Vol. 148, No. 12 — June 4, 2014

Registration

SOR/2014-126 May 16, 2014

DEFENCE PRODUCTION ACT

Regulations Amending the Schedule to the Defence Production Act

P.C. 2014-596 May 15, 2014

His Excellency the Governor General in Council, on the joint recommendation of the Minister of Public Works and Government Services and the Minister of Foreign Affairs, pursuant to paragraph 43(d) (see footnote a) of the Defence Production Act (see footnote b), makes the annexed Regulations Amending the Schedule to the Defence Production Act.

REGULATIONS AMENDING THE SCHEDULE TO THE DEFENCE PRODUCTION ACT

AMENDMENT

1. Section 1 of the schedule to the Defence Production Act (see footnote 1) is replaced by the following:

INTERPRETATION

1. The following definitions apply in this schedule.

“firearm” has the same meaning as in section 2 of the Criminal Code. (arme à feu)

“full demilitarization” means an action that permanently prevents a good’s repair, restoration or reverse engineering. (démilitarisation complète)

“Guide” has the same meaning as in section 1 of the Export Control List. (guide)

“prohibited firearm” has the same meaning as in paragraph (c) of the definition “prohibited firearm” in subsection 84(1) of the Criminal Code. (arme à feu prohibée)

“restricted firearm” has the same meaning as in subsection 84(1) of the Criminal Code. (arme à feu à autorisation restreinte)

“DEFENSE ARTICLE”

2. (1) Subject to subsection (2) and section 6, the following are controlled goods:

(2) For the purposes of this section, controlled goods do not include a firearm or its specially designed components if it is not a prohibited firearm and it has

GROUP 2 OF THE GUIDE

3. (1) Subject to subsection (2) and section 6, goods set out in Group 2 of the Guide, other than those described in any of the following items, are controlled goods:

(2) The following modifications apply to the controlled goods as set out in Group 2 of the Guide:

GROUP 5 OF THE GUIDE

4. (1) Subject to subsection (2) and section 6, goods set out in item 5504 of Group 5 of the Guide, other than any of those described in items 5504.2.a.i or 5504.2.d to 5504.2.f or 5504.2.i, are controlled goods.

(2) The following modifications apply to the controlled goods set out in Group 5 of the Guide:

GROUP 6 OF THE GUIDE

5. (1) Subject to subsection (2) and section 6, goods set out in Group 6 of the Guide, other than those described in any of the following items, are controlled goods:

(2) The following modifications apply to the controlled goods set out in Group 6 of the Guide:

EXCEPTIONS

6. The following goods are not controlled goods:

COMING INTO FORCE

2. These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The Schedule to the Defence Production Act (the Schedule) has not been updated since it was introduced in April 2001. It requires updating to reflect Canada’s changing security requirements and to support the global competitiveness of the Canadian aerospace, defence, satellite and security industries. Domestic and international security landscapes have changed significantly since 2001 and there have been changes to the United States (U.S.) export control regime, both of which have an impact on the scope of goods which Canada needs to control domestically under the Schedule. The role of Canada’s Controlled Goods Program has also evolved in recent years to become a more integral part of Canada’s security framework, and the Canadian aerospace, defence, satellite and security industries have indicated that registration with the Controlled Goods Program affects their global competitiveness. The amendments to the Schedule would address the following issues:

1. Remove domestic controls on certain goods that have no strategic significance and do not pose national security concerns.

2. Respect the understanding between Canada and the United States for the Canadian safeguarding of defence articles listed on the United States Munitions List to the U.S. International Traffic in Arms Regulations (ITAR).

3. Respond to the aerospace, defence, satellite and security industries’ long-standing request to better align Canadian domestic controls with U.S. export control reforms.

4. Address the various Government of Canada recommendations aimed at improving the competitiveness of Canada’s aerospace industry.

5. Ensure alignment with Government of Canada initiatives aimed at reducing the administrative burden on business in order for entrepreneurs to focus on contributing to the economy and creating jobs.

Background

Public Works and Government Services Canada (PWGSC) is responsible for safeguarding controlled goods in Canada. In accordance with the Defence Production Act, registration with the Controlled Goods Program is mandatory (unless an individual has been granted an exemption or exclusion) for any person who possesses, examines or transfers controlled goods in Canada. Registrants of the Controlled Goods Program must comply with the Defence Production Act and the Controlled Goods Regulations. Controlled goods are defined in section 35 of the Defence Production Act. They are the goods and technologies on the Controlled Goods List which is found in the Schedule to the Defence Production Act. The Schedule sets out the goods and technologies that are defined as controlled goods. These controlled goods are subject to the regulatory requirements prescribed by the Controlled Goods Regulations and require safeguarding by the Controlled Goods Program. Examples of controlled goods include items specifically designed or modified for military use, such as anti-tank weapons, bombs, torpedoes, mines, missiles, military vehicles (tanks), vessels (submarines), combat aircraft, chemical, biological and radioactive material used in war, and nuclear weapons design and testing equipment.

Given that the focus of the Controlled Goods Program is on the domestic security of strategically significant goods and technologies, there are scenarios where the current Schedule contains instances of controls being imposed on goods with no strategic significance or proliferation concerns from a domestic security perspective. Hence, it is in the interest both of the industry and of the Government of Canada that these controls be revised accordingly, as the Schedule’s current controls are not entirely appropriate for the efficient and effective administration of the Controlled Goods Program.

There has been a long-term understanding, which was reconfirmed by the 2011 exchange of letters between PWGSC and the U.S. Department of State, that Canada will safeguard U.S. International Traffic in Arms Regulations defence articles through domestic controls. The U.S. provision of the Canadian Exemptions under the U.S. International Traffic in Arms Regulations is primarily contingent on the United States being assured that the Canadian government has effective control measures for the safeguarding of U.S. International Traffic in Arms Regulations defence articles. Prior to this amendment, there was no mechanism to maintain consistency between the Canadian and U.S. control regimes.

The United States has been undertaking its Export Control Reform Initiative since 2009 to modernize its control systems for the export of U.S. International Traffic in Arms Regulations defence articles. These reforms aim to focus efforts on the stringent controls of exports of sensitive goods and technologies while streamlining (through the simplification of licensing requirements) the export of less sensitive defence-related items to U.S. allies. The first round of reforms was implemented in October 2013. These amendments to the Schedule will serve to better align Canada’s program with that of the United States.

The existing Schedule is composed of a subset of the Department of Foreign Affairs, Trade and Development’s Export Control List. The Schedule makes reference to Group 2 (with minor exceptions), Group 6, and item 5504 of Group 5 of the Export Control List. The Schedule’s specific references to the Export Control List were selected because, at the time of the creation of the Controlled Goods Program, they captured all of the goods and technology listed on the United States Munitions List to the U.S. International Traffic in Arms Regulations. Modifications have since taken place to both the Export Control List and the United States Munitions List. As the Schedule had not been updated, there was a need for amendment in order to ensure the Controlled Goods Program facilitates the continued U.S. provision of the Canadian Exemptions under U.S. International Traffic in Arms Regulations.

In addition, the Government-commissioned aerospace review Beyond the Horizon: Canada’s Interests and Future in Aerospace (the Emerson Report) (see footnote 2) outlined how public policies and programs could help Canada to maintain and build upon its status in the global aerospace business. Among the recommendations made was “…that the government review export and domestic control regimes to ensure that they are not unnecessarily restrictive and that export permits be issued expeditiously.”

Other recommendations made by the Aerospace Review’s various working group reports and research reports included the following:

Objectives

These Regulations amend the Schedule to the Defence Production Act. Amending the Schedule focuses the Controlled Goods Program activities on goods and technologies with strategic significance and that have national security implications for Canada.

More specifically, the amendments to the Schedule are intended to achieve the following objectives:

The proposed amendments to the Schedule seek to strike the right balance between supporting Canada’s own national security objectives, honouring commitments to the United States, and enhancing the competitiveness of the Canadian industry.

Description

Due to the changing security and economic landscapes in Canada and abroad, the Governor in Council, on the joint recommendation of the Minister of Public Works and Government Services and the Minister of Foreign Affairs, is amending the Schedule to the Defence Production Act to focus the activities of the Controlled Goods Program on the control of goods and technologies that have been identified to have strategic significance for Canada or which have national security implications. The Schedule amendments will not control any new goods and technology, and will remove many goods and technology that are controlled by the current Schedule. The amendments to the Schedule will have no direct impact on Canada’s export controls (Canada’s export controls are administered by the Department of Foreign Affairs, Trade and Development pursuant to the Export and Import Permits Act).

The proposed regulatory amendment would change the Schedule to domestically control only goods and technologies that are strategically significant to Canada or that pose national security concerns, including those items listed on the United States Munitions List to the U.S. International Traffic in Arms Regulations. The updated Schedule would replace the current domestic controls with the following dual stream of domestic controls:

The dual streams of control would provide the Controlled Goods Program with a comprehensive listing of goods and technologies with strategic significance or national security implications. Violations related to any of the above items could pose a domestic risk to Canada and may harm Canada’s national security or foreign policy interests.

Stream 1: Domestic control of U.S. International Traffic in Arms Regulations defence articles

The amended Schedule’s proposed reference for the control of U.S. International Traffic in Arms Regulations defence articles is intended to preserve the U.S. provision of the Canadian Exemptions under the U.S. International Traffic in Arms Regulations for the licence-free transfer of many U.S. International Traffic in Arms Regulations defence articles between the United States and Canada. In addition, the proposed reference would provide for an “evergreen” mechanism that ensures that the Schedule’s control of items listed on the United States Munitions List would always remain current regardless of any changes made as the result of U.S. Export Control Reform. This will ensure that the Schedule is always aligned with the United States Munitions List to the U.S. International Traffic in Arms Regulations. Only those items listed on the United States Munitions List, as it is amended from time to time, will be controlled under Stream 1.

Stream 2: Domestic control of strategically significant goods and technologies regardless of the country of original manufacture

In addition to the control of items listed on the United States Munitions List to the U.S. International Traffic in Arms Regulations, it is proposed that the amended Schedule domestically controls all goods and technologies, regardless of their country of manufacture, that have strategic significance or pose national security concerns.

The inclusion of this stream will ensure that domestic controls remain on the critical items, which do not fall under the U.S. International Traffic in Arms Regulations, but may potentially pose strategic, national security or safety implications for Canada. The proposed controls under Stream 2 would apply to the possession, examination and transfer of non-U.S. origin tactical and strategic assets within Canada.

Stream 2 is a subset of the current Schedule. Stream 2 identifies the specific entries within the three groupings of the Export Control List (Group 2 [with minor exceptions], Group 6, and entry 5504 of Group 5) that are currently referenced by the Schedule, that have been determined to be strategically significant or to have national security concerns. The criteria used to determine items of strategic significance that should be controlled under Stream 2 were developed by a working group composed of officials from PWGSC, Foreign Affairs, Trade and Development Canada, National Defence and the Canadian Forces, Natural Resources Canada, Royal Canadian Mounted Police, Canadian Security Intelligence Service, and Public Safety Canada. The criteria are based on a decision tree that took into account the following:

Illustrative examples of items that have been removed from the Schedule (that would have formerly been listed under the new Stream 2 category) include the following:

Examples of items removed from the Schedule

Export Control List Groupings Affected Examples of Entries Removed
Group 2 (Munitions List)
  • Entry 2-9.a.2: Surface vessels that are not specially designed or modified for military use
  • Entry 2-10.b: Transport and logistics aircraft
Group 5, Entry 5504 (Strategic Goods and Technologies)
  • Entry 5504-2.e: Ground control equipment for telemetry, tracking and control of commercial satellites
Group 6 (Missile Technology Control Regime List)
  • Entry 6-3.A: Civilian turbofan and turbojet engines
  • Entry 6-11: Civilian avionics

The Stream 2 controls are made for the following purposes:

Unlike Stream 1, the domestic controls for Stream 2 are not country specific, and would apply to all goods and technologies regardless of their country of origin. The Controlled Goods Program has evolved since its creation to adapt to the post 9/11 security environment. The Program’s security requirements have been enhanced accordingly. In addition to meeting Canada’s international commitments to the United States for control of U.S. International Traffic in Arms Regulations defence articles, Canada’s control of items is broader in scope in order to strengthen domestic security and help prevent the proliferation of tactical and strategic assets, regardless of their country of origin.

Benefits and costs

The amendments to the Schedule do not impose any new costs and are purely burden-relieving. The proposed amendments would provide a net benefit to Canadians, with a quantifiable net present value (NPV) of $53,037,690 over a 10-year period. The table that follows illustrates the cost savings from 2014 to 2023; these amounts represent the costs avoided by firms that no longer require registration in the Controlled Goods Program.

Businesses that are no longer required to register for the Controlled Goods Program would benefit from compliance and administrative savings, as they would no longer incur the various costs associated with having a dedicated designated official, undertaking security assessments of employees, conducting inspections, record keeping and the associated training, as well as meeting physical security needs.

Expected cost savings to businesses (see note 1)

Administrative costs (see note 2)
Cost-Benefit Statement Base Year (2014) ... Final Year (2023) Total (Present Value) [10 years] Average Annual (Present Value)
A. Quantified impacts $
Benefits Large $357,527   $819,500    
Medium $318,527   $1,087,684    
Small $362,807   $1,263,504    
Sole proprietors $13,269   $42,285    
  Total $1,052,130   $3,212,972 $15,141,724 $2,091,398
Costs Large $0   $0 $0 $0
Medium $0   $0 $0 $0
Small $0   $0 $0 $0
Sole proprietors $0   $0 $0 $0
Total $0   $0 $0 $0
Net Administrative Benefits $15,141,724 $2,091,398
Compliance costs (see note 2)
Cost-Benefit Statement Base Year (2014) ... Final Year (2023) Total (Present Value) [10 years] Average Annual (Present Value)
A. Quantified impacts $
Benefits Large $638,386   $1,476,808    
Medium $1,745,491   $3,806,422    
Small $775,218   $3,025,180    
Sole proprietors $7,132   $22,445    
  Total $3,166,227   $8,330,856 $37,895,966 $5,234,249
Costs Large $0   $0 $0 $0
Medium $0   $0 $0 $0
Small $0   $0 $0 $0
Sole proprietors $0   $0 $0 $0
Total $0   $0 $0 $0
Net Compliance Benefits $37,895,966 $5,234,249
Total costs (see note 2)
Cost-Benefit Statement Base Year (2014) ... Final Year (2023) Total (Present Value) [10 years] Average Annual (Present Value)
A. Quantified impacts $ (see note 2)
Benefits Large $995,914   $2,296,308    
Medium $2,064,018   $4,894,106    
Small $1,138,025   $4,288,684    
Sole proprietors $20,401   $64,730    
  Total $4,218,357   $11,543,828 $53,037,690 $7,325,648
Costs Large $0   $0 $0 $0
Medium $0   $0 $0 $0
Small $0   $0 $0 $0
Sole proprietors $0   $0 $0 $0
Total $0   $0 $0 $0
Net Total Benefits $53,037,690 $7,325,648

Note 1
Based on Controlled Goods Program methodology.

Note 2
Discount rate: 7%.

Qualitative Impacts
Short list of qualitative impacts (positive and negative) by stakeholder
Canadians and the Canadian economy
  • Supports economic prosperity of Canada, particularly for the Canadian defence, aerospace, satellite and security industries.
  • Enhanced public security by focusing on most sensitive items of concern.
  • Helps reduce industrial espionage.
  • Enhanced ability to maintain Canada’s U.S. ITAR exemptions.
  • Ensures that Canada continues to benefit from its privileged defence trade relationship with the U.S. and access to the important U.S. market.
  • Closer regulatory alignment to the U.S.
  • Improved definition of domestic controlled goods list that supports Canada’s security needs and international obligations.
Canadian Government
  • Eliminates overlap among federal organizations that regulate similar items.
  • Strengthened Program’s effectiveness by focusing on domestic control of goods with strategic significance or that have national security implications.
  • Strengthened national security by providing a continuum of security controls before export/import processes.
  • Aligned with initiatives, such as:
  • Red Tape Reduction Action Plan; and
  • Recommendations in the Review of Aerospace and Space Programs and Policies (the Emerson Report), and the Canada First: Leveraging Defence Procurement through Key Industrial Capabilities (the Jenkins Report).
Industry and other stakeholders
  • Improved global competitiveness of Canadian aerospace, defence and satellite sectors vis-à-vis other jurisdictions.
  • Reduced administrative and compliance burden.
  • Better knowledge of controlled items through automatic updates to the Schedule when changes are made to the United States Munitions List (i.e. reduced confusion over categories of controlled items).
Canada-U.S. relations
  • Supports Canada’s agreement with U.S. for the safeguarding of all ITAR-controlled articles.
  • Better alignment with U.S. Export Control Reform Initiative.
  • Enhanced confidence-building measures to satisfy real and perceived U.S. security concerns.
  • Supports broader North American defences through initiatives such as the Beyond the Border Action Plan.

The full cost-benefit analysis is available upon request.

“One-for-One” Rule

There is no expected increase in the administration or compliance costs for Controlled Goods Program registrants. The amendments would only be expected to reduce administrative and compliance costs to the registrants who no longer require registration with the Controlled Goods Program as a result of the proposed changes to the definition of controlled goods.

The amended Schedule would remove the control of items deemed to not have any strategic significance for domestic transfer within Canada. This would remove the registration requirements for Canadian businesses, currently registered with the Controlled Goods Program, that do not examine, possess, or transfer U.S. International Traffic in Arms Regulations defence articles; or goods or technologies with strategic significance or national security concerns. The Schedule amendments would be expected to require fewer businesses, consultants, and other entities (e.g. museums and universities) to require registration with the Controlled Goods Program, as there would be fewer items requiring domestic control. Fewer registrants would result in a sector-level decrease in the associated administrative burden to which organizations are currently subjected when registered with the Controlled Goods Program.

In particular, some businesses in the aerospace, defence, satellite and security industries would see a reduction in the administrative burdens associated with being registered with the Controlled Goods Program. For example, businesses would be expected to benefit from cost savings attributed to no longer incurring administrative costs associated with requirements such as designating security officials, security assessments, on-site or telephone compliance inspections, and associated audits. A decrease in administrative burden would be most visible among small- and medium-sized businesses given that they comprise the vast majority of Controlled Goods Program registrants (95.7%).

For this reason, the proposed Schedule amendments are considered to be an “Out” under the “One-for-One” Rule.

Expected administrative cost savings to businesses

Whereas the administrative savings to business in the Benefits and costs section above reveal a projected savings of $2,091,398, it should be noted that this calculation takes into account both the expected administrative cost savings for those businesses associated with existing Program registrants as well as expected future registrants that would be excluded under the new Schedule based on a projected growth rate of 5.8%.

For the purposes of the “One-for-One” Rule, the methodology is applied to existing Program registrants who would no longer need to register based on the amended Schedule. Consequently, the projected decrease in administrative burden based on the “One-for-One” Rule is summarized below.

Cost savings for affected businesses (see footnote 5)

  Annualized Average
(Present Value)
[2012 Dollars]		 Total Annualized Savings
(Present Value)
[2012 Dollars]
Cost savings $3,568 $710,047

Small business lens

The small business lens does not apply to this proposal, as there are no new costs (administrative or compliance) placed on small business. The amendments actually reduce the number of small businesses that require registration with the Controlled Goods Program.

The amendments to the Schedule are expected to have a positive impact on small businesses by saving them the administrative and compliance costs associated with registration with the Controlled Goods Program. The removal of control on goods and technologies with no strategic significance would be expected to have a greater impact on small businesses (including consultants), as this industry group is typically involved in the manufacture or incorporation of less-sensitive defence articles.

Small- and medium-sized businesses that would no longer require registration with the Controlled Goods Program as a result of Schedule amendments would be expected to benefit from savings attributed to administrative costs, such as those noted above and compliance costs, such as staff training, record keeping and reporting, and physical security requirements.

Consultation

General public and industry stakeholders: PWGSC undertook a series of consultations with stakeholders and the public on the proposed amendments to the Schedule to the Defence Production Act between November 19, 2013, and December 20, 2013. Background information was available online and included a consultation paper that detailed the proposed amendments. The Controlled Goods Program notified all stakeholders of PWGSC’s intent to amend the Schedule; this was done through direct emails to Controlled Goods Program registrants, industry associations and relevant government organizations. The invitation to participate in the public consultations was posted on the Controlled Goods Program external Web site and was sent to almost 6 000 individuals in the Controlled Goods Program database. In addition, PWGSC posted the notification of the consultations on Service Canada’s Consulting with Canadians Web site and requested that industry associations notify their members of the consultations. Similarly, PWGSC’s Office of Small and Medium Enterprises (OSME) emailed an announcement regarding the consultations to firms across Canada.

Over 240 responses were received from stakeholders across Canada. Comments received during public consultations demonstrated that stakeholders were appreciative of the opportunity to comment on the proposal and that they were supportive of PWGSC’s efforts to relieve administrative burden. Respondents acknowledged that the proposal would benefit industry by relieving administrative and compliance burdens associated with registration with the Controlled Goods Program. The reduction in the number of items controlled by the Program and the improved alignment with the U.S. International Traffic in Arms Regulations are seen as critical to Canadian industry’s competitiveness. Respondents also indicated their support for the harmonization of items captured by the proposed Stream 1 with those items controlled on the United States Munitions List to the U.S. International Traffic in Arms Regulations.

A broad range of stakeholders, and Canadians in general, participated in the consultation process. Stakeholders included sole proprietors, consultants, academic institutions, museums, and firms or associations involved in the aerospace, defence, satellite and security sectors. Comments received during public consultations demonstrated that stakeholders were appreciative of the opportunity to comment on the proposal and that they were supportive of PWGSC’s efforts to relieve administrative burden. The majority of stakeholders expressed support for the proposed amendments and especially the removal from domestic controls of non-military items. The few comments received that did not express support were either related to other initiatives being undertaken by PWGSC (such as the proposed introduction of user fees), or pertained to broader policy issues that were beyond the scope of the consultations.

The results of the public consultations and the comments received can be found in the Consultation Report that is available on the Controlled Goods Program Web site at http://ssi-iss.tpsgc-pwgsc.gc.ca/dmc-cgd/consultations/consultations-details-eng.html.

Leading up to the public consultations, members of the Controlled Goods Program’s Industry Engagement Committee (IEC) provided feedback on the proposed amendments. This stakeholder engagement group is comprised of aerospace and defence organizations and represents over 2 000 Canadian companies.

Based on the support received during the public consultations and the lack of comments on the Notice of Intent that was published in the Canada Gazette, Part I, it is anticipated that the general public would be supportive of the proposed Schedule amendments as the proposal would be expected to relieve the administrative burden on Canadian industry and help maintain the provision of the Canadian Exemptions without sacrificing national security.

Other federal departments: It is anticipated that all departments and agencies would be supportive of the amended Schedule. Officials of at least 12 security and economic departments and agencies, both at the working and executive levels, were consulted throughout the process.

A Controlled Goods Working Group, co-chaired by PWGSC and the Department of Foreign Affairs, Trade and Development, was created to review the Schedule to identify goods and technologies with strategic significance or national security concerns. The criteria used to make these determinations was created by this Working Group which was comprised of subject matter experts from federal departments/agencies with a stake in safeguarding controlled goods (i.e. Department of National Defence, the Canadian Forces and Natural Resources Canada), or with national security issues (i.e. Royal Canadian Mounted Police, Canadian Security Intelligence Service, and Public Safety Canada). In the course of the review, the Working Group additionally consulted with the subject matter experts from Industry Canada, the Canadian Space Agency, the Canadian Nuclear Safety Commission, and the Canadian National Authority on the Chemical Weapons Convention. All the federal departments/agencies involved in the Schedule review expressed support for the Schedule amendments, and it would be anticipated that this support would extend to all other federal departments without opposition.

Additionally, the Schedule amendments have been shared with a broader intergovernmental working group composed of senior executives from 12 federal departments and agencies. This group expressed its support for the initiative without opposition.

U.S. government: Based on the exchange of letters and formal and informal engagement with U.S. government representatives over the past year, it is expected that the U.S. government would be supportive of the amended Schedule. PWGSC has discussed the reference for the control of United States Munitions List defence articles with U.S. government officials. It is anticipated that there would be no opposition by the United States to the proposed changes.

Notice of Intent: A Notice of Intent notifying Canadians of the proposed amendments to the Schedule was published in the Canada Gazette, Part I, on March 8, 2014. Although Canadians were invited to provide comments over a two-week period, none were received.

Rationale

The proposed regulatory amendment would ensure that the new Schedule would limit domestic controls to those specific goods and technologies with strategic significance or that have national security implications to Canada. This re-focus of domestic controls is intended to reduce the number of items requiring domestic control by the Controlled Goods Program which, consequently, would alleviate some of the registration-related administrative and compliance burdens placed on the Canadian industry. This will assist the global competitiveness of the Canadian aerospace, defence, satellite and security industries, which will, in turn, result in greater benefits to the Canadian economy.

Ongoing changes to the U.S. export control regime further emphasize the need to revisit the items that the Controlled Goods Program controls domestically to foster a better competitive environment for Canadian industry. Part of the strategy for amending the Schedule involves a reference to the United States Munitions List to the U.S. International Traffic in Arms Regulations, as amended from time to time. This reference would formalize the understanding for Canada to control U.S. International Traffic in Arms Regulations defence articles and address the concerns of Canadian industries regarding the registration requirements of the Controlled Goods Program.

In addition, the proposed amendments would address various recommendations outlined in the Government of Canadacommissioned aerospace review Beyond the Horizon: Canada’s Interests and Future in Aerospace that are aimed at improving the competitiveness of Canada’s aerospace industry. The proposed domestic controls refine, and consequently reduce, the definition of controlled goods to those items that are truly considered sensitive and/or critical to strengthen national security while meeting a bilateral agreement with the United States for the Canadian safeguarding of U.S. International Traffic in Arms Regulations defence articles.

Similarly, the new Schedule addresses one of the recommendations of the Market Development Report to link the Schedule to the United States Munitions List to the U.S. International Traffic in Arms Regulations. The amended Schedule will have a reference for the control of U.S. International Traffic in Arms Regulations defence articles that are manufactured in the United States and deemed by the United States (Department of State, manufacturers, exporters, or Customs and Border Protection) to fall under the requirements of the U.S. International Traffic in Arms Regulations. The control will ensure that the items domestically controlled by the Schedule will capture the items requiring control under the U.S. International Traffic in Arms Regulations and automatically reflect the changes from the ongoing U.S. export control reforms.

Finally, the new Schedule addresses the recommendations of The Aerospace Export and Domestic Controls Review Final Report for the removal of certain dual-use goods from domestic controls. The last three criteria for strategic significance are intended to remove predominantly dual-use goods from domestic control.

Overall, the proposed amendments are also expected to have a positive effect on businesses.

Implementation, enforcement and service standards

The implementation of the new Schedule to the Defence Production Act will come into force on the day on which it is registered.

The reference for the control of U.S. International Traffic in Arms Regulations items (under which the United States Munitions List falls) will result in the items in the Schedule automatically reflecting any changes that take place to the U.S. regime. PWGSC officials will regularly monitor changes that take place in the United States. The Schedule will be reviewed on a regular basis and should significant changes occur (in Canada, in the United States or internationally), further amendments to the Schedule will be considered at that time.

Contact

Jennifer Stewart
Director General
Industrial Security Sector
Public Works and Government Services Canada
2745 Iris Street
Ottawa, Ontario
K1A 0S5
Telephone: 613-948-1777
Email: Jennifer.Stewart@pwgsc-tpsgc.gc.ca