Notice to Brokers
Canada’s Brokering Controls (Export and Import Permits Act, Brokering Control List, Brokering Permit Regulations, Regulations Specifying Activities that Do Not Constitute Brokering, General Brokering Permit No. 1)
Export and Import Permits Act
Serial No. 216
Date: August 2019
- What is brokering?
- What is required in order to broker?
- What goods are covered?
- Who is a broker?
- Exceptions to Canada’s brokering controls
- Brokering permits
- Enforcement of Canada’s brokering controls
1. The purpose of this Notice is to advise brokers that, pursuant to Bill C-47, 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), Canada’s brokering controls are in force as of September 1, 2019. These brokering controls are set out in four regulations enacted under the amended Export and Import Permits Act (EIPA):
- the Brokering Control List, which lists all the items for which a brokering permit is required;
- the Brokering Permit Regulations, which set out the information that an applicant (meaning a person or organization) must submit in their application for an individual brokering permit;
- the Regulations Specifying Activities that Do Not Constitute Brokering, which specify activities that, while technically falling under the definition of “brokering,” are excluded from the scope of the controls; and,
- General Brokering Permit No. 1, which is an expedited permitting measure that can be used to broker in certain pre-defined, lower-risk circumstances.
2. This Notice should be read in conjunction with the four regulations mentioned above as well as the current versions of the “Handbook on Export and Brokering Controls” (when it goes live) and “A Guide to Canada's Export Control List”, which are available online.
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What is brokering?
3. Bill C-47 amended the Export and Import Permits Act (EIPA) to define brokering in the following way: “to broker means to arrange or negotiate a transaction that relates to the movement of goods or technology included on the Brokering Control List from a foreign country to another foreign country.” This is an activity-based definition that targets the actions that lead to the movement of controlled items from one third country to another third country.Footnote 1 Officials recognise that there can be legitimate questions as to when brokering actually takes place.
4. Here are some key elements of the definition of “brokering”:
- A “foreign country” means a country other than Canada. Moving an item into or out of Canada is not brokering. Requirements regarding items moving into Canada (i.e. imports) or out of Canada (i.e. exports), or within Canada, are captured through existing import, export, and domestic controls.
- A “transaction that relates to the movement of goods or technology” includes, but is not limited to, a transaction related to the acquisition or disposition of these goods or technology from one foreign country to another foreign country that may or may not result in a change in ownership (e.g. buying, selling, shipping, temporarily moving, or donating goods or technology).
- With respect to a transaction that relates to the movement of technology, “movement” includes both the physical movement of the technology itself (e.g. by mail or on a USB key) as well as the disclosure of the contents of that technology (e.g., by email, downloading or uploading) from one country to another.
- The legal definition of brokering does not include the provision of strictly administrative or support services (e.g. booking of rooms, arranging transportation, providing legal advice, marketing or conducting other general business development activities).
- Brokering, by its very nature, can cover a broad scope of activities and depends on the specific roles and activities of individuals and organisations involved in the transaction, and the context in which these take place.
- As a rule of thumb, general business development activities would not normally constitute brokering. However, the closer one gets to negotiating terms related to the transfer/exporting/manufacturing process – then the closer one gets to brokering. (If in doubt, please contact the Export Controls Division.)
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What is required in order to broker?
5. Bill C-47 creates a legal prohibition against unauthorized brokering (by amending the Criminal Code). It contains penalties for engaging in brokering activities without first having obtained the necessary authorization, in the form of a brokering permit. As of September 1, 2019, all brokers are required to apply for brokering permits ahead of any brokering transactions. Brokering transactions that would already be in progress on that date will also require a permit.
6. As with other types of controls under the EIPA, the Minister of Foreign Affairs has the authority to issue permits to broker. To the extent possible, officials have developed brokering controls using the same documents and processes that are used for Canada’s export controls. This is intended to facilitate understanding of the brokering controls. As a result, familiar elements such as EXCOL, the newly-renamed Export and Brokering Controls Handbook, the Export Control List, the use of General Permits, and other similar resources are being used as possible.
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What goods are covered?
7. The Brokering Control List (BCL) lists all items for which a brokering permit are required. The BCL is based on the groups identified in the Export Control List (ECL) and includes all items listed in Group 2 (Munitions List) and Group 9 (Arms Trade Treaty Items). It also includes all other strategic and dual-use items on the ECL when they are likely to be destined for use in the production or development of a weapon of mass destruction (WMD).
8. Items listed in ECL Group 2 (Munitions List) are those “specially designed or modified for military use,” such as ground vehicles, firearms, ammunition and imaging equipment made specifically for military use. For a complete list of Group 2 items, please consult the latest version of A Guide to Canada's Export Control List. ECL Group 9 (Arms Trade Treaty items) lists the 8 categories of full-system items that fall within the scope of the ATT (as described in Article 2(1)), namely: battle tanks; armoured combat vehicles; large-calibre artillery systems; combat aircraft; attack helicopters; warships; missiles and missile launchers; and, small arms and light weapons). ECL Group 9 items are also listed in ECL Group 2, and therefore Group 9 can be seen as a subset of Group 2.
9. The BCL also includes all other items on the ECL that are likely to be used to produce or develop a weapon of mass destruction (WMD). This control is triggered if the properties of the item and any information made known to the broker would lead a reasonable person to suspect that the item will be used in:
- the development, production, handling, operation, maintenance, storage, detection, identification or dissemination of chemical or biological weapons, nuclear explosive or radiological dispersal devices, or materials or equipment that could be used in such weapons or devices;
- the development, production, handling, operation, maintenance or storage of missiles or other systems capable of delivering chemical or biological weapons or nuclear explosive or radiological dispersal devices, or materials or equipment that could be used in such missiles or systems, or in any facility used for any of the activities described above.
If the broker suspects that the item may be used for one of the above purposes, the broker is obligated to apply for a brokering permit.
10. This control is also triggered if the Minister of Foreign Affairs has determined, on the basis of the properties of the item and any additional information relating to their intended end-use or the identity or conduct of their consignees, that they are likely to be used in the activities or facilities described above. In such cases, Global Affairs Canada will contact the broker directly regarding next steps.
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Who is a broker?
11. As per Bill C-47, Canada’s brokering controls apply to any natural or legal person in Canada (i.e. persons and organizations). This includes all Canadians, permanent residents, and temporary residents (including, for instance, tourists, businesspeople, visitors, etc.) who are in Canada when undertaking brokering activities. It also includes all organizations (foreign as well as domestic) that undertake brokering activities from Canada.
12. The brokering controls also have extraterritorial reach. They apply to the following entities, even if they broker outside of Canada: Canadian citizens, permanent residents of Canada, and any organization that is incorporated, formed or otherwise organized under the laws of Canada or one of its provinces.
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Exceptions to Canada’s brokering controls
13. In order to minimize the burden on Canadian businesses, Canada’s brokering controls contain certain exceptions. As provided in the Regulations Specifying Activities that Do Not Constitute Brokering, two exceptions ensure the prioritization of the scrutiny of actual arms brokering activities. These exceptions also ensure that government scrutiny is directed towards the evaluation of potentially riskier brokering activities.
14. The first exception relates to the brokering of a transaction between a corporation and its affiliates. A corporation that is an affiliate of another corporation (either because one controls the other, or because both are controlled by a third corporation) does not need a permit to undertake brokering activities if the goods being brokered are for end-use by an affiliate. This exception ensures that supply chain management can proceed without impediment as the application of brokering controls is limited to the movement of goods outside of the corporate family. Please note, however, that this exception does not apply if the goods being brokered are items listed in Group 9 (Arms Trade Treaty Items).
15. The second exception relates to brokering activities undertaken by a Canadian citizen or permanent resident abroad. If a Canadian citizen or permanent resident located outside of Canada is an employee directed to undertake brokering activities by and on behalf of their employer (who cannot be a Canadian citizen, permanent resident or organization), he or she does not need to request a brokering permit. This exception ensures that Canadian citizens are not disadvantaged in the global labour market. However, this exception does not apply if the employee can exercise control over their employer, or if the goods being brokered are items found in Group 9 (Arms Trade Treaty Items).
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16. At this time, Canada’s brokering controls include two types of brokering permits. The first type is a general brokering permit, namely: General Brokering Permit No. 1, pursuant to the regulation of the same name, can be used by all persons or organizations that conduct brokering activities without the need to file an application. The second type is an individual brokering permit, for which an application must be submitted pursuant to the Brokering Permit Regulations. As a potential broker, you must determine which type of brokering permit best applies to you.
General Brokering Permit No. 1
17. The first type of brokering permit is the General Brokering Permit No. 1 (GBP1). Like General Export Permits, a General Brokering Permit (GBP) is a type of permit that is generally available as a way to reduce administrative burden in pre-defined, lower-risk situations, provided that users follow all associated terms and conditions. General brokering permits help Canadian businesses to remain competitive in the global marketplace by giving them expedited licensing measures in appropriate circumstances. Another advantage of the GBP is that brokers are not be required to apply for individual brokering permits prior to undertaking the brokering activity covered by the GBP.
18. GBP1 can be used for brokering transactions involving ECL Group 2 items from any country to the following eligible countries: 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. In addition, GBP1 can be used for brokering transactions from any country to any other country (that is not Canada) if the controlled item is for end-use by the Government of Canada. As an illustrative example, GBP1 might be useful for military equipment that is brokered to support the operations of the Canadian Armed Forces when they are deployed abroad.
19. GBP1 is available to all persons and organizations 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).
20. To use GBP1, brokers first need to advise Global Affairs Canada via email to firstname.lastname@example.org of their intent to use this GBP before any brokering activities take place in that calendar year. Pre-notification should include the following information: the name of the broker (whether a person or organization), their address, their telephone number, their email address and any facsimile number. If the brokering entity is a corporation, it should also provide any assigned business number, the name of a contact person, and the contact person’s address, telephone number, email address and any facsimile number. Once the pre-notification is sent, brokers may proceed with the brokering transactions to the eligible destinations or to the destination where the controlled item will be end-used by the Government of Canada. Brokers must pre-notify every year that they intend to use this General Permit.
Conditions and reporting requirements
21. If a brokering transaction authorized under this GBP includes automatic firearms, brokers must ensure that automatic firearms only transit through countries that are listed on the AFCCL. The country of end-use must also be listed on the AFCCL.
22. Brokers who use GBP1 are required to report on their use of the permit on a semi-annual basis no later than thirty days after June 30 and December 31 of each calendar year.Footnote 2 The report’s content should be as follows:
- The report must indicate whether brokers did or did not broker under the authority of this permit.
- If so, brokers are required to provide the name, address, telephone number, email address and any facsimile of: the person(s) that sold the items, the person(s) that purchased the items, and any brokers, agents or mandataries involved in the transaction.Footnote 3
- If an organization was a party to a brokering transaction (whether as broker, buyer, seller, agent or mandatary), additional information should be provided as follows: the name and title of a contact person who has knowledge of the transaction, as well as the contact person’s address, telephone number, email address, and any facsimile number.
- For each brokered item, the relevant provision of the Brokering Control List, the item number assigned to it by the Guide to Canada’s Export Control List, and a description of the good or technology, including its purpose and technical specifications. If available, information on the quantity and the total and unit value of the brokered good or technology by country of end-use.
- Finally, the report must also include a detailed description of the brokering activities conducted by the broker in order to allow for an understanding of the role played by the broker and how the transaction unfolded.
Recordkeeping requirements and enforcement
23. In addition, brokers are required to maintain records for each brokering transaction for which GBP1 was used. These records must be kept for a period of six years after the year in which the transaction takes place. They need to include the following information:
- The date, if any, on which the goods or technology moved from the country of export.
- The name, address, telephone number, email address and any facsimile number of the seller(s), the buyer(s), and any other brokers, agents or mandataries involved in the transaction.
- For each brokered item, the relevant provision of the Brokering Control List, the item number assigned to it by the Guide to Canada’s Export Control List, and a description of the good or technology, including its purpose and technical specifications.
- The quantity, as well as the total and unit value, of the brokered good or technology (in Canadian dollars), by country of end-use.
- A detailed description of the brokering activities conducted by the broker with respect to the transaction in order to allow for an understanding of the role played by the broker and how the transaction unfolded.
- If available, records should include documentation such as contracts between the broker and each party to the transaction and any invoice or export or shipping documents relating to the movement of the items from the country of export.
Officials from Global Affairs Canada retain the right to request these records from brokers, who are required to provide them within 15 days after receipt of the request.
Individual Brokering Permits
24. The individual brokering permit is the main way through which prospective brokers obtain authorization from Global Affairs Canada for their proposed brokering transactions. To obtain one, prospective brokers will need to apply and provide information about the proposed brokering transaction. This information will be reviewed and assessed by officials, who will determine whether the permit should be issued. Prospective brokers are encouraged to apply for an individual brokering permit online through EXCOL. New users can create a profile on EXCOL, while existing users can make use of their current profile. Please refer to the “Handbook on Export and Brokering Controls” (when it goes live) for more information. Paper applications are also available by using form available here. Please note that paper applications may delay the processing time for brokering permit applications (due to the need for manual data entry).
25. Applicants for an individual brokering permit are required to provide information about the proposed brokering transaction. The information requested for brokering transactions generally mirrors the information requested for export transactions, with some additional details about parties to the brokering transaction (seller/exporter, other brokers, etc.). The applicant must provide:
- The applicant’s name, address, telephone number, email address and any facsimile number. If the applicant is an organization, the name of a contact person is also required. If the applicant is a person, they must provide information on all the citizenships they possess, and if they are not a citizen of Canada, whether they are a permanent resident of Canada.
- The country from which the items to be brokered are to be exported.
- The seller’s name, address, telephone number, email address and any facsimile number. If there is more than one seller involved in the transaction, this information must be provided for each seller.
- The purchaser’s name, address, telephone number, email address and any facsimile number. If there is more than one purchaser involved in the transaction, this information must be provided for each purchaser.
- For any other broker, agent or mandatary involved in the transaction, their name, address, telephone number, email address and any facsimile number.
- The country of final destination of the brokered items.
- For each consignee, the name, address, telephone number and email address. If the consignee is an organization, the name of a contact person must also be provided, if known.
- For each type of good or technology that is brokered, the relevant provision of the Brokering Control List, the item number assigned to it by the Guide to Canada’s Export Control List, and a description of the good or technology, including its purpose and technical specifications. If available, information on the quantity and the total and unit value of the good or technology (in Canadian dollars). If the item is listed in both Group 2 and Group 9 of the Export Control List, brokers are required to provide both numbers.
- A copy of any available end-use certificate or end-use statement, and a statement indicating whether the item is destined for commercial resale or for end-use by a government.
- A statement indicating whether the good or technology is included in paragraph 1(b) or (c) of the Brokering Control List, i.e. whether it will likely be used to produce or develop a weapon of mass destruction (WMD).
26. Applicants are encouraged to provide as much of the information requested above as possible. A lack of information will result in a processing delay or the return of the application without action.
27. Once the application is submitted, officials will begin the review process and will employ a similar evaluation process to the one used for assessing export permit applications. (Please see the Export and Brokering Controls Handbook for further information on the Government of Canada review process). If needed, officials may contact the applicant with questions about the application.
28. No service standards have been established for the processing of individual brokering permit applications to allow officials to gain experience in evaluating these types of transactions. All efforts will be made to process individual brokering permit applications in a timely manner. Applicants are encouraged to apply for a brokering permit with sufficient time in order to minimise the potential impact of processing delays. When service standards for individual brokering permit applications are developed, this Notice to Brokers will be updated and stakeholders will be advised.
Conditions and reporting requirements
29. Applicants will be informed when their application has been processed. If it is approved, a brokering permit will be issued, with specified terms and conditions. These may include:
- Reporting: The standard condition on all permits will be the obligation to report on permit utilization on a semi-annual basis, no later than June 30 and December 31 of each calendar year.
- Others: There may be other terms and conditions that reflect the characteristics of different types of brokering transactions.
30. If the application for an individual brokering permit is approved, brokers may proceed with the brokering activities, while taking care to follow any terms and conditions and all applicable laws. For instance, if the brokering transaction includes automatic firearms, brokers in Canada must ensure that automatic firearms only transit through countries that are listed in the Automatic Firearms Country Control List (AFCCL). The country of end-use must also be listed in the AFCCL.
Recordkeeping requirements and enforcement
31. In addition, all brokers who apply for individual brokering permits are required by the EIPA to maintain records. Brokers need to keep all records that are necessary to determine whether they have complied with the Act. These records must be maintained for at least six years after the end of the year to which they relate. For the purposes of enforcement and administration of the EIPA, officials may ask to see these records and brokers will be bound to provide them.
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Enforcement of Canada’s brokering controls
32. Brokers are advised to consult the EIPA to know and understand all legal requirements. Brokers are also required to follow all of their permits’ terms and conditions. Should brokers not do so, they may lose brokering privileges (i.e. the individual brokering permit could be suspended or canceled).
33. The RCMP and the Canada Border Services Agency are responsible for the enforcement of the EIPA, with the RCMP being the enforcement authority for the new brokering controls. Failure to comply with the EIPA and its associated regulations, including those on brokering described in this document, can lead to prosecution. It can lead to imprisonment up to a maximum of 12 months on summary conviction and of 10 years on indictment. Bill C-47 amended the EIPA to increase the maximum monetary fine for all offences punishable on summary conviction from $25,000 to $250,000 (the amount can be greater on indictment).
34. Canada’s brokering controls are in effect as of September 1, 2019. As this is a shift in Canada’s controls, the initial focus will be on implementation and outreach. Initially, enforcement actions will be limited to wilfully fraudulent situations.
35. Global Affairs Canada recognizes that, on occasion, responsible brokers may inadvertently fail to comply with the EIPA and Canada’s brokering controls. We encourage all brokers finding themselves in such a situation to disclose any incidents of noncompliance as soon as possible. Global Affairs Canada looks favourably upon disclosures if, after considering the information provided, we are satisfied that the broker has fully cooperated and that no further action is warranted. Depending on the gravity or overall circumstances of a case, we may nonetheless refer disclosures to the RCMP for further review.
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36. Canada’s brokering controls represent a new shared responsibility for Global Affairs Canada and Canadian industry. Successful implementation will require ongoing communication and collaboration between these two parties. In this spirit, Global Affairs Canada invites all brokers to reach out to the Export Controls Division with any questions about Canada’s brokering controls. Feedback about the controls is welcomed, as it will be used to determine if further refinement of the regulations is warranted.
37. For further information or to provide comment, brokers and all interested stakeholders may contact:
Export Controls Policy Division (TIR)
Trade and Export Controls Bureau
Global Affairs Canada
125 Sussex Drive
Ottawa, Ontario K1A 0G2
Internet: Export and Import Controls
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