jwb presentation - ie canada cgp-itar session - 11th annual western regional conference february 26...
DESCRIPTION
ITAR and Controlled GoodsTRANSCRIPT
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
ITAR & Controlled Goods: Canadian Defense Production Act & CGP Proposed
Amendments
Practical Compliance & Enforcement Issues
John W. Boscariol
February 26, 2014
I.E. Canada 11th Annual Western Regional Conference
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
Canadas 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
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Todays Focus Common CGP Issues and Challenges for Canadian Companies
background on Canadas Controlled Goods Program and relationship with United States defense trade controls
interaction with US ITAR - dual- and third-country nationals (ITAR 126.18)
impact of proposed changes to the coverage of the CGP
interaction with Canadas export control regime
John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
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Canadas Controlled Goods Program
background and history
relationship with US ITAR and Canadian exemption
John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
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 Canadas Defence Production Act
Canadas 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
and item 5504 is listed in the Schedule to the Defence Production Act and thereby included in the CGP
Canadas 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
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
Integration of Canadian and US Defence Trade Controls key differences between CGP and 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
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
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
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
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
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
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
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
Canadian Human Rights vs. ITAR
examples of conflicts (ITAR) (contd)
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
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
Canadian Human Rights vs. ITAR
Qubec Human Rights Commission reiterates its opposition to the application of the ITAR rules in
Qubec because of their discriminatory impact
they include requirements that are inconsistent with the Qubec Charter of Human Rights and Freedoms
can no longer accept that companies established in Qubec 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
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
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
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
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
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
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
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
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
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
How Does Canadas 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
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
How Does Canadas 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
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
How Does Canadas 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
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
How Does Canadas 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
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
How Does Canadas Controlled Goods Program Work With ITAR 126.18? continuing ITAR/CGP challenges
does not resolve anything for academic institutions
ITAR coverage shrinking, but CGP remains the same (US export control reform)
DDTCs 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.
made-in-Canada NDA?
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
How Does Canadas Controlled Goods Program Work With ITAR 126.18? continuing ITAR/CGP challenges
broader issues:
is ESS permitted under the DPA and controlled goods regulations?
is this consistent with Canadian constitutional (Charter) law?
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
Proposed Changes to Coverage of CGP Defence Production Act Schedule attempts to resolve issues regarding differences in
coverage of ITAR and CGP
Stream 1 ITAR-controlled items from United States
concerns with Stream 2 certain non-US origin Group 2, 5504, and Group 6 items
administrative burden of tracking two streams vs one
consistent with purpose of CGP?
competitiveness vis--vis United States and other countries?
timing of implementation as US export control reform proceeds
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
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
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
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
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John W. Boscariol, International Trade and Investment Law Group, McCarthy Ttrault LLP / mccarthy.ca
John W. BoscariolMcCarthy Ttrault LLPInternational Trade and Investment Lawwww.mccarthy.caDirect Line: 416-601-7835
E-mail: [email protected]: www.linkedin.com/in/johnboscarioltradelawTwitter: www.twitter.com/tradelawyer