NAFTA Challenge to DEA Hemp Rule Enters Next Phase

WASHINGTON, DC – Kenex Ltd., a Canadian agro-firm that has been growing and processing hemp oil, seed and fiber products in Canada for distribution throughout the United States for the past five years, will meet with numerous U.S. federal agencies at the U.S. Department of State on Monday, March 25, 2002 to review the company’s notice of intent to sue the U.S. government under the North American Free Trade Agreement (NAFTA). The meeting will be attended by representatives from the Departments of State, Justice, Treasury, and Commerce, as well as from the Environmental Protection Agency, the Drug Enforcement Administration (DEA), the Office of National Drug Control Policy, the U.S. Customs Service, and the Office of the United States Trade Representative.

On October 9, 2001, without public notice or opportunity for comment, the DEA issued an interpretive rule purporting to make hemp foods containing any traces of naturally-occurring tetrahydrocannabinol (THC), the active ingredient found in marijuana, immediately illegal under the Controlled Substances Act (CSA) of 1970. Because trace THC does not pose any potential for abuse as a drug, the U.S. Congress had exempted non-viable hemp seed and oil from control under the CSA in the same place and way as poppy seeds containing harmless trace opiates. Kenex filed the NAFTA action in January because the DEA seeks to effectively prevent Kenex from accessing American markets for its hemp food products. The Government of Canada, in response to the DEA’s new rule, stated that, “there is no evidence that the effective ban on relevant Canadian food products on the U.S. market is based on any risk assessment. Therefore, Canada objects to these measures.” On March 7, the 9th Circuit Court of Appeals blocked DEA’s rule pending their ultimate decision on the case.

Sterilized hemp seeds have been available in the U.S. for decades and are recognized as an exceptional source of protein, omega-3 and omega-6 essential fatty acids (EFAs). Independent studies and reviews conducted by foreign governments have confirmed that trace THC found in the increasingly popular hemp foods cannot cause psychoactivity or other health effects, or result in a confirmed positive urine test for marijuana, even when unrealistically high amounts of hemp seed and oil are consumed daily. The 10-year-old global hemp market is a thriving commercial success. Popular hemp foods include pretzels, tortilla chips, energy bars, waffles, bread, salad dressing, cereal, ice cream and even non-dairy milk.

Kenex has suffered previously at the hands of DEA’s myopic refusal to distinguish between industrial hemp and drug varieties of cannabis. In 1999, U.S. Customs at the behest of DEA impounded a Kenex shipment of hemp birdseed. Customs relinquished the shipment only after an experienced legal team demonstrated that the seizure was not justified by either the law or common sense and the New York Times published an embarrassing expose. Jean Laprise, the president of Kenex states that: “A few million dollars would not even begin to cover the cost of the financial hardships Kenex has suffered through DEA’s harassment of our business and the hemp food marketplace in general. Since the DEA’s new rule was announced, our U.S. hemp seed and oil sales have virtually ceased. If the DEA is not stopped, we are finished. Tallying our current and future losses, we expect to be compensated at least $20 million under NAFTA.”

The DEA’s attempt to ban hemp food sales in the U.S. is clearly in conflict with NAFTA for several reasons. The DEA did not provide any notice and opportunity to U.S. trading partners or foreign companies to provide input into its ruling; the agency did not conduct a risk assessment or offer any science-based rationale for issuance of the rule; the DEA did not seek to minimize impact on trade; and it has not similarly regulated poppy seeds and their trace opiates. Anita Roddick, an investor in Kenex and founder of The Body Shop, which markets a highly successful line of hemp oil based cosmetics, stated in regard to the DEA’s current attempt to sabotage the hemp industry: “The blind prejudice and bloodymindedness of the DEA takes my breath away, especially when its actions are in direct contradiction to Congress. This is one instance when we have to invoke NAFTA. Without its protection, the future is bleak for hemp companies like Kenex.” In fact, other similarly affected Canadian hemp companies are considering joining Kenex in filing their own NAFTA actions. Nature's Path Foods, Inc. and Nature's Path Foods USA, Inc., which operate food plants in the U.S. and Canada that produce two of North America's best-selling natural granolas and waffles under their Hemp Plus® sub-brands, project losing over $30 million in investments and future revenue, and will have to lay off employees, if the DEA's unreasonable interpretation is not defeated. Nature's Path is currently evaluating its options.

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