CBD import confusion sparks California lawsuit against US Customs

By Kristen Nichols
Source: hempindustrydaily.com

A California CBD producer is suing the federal government for seizing hemp shipments at airports.

The lawsuit seeks to end sporadic hemp seizures by U.S. Customs and Border Protection and to give hemp importers faster notifications when federal agents seize plant material for examination.

“The government cannot just take your stuff and destroy it and not pay for it,” said Michael Chernis, a Santa Monica, California, attorney who filed the lawsuit.

Hemp and CBD are legal to import and export as long as the products meet federal standards – meaning they must contain less than 0.3% THC. In the case of exports, the hemp and CBD must also have been produced legally under the terms of the 2014 Farm Bill.

Still, hemp is routinely seized and destroyed at ports, borders and airports, according to lawyers who represent cannabis clients.

“The government’s position is often that CBD equals marijuana, therefore these products are illegal,” said Rod Kight, a North Carolina attorney who represents clients that import hemp and have run into seizures. “That’s not only wrong, that’s absurd.”

The case

The lawsuit comes from Innovative Neutraceuticals, a company that has been making CBD products since 2013 in Lake Elsinore, California.

The company has 15 employees and makes CBD tinctures, topicals and capsules sold under the brand Innovative CBD. All are made from about 1,200 kilograms of imported hemp a year.

Owner Dave Hargett set up the company before hemp production was legal in any U.S. state, so he sourced his raw hemp from Spain.

“We tried to follow the federal government’s rules to a ‘T,’” Hargett said.

Unfortunately, Hargett said, he gets his hemp from Spain only about 60% of the time, so not being able to rely on U.S. hemp endangers his company.

“We have retailers and customers that are relying on our products,” Hargett told Hemp Industry Daily. “If we can’t manufacture products, we can’t fill orders.

“I’ve had to tell my staff on multiple occasions that if we don’t get a shipment, I’m going to have to let people go.”

Hargett’s lawsuit outlines four cases where he says his hemp was improperly seized:

• A 2015 shipment of 31 kilograms of “ground industrial hemp plant material” was seized at Los Angeles International Airport (LAX). Ten months after that shipment was seized, Innovative Neutraceuticals asked customs to review the seizure. Customs did not respond for another seven months, at which time the company as told that the ground material tested positive for CBD and was therefore illegal.
• A 2017 shipment of “crushed hemp material” was seized in Newark, New Jersey. As in Los Angeles, the federal government “failed to provide (Innovative Neutraceuticals) with notice and the opportunity for a hearing to contest the seizure or destruction of its property,” according to the complaint.
• Another 2017 shipment of crushed hemp was intercepted at LAX, this time after the shipment was flown in on LOT Polish Airlines. The CBD company “requested reimbursement … for the destroyed property, along with copies of all documents concerning the seizure and destruction of its property, including investigative and lab reports, to no avail,” according to the complaint.
• A 2018 shipment of 50 kilograms of crushed hemp were seized at the airport in Louisville, Kentucky. This time, customs agreed not to destroy the shipment. Innovative Neutraceuticals challenged the seizure in April. Just last month, customs agreed to release the hemp, but only if the CBD company agreed not to sue and to “either pay for the government’s private storage contractor’s delivery fees for the return of its shipment or incur its own costs to pick up the shipment from the contractor in Dayton, New Jersey.”

Instead of agreeing to the terms of U.S. Customs and Border Protection to get back his Spanish hemp seized in Kentucky last March, the company decided to sue. Hargett says he’s tired of the uncertainty.

“It’s extremely detrimental to our business,” Hargett told Hemp Industry Daily.

He is seeking unspecified damages, along with a requirement that the U.S. government give shippers and recipients notice of a seizure within seven days and to give the parties a hearing within 30 days if they challenge the seizure.

Bigger impact

Hargett’s lawyer says the case is much bigger than a few lost shipments for one company.

“This is just another step forward in clarifying what is legal and what is not,” Chernis said. “We’re pushing for clarifying the legality of hemp.”

The case is important even if Congress takes hemp out of the Controlled Substances Act through the 2018 Farm Bill, Chernis said. That’s because it could prompt federal agencies to take greater care determining whether hemp is legal, instead of simply testing it for the presence of CBD or THC.

“Not everything that has hemp or cannabis attached to it is necessarily illegal,” Chernis said.

Kight, the North Carolina lawyer who is not involved with the Innovative Neutraceuticals lawsuit, said that import/export confusion stymies the entire cannabis industry.

Not all federal agencies interpret laws the same way, he said, and what sails through at one airport may not get through another.

“It’s a very strange game that’s being played at the borders, where the right hand is not talking to the left hand about what is legal or allowed,” Kight said.

“You have businesses and investors that want to engage in this industry, but they see these problems companies are having and they say, nope, it’s too much risk.”