Concerning news out of Idaho, where the U.S. District Court in Idaho delivered some bad news to the owners of the contents of a tractor trailer recently seized by the Idaho State  Police. The trailer contained nearly 7,000 pounds of Cannabis sativa en route from Oregon to Colorado. Seizures of outbound Oregon marijuana are an unfortunate status quo these days — overproduction and cratered prices in Oregon have led to regulatory lamentation over black-market sales across state lines.

This seizure is different, however, as Big Sky Scientific LLC (“Big Sky”), the Colorado-based owner of the plants, sued Idaho law enforcement for the release of the shipment. Big Sky claims that the plants are hemp, that hemp is now legal since the passage of the Agricultural Improvement Act of 2018 (“2018 Farm Bill”), and that the 2018 Farm Bill protects the interstate commerce of hemp. The case highlights important questions about what the 2018 Farm Bill does and doesn’t do with respect to hemp, and Magistrate Judge Ronald Bush provided some worrying initial answers to these questions last week when he denied Big Sky’s motion for an injunction to have the shipment released.

The crux of the dispute isn’t over whether the plants are or aren’t “hemp,” but rather whether or not the 2018 Farm Bill preempts Idaho law, which prohibits cannabis and makes no exception for hemp. Big Sky points to Section 10114(b) of the 2018 Farm Bill that states, “[n]o State…shall prohibit the transportation or shipment of hemp or hemp products produced in accordance with subtitle G of the Agricultural Marketing Act of 1946 (as added by section 10113) through the State.” Big Sky contends that Section 10114(b) prevents Idaho from prohibiting the transport of hemp.

Idaho law enforcement, however, contends that Section 10114(b)’s prohibition applies only to hemp that is “produced in accordance with subtitle G of the Agricultural Marketing Act of 1946.” The 2018 Farm Bill authorizes states and the U.S. Department of Agriculture to create plans regulating the production of hemp, but no such plans have been approved yet. Therefore, Idaho argues, the seized hemp was not “produced in accordance with subtitle G,” and is not protected by 10114(b).

Judge Bush agreed with Idaho’s arguments, holding that in the absence of state or federal plans approved pursuant to the 2018 Farm Bill, the hemp at issue was not “produced in accordance with Subtitle G,” and therefore not afforded the interstate commerce protections of the 2018 Farm Bill. Further, the 2018 Farm Bill doesn’t preempt state laws prohibiting cannabis if the cannabis is not produced in accordance with Subtitle G.

This decision should be taken with a measured portion of concern. On the one hand, it is deeply unsettling for the burgeoning hemp industry. Conventional wisdom held that the 2018 Farm Bill would immediately usher in a new era for hemp, which would be legal, protected from state prohibitions by federal law, and freely tradeable. This decision throws cold water on such exuberance — if it stands (which, more below), interstate commerce in hemp will remain risky, especially in states like Idaho that have chosen to aggressively police it. On the other hand, the decision is only the first step in answering the questions raised above. An injunction of the kind sought by Big Sky is an “extraordinary remedy,” which courts are generally reluctant to wield. Big Sky has appealed the decision, and will have another chance to argue its case before the 9th Circuit Court of Appeals. The 9th Circuit covers a broad swath of the west coast, where hemp production is prevalent. Further, there is language in the 2018 Farm Bill to suggest that hemp produced under a license issued by a 2014 Farm Bill pilot program (Oregon has one of the most permissive) may be “produced in accordance with Subtitle G.”

In the interim, anyone transporting hemp across state lines should be very careful about which state lines they cross. The Idaho seizure is not an isolated incident — we’ve seen similar seizures recently in Wyoming, Oklahoma and elsewhere. If you have questions about the production and transportation of hemp, our cannabis team can assist.

South Korea is currently garnering a lot of attention in the cannabis industry following its legalization of some cannabis derivatives for medical purposes. The legalization comes as a surprise for many in the international community, particularly because South Korea has aggressively opposed cannabis — most notably by criminalizing the consumption of cannabis by South Koreans traveling abroad to nations where cannabis is legal, such as Canada. Most of Asia, particularly Southeast Asia, has generally lagged behind other regions of the world in cannabis law reform. South Korea’s change of heart is prompting a lot of speculation regarding possible widespread reform across Asia much sooner than previously anticipated.

The revised law adopted November 23, 2018 is limited to CBD concentrates with THC levels too low to cause intoxication. Although somewhat unexpected internationally, it was less surprising for those in South Korea during last year’s media coverage of law enforcement action resulting in the incarceration of an ailing child’s mother for attempting to import CBD derived medication for her 4-year-old son who was suffering from brain cancer — public opinion clearly opposed such punishment. Not long after this event, Shin Chang-Hyun  introduced a legislative amendment to South Korea’s national drug policy — pointing to CBD’s acceptance as an effective treatment related to cancer, autism, dementia and epilepsy in other countries from Europe to North America.

The new rules impose highly restrictive conditions that will apply to the new regime governing the use of medical cannabis. Nevertheless, proponents of legal form for cannabis laws believe the change signals a major shift in attitudes not only by the public generally but more importantly among lawmakers. Additional details regarding implementation of those rules will be available by the end of the year with importation of CBD products anticipated by the middle of 2019.

Thank you MJBizCon for another great hit last week in Las Vegas!  Previous conferences have consistently provided both valuable and relevant content for attendees. This year was no exception — high quality speakers covering a timely array of topics that ranged from recent developments in production and packaging to strategic considerations for potential partnerships with mainstream companies preparing to enter the cannabis industry. It was a seriously good conference and we encourage all industry participants to attend in the future.

We were happy to send four team members to the event, including three MJBizCon veterans who recently joined our Cannabis Team roster — Josh Ashby, Ben Pirie and Sativa Rasmussen. All four of us welcomed the opportunity to meet with our many clients and industry friends. Apologies to the many other clients (and potential clients) with whom we could not meet for lack of time. We simply had to jump ship in Vegas to head for the 6th Annual Northwest Marijuana Law Conference, hosted by Seattle University School of Law. Sativa and Josh co-chaired the seminar, Lane Powell served as a sponsor, and Justin Hobson and Ben were both speakers. So our absence at the Seattle conference would have been problematic. We have been assured that overlap of the two conferences will be avoided next year. Again, our apologies to the many people whom we wanted to accommodate but could not for lack of time. Of course our phone lines are always open . . . Our goal next year is not only to catch up with our friends and clients but also to facilitate introductions between participants in the industry.

Wishing you all a Happy Thanksgiving,

Josh, Justin, Ben & Sativa

It comes as no surprise that several Canadian cannabis company employees and investors will be traveling to the United States this week to attend the largest cannabis industry conference in the world, MJBizCon, in Las Vegas. The conference lists several Canadian companies among its speakers and will cover a variety of topics including investment, branding and an assessment of Canada’s first month of legalization, but for those wishing to cross the border into the U.S. for the conference, there are additional considerations that must be taken into account.

On October 9, 2018, United States Customs and Border Protection (CBP) revised its Policy Statement on Canada’s Legalization of Cannabis and Crossing the Border (the “Revised Statement”). Prior to this date, CBP had taken the position that merely being an employee (or an investor) of a legal cannabis business in Canada could result in inadmissibility under Section 212 of The Immigration and Nationality Act. See INA §212(a)(2)(C).

INA §212(a)(2)(C) permanently bars an individual if a CBP officer has reason to believe that he or she is an illicit trafficker in a controlled substance, or a knowing assister, abettor, conspirator or colluder in illicit trafficking. Prior to the Revised Statement, there were already a number of reported cases of employees and investors of Canadian cannabis businesses receiving lifetime bans under INA §212(a)(2)(C). Although these cases appeared to be limited to ports of entry on the West Coast, they demonstrated that employees and investors of Canadian cannabis companies were being banned as illicit traffickers.

The Revised Statement was welcome news for employees and investors of Canadian cannabis companies as it opened up the possibility of travel to the U.S. once more, but with a very import caveat. The current position taken by CBP is as follows:

A Canadian citizen working in or facilitating the proliferation of the legal cannabis industry in Canada, coming to the U.S. for reasons unrelated to the cannabis industry will generally be admissible to the U.S. However, if a traveler is found to be coming to the U.S. for reason related to the cannabis industry, they may be deemed inadmissible.

The Revised Statement confirms that employees of Canadian cannabis companies should be admissible if their reasons for coming to the United States are “unrelated to the cannabis industry.” This clearly includes traveling purely for vacation (for example, visiting with family) and even business visitor activities that were completely unrelated to the cannabis industry.

However, although the Revised Statement was a step in the right direction, CBP’s current stance means that someone can be barred merely for visiting a U.S. investor in his or her Canadian cannabis company or, you guessed it, attending a cannabis conference in the United States such as MJBizCon.

On October 25, 2018, the Canadian Press reported that they had received an email from Stephanie Malin, CBP Branch Chief for Northern/Coastal Regions, which stated the following:

If the purpose of travel is unrelated to the cannabis industry such as a vacation, shopping trip, visit to relatives, they will generally be admissible to the U.S. However, if they are coming for reasons related to the industry, such as the conference… they may be found inadmissible.

This statement by Ms. Malin in an ominous reminder that for Canadians wishing to come to the U.S. for conferences such as MJBizCon, there is a risk that you may be denied entry.

If you want to hear more about this issues, Lane Powell’s own Dustin O’Quinn and Sativa Rasmussen will present a Continuing Legal Education Society of British Columbia webinar on Tuesday, November 20, titled “The U.S. Border After Cannabis Legalization in Canada.” The presentation will start at noon PST and cover:

  • U.S. immigration law and how it’s impacted by some states’ legalization of cannabis,
  • Cross-border transactions to the U.S.,
  • Overview of U.S. policies that affect Canadians, and
  • Potential forms of relief.

The event is intended for lawyers who represent clients involved in the cannabis industry or clients who conduct business with cannabis-related industries.

For more information or to register for the conference, please visit the event website.

Just in case you missed it, Rep. Earl Blumenauer (D-OR) sent a memo to Democratic congressional leaders on Wednesday outlining a comprehensive plan to legalize marijuana in the United States as soon as 2019. You can read the full text here, and we couldn’t have said it better ourselves. It’s hard to overstate the importance of the comprehensive federal marijuana reforms outlined by Rep. Blumenauer (up for reelection next month — Lane Powell endorses civic engagement), which would address banking, taxation, safe access for veterans, criminal justice reform, states’ rights and scientific research. With Canada positioning itself recently as the world leader on sensible cannabis policy, the question is — why not us?

I am thrilled to announce that we have added three well-recognized industry leaders to our Cannabis Team roster. Joshua Ashby and Sativa Rasmussen joined the firm on September 4 from Ashby Law Group PLLC in Seattle, and Ben Pirie joined from 7 Point Law in Portland in June. The experience these three bring with them strengthens our ability to help legal cannabis businesses navigate the complex regulatory environment in both Washington and Oregon and achieve long-term success.

Ashby will assume the role of Co-Chair of the Team, serving alongside Justin Hobson. He is one of Washington’s most experienced recreational marijuana transactional lawyers and authored the seminal guide on the state’s cannabis industry, Lost in the Weeds. Josh advises cannabis businesses on general corporate, mergers and acquisitions, and real estate transactions while guiding clients through the industry’s highly regulated landscape. He received his J.D. from Seattle University School of Law, and his B.S., summa cum laude, in Aeronautics from Embry-Riddle Aeronautical University.

When asked why Lane Powell was the right fit, Josh commented:

The interdisciplinary nature of the firm’s Cannabis Team allows us to provide a better client experience by offering a holistic approach to address all of our clients’ legal needs from trademark procurement and brand protection to employment practices and beyond.

Sativa advises cannabis businesses on corporate governance and contract law, internationally and domestically. She also represents businesses in highly regulated industries with their transactional, regulatory and compliance needs. Sativa has extensive experience negotiating transactions, drafting documents, and communicating the needs of her clients to the Washington State Liquor and Cannabis Board and other administrative agencies. She received her J.D., cum laude, from Seattle University School of Law and B.A.s in Political Science, magna cum laude, and Criminal Justice, magna cum laude, from Washington State University.

Ben counsels cannabis businesses on a wide range of corporate and regulatory needs, including contracts, entity formation and governance, intellectual property, mergers and acquisitions, and compliance. He is active in engaging with state and local governments in order to ensure common sense, business-friendly regulation of the cannabis industry. Ben received his J.D. from Lewis & Clark Law School and a B.A. in Art History and Chemistry from Duke University.

Our interdisciplinary team provides a myriad of legal services such as compliance strategies, business transactions and solutions, real estate, plant and process patents, dispute resolution, sophisticated state and federal tax counseling, and more. We also maintain close ties with regulators and anticipate the impact of proposed rule changes to our clients’ businesses, and regularly share those updates here on the blog. Learn more about our team.