Canada Implements New Export Brokering Controls to Join the UN Arms Trade Treaty

September 18, 2019

Written By Darrel Pearson, Jessica Horwitz and Margaret Kim

On September 17, 2019, Canada formally became a party to the United Nations Arms Trade Treaty (ATT), an international treaty that aims to regulate trade of conventional arms, including small arms, battle tanks, missiles, and warships. 

In preparation for Canada’s accession to the ATT, the Government of Canada implemented a number of legislative and regulatory amendments to the Export and Import Permits Act (EIPA) that, among other things, creates a new regulatory framework covering controls over arms “brokering” (i.e., arranging or negotiating a transaction that relates to the movement of controlled goods or technology from one foreign country to another). The new brokering rules expand Canada’s export control regime from regulating the import and export of controlled goods and technologies to and from Canada, to the movement of such goods and technologies between two or more foreign countries in cases where Canadian citizens, permanent residents or organizations are involved in the transactions. In effect, the brokering obligations apply extraterritorially as well as within Canada. 

The revised export controls and new brokering control regime are particularly relevant for Canadians and Canadian businesses that may be involved in foreign transactions involving the movement of arms or other controlled materials, including electronic transfers of technology, whether as an agent, intermediary, consultant or other advisor operating abroad, or as an exporter of goods or technology from Canada. 

Arms Brokering Permit and Assessment Criteria 

Under the revised EIPA, the Minister of Foreign Affairs (the Minister) assesses all proposed export and brokering of arms, ammunition, implements or munitions of war prior to their authorization. In doing so, the Minister will apply the following mandatory criteria:

• would the good or technology contribute to or undermine peace and security; and
• could the good or technology be used to commit or facilitate:
  • a serious violation of international humanitarian law or international human rights law;
  • an offence under international conventions or protocols relating to terrorism or transactional organized crime to which Canada is a party; or 
  • serious acts of gender-based violence or serious acts of violence against women and children. 

If the Minister determines that there is a “substantial risk” that the export or brokering of the goods or technology would result in any of these negative consequences, no permit will be granted. While the word “diversion” is not present in the text of the Brokering Permit Regulations, these regulations require that applicants submit information about the parties to the transaction, including consignees and any other brokers, specific details regarding the type of good or technology at issue, and information on end-use. According to the Regulatory Impact Analysis Statement and the updated Export and Brokering Controls Handbook, the Minister will also determine any diversion risks as part of the permit assessment, that is, whether there is any risk that controlled goods could be diverted to end-uses or end-users that would contravene the policy goals of the ATT and the Canadian legislation.  

Brokering Control List (BCL) 

The BCL lists all goods or technology for which a brokering permit is required. In addition to all items in Group 2 (Munitions List), a newly-created Group 9 (ATT items) of the Export Control List (ECL), as well as any other ECL items, including dual-use items, that the broker has (or should have) reason to suspect will be used to produce or develop a weapon of mass destruction, are included. Dual-use items refer to goods or technology that can be used for both civilian and military applications (as listed in Groups 1 and 4 of the ECL). 

Export Control List (Group 9) and Exports to the United States

The ECL is revised to include the eight ATT categories of full-system conventional arms as Group 9. Group 9 items include the following:

• battle tanks;
• armoured combat vehicles;
• large-calibre artillery systems;
• military aircraft;
• attack helicopters;
• warships equipped for military use;
• missiles and missile launchers; and 
• small arms and light weapons when destined for police and/ or military end-use.

The amendments to the ECL are accompanied by the requirement for obtaining a new General Export Permit (GEP-47: Exports of Arms Trade Treaty Items to the United States). For exporting items of Group 9 and certain items of Group 2 to the United States, Canadian exporters can use the GEP instead of applying for individual permits. The GEP requires exporters to notify the Government of Canada of their intent to use the GEP and to report twice a year on any permanent exports (i.e., items that will not be returned to Canada within two years) of the goods or technology under Group 9. GEP-47 aims to reduce the administrative burden on Canadian companies and the impact on the Canadian economy, while ensuring that the export of ATT items to the United States is adequately recorded. 

Applicants for brokering permits will be able to apply through Export Controls On-Line (EXCOL), the same website used for export permit applications. General Brokering Permit No.1 can be relied upon in lieu of an individual brokering permit to broker in pre-defined, lower-risk countries, provided that the applicant satisfies certain reporting requirements.  

Brokering Exemptions

The Regulations Specifying Activities that Do Not Constitute Brokering (“Exclusions”) specifies activities that do not constitute brokering for the purposes of EIPA. They are: (1) transfers between affiliates of a corporation; and (2) Canadians who are directed by their non-Canadian employer to undertake brokering activities on behalf of the employer, so long as they do not control the employer. 

However, these exclusions do not apply to the movement of full-systems conventional weapons identified in Group 9 of the ECL.  

Going Forward

Canadian businesses looking to engage in arms transactions should take proactive measures to ensure that they structure such transactions to comply with the revised export control and new brokering controls regime. The length of time required in the normal course to obtain an export and/or brokering permit depends on the country of destination and the nature of the goods or technology in question. Clearly communicating and demonstrating how the good or technology satisfies the eligibility criteria in a permit application is integral  to ensure a smooth, timely and successful permit application. For further assistance on the export control or broker control compliance requirements or permit applications, please contact Darrel Pearson, Jessica Horwitz or Margaret Kim.  

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