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Border concerns have chilling effect on Canada cannabis industry

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Reports that some Canadian cannabis professionals have been turned away while trying to enter the United States and then received lifetime bans due to their involvement in the marijuana sector in states where it’s legal are having a chilling effect across the industry.

While isolated concerns have been raised in the past about the potential for increased scrutiny for those in the industry, executives and analysts acknowledge that now they are becoming more concerned about running into problems when they try to enter the United States.

Most Canadians involved in the marijuana industry have been and still are traveling between the countries without incident.

But some are starting to avoid travel to the United States altogether, and others are warning that Canadian companies could slow expansion plans there.

It’s unclear what spurred the recent incidents that resulted in bans.

Spokespeople from the U.S. Department of State and the Department of Homeland Security said the country has not changed its admission requirements in response to Canada’s pending legalization of recreational cannabis.

Anecdotal evidence

But stories of individuals who were prevented from crossing the border have become more common in recent months, possibly indicating the U.S. is increasing enforcement of its existing laws, according to Washington state-based immigration lawyer Len Saunders. 

Admissibility to the United States may be denied merely by “working or having involvement in the legal marijuana industry in U.S. states where it is deemed legal or in Canada” as cannabis remains federally prohibited, a Customs and Border Protection (CBP) official told Marijuana Business Daily.

Inadmissibility in the U.S. implies a lifetime ban because it won’t be lifted unless one applies for and obtains a waiver.

The Canadian government, for its part, recently stated that simply being involved in the legal cannabis industry could also result in inadmissibility to other countries.

That also appears to be the stance of the U.S. State Department.

The agency’s Foreign Affairs Manual – commonly referred to as the FAM note – gives guidance to immigration officials on admissibility, such as: “Whether or not a substance is legal under a state or foreign law is not relevant to its illegality under U.S. federal law.”

Under that guidance, anyone working in the Canadian cannabis industry is technically inadmissible into the United States, Saunders said, even though medical marijuana is legal in Canada and adult use will be Oct. 17.

The Canadian government warning was issued June 20, but it is unclear whether the FAM note and customs statement involving Canada are recent changes in policy.

More than rumor?

A small number of executives have come forward so far about having been banned, but Saunders says he has seen dozens of cases in the past six months.

“Since April, the businesspeople who are being barred are businesspeople who have direct involvement with the U.S. (cannabis) industry,” he said.

“They’re either selling their services or goods from Canada, they’re a landlord of a property and they’re making money – living off the avails of drug money – or they’re investing their personal money.”

Jay Evans, CEO of Keirton, an agricultural equipment manufacturer, and two of his colleagues were deemed inadmissible in April.

The following month, Sam Znaimer, a director for Anandia Labs – which is being acquired by Aurora Cannabis – received a ban for marijuana-related investment activity.

Mike Gorenstein, CEO of Cronos Group, believes the probability of lifetime bans is low so long as executives are honest with officials at the borders.

“That being said, it is a risk that non-American executives need to factor in – so it may affect their business development opportunities with U.S. companies and relationship-building opportunities with U.S. investors,” he said. “It’s not a risk that I’ve had to personally consider given my dual citizenship.”

Akshat Divatia, a lawyer with Harris Bricken in Seattle, said the law applies broadly to cannabis, so even if a Canadian has never consumed marijuana and does not possess it, simply making a living off the trade of a federally illegal drug is enough to be deemed inadmissible.

“The act of investing, working or collaborating with a U.S. cannabis company can be considered trafficking illegal drugs or aiding, abetting, assisting, conspiring or colluding in its trafficking,” Divatia said.

“Even where Canadians are merely working in the cannabis industry in Canada – where it is legal nationwide – then they may be deemed inadmissible for making a living off of the trade of an illegal drug.”

Divatia sees “an increasingly zealous application of a federal law against all foreign nationals, not just Canadians. But the recent rise in tension between the U.S. and Canada over trade issues is not helpful.”

Waivers, which are granted completely at CBP’s discretion, take up to six months, cost $930 in government fees, plus lawyers’ fees, and are initially approved for only a year – and never for more than five years.

Deepak Anand, vice president of Toronto consultancy Cannabis Compliance, does not believe they are isolated examples.

“It’s becoming more of a problem in the industry,” he said. “We’re going to see less investment from Canada going into the U.S.”

 

Source: Border concerns have chilling effect on Canada cannabis industry

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