
Reading a single criterion in isolation. Bulk form alone does not prove raw material status if the labelling and advertising present it to consumers with a use and a dose.
Scaling a compounded formula into a product line. Once a product is made for sale outside the practitioner-patient relationship or in commercial volumes, it is manufacturing and needs licensing.
Skipping GMP on raw materials. Raw materials used to manufacture an NHP must still meet Part 3 GMP, including identity verification before use.
No documented rationale. A classification you cannot explain in writing will not hold up when Health Canada or a border officer questions it.

Frequently asked questions

What is the main test for raw material versus finished NHP?

The primary test is the intended purpose of use, judged from a combination of seven criteria that include the nature and form of the substance, its packaging and labelling, accompanying information, the supplier, the recipient and how it will be used. Health Canada does not rely on any single criterion. It weighs them together to decide whether the substance is represented and intended for use as a finished NHP.

Do I need a site licence to import a raw material?

No. Importing a substance that requires further manufacturing does not require a site licence or a product licence for that importation, because it is a raw material. If the substance requires no further manufacturing and is imported for sale as an NHP, both a site licence and a product licence are required.

Is repackaging a bulk ingredient considered manufacturing?

Repackaging or relabelling a substance and then selling it as an NHP is not treated as further manufacturing, but it still requires a site licence and a product licence because the result is a finished NHP offered for sale. This is one of the most common misclassifications.

Does a practitioner compounding an NHP need a site licence?

No. A health care practitioner who compounds a product for a specific patient within a practitioner-patient relationship does not need a site licence, and the compounded product does not need a product licence. The practitioner is responsible for its safety, efficacy and quality. Compounding for sale outside that relationship or in commercial volumes is manufacturing and does require licensing.

Do raw materials have to meet GMP?

Yes, when they are used to manufacture an NHP. Raw materials must comply with the Part 3 good manufacturing practices requirements of the Natural Health Products Regulations, as interpreted by GUI-0158. That includes verifying identity and quality before use, even though importing the raw material itself does not require a licence.

What happens if a shipment could be used more than one way?

Where importation or distribution is intended for multiple uses, Health Canada applies the highest regulatory requirement. In practice, that means if any of the intended uses would make the substance a finished NHP, the site licence and product licence obligations apply.

How MFLRC can help

MFLRC writes the classification opinion that this decision needs. We review each substance against the seven criteria, document a defensible rationale, and map the licensing outcome so you licence exactly what the law requires and nothing more. Our regulatory affairs, licensing and import and export services cover site licence scope reviews, product licence strategy, import documentation, and practitioner-channel compliance. For the wider picture, see our overview of NHP compliance in Canada and our natural health product licensing services. A written classification opinion is fast, low cost and can save a licensing project you never needed, or prevent an enforcement action you did not see coming.

Request an NHP classification opinion

Conclusion

The raw material versus finished NHP question looks small until you see what rides on it. It sets your licensing cost, your GMP obligations, and your exposure at the border and at inspection. Health Canada's updated Raw Material Policy gives you a real test, built on intended purpose and a combination of seven criteria, and a clear licensing table for the common scenarios. Apply it deliberately, document the reasoning, and resolve any ambiguity toward the higher requirement. If you also weigh NHP against other regulated pathways, our comparison of an NHP licence and a cannabis licence shows how much classification drives cost across categories. Classify with care and you licence what the law actually asks for, no more and no less.