In case you missed our webinar this week, “U.S. Import and Export of Marijuana, Hemp and Paraphernalia”, the replay video is just above. And if you don’t have an hour to spare, below are highlights of what our cannabis and international trade lawyers had to say about the status and pitfalls of the international marijuana trade.
U.S. companies are moving into international cannabis trade
Despite the current financial struggles for many U.S.-based cannabis companies, the international cannabis trade is growing. In particular, there’s a renewed demand internationally for hemp and hemp-derived products. Hemp seeds are seeing more traction on the international trade stage; and following on a Drug Enforcement Administration (DEA) letter last year, some companies have even begun to export seeds that will ultimately germinated into high-THC plants. Furthermore, otherwise illegal drug paraphernalia (under federal law) has been allowed to enter U.S. borders in certain cases.
The 2018 Farm Bill legalized hemp and its derivatives, removing hemp from the definition of “marijuana” pursuant to the Controlled Substances Act. As a result, hemp and hemp-derived products, such as CBD, are no longer illegal controlled substances (so long as they contain no more than 0.3% delta-9 THC) and, therefore, now legal to import and export (see here and here for United States Department of Agriculture (USDA) guidance on the topic). Don’t forget though that the Food and Drug Administration (FDA) takes major issue with CBD in the food, beverage and supplements space, especially regarding health and bodily claims under the Food, Drug & Cosmetic Act.
How to import/export cannabis products to and from the U.S.
Know the international trade and cannabis laws and regulations at home and abroad, and don’t bother “port shopping”
In order to import/export cannabis and cannabis paraphernalia, you must know the applicable laws and regulations for the countries of origin and destination, including the specific requirements of customs and border agencies. Of course, in all countries, only specific types of cannabis products are going to be lawful: generally, hemp and hemp derivatives. Some countries dictate that hemp products cannot contain more than .1% THC (rather than the .3% we see here in the states). Others ban synthetic cannabinoids.
Be mindful that, for both import and export analysis, certain U.S. states restrict products that the federal government hasn’t banned, which could make even getting to a port challenging. Finally, As far as the U.S. goes, the concept of port-shopping for a friendlier point of entry (even in states that legalized medical or adult-use marijuana) won’t matter since customs/trade enforcement is centralized and state marijuana laws won’t be a priority anyway.
Pick a marijuana-friendly country for marijuana imports or exports
Medical marijuana import and export is exceedingly difficult in the U.S. and can only be done pursuant to DEA licenses. Companies able to pull import/export permits for medical marijuana in the U.S. are true unicorns, and much choose countries that are progressive when it comes to medical marijuana imports/exports. That list has considerably expanded over the years, and now includes at least Canada, the Netherlands, Germany, Uruguay, Colombia, Israel, Jamaica, South Africa, Lesotho or Australia.
The U.S. has enhanced standards of operation for importers of record
Additionally in the U.S., among the myriad federal trade laws and regulations you must know, in addition to the hemp laws, U.S. trade laws place a legal burden on the importer of record to exercise “reasonable care” to make sure that imported products are accurately declared to U.S. Customs and Border Protection (CBP).
CBP is the federal agency responsible for ensuring that imported goods are allowed to enter only if they are in compliance with all applicable U.S. laws and regulations. CBP coordinates with a wide range of partner government agencies (e.g., FDA, EPA, DOT, ATF, CPSC, etc.) that have expertise in the laws and regulations applicable to particular products. CBP coordinates with the DEA to implement and enforce the relevant provisions of the Controlled Substances Import and Export Act which makes it a crime to bring controlled substances into the country without a proper license.
An indicator of an importer exercising reasonable care is when they seek assistance from a qualified expert who can assist this evaluation. We tell our clients that the gold standard for exercising reasonable care is when importers submit to CBP a formal ruling request for the product in question. Typically CBP ruling requests usually involve determining the appropriate tariff classification, valuation, or country of origin. CBP has issued plenty of rulings on whether products such as tobacco leaf wraps, water pipes, or grinders are drug paraphernalia. CBP has also issued tariff classification rulings on CBD oil and distillates and hemp biomass.
Hire knowledgeable people to help you get through the cannabis import and export process
A cannabis lawyer should not be dabbling in international trade law and vice versa. If you already have your knowledgeable cannabis lawyer, great. But you’re going to need an international trade expert, too.
Importing or exporting cannabis is a complex process to navigate. First, you must determine the permissibility of the import or export under existing controls. Such an endeavor generally requires working with an attorney experienced in international trade laws. When the product doesn’t appear on the Commerce Control List (CCL) — a set of standards determining whether an item can be shipped and where — a knowledgeable professional can help you move forward.
Articles on the CCL will have an Export Control Classification Number (ECCN) based on their characteristics, which determines whether exporting them requires a license. In the absence of an ECCN, items may be designated as EAR99, which means exporting them does not call for specific licensure.
Items assigned an ECCN generally fall into categories such as electronics or technology, but it is still worthwhile to have an experienced legal expert review your product to ensure an ECCN does not apply. At that point, you can have your professional obtain a Commodity Classification Automated Tracking System (CCATS) number from the Bureau of Industry and Security (BIS) to give the product a formal classification.
Although not every circumstance requires it, a CCATS may provide assurances to finance partners, customs brokers and receiving entities by demonstrating that you went through the proper channels to export your product. That means it may be easier to find a suitable consignee in your destination and get the necessary permits.
Diligence your international cannabis trade partners
After obtaining a CCATS, exporters should conduct due diligence on any partner in the transaction and the ultimate product destination. Due to embargoes, export to Cuba, North Korea, Syria and Iran are impermissible except by explicit licensing from appropriate U.S. agencies. All parties to the transaction — including entities and their majority stakeholders — should also clear the restricted-parties lists with the BIS and the Office of Foreign Assets Control.
The future of cannabis and marijuana paraphernalia imports/exports
Obviously, marijuana products (i.e., containing more than .3% delta-9 THC) are still federally illegal in the U.S. There is no lawful market for their import/export (with the exceptions blessed by the DEA mentioned above). However, hemp (including “marijuana” seeds) and hemp derived products are picking up speed in the international marijuana trade.
Overall, the process is complex and fraught with legal pitfalls. The international cannabis trade is nonetheless an opportunity for businesses to diversify and expand their reach across the globe. If you’re contemplating the import or export of cannabis or paraphernalia, you’re definitely onto something. Know the game and proceed with caution given the compliance obligations and everchanging dynamics of the international cannabis trade.
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