Key events that shaped the Controlled Goods Program

A summary of why and when Canada’s Controlled Goods Program was established, and how the program has been enhanced to align with Canada’s changing domestic security requirements and international obligations.

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Canada and the International Traffic in Arms Regulations

From the inception of the International Traffic in Arms Regulations (ITAR) in 1954, Canada was the only country to benefit from an exemption allowing the license-free import of certain defence articles. This exemption placed Canadian defence industries on a quasi-equal footing with their United States (U.S.) counterparts with significant economic benefits such as reduced export paperwork and approval timelines.

On April 12, 1999, the U.S. State Department unilaterally revoked Canada's exemption under part 126.5 of the U.S. ITAR due to increased security concerns by the Americans regarding the risk of diversion of defence articles for criminal or terrorist aims.

This ruling also affected the definition of a Canadian citizen by restricting dual nationals and third-country nationals of specified countries from accessing ITAR goods if they maintained citizenship with a proscribed country listed under ITAR (for example, North Korea, Iran, Sudan or Venezuela). This rule change resulted in various human rights complaints against employers in Canada by employees who were denied access to ITAR-controlled articles based on their citizenship status because the Canadian Charter of Rights and Freedoms protects individuals from discrimination based on nationality.

On October 8, 1999, Canada and the U.S. announced an agreement in principle which recognized a shared commitment to protect against illegal retransfers of defence or military controlled goods and technology. The U.S. agreed to revise its own defence trade control regulation to permit export to Canada of most defence technology without a licence and in return Canada agreed to strengthen its defence trade controls. Canada harmonized the Canadian Export Control List with the U.S. Munitions List.

Strengthening defence trade controls

On June 16, 2000, Canada and the U.S. announced an agreement on legislative measures to strengthen defence trade controls. The Canadian government agreed to create its own domestic regulatory regime to restrict access to defence articles as a condition to regain the U.S. ITAR exemption.

On October 20, 2000, Bill S-25, a regulatory amendment to the Defence Production Act received royal assent. This amendment added part 2, which gave the Minister of Public Works and Government Services the authority to regulate access to controlled goods, which are goods that have military or national strategic value.

Implementation of the Controlled Goods Program

The Controlled Goods Program was initiated in April 2001 to further strengthen and coordinate defence trade controls with the U.S. The Controlled Goods Program is a registration and compliance program that regulates access to controlled goods and technologies, including ITAR-controlled articles, in Canada.

On April 30, 2001, the Controlled Goods Regulations, pursuant to the Defence Production Act and administered by the Controlled Goods Directorate, came into effect providing the rules and conditions for registration of companies accessing controlled goods.

On May 30, 2001, the U.S. amendment came into effect and the Canadian exemption, which was curtailed in 1999, was substantially regained under ITAR 126.5.

Events that led to the development of the Enhanced Security Strategy

In 2007, the Minister of Public Works and Government Services was given the industry lead for the ITAR dual national issue and began discussions with U.S. counterparts to identify solutions.

In fiscal year 2008 to 2009, a thorough threat and risk assessment of the program revealed possible security gaps and some operational inefficiencies.

On May 16, 2011, the U.S. published a new ITAR rule amending the treatment of dual and third-country nationals. The department of Public Works and Government Services Canada engaged in discussions with the U.S. and worked in close cooperation with stakeholders regarding the proposed amendments.

On August 15, 2011, the new rule, ITAR part 126.18, came into effect. This amendment established the parameters for the transfer of defence articles and services, as well as technical data, to dual and third-country nationals.

Resolution of the dual national and third-country national issue

On August 25, 2011, Canada and the U.S. published an exchange of letters, which acknowledged the acceptance of the security enhancements made to meet the requirements of the new ITAR rule. This, in effect, resolved the dual national and third-country national issue.

Implementation of the Enhanced Security Strategy

In response to the threat and risk assessment, the Enhanced Security Strategy came into effect on October 1, 2011 and set out the changes affecting registrants and their business operations. The Enhanced Security Strategy is a more robust approach to meeting domestic industrial security needs and was implemented through a phased-in approach over three years, ending September 30, 2014. The changes include new methods and tools for conducting security assessments, implementation of designated official training and certification, updated forms, program improvements, development of guidelines on students and a continued consultative approach. The Enhanced Security Strategy also ensures that security assessments of individuals accessing controlled goods are conducted in a uniform manner.

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