Export controls are applied by many governments as a means to regulate, and sometimes deny, trade in specific lists of military and dual-use goods and technologies. The principal objective of export controls is to ensure that exports of certain goods and technology are consistent with Canada's foreign and defence policies.
Export Controls and Canada
Canada's Export and Import Permits Act authorizes the Minister of Foreign Affairs to issue to any resident of Canada a permit to export items included on the Export Control List or to a country included on the Area Control List, subject to certain terms and conditions. An export permit constitutes a legally binding authorization to export controlled goods or technology as described. Factors such as the nature, characteristics, origin or destination of the goods or technology being exported determine whether an export permit is required. If an export permit is required, one must be obtained from the Export Controls Division of Foreign Affairs, Trade, and Development Canada before these items can be exported legally.
The Export Control List identifies specific goods and technology that are controlled for export from Canada to other countries, regardless of their means of delivery. Products subject to export controls include military and strategic goods and technology, softwood lumber, firearms, sugar and sugar containing products, peanut butter, logs, and U.S.-origin goods and technology.
Exports of goods or technology identified on the Export Control List may be exempted from export permit requirement if the items are shipped to certain countries. Export permits are not required for most controlled goods or technology destined to a final consignee in the United States, but some exceptions apply (e.g. firearms, nuclear technologies, and precursor chemicals). Items that require an individual permit to the U.S. are listed in Section D.5 of the Export Controls Handbook.
Canadian exporters should note that the exports of all goods and technology of U.S.-origin, as defined in Item 5400 on the Export Control List, regardless of their nature and destination, require permits from the Export Controls Division of Foreign Affairs, Trade, and Development Canada.
Controlled Goods Program (CGP)
The Controlled Goods Program (CGP) (under the Controlled Goods Directorate – CGD) is a federal government program administered by Public Works and Government Services Canada (PWGSC). It is a domestic industrial security program that helps strengthen Canada's defence trade controls and prevents the proliferation of tactical and strategic assets including weapons, satellite global positioning systems and communications equipment, military equipment and related intellectual property.
The objective of the CGD is to safeguard controlled goods and/or controlled technology within Canada and prevents controlled goods and/or controlled technology from being accessed by unauthorized persons. Anyone who conducts business in Canada and examines, possesses and/or transfers controlled goods and/or controlled technology in Canada must comply with Canada's Defence Production Act and Controlled Goods Regulations.
Export Controls and the U.S.
In the United States, the laws and regulations can be very lengthy, complex, and differ in their intent, language and interpretation from licensing agency to licensing agency, and over time. While generally these regulations apply to U.S. exporters, and are therefore the responsibility of U.S.-based suppliers to fulfill, there are frequently obligations that must be met by Canadian companies or persons. The U.S. Export Controls are divided into three systems: the ITAR regulates the export of defence items, the EAR regulates the export and the re-export of commercial, dual-use items, and the OFAC regulates economic sanctions.
International Traffic in Arms Regulations (ITAR)
The U.S. International Traffic in Arms Regulations (ITAR), administered by the Department of State, regulates the export of defence and aerospace articles, technology and materials from the U.S. The U.S. Government views the sale, export, and re-transfer of defense articles and defense services as an integral part of safeguarding U.S. national security and furthering U.S. foreign policy objectives. The Directorate of Defense Trade Controls (DDTC) is charged with controlling the export and temporary import of defense articles and defense services covered by the United States Munitions List (USML).
ITAR Dual National Issue
The ITAR contain provisions prohibiting the export of certain controlled materials to a list of 25 U.S. "proscribed" countries (e.g. China, Iran, etc.). All foreign signatories to licensing agreements, or recipients of licensed items, are currently required to identify all nationalities of their employees to ensure that no individuals who were born in, or hold the citizenship of, a U.S. proscribed country gain access to controlled material.
On May 16, 2011, the U.S. government released a new rule (ITAR §126.18) regarding the treatment of employees with dual nationality, as well as third-country nationals employed at foreign firms. The new rule allows nationality–based practices to be replaced with security measures that can be applied to all persons equally. PWGSC has worked to augment the CGP to address domestic security concerns while also accommodating the specific requirements of the new ITAR rule in respect of dual and third-country nationals. The Enhanced Security Strategy of Canada's Controlled Goods Program is recognized as an effective solution to prevent illicit transfers. PWGSC has recently signed an Exchange of Letters (EOL) with the U.S. Department of State to address issues surrounding the application of the new rule to Canadian companies. This EOL recognizes the efforts that PWGSC has taken to enhance the Controlled Goods Program to meet the requirements of the new rule and charts a process for government-to-government exchange of information if and when the U.S. Department of State requests technology security clearance plans or screening records as outlined in the new rule.
Canadian Exemption under ITAR
The Canadian Exemption (ITAR §126.5) allows U.S. suppliers to export licence-free certain less sensitive, unclassified ITAR-controlled materiel and services to Canadian recipients registered under Canada's Controlled Goods Program. One prerequisite for Canadian Industry to use the Canadian Exemption is to register with CGD. Exports to Canada of more sensitive as well as classified ITAR-controlled items or services still require a licence, just like any other destination.
BIS Export Administration Regulations (EAR)
The U.S. Department of Commerce's Bureau of Industry and Security (BIS) is responsible for implementing and enforcing the Export Administration Regulations (EAR), which regulate the export and re-export of most commercial items. BIS administers regulations that control the movement of dual-use technologies that, while normally used in civilian applications, have the potential for military uses.
A relatively small percentage of total U.S. exports and re-exports require a license from BIS. License requirements are dependent upon an item's technical characteristics, the destination, the end-user, and the end-use. A key in determining whether an export license is needed from the Department of Commerce is knowing whether the item has a specific Export Control Classification Number (ECCN) as listed in the Commerce Control List (CCL).
Deemed exports is an important concept under the EAR. An export of technology or source code (except encryption source code) is "deemed" to take place when it is released to a foreign national within the United States. Under the EAR, nationality is determined by the last citizenship obtained by the foreign national.
For more information, please visit the Bureau of Industry and Security's Introduction to Commerce Department Export Controls (PDF version, 1.74 MB, 16 pages).
OFAC Economic Sanctions
The Office of Foreign Assets Control (OFAC), in the U.S. Department of the Treasury, administers and enforces economic sanctions against specific foreign countries. Sanctions play an important U.S. policy role in protecting national security. Sanctions involve the blocking of assets, restriction of trade and financial transactions.
The jurisdiction of these U.S. sanctions covers U.S. individuals and citizens that are located anywhere in the world. It also includes individuals regardless of citizenship physically located in the U.S. as well as corporations organized under U.S. law, including foreign branches.
OFAC enforcement is dealt with on a case by case basis. Factors that will increase the level of consequences include those that inflict the greatest harm to sanctions programs. For example, cases involving the supply of oil will result in greater penalties. Whether the company had knowledge of the violations will also play a large role in the level of consequences enforced. For specific inquiries, contact the OFAC hotline: 1-800-540-6322.
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