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Changes Coming to Canada’s Controlled Goods Program!

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On June 4, 2021, the Government of Canada published an Order Amending the Export Control List (the “Order”), changing the regulatory landscape for businesses that deal with controlled goods and technologies in Canada. While a seemingly minor update — set to come into force after July 23rd, 2021 — this change actually has very far-reaching implications for firms looking to stay in compliance with these important rules!

Background - Canada’s Controlled Goods Program

Canada regulates the control of / access to sensitive goods and technologies (i.e., usually those with potential military applications) under Defence Production Act (the “DPA”). Section 35 of the DPA defines “controlled goods” as goods referred to in the Schedule of the DPA (the “Controlled Goods Schedule”), which reads in various ‘Group 2’ items from Canada’s December 2018 version of “A Guide to Canada’s Export Control List” (the “Guide”). These are largely military technologies, weapons, and vehicles.

In turn, subsection 37(1) of the DPA prohibits unregistered persons from knowingly examining, possessing, or transferring a controlled good.

Similarly, the Export and Import Permits Act (“EIPA”) enables Canada to regulate the export of the same kinds of sensitive goods and technology outside of Canada. This is done through the Export Control List (SOR/89-202) under the EIPA, which again reads in various groups of goods/technologies from the Guide which are subject to export control, including many of the ‘Group 2’ items mentioned above.

Historically, when Canada’s international export control agreements were updated (e.g., for newly controlled goods or technologies) it would take a significant amount of time for regulatory references to the Guide (i.e., in the Export Control List) to be updated. This usually created a long delay before Canada’s applicable laws became up to date.

The Incoming Changes

The most deceptively far-reaching change from the Order appears to be an amendment to the Export Control List which defines the Guide as “A Guide to Canada's Export Control List, published by the Department of Foreign Affairs, Trade and Development, as amended from time to time” (emphasis ours). Prior references were simply to “A Guide to Canada’s Export Control List – December 2018”.

The government’s regulatory impact statement confirms that the use of the “as amended from time to time” language — which was also been added to other international agreements referenced in the Export Control List — is designed to increase “the efficiency through which updates to the common control list are implemented in Canada”.

The effect is that the regulatory runway for future updates will become noticeably shorter, with the government providing that the “updated controls [would] instead come into force 30 days after the Department publishes the latest version of the Guide online” rather than the long period of time for updates which was the hallmark of the previous system.

Importantly, this means that the government can now effectively update the list of controlled Goods Schedule without amending any regulations.

The Order makes also several other changes, including carveouts for antique firearms (which were previously subject to export controls), ands updates to the Nuclear Non-proliferation and Missile Technology control provisions.

Commentary

The takeaway point is that businesses dealing with controlled goods/technology must now pay active attention to published updates to the Guide going forward — rather than passively waiting to be involved in a government regulatory consultative process.

Exporters and domestic businesses handling controlled goods can (and should) expect changes to the scope of regimes like the Controlled Goods Schedule and Export Control List to come more quickly with less visible notice than the historically long regulatory runway. As always, businesses should seek expert advice on how to stay on top of any impending compliance changes!

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