Canada and U.S. Export Reform Supports Canadian Defence, Security and Aerospace Industries
October 12, 2011
As of August 15, 2011, an important obstacle for Canadian companies registered in the Controlled Goods Program who are competing for aerospace and defence-related contracts has been removed for their dual-national employees who must have access to controlled articles. This development follows negotiations championed by the Honourable Rona Ambrose, Minister of Public Works and Government Services and Minister for Status of Women, on behalf of the Government of Canada.
It is excellent news for Canadian business and represents a positive step that supports Canada's important defence and economic relationships with the U.S., while enhancing both countries' national security.
U.S. export controls reform and International Traffic in Arms Regulations (ITAR) amendment on dual- and third-country nationals
In March 2010, U.S. President Barack Obama announced his intention to eliminate obstacles to exporting defence articles and technology controlled by the ITAR to certain foreign companies, including Canadian companies that employ dual- and third-country nationals.
On August 11, 2010, the U.S.-proposed rule—Amendment to the International Traffic in Arms Regulations: Dual Nationals and Third-Country Nationals Employed by End-Users—was published in the Federal Register with a 30-day comment period. In collaboration with industry and government stakeholders, Minister Ambrose submitted Canada's official response to the proposed rule.
In January 2011, Minister Ambrose went to Washington to urge officials to adopt an amendment to the ITAR, given the strength and effectiveness of Canada's Controlled Goods Program's Enhanced Security Strategy. The Minister demonstrated that program enhancements would meet or exceed the requirements of the amended regulations and support Canada's strong national security framework.
The new rule took effect on August 15, 2011, effectively amending the treatment of dual- and third-country nationals. The rule introduced a new exemption that now allows the transfer of defence articles, including technical data, to dual- and third-country national employees, subject to the following conditions: employees must either have a government-approved security clearance, or be screened for substantive contacts with U.S.-proscribed countries.
Dual-national issue
In the post-9/11 era, the increasingly restrictive application of the ITAR on U.S. exporters regarding access by foreign citizens and permanent residents, including Canadians, who were born in other countries, has been an issue between the U.S. and Canada. Technical assistance agreements and manufacturing licensing agreements issued under the ITAR required all dual- and third-country nationals working on a project to be identified.
Provisions under these regulations prevented the transfer of any form of controlled goods or data to Canadians who were born in, or were nationals of, a U.S. proscribed country; at present there are 25 countries on this list. For additional information on the proscribed countries, consult the U.S. Department of State web site.
The Government of Canada supported an approach that places the emphasis on security rather than focusing on an individual's country of origin.
Government of Canada response and Public Works and Government Services Canada's (PWGSC) role
PWGSC is responsible for the Government of Canada's Industrial Security Program, which includes the oversight of controlled goods and technology in Canada through the Controlled Goods Program. The Controlled Goods Program prevents diversion and proliferation of tactical and strategic assets (including goods, technologies and services) subject to ITAR. The program helps strengthen Canada's defence trade controls and supports the country's domestic and international security interests, under the auspices of the Defence Production Act.
Shortly after the new rule came into effect, the Controlled Goods Program set out to ensure that Canadian industry understood how it could take immediate advantage of enhancements to the program to meet the requirements of the new rule. Information about changes to controlled goods processes under the Enhanced Security Strategy is available on the Controlled Goods Program program's Web site.
Enhancements to the program are helping Canadian industry to meet the requirements of the new ITAR rule. Strong and effective security procedures are expected to both improve Canada's economic competitiveness and enhance national security.
On August 29, 2011, the Government of Canada reached an agreement with the U.S. Department of State on an implementation process for the new rule. This is contained in an Exchange of Letters (EOL) signed by the U.S. Deputy Assistant Secretary of State, who has delegated authority for administering the ITAR, and the Canadian Assistant Deputy Minister of Public Works and Government Services Canada, who is responsible for the Controlled Goods Program. The EOL is designed to provide Canadian companies with the assurance that:
- the new rule will be administered in compliance with Canada's privacy legislation; and
- the U.S. endorses the enhanced Controlled Goods Program as Canada's chosen avenue for Canadian industry to meet the requirements of the new rule.
A copy of the EOL is available on the program Web site.
Industry response to the final dual-national rule
Through the Exchange of Letters, the U.S. recognizes that Canada's enhanced Controlled Goods Program has appropriate security measures and processes in place to comply with the provisions of the new rule. Canada's Controlled Goods Program is viewed as a strong program that prevents diversion and proliferation of tactical and strategic goods, technologies and services subject to the ITAR. Canadian companies can take immediate advantage of the new rule, in a manner consistent with Canadian privacy and human rights legislation. Feedback from Canadian industry has been positive to date.
The Canadian Association of Defence and Security Industries (CADSI) recognizes the important role of Minister Ambrose and the work of PWGSC officials for the agreement between Canada and the U.S. that resolves the ITAR dual- and third-country national issue in a manner that respects Canada's sovereignty, security, public policy and other important national interests. This agreement will allow for CADSI's 860 members to retain access to critical information and have increased export opportunities while continuing to ensure the security of Canada and the U.S.
The Aerospace Industries Association of Canada (AIAC) and its member companies are very pleased with the announcement. For them, it represents an important milestone for the aerospace and defence industries, as this sought-for recognition of the measures undertaken by the Government of Canada through the Enhanced Security Strategy has allowed the resolution of the long-standing ITAR dual-national problem.
Canadian Manufacturers & Exporters, Canada's largest trade and industry association, has expressed appreciation for the efforts of Minister Ambrose and PWGSC to achieve a major step in the right direction—both in terms of a workable and mutually acceptable process for controlled goods and in terms of government-to-government exchanges of information in the area of export controls. The enhancements to Canada's Controlled Goods Program and the recognition by the U.S. that they meet the requirements under the new ITAR dual-national rule will strengthen Canadian and U.S. defence trade controls, as well as our economic competitiveness.
Canadian companies are hopeful that this will serve as a model for greater regulatory cooperation and a common approach to defence trade controls that will not only strengthen our bilateral economic ties, but also enhance our economic competitiveness and bolster national security objectives for both countries.
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