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Canada Adopts New Export Controls and Brokering Requirements

Ground-breaking changes are now in force impacting Canadian export controls and certain activities abroad regarding export controlled goods and technology.

Earlier this month Canada became a State Party to the United Nations Arms Trade Treaty (ATT), a treaty establishing standards for international trade in a broad range of conventional arms that currently counts more than 100 State Parties. To meet its ATT obligations Canada amended the Export and Import Permits Act (EIPA) and adopted a package of brokering regulations, namely, the Brokering Control List, Brokering Permit Regulations, Regulations Specifying Activities that Do Not Constitute Brokering, General Brokering Permit No 1, and General Export Permit No 47 (ATT Package). This ATT Package came into force on September 1, 2019. Please see our previous publication on the brokering controls and new standards for export and brokering permits here.

The newly-established legislative scheme imposes controls over brokering activities. This is a significant development for Canadian industry as this is the first time such controls have been introduced in Canada. Therefore, anyone involved in international trade in defence goods or technology should review the ATT Package thoroughly, and assess the implications for their business activities. 

How Did We Get Here?

The path to Canada’s ATT accession has been long and tedious. The ATT was first addressed in the UN in December 2006. The underlying reason for the discussion was that while there are some international standards in place with respect to chemical, biological and nuclear weapons, the area of conventional arms remained untouched.

The ATT has been the subject of heavy negotiation. It took six years to adopt it, and it has taken Canada a further six years to accede to the ATT. Not until in March 2019 did Global Affairs Canada submit the ATT Package for public consultation. The responses gathered during the consultation period largely supported suggested regulatory steps which led to the adoption of the ATT Package with only minor technical changes.

Extraterritorial Application

The biggest hurdle in the path of Canada’s accession to the ATT has been the extraterritorial application of brokering controls. During ATT negotiations, Canada objected to the proposed brokering provisions voicing concerns over the efficacy of extraterritorial application due to practical enforcement obstacles. However, the amended EIPA prohibits unauthorized brokering by any Canadian company or individual whether one is located in Canada or abroad, which essentially means that new Canadian brokering obligations apply on an extraterritorial basis. All persons in Canada as well as Canadians (including permanent residents) abroad now require a Canadian permit to engage in brokering activities. An offence committed outside of Canada can be prosecuted in any territorial division of Canada.

In sum, businesses who are engaged – either directly or indirectly – in defence-related transactions should carefully review the ATT Package, and in particular its application in scenarios where Canadian companies facilitate arms purchases or sales that do not involve exports from Canada.

Definition of Brokering

The EIPA defines brokering as an activity aimed “to arrange or negotiate a transaction that relates to the movement of goods or technology included in a Brokering Control List from a foreign country to another foreign country”. This means that the import or export of goods or technology in or out of Canada or negotiations or arrangements solely in respect of such transfers are not covered by the new brokering regulations. As was pointed out in our previous publication on the brokering controls here, there is uncertainty as to whether a transaction involving the movement of technology from one place to another that does not include the disclosure of the contents of that technology (e.g., on a USB key that remains unopened) is captured by the new brokering regulations.

Items That Fall Under the Brokering Controls

The new Brokering Control List identifies the items for which a brokering permit is required. It encompasses all Group 2 (Munitions List) and newly formed Group 9 items listed on the ECL (eight ATT categories of full-system conventional arms), as well as other ECL items, including dual-use ones, that are likely to be used to produce or develop a weapon of mass destruction.

The New Substantial Risk Test

Canada’s commitments under the ATT require that proposed exports and brokering activities be assessed to determine whether there is an “overriding risk” that the grant of a permit on certain brokering activity would contribute to the following:

  • undermining of peace and security;
  • a serious violation of international humanitarian law or international human rights law;
  • an offence under international conventions or protocols relating to terrorism or transnational organized crime to which Canada is a party; or
  • serious acts of gender-based violence or serious acts of violence against women and children.

Of interest is the fact that Canada’s implementation of its ATT commitments employs a “substantial risk” threshold, rather than the original “overriding risk” language set out in the ATT itself. This differing terminology has ostensibly been used because the concept of “substantial risk” is one that is used elsewhere in Canadian legislation, and consequently the Canadian government has described it as a more familiar standard than that of “overriding risk.” The question as to whether a substantial risk standard is in fact an easier threshold to cross than overriding risk remains an open one.

Assessing Substantial Risk

In its administrative guidance explaining the application of the substantial risk test, the Canadian Government describes the threshold as being met where “compelling evidence exists of a connection between the proposed export and the negative consequences.” This clearly suggests an evidence-based assessment, as opposed to one that considers hypothetical or speculative risks.

Notably, this is the first instance in which such humanitarian factors have been expressly incorporated into the export/import controls framework. This recent development demonstrates increasing alignment between Canada’s export control regime and the objectives pursued by its economic sanctions program.

If it is determined that there is a substantial risk that the intended export or brokering activity would result in any of the above negative consequences, and such risk cannot be mitigated, the permit application must be denied. 

Mitigating Factors

As noted, mitigating factors will be taken into consideration in the application of the substantial risk test. While these will ultimately vary on a case-by-case basis, additional end-use statements or declarations from the importing state regarding the intended use of the goods may be of assistance, along with undertakings and/or guarantees not to use the goods in question for purposes counter to the objectives of the ATT, Likewise, the existence of transparency and information-exchange agreements between Canada and the importing state may mitigate in favour of permit approval. Accordingly, permit applicants should leverage these factors when assembling their application packages.

Export to the United States

While Canadian business has enjoyed permit-free export and transfer of most military items to the United States since World War II, compliance with the ATT required Canada to report on its export of full-system conventional arms, including those shipped to the United States.

To satisfy this ATT obligation, Canada has created the eight ATT categories of full-system conventional arms that will require a permit to be exported to the United States. The new General Export Permit No. 47 provides a streamlined permitting process that eliminates the need to file individual export permit applications for the majority of ATT items. The permit-free movement of other military goods and technology to the United States remains intact.


The industries and entities potentially affected by the ATT Package include Canadian defence, security, and aerospace industries, companies that manufacture, export and/or broker military and dual-use goods and technologies, and those providing related technical and after-sale services. These companies should be carefully reviewing the impact of the new controls on their export and technology transfers from Canada, as well as their activities outside Canada.

The McCarthy Tétrault team will continue to keep you updated as these new export and brokering controls are developed and implemented.

Click here to review the text of the Act to amend the EIPA and the Criminal Code and here to see the ATT package.



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