Canadian businesses engaged in international trade always have been less diligent on compliance with import and export controls imposed by the Export and Import Permits and Controlled Goods Acts and similar legislation, than on other regulation. Often compliance did not occur until due diligence requirements on financings or at the sale of the business focussed attention on required inquiry and compliance “with all applicable laws”.
Since a significant and essential aspect of Canadian import and export controls covers the re-export from Canada of goods of U.S. origin, Canadian business should take note that increased surveillance and compliance as well as controls generally, have received much recent attention in the U.S.
In March 2010, President Obama announced the introduction of changes to the U.S. export controls regime. Although details have yet to be released, the changes will include streamlining the regulatory application process for companies that sell encryption equipped products and the elimination of unnecessary regulatory obstacles that hinder the export of products to companies with employees that are either foreign citizens or dual-nationals.1
At the same time, significant fines for contravention have been levied recently against both U.S. based and foreign owned businesses for violations of a variety of applicable U.S. legislation. For example in January, 2010 Interturbine Aviation Logistics GmbH and its U.S. subsidiary settled the violation of the U.S. Arms Export Control Act and the International Traffic in Arms Regulations (ITAR) with the U.S. State Department. The settlement included a fine of US$1,000,000. However, the State Department suspended US$500,000. of the fine because subsequent to the violation Interturbine had implemented export control compliance measures at an equivalent cost.2
Export and import controls compliance programs have been developed by many U.S. companies. What the U.S. enforcement agencies recommend for such programs should be of particular interest to Canadians faced with (remedial) compliance since Canadian authorities are fully familiar with U.S. requirements. Also, the creation or improvement of such programs often has been required by Canadian authorities when approached to rule on possible contraventions, particularly when requests are made for expedited consideration in view of an impending “closing”.
In late February the United States Department of Commerce published “How to Develop An Effective Export Management And Compliance Program And Manual”. The U.S. Department of State similarly has published guidelines for compliance programs in this area. Although no one “template” will suffice for all companies, the following Canadianized version of the U.S. government’s guidelines provides an effective starting point from which to develop a compliance program acceptable to Canadian regulators.