Both parts of the illicit trafficking aggravated felony definition require that the conviction be a felony.  In Matter of Davis, the BIA stated:

 

Thus, we conclude that a drug-related aggravated felony includes any state, federal or qualified foreign felony conviction involving [actual unlawful trafficking] . . . .  Conversely, we would not conclude, based solely on the common definitions of “traffic” or “trafficking,” and considering that the ultimate term in question is “aggravated felony,” that an offense that is not a felony and/or an offense which lacks a sufficient nexus to the trade or dealing of controlled substances constitutes “illicit trafficking” [under the aggravated felony definition.]”[243] 

 

There is quite a bit of controversy, however, on how to define “felony” in this context.  See § 3.57, supra.  Counsel must therefore bear in mind the rules of the jurisdiction in which the case arises.

[243] Matter of Davis, 20 I. & N. Dec. 536, 541 (BIA 1992) (emphasis in original).

BIA

AGGRAVATED FELONY - DRUG TRAFFICKING - SMALL QUANTITY
Matter of Aruna, 24 I.& N. Dec. 452 (BIA 2008) (Maryland misdemeanor conviction for violation of Maryland Criminal Law 5-602, distribution of a controlled substance, is an drug trafficking aggravated felony because the offense would be a felony if prosecuted under federal law; 21 U.S.C. 841(b)(4), which treats distribution of a small amount of marijuana without remuneration as a misdemeanor is not a separate federal offense, but rather a "mitigating exception" to the federal felony offense; therefore the categorical analysis is inapplicable to that section).

NOTE: A good example of outcome-based legal reasoning (and the BIA trying to have its cake and eat it too), this case may actually have some positive effect in fighting against Matter of Babaisakov, and other BIA attempts to avoid the categorical analysis. The BIA in this case pushes the "elements" vs. "facts" distinction very hard, providing language counsel can use in other cases.

First Circuit

AGGRAVATED FELONY - DRUG TRAFFICKING - STATE MISDEMEANOR CONVICTION OF POSSESSION OF CONTROLLED SUBSTANCES WITH INTENT TO DISTRIBUTE HELD AN AGGRAVATED FELONY BECAUSE IT WOULD HAVE BEEN A FELONY IF PROSECUTED IN FEDERAL COURT
Berhe v. Gonzales, ___ F.3d ___, 2006 WL 2729689 (1st Cir. Sept. 26, 2006) (to determine whether a state drug offense is an aggravated felony under INA 101(a)(43)(B), 8 U.S.C. 1101(a)(43)(B), the court examines whether the underlying offense would have been punishable as a felony if it had been prosecuted under federal law, and is not bound by the fact that the conviction is a misdemeanor under state law).

Third Circuit

AGGRAVATED FELONY " DRUG TRAFFICKING " ILLICIT TRAFFICKING TEST " FELONY REQUIRED
Thomas v. Attorney General of U.S., 625 F.3d 134 (3d Cir. Oct. 26, 2010) (Because Thomas's convictions were misdemeanors under New York Penal Law, see N.Y. Penal Law 221.40, those convictions cannot, by definition, be aggravated felonies pursuant to the illicit trafficking route.)

Ninth Circuit

AGGRAVATED FELONY " DRUG TRAFFICKING " COCAINE BASE
United States v. Baptist, __ F.3d __, 2011 WL 2150993 (9th Cir. Jun. 2, 2011) (Fair Sentencing Act of 2010, reducing 100-1 disparity in sentencing for crack cocaine, is not retroactive).