Cross-border defence procurement and trade in Canada

International trade rules

What export controls limit international trade in defence and security articles? Who administers them?

Exports from Canada are subject to the Export and Import Permits Act, which authorises the creation of an Export Control List. The exportation of articles listed on the Export Control List must be specifically authorised by a permit issued by the Minister of Global Affairs.

What domestic preferences are applied to defence and security procurements? Can a foreign contractor bid on a procurement directly?

A foreign contractor may bid on a defence and security procurement directly. Subject to security concerns, defence and security procurements are generally open.

However, major defence and security procurements (more than C$100 million) require the successful bidder to commit to Industrial and Technological Benefits (ITB), which generally provide that the successful bidder is to make certain investments in Canada or carry out certain work in Canada. The ITB programme is designed to foster investment in Canada in specified sectors, including manufacturing, aerospace and technology. Normally, the ITB commitment is equivalent to the value paid by Canada to the successful bidder.

Are certain treaty partners treated more favourably?

No.

Are there any boycotts, embargoes or other trade sanctions between this jurisdiction and others?

Yes, the government has imposed trade sanctions on various jurisdictions through the United Nations Act (which implements United Nations Security Council sanctions) and the Special Economic Measures Act (which implements autonomous sanctions issued by the government of Canada). Also, Canada recently adopted the Justice for Victims of Corrupt Foreign Officials Act, which allows Canada to impose an asset freeze and a dealings prohibition against individuals who, in the opinion of the Governor in Council, are responsible for or complicit in gross violations of internationally recognised human rights or are foreign public officials or their associates, who are responsible for or complicit in acts of significant corruption.

Measures under the United Nations Act and the Special Economic Measures Act are currently in place with respect to the following jurisdictions: the Central African Republic, Democratic Republic of the Congo, Eritrea, Iran, Iraq, Lebanon, Libya, Myanmar, North Korea, Russia, Somalia, South Sudan, Sudan, Syria, Ukraine, Venezuela, Yemen and Zimbabwe.

Are defence trade offsets part of this country’s defence and security procurement regime? How are they administered?

Yes, defence trade offsets are part of Canada defence and security procurement regime. The government has adopted the ITB Policy. The ITB programme is administered by Industry Canada. Under the ITB Policy, contractors awarded defence procurement contracts are required to undertake business activities in Canada, equal to the value of the contract. Bidders are required to articulate the proposed business activities in their respective proposals submitted in response to the procurement and bids are evaluated on the basis of the ‘value proposition’ that the bidder proposes to Canada at the time of bid. After a contract is awarded, the contractor is required to start fulfilling its commitments and to identify further business activities in Canada, as may be required to meet its overall ITB obligation (ie, 100 per cent of contract value). For example, if contractor’s value proposition includes specific commitments and activities equal to 75 per cent of the contract value, it will be required to identify additional activities equal to 25 per cent of the contract value after the contract is awarded.