MILLAR KREKLEWETZ LLP is a boutique Canadian law firm with lawyers who have significant expertise in Export Controls, and the application of Canada's Export and Import Permits Act and the Defence Production Act (implementing Canada's Controlled Goods Program).

Export Controls

Overview

Canadian companies wishing to export goods face a myriad of potential rules and restrictions, which may generally be called “export controls.”  Export of certain goods is controlled by law for a number of reasons, ranging from protection of national security interests, to implementation of Canada’s obligations under international agreements and strategic trade policy. 

There are a number of laws that could restrict export of goods, but the main ones are the Export and Import Permits Act (the “EIPA”) and the Defence Production Act (the “DPA”).

Under these laws, if your company is exporting goods subject to export control, you generally must first obtain an export permit, and in some cases, you must also register with the government.

You should pay special attention to your export control obligations if you deal in any goods that fall into the following categories:

• Agricultural Products (e.g., Refined Sugar, Sugar-containing Products and Peanut Butter)

• Textiles and Clothing

• Softwood Lumber, Unprocessed Logs and Certain Other Forest Products

• All Goods Destined for Countries on the Area Control List (e.g., Myanmar and Belarus)

• Nuclear Energy Materials and Technology

• Missile, Chemical or Biological Goods of Non-proliferation Concern

• Military, Strategic Dual-use Goods

• Miscellaneous Other Goods, including Goods of U.S. Origin (e.g., Roe Herring and Certain Items with Medical Value)

The export control regime is very complicated and it is easy for a company to inadvertently contravene the technical requirements – which may subject you and/or your company to significant fines and even imprisonment. Accordingly, if you are exporting goods that could fall under the above categories, they are potentially subject to export controls, and you should consult a trade expert to learn more about your obligations.

Export Permits

One of the major obligations for controlled goods is the permit system under the EIPA.  The EIPA sets up a system where permits are required in order to export goods that are listed on what is known as the “Export Control List” (“ECL”).  

Generally, export permits may be obtained by submitting an application to the Department of Foreign Affairs and International Trade.  However, for some goods, exporters may be able to take advantage of a “General Export Permit” specific to that good, which may simply be cited when exporting and which does not require an application. 

Exporters should also be aware of another list, the Area Control List, which lists countries to which export of any goods is restricted.  Currently, Myanmar (Burma) and Belarus (recently added) are the only countries on the Area Control List.

Controlled Goods & Canada's Controlled Goods Registration Program

In addition to the requirements for export permits, it is important to note that the export of “controlled goods,” which are a subset of goods listed on the ECL, requires registration under the DPA.  In other words, in order to export controlled goods, a company must not only obtain an export permit but must also register under the DPA (specifically, the Controlled Goods Program), unless they are exempt from registration.

A wide range of activity – not only export – requires registration under the Controlled Goods Program.  For example, registration is required for anyone to “knowingly examine or possess a controlled goods or transfer control a controlled good to another person,” unless exempt from registration. 

Canadian exporters should also be aware that additional documentation (a “US export authorization”) is required to obtain an export permit for the export from Canada of controlled goods of US origin or goods incorporating/manufactured using controlled goods of US origin.

Other Restrictions

Please note that other laws may also restrict export or import of a particular good; for example, the Controlled Drugs and Substances Act restricts the import and export of certain drugs and is administered by Health Canada.

Violations

Both the EIPA and DPA provide for some potentially severe sanctions for violation.  Penalties for violating the EIPA (or its regulations) can range from maximum fines of $25,000 and 1 year imprisonment for less severe infractions (i.e., those prosecuted by summary judgment), and up to 10 years in prison, with no maximum fine, for the most severe of infractions (i.e., prosecuted by indictment).

Penalties for violating the DPA (or its regulations) can range from maximum fines of $100,000 to $2,000,000, and maximum incarcerations periods of 2 years to 10 years, or both – all depending on the severity of the violation, and the manner in which it is prosecuted (i.e., by summary conviction, or by indictment).  Even the relatively more minor transgressions are subject to maximum $25,000 penalties, and imprisonment of up to 12 months.

Personal Liability

It is important to appreciate that directors and officers of corporations are liable to the same punishment above for violations of the EIPA or DPA committed by the corporation, even if the corporation has not been prosecuted or convicted.

Millar Kreklewetz LLP is well-placed to provide guidance and counsel on export control matters, and persons facing criminal prosecution or wishing to understand their export control obligations are encouraged to contact us for a 30 minute free consultation on the issues inherent in their files.

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