The potential impact of trade wars dominates the headlines. Savvy shippers also know that expanding markets through international trade requires knowledge of and adoption of best practices to address trade issues. Depending on the misbehaviour, exporters can be subject to fines, audits, seizures, inspections, investigations, loss of market access and even imprisonment.
Export Controls Overview
Export Development Canada summarizes trade “compliance” as the process used by companies to observe the laws and regulations that govern its international business operations. Many of these rules are established by national governments to manage their countries’ trade with other nations (such as setting rates of duty), while others are created to fulfill the requirements of international trade agreements.
Export Control List
The Export Control List sets out a variety of items and technologies that require permits for export, regardless of their export destination. The Export Control List is organized into seven groups as follows:
- Group 1: Dual-Use List
- Group 2: Munitions List
- Group 3: Nuclear Non-Proliferation List
- Group 4: Nuclear-Related Dual-Use List
- Group 5: Miscellaneous Goods
- Group 6: Missile Technology Control Regime List
- Group 7: Chemical and Biological Weapons Non-Proliferation List
The major international destination of Canadian strategic export permits issues in 2017 were the United States, Europe, and Asia.
Export Control Supply Chain Best Practices
Shippers should undertake an internal export compliance review.
Firms should also implement and fine tune their internal export compliance program. The program should, amongst other things, have executive buy in, identify an export compliance manager, establish a records keeping policy, establish an internal audit procedure, set out internal training requirements and confirm the processes relating to export permit applications.
Trade lawyer Cyndee Todgham Cherniak stated, “It is important to understand Canada’s export controls and carefully review the additions and changes.” Cyndee noted “the most time-consuming step is a review of one’s exports and transfers to identify controlled goods and technology (including components of products to be exported or transferred). It is not just physical exports (that is sending something by courier, ship, air, etc. from Canada to a place outside Canada) that are covered by Canada’s export controls. Transfers, in the form of server access, uploads, and downloads (e.g., Dropbox) USB key/DVDs/CD-Roms, emails, telephone conversations, technical assistance, and services, etc. are covered by Canada’s export controls.
Another step is to update computerized systems that ensure an export permit is obtained before the export or transfer of all controlled goods or technology.
Updating compliance policies and programs and educating the critical people in your organization about the changes to Canada’s export controls laws and the compliance program is a vital best practice according to Ms. Todgham Cherniak.
It may also be necessary to contact agents and representatives outside Canada (including subsidiaries) to inform them of the changes to Canada’s export controls laws and train them to follow compliance programs.
Political tensions and when there are significant changes to the Export Control List or Canada’s Export Controls Guide indicate to shippers that it is necessary to anticipate and understand the changes and update systems used to ensure compliance with the Export and Import Permits Act. Professional education and networking offered by CITT and others is an essential best practice for managing supply chain export compliance risk because knowledge is the backbone that supports the implementation of all other best practices.