Canadian and U.S. export control laws are similar, but do differ. Prospective purchasers of Canadian companies should take care in determining whether the technology assets they purchase will be subject to Canada’s export laws.

The key piece of legislation in Canada’s export control regime is the Export and Import Permits Act (EIPA).1 Under the EIPA, the Governor in Council establishes certain key lists, including the Export Control List (ECL) and the Area Control List (ACL).2

The EIPA potentially applies to all transfers, by persons or corporations, of goods and technology listed in the ECL to any countries listed in the ACL.

The EIPA does not define “goods,” but “technology” includes technical data, technical assistance and information necessary for the development, production or use of an article included in the ECL, and “transfer” means, in relation to technology, to dispose of or disclose its content in any manner from a place in Canada to a place outside of Canada, as well as any electronic transfer of technology listed on the ECL.

In practical terms, export permits or other authorizations will be required for Canadian technology assets that are:

  • Destined to a country on the ACL (as describedbelow);
  • Subject to a UN Security Council embargo/action;
  • Listed on the ECL;
  • Of U.S. origin; or
  • Destined for a chemical, biological or nuclear weapon, or missile application (Goods for Certain Uses).


The ACL is intended to provide an absolute prohibition on exports or transfers to the countries on the list. Any item going to a country on the ACL (currently, Myanmar and Belarus), whether or not it is listed on the ECL, requires a special permit before it can be exported.


The ECL, set out as a regulation under the EIPA,3 lists goods and technology in eight Groups, each based on international treaties and agreements to which Canada is a signatory. For tech deals, the most relevant groups are:

  • ECL Group 1, dual-purpose goods andtechnology that have both a civilian and military application;
  • ECL Group 2, goods and technology that are specifically designed or modified for military purposes; and
  • ECL Group 5, miscellaneous goods (including U.S.-origin goods).

Purchasers will need to review the Group 1 Dual-Use List to see if purchased products fall into this category. “Off the shelf” technology is unlikely to fall in this category, but the purchaser should, if necessary, undertake a detailed review of the Guide.

U.S.-Origin Goods: Item 5400

The export of any goods of U.S. origin (as defined in ECL Number [or Item] 5400, unless they are included elsewhere in the ECL) will require Canadian export permits. The intention is to ensure that Canada is not used by exporters to circumvent ongoing U.S. embargoes and other export controls. If goods under Item 5400 are destined for end use in countries where currently no such restrictions apply, exporters can use General Export Permit 12 to export U.S.- origin goods that are not listed anywhere else on the ECL.4 However, if the goods are destined for end use in Cuba, the Democratic People’s Republic of Korea (North Korea), Iran, or any country listed on the ACL, the exporter must apply to the Department of Foreign Affairs (DFAIT) for an individual export permit. If the ECL goods are “transiting” the U.S. for export to other destinations, export permits will be required. The export permit required for goods transiting the U.S. is based on the country of final destination.

U.S. Long Arm Regulations

U.S. export licences are not required for certain unclassified defence goods and technology controlled under the U.S. International Traffic in Arms Regulation (ITAR) and for most exports to Canada of commercial items controlled under the United States Export Administration Regulations. However, the U.S. government has traditionally controlled the export from other countries of goods and technology that had their origins in the U.S. and imposes re-export controls. This may also include U.S.-origin parts and components incorporated into a finished product. Accordingly, a U.S. licence may be required when reexporting items of U.S. origin, or non-U.S. made items with American content, exceeding certain levels from Canada to third countries.

The re-export of U.S.-origin goods subject to ITAR from Canada to third countries will almost always require a U.S. licence or other authorization. Before a Canadian export permit can be granted, proof of authorization is required for U.S.-origin goods specifically mentioned in the ECL, including goods, technology and components of U.S.-origin goods that fall within ECL Group 2, ECL Group 6 or ECL Group 5504. U.S. suppliers may often require, as a condition to supplying certain goods and technology, that the Canadian purchaser seek reexport authorization before exporting the goods and technology from Canada, regardless of whether the goods and technology have been incorporated into a finished product in Canada. Therefore, the purchaser may have to investigate whether the products contain sufficient U.S.-origin components to prompt additional analysis.

Employees with Dual Citizenship

If an ITAR licence is required to export products, the purchaser should verify whether employees of the target company have dual citizenship. If Canadian “dual nationals” are exposed to U.S. technology, the product will be deemed to have been exported not only to Canada, but to the person’s other country of citizenship. If the dual national is from a country of concern (e.g., Cuba, Syria, Iran, North Korea, Belarus, Iraq or Venezuela), or a country against which there is an arms embargo, the purchaser will not likely be able to export the technology, unless the seller reassigns the employee to another position.

Conflicts with U.S. Export Control Laws

The Foreign Extraterritorial Measures (United States) Order, 1992 (FEMA [U.S.])5 explicitly requires every Canadian corporation and every director and officer of a corporation to give notice to the Attorney General of Canada of any directive, instruction, intimation of policy or other communication relating to an extraterritorial measure of the U.S. in respect of any trade or commerce between Canada and Cuba that the Canadian corporation, director or officer has received from a person who is in a position to direct or influence the policies of the Canadian corporation in Canada.6

The FEMA (U.S.) Order also explicitly prohibits any Canadian corporation and any director, officer, manager or employee “in a position of authority of a Canadian corporation” from complying with extraterritorial measures of the U.S. concerning trade or commerce with Cuba, and specifically instructs corporations not to be directed or influenced by U.S. trade measures or allow such measures to include the policies of the Canadian corporation in Canada.7 The FEMA (U.S.) Order would apply to directors and officers of a Canadian subsidiary who are also U.S. nationals, reinforcing the conflict between U.S. and Canadian regimes.

Many U.S. and Canadian licences also contain explicit reference to export control legislation that preclude the transfer of the licensed software to countries referenced on U.S. export control and Canadian area control lists. Conventional language in the transaction documents may have to be tweaked to address these considerations, and the purchaser should broadly consider whether any of the technology assets of the target company would be affected by these considerations.8