LexSage

Can A Canadian Business Make A
Voluntary Disclosure For An
Export Controls Violation?

July 11, 2016

The short answer is “yes”.

There is a procedure whereby a Canadian business or person may make a voluntary disclosure to the Government of Canada (Export Controls Division of Global Affairs Canada) for an export controls violation or infraction.  For example, if your company exported controlled goods (e.g. encryption technology, dual-use goods) without an export permit, there is a procedure to voluntarily report the mistake.

In the “Annual Report for the Year 2015: Annual Report to Parliament on the Administration of the Export and Import Permits Act”, Global Affairs Canada reported that 37 voluntary disclosures had been made in 2015. In the “Annual Report for the Year 2014: Annual Report to Parliament on the Administration of the Export and Import Permits Act”, Global Affairs Canada reported that 41 voluntary disclosures had been made in 2014.

Global Affairs Canada writes the following in the Reports concerning the voluntary disclosure process:

"The Export Controls Division recognizes that, on occasion, responsible exporters inadvertently fail to comply with the EIPA. Exporters finding themselves in such a situation are encouraged to disclose any incidents of non-compliance to Global Affairs Canada as soon as possible. The Export Controls Division looks favourably upon disclosures if, after considering the information provided, it is satisfied that the exporter has fully cooperated and that no further action is warranted. Depending on the gravity or overall circumstances of a case, the Export Controls Division may nonetheless refer disclosures to CBSA or RCMP for further review."

The Export Controls Handbook – Administrative Procedures described the voluntary disclosure process as follows:

"G.7. Disclosures of Non-Compliance
The Export Controls Division recognizes that, on occasion, responsible exporters inadvertently fail to comply with the Export and Import Permits Act.  We encourage all exporters finding themselves in such a situation to disclose any incidents of non-compliance to us as soon as possible.

The Export Controls Division looks favourably upon disclosures if, after considering the information provided, we are satisfied that the exporter has fully cooperated and that no further action is warranted.  Depending on the gravity or overall circumstances of a case, we may nonetheless refer disclosures to the Canada Border Services Agency or the Royal Canadian Mounted Police for further review.

G.7.1. Disclosure Procedures
Any voluntary disclosure must be accompanied by a cover letter, signed by a senior company officer and addressed to the Director, Export Controls Division, Foreign Affairs, Trade and Development Canada, 125 Sussex Drive, Ottawa, Ontario K1A 0G2, which clearly states that its purpose is to disclose non-compliance with the Export and Import Permits Act.  Included in the cover letter or in accompanying documentation must be the following:

• Details of the products concerned (including technical specifications for assessment of export control status); exporters should provide their self-assessment against the Export Control List on the control status of the goods or technology that was exported, including the rationale for such assessment;
• Dates of all shipments, mode of transport, and port of exit;
• Quantities and values of each shipment for each product concerned (including copies of the B13A or Canadian Automated Export Declaration submitted to the Canada Border Services Agency, as well as copies of bills of lading, freight forwarding, shipping or commercial invoices);
• Contract of sale between the exporter and the final consignee;
• For each export shipment in question, a statement as to whether the export took place intentionally;
• Description of the circumstances underlying each export shipment in question;
• Description of steps taken or processes and procedures put in place to ensure that where required, export permits will be obtained in future; and,
• Any other documentation that the exporter believes is relevant to the purpose of the disclosure.

Disclosures must be submitted in writing.  You should contact the Export Controls Division for advice on the most appropriate means of submitting a disclosure of non-compliance."

It is important to note that violations of export controls laws can result in fines and imprisonment.  As a result, the voluntary disclosure process must be undertaken with careful thought.  It may be wise to commence the process with the assistance of legal counsel where you may be protected by solicitor-client privilege.  A lawyer who has been down the road before can assist with the avoidance of serious obstacles.  More importantly, a lawyer can help your company organize the information in the most favourable manner. I often tell clients that they must be prepared to “open the kimono” because if they are perceived to be hiding important details, the voluntary disclosure can go sideways quickly.  Sometimes just a lack of organization can be perceived as avoidance by the authorities.

It is also important to note that violations of the United Nations Act and/or the Special Economic Measures Act involves economic sanctions, which are different from export controls.  This blog post does not discuss voluntary disclosures of economic sanctions violations.

For more information, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.

This article was originally published on www.Canada-USBlog.com. Republished with permission.