Import/Export Best Practices For The CBD Sector — Robert Jappie & Alexej Pikovsky

Alphagreen is Europe’s largest marketplace for CBD products and is helping several US brands to distribute products in the UK. Together with Ince, a leading law firm in the UK, best practices on import and export of CBD products have been discussed.

The following summary gives an overview of the critical takings from the presentation, providing you with all the inside knowledge of the legal provisions for importing good from the US into the UK exporting from the US and importing into the UK, while also detailing the challenges of Brexit and the upcoming Novel Food application deadline.

What are the UK’s regulations?

Firstly, it is important to understand the current regulations in the UK. This may seem obvious for people looking to import CBD into the UK, but it is complicated and many people misunderstand the rules. There is also a lot of misinformation out there, so it is important to separate fact from the fiction.

• Why is there so much product moving around the UK?

This is because the regulations of handling hemp in the UK are extremely tough. The UK license states that green material must be destroyed on site and all the buds, leaves and flowers must not be used for extraction. Because of the difficulties with regulations, most of the CBD extractions and products in the UK are sourced from eastern Europe or the US, and in some cases, other regions around the world.

• The Difficulties with the UK Border Force.

The Border Force is challenging to deal with from a legal perspective due to their inadequate knowledge of the law. Disputes can often be dragged out, and discussion is virtually impossible when a simple resolution could be made. To avoid the inevitable answer of ‘no’, preparation is vital — it is advised to put the Border Force into a position where they can’t say no to your shipment coming in the first place. Without implementing this preparation, your imports will likely be seized at the border, and if this does happen, be aware that you could be waiting months of back-and-forth to get your shipment back.

• What cannabinoids are controlled substances?

There are over 100 cannabinoids known to scientists today, and some of these are prohibited for use and therefore a controlled substance. For these substances, you need a license which is very difficult to get — most, if not all, entities that obtain this license have permission for scientific medical research, i.e. Big Pharma. The main cannabinoids which have been restricted are THC, CBN and THC V. Still, the Home Office also considers THC A and THC M — which are currently permitted to be imported into the country — to be unstable, as both can be decarboxylated into THC easily. So, with all the cannabinoids just mentioned, you must have an accurate Certificate of Analysis to know the precise levels of these compounds in your finished product to ensure you are not breaching regulations.

• How much THC are you allowed? (exempt product criteria)

Most people see the figure of 0.2% and assume that this is uniform for extractions and finished products, but this is incorrect. When people review the law, they will see that you have to use EU approved strains of the hemp plant, which typically yield 0.2% THC or less. People assume this translates into finished CBD products and extracts, but it doesn’t, and anyone that suggests 0.2% limit applies across the board is incorrect and should be ignored. So, in the UK, we have something called the exempt product criteria. There are three parts, but the main bit we are concerned about is part C. This exemption allows you to have a small amount (up to 1mg) of THC in your product without the need for a license.

The exemption is set up in regulation two of the misuse of drugs regulations 2001, and there’s a huge dispute here in the UK as to whether or not this exemption can be used for CBD products. The home office has made some suggestions that this exception can only be used for Medicinal Products or pharmaceutical products. You should remember that all of this is untested — there’s no case law, there’s no case precedent and there are no Supreme Court judgments on whether this can be applied or not. This means you should always invoke the exemption and make it clear that you are using it.

• Does this THC limit apply to Imports?

The Home Office view is that the one-milligram threshold referred to in part C applies to the whole container. So, if you had a packet of gel caps with 14 caps within the container, this ruling is applied to the contents of this container, not an individual gel cap. This effectively reduces your container size, as the bigger your container of CBD, the more likely you are to be in breach of that one-milligram threshold. This is a real pain for many businesses, particularly businesses that are importing bulk material like isolate or distillate in large volumes. If you are a US company be aware of this, as one minute you will be compliant, the next minute you won’t once you have imported your product into the UK.

What do you do if your shipment is seized?

In the worst-case scenario of your shipment being seized, you need to be aware of the technicalities of the judicial process in the UK so you can approach the situation effectively and have more chance of winning your case. From the get-go, it is important to note that this can be a long, drawn-out process and can cost your business a lot of money, so it’s best if you don’t get your shipment seized in the first place by taking the steps mentioned below.

• What happens if you don’t invoke exemption?

The Border Force is strict, and they don’t use the most sophisticated tests. Upon asking for the results of these tests for THC, they will not disclose this to you, which is extremely frustrating and makes you wonder if they are even testing shipments. So here you have two problems — 1) the test Border Force are using may wrongly show higher levels of THC, meaning it seizes your shipment 2) If your test for shipment is positive for THC, they won’t show you the tests, meaning it is challenging to prove they are wrong.

Once you’ve had this review from a senior officer in the border force you’ve now got 30 days to appeal to take the matter to a court hearing. At the hearing, you can make your case that your product is legal due to the exempt product criteria.

• Should you appeal and take this to court?

You’ve got to make a decision here — is it worth losing a lot of money in legal fees to take this to court? If your shipment is not worth much money, let’s say £3000, then you have to say to yourself, is this worth the stress, hassle and money to take this to court? The answer is probably no unless you and a legal team are sure you will win the case and receive compensation for your troubles. If your shipment is worth over £10,000, then you want to take this to court, as losing this amount of money could be catastrophic for your business.

If you do decide to cut your losses as your shipment wasn’t worth the legal fees, then take this as a hard lesson learnt. It is recommended that you still contest this as if you don’t, you are essentially accepting that you imported an unlawful product.

• What happens when you appeal?

Once you have put in an appeal to the Border Force, they send this case to their lawyers who review the issue properly, and in turn, will send a summons to the court. This is going to be listed for a hearing where we can present our arguments to the court and hopefully get the shipment back. They have to lodge the summons to the court within six months of the appeal, and once this is processed, we will finally get our court hearing. This is when we can provide the evidence to the court and exhibit that the extractions or products do not contain above 1mg of CBD per container.

• If I get my shipment back, do I get compensated?

Once you have taken this to the court hearing and it is confirmed that your shipment was unnecessarily seized, you can also apply for compensation for the damage that has been caused by the Border Force. The lawyer that works on behalf of the Border Force will ask the court to confirm that they acted reasonably in seizing the shipment once it entered the UK. If the shipment wasn’t seized for a short time, it could be argued that it was necessary. Still, it is more likely that the Border Force will have held your shipment for an extended period, which is a problem and shouldn’t be accepted by you or the lawyer working on behalf of your company. They will try and argue their innocence, but you’ve got to contest and be adamant that you still want the hearing to go ahead to receive your compensation and recover your losses.

How can you prevent a shipment from being seized?

Prevention is better than cure. Most brands will come to a lawyer once a shipment has been seized, rather than asking the lawyer to help with preparation before. It will be a lot cheaper, and you will save a lot of time if you get a lawyer to help you prevent a shipment from being seized rather than contacting a lawyer to help you get your shipment released.

• You must invoke exemption before your import arrives.

The problem that many businesses have, is they don’t apply for exemption before their import arrives — they wait for the shipment to be seized and then they will call a lawyer to try and sort out the mess. At this point it’s too late — you must apply for this exemption before importing the goods to the UK. You also must provide clarity on your labelling and packaging to make sure that it matches your exemption, and it is clear for the Border Force.

• Make sure you include all the relevant documentation.

So the first part is your documentation, you’ve got to make sure that it’s correct. If you don’t have the relevant documentation, it will become more difficult to argue against in court. You will be at risk of losing your shipment and losing a substantial amount of money in legal fees. If you are new to the industry and don’t know what is required, it will be beneficial to employ a lawyer to help you with this as it can be confusing and you don’t want to make any mistakes.

• Make sure your labelling is correct.

What may be compliant in the US, France, Germany, or Eastern Europe may not be compliant here in the UK. Make sure that your labels and your packaging have been reviewed and are UK compliant, as while it is likely that the Border Force officer is not going to be experienced enough to pick up on these problems, it’s better to be safe than sorry.

• Use a partner organisation which can help with shipping and distribution

You must use an experienced shipping agent that knows the regulations surrounding CBD. Big companies such as DHL and FedEx usually do not know how to deal with the specifics of CBD logistics and therefore it is important to work with players who have done it before.
Alphagreen has a presence in the US and in the UK. Being able to store and bundle products in the US before sending it over to the UK or to Europe is a big advantage.

It is very important to stay on top of correct commodity codes, so you are paying for the right tariffs and avoid problems further down the line. Having the right distribution partner is vital and could potentially save you a lot of time, money and hassle.

• Hire a lawyer to help you with your shipment

You can ask a UK lawyer to review your packaging and produce a letter to go with the shipment. This letter will effectively set out the relevant regulations so that when Border Force examines your shipment, you are already providing them with the documentation that proves your shipment is exempt from seizure. It also confirms that the products are compliant with UK law, and no license is required to invoke this exemption. This will significantly minimise the risk of your shipment being seized, which in the long-term will save you a lot of money.

How will Brexit impact upon importation into the UK?

With Brexit on the horizon, it is essential to know how this will affect imports and exports moving forward. Tariffs are going to change as a result of Brexit — these could either hinder or benefit your company, and it is crucial to be aware of what camp you are in.

• Changes to tariffs and non-tariff barriers — who will benefit?

When inputting details for a standard commodity code on check future tariffs websites, you can see how the tariffs will be affected by Brexit for businesses in different regions. Currently, for the common external tariff — which applies to anyone from outside the EU importing CBD into the UK — you are going to be paying 5.5%. So, if you are a US supplier, you will currently be paying a 5.5% rate to import your products or bulk materials into the UK. After the UK leaves the EU, we are not subject to EU regulations anymore, which means Britain will have its separate tariffs. The suggestion is that the UK tariff will drop to 4%, so our friends in the US might get to benefit from the UK leaving the EU.

• Changes to tariffs and non-tariff barriers — who will it hinder?

If your product is coming from mainland Europe, through the Channel Tunnel and into the UK, this is where the problems are going to arise. No one is sure about how this is going to go, but one thing is for sure, there is going to be a lot of additional documentation that has to be submitted. So, if you’re shipping into the UK via the Channel Tunnel from mainland Europe, you need to get on top of this now. Make sure you have all the necessary regulatory approvals and tariff documentation submitted to make sure that your product is not being held up at the French/UK Border.

You need to be extremely careful with tariff information as it can change quickly — one day you think you have got a generous tariff, the next day you find out it has been raised substantially. So again, this is another reason to have a good shipping agent on board as they get the Binding Tariff Information (BTI) before anyone else. These BTI’s are sent from the government for when there’s a dispute over what commodity code to use or what commodity code should be applied to a particular product and a reliable shipping agent will make you aware of this before any other entity. These BTI’s can be costly, which is why it is essential to find out as soon as you can.

Summary

This discussion has demonstrated how important it is to prepare your business before you import your products into the UK, and while we recommend that you avoid going to court if your shipment is not worth a bank-breaking figure, we have established the legal processes you will need to take to release your shipment if it is seized. We have also displayed the course of action to take if you wish to be compensated for an unjustly UK Border Force seizure.

Alphagreen Services

We have shown it is critical to work with companies that are experienced with the UK’s CBD space to be successful. Both Ince and Alphagreen have a long track record of providing exemplary service in the UK — we have the tools and knowledge readily available so you can successfully import your shipments into the UK without legal disputes and without logistical problems. Without entities such as Ince and Alphagreen helping brands enter the UK market, we fear that the UK customer base will be starved of a plethora of great CBD brands from around the world. Competition is vital if the UK market wants to be the powerhouse of the CBD industry like many have predicted, which is why we need you to take the leap into the UK. For the reasons detailed above, we are happy to help anyone, anywhere and anytime.