TORONTO (CP) -- America's war on drugs has turned into a trade battle
between the U.S. government and a small Canadian company.

Industrial hemp-growing company Kenex Ltd., will take on the U.S. State
Department tomorrow when it files a lawsuit under the North American Free
Trade Agreement.

The company, based in Chatham, is seeking at least $20 million US
compensation because it says the U.S. Drug Enforcement Administration's
attempt to ban hemp-seed foods is financially devastating.

"Kenex's business was going to be built around and focused on its access
to the U.S. market," says the company's lawyer, Todd Weiler. "They were
ready to go to town and they have this come down on them . . . . It's not
just that they were exporting into the U.S., they had plans to do a heck
of a lot more, and that got stymied."

The company, which employs about 10 people, has grown and processed hemp
oil, seed and fibre products since 1998 -- when the Canadian government
lifted a ban on hemp farming dating back to 1938. Kenex is now North
America's largest producer of hemp seed, with three-quarters of its
business going to the United States where it's illegal to grow and process

"The U.S. government has such an absurd practice of harassing and seizing
shipments that it's put a real chill in the market," says David Bronner,
president of Dr. Bronner's Magic Soap, which makes soap containing hemp
oil, and chairperson of the Hemp Industry Association's food and oils

"Customers need on-time delivery and they can't be worried about holdups,
let alone seizures . . . we want the marketplace to be more free so we
don't have to worry about DEA harassment."

Legal counsel for Kenex met with Washington officials in March in an
attempt to prevent a drawn-out trade dispute, but after the officials
failed to recognize the legality of Kenex's products, the company moved to
seek compensation under Chapter 11 of NAFTA, which allows investors to sue

"They haven't played by the rules. And it's crippled our investment . . .
we're done if this stands," Kenex president Jean Laprise said in January
when the company filed its notice of intent to sue.

Spokespeople for the DEA and the State Department refused to comment on
the impending case until they reviewed the notice of arbitration.

Kenex is the fifth Canadian company to face the U.S. government in
arbitration at a NAFTA tribunal. A three-member panel will listen to
arguments and issue a decision -- a process that can take two years.

Even though hemp seed and oil is highly nutritious -- packed with Vitamin
E and essential fatty acids -- and is used in everything from bread to ice
cream, the DEA wants it banned.

While marijuana has long been considered a controlled substance,
industrial hemp products, such as fibres and textiles, are exempt from
control under U.S. legislation.

However, the 1970 Controlled Substances Act still lists THC as a
controlled substance, giving the DEA grounds for its "zero THC policy" in
products for human consumption.

The ruckus, which prompted Kenex to sue, started when a shipment of its
sterilized hemp seed was confiscated at the border in 1999. After a
four-month legal battle, Customs allowed the shipment to cross, but by
that time the seed had spoiled and the company had lost major customers.

Kenex argued the DEA's actions violated the 1970 Controlled Substances
Act, which exempts sterilized hemp seed and oil from control. And six
months after the seizure, the U.S. Department of Justice said the DEA
lacked the authority to confiscate the goods.

In October 2001, the DEA issued a ban on food products made with hemp seed
and oil, giving manufacturers and retailers until February 2002 to pull
products from the shelves. That would have dealt a blow to the $5-million
hemp food industry, but a counter-attack launched by the Hemp Industry
Association blocked the move in a ninth Circuit Court of Appeals, where a
decision is still pending. Kenex is a co-plaintiff in that case.

Copyright The London Free Press a division of Sun Media Corporation.

Author: Canadian Press
Source: London Free Press
Pubdate: Thursday, August 1, 2002