The important questions you need to ask yourself before exporting

February 28th, 2018

By Dominique Babin, Lawyer and BCF Business Law Partner

  • Did you know that some goods require an export permit, regardless of their destination? That an electronic transfer can be considered as an export? That the transfer of some information to an employee with a dual nationality may be prohibited by law?

  • However, you will not be surprised to learn that no goods can be exported to North Korea without a permit. But what about Iran? And Russia?

  • Did you know that some individuals are targeted by sanctions from several countries, and that selling goods to them, or rendering certain services to them, constitutes a criminal offence?

Export controls entail many aspects that may be very costly to ignore. On top of Canadian laws such as the Export and Import Permits Act, the Defence Production Act, the United Nations Act, the Special Economic Measures Act, and the Freezing Assets of Corrupt Foreign Officials Act, U.S. laws with an extraterritorial scope may also apply. But, aside from the penalties and the risk of imprisonment that any offence may entail, one also needs to consider the delays at the border and the impact on your reputation, or on the value of your business.

The questions to ask yourselves can be summed up in 5 words: What? Where? To whom? Why? How? I hereby put forward a series of articles exploring each of these questions. Several of those questions are actually connected to your business strategy. This article dwells on the "What?", from which everything else follows.

Intuitively, one can imagine that armored vehicles, military helicopters, or nuclear missiles are on the Export Control List. But what about their components? Or what about certain parts, that a few years ago were modified for such materiel, and are currently sold commercially? In some cases, export permits are required.

The goods known as "dual use" also need to be watched. Thus, certain protection, production, inspection, or testing equipment, some metals or metal alloy powders or ceramics, some fluids and lubricating materials, some software, some systems, equipment, or electric components for telecoms or for the security of cryptographic information and of sensors and lasers, just to mention a few examples, are considered as being usable for both civilian and military purposes, and are on the Export Control List. It is therefore necessary to examine their features in detail in order to establish whether a permit is required.

Moreover, each item originating from the United States that you export is subject to the U.S. export control system, and any infraction may technically make you liable to incur several penalties. Do not be surprised if your U.S. supplier, customer, investor, or purchaser asks you about the compliance of your exports, since the penalties imposed by our southern neighbors are extremely severe. You may have perhaps already heard the word "ITAR".

Moreover, the Export Control List includes a "catchall" category for any goods and technologies that one knows, or should know, will be used for developing chemical or biological weapons, or nuclear devices. Wilful blindness is therefore no excuse. It is of the essence, before you engage in any international transaction, to proceed with an analysis of goods and technology, to ensure that the required permits are obtained. You also need to be aware of the sanctions that may apply to the country toward which you export, or the persons involved. Experts can help you develop and implement a plan for carrying out your international expansion so that you can rest easy.

Note: BCF Business Law provides technical and legal experts for carrying out technical assessments, developing your export plan, entering into the suitable agreements, and resolving the issues and challenges connected to your exports.