Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



The Canadian Defence Industry Needs the Canadian Government to Ask the Americans (Again) to Fix ITAR rules

On November 12, 2008, the Ottawa Business Journal ran an article entitled “Defence industry pushes for reform of U.S. export controls” abouts the Canadian defence industry’s desire for a flexible application of the ITAR rules based on risk instead of birthplace of a person.  Peter Kovessy writes:

“Canada's aerospace industry is requesting federal officials press their American counterparts to expand an agreement allowing dual nationals to work on joint high-level military-related projects.

The dual-nationality issue has hampered Canadian defence and security firms for years because American International Traffic in Arms Regulations (ITAR) prohibit secure data from being exported to Canadian companies who employ certain workers – in particular, employees holding citizenship from countries the United States deems sponsors of terrorism or in non-compliance with nuclear or biological weapon treaties.

Around a year ago, an agreement was reached between the two governments permitting federal public servants holding a 'secret' security clearance to have access to ITAR material, regardless of whether they hold dual citizenship, says Ron Kane, the vice-president of the Ottawa-based Aerospace Industries Association of Canada (AIAC).

"We now have our (precedent) that has been set in terms of Canadian government employees. Our want is to get that same approach extended to encompass Canadian industry," says Mr. Kane, adding most defence and aerospace companies already have their employees cleared at the secret level.

He says his organization is also advocating for individuals to be assessed on their inherent security risk, as opposed to their citizenship.

"An individual born in Canada could pose just as much of a security risk as someone who immigrated to Canada from another country. You have to look at the behaviour of individuals, not their nationalities," he says.

Mr. Kane says he has seen efforts on the part of the U.S. State Department to make ITAR more efficient by shortening licence approval timelines, and examining whether certain dated technologies covered by the regulations still pose a security risk.

Businesses were not expecting any breakthroughs this year because of elections on both sides of the border, but hope serious discussions can resume in the new year. Likewise, Tim Page, president of the Canadian Association of Defence and Security Industries, says it's reasonable to expect the new Barack Obama administration will examine ITAR in its first term.

"Our two economies in the defence and security industries have become deeply integrated. So any regulation or legislation that impedes the ability of defence and security companies on either side of the border to do business with each other is not helpful," says Mr. Page.

He adds the same restrictions can put Canadian companies at a disadvantage if it prevents them from hiring qualified employees.

In this regard, ITAR requirements are becoming more stringent as Canadian companies find candidate pools shallowing, observes Harrison Crotin, recruitment director at the aerospace and defence industry staffing firm Recruitall.

He says an increasing number of his clients are running into ITAR barriers when looking to fill positions in manufacturing. In the past, he says, obstacles were generally reserved for jobs in design.

"Clients consider industry experience a primary interest when they look at a potential job candidate. That is already enough of a challenge ... When you add ITAR on top of that, it just makes things much more competitive."

The problem for Canadian companies is that compliance with the ITAR nationality rules is contrary to Canada's human rights laws.  There have been claims filed by affected employees with the provincial human rights commissions.  The provincial human rights commissions have determined that the companies are in breach of fundamental rights against discrimination on the basis of nationality.  The companies settle the lawsuits rather than risking a worse outcome to be determined by the provincial human rights commission.

For more information, please review the articles on trade Lawyers Blog in the category "Export Controls and Economic Sanctions" or contact Cyndee Todgham Cherniak (6130307-4168).

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