Deemed Export Compliance in Canada: Balancing … W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 2 Balancing Conflicts Between Canadian and

Deemed Export Compliance in Canada: Balancing U.S. Dual National Rules with

Canadian Human Rights and Privacy Laws

John W. [email protected]

May 28, 2008

American Conference InstituteAmerican Conference Institute’’s 11th National Forum on s 11th National Forum on Export Controls Export Controls -- Global Compliance StrategiesGlobal Compliance Strategies

May 28 & 29, 2008May 28 & 29, 2008Washington D.C.Washington D.C.

TIE #8723921

John W. Boscariol, McCarthy Tétrault LLP, International Trade and Investment Law Group Slide 2

Balancing Conflicts Between Canadian and U.S. Law• managing export control and economic

sanction compliance for your Canadian operations

• Canadian human rights and privacy law vs. U.S. ITARs / EARs

• Canadian blocking legislation vs. U.S. trade embargo of Cuba


Canadian Human Rights vs. ITARs / EARs

• compliance with U.S. ITARs licensing requirements

• in order to benefit from “Canadian exemption”, transfers of technical data and defence services must be to Canadian registered persons

• exemption unavailable if “dual national” of a proscribed country, including those holding citizenship or born there

• terms of TAA or MLA approved by State may allow transfers only to certain “dual nationals”

• compliance may require Canadian companies to determine citizenship, country of origin/birth, exclude access to certain areas, projects

• may also require application for license or TAA/MLA amendments



• compliance with U.S. EARs

• deemed re-export: release of EAR-controlled technology or source code in Canada to a third country national

• general BIS policy: last permanent resident status or citizenship obtained governs


Canadian Human Rights vs. ITARs / EARs• but may not be the case where the Canadian citizen or

permanent resident was born in or holds citizenship in certain sanctioned countries

• temporary residents, students

• in order to comply, companies in Canada may be required to determine country of birth, citizenship

• if licence denied, required to restrict individual’s access to the controlled technology or software

• denial of employment

• denial of advancement, training opportunities



• compliance in Canada with human rights law

• Charter of Rights and Freedoms

• federal human rights code

• provincial human rights codes



• the Ontario Human Rights Code:

“Every person has a right to equal treatment with respect to employment without discrimination because of race, ancestry,place of origin, colour, ethnic origin, citizenship, creed, sex, sexual orientation, age, record of offences, marital status, family status or disability.”

• prohibited grounds of discrimination under Canadian Human Rights Act:

“For all purposes of this Act, the prohibited grounds of discrimination are race, national or ethnic origin, colour, religion, age, sex, sexual orientation, marital status, family status, disability and conviction for which a pardon has been granted.”



• prima facie breach of Canadian human rights law, if on basis of citizenship or country of origin:

• terminate an employee

• deny employment

• restrict access to training

• treat others preferentially • promotions • overtime • scheduling

• also - asking about citizenship, nationality, country of birth



• possible defence to a complaint

• bona fide occupational requirement • rule is rationally connected to job performance • adopted in honest and good faith belief that it is necessary • reasonably necessary and impossible to accommodate

without imposing undue hardship

• no case law re compliance with discriminatory laws

• drug testing policy – accommodate to point of undue hardship



• employees identified on “warning lists”?

• not an enumerated ground under human rights codes

• but wrongful dismissal case?



• examples of conflicts (ITARs)

• Standard Aero (1999- Manitoba Human Rights Commission)

• Canadian citizen, born in Libya • student denied opportunity to participate in

practical training at Aero • settled



• examples of conflicts (ITARs) (cont’d)

• General Motors Defense (2007 – Ontario Human Rights Commission)

• complaints by six employees, Canadian citizens or landed immigrants, citizenships of third countries (ITAR proscribed states)

• employees sent home with pay, restricted their access to information, reassignments

• settled, including monetary remedies • employer to make “all reasonable efforts to secure such

lawful permission as may be obtained to minimize any differential treatment”



• examples of conflicts (ITARs) (cont’d)

• Bell Helicopter (2008 – Quebec Human Rights Commission)

• complainant born in Haiti, Canadian citizen for 30 years

• applied for and hired on internship and training • subsequently denied internship because of ITAR

rules• claim for damages settled



• Québec Human Rights Commission

• “reiterates its opposition to the application of the ITAR rules in Québec because of their discriminatory impact”

• “they include requirements that are inconsistent with the Québec Charter of Human Rights and Freedoms”

• “can no longer accept that companies established in Québec submit to foreign rules that infringe on the values and rights of citizens as recognized by the National Assembly”

• “following the political developments in this matter attentively … any person that believes that his or her rights have been infringed by the application of the ITAR rules may rely on the services of the Commission”



• is there a solution?

• May 17, 2007 – Department of National Defence agreement with U.S. State Department

• access to ITAR defence articles and services • DND personnel who are Canadian citizens, even if dual nationals • possess minimum Secret-level security clearance, and need to know • includes Canadian Forces, civilians, embedded contractors,

employees of other government department working with DND

• June 19, 2007 – Canadian Communication Security Establishment, Canadian Space Agency, and National Research Council

• private sector?



• in the meantime …

• complaint based process – you will be vulnerable

• caution in making employee inquiries

• steps to minimize exposure to human rights action

• retaining Canadian labour/human rights counsel

• undertaking best efforts to apply and obtain license

• explaining the process, keeping employees apprised

• accommodating to point of undue hardship


Impact of Canadian Privacy Protection Legislation • provincial and federal legislation regulate

the collection, use and disclosure of personal information

• organized around 10 principles:

• accountability• consent • identifying purposes • limiting collection • limiting use, disclosure

and retention

• accuracy • security safeguards • individual access • openness • challenging compliance


Impact of Canadian Privacy Protection Legislation• differing application depending on:

• employee vs. commercial information

• provincially vs. federally regulated undertakings

• public vs. private sector


Impact of Canadian Privacy Protection Legislation • private sector employee information, including country

of origin, protected in three provinces

• Québec – An Act Respecting the Protection of Personal Information in the Private Sector

• British Columbia – Personal Information Protection Act

• Alberta – Personal Information Protection Act

• B.C. and Alberta “personal employee information”exception – must notify but not necessary to obtain consent


Impact of Canadian Privacy Protection Legislation • the federal Personal Information Protection and

Electronic Documents Act governs the collection, use and disclosure of personal information in the private sector

• if a federally regulated undertaking, protection extends to employee information

• federal works, undertakings or businesses include those in telecommunications, broadcasting, provincial and international trucking, shipping, railways, transportation, aviation, banking,nuclear energy, and activities related to marine navigation and shipping

• employees must be notified of purposes, and consent obtained for collection, use or disclosure of their personal information,subject to limited exemptions


Impact of Canadian Privacy Protection Legislation

• common law claim of breach of privacy

• best practices – even where PIPEDA or provincial legislation does not apply

• notification as to why information is being collected and that it may be made available in foreign jurisdiction in response to foreign legal requests


Canadian Blocking Legislation vs. U.S. Trade Embargo of Cuba

• reaction to the U.S. trade embargo of Cuba

• Cuban Assets Control Regulations

• Export Administration Regulations

• Helms-Burton Act

• extraterritorial application of transaction and export controls



• Canada’s response - Foreign Extraterritorial Measures Act

• 1996 “blocking” order

• obligation to notify Canadian AG of certain communications

• prohibition against complying with certain U.S. trade embargo measures

• penalty exposure: up to $1.5 million and/or 5 years imprisonment



“Every Canadian corporation and every director and officer of a Canadian corporation shall forthwith give notice to the Attorney General of Canada of any directive, instruction, intimation of policy or other communication relating to an extraterritorial measure of United States in respect of any trade or commerce between Canada and Cuba that the Canadian corporation, director or officer has received from a person who is in a position to direct or influence the policies of the Canadian corporation in Canada.”



“No Canadian corporation and no director, officer, manager or employee in a position of authority of a Canadian corporation shall, in respect of any trade or commerce between Canada and Cuba, comply with an extraterritorial measure of United States or with any directive, instruction, intimation of policy or other communication relating to such a measure that the Canadian corporation or director, officer, manager or employee has received from a person who is in a position to direct or influence the policies of the Canadian corporation in Canada.”



• what is an “extraterritorial measure of the United States”?

• defined as the U.S. Cuban Assets Control Regulations and any law, ruling, guideline or other communication having a purpose similar to that of the CACRs “to the extent that they operate or are likely to operate so as to prevent, impede or reduce trade or commerce between Canada and Cuba”



• U.S. laws that may be considered “extraterritorial measures of the United States”:

• Cuban Assets Control Regulations

• Export Administration Regulations

• Helms-Burton (?)

• other



• there has never been an attempted prosecution under the Canadian blocking order

• numerous investigations - American Express, Eli-Lilly, Heinz, Red Lobster, Wal-Mart and others

• Wal-Mart’s Cuban pyjamas


Canadian Blocking Legislation vs. U.S. Trade Embargo of Cuba• when an apparent conflicts arise, key issues to

be addressed include:

1. Is the U.S. measure at issue subject to the FEMA Order? - is it an “extraterritorial measure of the United States”?

2. Does the U.S. measure operate or is it likely to operate to reduce or impede trade or commerce between Canada and Cuba?- compliance with the U.S. measure may not reduce trade or

commerce between Canada and Cuba



3. Is the communication at issue in the nature of a directive or intimation of policy?

- depending on the context, a simple statement as to what U.S. law provides regarding trade with Cuba may not be notifiable



4. Is the source of the communication in a position to direct or influence the policies of the Canadian corporation in Canada?

- consider the position or authority of the person that has made the communication to the Canadian entity



5. Does the Canadian entity’s act or omission constitute “compliance”?

- by following a particular course of action, is the Canadian entity actually complying with applicable U.S. law?

- what is the reason for the act or omission?

- is the reason compliance with Canadian law?

- are there other reasons unrelated to the U.S. trade embargo?



6. If the issue concerns goods to be supplied to Cuba, what is their U.S.-origin content?

- if they are of U.S.-origin, Canadian law may not allow for their export to Cuba

- need to consider and possibly apply for Canadian export permit

John W. BoscariolPartner McCarthy Tétrault LLPSuite 5300Toronto Dominion Bank TowerToronto-Dominion CentreToronto, Ontario M5K 1E6www.mccarthy.caDirect Line: 416-601-7835 E-mail: [email protected]