LexSage

Canada Has Made Important Changes
To The Export Control List And
Export Controls Guide: It Is Time To
Update Company Export Controls

July 21, 2017
Authored by Cyndee Todgham Cherniak

On July 12, 2017, the Government of Canada (more specifically, the Governor in Council (Cabinet)) promulgated changes to the Export Control list, which is a regulation.  In the Canada Gazette, Part II, Regulation SOR/2017-139 “Order Amending the Export Control List”  (the “ECL Order”) made pursuant to the Export and Import Permits Act was published.  The Order comes into effect on August 30, 2017.  This means that Canadian businesses have one month to determine whether the changes affect their export activities. Exporting or transferring (and attempting to export or transfer) goods and technology on the Export Control List without a permit is prohibited.

Global Affairs Canada, Export Controls Division plans to release an updated Guide to Canada’s Export Controls (“Export Controls Guide”).  Global Affairs Canada has announced that that the current version of the Export Controls Guide (that is the 2013 version) will remain in effect. On August 11, 2017, the December 2015 Export Controls Guide will be in effect (yes, I know it is July 2017, but the official title given to the new Export Controls Guide in the ECL Order is “A Guide To Canada’s Export Control list – December 2015″).  The Export Controls Guide lists goods and technology that are subject to Canada’s exports restrictions and for which an export permit is required.

The changes to both the Export Control List and the Export Controls Guide are not taking place in a vacuum.  The Government of Canada conducted consultations with stakeholders in 2014 and 2015.  These changes and additions are made in response to those consultations and changes to Canada’s international obligations in/with the Wassenaar Agreement (December 2015), Nuclear Suppliers Group (June 2015), Missile Technology Control Regime (October 2015) and Australia Group (June 2015).

The ECL Order adds new export controls and changes a significant number of existing export controls (see the complete summary here).  Additions are made to Groups 1, 2, 3, 4, 6, and 7. Changes are made to all Groups.

Some (not all) of the more significant additions are:

• controls over laser materials (rare-earth-metal doped double fibres);
• controls over technology for certain flight controls systems;
• controls over satellite goods and technology (space craft buses, spacecraft payloads, spacecraft on-board systems, spacecraft-related terrestrial equipment);
• controls for various aerospace goods and technologies (specific technology for wing-folding systems for fixed-wing aircraft, specific combustion chambers for liquid propellant rocked engines, specific fuel and polymetric substances for rocket propellants);
• controls over the explosive mixture BTNEN; and
• controls over chemical weapons precursor chemicals and pathogens.

Some (not all) of the significant changes are:

• removal of controls over certain marine goods and technology;
• removal of controls over certain small-waterplane-area vessels and associated equipment;
• removal of controls over certain seals and gaskets;
• removal of certain controls over certain hydraulic fluids;
• removal of certain controls over certain polymers made from vinylidene fluoride;
• removal of certain controls over certain unprocessed fluorinated compounds;
• removal of certain controls over certain plasma dry etching equipment;
• removal of certain controls over certain laser-based telecommunications test/inspection equipment;
• removal of certain controls over certain thermopile arrays;
• removal of certain controls over certain mirrors for terrestrial helio installations;
• clarifications to controls relating to machine tools;
• clarifications to controls relating to certain microwave assemblies (coverters and harmonic mixers, oscillators and oscillator assemblies);
• clarifications to controls relating to cryptographic items;
• clarifications to controls relating to sonar acoustic projectors;
• clarifications to controls relating to optical mirrors;
• clarifications to controls relating to unmanned aerial vehicles (UAVs)
• clarifications to controls relating to UAV navigation and control equipment;
• clarifications to controls relating to space launch vehicles;
• clarifications to controls relating to military diving and swimming apparatus:
• clarifications to controls relating to liquid slurry and gel propellant control systems;
• clarifications to controls relating to analogue-to-digital converter integrated circuits and analogue-to-digital converter assemblies valves;
• clarifications to controls relating to biological weapons agents;
• clarifications to controls relating to measuring systems;
• clarifications to controls relating to high energy devices;
• clarifications to controls relating to digital data recorders;
• clarifications to controls relating to electronically steerable phased array antennae;
• clarifications to controls relating to underwater vision systems;
• clarifications to controls relating to fibre/tow placement machines;
• clarifications to controls relating to centrifugal balancing machines;
• clarifications to controls relating to freeze-drying equipment;
• clarifications to controls relating to biocontainment chambers; and
• clarifications to controls relating to aerosol inhalation chambers.

The details are contained in Global Affairs’ complete summary.

One of the areas of clarification is in the area of cryptographic goods and technology (see 1-5.-Part 2 – Note 1, 1-5.-Part 2 – Note 3, 1-5.A.2., 1-5.B.2., 1-5.D.2. and 1-5.E.2 in the December 2015 Guide to Canada’s Export Conrols).

It is important to understand Canada’s export controls and carefully review the additions and changes. It is not just physical exports (that is sending something by courier, ship, air, etc. from Canada to a place outside Canada) that are covered by Canada’s export controls. Transfers, in the form of server access, uploads and downloads (e.g. DropBox) USB key/DVDs/CD-Roms, emails, telephone conversations, technical assistance and services, etc. are covered by Canada’s export controls.

Any time there are major changes to the Export Control List or the Export Controls Guide, it is time to understand the changes and update systems used to ensure compliance with the Export and Import Permits Act.  The most time consuming step is a review of one’s exports and transfers to identify controlled goods and technology (including components of goods to be exported or transferred).  The next step is to determine whether any newly controlled goods are in the possession of representatives or agents outside of Canada (a transfer could take place after the changes come into effect on August 11, 2017 and your organization may be held to be responsible for a violation). The next step is to update computerized systems that ensure an export permit is obtained prior to the export or transfer of all controlled goods or technology.  The next step is to update compliance policies and programs.  Don’t forget to educate the key people in your organization about the changes to Canada’s export controls laws and the compliance program.  It is often necessary to contact agents and representatives outside Canada (including subsidiaries) in order to inform them of the changes to Canada’s export controls laws and train them to follow compliance programs.

Managing an internal update takes time and must be carefully managed (or you will miss the implementation date).  There is not much time – so, get started as soon as possible.  The Government of Canada has chosen to implement these changes over summer holidays.

For more information or to arrange an export controls diagnostic, please contact Cyndee Todgham Cherniak at 416-307-4168 or at Cyndee@LexSage.com. If you would like assistance in managing the process, Heather Innes, formerly in-house counsel at a company with export controls processes, would be happy to assist. Please call Heather at 416-350-1234.