Mexico and Hemp: A Strong Emerging Market

MEXICO AND HEMP: A STRONG EMERGING MARKET

As many of you know, Ashley and I have been spending a lot of our time in Mexico during the past year. In addition to the idyllic climate, beautiful landscape, festive atmosphere, delicious food, friendly people, and rich cultural history, important legal changes signal that Mexico is poised to become an international cannabis powerhouse. We are actively preparing for this exciting development.

Despite having a population of 130 million and a gross domestic product over a trillion as measured in US dollars, many Americans are surprised to learn that Mexico is the 15^th richest country in the world. If you compare its population with that of legalized Canada (38 million), or soon to be legalized Germany (83 million), Mexico’s potential impact on the international cannabis industry quickly becomes apparent.

In this article, I will discuss the legal status of hemp in Mexico, an evolving issue that was the subject of a recent decision by the country’s highest court, the Supreme Court of Justice of the Nation (Supreme Court). I will also make some predictions and practical recommendations for engaging in the emerging Mexican hemp industry.

Part 1- What is “Hemp” in Mexico?

As is the case with most countries, Mexican law distinguishes between cannabis with high tetrahydrocannabinol (THC) concentrations and cannabis with low THC concentrations. The General Health Law does not use the term “hemp”, though the term is commonly used to refer to low-THC cannabis, and I will use it in this article. Current law provides that a product containing cannabis derivatives with THC concentrations that do not exceed 1% and which have wide industrial uses, such as cosmetics and dietary supplements, can be commercialized, exported, and imported, provided that they comply with the applicable health regulations.

Notably, there are currently no “applicable health regulations” for hemp products. Regulations were published through the Federal Commission for the Protection against Sanitary Risks (COFREPRIS), which is roughly analogous to the Food and Drug Administration (FDA) in the US, on October 30, 2018 in the form of “Guidelines on Health Control of Cannabis and its Derivatives” (Guidelines). Several dozen hemp products were approved shortly thereafter; however, the Guidelines were revoked in 2019 and have not been replaced. In other words, the Mexican standard for hemp is cannabis with THC concentrations (presumably, this means “total THC”) up to 1%. Hemp is not prohibited or even regulated in Mexico. However, as I will discuss below, it may be prudent, and even necessary, to obtain a permit before engaging in hemp production or commercialization.

Part 2- The Mexican Supreme Court Addresses Hemp

Unlike in the US, the Supreme Court in Mexico has been active in the cannabis debate. Most recently, it issued a ruling regarding hemp in a case brought by Xebra Brands Ltd. and its Mexican subsidiary, Xebra Mexico, in which Xebra sought a court ruling, called an “amparo”, authorizing it to produce hemp and commercialize hemp products. As a side note, the amparo has no equivalent in American jurisprudence. Generally speaking, it is a court action to protect an individual against abuses by the state and is used to challenge acts by governmental authorities as being contrary to Constitutional rights.

In the Xebra case, the amparo action was necessary due to actions taken by COFREPRIS to prohibit hemp production except for medical and scientific purposes. On December 1, 2021, the Supreme Court unanimously ruled in favor of Xebra and granted an injunction allowing it to import hemp seeds, cultivate hemp, process hemp, extract cannabinoids from hemp, manufacture hemp products, and sell hemp products within Mexico and export them. Presumably, the ruling will assist future applicants in obtaining permits from COFREPRIS to engage in production and commercialization of hemp and hemp products. You can read the Supreme Court’s press release on the case below.

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Part 3- What Does the Future Hold for Hemp in Mexico?

Last month, a draft proposal, called “Federal Law for the Regulation of Industrial Hemp”, was put forth by María Clemente García, a representative in the Chamber of Deputies. According to Ms. Clemente, the proposal is intended to “create conditions for a legal framework that allows small industrial producers to generate a new economy based on this plant that has been stigmatized. Incidentally, it will contribute to the economic development of the country.”

The proposal implicates multiple federal agencies, including the National Service of Health, Food Safety, and Quality (SENASICA), which would issue and regulate licenses for the cultivation and processing of industrial hemp; the Ministry of Agriculture (SADER), which would issue permits to import seeds and also be in charge of control and secondary regulation; and COFEPRIS, which would regulate importation of raw materials. It is too early to predict whether this proposal will become law, but we are following it closely.

In the meantime, hemp products are currently being sold in Mexico. Although hemp is lawful, it is prudent and probably necessary at the moment to obtain authorization from COFREPRIS before engaging in hemp production and commercialization in Mexico. I say “probably” because of the lack of regulations and the position taken by COFREPRIS on the matter. Additionally, hemp’s relative novelty still means that officials are often not well-informed about it. That being said, it is definitely necessary to obtain a permit from COFREPRIS to export hemp products to Mexico, a legal process that can be daunting.

It is also important to keep in mind that the legal developments regarding hemp are occurring while Mexico is experiencing a radical shift in cannabis policy generally. Cannabis for medical use is technically lawful, but the framework is in its infancy and medical cannabis is not available in any meaningful sense. Additionally, in June 2021 the Supreme Court struck down laws prohibiting the personal use of cannabis as unconstitutional. While widely touted, the ruling did not authorize commercialization of cannabis. Congress is close to legalizing cannabis for adult-use, and may do so soon; however, it bears keeping in mind that Congress has come close to legalizing cannabis in the past but has so far failed to do so. A discussion of these developments is for another article. My point in addressing them here is that they will most likely impact hemp’s future.

Part 4- What Does All This Mean for Hemp in Mexico?

The artificial division of cannabis into high THC (“marijuana”) and low THC (“hemp”) forms has resulted in both a thicket of unresolved legal issues and numerous business opportunities in the United States. Among other things, it necessitated introduction of the Source Rule to determine whether a cannabinoid, such as cannabidiol (CBD), is a controlled substance or not. Although I articulated the Source Rule in 2016 when the CBD market began to emerge, it is still being used to support the legal status of novel hemp-derived cannabinoids, such as delta-8 THC, tetrahydrocannabivarin (THCV), and cannabinol (CBN). I anticipate that the marijuana-hemp bifurcation of cannabis in Mexico will produce similar legal issues and business opportunities in Mexico and that the country will soon have a robust market for hemp and hemp products.

We are actively involved in the nascent Mexican hemp industry and work with local lawyers and professionals in aiding our clients to participate in it. We have years of experience advising clients about hemp in the US and throughout the world and are excited about the opportunities in Mexico. Contact us if you want to discuss hemp in Mexico. 

December 8, 2021

Rod Kight is an international hemp lawyer. He represents businesses throughout the hemp industry. Additionally, Rod speaks at cannabis conferences, drafts and presents legislation to foreign governments, is regularly quoted on cannabis matters in the media, and is the editor of the Kight on Cannabis legal blog, which discusses legal issues affecting the cannabis industry. You can contact him by clicking here.