Given the growth of both the cannabis industry and international trade, it’s more important than ever to understand the basics, and challenges of, purchasing cannabis-related goods overseas. Root Sciences, a cannabis extraction company, has been learning this the hard way. Last week, it initiated an appeal in the Federal Circuit last week after their lawsuit was dismissed in October 2021.
The facts
In early 2021, U.S. Customs and Border Protection (CBP) agents detained certain cannabis extraction equipment that had been manufactured in Germany and come in from overseas through the Los Angeles/Long Beach port. The equipment consisted of cryo-ethanol extraction system parts.
Root Sciences allegedly attempted to contact CBP repeatedly with no response, then submitted a protest with no response, and finally filed a lawsuit in March 2021 after it assumed its protest was denied by the CBP. The lawsuit against the United States was filed in the United States Court of International Trade (CIT). Root Sciences principally argued that cannabis and cannabis processing equipment are legal under California law, so the seized equipment is exempt from Section 863 of Title 21 of the United States Code, which prohibits the import of “drug paraphernalia.”
The CIT lawsuit and appeal
Unfortunately, the lawsuit didn’t go very far. The entire case was centered on whether the CIT had jurisdiction over the case, and the Court ultimately decided it did not. This was based on the Court’s decision that the equipment was “seized and forfeited” (giving jurisdiction to the federal district court) instead of “excluded” (giving jurisdiction to the CIT). Ultimately, the Court didn’t address the merits of the parties’ arguments at all, which means Root Sciences went through about seven months of very contentious litigation to end up back at square one.
On May 16, 2022, Root Sciences initiated an appeal in the Federal Circuit. We’ll be monitoring the case for review of their arguments and ultimately, the position the Federal Circuit takes. Root Sciences’ brief is due in July 2022.
The lesson (?)
Even in our own practice and client circle, our customs and international trade team is seeing this more and more. We’ve had calls about cannabis-related equipment or merchandise being seized by the CBP on what seems like a more frequent basis. And as Root Sciences’ ongoing saga demonstrates, this can turn into a long, expensive battle. In many situations, it very well could be the smart, “economic” choice to forfeit whatever was seized, even if that results in a monetary loss to a client’s business.
The overarching lesson to take here is that you should consult, research, and use caution when considering importing cannabis-related goods into the United States. If there’s an option to purchase something domestically, factor that into your cost-benefit analysis. If a piece of equipment is going to make or break a new business, consult the right people.
Finally, always be prepared for the risk that CBP agents determine your cannabis equipment is “drug paraphernalia.” In that event, this post from our customs and international trade team is a good place to start.
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