Notes on the International Cannabis Trade

Before the holiday, I had the pleasure of being invited to speak at The Global Business of Cannabis Conference organized by the American Bar Association International Law Section. My panel looked at the wide range of the current progress towards legalization of cannabis across North America – Canada (recreational cannabis legal since 2018), Mexico (legislation pending to legalize recreational marijuana), and Brazil (still strictly illegal, but pending legislation to consider allowing medical marijuana). We then tried to look into our crystal balls to try to see what the future of international trade of marijuana might look like in the hopefully not too distant future.

At this point there is little to no international trade of legal cannabis. In the U.S., it is still illegal for marijuana to cross state borders, let alone national borders. Even between countries where cannabis is legal, the international trade is limited to medical and scientific purposes and subject to extensive regulatory and licensing requirements from both importing and exporting countries. No one realistically expects fully free international trade of legal cannabis to happen any time in the near future. But the continuing trend towards legalization of cannabis in so many countries suggests that the potential for international trade of cannabis is a realistic achievable goal and not just a pipe dream.

Many folks working towards expanding the legalization of cannabis will focus on the potential benefits and opportunities that international trade will create for the cannabis industry. Within the framework of the US-Mexico-Canada Agreement (NAFTA 2.0), we have written about the possibility of a super North American cannabis industry that maximizes the advantages that each country offers. Canada with its full legalization has a clear head start at developing financing, distributional and operational infrastructure. Mexico has better growing environment for marijuana and lower farm labor rates that could provide significant cost advantages. The U.S. at a minimum offers the sheer size of its market. Companies who can access and fully utilize these advantages from trade across all three North American countries would have a clear competitive advantage.

However, it is also important to consider the potential risks of what can happen when legal cannabis products are finally allowed to be traded across international borders. While some will welcome imports, others will complain that imports are unfairly driving prices so low that they can no longer compete in the market anymore. International trade often creates at least the perception of “winners” and “losers” of import competition. Often a domestic industry that feels it is “losing” to imports resorts to filing legal actions based on international trade laws designed to protect domestic industries against the injury they are suffering from unfairly traded imports that are either sold at unfairly low prices (dumping), or are unfairly subsidized by the foreign government (countervailing duties).

China is often viewed as a primary source of unfair trade for products ranging from various chemicals, to kegs to crawfish. But even just within agricultural products, there have been many antidumping and countervailing duty (AD/CVD) cases filed against Canada (lumber, wheat, cattle) and Mexico (tomatoes, sugar).  All these cases are warning signs for those people planning on making international trade of cannabis happen. Those people should also consider how trade disputes can throw a huge monkey wrench into those plans.

If (or when) the federal government allows foreign cannabis to be imported into the United States, it is not hard to imagine that US growers who invested so much in setting up their own cannabis operations may feel threatened by the influx of bigger or better financed Canadian producers or lower cost Mexican cannabis imports cutting into their market share. And don’t forget about China as a potential low cost source of cannabis imports. Right now China is not a player in the cannabis market, but China is already the world’s leader in hemp production.  So China could become a huge force in the cannabis market if they ever decide to get into the international trade of cannabis. If imports are allowed to rush into the U.S. market, it would not be surprising to see some U.S. producers consider using U.S. trade laws to try to fend off the damaging effects caused by imports.

Another interesting factor on the potential development of international trade of legal cannabis is the significant market presence of illicit marijuana. After Canada legalized recreational marijuana in 2018, spending on illicit cannabis products in Canada has declined steadily while sales through legal cannabis distributors increased. In third quarter 2020, legal recreational cannabis spending in Canada for the first time surpassed the amount spent on illicit cannabis. The legal cannabis market has grown because of the increase in openings of legal regulated stores that can offer a wider range of products and consistent inventory than many illicit cannabis sellers. Also the price for legal cannabis has dropped significantly so that it is relatively close to the price of illicit cannabis. If the difference in price is not too significant, many consumers prefer buying legal rather than illegal marijuana. Dealers of illicit marijuana could benefit from antidumping duties or other trade actions that would artificially increase the market price for legal cannabis, which could create a more significant price gap between legal and illegal cannabis. With antidumping duties supporting a higher legal cannabis price, this could make illegal cannabis to be a more attractive lower priced alternative for certain consumers. Or antidumping duties could also allow the price of illegal cannabis to also increase, at least proportional to the increase in legal cannabis prices

The trade battles with cannabis are still a way off. But in the immediate near term future, it may be worth keeping an eye on products such as hemp and CBD that are in the cannabis space and trade is already starting to happen. For example, it is possible a case could be brought on a narrowly defined product such as hemp biomass. When hemp was legalized with the 2018 Farm Bill, many farmers across America rushed in to plant hemp. Not surprisingly, the supply of hemp soon exceeded demand as there simply were not enough hemp buyers or processors of hemp that were available to soak up all that hemp supply.  If the volume of imported hemp biomass is significant or the prices are significantly lower than domestic hemp biomass, these could be indicators of a possible antidumping case just waiting to be filed.

So, as international trade of cannabis gets closer to a reality, it will become important for companies in the cannabis industry to better understand how U.S. trade laws can be used by domestic producers to try to protect their US market position against import competition. Similarly, US importers and foreign producers and exporters may soon need to understand how AD/CVD cases can disrupt any plans to export to the US market and what options they may have to respond to such actions. Whether on an offensive or defensive position in AD/CVD cases, companies affected by the international trade of cannabis should become familiar with how these trade laws work and how these cases can be used so that they can plan accordingly.

In the meantime, for more on the international cannabis trade, check out the following posts:

• The International Cannabis Trade: Webinar Video Replay
• USMCA and Cannabis Trade
• How to Export Medical Cannabis Internationally
• International Cannabis: Selling Worldwide
• U.S. Cannabis and International Trade: Never the Twain Shall Meet?
• International Cannabis: Breaking the Law, Staying Honest
• Should You Import Hemp to the United States?
• International Cannabis: Guidance for Companies Entering the U.S. Market
• International Cannabis Continues to Look to the U.S. Market
• As China’s Hemp Industry Suffers, U.S. Hemp Growers Prepare to Pounce
• What to Consider Before Entering the European CBD Market
• Border Woes: Transporting CBD into Canada is Not OK
• Cannabis and International Trade: Don’t Ignore the U.S.–China Trade War
• Will China Really Buy More U.S. Hemp? There is No Guarantee
• Cannabis, Tariffs and Vaping Imports from China
• Cannabis Legalization Roundup: Mexico, Luxembourg, Switzerland
• The World Trade Organization and Cannabis

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7 questions about Germany’s weed legalization answered

Is weed legal in Germany? Not yet, but we answered five questions you might have about cannabis legalization in Deutschland.

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Is it time to regulate alcohol like marijuana?

Before squeezing cannabis potency, let's lower alcohol content to marijuana levels.

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Home of Dubai, the United Arab Emirates, Ends Jail Time for Travelers with THC

The United Arab Emirates (UAE) eased some of its harsh drug laws, relaxing penalties for tourists who enter the country with products infused with THC. The new protocol for Dubai travelers is to confiscate and destroy cannabis products instead of imposing hard time.

Sheikh Khalifa bin Zayed Al Nahyan, president of the UAE, announced the new changes on November 27. As part of a series of sweeping changes, people who are convicted of drug-related crimes may serve time in secure detention offering treatment and education instead of prison time. In addition, deportation for non-citizens in drug use and possession cases is no longer mandatory. 

Until recently, drug possession was not tolerated in any degree in the UAE. Carrying residual amounts of any drug—including cannabis—could land you years in prison. As little as five years ago, four years was the minimum jail sentence for drug crimes. High Times routinely called it one of the worst countries with some of the “strictest weed laws.”

But the nation updated its outdated laws. The new legislation was outlined in the Official Gazette. The latest issue of the Official Gazette can be downloaded here. First-time offenders will receive minimum sentences of three months as part of a new approach that hopes to integrate “drug users” back into society, but also imposing harsher punishments for serial offenders.

The Official Gazette is a periodic publication issued by the Government of Dubai through the Supreme Legislation Committee (SLC). According to the government’s website, it contains all legislation issued by the Government of Dubai​​ including laws, decrees, resolutions, regulations, bylaws, instructions and orders.

Carrying food, drinks or any other cannabis-infused products will no longer be a criminal offense. Instead, such items will simply be confiscated and destroyed. The UAE previously reduced minimum sentences for cannabis from four years to two in 2016.

The National News, which reports on the UAE, announced that the new legislation will go into effect on January 2. “The legislator gave the court freedom to decide the penalty between either imprisonment or fine in the first and second instances but in the third instance, a penalty of combined prison and fine is mandatory,” Dr. Hasan Elhais, of Al Rowaad Advocates, told National News.

“We can clearly see a recognition of the need for a co-ordinated approach that considers criminal justice and public health in regards to using drugs,” Dr. Elhais said. “While justice is at the heart of the new law, we can also see how the issue of using drugs is being looked at as an illness rather than a crime.”

Americans in Dubai 

Americans tend to run into a bit of culture clash in UAE: for instance, it’s illegal to say “fuck” in public or take photos of people without their permission. The same applies to the degree of punishment for cannabis.

Last April, American Peter Clark found himself in legal jeopardy over testing positive for cannabinoids, even though he consumed it in the United States. The website “Detained in Dubai”, a group founded by Radha Stirling, claims to “have helped thousands of victims of injustice over the past 10 years.”

It was there High Times caught on about the case of Clark, who learned the hard way that Dubai does not play around when it comes to cannabis. Unfortunately, this was before the law of the land was updated.

“I was absolutely stunned to learn that I was being charged due to residual marijuana in my system. I smoked it legally back in America long before I even got on the plane,” he told the Daily Mail. “I knew about Dubai’s strict drug laws but never for one moment did I think something I legally did in my own country would lead to my arrest.”

With the nation’s new laws on drugs, it’s clear the times have changed.

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South Dakota Supreme Court Strikes Down Recreational Cannabis Legalization

A majority of South Dakota voters gave their blessing to cannabis legalization last year, but the state’s court system did not.

The long, drawn-out saga surrounding the Mouth Rushmore State’s flirtation with cannabis reached its coda last week, as the South Dakota Supreme Court ruled the voter-approved amendment unconstitutional on technical grounds.

In a 4-1 ruling handed down on the eve of Thanksgiving, the justices said that Amendment A, which would have legalized pot use for adults aged 21 and older, violated the state constitution’s “one subject” requirement for constitutional amendments.

Writing for the majority, Chief Justice Steven Jensen said that Amendment A clearly contained “provisions embracing at least three separate subjects, each with distinct objects or purposes.” 

Amendment A, which was approved in last year’s election with the support of 54 percent of South Dakota voters, dealt with not only recreational pot, but also medicinal cannabis and hemp.

The state’s constitution, Jensen wrote, “not only includes a single subject requirement but also directs proponents of a constitutional amendment to prepare an amendment so that the different subjects can be voted on separately.”

“This constitutional directive could not be expressed more clearly—each subject must be voted on separately—and simply severing certain provisions may or may not reflect the actual will of the voters,” Jensen wrote. “Therefore, we cannot accept Proponents’ suggestion that excising the medical marijuana and hemp provisions from Amendment A in favor of retaining the provisions regulating and legalizing recreational marijuana is an appropriate remedy. Amendment A is void in its entirety.”

The ruling upholds a previous decision by a South Dakota circuit court, which struck down Amendment A in February.

Amendment A Long Opposed by South Dakota Leaders

The amendment was staunchly opposed by Republican Gov. Kristi Noem and the lawsuit challenging its constitutionality was brought on her behalf by the South Dakota Highway Patrol Superintendent and a county sheriff.

Jensen said in his opinion last week that neither of those law enforcement officials “had standing to challenge Amendment A in their official capacities,” and that the circuit court had erred in its determination of such. But because Noem ratified the lawsuit, the “standing defect” had been alleviated and the action proceeded “as if it had been commenced by the real party in interest,” meaning the governor.

In April, the state’s Supreme Court agreed to hear the case.

After the high court’s ruling last week, Noem, widely considered a potential 2022 GOP presidential candidate, took a victory lap.

“South Dakota is a place where the rule of law and our Constitution matter, and that’s what today’s decision is about,” the governor said in a statement. “We do things right—and how we do things matters just as much as what we are doing. We are still governed by the rule of law. This decision does not affect my Administration’s implementation of the medical cannabis program voters approved in 2020. That program was launched earlier this month, and the first cards have already gone out to eligible South Dakotans.” 

In addition to Amendment A, South Dakota voters also approved a separate proposal legalizing medical marijuana last year. That proposal, Measure 26, passed with the support of 70 percent of South Dakota voters.

The state’s medicinal cannabis program is slowly getting off the ground. Earlier this month, the state announced that it would begin accepting applications from eligible medical cannabis patients.

Marijuana advocates in South Dakota have been left dismayed by the opposition from both the governor and the courts, but the road to legalization did not end last week. Activists began circulating petitions earlier this fall in the hopes of getting another recreational pot proposal on next year’s ballot. 

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Supernova Women fight for equity-focused cannabis businesses in Oakland

Supernova Women are warriors for equity and justice, and they are ready to help small cannabis businesses in Oakland recover.

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Industry and Activists Call On Western Governors to Explore Cannabis Interstate Commerce

A group representing cannabis businesses and activists is calling on the governors of four western states to explore receiving federal approval for interstate trade in cannabis, a move that could help set the stage for the eventual national legalization of cannabis. 

In a letter posted online, the Alliance for Sensible Markets called on the governors of California, Colorado, Oregon and Washington to seek guidance from the U.S. Department of Justice on how the government would react if two or more states with legal medical or adult-use marijuana decided to regulate cannabis trade across their state lines. The letter notes that federal legalization of cannabis, which at this point seems inevitable, will present an economic opportunity to cannabis-producing states in the West.

“When the federal government legalizes cannabis, the Commerce Clause of the U.S. Constitution guarantees that producers across our four states will have non-discriminatory access to every legal adult-use and medical market in the country,” the letter reads. “That will be worth billions of dollars per year to our states’ economies, increasing state revenues and spurring investment, expansion, business formation, and jobs and could, if it happens soon, save thousands of small farms and businesses from extinction.”

The Alliance for Sensible Markets is a Portland, Oregon-based coalition of cannabis activists and producers including the National Organization for the Reform of Marijuana Laws (NORML), the Washington Sun and Craft Growers Association, the Weed for Warriors Project, and the Colorado Cannabis Manufacturers Association. Formed last year, the organization has two primary goals to achieve interstate cannabis commerce.

First, the group is working to bring two or more states with legal marijuana together to join in an interstate compact outlining the parameters for legal cannabis commerce between them. Secondly, a path to federal approval of the plan would have to be drafted and set into motion.

Interstate Commerce to Set the Stage for a National Cannabis Industry

Paired with a federal policy that would permit state-legal cannabis businesses to operate without interference, interstate cannabis commerce could be a more politically viable path to many of the goals of full legalization. Adam Smith, the founder and president of the Alliance for Sensible Markets, believes that interstate commerce in cannabis can connect consumers in newly legal markets with western cannabis producers, who have recently seen wholesale prices plummet.

“Thousands of small farms and businesses across the Pacific Northwest, in communities that have depended on the economics of cannabis for generations, face economic catastrophe as they choke on a glut of some of the world’s best and most efficiently produced cannabis,” Smith wrote in an email to High Times. “This is not an oversupply problem, it’s a market access problem. Meanwhile, millions of patients and consumers in legal states where cannabis is expensive and environmentally costly to grow will be stuck in illicit markets for years, and thousands of potential retail, distribution, delivery and other businesses will be stuck on the sidelines waiting for a steady but limited and overpriced supply chain to emerge in their states.”

The group maintains that the current system of regulated cannabis trade, with each state that has legalized marijuana operating its own contained market of production, manufacturing, distribution and sales, is unsustainable. By seeking guidance from the federal government now instead of waiting for national legalization, the coalition hopes to create a more sustainable cannabis industry that better serves the needs of all stakeholders.

“We believe that the simple act of asking the question will significantly advance the national conversation around the future of legal cannabis, and that positive guidance from DOJ will spur changes beneficial to both producer and consumer states, as well as to patients, consumers, public safety, social equity, small businesses and environmental sustainability in any legal or medical states that choose to regulate and engage in commerce in advance of federal legalization,” the letter concludes.

Smith says that California, Colorado, Oregon and Washington, four states that were early pioneers in the cannabis legalization movement, are uniquely positioned to help shape national policy with federal regulators.

“Federal Legalization will open markets, but waiting for the federal government to ‘fix’ cannabis has never been a winning strategy,” Smith explained. “It has always been the states taking the lead on reform. Positive DOJ guidance will open the path to a more rational, just, and sustainable industry now, in states that choose to participate in commerce.”

The Alliance for Sensible Markets is currently encouraging additional cannabis consumers, businesses, and other interested parties to sign the letter and plan to deliver it to the four western governors next month.

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