Eteros Wins Court Case in Favor Of Excluding “Marijuana-Related Drug Paraphernalia” Pursuant to the Authorization Exemption of the Controlled Substances Act

Las Vegas, NV, September 21, 2022 — PRESS RELEASE — Eteros Technologies USA, Inc., a provider of post-harvest cannabis automation equipment, announced the success of its court case regarding the authorization exemption of 21 U.S.C. Section 863(f)(1) of the Controlled Substances Act (CSA). This was a case of first impression never before decided by a Federal or State court. It sets an important precedent for international trade in cannabis paraphernalia, recognizing that States’ authorization of persons to manufacture, distribute or possess cannabis paraphernalia triggers the “authorization exemption” which allows the importation of such products into the United States. The decision effectively instructs U.S. Customs and Border Protection (CBP) to permit the importation of cannabis paraphernalia into states that have legalized the manufacture, distribution, and possession of such items. With the cannabis market estimated at $38.8B in 2023 and multi-state operators’ capital expenditures representing up to 30% of revenue, this decision could impact billions of dollars of cannabis equipment imports annually.

Eteros traces its roots back to Surrey, British Columbia when in 2016, founder Aaron McKellar and a core group of engineers from diverse backgrounds and a passion for innovation and “divergent thinking” began manufacturing equipment for Canada’s newly legalized cannabis industry. In 2019, Eteros, the parent company of the Mobius and Triminator brands, expanded sales from Canada into the US to help support farmers growing now federal-legal hemp and the growing market of state-legal cannabis.

In April 2021, Eteros attempted to import sub-assembly components used to manufacture the Mobius M108S cannabis trimming machine into the Port of Blaine, Washington. On inspection, CBP deemed the parts prohibited “drug paraphernalia,” citing the Federal Controlled Substances Act. Eteros engaged counsel who challenged CBP’s determination by arguing that Washington State’s legalization of cannabis and related paraphernalia triggers the authorization exemption, serving to exclude importations of cannabis paraphernalia from the federal prohibition. The federal authorization exemption states that Section 863 shall not apply to “any person authorized by local, State, or Federal law to manufacture, possess, or distribute such items[.]” CBP ultimately disagreed with Eteros’ legal arguments and Eteros filed an action in the U.S. Court of International Trade to get a definitive court ruling on the meaning of the authorization exemption of Section 863(f)(1). 

After months of litigation, CIT Judge Gary S. Katzmann ruled in favor of Eteros, confirming that state law authorizing the manufacture, possession, and distribution of cannabis harvesting equipment (and other cannabis-related paraphernalia) exempts Eteros from the prohibition against importing such merchandise into the United States, at least insofar as the goods are imported into a State like Washington which authorizes manufacture, possession, and distribution of cannabis-related paraphernalia.

“The Court’s decision today is a huge win for the cannabis industry. States’ authorization of persons to manufacture, possess, and/or distribute marijuana-related drug paraphernalia serves to trigger the federal authorization exemption, therefore exempting cannabis-related paraphernalia from the import prohibitions which prevent the importation of all other forms of drug paraphernalia,” said Eteros Technologies’ legal counsel, Richard O’Neill, of Neville Peterson LLP.

“NCIA commends Eteros for challenging the Customs and Border Patrol on this important issue and bringing about this win for the legal cannabis industry. Legitimate businesses all over the world are serving the legal cannabis industry, which generates hundreds of thousands of U.S. jobs. Hopefully, this decision will ensure that these law-abiding businesses will no longer face unfair impediments to importation or exportation of legal products across our borders”, said Aaron Smith, Co-founder, and CEO of The National Cannabis Industry Association.