Archive for the ‘Canada’ Category

Chinese Man Attempts to Smuggle 51 Turtles in His Pants across the Canadian Border

Monday, November 24th, 2014 by Brooke Driver

By: Brooke Driver

Now here’s one you don’t hear every day, folks. Recently, Kai Xu, a Chinese-born Canadian citizen and engineering student at the University of Waterloo, attempted—unsuccessfully, of course—to smuggle 51 turtles of various species across the Detroit-Windsor border into Canada…in his pants.

And while the incident sounds more like a Road Runner episode than an export enforcement case, turtle smuggling is apparently a more common problem than you’d think, with a high demand for turtles as food or pets and one species—which was represented in the unfortunate hostages in Xu’s sweatpants—worth as much as $800 a pop.

And apparently, this is not the first time Xu has attempted to smuggle these animals (although, for his sake, we hope this was the first time the turtles were strapped to his legs and groin—ouch!). This is one in a series of incidents involving the 26-year-old Xu, who was also recently arrested, along with accomplice Lihua Lin, for attempting to fly to Shanghai with over 200 turtles hidden in Lin’s suitcase.

And while the crime is rather funny, the potential consequences aren’t. Xu, charged with smuggling, illegal trading and exporting could serve up to ten years behind bars for his crimes.

The (assuredly traumatized) turtles in question have been seized and placed with Fish and Wildlife Service agents, where they will hopefully lead a peaceful and pants-free life from now on.

Bass Pro Fined for Illegal Rifle Scope Exports

Wednesday, July 16th, 2014 by Brooke Driver

By: John Black

What? Bass Pro Shops, the favorite store for all my redneck buddies and family members got busted for sending scopes to the Chinese Communists? What in the world can be next?

BIS announced on the 10th of June that it has settled with the outdoors retail giant Bass Pro over its nine alleged violations of the Export Administration Regulations. According to BIS, during the period between June 2, 2010 and June 29, 2011, Bass Pro exported controlled optical sighting devices with a total value of $3,513 to end users in Canada, China and Cyprus without first attaining the necessary licensure. These items are controlled for Firearms Conventions reasons when exporting to Canada and Crime Control reasons when exporting to the two other countries.

Although the total amount of the shipments was fairly low, BIS has decided to enforce a $25,000 penalty, likely due to the number of countries involved in the illegal transactions.

Top 5 Things Canadian Firms Need to Know About US Export Control Reform

Friday, May 23rd, 2014 by Brooke Driver

By: Scott Gearity

1. Reform makes exporting transitioned items from the US to Canada especially simple 

A key feature – perhaps the key feature – of Export Control Reform is that many items which were once controlled (or assumed to be controlled) under the International Traffic in Arms Regulations have or will instead come under the scope of the Export Administration Regulations.

One of the major differences between the ITAR and the EAR is in how these two bodies of regulations determine export license requirements. With the ITAR, each export of a defense article requires a license, unless the transaction specifically qualifies for an exemption. By contrast, the most common EAR export authorization is No License Required. The vast majority of EAR-controlled items may already be exported from the US to Canada NLR. With reform, this treatment is extended to include the military items no longer included on the US Munitions List and now classified in 600 series Export Control Classification Numbers. In other words, many military commodities which used to require Department of State licenses for export from the US to Canada (or perhaps qualified for the ITAR’s Canadian exemption) may now be exported for ultimate end-use in Canada without a license.

This is a big change that makes exporting some military items from the US to Canada much easier. But it is also consistent with the longstanding US policy of granting Canada favorable treatment under the EAR. Canada is the only country to which 600 series items in general may be shipped NLR.

2. Reform also means easier movement of transitioned items within Canada

Want to send ITAR-controlled goods across Toronto for heat treatment? Or to Vancouver for testing? What about selling surplus to potential buyers elsewhere in Canada? The State Department may view such actions as retransfers, requiring their approval.

But just as the export of USML to Commerce Control list transitioned items is eased by reform, so is the movement of these items within Canada. In general, as long as a Canadian firm avoids transferring an EAR-controlled item for a problematic end-use or end-user or with knowledge that the other party will reexport the item contrary to the EAR (e.g. to Europe without a license or qualifying license exception), it is possible to retransfer most EAR-controlled goods (including 600 series items) without specific US Government authorization.

3. You might be able to say goodbye to the “see-through rule” 

From the perspective of the Canadian purchaser of US-origin parts and components, another major benefit of ECR is the EAR’s more reasonable approach to determining which Canadian-made products are subject to US reexport controls as a result of their integrated US-origin content. Under the ITAR’s infamous “see-through rule,” burdensome State Department regulations may apply to a Canadian-origin product – any Canadian-origin product (including entirely commercial ones) – based on the incorporation of even a single, minor ITAR-controlled part.

The EAR takes a different approach. The general rule is that reexports of products made in Canada are subject to the EAR only if they incorporate more than a certain proportion of US-origin controlled content (25 percent for most countries or 10 percent for Cuba, Iran, North Korea, Sudan and Syria). For Canadian equipment, software or technology with US-origin 600 series content, this general rule applies as well, with one important exception – when the destination is under US arms embargo (i.e. is included in Country Group D:5) the Canadian product is always subject to the EAR. This does not necessarily mean it requires a Department of Commerce reexport license, but it does mean that if the destination of your product incorporating 600 series content is a place like China, Venezuela or Vietnam, the EAR is relevant to the reexport transaction.

4. US exporters are now (sometimes) required to provide you with ECCNs 

It can be difficult for Canadian purchasers to reliably obtain US export control jurisdiction and classification information from their US suppliers. Those same Canadian companies are sometimes surprised to learn that there has been nothing in the ITAR or the EAR which generally requires US companies to provide that information.

Now, with ECR, there is, at least when it comes to 600 series items. According to EAR §758.6(b), the ECCN “must be printed on the invoice and on the bill of lading, air waybill, or other export control document that accompanies the shipment from its point of origin in the United States to the ultimate consignee or end-user abroad.”

5. Nothing is changing about the ITAR’s Canadian exemption 

Many items are transitioning from the USML to the CCL, but by no means everything. Whether the goods you purchase from the US will move off the USML depends on exactly what they are, though it is already clear that more parts, components and materials are being removed from ITAR control in some areas (e.g. ground vehicles, surface vessels) than others (missiles, explosives & energetic materials).

And what if the items of interest to you remain subject to the ITAR? The status quo applies. Some of those defense articles may be eligible for export to Canada (and retransfer within Canada) under the existing Canadian exemptions at ITAR §126.5. And aside from some minor revisions to mirror the restructuring of the USML, the Canadian exemptions remain essentially unchanged from its pre-ECR state.

A Very Busy Year for Canadian Economic Sanctions and Export Controls With More to Follow in 2014

Thursday, March 27th, 2014 by Brooke Driver

By: John Boscariol

Canadian export controls specialist John Boscariol of McCarthy Tétrault–to speak at ECTI’s US Export Controls for Non-US Companies seminar series in Montreal this May–analyzes the current state of Canadian economic sanctions and trade controls. 

As we start the New Year, it is an opportune time for Canadian companies engaged in international or cross-border activities to review the key changes to Canada’s economic sanctions, anti-terrorism and trade and technology controls during 2013 to ensure compliance programs, including due diligence and screening processes, are fully up-to-date and risks of contravention and enforcement action are minimized. This is particularly important in light of the substantial financial and reputational costs of violating these laws.

For Canada, 2013 was another very active year as trade and technology control measures were liberalized in some areas while significantly tightened in others. The most important developments of this past year and some thoughts on what to expect for 2014 are discussed below.

Further Liberalization of Encryption Controls

In its continuing effort to level the playing field for Canadian companies subject to export and technology transfer controls over information security goods and technology, on January 14, 2013 the Canadian government issued a General Export Permit - GEP No. 46 (Cryptography for Use by Certain Consignees) – which allows for the transfer of finished products containing controlled cryptography to affiliates without having to apply for an individual export permit.

Under this GEP, transfers may be made to a consignee in another country that is (i) controlled by a resident of Canada or (ii) is controlled by an entity that has its head office in one of 29 designated countries and controls the resident of Canada who is making the transfer. The exporter must notify Foreign Affairs, Trade and Development Canada’s Export Controls Division (ECD) prior to the first transfer in each calendar year and then report on transfers made during the previous calendar year by January 31. Transferors must respond to ECD information requests within 15 days. In the case of physical exports, “GEP-46″ must be specified on the export report filed with the Canada Border Services Agency.

Update of Export Control List

On February 13, 2013, the Canadian government announced a number changes to Canada’s Export Control List (ECL), which sets out the goods, services and technology subject to export and technology transfer controls that include permit and reporting requirements. Many additions and removals of controls, as well as clarifications to existing controls, were made in order to reflect Canada’s obligations and commitments under international control regimes – in this case, the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies, the Nuclear Suppliers Group, the Missile Technology Control Regime and the Australia Group. The amendments brought Canada up to date with its commitments under these international arrangements as of April 2011.

The changes impact goods, software and technology that are dual-use commercial items in ECL Group 1 (including encryption), military items in Group 2, missile control-related items in Group 6, as well as chemical and biological items in Group 7.

The new Guide to Canada’s Export Controls (April 2011) reflecting these changes came into effect on March 15, 2013.

Comprehensive Economic Sanctions Imposed Against Iran

Effective May 29, 2013, Canada expanded its existing economic sanctions measures against Iran under the Special Economic Measures (Iran) Regulations (Iran Regulations). Up until that time, Canada’s sanctions against Iran had been restricted to nuclear and military activities, financial services, as well as activities in certain sectors of the Iranian economy, including oil and gas, mining, telecommunications and shipping.

Key Measures

These are the most significant changes to Canada’s economic sanctions against Iran since a financial services ban was imposed on November 22, 2011. The amendments include three key measures that apply to persons in Canada and Canadian outside Canada:

(i) a prohibition against exporting, selling, supplying or shipping goods, wherever situated, to Iran, to a person in Iran, or to a person for the purposes of a business carried on in or operated from Iran;

(ii) a prohibition against importing, purchasing, acquiring, shipping or transhipping any goods that are exported, supplied or shipped from Iran, whether the goods originated in Iran or elsewhere; and

(iii) a prohibition against making an investment in an entity in Iran.

Goods that are sourced or supplied under a contract entered into before May 29, 2013 are exempted, provided that they were not already banned pursuant to the pre-existing measures and certain other conditions are satisfied. There are some other limited exceptions, including for informational materials, personal and settlers’ effects, and non-commercial packages sent by mail. Exemptions have also been added for equipment, services and software that facilitate secure and widespread communications via information technologies (provided that an export permit has been issued in respect of any export-controlled goods) and for goods used to purify water for civilian and public health purposes.

Prohibited Dealings Involving Designated Persons

There are now over 600 entities and individuals that have been designated under Canada’s Special Economic Measures (Iran) Regulations.

Companies and individuals are prohibited from engaging in a wide range of dealings with designated persons under Canada’s numerous economic sanctions programs, including its measures against Iran. Canadians are also subject to reporting requirements in respect of property owned or controlled by designated persons and related proposed or actual transactions. Financial institutions, including federally regulated banks and provincial trust and loan companies and securities dealers, are required to monitor and determine on a continuing basis whether they are in possession or control of property owned or controlled by or on behalf of a designated person under these measures.

Potential for Relaxation?

On November 23, 2013 an agreement between Iran and the P5+1 (the United States, United Kingdom, Germany, France, Russia, and China, facilitated by the European Union) was announced that provides for the halting of Iran’s nuclear program in return for the relaxation of certain sanctions measures. However, the Canadian government has been clear that it is skeptical of Iran’s commitments and that comprehensive sanctions will remain in force while it reviews the deal and Iran’s progress in implementation and granting access to its nuclear facilities.

Major Changes Coming to the Defence Production Act and Controlled Goods Program

On November 19, 2013, Public Works and Government Services Canada launched consultations on proposed amendments to the Defence Production Act (DPA) which will have a significant impact on Canadian companies in the defence, aerospace, security and satellite sectors.

Companies that are subject to the DPA and its Controlled Goods Regulations must comply with significant registration, screening and security obligations in their dealings with controlled goods and technology within Canada. The proposed amendments to the Schedule to the DPA will significantly change the scope of products and technology subject to the Controlled Goods Program (CGP), including by removing just over half of the current entries.

The Canadian CGP was designed to work hand-in-hand with the U.S. International Traffic in Arms Regulations (ITAR) regime so that, generally speaking, the kinds of goods and technology controlled for ITAR purposes would also be subject to domestic security controls in Canada under the CGP. These latest amendments have been proposed in response to complaints that CGP requirements are overly burdensome and there have been problems specifically with the intersection of the Canadian and U.S. regimes. This has included instances in which items that were no longer controlled under the U.S. ITAR regime are still being controlled under the Canadian CGP regime, a challenge that would become more difficult as the United States reforms its export controls and moves items from United States Munitions List control under the U.S. State Department to dual-use control under the U.S. Commerce Department.

It is important to note that none of the proposed changes will impact Canadian controls on the export or transfer of controlled goods or technology from Canada.

Prospects for 2014

In addition to the DPA defense trade control changes discussed above, amendments to export controls are also anticipated as Canada continues to update its Export Control List in accordance with its international obligations, including under the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies. Canadian companies engaged in cross-border transactions should be closely monitoring developments under Wassenaar and other international control regimes to anticipate coming changes to Canadian law in this area – this includes new controls over goods and technology associated with internet and network surveillance.

Further, all indications are that Canada will continue to implement an aggressive economic sanctions and anti-terrorism regime, not simply based on multilateral initiatives through the United Nations Security Council, but also through unilateral measures where Canada is of the view that UN measures are insufficient or non-existent. This continues to be the case for Canada’s measures controlling dealings with a number of countries, including Iran, Syria, Belarus, Burma (Myanmar), Zimbabwe and North Korea.

Canadian companies and financial institutions should be carefully reviewing their compliance policies and screening lists in light of these latest developments. Because of the substantial financial and reputational impact that contraventions in this area can have, it is important that any company doing business internationally, whether in the goods, services or technology sector, ensure appropriate compliance and due diligence measures are in place. These include: maintaining compliance manuals; appointing responsible compliance officers; screening customers, end-users and suppliers; providing training programs; conducting internal audits; establishing disclosure procedures; and reviewing contracts and other legal documentation on a regular basis.

At the present time, Canada imposes trade controls of varying degrees on activities involving the following countries (and in many cases, listed entities and individuals associated with them): Belarus, Burma (Myanmar), Côte d’Ivoire, the Democratic Republic of the Congo, Cuba, Egypt, Eritrea, Guinea, Iran, Iraq, Lebanon, Liberia, Libya, North Korea, Pakistan, Somalia, Sudan, Syria, Tunisia and Zimbabwe. Any involvement of these countries or any “designated person” in proposed transactions or other activities should raise a red flag for further investigation to ensure compliance with export and technology transfer controls and economic sanctions.
______________________________________________________________________________

John W. Boscariol is a partner at McCarthy Tétrault LLP and leader of the firm’s International Trade & Investment Law Group. He specializes in compliance and enforcement matters related to anti-corruption laws and policies, economic sanctions and export controls and other laws governing the cross-border trade in goods, services and technology and foreign investment.

State/DDTC Posts New Agreement Guidelines for US-Canada Exchange of Notes re ITAR 126.18 Dual/3rds Exemption

Monday, March 5th, 2012 by Holly Thorne

Licensing: New agreement guidelines pursuant to the US-Canadian Exchange of Notes regarding ITAR section 126.18, Canada has provided appropriate implementation guidance which can be found at the following links:http://ssi-iss.tpsgc-pwgsc.gc.ca/dmc-cgd/bulletins/bulletin3-eng.html

I. Background — Classification Requests Section 748.3(a) of the Export Administration Regulations (EAR) sets forth a procedure for how the public may seek and receive determinations regarding where or if items “subject to the EAR”1 are classified on the EAR’s Commerce Control List (CCL). In essence, if one makes a request in accordance with EAR sections 748.1 and 748.3(b), the Commerce Department’s Bureau of Industry and Security (BIS) will issue a formal classification determination regarding which, if any, ECCN controls the item described in the request.

Classification determinations are only as good as the quality, clarity, and the accuracy of the information provided in the classification request. The rules pertaining to the classification of composite-related information are complex largely because composite related technology is complex. Small changes in facts can result in significant differences in the control status of technologies. Thus, if a classification request for composite-related information does not describe carefully and address all the potentially applicable regulatory, definitional, and technical issues associated with a particular item at issue (as opposed to broad categories of items), then the classification determination will not likely be as reliable or useful as it should or could be. The most common questions BIS personnel have received in recent years regarding such items pertain to whether information used in the production or development of carbon fiber organic matrix material systems and related structures are within the scope of Export Control Classification Number (“ECCN”) 1E001.

To read fully article see<http://www.bis.doc.gov/policiesandregulations/advisoryopinions/oct25_2011_guidance.pdf>

The following are paragraphs 1 and 2 of the 14-page document:

Guidance for Preparing Commodity Classification (“CCATS”) Requests for Information Pertaining to the Development or Production of Carbon Fiber Organic Matrix Composite Items (October 25, 2011)

I. Background — Classification Requests

Section 748.3(a) of the Export Administration Regulations (EAR) sets forth a procedure for how the public may seek and receive determinations regarding where or if items “subject to the EAR”1 are classified on the EAR’s Commerce Control List (CCL). In essence, if one makes a request in accordance with EAR sections 748.1 and 748.3(b), the Commerce Department’s Bureau of Industry and Security (BIS) will issue a formal classification determination regarding which, if any, ECCN controls the item described in the request.

Classification determinations are only as good as the quality, clarity, and the accuracy of the information provided in the classification request. The rules pertaining to the classification of composite-related information are complex largely because composite-related technology is complex. Small changes in facts can result in significant differences in the control status of technologies. Thus, if a classification request for composite-related information does not describe carefully and address all the potentially applicable regulatory, definitional, and technical issues associated with a particular item at issue (as opposed to broad categories of items), then the classification determination will not likely be as reliable or useful as it should or could be. The most common questions BIS personnel have received in recent years regarding such items pertain to whether information used in the production or development of carbon fiber organic matrix material systems and related structures are within the scope of Export Control Classification Number (“ECCN”) 1E001.

II. Purpose of this Document

In light of the foregoing, BIS hopes to begin building a public collection of carbon fiber organic matrix composite-related classification determinations that will be the foundation for the development of better and common understandings between and within industry and government regarding the proper classifications of a wide variety of such technologies. For such a collection to be useful, however, the requests should address all the relevant definitional and control variables in the EAR for such composite-related technologies. To assist those preparing such requests, BIS has assembled this guidance document. Section III below contains a description of the various EAR provisions relevant to analyzing the classification status of carbon fiber organic matrix technologies. Drawing upon these descriptions, section IV contains BIS’s recommendations for issues to consider and address when drafting classification requests for carbon fiber organic matrix technologies.

The guidance in this document is limited in scope to descriptions of composite-related EAR provisions in effect at the time of its publication and related suggestions pertaining to the preparation of classification requests. Exporters are reminded that they will need to refer to all relevant EAR provisions in effect at the time of any particular export to determine the export control-related obligations pertaining to the export.

Source: http://www.bis.doc.gov/policiesandregulations/advisoryopinions.htm

DDTC Waives Amendment Requirement for Canadian Acquisition

Monday, April 20th, 2009 by Danielle McClellan

CAE Professional Services (Canada) Inc. (CAE PS) has acquired Bell Aliant Regional Communications, Limited Partnership’s xwave Division Canada (formerly a division of Xwave Solutions Inc.). CAE PS will operate the company under the CAE PS name, due to the high volume of authorizations requiring amendments under this name change DDTC has decided to waive the amendments requirement. (more…)

DDTC Asks NSC For Guidance on Foreign National Rules

Tuesday, April 14th, 2009 by Guest Author

Source: Reprinted from Export Law Blog (ExportLawBlog.com) by permission of its author Clif Burns, Bryan Cave LLP, Washington DC (telephone: 202.624.3949, email: clif.burns@bryancave.com).

April 14, 2009. An article in this week’s Washington Tariff & Trade Letter (paid subscription required) reports that at the Defense Trade Advisory Group (“DTAG”) meeting held on April 7, Frank Ruggiero, the Deputy Assistant Secretary of the Directorate of Defense Trade Controls (“DDTC”) announced that the agency had asked the National Security Council to review the treatment of foreign nationals under U.S.
export laws. The DDTC request was sent at the end of March, but there is no current timetable for its consideration by the NSC inasmuch as the Obama administration is still putting together and organizing the new NSC. (more…)

Forwarder Gets Slapped on Wrist for Involvement in Illegal Cuba Shipment

Saturday, July 5th, 2008 by Danielle McClellan

Kabba & Amir Investments, Inc., d.b.a. International Freight Forwarders (IFF) of Canada have been fined $6,000 for export violations. The company is a freight forwarding company. In June 2000, IFF took possession of shipment of X-Ray Film Processors, items subject to the Regulations, and exported them to Cuba without a license.

The company worked with known and unknown co- conspirators to export the processors to Cuba via Canada without obtaining a BIS export license. IFF violated the regulations when they took possession of the items in the United States and took them to Canada.

After several reviews, and IFF claiming that they were unaware that a license was necessary, BIS found that they do not have to prove that the company knew or did know that they needed a license. As long as IFF pays their fine within 30 days of their final charging letter they will not be denied export privileges, if they do not, their export privileges will be denied for three years.

More information:

Canada Implements Export and Financial Sanctions on Burma

Tuesday, January 29th, 2008 by Danielle McClellan

Canada has released the implementation to the Special Economic Measures (Burma) Regulations applying sanctions against Burma.

The main measures taken by Canada prohibit:

  1. The export from Canada to Burma of any goods, excepting only the export of humanitarian goods
  2. The export of technical data
  3. The provision of financial services to Burma

Canada implemented the new sanctions in light of resolutions by both the United Nations Commission on Human Rights and the General Assembly who condemned the human right violations in Burma at this time.

More information:

dfait-maeci.gc.ca/trade/eicb/notices/Ser155-en.asp

Bell Helicopter and Quebec Human Rights Commission Settle ITAR-Based Problem

Thursday, January 17th, 2008 by Danielle McClellan

The Quebec Human Rights Commission issued a press release on January 17, 2008 regarding the settlement between Bell Helicopter Textron Canada Ltd. and a Haitian-born man who held Canadian citizenship but was denied an internship because of his ethnicity and the ITAR. According to the ITAR, individuals who hold citizenship in 25 countries, Haiti included, cannot work on U.S. military contracts.

The man was initially hired for the internship with Bell Helicopter until it was found that his citizenship would affect the company’s compliance with the ITAR so he was denied the position. The man has lived in Canada for 30 years and was a citizen, but because he was born in Haiti he was restricted by the ITAR to perform duties at Bell Helicopter.

Quebec Human Rights Commission is now encouraging other individuals of dual citizenship to bring cases to the human rights commissions if they have suffered, are suffering or will suffer in the future discrimination by companies who are complying with the U.S. ITAR. Companies are urged to develop policies and procedures to comply with Canada’s Charter of Rights and Freedoms. This however, will be difficult because certain policies and procedures will not be appropriate and work for the laws in both Canada and the United States.