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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