Canada Gazette, Part I, Volume 153, Number 11: General Brokering Permit N^o 1

March 16, 2019

Statutory authority

Export and Import Permits Act

Sponsoring department

Department of Foreign Affairs, Trade and Development

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Permit.)

Issues

The Government of Canada wishes to accede to the Arms Trade Treaty (ATT or the Treaty).

The ATT establishes standards for international trade in a broad range of conventional arms with the goal of ensuring that States have effective national systems to review and control arms trading, and thus provides an opportunity for Canada to further strengthen its export control regime. The full-system conventional arms over which the ATT requires reporting as defined in article 2(1) are battle tanks, armoured combat vehicles, large-calibre artillery systems, combat aircraft, attack helicopters, warships, missiles and missile launchers, and small arms and light weapons. Article 10 of the ATT requires that each State Party take measures to regulate brokering taking place under its jurisdiction for the full-system conventional arms that fall under the scope of article 2(1) of the Treaty.

On December 13, 2018, royal assent was granted to An Act to amend the Export and Import Permits Act and the Criminal Code (amendments permitting the accession to the Arms Trade Treaty and other amendments) [the Act] that contained a series of amendments to the Export and Import Permits Act (EIPA) to permit Canada’s accession to the ATT. Upon the coming into force of the Act, brokering will be defined as “arranging or negotiating 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.” All persons and organizations in Canada, as well as Canadians abroad (citizens, permanent residents and organizations), will require a permit prior to engaging in brokering activities.

A review of the brokering regimes in place in allied countries, which are also States Parties to the ATT, has shown that many have implemented procedures to administratively streamline the authorization processes for brokering related to low destinations. The implementation of streamlined brokering processes for low-risk destinations would be an effective way to ensure that government resources are focused on the scrutiny of higher-risk brokering transactions.

Background

On the coming into force of the amendments to the Act, section 4.11 would authorize the Governor in Council to establish a list of goods and technology called the Brokering Control List that would identify goods and technology that are to be controlled for brokering. The Government is proposing (through a separate regulatory package submitted to the Governor in Council: the Regulatory Impact Analysis Statement for the Brokering Control List) to include in the Brokering Control List all items listed in Group 2 (Munitions List) and Group 9 (Arms Trade Treaty) of the Export Control List, as well as other Export Control List items, including dual-use items, likely to be used as weapons of mass destruction.

As well, subsection 7.1(2) of the EIPA would authorize the Minister of Foreign Affairs, Trade and Development to issue to all persons in Canada and Canadians acting abroad (including citizens, permanent residents and organizations incorporated, formed or otherwise organized under the laws of Canada or a province) a general permit to engage in brokering of controlled goods or technology, subject to such terms and conditions as would be described in the permit. Much like general export permits, a general brokering permit would allow for the brokering of certain items included in the Brokering Control List to eligible destinations by means of a simplified procedure (i.e. citing the general brokering permit number in the pre-notification of intent to use the permit), as opposed to the standard, lengthier process of applying for an individual brokering permit. When making use of a general brokering permit, brokers would need to abide by all the associated terms and conditions, including pre-notification and reporting.

Objectives

The objective of the proposed General Brokering Permit N^o 1 (GBP-1) would be to provide a streamlined process for the brokering of controlled goods and technology to certain eligible low-risk destinations. This will ensure that Canadian businesses remain competitive in the global marketplace, and that government resources can be directed towards the scrutiny of higher-risk transactions.

Description

General brokering permits would be used to facilitate trade in defined lower-risk circumstances, as brokers would not be required to apply for individual brokering permits prior to undertaking a brokering activity.

The GBP-1 would authorize, subject to certain terms and conditions, the brokering of Group 2 (Munitions List) items on the Brokering Control List to consignees in an eligible destination. These destinations would include like-minded countries that are members of multiple multilateral export control regimes of which Canada is a member and that have implemented an effective system of controls. The selection of destinations, along with the terms and conditions imposed on the use of the General Brokering Permit, would ensure that this streamlined process would not represent a strategic risk to Canada’s security or that of our allies.

The GBP-1 would significantly limit the additional administrative burden placed on brokers. The only requirement placed on Canadian businesses and individuals brokering controlled items to an eligible destination would be to pre-notify an intention to use this general brokering permit in a calendar year, and report, on an annual basis, on the brokering activities undertaken in the previous period.

Regulatory development

Consultation

An online consultation entitled “Global Affairs Canada’s proposed strengthening of Canada’s export controls regime” was undertaken from December 13, 2018, until January 31, 2019. In addition to the online consultation, Global Affairs Canada officials met with representatives from industry and civil society through a series of meetings, workshops, webinars and roundtable discussions, which took place across the country between December 13, 2018, and February 11, 2019. This consultation process sought the views of stakeholders with respect to implementing the changes required to strengthen Canada’s export controls program, including as a result of recent amendments to the EIPA.

During these consultations, industry stakeholders were supportive of the Government’s intention to join the ATT and were generally supportive of the proposal to create a general brokering permit to streamline low-risk brokering transactions. Civil society stakeholders also welcomed Canada’s desire to accede to the ATT and have applauded the Government’s desire to implement brokering controls.

These proposed Regulations will be prepublished in the Canada Gazette, Part I, for 30 days so that interested parties may register comments with Global Affairs Canada. All comments and concerns received during the prepublication exercise will be taken into consideration.

As is customary when dealing with potential regulatory changes, consultations have been held with the various Government of Canada organizations that are partners in the administration and enforcement of Canada’s export control regime. Recommendations made by these organizations have been taken into consideration in the drafting of this general brokering permit.

Instrument choice

Article 10 of the Arms Trade Treaty requires States Parties to take measures to regulate brokering taking place under their jurisdiction. The ATT thus limits Canada’s options in determining the appropriate instrument to control brokering activities. With respect to streamlining low-risk brokering transactions, the regulatory approach was chosen because the Act grants the Minister the authority to issue general export and brokering permits. Maintaining the same regulatory system for expediting brokering as is used for exports is optimal, as it is one that is familiar to Canadian industry.

Regulatory analysis

Benefits and costs

Companies or individuals who wish to broker items and meet the conditions of the General Brokering Permit would be able to use this permit without having to apply for an individual brokering permit. The General Brokering Permit would significantly minimize the costs imposed by the Brokering Control List and the Brokering Permit Regulations by not requiring individual brokering permits to these destinations, and would enable the Government of Canada to prioritize the scrutiny of higher-risk brokering transactions.

There would be a small cost associated with the reporting requirements of the General Brokering Permit. Companies engaging in brokering activities authorized by these Regulations would have to inform Global Affairs Canada of their intent to use the permit and report on any actual brokering activities undertaken under the authority of the permit during the preceding calendar year. Typically, most companies that would broker items internationally are accustomed to reporting to Global Affairs Canada on their controlled exports.

There may be a slightly higher administrative burden for those few persons and companies not accustomed to reporting on their activities, particularly with respect to individual agents. Nevertheless, these slightly higher costs would be justified, as the intent of the ATT is for States to be able to control and monitor such actors to ensure that they do not engage in unscrupulous brokering activities. In addition, Global Affairs Canada has allocated resources (three staff members) to work on different aspects of brokering controls and has a telephone hotline to assist businesses in navigating the new brokering controls. Officials will carefully monitor the implementation of the brokering controls. If feedback about the cost of these Regulations is expressed, officials will consider appropriate adjustments to these Regulations.

Small business lens

The General Brokering Permit aims to lower the administrative burden on business, particularly on small businesses that would also be able to benefit from this streamlined process. There may be some small businesses that are undertaking brokering activities, including some agents and consultants. Small businesses such as these have special needs and officials are prepared to assist these businesses in understanding whether they are impacted by the reporting obligations imposed by these Regulations.

One-for-one rule

This proposal is tied to a related package of regulations pertaining to Canada’s accession to the ATT that is under consideration by the Governor in Council. The package of ATT regulations would establish new controls over brokering by listing the items to be controlled in the proposed Brokering Control List regulation and by specifying through a separate regulation, the Brokering Permit Regulations, and the information required from applicants for such permits (tombstone information about the parties to the transaction, the items to be brokered, the end use and the end destination). As controlling brokering is a new activity for Canada, these two regulatory proposals would result in a slight increase in administrative burden since brokers would be required to apply for permits and report on activities undertaken against issued permits, when there would previously have been no such requirements. Consultations with stakeholders indicate that the number of brokers would be quite low.

A separate and related Governor in Council regulation is being proposed to specify activities that do not constitute brokering. These Regulations would limit the additional administrative burden, as it would narrow the scope of activities that would be captured by the proposed brokering controls.

This proposal also seeks to decrease the new burden, as it streamlines the authorization process for the brokering of certain items to low-risk destinations. Given that this regulatory package would result in a slight overall increase in administrative burden over the current situation, the one-for-one rule is triggered. However, as the package of ATT regulations is being put forward to comply with an international obligation, an exemption from the rule is being sought.

Regulatory cooperation and alignment

These proposed Regulations align with the practices of many of Canada’s allies and States Parties to the ATT, who also maintain expedited measures to authorize low-risk transactions brokering to certain destinations. For instance, the United Kingdom maintains a system of Open general trade control licences, which authorize the brokering of controlled items from certain countries to specific low-risk destinations.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment would not be required.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for this proposal. However, there are relevant considerations in the broader context of Canada’s accession to the ATT. The ATT is the first international treaty that specifically mentions gender-based violence as an outcome to prevent. Therefore, by acceding to the Treaty, Canada would support this objective.

Rationale

Canada’s export and brokering control regime aims to balance national and international security concerns associated with the export and brokering of strategic and military goods and technology with Canada’s interests as a trading nation. The proposed GBP-1 would simplify the process for authorizing brokering transactions of eligible items to eligible destinations as identified in the permit and would reduce the overall regulatory burden associated with brokering controls for Canadian industry. The proposed introduction of this streamlined process for low-risk brokering transactions is part of the Government of Canada’s risk-management framework; it would reduce the administrative burden on industry and allow officials to focus attention on higher-risk brokering transactions. This proposed measure is in line with the expedited destination-based measures of key allies; an additional benefit is that it places Canadian businesses on a level playing field with international competitors.

Implementation, compliance and enforcement, and service standards

The brokering of items listed on the Brokering Control List to any destination not specified in this general brokering permit would need to be authorized by a brokering permit. There are certain conditions associated with the GBP-1, and brokers would need to comply with those conditions in order to lawfully broker under this proposed General Brokering Permit. Non-compliance with any condition of the proposed General Brokering Permit would lead to prosecution under the relevant provisions of the EIPA.

The Royal Canadian Mounted Police is responsible for the enforcement of both brokering and export controls.

Contact

Judy Korecky
Deputy Director
Export Controls Policy Division
Global Affairs Canada
125 Sussex Drive
Ottawa, Ontario
K1A 0G2
Telephone: 343‑203‑4332
Fax: 613‑996‑9933
Email: judy.korecky@international.gc.ca

PROPOSED REGULATORY TEXT

Notice is given that the Minister of Foreign Affairs, pursuant to section 7.1(2) ^{footnote a} of the Export and Import Permits Act ^{footnote b}, proposes to issue the annexed General Brokering Permit N^o 1.

Interested persons may make representations concerning the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Judy Korecky, Deputy Director, Export Controls Policy Division, Global Affairs Canada, 125 Sussex Drive, Ottawa, Ontario K1A 0G2 (tel.: 343‑203‑4332; fax: 613‑996‑9933; email: judy.korecky@international.gc.ca).

Ottawa, February 19, 2019

Chrystia Freeland
Minister of Foreign Affairs

General Brokering Permit N^o 1

Definitions

1 The following definitions apply in this Permit.

• eligible country means Australia, Austria, Belgium, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, the Netherlands, New Zealand, Norway, Poland, Portugal, the Republic of Korea, Slovakia, Slovenia, Spain, Sweden, Switzerland, the United Kingdom or the United States. (pays admissible)
• Export Controls Operations Division means the Export Controls Operations Division of the Department of Foreign Affairs, Trade and Development. (Direction des opérations des contrôles à l’exportation)

Authorization

2 Subject to sections 3 to 5, any person or organization may, under this Permit, broker any good or technology referred to in Group 2 of the Export Control List if the good or technology is to be imported into an eligible country for end-use in that country.

Prohibited firearms, weapons and devices

3 This Permit does not authorize the brokering of the goods referred to in section 4.1 of the Export and Import Permits Act unless the country of end-use, and each country through which the goods are to be moved, is listed on the Automatic Firearms Country Control List.

Information

4 (1) A person or organization who brokers under this Permit must

• (a) provide in writing to the Export Controls Operations Division, before brokering under this Permit in a calendar year, the following information:
  • (i) their name, address, telephone number, email address and any facsimile number, and
  • (ii) if the person who brokers is a corporation, any business number assigned to it by the Minister of National Revenue, the name of a contact person, the contact person’s address, telephone number, email address and any facsimile number;
• (b) provide to the Export Controls Operations Division, within 30 days after each six month period ending on June 30 and December 31 of the calendar year for which the information in paragraph (a) was provided, a report stating
  • (i) whether they brokered under this Permit during that period, and
  • (ii) if they brokered, the name, address, telephone number, email address and any fascimile number of
    • (A) the person who sold the goods or technologies,
    • (B) the person who purchased the goods or technologies, and
    • (C) any agents or other brokers involved in the transaction,
  • (iii) if an organization was a party to a transaction that was brokered, the name and title of a contact person for the organization who has knowledge of the transaction, and the contact person’s address, telephone number, email address and any facsimile number,
  • (iv) for each brokered good or technology,
    • (A) the provision of the Brokering Control List that refers to the good or technology, and the item number assigned to it by the Guide referred to in the Export Control List
    • (B) a description of the good or technology, including its purpose and technical specifications, with sufficient detail to disclose its true identity and in terms that avoid the use of trade-names, technical names or general terms that do not adequately describe the good or technology,
  • (v) the quantity, total value and unit value of each good or technology brokered by country of end use,
  • (vi) a detailed description of the brokering activities conducted by the broker; and
• (c) provide to the Export Controls Operations Division, within 15 days after receipt of a request from it, the records referred to in section 5 in respect of any brokering during the period specified in the request.

Exception

(2) Despite paragraph (1)(b), a person or organization that provides the information referred to in paragraph (1)(a) during the 6 month period ending on December 31 is not obliged to provide a report for the preceding 6 month period in the calendar year.

Records

5 A person or organization who brokers under this Permit must retain, for a period of six years after any year in which a transaction was brokered, the following records in respect of the transaction:

• (a) the date, if any, on which the goods or technologies moved from the country of export;
• (b) the name, address, telephone number, email address and any fascimile number of
  • (i) the person who sold the goods or technologies,
  • (ii) the person who purchased the goods or technologies,
  • (iii) any agents or other brokers involved in the transaction;
• (c) for each brokered good or technology,
  • (i) the provision of the Brokering Control List that refers to the good or technology, and the item number assigned to it by the Guide referred to in the Export Control List, and
  • (ii) a description of the good or technology, including its purpose and technical specifications, with sufficient detail to disclose its true identity and in terms that avoid the use of trade-names, technical names or general terms that do not adequately describe the good or technology;
• (d) the quantity, total value and unit value of the goods or technologies;
• (e) a detailed description of the brokering activities conducted by the broker; and
• (f) a copy, if available, of any contract between the brokering person or organization and each party to the transaction and any invoice or export or shipping document relating to the movement of the goods or technologies from the country of export.

Coming into force

6 This Permit comes into force on the day on which section 5 of the Act to amend the Export and Import Permits Act and the Criminal Code (amendments permitting the accession to the Arms Trade Treaty and other amendments), chapter 26 of the Statutes of Canada 2018, comes into force, but if it is registered after that day, it comes into force on the day on which it is registered.