The Green Kilometers: Exporting cannabis from Israel to the U.S.

On Christmas Day, 2018, the Knesset (the Israeli Parliament) passed Resolution 4490, allowing for the exportation of medical cannabis from Israel. Many are reporting that the flood gates are wide open, and that Israel will quickly be able to stuff its coffers. However, similar to how Colorado needed new regulations to implement the medical and recreational marijuana markets once they were legalized, and now the U.S. Department of Agriculture needs to issue regulations to provide rules for growing hemp following the 2018 Farm Bill, Israel also needs regulations to be issued before export licenses will be provided.

According to our Israeli counsel, Abe Erdynast: “Israel approved the export of medical cannabis with an expected start date of September 2019. Unfortunately, due to continuing bureaucratic bungling, this is not likely to happen as scheduled. However, with an estimated revenue potential of up to $1 billion a year, the local cannabis industry is excited and optimistic that it will become a world leader in cannabis agri-tech, R&D and pharma-tech. Our first markets are in Europe, Latin America and Canada, but when the door opens up, we will expand quickly into the U.S. market.”

There are two notable blockades already in place for getting cannabis products out of the Israeli border. First, Section 1.B. of Resolution 4490 states that “Exports of plant materials that can be propagated … will not be approved.” This means that plants, seeds or anything that can be used to create more marijuana cannot legally be exported from Israel, but finished products such as smokable joints, oils and vapes can go out the door. Second, once the procedures for exporting are finally in place, the provision of export licenses will be handled by both the Ministry of Health and the Israeli Police. Both groups will have a say in whether an individual or company should be issued an export license.

Another important facet of the new resolution is that exports will only be made to those countries that have signed the United Nations’ International Convention on Narcotic Drugs and only if the specific country has given express consent to the importation of the marijuana product. The United States became a party to the treaty on November 1, 1972, but it has rarely given express consent for cannabis importation. Getting cannabis into the U.S. legally requires DEA approval. Only a few companies are known to have received DEA approval to import cannabis products into the U.S. — most notably Tilray and Canopy Growth Corp. Both companies were only allowed to import cannabis to be used for medical research being done by U.S. entities. However, optimists claim that the DEA approval signals that the agency is standing by its goal to improve cannabis research by allowing more cannabis into the U.S. It remains to be seen whether these are one-off situations or whether more approvals are in the making.

The current method to register for importing controlled substances like marijuana into the U.S. is to register with the DEA Diversion Control Division and then declare each import being made. The DEA does not currently provide a timeline for when, or rather if, an application will be approved. However, one company, Sanyal Biotechnology, stated in an interview that it had been four months since it submitted its application with no response and that the company expected the whole process to take about six months. Comparing the dates of the interview and the documentation on the DEA website show that the DEA processed the application at around the four-month mark, and later approved it a week before the seven-month mark.

Since Israel does not allow exports of plants or seeds, and the U.S. federal government has so far restricted most companies to importing only plants, it seems unlikely that any Israeli products containing high levels of THC will enter the U.S. anytime soon. In some rare cases, the U.S. has allowed the import of plant-derived pharmaceuticals and synthetic cannabinoids for research. Also, hemp products are no longer illegal to import into the U.S., so long as they have a THC content of less than 0.3%. The only requirement is that the seeds be declared to U.S. Customs and Border Protection and be accompanied by a certificate that shows the origin of the seeds and confirms that no plant pests are present. These are all potential avenues for Israeli companies to import cannabis products into the U.S.

Should an Israeli company desire to have its genetics grown on U.S. soil, it would need to get creative. One way could involve the creation of a subsidiary company or a partnership and transfer of a license to allow the second company to grow the specific strains owned by the Israeli company. Once the genetic rights are transferred, the Israeli company can provide the expertise needed for the U.S.-based company to grow the crop according to the high Israeli standards.

But the day is coming when cannabis will truly be a global commodity, and shrewd investors and operators are already taking steps to navigate that global supply chain.

 

Charles Feldmann is founding partner of international consulting company Gateway Proven Strategies (GPS.Global) and cannabis law firm Feldmann Nagel Cantafio, PLLC. His full bio can be found at: MJBusinessAttorneys.com.

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