Under the new scheme, a person convicted of possessing a small amount of pot would not register a criminal record, according to insiders.
The move, part of a renewed National Drug Strategy that could be tabled next week, will also include tougher measures to target illegal marijuana growing operations, including the doubling of penalties for drug trafficking, sources said.
The Liberals are also expected to direct more money towards efforts to target traffickers.
The Chrétien government triggered outrage among officials in the Bush administration with months of musing publicly about the "decriminalization" of marijuana. Within the Liberal caucus, some cabinet ministers and backbench MPs have also opposed the move.
Last week, U.S. drug czar John Walters suggested border traffic would slow to a crawl because the U.S. would increase inspections to stop smugglers from illegally shipping "poison" south.
Will Glaspy, a U.S. Drug Enforcement Agency spokesman, told The Detroit News yesterday that talk of decriminalizing pot in Canada would mean "more customs, more border patrols, more DEA. For Canada to decriminalize or legitimize marijuana means a greater availability of marijuana in Canada, which is going to cause individuals and organizations to try and smuggle the drug into the United States.''
The revised plan will allow Ottawa to remain in good stead with the international conventions it has signed on drug trafficking and signal to the United States it is not "softening" its laws, while still ushering in a new approach to enforcing prohibitions against pot.
Justice Minister Martin Cauchon, fresh from a meeting of G-8 justice ministers, refused comment on the timing and substance of the proposals.
"It will be a policy where you will find a reform of the cannabis law and at the same time the renewal of the national drug strategy," Cauchon said in an interview. "What we want to do with that new policy, is to send a better message to the population that the use of cannabis is illegal in our society, harmful to our society (and) be more effective on the enforcement side."
He acknowledged he broadly outlined where Canada wanted to go in a brief conversation with his American counterpart, U.S. Attorney-General John Ashcroft, on Monday at the G-8 justice ministers' meeting, but said Ashcroft did not voice strong opposition to him.
"We have a very good co-operation with the United States. The two countries have the very same vision, heading in the same direction as regards the fight against the use of drugs, organized crime, terrorist activities and all that."
Cauchon said Canada, like other G-8 countries with similar laws, is in the position of having "a piece of legislation which is deemed to be criminal ... that you are not able to enforce, knowing the amount of people that are using cannabis on a daily basis.
"The result of all that is that you have kids using cannabis knowing that it's criminal but we don't enforce it when you get caught with five or 10 grams, for example. So, at the end of the day, there's a high disregard for the justice system. It's not the message I want to send to our people. The message I want to send to our people is that it is illegal, harmful to our society, and therefore I want to make sure that we will develop a piece of legislation that we're going to be able to enforce."
He said two parliamentary committee reports last year the Senate urged outright legalization while a Commons committee called for decriminalization "send the message it's time for the government as well as for Canadian society to deal with that question."