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AD/CVD Proceedings Likely if Cannabis Made Legal to Import, Trade Lawyer Says

If and when cannabis becomes legal to import into the U.S., there is a "high level of certainty" that a U.S. producer will complain about the fairness of the imports to the domestic industry, leading to antidumping and countervailing duty proceedings, said Adams Lee, international trade attorney at Harris Bricken, during a Dec. 1 webinar hosted by the law firm. Speaking about cannabis and international trade, Lee predicted that if imports of cannabis become legal, they will likely come from Canada -- a nation that has legalized recreational marijuana -- and diminish the market share of U.S.-made product.

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Lee clarified in a follow-up email to Trade Law Daily that AD/CVD proceedings on cannabis would only be brought if cannabis becomes legal federally. Should this happen, the Commerce Department would likely view varying restrictions to cannabis across different states as conditions of competition to be considered when evaluating the degree of competition between imports and the U.S product. As for the scope of any potential AD/CVD orders on cannabis, Lee added that this question would be one to monitor and could potentially have large impacts on the cannabis importing industry.

"I was wondering if we would see any cases on CBD oil or legal hemp products (e.g, hemp biomass), as that would be a great opportunity to see how the scope definition of a cannabis-related product might play out," Lee said. "It seems like it could be defined very narrowly (e.g., industrial hemp seeds for planting, hemp biomass pellets), or very broadly. Any scope definition will likely generate tons of questions on what’s covered or not because products in this space are all so new."

During the webinar, Lee also presented his estimation of what permitting Canadian cannabis imports into the U.S. market would do to the price of cannabis in the U.S. Lee estimated that in year one, prior to allowing Canadian imports, the price of U.S.-made cannabis would stand at 100 average unit values (AUVs) while illegally-made product would sit at 80 AUVs. A year after permitting imports, the price of American cannabis would dip to 90 AUVs while the price of illegally-made cannabis would dip down to 70 AUVs. The second year of permitting imports would see the U.S. price drop to 80 AUVs and the illegal product down to 60 AUVs.

"If and when cannabis does get to the point where it's legal to import cannabis from other countries, there's a pretty high level of certainty that someone in the U.S. is going to complain that these imports are unfairly traded and causing injury and I think there's a high probability of a dumping case or a CVD case being filed to try to block and limit those imports."

Fred Rocafort, an intellectual property attorney at Harris Bricken, then added insights about the regulatory framework affecting the international trade of cannabis. The prospect of bringing in goods to the U.S. is linked to their legality, Rocafort said. While some cases the law is clear, in others it is murkier. For instance, according to the federal government, there is no such thing as medical cannabis, and state law may be more important to consider, Rocafort said.