2002: State Dep’t on Kenex NAFTA Suit

In 1999 Kenex Inc. was a Canadian company exporting many different hempseed and fiber products to the U.S. I was one of their customers for one shipment, and in reviewing pro-forma invoices in advance of the export to me in California I noticed a massive red flag: they put “Contains less than 10 ppm THC.” While required for intra-Canadian shipments, in the zero-tolerance USA it’s an admission under penalty of perjury of importing tons of a Schedule 1 controlled substance.

So I called Jean-Marie LaPrise, the CEO, and advised him of the danger of including that statement on shipments to the USA and why. He didn’t seem to GAF, almost like he wanted to bait the government into reacting, so I changed our Purchase Order to reflect that if the statement was included on any paperwork for my shipment, I would not pay him, period. It was absolutely not to be on any paperwork, it was that radioactive.

Consequently it was not included, I paid him, then a few months later U.S. Customs detained a shipment, then wanted all previous ones recalled as well. All but mine, that is. It was the nuclear option for Customs.

Although Kenex was not a member and actually had a history of slagging them for being longhairs and stoners, HIA never saw a fight with the government it didn’t like so it spun the incident into “DEA Bans Hemp Food” and then the “U.S. Hemp Embargo.” Kenex’ U.S. importer was later on probation by HIA for slagging it to NAIHC in the same tone. At no time did any of them reveal the actual reason for the brouhaha, the statement “Contains less than 10 ppm THC” on export documents. Note that the shipments were not alleged to contain any THC whatsoever, but they didn’t have to; export documents are submitted under penalty of perjury. The signed statement so attested and submitted makes it an open-and-shut case. They didn’t have to test it, technically the exporter confessed to importing a Schedule 1 controlled substance right there on the piece of paper.

This is how we lost the 3,000 tons/year birdseed market (“most of its major customers” in the blurb below) for hempseed, to this day. HIA killed an important market for hempseed, ~$90 million worth over the years. While they were claiming an embargo was on, in fact some of us were importing all through those months with no problems whatsoever. It was a “Fauxthentic” campaign designed to raise funds and fabricate outrage.

It also was proof of concept of the idea of “Manufacturing Dissent” (apologies to Prof. Chomsky) which they trotted out a few years later when DEA tried to legalize 98% of all hemp products, no max THC. People with no burden of compliance saw a way to spin it into the lie “DEA Bans Hemp Foods.” DEA tossed us a bone and got sued for it, and never again cut the hemp industry any slack.

From this U.S. State Department missive it appears Kenex lost its investor, perhaps Woody Harrelson. Coincidentally, I was in the suite in Vancouver when Jean-Marie pitched that investment to Woody, just the three of us. Having heard the pitch and knowing the pitcher, I was surprised that the pitchee actually invested. He would later rue that decision, funny as I could have told him that in Vancouver.

Later, Woody’s former valet would claim that he was a founder of Kenex (which went bankrupt years ago); later he ran yet another hemp company into the same fate. On 10/12/2001 he swore to the Ninth Circuit Court of Appeals that he wanted to introduce a hemp milk but couldn’t because of DEA’s Interpretive Rule. However, being a low-solids beverage with less than 5% hempseed in it the product could have been put on the market back then with no danger. Plus, the Rule was enjoined for years while in litigation anyway. Even after the suit ended it was not introduced. Apparently a success record of 0-3 still gets you a job in hemp these days.

While this $20 million suit failed once the equally-bogus HIA v DEA 2004 was decided, which also killed the hemp food market for years and almost took Canadian hemp down with it, today a CBD or smokable hemp company could use NAFTA (now called USMCA) to open up the Canadian market.

That 2004 suit cost me $2.5 million since there was no longer a hemp food market, after building it for 8 years. I was vehemently opposed to people not in food suing DEA for such a lame reason, as we could have complied easily and almost all products already did (even HIA admitted that back then). Since all hemp had to be imported, U.S. Customs’ THC testing protocol was used, and that cut-off was 1 ppm.

It took HIA only $200,000 to make Kenex lose $20 million and me $2.5 million, and almost tank hemp in Canada. Ironically, they ostensibly raised money to “sue DEA and protect hemp foods,” netting thousands; then DEA lost the suit and paid $200,000 in legal fees. HIA made out like bandits, Kenex and me not so much. Protecting member investments in Canadian hemp, it would take the U.S. another 14 years to legalize despite Sen. Paul carrying a hemp legalization bill every session since 2005.

Ironically, study after study reveals that Canadian and U.S. hempseed oil contained THC well in excess of Canada’s 10 ppm limit.

CANADIAN HEMP GROWER STARTS ARBITRATION OVER COMPENSATION CLAIM: According to an August 7, 2002 article from Just-food.com, Canadian hemp exporter Kenex has filed its NAFTA Notice of Arbitration with the US State Department and will now work with the US to will select a three-member arbitration panel to determine if at least US$20M compensation is due to Kenex for losses stemming from the Drug Enforcement Administration’s (DEA) attempt to ban hemp seed foods. Kenex has exported industrial hemp products to the US for the past five years, but its sales were affected when the DEA introduced a zero tolerance import policy on THC, the active ingredient in marijuana that is found in trace measure in hemp seeds. On 9 August 1999, US Customs at the behest of the DEA impounded a Kenex hemp birdseed shipment, issued recalls on other shipments, and threatened Kenex with over US$500,000 in fines. While the shipment was eventually released, Kenex said it had lost most of its major customers as well as a major investor, and was financially devastated. Kenex insists that the DEA’s attempt to ban hemp food sales is a clear violation of NAFTA because hemp is a recognized commodity of trade under both NAFTA and WTO; the DEA did not provide any notice and opportunity to US trading partners or foreign companies to provide input into its ruling; the US did not conduct a risk assessment or offer any science-based rationale for issuance of the rule; and the DEA did not seek to minimize impact on trade. The article states that the Government of Canada has voiced its objections to the new DEA rules and notes that the US is the number one importer and consumer of hemp products, including hemp foods.

Canada Agricultural Situation
This Week in Canadian Agriculture, Issue 27, 2002
U.S. Embassy, GAIN Report #CA2090

And the myth continues, because “Manufacturing Dissent” is profitable:

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