Canadian Firm Plans to Sue U.S. Over Hemp Ban

OTTAWA (Reuters) - Canadian hemp grower and processor Kenex Ltd. said on Monday it will sue the U.S. government for C$20 million ($12.7 million) under the North American Free Trade Agreement for stopping the company from selling its hemp food products in the United States.

"If the DEA is not stopped, we are finished. Tallying our current and future losses, we expect to be compensated at least C$20 million under NAFTA," Kenex president Jean Laprise said in a statement.

The Ontario company said it intended to sue after the U.S. Drug Enforcement Administration last October deemed illegal any hemp foods containing traces of tetrahydrocannabinol (THC), the active ingredient found in marijuana.

Industrial hemp, legalized in Canada in 1998, is still illegal in the United States because the cannabis sativa plant -- from which hemp is derived -- is used to produce marijuana. But industrial hemp contains minuscule amounts of THC compared with its illegal brother. Foods made from hemp include pretzels, tortilla chips, waffles, bread, salad dressing, candy, cereal and ice cream.

"Hemp seeds and oil are as likely to be abused as poppy seed bagels for their trace opiate content, or fruit juices because of their trace alcohol content," Kenex said in a statement.

The company, which produces and processes hemp oil, seed and fiber products in Canada, distributes three-quarters of its goods in the United States and has done so for the past five years.

The company said studies have shown the consumption of hemp foods cannot cause psychoactive or other health effects, or result in positive urine tests for marijuana.

The company said the DEA's action conflicts with NAFTA because the agency did not provide an opportunity for input into its decision and failed to offer a science-based rationale for the ruling, nor did it seek to minimize the impact on international trade.

Kenex said it has "suffered previously" because of the DEA, which in 1999 had U.S. Customs impound a Kenex shipment of birdseed.

($1=$1.60 Canadian)