Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



Potential Setback in the Resolution of the Dual Nationality ITAR Issue

Should Canadian businesses who sell military and defense goods to the United States and Canadian subsidiaries of U.S. companies be concerned about the reported arrest of a dual American-Chinese former employee of Boeing on Monday, February 11, 2008?  How will this impact of the January 22, 2008 White House Directive to the United States Department of State (the "State Department") to "update U.S. controls on exports involving dual and third country nationals from NATO and other allied countries"?

Canada's Globe & Mail newspaper has reported that "A former Boeing engineer was arrested on Monday on charges of stealing trade secrets for China related to several aerospace programs, including the Space Shuttle."  Mr. Dongfan "Greg" Chung was born in China, but is currently a naturalized U.S. citizen.  He was employed by Rockwell International from 1973 to 1996 when Rockwell was acquired by Boeing.  He retired from Boeing in 2002, but returned as contractor in 2003 and worked at Boeing until September 2006. He is 73 years old.  He held security clearances relating to the Space Shuttle programs. 

It has been alleged (but not proven in court) that Mr. Chung took and concealed Boeing trade secrets relating to the Space Shuttle, the C-17 military transport aircraft and the Delta IV rocket. The Justice Department indictment accuses Chung of eight counts of economic espionage, one count of conspiracy to commit economic espionage, one count of acting as an unregistered foreign agent without prior notification to the Attorney General, one count of obstruction of justice, and three counts of making false statements to FBI investigators.

How will this case affect the State Department actions regarding dual nationals working in countries such as Canada?  Very senior Canadian officials have been lobbying the United States government to ease the International Traffic in Arms Regulations (ITAR) rules.  But, does the case of Mr. Chung demonstrate that there is a potential for espionage or inappropriate activities by dual nationals who have lived in North America for some time?  Will the U.S. officials cite this case as a reason for not alleviating the restrictions?

The ITAR rules require that persons and corporations having access to U.S. military and defense articles, services and related technical data be registered and licensed by the State Department.  Under ITARs, individuals who hold citizenship from 25 countries including Haiti, Cuba, Venezuela, China, North Korea, Iran and Syria cannot work on U.S. military contracts, even when the individuals have obtained the appropriate Canadian security clearances.

As a result, Canadian employers are facing human rights complaints and the provincial human rights commissions have clearly indicated their opinion that the the Canadian Charter of Rights and Freedoms and the Canadian Human Rights Act and provincial human rights codes prohibit such discrimination based on nationality.

On January 17, 2008, the Quebec Human Rights Commission issued a press release regarding the settlement of the Bell Helicopter Textron Canada Ltd. case, which involved the company's decision not to hire a prospective intern who held dual Haitian-Canadian citizenship in order to comply with the U.S. International Traffic in Arms Regulations (ITARs).

In July 2007, General Motors Defense (GMD) settled a case that was filed by some of its non-North American workers with the Ontario Human Rights Commission on the basis that they were subjected to discrimination based on nationality. GMD was a division of General Motors of Canada Limited (“GMCL”), which manufactured military vehicles for various governments, including that of the United States prior to selling its operation to General Dynamics Land Systems Canada Corporation.

Cases have also been settled in Manitoba.

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