Canada-U.S. Blog

Trade Lawyers Cyndee Todgham Cherniak and Susan K. Ross

Tips For Conducting An Internal Investigation

Posted in Aerospace & Defence, Agriculture, Anti-Trust/Competition Law, Border Security, Buy America, Constitutional Law, Controlled Goods Program, Corporate Counsel, Criminal Law, Cross-border deals, Cross-border litigation, Cross-Border Real Estate, Cross-border trade, Customs Law, Energy, Environment, Export Controls & Economic Sanctions, FCPA/Anti-Corruption, Government Procurement, Intellectual Property, Labour, Legal Developments, NAFTA, Transportation

Perhaps your computer system was hacked. Maybe you opened a container to find goods in it that did not belong to you (thank goodness they were not dangerous) or perhaps no goods but evidence people lived in the container while it was en route to the U.S., or you found sizable payments made to questionable parties in odd locations in the world when you checked your records. Perhaps the adverse event is a major product defect. It might also be a significant employment dispute. Whether faced with these serious issues or others equally compelling, once management has been presented with a “situation,” the first step is to figure out what happened and then what to do about it. This article contains best practices for conducting an internal investigation, but really the first question to address is when do you call in counsel? This may seem a self-serving question, but, in fact, whether you have in–house counsel or rely on outside counsel, it is in the company’s best interest to protect the investigation by cloaking it with the attorney-client privilege to sort out what happened, and to then address such important questions as:

1)      Are there government agencies to which we are obliged to give notice about what happened? If so, is there a specific time frame under which we must act?

2)      What do we tell our customers/clients and when?

3)      What do we tell our staff and when?

4)      Who on our staff was involved and what punishment is merited? Is our only choice to fire the people involved?

5)      When do we tell our Board? Shareholders?

6)      Should we report what happened to law enforcement? If so, to what agency and when?

7)      If a vendor was involved, must we change vendors? If so, how quickly? Can we afford to cut off that vendor?

Until you are ready to answer all of these questions, and the many more that arise, it is best to keep the investigation confidential under the attorney-client privilege. For purposes of this article, we will frame the investigation as having to do with a cybersecurity breach, but these recommendations apply in any context where the company finds itself facing serious challenges.

Cloaking The Investigation With Privilege.

Best practice is to immediately engage outside counsel, have him/her lead the investigation, and include him/her on all communications from the start. While relying on in-house counsel alone may be sufficient to establish the privilege, it increases the risk that certain communications may fall outside of the privilege, based on whether the in-house counsel was using his or her “lawyer hat” or “business  hat” for the particular communication. See Wellpoint Health Networks v. Superior Court, 59 Cal. App. 4th 110, 120 (1997). Having cloaked the investigation in privilege, it is equally important to be conscientious, both during the investigation and in its aftermath, to avoid any subsequent waiver.  Generally, sharing a privileged communication with a third party will destroy the privilege. Pac. Pictures Corp. v. United States Dist. Court, 679 F.3d 1121, 1127 (9th Cir. 2012). While the rule appears simple, in the context of an investigation, complexities are likely to arise that readily complicate application of this rule.

Sharing information with the government, for instance, also presents a waiver dilemma. In California, there is a split of authority over whether, and in what circumstances, voluntary sharing of privileged documents with the government constitutes a waiver, whether during the investigation or after its conclusion. Compare McKesson HBOC, Inc. v. Superior Court, 115 Cal. App. 4th 1229 (2004) (disclosure of the results of an internal investigation to the U.S. Attorney and the Securities and Exchange Commission resulted in waiver); Regents of University of California v. Superior Court, 165 Cal. App. 4th 672 (2008) (results of privileged investigation produced to federal Corporate Fraud Task Force pursuant to subpoena did not waive the privilege; although Appellants could have refused to produce the results of the privileged investigation, cooperation with the federal agencies did not waive the privilege “because each defendant believed there would be severe regulatory or criminal consequences if it was labeled as uncooperative by the government”).

Moreover, the majority federal view is that such “selective waiver,” even with a confidentiality agreement in place, may not preserve the privilege. See, e.g., In re Pacific Pictures Corp., 679 F.3d at 1128-29; In re Columbia/HCA Healthcare Corp. Billing Practices Litigation, 293 F.3d 289, 302 (6th Cir. 2002); In re Qwest Communications Intern. Inc., 450 F.3d 1179 (10th Cir. 2006).

Accordingly, if faced with having to make a disclosure to the government, it would be wise to carefully frame the disclosure, including signing a confidentiality and joint-interest agreement, if possible, to strengthen arguments against waiver. However, having done so, there still remains a high degree of risk that any disclosure to any government entity constitutes a waiver.

The possibility of reliance on the investigation in future litigation may also raise issues regarding waiver. Typically, asserting reliance on an investigation or advice of counsel waives the privilege. See Wellpoint Health Networks, 59 Cal. App. 4th at 128 (“If a defendant employer hopes to prevail by showing that it investigated an employee’s complaint and took action appropriate to the findings of the investigation, then it will have put the adequacy of the investigation directly at issue, and cannot stand on the attorney-client privilege or work product doctrine to preclude a thorough examination of its adequacy.”). However, the privilege is waived only if and when the issue actually arises in a pending lawsuit, not at some point where there is only a possibility or likelihood that it will be raised. Id. at 129.

The key points to why you engage outside counsel from the outset are a company’s self-interest in controlling information regarding an adverse event and the legal interests protected by the involvement of counsel. The same is true when promptly bringing in-house counsel into the picture, but relying strictly on in-house counsel leaves the company vulnerable to the side issue of what “hat” counsel was wearing with each communication. If it is a business hat, the information exchanged is not privileged, and who wants to go through the nightmare of that collateral issue when the company is facing such serious challenges?

Best Practices for Conducting the Actual Internal Investigation

When setting out to investigate a cybersecurity breach, the company should first determine whether the investigation should be conducted by an “inside” human resources representative or attorney or an “outside” investigator or attorney. When selecting an investigator, in addition to the privilege considerations discussed above and below, consider whether the proposed investigator possesses the skills to properly conduct an investigation that could require technical knowledge of the systems affected.

A few additional things to keep in mind when conducting the investigation:

  • Jump in right away. The investigation should be conducted promptly, even if certain evidence is not immediately available or certain witnesses are unavailable or uncooperative. Any necessary delays in the investigation should be well documented.
  • Preserve all available evidence as soon as possible and before meeting with witnesses. Once it becomes clear an investigation is going to be conducted, people may alter or destroy electronic (or other) evidence purely out of self-preservation interests. Consider whether interim measures should be taken to preserve information; and, if so, what is available, how can it be done, and who should be involved in that effort?
  • Chase down all reasonable leads, regardless of where they might take you, ask the tough questions, and be flexible. In order to conduct a complete investigation, and in order to later defend the integrity of the investigation, the company must be able to show the investigation was fair, comprehensive and not biased.
  • Document witness interviews appropriately. The investigator should keep notes for each interview that capture both questions and answers and note the date and time of the interview and the people present. These notes may be essential support for the investigator’s conclusions and any resulting employment action taken. If appropriate, getting signed affidavits from the concerned parties may be a wise option.
  • Don’t jump to conclusions. There is almost always another side to the story. Make sure the investigator has reviewed all potentially relevant data and versions of what occurred before coming to any conclusions.
  • Once you have the outcome, take prompt but reasonable action. Once the source and scope of the problem are identified, take timely but prudent action and do not delay in doing so. The more serious the problem, the more reason to document everything that was done and why.

We mentioned above how best to protect the investigation – i.e., to cloak it in the attorney–client privilege. To illustrate the reason for that recommendation, one of our best practice recommendations was to preserve all available evidence and do so promptly. This is both a sensitive area and also one where applying the privilege can become complicated. The issue is sensitive because management wants to make sure it has all the evidence and knows the positive and negative about the situation. But, for the employee put in charge of the investigation, one of the first principles of such an effort is to keep those in the know to a small group, at least until the source and extent of the breach are known. If the investigation is started without counsel being involved, all those efforts are fair game for inquiry in any government investigation, employee action, or other litigation, including by whistleblower and class action plaintiffs. On the other hand, if counsel is involved from the start, the actions of the staff and even outside experts are protected from disclosure unless and until the company decides to voluntarily disclose any information.

Another point we raised is the investigator. It is important to keep in mind that often the skills needed to conduct the investigation are specialized, and so hiring outside experts can be necessary and prudent. The expert should work for the lawyer so there is no question that the expert is acting at the direction of the lawyer, and, thereby, those efforts are cloaked in the attorney-client privilege.

Another area where things can get complicated is when employees are interviewed. If not handled correctly, the company could end up with a whistleblower on its hands. So sensitivity during the interview process is key, but also making clear the attorney works for the company and not the employee is critical to the validity of the outcome.

The current situation with General Motors (GM) and its recall dilemma are a good example of how convoluted things can become. On the other hand, it is likely GM conducted an internal investigation about the ignition switches. From press reports, it seems possible GM had an inking of the problem several years ago and so an investigation of some sort was probably conducted back then. On the one hand, GM likely wants to keep the results concealed for a variety of plausible reasons. For example, it wants its customers to see the company as compassionate and feel confidence in GM as its weathers the storm. GM also wants the regulators to see the company as compliant and this malfunction as an aberration. Further, GM wants its employees and shareholders to see it as a good, solid, and caring company. In short, quite understandably, GM wants to protect it good name and brand. Whether GM will be able to shield the results of any old investigations (or even a current one) remains to be seen, but depending on their results, GM may decide it is better served to waive the privilege and share those findings.

Exactly how the GM situation turns out will be some time in happening. A final and more public example is the dilemma Boeing found itself in a few years back when it hired someone from a competitor in order to gain an advantage in a government contract bidding process. Because it failed to conduct due diligence in the hiring and retention of that employee, it paid $615 million to settle criminal and civil charges. After the case was resolved, a member of the Boeing legal team spoke publicly about other consequences to the company. Among them were the following: senior executives being forced to plead guilty, serve time in a federal prison, pay a fine of $250,000, and forfeit approximately $5 billion in equity-based compensation; denial of export licenses; potential loss of security clearances; resuspension or debarment; potential prohibition of the use and possession of explosive devices (needed for actuators on airplane doors); future impacts on contractor integrity scoring; defense of the Boeing competitor’s lawsuit; loss of $1 billion of launches and being suspended from the launch business for 20 months; employees fired or indicted; loss of the U.S. Government tanker market; and being forced to recompete certain projects. But the biggest damage was to the company’s reputation. Did people still want to work there? How can employees and others see the company in a good light?

While certainly there is not a lot of detail available even now about the specifics of any internal investigation Boeing conducted, it is reasonable to expect there was one. The question is when was it conducted? It would also be critical to know how far into the investigation was the government when it was completed? Given the severity of the penalties on Boeing and its staff, there is reason to think the results of any internal investigation might not have been a great bargaining chip. While this is admittedly speculation, when you look at the situation, the question you have to ask is, if you were faced with a similar situation, how would you conduct the investigation? What is the team you would bring together to help you? Wisdom suggests managers should have these questions answered before the situation explodes rather than being reactive. Are you ready?

Cybersecurity

Posted in Aerospace & Defence, Border Security, Buy America, Corporate Counsel, Customs Law, Export Controls & Economic Sanctions, FCPA/Anti-Corruption, Government Procurement, Legal Developments

President Obama issued Executive Order 13636 on February 12, 2014 setting out potentially far reaching cybersecurity standards. To learn what these new standards could mean for your company, the impact it will have on how companies are measured in the face of a hacking event and just what you are in for in the future, see http://www.msk.com/news/pub.cfm?id=2159&type=Alert.

Can I Sue the Canada Border Services Agency If They Make A Mistake?

Posted in Customs Law

I get asked this question very often.  The answer is “yes” with a BUT.  Pursuant to subsection 106(1) of the Customs Act (Canada), an action or proceeding may be brought against an officer or person assisting an officer.  Subsection 106(1) of the Customs Act (Canada) provides that “no action or judicial proceeding shall be commenced against an officer for anything done in the performance of his or her duties under [the Customs Act] or any other Act of Parliament or a person called to assist the officer in the performance of such duties more than three months after the time when the cause of action or the subject matter of the proceeding arose.”

Pursuant to subsection 106(2) of the Customs Act (Canada), an action or proceeding may be brought against the Crown to recover seized or detained goods. Subsection 106(1) of the Customs Act (Canada) provides that “no action or judicial proceeding shall be commenced against the Crown, an officer or any person in possession of goods under the authority of an officer for the recovery of anything seized, detained or held in custody or safe-keeping under [the Customs Act] more than three months after the later of (a) the time when the cause of action or the subject-matter of the proceeding arose and (b) the final determination of the outcome of any action or proceeding taken under [the Customs Act] in respect of the thing seized, detained or held in custody of safe-keeping.”

The important takes aways are:

1) Yes, you may bring an action or a proceeding against the Canada Border Services Agency (“CBSA”); and

2) You MUST file the notice of application or other commencement of proceeding within 3 months.

Often, the question about suing the CBSA comes after the expiration of the three month limitation period.  The courts strictly apply the limitation period. So, if you wish to pursue a civil or criminal claim against a CBSA officer, do not delay.  It may be possible to file a protective claim and withdraw the case if you later decide to not pursue the matter.

Canada Border Services Agency Looks For Cute Puppies In The Vehicle?

Posted in Customs Law, NEXUS, Uncategorized

If you have a cute little puppy on your lap as you cross the border or a dog crate in the back of the minivan, expect the Canada Border Services Agency (CBSA) to ask some questions about the dog.  The CBSA recently released information about the December 2013 cases of non-compliance.  The CBSA gives the following examples:

  • Travelers who bought a dog in the US, claiming it was worth $500 US, but then admitted it actually cost them $1,900 US.  They were given penalties of $670.
  • A man declared $1,000 for a puppy he bought from a breeder in the United States. A quick check showed he paid $3000 for the dog.  He ended up paying a $1,100 penalty.

We have seen this happen many times.  The CBSA knows that breeders of pure breed dogs ask for significant amounts for a puppy.  If the value appears too low, the CBSA will ask where you located the breeder.  If you say Craigslist, they will search by the breed of dog and the location of the breeder to find the original advertisement.  If you say you negotiated the price by email, they will search your Blackberry/iPhone/computer for the email exchange.

If you provide the CBSA with an invoice that just does not seem right, the CBSA will accuse you of providing a false invoice.  It happens more often than you would think.

The CBSA would prefer that travelers make an accurate declaration.  The proper paperwork should be provided and make sense.  If the price is lower than what would be usual, the seller should provide a written explanation.  For example, a traveler acquired the pick of the little because her Canadian dog was used as a stud.  Another traveler owned the mommy dog and was surprised by a little of puppies while spending the summer in New York State.  Another traveler returned with a dog after the owner had passed away and did not want to put the dog down.  There are many valid reasons for a lower value for duty – they key is proving that the facts are accurate and truthful.

Wassenaar Countries Agree To Limit Transfers of Surveillance Technologies

Posted in Export Controls & Economic Sanctions, Uncategorized

At the December 3-4, 2013 Plenary meeting of the signatories to the The Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (the “Wassenaar Arrangement), the parties agree to additions to the List of Dual-Use Goods and Technologies.

The newly added export controls relate to surveillance technology.  The Public Statement relating to the 2013 Plenary Meeting describes the changes as follows:

In 2013, new export controls were agreed in a number of areas including surveillance and law enforcement/intelligence gathering tools and Internet Protocol (IP) network surveillance systems or equipment, which, under certain conditions,may be detrimental to international and regional security and stability. Participating States also further clarified existing controls in respect of inertial measurement equipment or systems and relaxed some controls such as for instrumentation tape recorders and digital computers.

The agreed changes follow a few tough years of cyber-security concerns:

1) Autocratic regimes (such as the Assad regime in Syria) monitoring the communications of dissenting citizens; and

2) Government surveillance of communications of foreign leaders (that is Wassenaar signatories intercepting/listening to communications of each other).

The additions limit is the transfer of the surveillance technology, but do not address or limit surveillance activities per se.  What will and will not be restricted will depend largely on the actions taken by signatories to update their domestic export controls legislation.

For additional information, please refer to the following articles:

Circumvention of Antidumping and Countervailing Duties Is Going to Cost The Importer

Posted in Trade Remedies

It is not a good idea to intentionally evade the payment of anti-dumping and countervailing duties by conspiring with a manufacturer in a subject country to transship goods (in an unchanged condition without any modification) through a third country.  A U.S. importer learned an expensive lesson for their actions in the United States.

Canadian importers should take a look at the Global Trade Law Blog post “A Peek Around the Curtain: A False Claims Act Settlement for Avoiding Customs Charges” written by Mark Jensen and Ryan Roberts to learn about what happened south of the border (as a lesson about what not to do).  In this blog article, the authors write about a U.S. False Claims Act settlement by a U.S. importer of aluminum extrusions into the United States who intentional provided false information about the origin of the goods and participated in the deception.

While Canada does not have legislation like the False Claims Act, a similar set of facts relating to actions undertaken to circumvent anti-dumping duties and/or countervailing duties could land a Canadian importer of record in a heap of expensive trouble.

First, if a Canadian importer of record imported aluminum extrusions from China after conspiring with an exporter to misstate the origin of the goods (and route the goods via a third country such as Malaysia), they would be in a lot of trouble under Canadian laws.  If the importer filed documentation with the Canada Border Services Agency (CBSA) that it knows to be false and the documentation relates to goods that are subject to an anti-dumping/countervailing duty order of the Canadian International Trade Tribunal, the importer of record may be charged under the offence provisions of both the Special Import Measures Act (Canada’s anti-dumping/countervailing duty law) and Customs Act (for misstating the origin for customs duty purposes). The penalty for committing an offence includes fines and/or imprisonment.

In addition, the importer of record would receive a detailed adjustment statement for the duties that were alleged to be evaded (plus interest and penalties). Most likely, the duties would be at the highest rate that was set by ministerial specification because the most likely scenario is that the real manufacturer does not have normal values.  If the real exporter did have normal values, the transshipment through a third country in this manner may be sufficient to result in the inapplicability of those normal values.

Further, the CBSA may impose administrative monetary penalties for both the false information under the Special Import Measures Act and the Customs Act. In short, the amounts payable will add up to far exceed the evaded duties.

On top of all of these amounts, the customs broker fees and lawyers fees will add up.

More importantly, the appeal of the imposition of the duties would be made to the Canadian International Trade Tribunal, which is the same quasi-judicial body who made the original injury finding.  The Tribunal will not be favourably disposed to any appellant who circumvented their order in such a dishonest manner.  The appeals under the offense provisions would go to the courts.  As a result, the importer of record would be fighting more than one legal battle in more than one legal venue.

CAVEAT: It is important to recognize that there is a very big difference between intentional transshipment of goods (discussed above) and an importer of record buying goods from a non-subject country that happen to be subject to an anti-dumping/countervailing order in Canada.  There are many situations where an honest importer of record does not know the origin of the goods and is not actively attempting to circumvent an anti-dumping/countervailing duty order.  These importers may still receive a detailed adjustment statement from the CBSA, but should not be subjected to other more serious enforcement measures/penalties.

Prescribed Form for Reporting Exports of Controlled Goods From Canada

Posted in Canada's Federal Government, Customs Law, Export Controls & Economic Sanctions

On January 17, 2014, the Canada Border Services Agency posted Form BSF728 “”Electronic Export Reporting of Controlled Goods Process“. This form is required pursuant to section 95 of the Customs Act (Canada),  which requires “all goods that are exported shall be reported at such time and place and in such manner as may be prescribed.”  The Form BSF728 is a prescribed form.

Notwithstanding the general rules that “all goods that are exported shall be reported”, the Governor-in-Council (the Cabinet) may promulgate regulations that exempt classes of goods from the reporting requirement.  The Reporting of Exported Goods Regulations sets out the exemptions (see sections 6-8).  For example, exporting commercial goods valued at less than $CDN 2000 is exempt from the reporting requirement.  The corollary is that exported commercial goods valued at more than $CDN 2000 must be reported unless a different exemption applies.

Failure to report exported goods as required is an offence under subsection 160(1) the Customs Act.  False statements on the form may be an offence under section 153 of the Customs Act.

 

What is a Detailed Adjustment Statement?

Posted in Customs Law, Trade Remedies

A detailed adjustment statement (also called a DAS) is the term used by the Canada Border Services Agency (CBSA) for an assessment or reassessment of duties (customs, excise, anti-dumping, countervailing) or penalties.  A DAS may be issued with respect to the original assessment/reassessment by the CBSA or after a request for redetermination.  The same for of document is used and it is important to understand the stage of the disagreement with the CBSA.  A careful review of the DAS will indicate what type of DAS has been issued and the next steps in the process.

Let’s review some of the important areas on the DAS.

Box 1 indicates the name of the importer of record and their address.  Generally, this is the person who must pay the amount assessed/reassessed in the DAS.  Generally, this is the person who must file a request for redetermination.  That being said, there are circumstances wher an exporter may file a request for redetemination (for example, an exporter in a NAFTA country may appeal certain origin determinations made by the CBSA).

Box 2 indicates the number assigned to the DAS.  This is the number that must be quoted when referring to the DAS.

Box 6 is the original transaction number.  This is the number issued by the CBSA at the time of the entry of the goods into Canada. Ask your customs broker to provide the information filed with the CBSA in connection with this original transaction number.  Usually this is the best method of matching the DAS to the commercial invoice and bill of lading.

Box 7 is the date of the original release of the goods by the CBSA.  This will help an importer determine the transaction that is being assessed/reassessed.  This date is also relevant for determining whether the DAS has been issued within the statutory limitation period.

Date of Decision is the date of the DAS.  This box next to Box 14.  Start counting from this date.

The DAS will set out assessments/reassessment based on the line of the original B3 Customs Coding Form and the original information provided.  The assessed duties (not the original amounts declared as owing) will be indicated.

The DAS should set out the reason for the assessment/reassessment after the transaction line by transaction line assessment(s).  Often the reasons provided are limited and information must be obtained from the CBSA directly or by way of an access to information request.

The DAS indicates the statutory provisions pursuant to which the assessment/reassessment has been made.   Usually, the DAS indicates whether the DAS relates to customs duties, anti-dumping/countervailing duties or excise duties.  Usually, the customs duty DAS will indicate if the issue is a tariff classification issue (and the line items will show the CBSA’s tariff classification number in box 21), a origin issue (and box 12, 13 or 25 will provide more details about origin determinations by the CBSA) or a valuation issue (and box 31 usually indicates the changed value for duty). Usually, the DAS provides the statutory limitation period (such as 90 days), but does not give the date by which a request for redetermination or appeal must be filed. We strongly recommend diarizing the deadline as soon as the DAS is received.

The last page of the DAS summarizes the assessed/reassessed amounts.  This is the page that gives the total of the amount owing for customs duties, SIMA duties, GST, excise duties, interest and penalties. The last page also gives the deadline for paying the DASsed amounts at the prescribed rate of interest.  If the DASsed amounts are not paid by that date, the interest rate increases to the specified rate of interest (which is higher than the prescribed rate of interest).

As soon as a DAS is received, the importer of record identified in Box 1 should determine whether he/she wishes to file a request for redetermination or appeal.  It is at this time that the importer should start to gather the relevant documentation needed to support the request for redetermination/appeal.  The importer or record should not wait until the last day to consider the documentation to be provided to demonstrate that the CBSA is incorrect.  Often the DAS is sent by the CBSA to the customs broker and the importer of record does not receive the DAS immediately,  It is important for these documents to be provided to the importer of record as quickly as possible.

For more information about how to respond to a DAS, please do not hesitate to contact us.

The ABCs of Canada’s Export Controls and Economic Sanctions Laws – Part 2

Posted in Aerospace & Defence, Border Security, Controlled Goods Program, Export Controls & Economic Sanctions

Yesterday, we published “The ABCs of Canada’s Export Controls and Economic Sanctions Laws – Part 1″.  Today, we are providing the second part of the blog post.

M = Minister Approvals = Canada’s Minister of International Trade and/or the Minister of Foreign Affairs may issue a Ministerial Authorization to permit certain transactions with designated persons (or persons who are not designated persons) in sanctioned countries even if the transaction would otherwise be prohibited.  A Ministerial Approval must be obtained prior to the export and should not be sought in order to correct an infraction.

N = Nuclear Non-Proliferation – Canada imposes export controls and economic sanctions in order to contain and prevent the proliferation of nuclear weapons.

O = Origin – The origin of goods to be exported from Canada may be relevant.  Certain goods of U.S. origin require an export permit prior to export from Canada.  Canada has a bilateral arrangement with the United States that requires Canada to ensure that U.S. controlled goods are not shipped from Canada in order to circumvent U.S. export controls and economic sanctions rules. Some goods require a specific export permit and other goods may be exported pursuant to General Export Permit No. 12.

P = Permits – An exporter of controlled goods must obtain an export permit from the Trade Controls Bureau prior to exporting the goods.

Q = Quotas – Certain goods, such as softwood lumber are subject to export quotas.

R = Registration – Canadian companies may be required to register with the Controlled Goods Directorate of Public Works and Government Services Canada with respect to domestic transfers of certain controlled goods on Canada’s Export Controls List.  Companies are required to maintain a security plan, undertake security assessments of employees who are involved with controlled goods, appoint a designated officer and maintain detailed records concerning inbound and outbound transfers of controlled goods, including technical data sheets.

S = Sanctions – Canada imposes multi-lateral and unilateral economic sanctions against a number of countries,

T = Trade Controls Bureau – The Trade Controls Bureau (TID) of the Foreign Affairs, Trade and Development Canada administers Canada’s export controls and economic sanctions laws.

U = Unilateral Sanctions – Canada may choose to impose unilateral sanctions against a country in order to send a message that Canada does not agree with that country’s activities.  Unilateral sanctions may be imposed in addition to or to supplement sanctions imposed by the United Nations Security Council.

V = Vigilance = Exporters must exercise vigilance to ensure that they are in compliance with Canada’s export controls laws (and the laws of other countries and some laws have extra-territorial application).  The first step is to establish internal policies and controls.

W = Wassenaar Convention – Canada is a signatory to the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (the Wassenaar Arrangement). The Wassenaar Arrangement is a voluntary multilateral export control regime established by 41 countries with a view to regional and international security and stability, transparency and greater responsibility in transfers of conventional arms and dual-use goods and technologies. The List of Dual Use Goods and Technologies is updated from time to time (usually based on Plenary Meetings).

X = XO – XO means executive officer.  Any compliance program must have the support of executive officers in order to be successful.

Y = Yellow = Anyone engaged in export activities or dual use goods or U.S. Origin goods must exercise caution.

Z = Zimbabwe – Zimbabwe and many others countries are the subject of regulations pursuant to the Special Economic Measures Act and the United Nations Act.

The ABCs of Canada’s Export Controls and Economic Sanctions Laws – Part 1

Posted in Border Security, Export Controls & Economic Sanctions

As 2014 begins, we want exporters in Canada to succeed in their export trade activities.  Here is an alphabetical guide to some the relevant Canadian export controls and economic sanctions issues.

A = Area Control List – Canada’s Area Control List (ACL) is a list of countries in respect of which Canada requires export permits to be obtained for all goods (even for pencils).  Currently North Korea and Belarus are on the Area Control List.

B = Blocking Orders – Pursuant to the Foreign Extra-territorial Measures Act, the Attorney General of Canada may issue a blocking order to prevent a Canadian company from refusing to export to a stated country (e.g. Cuba).

C = Canada Border Services Agency – The CBSA is one of many governmental authorities with a statutory mandate to enforce Canada’s export controls laws.  The CBSA may detain exported goods and seek information about export permits before permitting the export to proceed.  Usually, the CBSA will contact the exporter of record of the export documentation.

D = Dual-Use Goods – Many dual-use goods that may be used for military purposes and civilian purposes may require an export permit in order to be exported. Dual-use goods include include products and technologies associated with a variety of advanced materials, electronics,computers, telecommunications, sensors, lasers, navigation, avionics, marine equipment and technology and propulsion.

E – Encryption Software – An exporter of encryption software, and related information technology goods may require an export permit (or multi-destination permit) before exportation of these goods from Canada.  Few exporters realize that any software can be subject to export controls.

F = Firearms, Munitions, Missiles and Military Goods – Most forms of weapons cannot be exported without an export permit.

G = Guide to Canada’s Export Controls – This is an important government publication setting out Canada’s export controls rules and the goods on Canada’s Export Control List.

H = Hazardous Goods and Waste Materials – Canada restricts the export of hazardous goods and waste materials and puts conditions on the export to ensure safe transportation and arrival. Since 1992, Canada has been a party to the international Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal. The exporter primarily deals with Environment Canada.

I = Iran – Canada imposes multi-lateral and unilateral economic sanctions against Iran. Canada’s most severe export sanctions are in respect of Iran.

J = Judge – If you do not comply with Canada’s export control and economic sanctions laws, a Canadian judge may impose significant fines and/or prison terms.  Directors and officers of a corporation may also be subject to penalties.  The CBSA may impose AMPS penalties without having to ask a judge.

K = Keep Records – Keep records of your due diligence efforts to determine that you are not selling to a designated person is a country against which Canada imposes economic sanctions.  Keep records of rulings obtained concerning whether goods are on Canada’s Export Control List.  Keep records of the end use certificates that you have obtained.  If you are registered with the Controlled Goods Program, keep all the required records.

L = Legislation – Canada’s export controls and economic sanctions laws are imposed pursuant to many statutes and regulations.  Some of the laws are: Export and Import Permits Act, Special Economic Measures Act, United Nations Act, Criminal Code, Defence Production Act, Freezing of Assets of Corrupt Foreign Public Official Act, etc.

Please come back tomorrow for The ABCs of Canada’s Export Controls and Economic Sanctions Laws – Part 2.