CANADIAN HEMP COMPANY TO SUE U.S. DRUG AGENCY

A Canadian company that produces hemp-based products is using a
controversial section of the North American Free Trade Agreement to try to
force its way into the American market.

Kenex Ltd. of Chatham, Ont., said last week it plans to sue the American
government for $20 million because of harassment by the United States Drug
Enforcement Agency.

On Feb. 6 the DEA plans to enforce a ban on hemp-based food on the
assumption such products contain hallucinogenic drugs.

Jean Laprise, Kenex president, said in a Jan. 21 interview the proposed ban
is the latest in a long list of DEA actions that have kept many company
products out of the U.S. market in the six years since the company was formed.

"We have invested millions of dollars and every step of the way, we have
had to fight the U.S. government," he said. "We've been shut out of most of
the American market by tactics which scared away our buyers. We are asking
for $20 million in compensation."

A panel of experts assembled by NAFTA officials will hear the suit.

"I think it will take months or years to decide," said Laprise.

Kenex was formed in 1996 with a business plan that called for up to 90
percent of its Ontario hemp-based products to be sold into the U.S.

"That got jerked around early in the game," he said. "Over years, we have
had to be more cautious. That has cost us jobs and a significant amount of
money."

Staff at the Chatham plant has fallen from a peak of 22 to fewer than 10.

Laprise said the DEA is acting illegally because American drug laws exempt
hemp seed, oil, fibre or other derivatives.

But the DEA has never accepted that and has used tactics as diverse as
seizing a load of birdseed in 1999 and issuing statements before the launch
of new Kenex products warning that they are illegal.

American-based hemp products companies also have been fighting the DEA in
court but as a Canadian company, Kenex had the ability to use NAFTA's
chapter 11, which allows a company to sue a government if it believes
policies illegally damage the value of investment or return on investment.

One of the most controversial chapter 11 actions is a move by the American
courier giant UPS to sue for compensation on the claim that Canada Post is
an unfair competitor.

"Chapter 11 is a very loosely worded section of NAFTA and I don't think it
is being used the way its drafters intended," Ottawa trade consultant Gerry
Shannon said Jan. 19. "I'm not sure it was intended for a situation like this."

That is the question a NAFTA panel will have to consider.

Said Laprise: "The DEA has put a big scare into the marketplace and a lot
of our buyers have backed off," he said. "If the DEA is not stopped, we are
finished."