CANADIAN HEMP SALES TO U.S. SHAKEN

Canada is once again in jeopardy of losing its biggest market for hemp oil.

The U.S. Drug Enforcement Administration has issued its "final rules" on
cannabis products that prohibits human consumption of food containing any
amount of tetrahydrocannabinois, or THC.

Canadian regulations limit THC content in hemp to 10 parts per million, but
that isn't low enough to satisfy the DEA.

If it went unchecked, the agency's zero tolerance policy would close the
border for hemp products destined for American food and beverage markets by
April 21, 2003.

But all is not lost.

The DEA issued a similar edict on Oct. 9, 2001, that never went into effect
because the hemp industry won a United States Court of Appeals stay on
March 7, 2002.

Rather than duking it out in court, the DEA "sidestepped" the process and
issued a new rule governing cannabis products, said Arthur Hanks, general
manager of the Saskatchewan Hemp Association.

"That previous stay basically is irrelevant because there is a new rule on
the table," he said.

A coalition of hemp importers and exporters are in the process of
requesting a second stay to combat the new final rules. Hanks fully expects
the U.S. Court of Appeals to grant another stay, but in the meantime the
trading atmosphere is foggy.

"Hemp is going to be working in a grey area again," he said.

"It's not a comfortable situation. We're looking at this going, 'is this
going to be happening every year?' It grinds you."

Canadian farmers seeded 3,800 acres of hemp in 2002 and harvested about two
million pounds of the crop. Hanks estimates half of that will end up in the
U.S., where there is no commercial hemp production, and the other half will
be consumed domestically.

The food market is the segment of the hemp industry with the best margins,
worth an estimated $10 million. Hemp-based cosmetics is a larger volume
sector with annual sales of two or three times that amount.

Most industrial products are exempted under the new DEA rules, but Hanks
worries that cosmetics could be caught in the crossfire.

"If we're sending hemp oil over the border, how does the DEA agent know
it's going for cosmetics or not?"

He said the new rules give DEA officials too much discretionary power.

"It may force cosmetic manufacturers to relocate to Canada or to shut
down," Hanks said.

The uncertainty has caused hemp plantings to plummet from 34,000 acres in
1999 to a little more than one-tenth that amount in 2002. But Hanks
encouraged interested growers to seriously consider planting a small crop
of 10-20 acres in 2003.

"It's a good risk to take if you can afford to take risk," he said, because
the industry has gone from a state of overproduction to undersupply.

"We're just not meeting our current demand right now so there's a good
reason to be planting hemp this year."

Hanks is confident the ambiguity south of the border will be cleared up
once the industry secures another stay from the courts.

He said there is a groundswell of support for hemp products in the U.S.
that includes a new recruit, the powerful Organic Consumers Association.

"That's serious troop strength," Hanks said.

Unfortunately, American politicians are currently preoccupied by troops of
a different kind.