CONTROLLED SUBSTANCES ACT DOES NOT BAR IMPORTATION OF MARIJUANA PRODUCTION EQUIPMENT, COURT OF INTERNATIONAL TRADE RULES

The Federal Controlled Substances Act (CSA) does not bar the importation of equipment for processing marijuana where State laws authorize the possession and use of such equipment, according to an important new ruling by the United States Court of International Trade (CIT).

In Eteros Technologies USA Inc. v. United States, Slip Op. 22-111 (September 21, 2022), Customs officials at Blaine, Washington excluded from entry certain imported “motor frame assemblies”, which were designed to be used in cannabis harvesting equipment, asserting that the assemblies were “drug paraphernalia”, whose importation was barred by the CSA, specifically 21 U.S.C. §863(a)(1). This was in line with Customs’ position that the CSA barred importation of all “drug paraphernalia”, regardless of State law provisions.

The importer contended that, because Washington State had legalized the production, possession and use of marijuana, and excluded marijuana equipment from its definition of prohibited “drug paraphernalia”, the importation of the equipment was allowed by 21 U.S.C. §863(f)(1), which says that the Federal drug paraphernalia ban does not apply to “any person authorized by local, State or Federal law to manufacture, possess or distribute such items”.

The importer stipulated that its harvesting equipment fell within the Federal definition of “drug paraphernalia”. The parties also agreed that Washington State had legalized marijuana for recreational use in 2012. The dispute centered around whether Eteros, the plaintiff, was “authorized by . . . State . . . law to manufacture, possess or distribute” such items. Eteros argued that the lifting of Washington State’s prohibition against cannabis-related “drug paraphernalia” authorized it to import and possess the harvesting equipment. The Federal Government, however, argued that the concept of “authorized” required the importer to have a specific permit or license from the State to possess the goods.

Deeming the issue of what it means to be “authorized” to possess drug paraphernalia to be an issue of first impression, Judge Gary Katzmann concluded that a user-specific permit or license was not required. He relied on the U.S. Supreme Court’s decision in Murphy v. NCAA, 138 S. Ct. 1461 (2018), where the high court concluded that, by removing a ban on sports gambling schemes, the State of New Jersey had “authorized” its citizens to engage in sports betting. In particular, the CIT noted Justice Alito’s comment that “[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’”. The Supreme Court determined that “[w]hen a State completely or partially repeals old laws banning sports gambling, it ‘authorize[s] that activity’”.

In like fashion, the Eteros court concluded that the Washington State legislature’s decision to lift the ban on marijuana paraphernalia “authorized” persons to possess such merchandise, and triggered the exception to the CSA found at 21 U.S.C. §863(f)(1). It rejected the government’s argument that a person-specific license or permit was required. The Eteros decision will likely open up sourcing choices for entities involved in the various States’ legal marijuana-related industries. However, the particular legalization scheme each State has adopted needs to be carefully evaluated against the Federal prohibitions and exceptions in the Controlled Substances Act.