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This post has been updated.
Legal cannabis and hemp business owners say that Border Patrol checkpoints between Imperial and San Diego counties are costing them millions.
Growers and distributors in Imperial County and other parts of Southern California often have to go through Border Patrol checkpoints en route to testing facilities or to bring them to markets farther west. Sometimes, they say, Border Patrol will let them through, checking their state license without problem. But other times, those agents confiscate products and cash.
“It’s been affecting us negatively,” said Angel Fernandez, director of Movocan Inc., which operates a dispensary in Imperial County and has a distribution permit. “We have missed on a lot of revenue because it’s uncertain that our cannabis product will make it out of the county.”
It is the inevitable consequence of different governments treating the same substance in two completely different ways. California voters legalized medical cannabis in the ‘90s and for recreational purposes in 2016, but the federal government continues to prohibit it and treat it like a schedule one narcotic.
Even as cities in Imperial County open to more cannabis businesses, some investors have balked at the opportunity. Others have begun to petition law enforcement at the local, state and federal levels with the hope that they might work out a more practical system to let the legal cannabis trade continue between San Diego and Imperial counties without the constant risk of one’s product and cash getting seized.
But even if the cannabis industry does see some additional leeway on the ground, others don’t think the issue will ever fully be resolved until federal law changes.
Though the stops have been happening for years, people who work in the legal industry started seeing an uptick in late 2019.
In November, Border Patrol confiscated 10.36 pounds of cannabis, amounting to roughly $35,000 in retail value, Fernandez said. He spent days trying to get his product back.
“There was no way, no documents I could file,” he said.
Fernandez said he estimates that the uncertainty the Border Patrol checkpoints have caused him a total loss of between $3 and $4 million. On top of the loss of products during seizures, many distributors have stopped coming to the area because of interactions with Border Patrol.
“It’s unfair to the development of this market,” Fernandez said. “This is the only place in California where you cannot leave without having to go through a federal checkpoint.”
A Border Patrol spokesperson said that since cannabis, regardless of its origin, is federally classified as a schedule one narcotic, it is subject to forfeiture at Border Patrol checkpoints. Hemp with a THC content below .03 percent is not subject to forfeiture and can go through checkpoints, the spokesperson said.
Max Mikalonis, a cannabis consultant and lobbyist at K Street Consulting in Sacramento, said he’s advised clients against seeking a license in Imperial County because of the financial and personal risk posed there. Some have been hesitant to talk about it publicly.
“I appreciate the issue getting attention because it’s just an untenable situation,” he said.
The federal government’s prohibition on cannabis means businesses can’t access traditional banks, so they’re forced to carry large amounts of cash around with them.
Border Patrol’s authority extends 100 miles from the border. All of San Diego is technically under its watch, “a cautionary note for any supplier or producer that wants to locate in the San Diego region,” Mikalonis said. “You might not be able to get your goods out of the region.”
Rocky Goyal, founder of the Apothekare dispensary in San Diego, said he had been interested in setting up a distribution or cultivation facility in Imperial County, but the federal checkpoints were too great a risk for his potentially seven-figure investment.
“When we started looking at the Border Patrol issue and their stance, I had to shy away,” he said. “There are better opportunities elsewhere and when you’re risking this kind of capital, you can’t take those chances.”
Imperial County has far higher unemployment rates than the rest of the state, and the agriculture sector has long been one of the biggest employers. Fernandez said if the checkpoints didn’t deter people from Imperial, the cannabis industry could have a significant economic impact on the county.
The county’s cheaper labor and electricity rates are also why it’s so attractive to the cannabis industry.
March and Ash has dispensaries in San Diego, Vista and the city of Imperial, and one of its principals thinks the checkpoints could actually serve a purpose. They’re not categorically opposed to the stops of suppliers along their Southern California routes.
Bret Peace, the general counsel, said it’s naïve to assume Border Patrol would just wave every cannabis company through. Ideally, he said, federal agents would give legal suppliers a pass but continue to crack down on illegal operators.
“Ultimately there needs to be a process with local and federal government so that they know and can quickly clear the legal product, but we want those agents to continue to inspect everything coming through,” he said. “That for us is a lynchpin towards dealing with the illegal market.”
But there’s a problem, as far as he sees it: The legal and illegal industries have some overlap. Legal manufacturers have been accused of also producing for the illegal marketplace. And local law enforcement’s response has mostly been a game of whack-a-mole. Authorities may try to prosecute the people working behind the counters, but rarely do they go after the actual players behind those interests.
The illegal market might be more fearful of federal agents, though.
“We want them to be active,” Peace said. “We want them off the sidelines.”
That’s why he said he reached out to federal, state and local law enforcement entities to try to reason with them and encourage them to coordinate their efforts, while at the same time conceding that the situation is nuanced and difficult because of their conflicting mandates and laws. Border Patrol checkpoints could be great, he said, if they served as “a choke point for weeding out the illegal supply.”
It’s not just suppliers who are taking a hit.
Mark Samuels, executive vice president of product and creative for Primordia, a hemp operator in Imperial County, said that the confiscations of samples headed to a testing lab can have significant impacts. It means that a crop can’t be quality-tested to ensure it meets state standards and without that assurance, business owners can’t use any of that crop.
Josh Swider, CEO of InfiniteCAL, a testing lab in San Diego, said one of his sampling technicians was stopped at the end of May and 14 samples of hemp were confiscated.
There are seven licensed distribution centers, three licensed product manufacturers and six licensed dispensaries impacted by checkpoints in the region, Swider noted in a letter to the state’s Bureau of Cannabis Control asking for assistance.
“Despite obtaining the correct licensing and paying local, state, and federal taxes in order to operate our businesses within the state of California, these businesses are now being deprived of an essential service required to get their products to market,” he wrote.
The Bureau of Cannabis Control responded that because commercial cannabis activity is still illegal federally, there is nothing the state could do. A spokesman for the bureau did not respond to a request for comment from Voice of San Diego, but Swider provided a copy of their e-mail correspondence.
“The Bureau understands that this creates challenges for those legally conducting commercial cannabis activity pursuant to state law,” an official wrote in that response. “However, the Bureau does not have the authority to change the federal law or Border Patrol checkpoint operations to allow licensees to transport cannabis goods through these checkpoints.”
Swider thinks the state should engage in a dialogue with border agents to figure out a better system for state-licensed businesses. Samuels said it would make sense if Border Patrol just logged shipments from state-licensed businesses and requested the Certificate of Analysis so they could keep track them, rather than confiscate the product.
Fernandez said he doesn’t think it would be complicated for Border Patrol to come up with a system to work with businesses that are licensed by the state. He would even be open to the agency charging back their time or money to the industry.
Update: This post has been updated to include information sent from Border Patrol after this post was initially published.