Hemp Industry on Fire

Exploding marketplace stoked by DEA lawsuit

Few Americans typically give much thought to the $200 million hemp industry: a market that includes such wide-ranging products as bread, clothing and soap. But this week hemp producers are getting a powerful marketing boost from an unlikely source—the Drug Enforcement Administration (DEA).

Nearly two and a half years ago, the DEA put a chill into the hemp marketplace by interpreting the definition of marijuana in the Controlled Substances Act to include hemp food products. Their logic was that ingestible hemp contained THC (tetrahydrocannabinol) and therefore was a Schedule 1 controlled substance, just like marijuana.

Never mind that hemp is explicitly exempted from the Controlled Substances Act. Never mind that hemp contains only trace amounts of THC, much like the minuscule amounts of opium found in poppy seeds or the trace amounts of alcohol found in orange juice. Never mind that hemp seed is the most complete source of amino acids and essential fatty acids found in nature. Never mind that you cannot "get high" eating hemp bread. And never mind that it is not possible to eat enough hemp seed to make one test positive for marijuana. After the DEA action, manufacturers and retailers pulled the products from their shelves, with the threat of customs seizures or criminal sentences looming on the horizon.

But not all hemp entrepreneurs were ready to comply. The Hemp Industries Association (HIA) took the DEA to court, and on February 6, 2004 the Ninth Circuit Court of Appeals ruled unanimously in favor of the HIA. The Reagan-appointed Judge Alex Kozinski ruled in favor of the hemp industry, and expressed concern for a common breakfast food to DEA attorney Daniel Dormont during the trial: "Can you tell me how you are going to save the [poppy seed] bagel?"

After filing for two extensions, and trying to get the case reheard in the Ninth Circuit, the Department of Justice now has a decision to make, and they must make it by Monday: Either they appeal their loss in HIA v. DEA to the Supreme Court, or they let the Ninth Circuit Court of Appeals decision stand, effectively protecting hemp foods in the US. Considering the unlikelihood that the Ninth Circuit's decision will be overturned, hemp producers see themselves in the catbird seat.

"Our thinking is that we're in a can't loose position," David Bronner, president of Dr. Bronner's Magic Soaps and primary funder of the HIA's legal efforts, tells Reason. "If the government does appeal, it's highly unlikely the Supreme Court will hear the case. If they do take it, it's that much more free publicity for hemp food. If they don't take it, we can focus on marketing and promoting hemp seed and fiber products. Every scenario plays in our favor."

The hemp marketplace is already reflecting the publicity garnered by the lawsuit. "In the last year sales have been explosive," Bronner continues, pointing to $10 million in year-to-date sales for the hemp food industry, nearly double what they were in 2003. And what's the market outlook for 2005? "Sales will double again. It's smokin'. People are hot for it."

As the Food and Drug Administration warns pregnant and nursing mothers about high levels of mercury in fish and fish oil, hemp seed oil products are expanding, easily replacing fish as one of few significant sources of essential fatty acids.

"The awareness of the health benefits of hemp are increasing," says Bronner. "People want a safe source for omega fatty acids. Traditionally, that source has been fish, but fish has mercury, which is chronically toxic. Hemp seed is not toxic. Yet the government is trying to ban hemp seed, not fish."

But it's not just about healthy hemp, nor is this simply a crunchy hippie industry. It's big business, and recent growth demonstrates the entrepreneurial power behind it.

Mike Fata, North American sales manager for the Canadian-based company Manitoba Harvest (producer of hemp oil, seed, butter and protein powder) confirms recent growth trends. "We've done about a million dollars in sales this year, and since February 6, it's been growing every day."

"We are a vertically integrated company," Fata continues. "We own a 6,000 square foot facility. We have 25 farmers that are shareholders in the company. Hemp goes right from the farm to our facility where we process and package it right there. All of our products are third party tested, THC-free. Our facility is certified organic and certified kosher. All products are grown without herbicides and pesticides. We do not use GMOs, and we have the rights to the seed variety we grow."

This type of consciousness runs throughout the hemp industry. "Our business philosophy is to take our money and promote social justice and environmental sustainability," says Bronner. "Hemp plays into that mission. The real environmental motivation is for the seed markets, so that hemp fiber will become a viable, sustainable option to wood pulp, cotton and fiberglass." After all, he asserts, hemp makes the finest cigarette and bible paper, and is even used in the door panels of popular Ford and Chrysler vehicles.

Hemp, however, is currently illegal to grow in the US without a specific license, and even then, as with the Lakota Indian Reservation, the DEA frequently destroys the crops, claiming they can't differentiate between the hemp plant (which is tall and stalky) and the smokeable marijuana plant (which is short, shrub-like, and has "buds".)

"The last place someone would want to cultivate marijuana would be in a hemp field, as the cross-pollination would ruin the potency of the drug crop," says Bronner. Hemp is currently legal to cultivate in more than 30 countries, including Canada, Russia, England, France, and China.

While tackling domestic hemp cultivation laws is on the horizon, the current issue is protecting hemp foods, and the outcome of HIA v. DEA will be decided next week.

DEA Public Affairs Specialist Bill Grant told Reason, "The issue has been handed over to the Office of Chief Counsel," and had no further comment.

"I don't know if the Solicitor General will appeal the case," Civil Specialist for the Department of Justice Office of Public Affairs Charles Miller tells Reason. "I won't know until a) we file [for appeal] or b) we let the deadline pass. I can promise that if we do appeal, it will be very close to the deadline."

"Appealing the decision would be a last-ditch effort to save face at the expense of taxpayers and limited law enforcement resources," counters Eric Steenstra, president of Vote Hemp.

And just how much has been spent trying to classify hemp seed with marijuana?

"We've spent $200,000," says Bronner. "I don't know what the DEA has spent, but it's a huge waste. We're not getting paid to fight the government. They're getting paid to fight us. It's a two and a half year court case, ringing up quite a sum of money for the tax payer."

The DEA and the Department of Justice Office of Public Affairs were unable to give any figures as to the cost of their case.

"This is free American enterprise versus an out of control government agency," says Bronner.

On Monday, however, the out of control government agency may unwittingly give free enterprise an unexpected gift.