Trade Court Says CBP Cannot Seize or Exclude Drug Paraphernalia Made Legal at State Level

"The Court’s decision today is a huge win for the cannabis industry," Richard O'Neill, counsel for plaintiff Eteros Technologies USA, told Trade Law Daily. "It affirms what Neville Peterson has long advised its clients—i.e., that imports of marijuana-related paraphernalia in Washington State, and many other states, are 'authorized' by state law and are therefore exempted from the import prohibitions attaching to all other forms of drug paraphernalia."

In April, importer Eteros Technologies USA entered motor frame assemblies -- used to make marijuana harvesting units and deemed "drug paraphernalia" -- through the Port of Blaine, Washington. CBP excluded the goods from entry, as drug paraphernalia under the CSA. Eteros contested the exclusion, telling the trade court the goods should be permitted to be imported under 21 U.S.C. Section 863(f)(1).

The exemption says CSA Section 863, which prohibits the sale, distribution or import of drug paraphernalia, doesn't apply to "any person authorized by local, State, or Federal law to manufacture, possess, or distribute such items." Katzmann looked to the conditions that trigger the exemption's applicability. The judge ruled that the authorization by one relevant legislative body at the local, state or federal level was sufficient to permit a party to engage in one of the activities barred by Section 863.

The next key question for the court to consider concerned how to construe the word "authorized." Katzmann held that the "interplay between the Federal and Washington State systems on marijuana-related drug paraphernalia necessitates construing the term 'authorized' ... as a matter of first impression." The judge said Washington state authorized Eteros to import the drug paraphernalia.

Katzmann, though, said the statute's ordinary meaning doesn't conclusively rule in favor of one party. The government argued per the statute's plain terms, the combination of the words person and authorized "explicitly requires a person to [be] specifically ... authorized to engage in the conduct at issue." Eteros, however, said the state plainly authorized the importer to enter the paraphernalia by repealing its past prohibitions on marijuana-related goods, "and that the court cannot accept the Government's person-specific construction without adding words to the statute."

The court, looking to the dictionary definitions of the words "authorize" and "any," said it can find support for both interpretations. The exemption can be found to refer to a class of people as put forth by Eteros or a single person authorized by a license or some similar mechanism, as put forth by the government. Having hit a dead end via the plain meaning of the statute, Katzmann turned to the "relevant case law." Eteros cited the 2018 Supreme Court case Murphy v. NCAA.

In this case, the U.S. Supreme Court considered whether a New Jersey law making sports betting legal violated the federal Professional and Amateur Sports Protection Act (PASPA), which made it illegal for states to authorize sports betting. The Supreme Court held that when a state repeals a law that prohibited something -- in this case the state law banning sports gambling -- the state authorizes the previously-banned activity. In the Murphy context, the New Jersey law thus authorized sports betting, putting it in violation of PASPA. The Supreme Court then ruled in favor of New Jersey, finding that PAPSA's prohibition against state authorization of sports betting violates the anticommandeering doctrine of the Constitution's 10th Amendment.

While the case does not explicitly direct lower courts to use this definition of "authorize" when looking at statutes other than PASPA, Katzmann said it has "good reasons for doing so here." The Supreme Court's reasoning can be adopted because the Murphy court did not construe the term to rest specifically in PASPA and that definition is relevant to the CSA, the judge said.

Katzmann applied the Murphy ruling -- "namely, that the repeal of a state law banning an activity gives those now free to conduct the activity in question the 'right or authority' to so act" -- finding that Eteros is "authorized" as laid out in the CSA federal exemption. In permitting the delivery, possession and/or manufacture of marijuana-related drug paraphernalia, the Washington state legislature said it was illegal to deliver, possess or manufacture drug paraphernalia for "other than marijuana." In doing so, it made it legal to possess marijuana-related drug paraphernalia, making CBP's exclusion of such goods illegal, the court ruled.

"As a result of this decision, each State’s cannabis legalization scheme will need to be evaluated against the federal authorization exemption which CBP has refused to apply in any circumstance," O'Neill said.

The judge wrapped up his opinion by finding that its holding is in line with the statute's purpose. The plain text of the exemption "suggests Congress contemplated non-uniform application of subsection 863(a)'s prohibitions on selling, transporting, and importing/exporting drug paraphernalia," the opinion said. "This is so because Congress used a disjunctive 'or' to make local, state, and federal 'authoriz[ation]' each individually sufficient" to make all the restrictions inapplicable.

"In sum, upon consideration of the ordinary meaning of the statutory terms, relevant case law, and Congress’s purpose, the court determines that Eteros is 'authorized' under 21 U.S.C. § 863(f)(1) such that § 863(a)(3)’s federal prohibition on importing drug paraphernalia does not apply to Eteros’ Subject Merchandise at the Port of Blaine, Washington," the opinion said. "The court reiterates that it is not within its province to weigh policy arguments regarding the merits of legislation or to entertain invitations to rewrite legislation; its charge is to interpret and apply the statute as enacted by Congress. Insofar as the Government seeks a different statute, that argument can be addressed."

(Eteros Technologies USA v. U.S., Slip Op. 22-111, CIT #21-00287, dated 09/21/22, Judge Gary Katzmann. Attorneys: Richard O'Neill of Neville Peterson for plaintiff Eteros; Guy Eddon for defendant U.S. government)