United States-based lawyer Dan Harris, a founding partner of Seattle international law firm Harris Sliwoski and co-author of the China Law Blog, said that the new law was “more of a change in degree than brand new things”

But he added uncertainties remained and that businesses were unclear on how to handle confidential information under the domestic legislation.

Harris said there were also concerns over liability for unintentional national security breaches.

The Seattle law firm Harris Sliwoski provided more background on the measure and its journey through the Washington legislature, noting that the 37 percent tax imposed an unnecessary burden on patients.

“On March 6, 2024, the Washington Senate passed HB 1453 which will provide an exemption from the 37% excise tax for medical cannabis patients and designated providers. The bill now waits for signatures and executive action to become law. First introduced in 2023, HB 1453 sought to harmonize the existing medical exemptions from general sales and use taxes with the 37% excise tax on cannabis sales,” the law firm explained. “Medical cannabis patients and providers face a significant financial burden when patients and providers are unfairly taxed the same as recreational consumers. Primarily, medical cannabis is not recreational or a luxury, but a necessity for many people who suffer from chronic pain, epilepsy, PTSD, and other conditions. Medical cannabis is often the only effective treatment that allows them to function and improve their quality of life. Medical cannabis patients and providers must already jump through additional regulatory hoops to stay compliant with the LCB and the DOH and the imposition of additional taxes only exacerbates this hardship. Medical cannabis patients and providers follow strict rules and guidelines to access the medicine not required by recreational cannabis users and providers, and it is unjust to further penalize those medical patients and providers.”

“Adding a tax aimed at recreational sales on top of that makes it even more unaffordable for many patients who are already struggling financially. This can force them to reduce their dosage, switch to cheaper but less effective products, or even turn to the recreational market which does not have the same DOH requirements and compliance standards,” the firm said. “Taxing medical cannabis patients the same as recreational consumers is a form of discrimination that harms their health and well-being. It also goes against the principle of harm reduction, which is one basis of medical cannabis legalization policy.”

The bill will now head to the desk of Democratic Gov. Jay Inslee. If he adds his signature, the bill “will take effect ninety (90) days after the adjournment of the current legislative session and will provide medical cannabis patients and providers a much-needed tax exemption for their medicine,” Harris Sliwoski said.

 Under federal tax code, companies cannot deduct many ordinary business expenses if they deal in Schedule I or II controlled substances. That prohibition would no longer apply if marijuana becomes a Schedule III substance, finally allowing many cannabis companies to turn a profit, said Griffen Thorne, a cannabis industry attorney based in Los Angeles. “This would be a lifeline for an industry that has really been suffering,” Thorne said.

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Packard, however, argued that growing U.S.-China tensions and increasing uncertainty is spurring Western companies to reorient supply chains out of China. This was echoed by Robert Kossick, an international trade lawyer at Harris Bricken, a law firm that assists companies relocating outside China.

“We are where we are today in part because of the initiatives and the legislative initiatives and the policy initiatives that are coming out of Washington, DC,” Kossick argued.

The flow of European, U.S., and Canadian businesses outsourcing contract manufacturing to China is drying up for a number of reasons, he told Inside U.S. Trade, citing “tariff reasons, policy reasons, [and] forced labor concerns.”

According to Kossick, the latest U.S.-China trade figures are a “harbinger” of further declines in the two countries’ trade.

“We realized how dependent and exposed we were to the goodwill of trading partners,” Kossick said, adding that it prompted companies to pursue improved supply chain security and sustainability even at the expense of cost and efficiency gains. “At a macro level, that is the ethos of our time.”