Canadian Export Controls: What They Are and Why You Need to know About Them

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Episode 5: Canadian Export Controls - What They Are and Why You Need to know About Them

Release date: August 28, 2009
Guest: Michael Stark
Running time: 6:18 minutes

Controls over the export of goods and technologies out of Canada may impact many industries including manufacturing, technology and software, pharmaceuticals, research etc. Noncompliance can be harsh and includes fines, civil and criminal sanctions or the closure of operations.

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What They Are and Why You Need to know About Them

Welcome to today’s podcast, brought to you by PricewaterhouseCoopers LLP and its associated law firm, Wilson and Partners LLP. This episode is another in a series on Canadian and international tax issues affecting businesses and individuals in Canada.

In this podcast, I’ll outline the nature of Canadian export control regulations. Then we’ll look at why you should be complying with these regulations.

Let’s start by looking at the role and purpose of the Export and Import Permits Act, or the EIPA. Administered by the Department of Foreign Affairs and International Trade, this Act controls and regulates the movement of certain goods and technologies into and out of Canada. It applies to any legal entity, or person, who exports goods and/or technology from Canada. Individual companies, hospitals, universities, and research facilities are affected by this Act.

Under the EIPA, Canadian exporters must obtain export permits for any goods and technologies included on the Canadian Government’s Export Control List, or the ECL. Similarly, exporters must also get permits for goods that are shipped to countries on another list called the Area Control List.

The range of goods covered in the seven categories that comprise the Export Control List may surprise many individuals. Listed goods are not limited to weapons or other goods that have a specific military application. One important category in the list, “Dual Use Goods”, covers civil goods that may also have a military application. For example, a chip used in a computer gaming console may be controlled because it could also be used in a missile guidance system.

Other types of exports requiring export permits include:

  • Exports of technology needed for the development, production, or use for ECL goods. These exports may include a foreign customer’s ability to access information on a company’s website, or even training provided by Canadian employees in a foreign country; and
  • Software exports, such as encryption products, designed or modified for the development, production, or use of ECL goods.

Now let’s consider special Canadian controls on US originating goods. Any product of US origin shipped to a non-US country from Canada requires a Canadian export permit. In some cases, Canadian legislation also requires re-export authorization from US authorities.

Also keep in mind that US export control laws continue to apply even after goods are sent out from the US. Canadian exporters that run afoul of US controls, even while complying with Canadian law, may find themselves placed on the Denied Parties List — and thereby restricted from obtaining any US exports in the future.

Additionally, Canadian legislation does more than just control exports. It also regulates access to certain specified items within Canada. These items are goods and technologies controlled under the US International Traffic in Arms Regulations, or ITAR.

Under these regulations, only persons registered with, or exempted from, the Controlled Goods Program are allowed access to these goods. How can you register? Among other things, you’ll have to prepare and submit a security plan. You’ll also need a designated official to perform an employee security check.

Now that we’ve looked at the nature of export controls in Canada, let’s consider why your company should follow these regulations closely.

Non-compliance can result in severe penalties. Companies that export can end up paying, a substantial fine. Company officers and directors can also be held personally liable, spend twelve months in jail, or up to ten years for an indictable offence.

The Canada Border Service Agency, the CBSA, can assess additional penalties through its Administrative Monetary Penalty System.

Non-compliance can also mean closer scrutiny from the CBSA, resulting in possible delivery delays. In this situation, an exporter cannot deliver to its customer and may face penalties under law for possible breach of contract.

So, how do you comply with export and domestic control regulations?

Begin by reviewing your exports. From there, identify the specific controls that apply to these goods and technologies.

Next ensure that you have the necessary compliance processes and security procedures in place. It may also be wise to review any of your existing procedures for non-compliance.

Before closing this podcast, let’s sum up:

  • First, like other countries, Canada has export controls policies in force. And the fact is, many companies and institutions are unaware of the scope of these controls, and the obligations associated with them. This is why it’s important to know about both domestic and US export control regulations.
  • Second, many categories of goods and technologies may be caught under these regulations. By not becoming familiar with the Export Control List, you could unwittingly violate export control legislation.
  • Finally, it’s important to give yourself a compliance health-check. Fines and jail time for officers and directors can be severe. The possibility of your operations being shut down, make it necessary for you seek the advice of an export control professional. Your risk management and security officers should determine whether or not you’re following these regulations properly.

PwC’s national export controls professionals are available to help you assess and manage a complete compliance process. For more information, please contact your PricewaterhouseCoopers advisor.

Thank you for listening.

The information in this podcast is provided with the understanding that the authors and publishers are not herein engaged in rendering legal, accounting, tax or other professional advice or services. Listeners should discuss with professional advisors how the information may apply to their specific situation.

Copyright 2009 PricewaterhouseCoopers LLP. All rights reserved. PricewaterhouseCoopers refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity. For full copyright details, please visit our website at pwc.com/ca.

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