Impact of Canadian Export Controls & Embargoes on OCRI Members

Transcription

1 Impact of Canadian Export Controls & Embargoes on OCRI Members Brenda C. Swick Sheraton Hotel, Ottawa October 24, 2008 Partnered Event with OCRI

2 Overview Why Do Canadian Export Controls/Trade Embargoes matter to my company? What are they? How do I comply? What if I don t? Why do I need to bother knowing about US Export Controls/Sanctions/Embargoes? Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 2

3 Why do Export Controls & Embargoes Matter? Impose controls on your company s exports of technology, know how and goods Impose controls on U.S. origin goods/components and technology that you use Financial exposure if you don t comply Non-compliance could have adverse impact on your company s reputation in Canada and abroad and with governments Products with cryptographic capabilities may be barred from further export until the necessary permits are secured Jeopardizing important transactions parties doing due diligence for mergers, acquisitions or financings will discover and not want to be liable for the lack of compliance Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 3

4 Why do Export Controls & Embargoes Matter? SO You need to be concerned about what your goods/technology are, whether US imported goods or technology are in them, where they go AND who you deal with Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 4

5 Canada s Export Control Regime Based on Canada s international commitments: Wassenaar (Convention on Arms and Dual-use Goods and Technologies) Missile Technology Control Regime Australia Group, Chemical Weapons Convention Nuclear Non-Proliferation Treaty, etc. various non-strategic export controls United Nations resolutions agreement with United Stated concerning USML goods Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 5

6 Canada s Export Control Regime Permit required if goods/technology are on the Export Control List ( ECL ) Permit definitely required if exporting to countries on Area Control List ( ACL ) Sometimes can use a General Export Permit Civil and criminal penalties if don t comply Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 6

7 Canada s Export Control Regime DFAIT Export Control Bureau decide if permit required; significant amount of discretion issue interpret ECL and ACL CBSA enforces regime detain your goods if permit not valid Others Communications Security Establishment (CSE) Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 7

8 Canada s Export Control Regime *Key Question: Do I need a permit to export this good/software or technology (including technical data, technical assistance)? Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 8

9 Canada s Export Control Regime 1. Am I exporting to the a country on the ACL (currently Myanmar and Belarus)? If yes, need a permit Unlikely to get it PS. Don t forget to check countries subject to Canada s embargo legislation Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 9

10 Canada s Export Control Regime 2. Are the goods/software/technology on the ECL? If yes, need a permit Can I rely on a General Export Permit? if no, apply for individual permit Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 10

11 Canada s Export Control Regime ECL consists of 7 Groups Group 1: Dual-use goods Category 1: Advanced Materials Category 2: Materials Processing Category 3: Electronics* Category 4: Computers* Category 5, Part 1: Telecommunications* Category 5, Part 2: Information Security* Category 6: Sensors and Lasers Category 7: Navigation and Avionics Category 8: Marine Category 9: Propulsion *key category for IT products Engineers and the like come in handy here Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 11

12 Canada s Export Control Regime Group 2: Munitions goods Group 3: Nuclear non-proliferation goods Group 4: Nuclear-related dual-use goods Group 5: Miscellaneous goods (including catch-all provision, U.S.-origin goods) Group 6: Missile technology control regime goods Group 7: Chemical and biological weapon nonproliferation goods Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 12

13 Canada s Export Control Regime Groups 2 munitions generally problematic Canada closely controls exports of military goods and technology Canada uses the definition of military good found in the International Munitions List Harmonization of US Munitions List and ECL These are goods that are agreed to be specially designed or modified for military use. Goods not designed for military use but employing strategically sensitive technologies are identified in Dual-Use Goods and Technologies- Group 1 Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 13

14 Creation of Controlled Goods Program Canadian exemption under ITAR transfer of defence items and technology from U.S. to Canada limited Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 14

15 Canada s Export Control Regime Other groups: may be controls on destination to limit risk of diversion may need end user certificate US-origin goods (Group 5) may need US export licence ECB significant discretion: get to know them Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 15

16 Canada s Export Control Regime US-origin goods or technology Canada tracks and controls re-export of US goods to prevent Canada from being diversion point for US-embargoed countries Re-export of US-origin products is controlled because product on the ECL product falls into catch-all ECL item 5400 Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 16

17 Canada s Export Control Regime Exceptions regarding destinations: No export permit required for shipments to the US if intended destination is US some use of the item in the US exports to resellers in US Exceptions to the US exception: permit required for shipment to the US of specific munitions, strategic/military, agricultural, forest products Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 17

18 Canada s Export Control Regime Where GEP is available, no need for to apply for individual permit GEP examples 12: US origin goods 18 portable personal computers and associated software Must cite GEP number in export declaration detention AMPS penalty Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 18

19 Canada s Export Control Regime Export and Import Permit Act offences: exporting/attempting to export without a permit causing or assisting diversions unauthorized use of permits false or misleading information in connection with application, subsequent use, or exportation inducing, aiding or abetting any person s contravention Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 19

20 Canada s Export Control Regime Penalties for non-compliance upon summary conviction, CAD25,000 fine and/or imprisonment for up to 12 months upon indictment, fine in an amount at the discretion of the Court and/or imprisonment for up to 10 years criminal penalties apply to both individuals and corporations civil sanctions customs search, seizure/detention Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 20

21 Canada s Export Control Regime AMPS Penalties monetary penalties up to CAD25,000 per contravention graduated penalty system more you do, the worse it gets Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 21

22 Canada s Export Control Regime Examples of AMPS C005- providing inaccurate information C315- exporting without a permit C348- failing to report goods subject to export control C362- failing to indicate GEP number Penalties of up to $6000 or 60 % of the value of the goods per contravention Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 22

23 Controls on Exports of Technology Exporting or transferring technology or software included in ECL requires permit Transfer of technology or software is considered to occur when it is disposed of or its content is disclosed in any manner, from a place in Canada to a place outside Canada may be by fax, or phone Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 23

24 Controls on Exports of Technology Technology defined as information necessary for development, production or use of a product: technical data (tangible or intangible blueprints, plans specifications, instructions, etc.) technical assistance (instruction, skills, training, consulting services) Part E of every category of Group 1 Control of technology linked to control of underlying good Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 24

25 Controls On Export of Technology Exceptions to technology controls technology which is the minimum necessary for the installation, maintenance and repair of those products for which the export has been authorized information in the public domain (say on internet) or basic scientific research or the minimum necessary information for patent application Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 25

26 Controls On Export of Technology In the public domain means technology that has been made available without restrictions upon its further dissemination (copyright restrictions do not remove technology form being in the pubic domain) basic scientific research is experimental or theoretical work undertaken principally to acquire new knowledge of the fundamental principles or phenomena or observable facts, not primarily directed towards a specific practical aim or objective Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 26

27 Controls on Exports of Technology Software : collection of one or more programs/micro programs files in any tangible medium of expression Part D of every category of Group 1 Control of software linked to control of underlying good/technology Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 27

28 Controls on Exports of Technology Many software products having nothing to do with computer security are subject to export controls Virtually any product using cryptography (including encryption and decryption) Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 28

29 Controls on Exports of Technology Information Security (Cat. 5, Part 2): includes products which incorporate cryptographic elements low encryption strengths (ECL 1-5.A.2 (1)(a) & (b)) A symmetric algorithm employing a key length in excess of 56 bits An asymmetric algorithm where the security of the algorithm is based on any of the following: Factorisation of integers in excess of 512 bits Computation of discrete logarithms in a multiplicative group of a finite field of size greater than 512 bits Discrete logarithms in a group other than those mentioned above in excess of 112 bits key lengths are very low, meaning that almost any product that provides a reasonable level of security will require an export permit Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 29

30 Controls on Exports of Technology Some exceptions for cryptography Note 2 products accompanying user for personal use Cryptography Note 3 items generally available to public & installed with little support & crypto not easily changed Cryptography used in software only for authentication or digital signatures Personalised smart cards with crypto function limited to radio, t.v., banking, etc. Exports to the USA Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 30

31 Controls on Exports of Technology Open Source Exception permit is not required if the software containing the cryptographic function is in the public domain does not apply where open source software is combined with proprietary software i.e. open source cryptographic program (OpenSSL, etc ) integrated as security feature in or linked into company s proprietary software Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 31

32 Controls on Exports of Technology Programmers are often not aware of all the cryptographic functionality included in the third party code they use in writing their programs yet the company will be liable if export control requirements are not met Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 32

33 Controls on Exports of Technology Receiving equipment for radio broadcasts, pay TV or similar restricted audience consumer broadcasts, if digital encryption only used for sending billing or programme-related information back to broadcast provider Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 33

34 Controls on Exports of Technology Equipment where the cryptographic capability is not user-accessible and which is specially designed and limited to: Execution of copy-protected software Limiting access to copy-protected contents stored on read-only media Limiting access to information stored in encrypted form on media (e.g. for IPR protection) when the media is offered for sale in identical sets to the public Copying control of copyrighted protected audio/video data Encryption and/or decryption for protection of libraries, design attributed, or associate data for the design of semiconductor devices or integrated circuits Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 34

35 Controls on Exports of Technology Portable or mobile radiotelephones for civil use (e.g. for use with commercial civil cellular radio communications systems) that are not capable of end-to-end encryption Cordless telephone equipment not capable of end-to-end encryption where the maximum effective range of unboosted cordless operation is less than 400 meters according to the manufacturer s specifications Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 35

36 Controls on Exports of Technology Information Required on Application to Export Cryptography (CSE) What is the purpose, type and strength of the cryptography? What type of end-users is this software specifically designed for (business, government, home-users, military, etc.)? Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 36

37 Controls on Exports of Technology If claiming the mass market exception set out in the Cryptography Note, which sections apply? Do other possible exemptions apply? Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 37

38 Controls on Exports of Technology Types of Permits Temporary permits good will return to Canada without having been copied in any way abroad Single-shipment permits Project development permits for transfer of technology abroad, such as responding to a RFP or developing new products Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 38

39 Controls on Export of Technology Multiple-shipment permits (to all consignees listed on the permit application, with periodic reporting requirements) Broad-based permit allows multiple shipments to a range of countries and endusers, requiring only semi-annual reporting requires history of demonstrated compliance with individual export permit requirements Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 39

40 Controls on Exports of Technology Application of US Export Controls to Canadian Cryptographic software and technology requires a US export license to be re-exported from a foreign country to another foreign destination or person, if the item was: produced or originated in the US worked on by an American person made outside the US but contains more than a certain percentage of US controlled content made outside the US, but based on certain US-origin technology or software; or made outside the US by a plant (or major component of a plant) that is the direct product of certain US-origin technology or software Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 40

41 Canada s Trade Embargo Legislation Special Economic Measures Act and United Nations Act includes assets freezes cannot deal with listed persons includes arms and military technical assistance embargoes application to persons in Canada and Canadians outside Canada Criminal Code anti-terrorism provisions Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 41

42 United Nations Act Regulations implements assets freezes for listed persons and arms and military technical assistance embargoes Al-Qaida and Taliban Côte d Ivorie Democratic Republic of the Congo Iran Sudan terrorists and terrorist organizations Liberia North Korea Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 42

43 United Nations Act Regulations implement arms and military technical assistance embargoes only Rwanda Sierra Leone Lebanon Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 43

44 United Nations Act Regulations Iraq most restrictions lifted May 28, 2003 restrictions continue on arms, Iraqi cultural property, Iraqi government property Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 44

45 United Nations Act Regulations Liberia arms and military technical assistance embargoes prohibition on importation of blood diamonds, timber products and round logs assets freeze on listed persons Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 45

46 United Nations Act Regulations Iran embargo on the export to Iran of certain items, materials, equipment, goods and technology which could contribute to Iran s uranium enrichment-related, reprocessing or heavy water-related activities, or to the development of nuclear delivery systems embargo on the import from Iran items related to proliferation-sensitive nuclear activities or to the development of nuclear weapon delivery systems Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 46

47 United Nations Act Regulations Iran (cont d) assets freeze against listed persons and entities engaged in Iran s uranium enrichment-related, reprocessing or heavy water-related activities, or in the development of nuclear weapon delivery systems prohibition on the provision of technical assistance or training, financial assistance, investment, brokering or other services, and the transfer of financial resources or services, related to the supply, sale, transfer, manufacture or use of the items, materials, equipment, goods and technology subject to the export ban Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 47

48 United Nations Act Regulations Democratic People s Republic of Korea (North Korea) asset freeze against listed individuals and entities engaged in or providing support for North Korea s nuclear, ballistic missilerelated or other weapons of mass destruction program embargo on exports of luxury goods to North Korea embargo on the provision to North Korea and the procurement from North Korea of arms, related material and technical assistance, including goods related to North Korea s nuclear, ballistic missile-related or other weapons of mass destruction program and don't forget Canadian export controls on U.S.-origin goods and technology, in addition to applicable U.S. laws Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 48

49 Penalty Exposure UN Act Regulations contravention of Canada s United Nations Act regulations subject to criminal penalties of up to $100,000 and/or imprisonment of up to ten years Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 49

50 Special Economics Measures Act Regulations authority for Canada to impose economic sanctions absent a UNSC resolution two currently in force Special Economic Measures (Burma) Regulations Special Economic Measures (Zimbabwe) Regulations Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 50

51 Special Economics Measures Act (Burma) Regulations came into force on December 13, 2007 ban all goods imported from Burma into Canada; ban all goods exported from Canada to Burma, except humanitarian goods; freeze assets in Canada of any designated Burmese nationals connected with the Burmese State; prohibit the provision of Canadian financial services to and from Burma; prohibit the export of any technical data to Burma; ban new investment in Burma by Canadian persons and companies; prohibit Canadian-registered ships or aircraft from docking or landing in Burma; and prohibit Burmese-registered ships or aircraft from docking or landing in Canada and passing through Canada Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 51

52 Special Economics Measures Act (Zimbabwe) Regulations came into force on September 4, 2008 requirement to freeze assets of designated persons duty to disclose to the RCMP the existence of any property believed to belong to or be controlled by a designated person prohibition on the export and transportation of arms and related material to Zimbabwe or to any person in Zimbabwe prohibition on provision of technical or financial assistance related to weapons or related material prohibition on Zimbabwean aircraft from flying over or landing in Canada Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 52

53 Criminal Code Anti-Terrorism Provisions Criminal Code list of entities - terrorist groups currently identifies approx. 40 terrorist groups or associations regularly updated Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 53

54 Criminal Code Anti-Terrorism Provisions offences related to terrorist groups include: collecting, providing or making available property or financial or other related services knowing that they will be used by or will benefit a terrorist group knowingly dealing in property owned or controlled by a terrorist group entering into or facilitating any transaction of property owned or controlled by a terrorist group would include importing from, exporting to or selling product to a terrorist group Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 54

55 Penalty Exposure Criminal Code Contravention of these Criminal Code provisions subject to criminal penalties of a fine of up to $100,000 and imprisonment of up to one year, or imprisonment up to 10 years Brenda C. Swick, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 55

56 Brenda C. Swick Partner McCarthy Tétrault LLP Suite 1400, The Chambers 40 Elgin Street Ottawa, Ontario K1P 5K6 Direct Line: