In an act of political jujitsu, Canada's largest hemp seed producer is taking advantage of a little-used provision of the North American Free Trade Agreement (NAFTA) to sue the US government over the Drug Enforcement Administration's (DEA) proposed administrative rule that would ban hemp foods containing traces of THC after February 6.
On Monday, Kenex Ltd. of Chatham, Ontario, filed a $20 million-plus lawsuit charging that the impending ban would destroy its rapidly growing business in the US. Kenex also argued that US government efforts had already caused the company to forego introduction of one new product line last year and that it was losing US customers because of uncertainty over its ability to import already contracted shipments.
Under NAFTA rules, member countries must treat companies from other member countries equitably and through a legitimate regulatory process. The Kenex filing, a copy of which was obtained by DRCNet, accuses the DEA and the Office of National Drug Control Policy (ONDCP, the drug czar's office) of "harassment of the legal and legitimate trade" in industrial hemp and attempting to "effectively amend" existing law through the regulatory process.
As the Kenex filing notes, the well-settled US federal statutory definition of marijuana excludes "the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seed of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination."
In other words, hemp, hemp seed, and hemp oil are not marijuana under US law. But Kenex argues that that the DEA and ONDCP, through DEA's rule-making procedure, are attempting to treat the trace amounts of THC in hemp as a controlled substance and have thus created "a de facto ban on the hemp food products produced, marketed, and distributed, by the investor and its investment in the United States."
"There are two principles at question here," said Kenex attorney Todd Weiler. "NAFTA spells out that member countries must treat companies fairly and equitably, and it also demands that under its 'national treatment' and Most Favored Nation provisions that companies in member countries be treated the same as their competitors in other member countries," he told DRCNet. "But it really comes down to fairness, that's what this case is all about."
Weiler cited the importation of poppy seeds, which contain trace elements of opiates, but which are allowed under US law. "Poppy seed producers make a product that competes with hemp seed," said Weiler, "but the DEA is not embargoing poppy seed bagels. They are not treating hemp seed producers like poppy seed producers."
The NAFTA expert expressed confidence that Kenex would prevail in its suit, but told DRCNet the aim was not so much monetary damages as forcing US authorities to come up with a reasonable policy. "The idea is to get them to come to their senses and adopt a reasonable policy, such as those of the Canadians, the Europeans, and the Australians," he said.
The Kenex lawsuit runs parallel to Canadian government concerns about US hemp rules. Canadian trade officials recently sent a letter to the DEA warning that the proposed ban would hurt a legitimate, regulated Canadian industry, the Toronto Globe and Mail reported on Monday. The letter also noted that the ban would violate World Trade Organization rules requiring countries to run risk-assessment tests before banning products.
"The Canadian government is on our side," said Weiler, adding that he was referring to general concerns about the DEA's hemp rules, not the Kenex case in particular. "The Ministry of Foreign Affairs heard about the hemp rulemaking and wrote to DEA asking to see on what basis they were making the changes. Under NAFTA, the DEA must give this stuff to the Canadian government," said Weiler. "But they must not have an international attorney. DEA wrote back tersely, saying the information was confidential."
The Canadian Ministry of Foreign Affairs and International Trade had not returned DRCNet calls for comment by press time.
The NAFTA challenge to DEA's hemp food ban through administrative fiat is only the latest front in this increasingly noticed battle. Last week, the Hemp Industries Association and seven hemp food producers, including Kenex, sued in federal court in San Francisco to block the ban on hemp food containing traces of THC (http://www.drcnet.org/wol/219.html#hempsuit). HIA is also awaiting a ruling on a temporary injunction blocking DEA from implementing the rule changes. And VoteHemp (http://www.votehemp.com), an advocacy group linked to the industry, along with Students for Sensible Drug Policy and the Mintwood Media Collective, put public pressure on the agency with a 74-city hemp food taste-test protest last month.
All of the pressure is starting to pay off, at least in terms of media attention. The story made big-time last Sunday, with a reasonably accurate and balanced front-page story on Sunday, January 13, followed by the Wall Street Journal and the Los Angeles Times on Tuesday.