Export Compliance for Canadian Companies Comp-Oct… · Export Compliance for Canadian Companies...

supply chain & logistics

Export Compliance for

Canadian Companies

CITT Webinar Series

Date: Wednesday, October 19 2016

Time: 12pm EST

Hosted by: Kevin Riddell, CCLP

Presenter Info

• Kevin Riddell, CCLP

• Director, International Logistics

• Tremco Incorporated:

http://www.tremcoinc.com/

Agenda

• Canadian export controls

• US Extraterritorial concerns

• It’s not just “exports”

• Automation

Canadian Export Controls

• Export and Import Permits Act

• Economic sanctions

• Defense controls

• Other government agencies

Export and Import Permits Act

• Primary source of Canadian controls

• 2 key considerations:

– Export Control list (what?)

– Area Control list (where?)

Export Control List

• Comprehensive list of goods controlled for export

• Controls for various reasons: – Multilateral agreements (Wassenaar, Australia Group…)

– Canada specific controls

– Partnership with US

Export Control List

• What’s in it? (a lot)

Export Control List

• US origin goods special note

Export Control List

• US origin goods GEP-12 good news

Export Control List

• US origin goods GEP-12 bad news

Area Control List

• Whose on it?

• What does it mean?

Penalty Examples

Best Practices

• Check all of your products against the Export Control List

• Pay special attention to 5400 US origin rule

• Know the Area Control List

• Have formal processes documented

• Implement controls on affected products – automate if

possible

• Get executive buy in

Canadian Economic Sanctions

• UN driven sanctions (United Nations Act)

• Autonomous sanctions (Special Economic Measures

Act)

Canadian Economic Sanctions

• 3 primary groupings:

– Where (though less severe than US embargos)

– What (i.e. Arms)

– Who

Canadian Economic Sanctions

• Entity sanctions

Penalty Example

Penalty Example?

Best Practices

• Know the sanctions (Education)

• Review your products against any product specific rules

• Automate your entity screening

Other government agencies

• Guidance from Global Affairs Canada:

Penalty Example

Best Practices

• Research possible risk – what agencies control your

products?

• Education and networking are essential – get out there!

US Extraterritorial Concerns

• Export Administration Regulations

• ITAR

• Department of Treasury OFAC

• Don’t forget FEMA!

Export Administration Regulations (EAR)

• 15 CFR

• Main source of export control in commerce (“dual use”)

• Governs not just US exports, but exports of US goods or

by US technology

Export Administration Regulations (EAR)

• Read the General Prohibitions Carefully! (15 CFR 736)

Penalty Example

• Read This!

Penalty Example

Penalty Example

EAR Office of Antiboycott

ITAR

• US Military Goods Controls

• Not as wide ranging as EAR – specific to military

purpose goods

Department of Treasury OFAC

• Primary source of economic sanction for US government

• Application can be extraterritorial

• Can deny ALL activity with listed entity or country

• 2 main areas to review:

– Countries

– Entities (“SDN”s)

Department of Treasury OFAC

• Application concerns

• “US Person” (Example below is 31 CFR 560)

Department of Treasury OFAC

• Country concerns

• Some countries are “off limits” i.e. North Korea – don’t

even send a greeting card!

• Some countries are similar to Canada and only certain

items are controlled

Department of Treasury OFAC

• Entity concerns – Specially Designated Nationals

• This is where it gets tricky

• A transaction with a listed entity can be forbidden,

wherever they are

Penalty Example

• SDN Example

Penalty Example

• Canadian example

Don’t forget FEMA!

• Little known

• Forbids Canadian companies from refusing to do

business with Cuba if directive came from US parent

• New development related to Buy American

2 FEMA Orders

Penalty Example

• None and lets hope this goes away! Puts Canadian

subsidiaries in an impossible position

Best Practices

• Know the US rules – BIS offers great free training

sessions

• Implement controls on movement of affected items –

automation is ideal

• Automation for entity screening is a must

• Educate your Canadian employees and get executive

buy in

It’s Not Just “Exports”

• Diversion

• “Deemed Export” rules

• Sanctioned parties in country

Diversion

• What is your customer doing with your goods?

• More of a US concern (for now…)

• Good idea to follow US “Red flags” advice

Diversion

• Could Canada be adopting similar rules?

• Two recent quotes from news coverage of Streit story:

“A parliamentary committee is preparing to take a hard look at the

export controls Canada places on foreign sales of military goods and

whether sanctions and embargoes meant to stop arms shipments by

Canadians have sufficient teeth”

“the armoured vehicles were manufactured and shipped by the

company's branch in the United Arab Emirates, and therefore the sale

is outside of the federal government's arms export regulatory regime”

Deemed Export Rules

• Delivery of technology and information related to

controlled products

• Canada and US both control technology transfers

Sanctioned Parties in country

• Common misconception that “sanctioned parties” are all

foreign:

Sanctioned Parties in country

Best Practices

• Implement a “red flags” education program

• Verify if any of your technology is controlled

• Screen ALL business partners, not just your exports

(don’t rely on “my freight forwarder checks that”)

• Automate…

Automation

• Compliance with some of the above requires automation

• SPL in particular cannot be handled manually

• Licenses and permits can be managed manually, but

risky

• Many options: from low cost, on demand, to high cost

local installation

• Can also act as catalyst for internal

review/improvements

Best Practices

• Find the system option that fits your business (not the

other way around)

• Review all the options

• Don’t let it be an “IT project” – it’s a “compliance project!”

• Use the project as chance to close any existing business

gaps

Conclusion

• Some common themes:

– Automate!

– Know the rules!

– Educate your employees!

– Document your processes!

– Get executive buy in!

Links to referenced articles

• Slide # 12 http://www.cbc.ca/news/canada/montreal/iran-illegal-exporting-canada-railway-train-equipment-1.3268414

• Slide # 17a http://www.theglobeandmail.com/report-on-business/international-business/african-and-mideast-business/rcmp-

charges-alberta-company-over-illegal-shipment-to-iran/article17959104/

• Slide # 17b http://www.blg.com/en/newsandpublications/publication_3745

• Slide # 18 http://www.cbc.ca/news/politics/streit-un-arms-report-sudan-1.3758670

• Slide # 21 http://www.surreyleader.com/news/200097481.html

• (All other images from public government web sites)

Q&A Feel free to contact me:

kriddell@tremco.ca

https://ca.linkedin.com/in/kevinriddellcclp

https://twitter.com/kngriddell

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