General Brokering Permit No. 1: SOR/2019-229
Canada Gazette, Part II, Volume 153, Number 13
SOR/2019-229 June 17, 2019
EXPORT AND IMPORT PERMITS ACT
The Minister of Foreign Affairs, pursuant to section 7.1(2) footnote a of the Export and Import Permits Act footnote b, issues the annexed General Brokering Permit No. 1.
Ottawa, June 17, 2019
Minister of Foreign Affairs
General Brokering Permit No. 1
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)
2 (1) 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 schedule to the Export Control List if the good or technology is to be imported into an eligible country for end-use in that country.
Government of Canada end-use
(2) Subject to subsection 4(1) and section 5, any person or organization may, under this Permit, broker any good or technology referred to in Group 2 of the schedule to Export Control List if the good or technology is for end-use by the Government of Canada.
Prohibited firearms, weapons and devices
3 Subsection 2(1) 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.
4 (1) A person or organization that 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,
- (ii) if the person that brokers is a corporation, any business number assigned to it by the Minister of National Revenue, the name of a contact person and the contact person’s address, telephone number, email address and any facsimile number; and
- (b) 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.
(2) A person or organization who brokers under subsection 2(1) must 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 (1)(a) was provided, a report stating
- (a) whether they brokered under this Permit during that period,
- (b) if they brokered, the name, address, telephone number, email address and any fascimile number of
- (i) the person that sold the goods or technology,
- (ii) the person that purchased the goods or technology, and
- (iii) any other brokers or agents or mandataries involved in the transaction,
- (c) 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,
- (d) 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,
- (e) the quantity, total value and unit value of each good or technology brokered by country of end-use, and
- (f) a detailed description of the brokering activities conducted by the broker.
(3) Despite subsection (2), a person or organization that provides the information referred to in paragraph (1)(a) during the six-month period ending on December 31 is not obliged to provide a report for the preceding six-month period in the calendar year.
5 A person or organization that 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 each transaction:
- (a) the date, if any, on which the goods or technology moved from the country of export;
- (b) the name, address, telephone number, email address and any fascimile number of
- (i) the person that sold the goods or technology,
- (ii) the person that purchased the goods or technology, and
- (iii) any other brokers or agents or mandataries 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 and the total value and unit value in Canadian dollars of the goods or technology by country of end-use;
- (e) a detailed description of the brokering activities conducted by the broker with respect to the transaction; 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 technology from the country of export.
Coming into force
6 This Permit comes into force on the day on which section 8 of 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), 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.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Permit.)
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 to low destinations. The implementation of streamlined brokering processes for low-risk destinations is an effective way to ensure that government resources are focused on the scrutiny of higher-risk brokering transactions.
On the coming into force of the amendments to the Act, section 4.11 will authorize the Governor in Council to establish a list of goods and technology called the Brokering Control List that identifies goods and technology that are controlled for brokering. The Government has through a separate regulatory package approved by Governor in Council (see the Regulatory Impact Analysis Statement for the Brokering Control List) included 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 authorizes the Minister of Foreign Affairs 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 are described in the permit. Much like general export permits, a general brokering permit allows 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 need to abide by all the associated terms and conditions, including pre-notification and reporting.
The objective of General Brokering Permit No. 1 (GBP-1) is to provide a streamlined process for the brokering of controlled goods and technology to certain eligible low-risk destinations. This ensures that Canadian businesses remain competitive in the global marketplace, and that government resources can be directed towards the scrutiny of higher-risk transactions.
General brokering permits will be used to facilitate trade in defined lower-risk circumstances, as brokers will not be required to apply for individual brokering permits prior to undertaking a brokering activity.
GBP-1 authorizes, under subsection 2(1), 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 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, ensure that this streamlined process does not represent a strategic risk to Canada’s security or that of our allies.
The only requirement placed on Canadian businesses and individuals brokering controlled items to an eligible destination is to pre-notify an intention to use this General Brokering Permit in a calendar year, and report, on a semi-annual basis and upon request, on the brokering activities undertaken in the previous period, including a report of no use.
This portion of GBP-1 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.
Further to comments received during the prepublication period, subsection 2(2) of GBP-1 also covers brokering activities related to the movement of Group 2 (Munitions List) items on the Brokering Control List that are destined for a Government of Canada end-use (for example transactions made for the use of the Canadian Armed Forces while located abroad).
The only requirement placed on Canadian businesses and individuals is to pre-notify an intention to use this General Brokering Permit in a calendar year, and report upon request on the brokering activities undertaken in the previous period, including a report of no use.
Brokers seeking to use this general permit must continue to abide by subsection 15(2) of the Export and Import Permits Act, which states that no person shall knowingly do anything in Canada that causes or assists or is intended to cause or assist any shipment, transhipment or diversion of anything referred to in any of paragraphs 4.1(a) to (c), or any component or part designed exclusively for assembly into such a thing, that is included in an Export Control List, from Canada or any other place, to any country that is not included in an Automatic Firearms Country Control List.
Results from the public consultations
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 round table 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.
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.
Results from the public comment period following publication of the proposed Regulations
The proposed Regulations were published in the Canada Gazette, Part I, for public comment from March 16 to April 15, 2019. Emails and notifications of this comment period were sent to over 3 500 groups and individuals including all the participants in the December 2018/January 2019 public consultations on “Global Affairs Canada’s proposed strengthening of Canada’s export controls regime,” industry members, industry associations, non-governmental organizations, key federal government partners, and other stakeholders. In-person and telephone engagement sessions were held during the public comment period to provide information and to answer questions about the proposed Regulations.
A total of 12 responses (emails, meetings and telephone calls) were received during the 30-day public comment period. All comments and concerns received during the prepublication exercise were taken into consideration. All responses supported Canada’s steps to accede to the Arms Trade Treaty or were neutral about the proposed Regulations. Some concerns and questions, however, were raised about specific elements of the proposed Regulations. Similar to the feedback received during the earlier public consultations, concerns identified by industry included the potential unintended impacts on industry related to the proposed scope of the controls, and the need for clarity on certain the procedural elements of the brokering process such as when to apply for a brokering permit. Industry also posed questions regarding whether their activities were captured by the proposed changes. Similar to the feedback received during the parliamentary phase and the recent public consultations, civil society organizations’ concerns related to how they would like to see the Government of Canada go further in certain areas to further strengthen the proposed controls and Canada’s adherence to the ATT, including related to transparency and to addressing diversion concerns.
With respect to GBP-1, stakeholders made a number of suggestions, one of which have resulted in changes to these Regulations.
Industry stakeholders requested that GBP-1 be expanded to apply in cases where the brokering is undertaken for end-use by the Government of Canada and by the government of an eligible country. Global Affairs Canada has carefully considered these two requests and believes that it would be appropriate for brokering activities with a Government of Canada end-use can avail themselves of GBP-1. However, in the case of other governments, there is a risk that this could lead to the creation of loopholes or situations where brokering activities are facilitated in a way that is not fully consistent with Canada’s foreign and defence policies. As an example, Canadian brokers might end up providing equipment to foreign armies undertaking military actions in a third country that are not supported by the Government of Canada. As a result, at this time, Global Affairs Canada will not be pursuing this second proposed amendment.
Industry stakeholders asked that GBP be also applied to cases where the Minister of Foreign Affairs has already issued an export permit for similar circumstances, if the situation is assessed as a low risk. Officials recognize the logic of such an approach and the benefits it would bring to Canadian industry. However, there are also important drawbacks, such as a temporal challenge (export permits have a finite duration, while GBP-1 would not) and a volume challenge (export permits are issued with a specific volume of items, while GBP-1 has no such limits). As a result, Global Affairs Canada will not take on this proposed amendment at this time. Instead, Global Affairs Canada will issue policy guidelines that will confirm that previously issued export permits will be taken into consideration when evaluating individual brokering permit applications.
Industry stakeholders put forward specific proposals to clarify some elements of clause and subparagraph 4(b)(iv)(B) and 4(b)(vi) of GBP-1, especially on the level of information required on the goods and technology to be brokered. The current language tracks long-standing existing language that is already well understood, and it is therefore desirable to maintain the language as is. However, Global Affairs Canada will ensure that policy guidelines clarify the level of information that is requested.
An industry stakeholder commented that the reporting requirements for GBP-1 would create an undue burden on industry due to the administrative costs of monitoring and reporting on the brokering activities covered by this general permit. While this requirement will result in a new burden, Global Affairs Canada assesses this to be a manageable burden, given that companies likely to broker would typically also export and would therefore be familiar with Global Affairs Canada’s reporting requirements for controlled goods. The information requested by GBP-1 is of a basic level and the frequency of reporting is on an annual basis, and would therefore not represent a significant new cost for industry. Furthermore, industry has the alternative to apply for individual brokering licences in order to avoid the reporting requirements of GBP-1. Consequently, Global Affairs Canada will not implement this proposal at this time.
Civil society stakeholders have argued that there is a gap in GBP-1, as it does not provide a rationale that explains the criteria to determine the “eligible countries” listed. The “Description” section of this RIAS addresses briefly the rationale for the threshold that must be met for a country’s inclusion on the list of eligible destinations. Global Affairs Canada will elaborate further on this rationale in the aforementioned policy guidelines.
Civil society stakeholders have highlighted the fact that there is no predetermined process detailed in GBP-1 on how frequently the Regulations would be reviewed. However, such information is typically not included in most regulations. Moreover, given that the Regulations are entirely new, it is premature to make commitments for future review. Indeed, it is Global Affairs Canada’s practice to review general permits as required (as circumstances change). Once the Regulations have been in effect for some time, and data on their use have been generated, Global Affairs Canada will be in a better position to evaluate the need for a review. As a result, this suggestion is duly noted.
Outreach and engagement actions including further face-to-face meetings will be undertaken to clarify the implications of the Regulations once made, and to help address any questions or concerns.
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.
Costs and benefits
Companies or individuals who wish to broker items and meet the conditions of the General Brokering Permit will be able to use this permit without having to apply for an individual brokering permit. The General Brokering Permit significantly minimizes the costs imposed by the Brokering Control List and the Brokering Permit Regulations by not requiring individual brokering permits to certain destinations, and enables the Government of Canada to prioritize the scrutiny of higher-risk brokering transactions. As noted previously, the public consultations have resulted in an important change that has widened the applicability of GBP-1 to a greater number of brokering activities, i.e. brokering transactions for Government of Canada end-use. This will therefore further minimize the costs imposed by the Brokering Control List and the Brokering Permit Regulations. As the prepublication of the Regulations did not bring additional information (such as information on quantitative costings) to the attention of officials, it is not possible to anticipate how much these changes will impact the number of transactions that will now be addressed under a general permit as opposed to an individual permit. There is a small cost associated with the reporting requirements of the General Brokering Permit. Companies engaging in brokering activities authorized by these Regulations must to inform Global Affairs Canada of their intent to use the permit in a calendar year and report on any actual brokering activities undertaken under the authority of the permit during the preceding six-month period. Typically, most companies that broker items internationally are accustomed to reporting to Global Affairs Canada on their controlled exports. Should these reporting costs be deemed prohibitive, companies will have the option to apply for individual brokering licences.
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 are 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 are also 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.
These Regulations are tied to a related package of regulations pertaining to Canada’s accession to the ATT that was approved by the Governor in Council. The package of ATT regulations establishes new controls over brokering by listing the items to be controlled in the 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 regulations result in a slight increase in administrative burden since brokers are now required to apply for permits and report on activities undertaken against issued permits, when there was previously no such requirements. Consultations with stakeholders indicated that the number of brokers is quite low.
Separate and related Governor in Council regulations have been created to specify activities that do not constitute brokering. These Regulations limit the additional administrative burden, as they narrow the scope of activities that are captured by the new brokering controls.
This General Brokering Permit also decreases the new burden, as it streamlines the authorization process for the brokering of certain items to low-risk destinations. As the increased administrative burden on business associated with the Brokering Control List was exempted from the “One-for-One” Rule because it is required to meet Canada’s international obligations under the ATT, Global Affairs Canada will not be given a credit for the OUT associated with the General Brokering Permit.
Regulatory cooperation and alignment
These 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 authorizes 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 is supporting this objective.
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. GBP-1 simplifies the process for authorizing brokering transactions of eligible items to eligible destinations as identified in the permit and reduces the overall regulatory burden associated with brokering controls for Canadian industry. The introduction of this streamlined process for low-risk brokering transactions is part of the Government of Canada’s risk-management framework; it reduces the administrative burden on industry and allows officials to focus attention on higher-risk brokering transactions. This 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 must be authorized by a brokering permit. There are certain conditions associated with GBP-1, and brokers must comply with those conditions in order to lawfully broker under this General Brokering Permit. Non-compliance with any condition of the General Brokering Permit could 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.
Export Controls Policy Division
Global Affairs Canada
125 Sussex Drive