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Are State Bans on the Importation of Marijuana Next to Fall Under the DCC?

Posted by on Monday, August 22, 2022 in News, Updates.

In the last two years, plaintiffs have successfully challenged state residency requirements for marijuana licenses by invoking the Dormant Commerce Clause (DCC), an implied doctrine of federal constitutional law that bars states from discriminating against or imposing undue burdens on interstate commerce. See this post for recent developments in those cases. I provide an in-depth discussion of the DCC and its implications for state marijuana reforms in two articles:

As I explain in Interstate Commerce in Cannabis, I think state bans on non-resident ownership of local marijuana businesses are indistinguishable (constitutionally speaking) from state bans on importation of marijuana produced outside the state. Both restrictions – residency preferences for licenses and bans on imported marijuana – violate the DCC and are thus unenforceable.

So far, however, plaintiffs have only challenged residency preferences for licensing. Could someone also successfully challenge a state ban on the importation of marijuana? And if the answer is yes, why hasn’t anyone brought such a challenge (yet)? In this post, I’ll try to answer these two questions.

My answer, in a nutshell, is that while a DCC challenge to a state import ban would have merit (and now has a lot of precedent to support it), there are some practical problems a plaintiff would encounter in capitalizing on any litigation victory. I suspect these practical difficulties explain why we haven’t yet seen anyone sue to challenge a state import ban.

At the outset, it’s important to recognize that there is no shortage of potential plaintiffs who could bring a DCC challenge to a state import ban. Imagine, for example, a thriving marijuana cultivator in State O (the origin state) that wants to sell its wares in State D (the destination state), but does not want to spend the money to set up another marijuana cultivation operation in State D. This company would have standing to challenge State D’s ban on imports of marijuana, without necessarily putting itself in legal jeopardy – e.g., it could ask State D for permission to import, and when State D (presumably) denies such permission, the company could seek a court judgment declaring that the state’s import ban violates the DCC. I think the company would have an excellent chance of prevailing in the suit – it could cite several cases invalidating analogous state laws on DCC grounds (and my article!) for support.

But even supposing the company could obtain a favorable declaratory judgment, it would still face a handful of practical problems in shipping its marijuana from State O to State D. Here I’ll discuss three of those problems, but there could be more.

First, the company might also need to raise a second legal challenge to its home state (State O) law. That’s because all legalization states ban not only imports of marijuana but also exports of the drug. So the company would need to get State D’s permission to import its wares into that state AND it would also need to get State O’s permission to export its wares out of that state. And there’s no guarantee that State O would give that permission. For example, if State O is worried about exports creating a shortage of marijuana in the state (especially for medical marijuana patients), or if it’s worried about upsetting State D or the federal government, it might withhold its permission to export the drug, thus requiring the company to file a second lawsuit – this one challenging State O’s export ban under the DCC. While the company should also prevail in this second lawsuit – state import and export restrictions are equally suspect under the DCC – the need to file the second lawsuit adds to the expense the company must incur to ship its product across state lines. Even if the company could somehow combine the two challenges into a single lawsuit, the need to challenge the laws of two different states adds to the cost and time required to obtain legal permission to ship marijuana across state lines.

Second, transportation from State O to State D could pose some challenges. It’s not such a big deal if the two states are neighbors (e.g., New York and New Jersey). But if they are separated, the company might have to ship its product through a third (fourth, etc.) state – including one (or more) prohibition states. Imagine, for example, if the company is based in Oregon and wants to ship its marijuana to New York. As I’ve made clear in Interstate Commerce in Cannabis, prohibition states can ban imports of marijuana as part of a broader ban against all shipments (sales, etc.) of marijuana, regardless of origin. Such outright prohibitions do not discriminate against interstate commerce and are thus (far) less suspect under the DCC. So the company will need to avoid states like Idaho (see here), Nebraska, and Tennessee if it wants to move its goods across the country. To be sure, it might be able to raise a DCC challenge to state bans on shipments that are just passing through the state. (Congress preempted such bans as applied to hemp in the 2018 Farm Bill, but the statutory provision may have been unnecessary given the DCC.) Still, removing this additional obstacle to shipments would take time and money.

Third, even if the company prevails in litigation and gets the green light to ship its wares from State O to State D, it would still need to make sure that its products comply with State D’s packaging and labeling regulations (among others). As I discuss in my book and in Interstate Commerce in Cannabis, there are lots of variations in state packaging and labeling rules. The company would thus likely need to create a separate set of labels and packages for each state in which it hopes to do business. Again, this isn’t an insurmountable obstacle (and some state regulations could probably be challenged under the DCC), but the need to conform to non-uniform state regulations does lessen the appeal of waging a legal challenge to state bans on the import of marijuana right now.

In sum, I think there are practical reasons why we have not yet seen a company challenge state bans on the importation of marijuana. Still, it only takes one plaintiff to get the ball rolling, and if a company is in the right position – say, it has an overabundance of production locally that it would like to ship out – it might be tempted by this gambit, especially if federal reform continues to falter.

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