Canada’s customs authority, the Canada Border Services Agency (CBSA), continues to exercise its broad authority under the Customs Act and the Export and Import Permits Act to engage in numerous searches, detentions, seizures, ascertained forfeitures, investigations and other enforcement activities to ensure that exports from Canada are in full compliance with Canadian legislation. Exporters must comply with significant, and at times complex, regulatory requirements, including controls over the transfer of goods and technology identified on the Export Control List (ECL), economic sanctions measures imposed under the Special Economic Measures Act (SEMA) and the United Nations Act (UNA), and CBSA export reporting obligations.
Continued reports of US authorities’ dissatisfaction with Canadian enforcement of export controls appear to be at least part of the reason for increasingly aggressive CBSA enforcement in this area. Historically, Canada does not have an as extensive enforcement record as that of the United States regarding export controls and economic sanctions. However, Canadian officials point to a “continuum of successes” recently, in addition to prosecutions and convictions, in addressing export violations – these include detentions and seizures which delay and disrupt shipments and can result in lost contracts.
Critical Areas for Exporters
Areas in which Canadian exporters are facing significant compliance and enforcement challenges include the following:
(i) dealings with “designated persons” – regardless of the destination country, exporters should be routinely screening all involved parties against the lists of companies, organizations and individuals established under the numerous SEMA and UNA sanctions regulations, the Freezing Assets of Corrupt Foreign Officials Act , as well as the Criminal Code provisions regarding dealings with terrorist entities; Canadian exporters are prohibited from engaging in dealings with these listed parties;
(ii) information security items – Canada’s export controls over goods, software and technology designed or modified to perform encryption or to work with such items (as identified on the Export Control List (ECL)) are more cumbersome than their US counterparts; often, exporters first discover that their products are subject to control when they are detained or seized by CBSA and the delays in responding to the enforcement action and obtaining a permit result in costly commercial disruption and lost sales ;
(iii) “catch-all” controls – pursuant to a “catch-all” provision in the ECL, exports of all goods and technology are prohibited without a permit if “their properties and any information made known to the exporter … would lead a reasonable person to suspect that they will be used” in connection with chemical, biological or nuclear weapons and their delivery systems or missiles (WMDs) or used in any WMD facility ; accordingly, exporters must exercise due diligence to ensure that their uncontrolled goods and technology are not destined for a WMD facility;
(iv) Iran – the supply of any goods and related technology to Iran for use in the petrochemical, oil or natural gas industry or for nuclear-related purposes is prohibited under SEMA and UNA regulations which also contain an extensive list of other prohibited items ; Canada’s recent imposition of a financial services ban can also significantly complicate matters for exporters to Iran ; further, no US-origin goods or technology can be transferred to Iran without an export permit which can only be obtained in limited circumstances ; exporters should be aware that CBSA is also closely scrutinizing exports to locations that are commonly used for transhipment to Iran, including the United Arab Emirates, Malaysia and Hong Kong;
(v) Syria – there is a ban on the export to Syria of any goods or technology identified on the ECL as well as any goods or technical data for use in the monitoring of telecommunications ; as is the case with transfers to Iran, all US-origin goods and technology is prohibited from being transferred to Syria without a permit which can only be obtained in very limited circumstances;
(vi) Cuba – Canada does not restrict exports or transfers to Cuba unless the goods or technology are of US-origin or otherwise controlled on the ECL in which case a permit must first be obtained; however, pursuant to an Order issued under the Foreign Extraterritorial Measures Act , companies and individuals are prohibited from complying with the extraterritorial US trade embargo of Cuba and are required to advise the Canadian Attorney General forthwith of any communications related to the US trade embargo received from a person in a position to influence their policies in Canada; failure to comply with the Order is punishable with criminal penalties; and
(vii) Belarus and Burma – Canada’s sanctions against Belarus and Burma are more aggressive than those imposed by other countries.