JWB Presentation - IE Canada CGP-ITAR Session - 11th Annual Western Regional Conference February 26 2014

ITAR & Controlled Goods: Canadian Defense Production Act & CGP Proposed Amendments Practical Compliance &
Enforcement Issues
John W. Boscariol February 26, 2014 I.E. Canada 11th Annual Western Regional Conference
John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
Canadas Trade Controls

export and technology transfer controls
Export Control List Area Control List
economic sanctions
Special Economic Measures Act United Nations Act Criminal Code Freezing Assets of Corrupt Foreign Officials Act
domestic industrial security

Defence Production Act, Controlled Goods Program
other trade control legislation

blocking orders (Cuba) anti-boycott policy and discriminatory business practices laws anti-bribery law (Corruption of Foreign Public Officials Act and FCPA)
compliance convergence
Todays Focus Common CGP Issues and Challenges for Canadian Companies
background on Canadas Controlled Goods Program and relationship with United States defense trade controls interaction with US ITAR - dual- and third-country nationals (ITAR 126.18) impact of proposed changes to the coverage of the CGP interaction with Canadas export control regime
Canadas Controlled Goods Program

background and history relationship with US ITAR and Canadian exemption
Integration of Canadian and US Defence Trade Controls

examples
ITAR 126.5(b) Canadian exemption permanent and temporary exports of certain defence articles and technical data to Canadianregistered persons defined by reference to Canadas Defence Production Act Canadas ECL item 5504(i) controls export of US-origin goods or technology which have been determined under Parts 120 to 130 of Title 22 of the International Traffic in Arms Regulations of the Code of Federal Regulations (United States) as having substantial military applicability
and item 5504 is listed in the Schedule to the Defence Production Act and thereby included in the CGP
Canadas Export Permit Regulations paragraph 3(2)(c) requires that a US ITAR authorization be obtained for the export from Canada of defence-controlled US-origin goods, goods incorporating defencecontrolled US-origin goods, and goods manufactured in Canada using defence-controlled US-origin goods
Integration of Canadian and US Defence Trade Controls

key differences between CGP and US ITAR
ITAR is an export control regime ITAR applies to deemed exports and deemed re-exports ITAR focuses on 25 proscribed countries ITAR does not require registration or security screening for examination, possession or transfer of controlled goods within the United States
Canadian Human Rights vs. ITAR

the problem
in order to benefit from ITAR 126.5 Canadian exemption, transfers of technical data and defence services must be to Canadian registered persons exemption unavailable if dual national of a proscribed country, including those holding citizenship or born there compliance with US ITAR licensing requirements terms of Technical Assistance Agreement (TAA) or Manufacturing Licensing Agreement (MLA) approved by US State Dept may allow transfers only to certain dual nationals to comply, Canadian companies required to determine citizenship, country of origin/birth, exclude access to certain areas, projects may also require application for license or TAA/MLA amendments

prima facie breach of Canadian human rights law, if on basis of citizenship or country of origin:
terminate an employee deny employment restrict access to training treat others preferentially
promotions overtime scheduling
also - asking about citizenship, nationality, country of birth


examples of conflicts (ITAR)
General Motors Defense (2007 Ontario Human Rights Commission)
complaints by six employees, Canadian citizens or landed immigrants, citizenships of third countries (ITAR proscribed states) employees sent home with pay, restricted their access to information, reassignments settled, including monetary remedies employer to make all reasonable efforts to secure such lawful permission as may be obtained to minimize any differential treatment

examples of conflicts (ITAR) (contd)
Bell Helicopter (2008 Quebec Human Rights Commission)
complainant born in Haiti, Canadian citizen for 30 years applied for and hired on internship and training subsequently denied internship because of ITAR rules claim for damages settled

Qubec Human Rights Commission
reiterates its opposition to the application of the ITAR rules in Qubec because of their discriminatory impact they include requirements that are inconsistent with the Qubec Charter of Human Rights and Freedoms can no longer accept that companies established in Qubec submit to foreign rules that infringe on the values and rights of citizens as recognized by the National Assembly following the political developments in this matter attentively any person that believes that his or her rights have been infringed by the application of the ITAR rules may rely on the services of the Commission
The New ITAR Rule (ITAR 126.18)

May 16, 2011 final rule became effective August 15, 2011 no approval from the US State Department Directorate of Defense Trade Controls required for the transfer of defence articles, including technical data, to a foreign business entity, foreign government entity, or international organization that is an approved end-user or consignee for those items, including the transfer to dual nationals or third-country nationals who are bona fide, regular employees, directly employed by the foreign business entity transfer must take place completely within the territories where the end-user is located or where the consignee operates, and must be within the scope of an approved export license, other export authorization, or license exemption the recipient of the defence article is required to have in place effective procedures to prevent diversion to destinations, entities, or for purposes other than those authorized by the applicable export licence or other authorization
New ITAR Rule (ITAR 126.18)

effective procedures to prevent diversion non-US firms that are consignees or end-users of the defence articles must either: require a security clearance approved by a foreign government for its employees or implement a screening process for their employees and execute Non-Disclosure Agreements (NDA) that provide assurances that employees will not transfer any information to persons or entities unless specifically authorized by the employer
must screen all employees who are to access controlled items for "substantive contacts" with the 25 restricted or prohibited countries under ITAR including China, Vietnam, Haiti, Cuba, Venezuela and other countries subject to U.S. military sanctions

what are substantive contacts?
include:
regular travel to those countries recent or continuing contact with agents, brokers and nationals of those countries continued demonstrated allegiance to those countries maintenance of business relationships with persons from those countries maintenance of a residence in those countries receiving salary or other continuing monetary compensation from those countries acts otherwise indicating a risk of diversion

if an employee is determined to have substantive contacts with persons from the ITAR-restricted or prohibited countries, this is presumed to raise a risk of diversion "unless DDTC determines otherwise other requirements
technology security/clearance plan that includes procedures for screening employees substantive contacts maintaining records of same for five years technology security/clearance plan and screening records to be made available to DDTC or its agents for civil or criminal law enforcement upon request
How Does Canadas Controlled Goods Program Work With ITAR 126.18?
problem: the final ITAR rule does not contain an explicit exemption for companies that are registered under and comply with CGP CGD Enhanced Security Strategy (October 1, 2011) August 2011 Exchange of Letters Between US DDTC and PWGSC
DDTC has high regard for the CGP as a means to mitigate the risks of diversion
what has DDTC policy section said (May 2012)?
gives CGP the golden seal of approval no circumstances in which CGP screening will be insufficient for 126.18 substantive contact screening non-disclosure agreement is not required if CGP-screened but has since retracted endeavouring to put it in writing
employee concerns and pushback on sensitive and personal information regarding:
travel frequency, duration and location significant and meaningful associations criminal history financial issues
previous broad Privacy Act statement: consent to disclosure to law enforcement and other government departments and agencies, including foreign governments, which conduct checks and/or investigations in accordance with Memoranda of Understanding (MOUs) established with Public Works and Government Services Canada (PWGSC) no longer references foreign governments
continuing ITAR/CGP challenges
no guarantee yet that screening in accordance with ESS, CGP and Canadian law will meet the ITAR section 126.18 requirements are US exporters/partners comfortable relying on section 126.18? does this resolve human rights and privacy issues?
practical issues remain highly sensitive area for employees
continue education and explanation careful adherence to the CGP application and guidance
continuing ITAR/CGP challenges
does not resolve anything for academic institutions ITAR coverage shrinking, but CGP remains the same (US export control reform) DDTCs suggested non-disclosure agreement (NDA) requires employees to comply with ITAR and certify that they have never acted for or provided information to 126.1 countries, including Cuba, etc.
made-in-Canada NDA?
continuing ITAR/CGP challenges broader issues: is ESS permitted under the DPA and controlled goods regulations? is this consistent with Canadian constitutional (Charter) law?
Proposed Changes to Coverage of CGP Defence Production Act Schedule

attempts to resolve issues regarding differences in coverage of ITAR and CGP Stream 1 ITAR-controlled items from United States concerns with Stream 2 certain non-US origin Group 2, 5504, and Group 6 items
administrative burden of tracking two streams vs one consistent with purpose of CGP? competitiveness vis--vis United States and other countries?
timing of implementation as US export control reform proceeds

Interaction Between CGP and Export Controls

domestic security regime (PWGSC - CGD) vs controls over international transfers (DFATD ECD) exporting CGP items
must apply to ECD for export permit and provide evidence of registration under CGP exporting most CGP items from Canada for end-use in the United States does not require a permit
Interaction Between CGP and Export Controls

discovery of potential contraventions
mandatory security breach report to CGD without delay voluntary disclosure available for ECD but informal others to notify
CBSA, RCMP, DFATD Economic Law Section (sanctions), Canadian Nuclear Safety Commission
John W. Boscariol McCarthy Ttrault LLP International Trade and Investment Law www.mccarthy.ca Direct Line: 416-601-7835
E-mail: jboscariol@mccarthy.ca LinkedIn: www.linkedin.com/in/johnboscarioltradelaw Twitter: www.twitter.com/tradelawyer

JWB Presentation - IE Canada CGP-ITAR Session - 11th Annual Western Regional Conference February 26 2014

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JWB Presentation - IE Canada CGP-ITAR Session - 11th Annual Western Regional Conference February 26 2014

Hochgeladen von

Copyright:

Verfügbare Formate

ITAR & Controlled Goods: Canadian Defense Production Act & CGP Proposed Amendments Practical Compliance &

Canadas Trade Controls

domestic industrial security

other trade control legislation

Canadas Controlled Goods Program

Integration of Canadian and US Defence Trade Controls

Integration of Canadian and US Defence Trade Controls

Canadian Human Rights vs. ITAR

Canadian Human Rights vs. ITAR

also - asking about citizenship, nationality, country of birth

Canadian Human Rights vs. ITAR

Canadian Human Rights vs. ITAR

Canadian Human Rights vs. ITAR

The New ITAR Rule (ITAR 126.18)

New ITAR Rule (ITAR 126.18)

New ITAR Rule (ITAR 126.18)

New ITAR Rule (ITAR 126.18)

Proposed Changes to Coverage of CGP Defence Production Act Schedule

timing of implementation as US export control reform proceeds

Interaction Between CGP and Export Controls

Interaction Between CGP and Export Controls

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