The intersection of state and federal law on cannabis has led to some interesting situations at the border, especially where cannabis related property is seized. States such as Washington, Oregon, and California have legalized cannabis for all uses, while the federal Controlled Substances Act still prohibits marijuana distribution and sale anywhere in the United States.
Although a particular product or piece of equipment might be legal within a state’s territory, trying to import that product or piece of equipment at the border (even in that same state) presents a special set of challenges. This often leads to U.S. Customs and Border Protection (CBP) seizing various items that cannabis companies seek to import for use within the state. In this context, many cannabis companies find themselves wondering, what should we do now, and what happens next?
Don’t panic when cannabis related property is seized
If your company had products or equipment seized at the border, the first (and perhaps most important) step is to avoid panic. Customs rules and regulations are sometimes opaque and mired in ambiguity. There are also sometimes novel situations when the government simply has not yet taken an official position about whether anyone can import a particular item. Nobody is getting arrested (assuming you are not carrying cannabis yourself). Approaching these issues with a game plan, executed without panic, is paramount.
Understand your options when cannabis related property is seized
When the government seizes property at the border, it provides an importer with (essentially) four options:
The importer can seek to administratively challenge CBP’s seizure and seek to change its mind.
The importer can elect to make an offer in compromise (OIC) to resolve the dispute, which is again processed administratively.
The importer can elect to have the matter addressed at the Department of Justice (DOJ) through formal forfeiture proceedings.
The importer can simply abandon the property and walk away.
Importantly, an importer’s election among these four options must be made within 30 days. The importer’s choice will likely depend on the importer’s objective with the particular products or property.
If the importer believes it has a legal right to use the products or equipment in commerce in the United States, it will likely elect to challenge the seizure through CBP or DOJ. If on the other hand the importer realizes it has made a mistake, it is more likely to choose the OIC or abandonment route. Each of these choices carries its own costs and benefits.
Challenging the cannabis related property seizure administratively or through DOJ
If the importer elects to challenge the seizure, it engages in a prolonged process with CBP or DOJ to dispute the legal basis for the refusal of entry. There are not necessarily any set or standard forms for these challenges, which should stick mostly to the simple facts surrounding the purported use of the product or equipment. Designations at entry are critical. The challenge process begins with the designated use for the product or equipment at the border, before the product or equipment is seized.
If the importer has administratively challenged CBP, there are a few rounds of back and forth prior to a decision. Through DOJ, the importer can have its issue heard before a federal court. The benefit of these challenges is obviously prospective: after engaging in this process once, the importer will have a set standard for any attempted importation of future product or equipment. In other words, it can rest easy each successive time it seeks to import the product or equipment.
An unsuccessful challenge leads mostly to more costs—paying storage fees for the seized items. If the property is refused entry after these challenges, CBP or DOJ (through the courts) can and will impose fines based on the appraised value of the product or equipment.
Making an OIC or abandoning the cannabis related property
If the importer would rather avoid the time and cost of engaging in this challenge process, it can elect to either settle the matter (an OIC) or simply abandon the property.
The benefit of either of these routes is the importer may avoid any judicial or administrative proceedings. The importer can make an offer to pay a penalty based on the appraised value and then walk away with the product or equipment. (The wise importer will seek to have storage fees waived in this instance, in connection with the OIC.)
The importer must then arrange to pick the product or equipment up and have it delivered to another country, such as Canada, and import the product or equipment there. If the importer elects to abandon the property, it likely incurs no penalty other than the loss of its property.
Choose the right team
Harris Bricken’s customs and international trade lawyers have extensive experience with each and every one of these issues, and we can assist with any challenges your cannabis company faces at the border adjacent to states where cannabis is legal. We can assist with any of the issues your company faces in these uncertain times, while always understanding that the importer’s objective takes first priority.
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