Canadas Defence Trade Controls for Academic Institutions Canadas

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Canada's Defence Trade Controls for Academic Institutions Canada’s Controlled Goods Program and the US

Canada's Defence Trade Controls for Academic Institutions Canada’s Controlled Goods Program and the US ITAR John W. Boscariol June 22, 2015 John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

1 Canada’s Trade Controls ¬ export and technology transfer controls ¬ Export Control List

1 Canada’s 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 John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

2 Today’s Focus ¬ background on Canada’s Controlled Goods Program and relationship with United

2 Today’s Focus ¬ background on Canada’s Controlled Goods Program and relationship with United States defense trade controls ¬ interaction with Canada’s export control regime ¬ overview of US ITAR ¬ continuing challenges ¬ May 2, 2015 proposed amendments to Controlled Goods Regulations ¬ five best practices John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

3 Canada’s Controlled Goods Program ¬ domestic industrial security program ¬ Defence Production Act

3 Canada’s Controlled Goods Program ¬ domestic industrial security program ¬ Defence Production Act and its Controlled Goods Regulations ¬ administered by the Controlled Goods Directorate (CGD) (part of Public Works and Government Services Canada) ¬ background and history ¬ relationship with U. S. ITAR and “Canadian exemption” John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

4 Integration of Canadian and US Defence Trade Controls ¬ examples ¬ ITAR 126.

4 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 “Canadian registered persons” defined by reference to Canada’s Defence Production Act ¬ Canada’s 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…” ¬ Canada’s 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 defence controlled US origin goods, and goods manufactured in Canada using defence controlled US origin goods John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

5 What Is a Controlled Good? ¬ defined in the Schedule to the Defence

5 What Is a Controlled Good? ¬ defined in the Schedule to the Defence Production Act as: ¬ any US origin good or technology that is a “defense article” as defined under the ITAR or a non US origin good that is manufactured using “technical data” of United States origin, as defined under the ITAR if the “technical data” is a “defense article”, and ¬ goods and technology, regardless of origin, that are specifically listed in the Schedule (and refer to Groups 2, 5 and 6 of the Export Control List with amendments) John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

6 So We Have Controlled Goods, What Now? ¬ as a CGP registrant, you

6 So We Have Controlled Goods, What Now? ¬ as a CGP registrant, you must: ¬ perform a “security risk management assessment” ¬ develop and implement a written security plan ¬ appoint a Designated Official ¬ maintain records and supporting documentation ¬ provide training programs and security briefings ¬ advise CGD of any security breaches John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

7 So We Have Controlled Goods, What Now? ¬ Designated Official (DO) must ¬

7 So We Have Controlled Goods, What Now? ¬ Designated Official (DO) must ¬ submit to a security assessment by CGD ¬ conduct, with consent, security assessments of individuals requiring access to controlled goods or technology ¬ determine extent to which individual poses risk of violation ¬ make and keep individual evaluations of honesty, reliability and trustworthiness ¬ authorize extent to which individuals may examine, possess, transfer controlled goods or technology ¬ submit applications to CGD for temporary workers / visitors to access controlled goods or technology John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

8 Who Can Access Controlled Goods at Your Facility? ¬ access to your controlled

8 Who Can Access Controlled Goods at Your Facility? ¬ access to your controlled goods and technology will be limited to: ¬ officers, directors and employees authorized by DO ¬ temporary workers or visitors (not Canadian citizens or residents) proposed by DO and authorized by CGD ¬ contractual workers that are themselves registered or employees of registered firm ¬ officers, directors and employees of US companies registered under ITAR John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

9 Student Access to Controlled Goods ¬ a student who is a Canadian citizen

9 Student Access to Controlled Goods ¬ a student who is a Canadian citizen or permanent resident is to be treated as an employee and an international student as a temporary worker, regardless of whether or not those students are paid ¬ students under supervision of an individual employed at a registered business, and have a requirement to examine, possess or transfer controlled goods located at that registered business, must be security assessed by its DO (e. g. , co ops, on site thesis research study or similar arrangements) John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

10 Student Access to Controlled Goods ¬ students under supervision of an individual employed

10 Student Access to Controlled Goods ¬ students under supervision of an individual employed at a registered educational institution and have requirement to examine, possess or transfer controlled goods located at a registered educational institution, must be security assessed by the DO of that educational institution ¬ for joint projects requiring examination, possession or transfer of controlled goods located at both a registered business and a registered educational institution, the student can be security assessed by either the DO from the educational institution or the DO from the business John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

11 Student Access to Controlled Goods ¬ International students are exempt from registration (like

11 Student Access to Controlled Goods ¬ International students are exempt from registration (like temporary workers) ¬ DO submits application for exemption to CGD and CGD conducts security assessment John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

12 Enforcement and Penalties ¬ non compliance attracts penalties of up to $2 million

12 Enforcement and Penalties ¬ non compliance attracts penalties of up to $2 million per day and 10 years imprisonment ¬ possible enforcement action ¬ Voluntary Disposal ¬ Negotiated Compliance ¬ Warning Letter ¬ Formal Hearing ¬ Suspension or Cancellation of Registration ¬ Detention and Removal ¬ Prosecution ¬ no prosecutions yet John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

13 Interaction Between CGP and Export Controls ¬ domestic security regime (PWGSC CGD) vs

13 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 John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

14 Interaction Between CGP and Export Controls ¬ discovery of potential contraventions ¬ mandatory

14 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 ¬ US authorities John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

15 United States International Traffic in Arms Regulations ¬ importance of retaining US counsel

15 United States International Traffic in Arms Regulations ¬ importance of retaining US counsel ¬ ITAR applies where: ¬ activity involves a “defense article” – controlled under US Munitions List; and ¬ it is a regulated activity (e. g. , export, release to foreign national) ¬ manufactures, exporters. brokers must register with US Department of State Directorate of Defense Trade Controls (DDTC) John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

16 United States International Traffic in Arms Regulations ¬ “defense article” ¬ any item

16 United States International Traffic in Arms Regulations ¬ “defense article” ¬ any item on USML ¬ any item specially designed, configured, modified or adapted for military use ¬ applies to ¬ US origin defense articles ¬ non US origin items that contain US origin defense articles ¬ non US origin produced using US origin ITAR data or defense services ¬ applies extraterritorially and “forever” John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

17 United States International Traffic in Arms Regulations ¬ authorization required for ¬ exports

17 United States International Traffic in Arms Regulations ¬ authorization required for ¬ exports from US ¬ re exports, re transfers (e. g. , change in end use, end user) of articles and defense services ¬ furnishing defense services ¬ temporary imports of defense articles into US ¬ brokering of defense articles John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

18 United States International Traffic in Arms Regulations ¬ types of authorizations ¬ licenses

18 United States International Traffic in Arms Regulations ¬ types of authorizations ¬ licenses (DSP) – exports, re exports, retransfers, technical data transfers ¬ agreements (ongoing) ¬ technical assistance agreements ¬ manufacturing licensing agreements ¬ distribution agreements John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

19 United States International Traffic in Arms Regulations ¬ ITAR exemptions include ¬ basic

19 United States International Traffic in Arms Regulations ¬ ITAR exemptions include ¬ basic marketing information ¬ public domain ¬ general scientific, mathematical and engineering principles commonly taught in schools, colleges, universities ¬ Canadian exemption (including CGP registered) John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

20 United States International Traffic in Arms Regulations ¬ license denial policy ¬ 25

20 United States International Traffic in Arms Regulations ¬ license denial policy ¬ 25 or so “proscribed countries” ¬ including China, Cuba, Vietnam, Venezuela, and other sanctioned and embargoed countries ¬ includes in country transfers to foreign nationals of proscribed countries John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

21 United States International Traffic in Arms Regulations ¬ enforcement ¬ civil and criminal

21 United States International Traffic in Arms Regulations ¬ enforcement ¬ civil and criminal penalties ¬ debarment ¬ order compliance measures and ongoing audit ¬ aggressive ¬ ITT $100 million and debarement ¬ Qioptic $25 million ¬ Northrop Grumman $15 million ¬ BAE (UK) $400 million ¬ see enforcement reports on DDTC website John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

22 United States International Traffic in Arms Regulations ¬ DDTC compliance program ¬ Organization

22 United States International Traffic in Arms Regulations ¬ DDTC compliance program ¬ Organization Structure ¬ Corporate Commitment and Policy ¬ Identification, Receipt and Tracking of ITAR Controlled Items/Technical Data ¬ Re Exports/Retransfers ¬ Restricted/Prohibited Exports and Transfers ¬ Recordkeeping ¬ Internal Monitoring ¬ Training ¬ Violations and Penalties ¬ www. pmddtc. state. gov/ compliance/ documents/ compliance_progr ams. pdf. John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

23 Integration of Canadian and US Defence Trade Controls ¬ key differences between Canada’s

23 Integration of Canadian and US Defence Trade Controls ¬ key differences between Canada’s CGP and the 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 John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

24 Canadian Human Rights vs. ITAR ¬ the problem ¬ in order to benefit

24 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 John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

25 Canadian Human Rights vs. ITAR ¬ prima facie breach of Canadian human rights

25 Canadian Human Rights vs. ITAR ¬ 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 John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

26 Canadian Human Rights vs. ITAR ¬ examples of conflicts (ITAR) ¬ General Motors

26 Canadian Human Rights vs. ITAR ¬ 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” John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

27 Canadian Human Rights vs. ITAR ¬ examples of conflicts (ITAR) (cont’d) ¬ Bell

27 Canadian Human Rights vs. ITAR ¬ examples of conflicts (ITAR) (cont’d) ¬ 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 John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

28 Canadian Human Rights vs. ITAR ¬ Québec Human Rights Commission ¬ “reiterates its

28 Canadian Human Rights vs. ITAR ¬ Québec Human Rights Commission ¬ “reiterates its opposition to the application of the ITAR rules in Québec because of their discriminatory impact” ¬ “they include requirements that are inconsistent with the Québec Charter of Human Rights and Freedoms” ¬ “can no longer accept that companies established in Québec 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” John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

29 The “New” ITAR Rule (ITAR 126. 18) ¬ May 16, 2011 final rule

29 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 John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

30 New ITAR Rule (ITAR 126. 18) ¬ “effective procedures to prevent diversion” –

30 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 John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

31 New ITAR Rule (ITAR 126. 18) ¬ what are “substantive contacts”? ¬ include:

31 New ITAR Rule (ITAR 126. 18) ¬ 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 John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

32 New ITAR Rule (ITAR 126. 18) ¬ if an employee is determined to

32 New ITAR Rule (ITAR 126. 18) ¬ 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 John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

33 How Does Canada’s Controlled Goods Program Work With ITAR 126. 18? ¬ problem:

33 How Does Canada’s 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” John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

34 How Does Canada’s Controlled Goods Program Work With ITAR 126. 18? ¬ what

34 How Does Canada’s Controlled Goods Program Work With ITAR 126. 18? ¬ 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 John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

35 How Does Canada’s Controlled Goods Program Work With ITAR 126. 18? ¬ employee

35 How Does Canada’s Controlled Goods Program Work With ITAR 126. 18? ¬ 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 John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

36 How Does Canada’s Controlled Goods Program Work With ITAR 126. 18? ¬ continuing

36 How Does Canada’s Controlled Goods Program Work With ITAR 126. 18? ¬ 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 John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

37 How Does Canada’s Controlled Goods Program Work With ITAR 126. 18? ¬ continuing

37 How Does Canada’s Controlled Goods Program Work With ITAR 126. 18? ¬ continuing ITAR/CGP challenges ¬ DDTC’s 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. ¬ October 2014 “made in Canada” NDA screening form to be signed by the security assessed employee in Canada (http: //ssi iss. tpsgc pwgsc. gc. ca/dmc cgd/ft fo/aaee nsaa eng. html) ¬ CGD states that “for those CGP registrants accessing U. S. International Traffic in Arms Regulations (ITAR) goods, this acknowledgement may be used to meet the requirements of ITAR 126. 18(c)(2)” John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

38 How Does Canada’s Controlled Goods Program Work With ITAR 126. 18? ¬ continuing

38 How Does Canada’s Controlled Goods Program Work With ITAR 126. 18? ¬ continuing ITAR/CGP challenges ¬ does not resolve anything for academic institutions ¬ broader issues: ¬ is this consistent with Canadian constitutional (Charter) law? John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

39 May 16, 2014 Changes to Coverage of CGP – Defence Production Act Schedule

39 May 16, 2014 Changes to Coverage of CGP – Defence Production Act Schedule ¬ seeks to resolve issues regarding differences in coverage of ITAR and CGP by creating two streams of controlled goods ¬ Stream 1 – goods of United States origin that are “defense articles” under ITAR and goods manufactured using ITAR controlled “technical data” of United States origin ¬ addresses US export control reform ¬ what does “United States origin” mean? ¬ overzealous ITAR destination control statements? John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

40 May 16, 2014 Changes to Coverage of CGP – Defence Production Act Schedule

40 May 16, 2014 Changes to Coverage of CGP – Defence Production Act Schedule ¬ concerns with Stream 2 – certain Group 2, 5504, and Group 6 items of US and other origin ¬ administrative burden of tracking two streams vs one ¬ consistent with original purpose of CGP? ¬ competitiveness vis à vis United States and other countries? John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

41 May 2, 2015 - Proposed Amendments to Controlled Goods Regulations ¬ reflect and

41 May 2, 2015 - Proposed Amendments to Controlled Goods Regulations ¬ reflect and clarify current CGP practices implemented in Phase I of the Enhanced Security Strategy ¬ includes definition of international student ¬ address the three ESS Phase II activities that require regulatory authority in order to be implemented ¬ enable the Minister to provide recommendation to DO for high risk employees ¬ obtain consent of individual in visitor exemption process ¬ require registrants to submit list of all individuals who have undergone security assessment John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

42 May 2, 2015 - Proposed Amendments to Controlled Goods Regulations ¬ concerns of

42 May 2, 2015 - Proposed Amendments to Controlled Goods Regulations ¬ concerns of Standing Joint Committee for the Scrutiny of Regulations ¬ clarifying criteria for revocation and suspension of registrations and exemptions ¬ clarifying decisional criteria for reinstatement of a suspended registration or exemption ¬ specifying a time period where the Regulations currently state “without delay” ¬ change in information – 5 days ¬ security breach – 3 days ¬ change in criminal history – 5 days ¬ change in exemption application (intl students) – 5 days John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

43 Best Practice #1 – Screening for Designated Persons ¬ lists of designated persons

43 Best Practice #1 – Screening for Designated Persons ¬ lists of designated persons – individuals, companies, organizations ¬ Special Economic Measures Act regulations ¬ United Nations Act regulations ¬ Freezing Assets of Corrupt Foreign Officials Act regulations ¬ Criminal Code anti terrorism provisions ¬ any involvement in the activity – research partner, collaborator, purchaser, ultimate user, vendor, creditor, broker, service provider John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

44 Best Practice #2 – Contract Clauses and Certifications ¬ trade control clauses for

44 Best Practice #2 – Contract Clauses and Certifications ¬ trade control clauses for agreements with vendors, customers, research partners, etc. ¬ designated person ¬ compliance with trade controls and certifications ¬ product information, including ECL/ECCN classification ¬ end use certification ¬ indemnification ¬ notification of investigations or inquiries, cooperation John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

45 Best Practice #3 – Using Voluntary Disclosure Mechanisms ¬ in certain circumstances, can

45 Best Practice #3 – Using Voluntary Disclosure Mechanisms ¬ in certain circumstances, can be an effective tool ¬ coordinate with several government depts ¬ Export Controls Division ¬ Economic Law Division ¬ CBSA ¬ RCMP ¬ PWGSC Controlled Goods Directorate (mandatory reporting) ¬ other (e. g. , Canadian Nuclear Safety Commission) John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

46 Best Practice #4 – Controlling Technology Transfers ¬ higher risk vs export shipments

46 Best Practice #4 – Controlling Technology Transfers ¬ higher risk vs export shipments ¬ process governing ¬ email ¬ virtual meetings – tele/video conference ¬ plans/drawings – marking ¬ server access – upload/download ¬ cloud computing John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

47 Best Practice #5 – “Home Grown” Compliance Policies ¬ trade control compliance in

47 Best Practice #5 – “Home Grown” Compliance Policies ¬ trade control compliance in the shadow of the United States ¬ Canadian controls can be more onerous than US controls – e. g. , encryption, Russia, Belarus, Burma, North Korea ¬ Canadian controls over US origin goods and technology ¬ conflicts ¬ Cuba ¬ ITAR John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

48 Compliance Policy and Internal Controls ¬ export controls, economic sanctions, defence trade controls

48 Compliance Policy and Internal Controls ¬ export controls, economic sanctions, defence trade controls ¬ core elements should include: ¬ corporate compliance manual ¬ screens and lists ¬ appointment of compliance officers ¬ internal audit procedures ¬ correction / voluntary disclosure process ¬ training programs ¬ contract review ¬ conflict procedures John W. Boscariol, International Trade and Investment Law Group, Mc. Carthy Tétrault LLP / mccarthy. ca

John W. Boscariol Mc. Carthy Tétrault LLP International Trade and Investment Law www. mccarthy.

John W. Boscariol Mc. Carthy Tétrault LLP International Trade and Investment Law www. mccarthy. ca Direct Line: 416 -601 -7835 E mail: jboscariol@mccarthy. ca Linked. In: www. linkedin. com/in/johnboscarioltradelaw Twitter: www. twitter. com/tradelawyer