As business owners, we think a lot about what’s happening locally. In the cannabis industry, it’s necessary to be aware of local regulations, state laws, and national trends. But as your business grows, managing the challenges that come with international business can be overwhelming.
One of the most surprising problems businesses encounter occurs with overseas vendors and sellers. Even if you’re not selling or distributing products or services abroad, it can affect your business in a costly way.
Purchasing supplies, packaging, or other elements of your product from overseas can really help your bottom line by leveraging cost savings of foreign-made goods, but a necessary component of importing anything from outside is U.S. Customs and Border Protection - who can be your best friend or an absolute nightmare – even for Colorado cannabis companies.
Importing From Overseas
The United States Customs and Border Protection (CBP) is not only a federal agency, but it is the largest law enforcement agency in the country. Housed under the Department of Homeland Security, CBP is responsible for regulating our international trade, collecting import duties, and enforcing U.S. laws and regulations. CBP patrols our northern border with Canada, southern border with Mexico, thousands of miles of coastlines, and (of course) every sea port and international airport in the U.S.
Because marijuana is still classified as a Schedule 1 drug under the federal Controlled Substances Act and CBP is a federal agency, any cannabis-related products are likely to be flagged and potentially seized. But sometimes, they also flag completely innocent products; I’ve personally worked on cases where stashboxes, vape cartridges and batteries were seized and successfully returned.
When you import products from overseas, it’s not only possible, but likely that CBP can and will seize it on claims that it is to be used for an illegal purpose. This determination can be based on the product being imported, or the importer.
Many times this is a result of the importing company’s name or the receiving company’s name, if either incorporate any of the synonyms or puns for cannabis or marijuana (think a marijuana cultivator called “The Pot Farm, LLC” importing packaging). Even completely arbitrary names are flagged due to their cannabis-related marketing, packaging, or logo design. Keep in mind, CBP has the internet, too, and if an importer’s website or other internet advertising reveal it is a marijuana company, or even ancillary to the marijuana industry, that can prompt CBP to take action.
What Happens During a Import Seizure
Since CBP is regulating trade and enforcing export/import policy, they reserve the right to seize property that the agency reasonably believes does not comply with federal law.
Often this is an administrative error of some kind: business isn’t registered with the IRS or DEA, importer doesn’t have a valid license, or forms have not been completed to CBP’s satisfaction. While paperwork in itself can be a headache, these types of errors can generally be avoided with knowledge and preparation.
CBP has the right under federal law to examine any shipment imported into the United States. The importer is responsible for bearing the cost of that examination, however it may be passed onto your company as the buyer, so read your contract carefully - and if you are directly importing the goods, well you get the idea.
If your package is selected for examination, it will be transferred to a Centralized Examination Station (CES), which is a privately operated facility. They will completely unload your shipment, examine it for violations or illegal product, and (if it passes) repack your shipment – then bill the importer for their services.
Not only can this be an expensive detour, but it is a massive time suck, especially if your business depends on receiving that shipment to operate. The cost of moving your package to and from the CES can cost hundreds of dollars, alone.
How To Avoid Problems with CBP
The best way to avoid losing time and money from your package being seized by CBP is to do everything possible to ensure it isn’t flagged in the first place.
Don’t order direct to a cannabis-related business, especially if it includes the terms “cannabis”, “marijuana” or other synonyms in it’s business name. Accordingly, when establishing your company, don’t use “cannabis” or “marijuana” in your business name.
As you build and grow your company, you’ll inevitably create marketing materials and begin growing your visual brand. Before approving - and certainly printing, publishing, or ordering - any of these materials from overseas, have them reviewed by legal counsel familiar with cannabis law, so you’re not inadvertently shooting yourself in the foot.
And likely the most important step is to consult with your cannabis attorney before making a substantial purchase from an overseas vendor.
Planning on working with an international supplier? Schedule a consultation today to avoid costly problems with Customs and Border Protection.