Dec 28th, 2023

The Evolving Legal Landscape For Importing Cannabis-Related Goods

The legal landscape surrounding the importation of cannabis “drug paraphernalia” has seen a remarkable turn in recent years that requires continued vigilance within the industry. A diverse range of cannabis products are needed to serve the  needs of the cannabis industry at each level of the supply chain. Whether focused on plant growth, harvesting, processing, storage, packaging, or consumption, the cartoonishly broad definition of “drug paraphernalia” in the federal code can encompass nearly any item a cannabis-touching company uses in its operations.[1]

At present, U.S. Customs and Border Protection (CBP) refuses admission to US imports of drug paraphernalia pursuant to 21 U.S.C. § 863(a)(3), which makes it “unlawful for any person (1) to sell or offer for sale drug paraphernalia; (2) to use the mails or any other facility of interstate commerce to transport drug paraphernalia; or (3) to import or export drug paraphernalia.” However, this import prohibition is by no means absolute—a federal exemption to the prohibition requires that CBP consider whether a person has been “authorized” by a “local, State, or Federal law” to “manufacture, possess, or distribute” drug paraphernalia. And yet, CBP, for more than 30 years, refused to entertain this exemption.

Until the 2010 legalization of recreational marijuana in Washington State and Colorado, no State or local government had clearly “authorized” manufacturing, possession, or distribution of cannabis or any other drug paraphernalia.[2] The immediate success of the cannabis industry in these early entry states shows the need for sophisticated, cannabis-focused growing, harvesting, storage, processing, and related equipment, much of which is imported into the U.S.

Undeterred by these States’ legalization efforts, CBP maintained its refusal to apply the (f)(1) exemption under any circumstances. In an August 2020 customs ruling,[3] CBP argued that even though some states have legalized cannabis, the only “authorization” that matters is Federal authorization, which, of course, did not exist. Citing the Supremacy Clause of the U.S. Constitution, the ruling rejected applying the (f)(1) exemption for individual states, stating:

It is clear that any interpretation of e.g., California or Washington, state law to permit the importation of drug paraphernalia would be in ‘positive conflict’ with 21 U.S.C. § 863.

CBP’s position was clear: it would strictly apply federal law over state law, even in states where cannabis possession was legal, and even though the federal law explicitly require consideration of whether a State law has authorized possession, distribution or manufacture of cannabis paraphernalia.

However, the landmark 2022 Court of International Trade decision in Eteros Technologies USA Inc. v. United States delivered a clear rejection of CBP’s position. CBP detained and later excluded an importation of “motor frame assemblies” which would be manufactured with other components to create a market-leading cannabis trimming machine known as the “Mobius.”

Eteros, represented by Neville Peterson,  sued CBP in the US Court of International Trade (CIT), arguing that Washington State’s legalization of recreational marijuana and repeal of its prior prohibition against cannabis paraphernalia effectively “authorizes” its importation under 21 U.S.C. § 863(f)(1). Eteros urged CIT Judge Gary Katzmann to draw upon the US Supreme Court’s interpretation of “authorization” in Murphy v. NCAA[4]—a case relating to sports gambling “authorizations”—to conclude that the repeal of a State law banning a particular activity (e.g., gambling, possession of cannabis paraphernalia), effectively “authorizes” that activity. The Court agreed with Eteros, holding that the lifting of Washington State’s prohibition against cannabis-related “drug paraphernalia” indeed “authorized” persons to fit within the exemption to the Controlled Substances Act found at 21 U.S.C. § 863(f)(1). And with that, the (f)(1) exemption was given life.

Despite Eteros’ legal victory and the CIT’s broad holding, the impact on CBP’s enforcement policies was not immediately apparent and its enforcement of the import prohibition continued unabated. When questioned, the agency represented to importers that the positions articulated in its August 2020 ruling were unchanged, and that because that ruling had never been revoked, the agency was obligated by regulation[5] to follow it.

This untenable position could not stand, and yet, due to the narrowness of the jurisdictional powers of the CIT, the Court could not be reenlisted to order a belligerent agency to acknowledge its decision in Eteros.

Recently CBP was forced to to acknowledge the Eteros decision in a Customs Ruling issued to an importer seeking to bring paraphernalia into the United States through Washington State.  In November, CBP published Customs Ruling N335656, which marked a noteworthy shift in the agency’s handling of cannabis-related paraphernalia importation. This ruling, specific to Washington State, confirms that importers of marijuana-related drug paraphernalia through Washington State ports are exempted from the federal prohibition according to 21 U.S.C. § 863(f)(1).

This acknowledgment by CBP is significant but because the agency limited its application of the exemption geographically to the State of Washington, additional vigilance by the industry is required. Because the ruling invites importers to apply for additional rulings involving imports through ports in States other than Washington, we see this as a clear indication that CBP is open to expanding its application of the exemption, but only if importers force them to.

Fortunately, the cannabis industry is full of strong-willed companies with a healthy appetite for forcing resolution. Securing a customs ruling is an excellent avenue for importers to lawfully address an agency that has elevated its own regulations and policies above the law, and above the Court’s interpretation of that law. Importers will want to obtain a customs ruling to interpret the laws of every State that has repealed prior prohibitions relating to cannabis paraphernalia, to better facilitate the importation of goods used to harvest, process, and store cannabis materials.

This approach may pave the way for a more harmonized legal framework that better integrates state-level cannabis legalization with federal importation regulations.

For further insights or assistance in this area, feel free to contact us. Our team at Neville Peterson LLP is dedicated to staying at the forefront of legal developments in  the customs and trade laws affecting the legal cannabis industry.

[1] 21 U.S.C. § 863(d) offers a cartoonishly broad definition for “drug paraphernalia,” stating in part:

The term “drug paraphernalia” means any equipment, product, or material of any kind which is primarily intended or designed for use in manufacturing, compounding, converting, concealing, producing, processing, preparing, injecting, ingesting, inhaling, or otherwise introducing into the human body a controlled substance, possession of which is unlawful under this subchapter. It includes items primarily intended or designed for use in ingesting, inhaling, or otherwise introducing marijuana,[1] cocaine, hashish, hashish oil, PCP, methamphetamine, or amphetamines into the human body, such as—

[2] Legalization of medical marijuana in States prior to 2010 certainly served to authorize some persons, but it would be difficult, if not impossible, to demonstrate that an importation of paraphernalia is intended only for card carrying medical marijuana license holders. This hurdle was observed in United States v. Assorted Drug Paraphernalia Valued at $29,627.07 & Jason Fernandez, No. 18-143, 2018 WL 6630524 (D.N.M. Dec. 19, 2018)

[3] See Customs Headquarters Ruling HQ H306125 (August 5, 2020) (concerning ElevareCo Saber vaporizer).

[4] Murphy held “[t]he repeal of a state law banning sports gambling … gives those now free to conduct a sports betting operation the ‘right or authority to act.’” 138 S. Ct. at 1474.

[5] See 19 CFR 177.9, stating that rulings are the official position of CBP and are binding on all ports of entry.