WASHINGTON, DC - Representatives of Kenex Ltd. and the Hemp
Industries Association (HIA) met with various federal agencies at the
U.S State Department this week regarding Kenex's NAFTA action filed
in January. Kenex filed notice of its intent to arbitrate under NAFTA
chapter 11 in response to the U.S. Drug Enforcement Administration's
(DEA's) previously impeding and, through its recent ruling, seeking
to effectively prevent Kenex from accessing American markets for its
hemp food products. Kenex is a Canadian agro-firm that has been
growing and processing hemp oil, seed and fiber products in Canada
and has invested heavily in its expansion into the United States
markets for edible oil, seed and fiber over the past five years.

At the meeting with representatives from the State Department and
DEA, as well as the Departments of Justice, Treasury and Commerce,
lawyers representing Kenex made clear that the U.S. government will
be forced to compensate Kenex for tens of millions of dollars in lost
investments if Kenex proceeds with its claim. Kenex's NAFTA challenge
compliments a lawsuit brought by the HIA and numerous hemp food
companies, including Kenex, in the U.S. Ninth Circuit Court of
Appeals. The Court has already granted the hemp industry's Motion to
Stay the new DEA rule on hemp foods, effectively blocking the DEA
from enforcing the rule pending the Court's final decision, and oral
arguments are scheduled in San Francisco on April 8, 2002. Despite
the fact that the Ninth Circuit Court's action sends a clear signal
that DEA's rule is on thin ice, Eric Steenstra, President of Vote
Hemp, who represented Kenex at the State Department meeting, stated:
"We unfortunately received no indication from the officials that we
met that they understand the gravity of their position or are in any
way interested in finding some middle ground so that we can all put
this nonsense behind us." Kenex is looking forward to the final
decision that the Ninth Circuit Court of Appeals will likely make
later this year, and intends to press forward with its NAFTA claim
for compensation before the end of the summer. While equally
satisfied with the progress of their domestic case, other Canadian
hemp seed companies are considering filing their own NAFTA claims for
compensation as well.

On October 9, 2001, without public notice or opportunity for comment,
the DEA issued an interpretive rule purporting to make hemp foods
containing harmless infinitesimal traces of naturally-occurring
tetrahydrocannabinol (THC), the active ingredient found in marijuana,
immediately illegal under the Controlled Substances Act (CSA) of
1970. Because trace THC does not pose any potential for abuse as a
drug, the U.S. Congress had exempted non-viable hemp seed and oil
from control under the CSA in the same place and way as poppy seeds
containing harmless trace opiates. The Government of Canada, in
response to the DEA's new rule, has stated that, "there is no
evidence that the effective ban on relevant Canadian food products on
the U.S. market is based on any risk assessment. Therefore, Canada
objects to these measures."

Sterilized hemp seeds have been available in the U.S. for decades and
are recognized as an exceptional source of protein, omega-3 and
omega-6 essential fatty acids (EFAs). Independent studies and reviews
conducted by foreign governments have confirmed that trace THC found
in the increasingly popular hemp foods cannot cause psychoactivity or
other health effects, or result in a confirmed positive urine test
for marijuana, even when unrealistically high amounts of hemp seed
and oil are consumed daily. The 10-year-old global hemp market is a
thriving commercial success. Popular hemp foods include pretzels,
tortilla chips, energy bars, waffles, bread, salad dressing, cereal,
ice cream and even non-dairy milk.

The DEA's ban of hemp food sales in the U.S. is clearly in conflict
with NAFTA for several reasons. The DEA did not provide any notice
and opportunity to U.S. trading partners or foreign companies to
provide input into its ruling; the agency did not conduct a risk
assessment or offer any other science-based rationale for issuance of
the rule; the DEA did not seek to minimize impact on international
trade; and it has not similarly regulated poppy seeds and their trace
opiates.