Export Control Laws: Critical Issues for Canadian Technology Companies

March 13, 2008

I had the opportunity to attend a seminar on Trade and Export Control laws sponsored by The Ottawa Centre for Research and Innovation (OCRI). Talks were given by both Canadian and US Trade Law experts.(Brief Bio’s and links below)

Disclainer: what follows are general notes from the talks, not a full transcript – and second, The talks were “general Information” and not intended as Legal Advice.

Many of the details were “expected”, however for some businesses, especially Canadian businesses, there were a couple of items that surprised me in these presentations.

Of the “expected” details, if you are in the weapons, nuclear, encryption and biological fields, I am quite confident that you have your own army of trade law experts on tap. If you are trading with “restricted” countries as defined by NATO, Canada or the US, I also assume that you are already confident in your trade law advice.

One of the surprises to me, deals with the Canadian manufacturing sector. Note that manufacturing can include software. If your finished product contains more than a minimal amount of US content, You may actually have to comply with both Canadian and US trade law. Even if you are only exporting within Canada or locations such as the United Kingdom. By US trade law – this is “re-exporting”.

The second one is a tenet of US trade law called “Deemed Export or Deemed Re-export” – now this was my second surprise. Canada has some different relationships with other nations of the world than our Southern neighbour has (think Cuba). The US trade laws define “Deemed Exports” as “uncontrolled data access for foreign national employees / visitors.” For example, an Indian Engineer working in a Toronto engineering lab. Assuming a product that would be covered by US Trade and Export laws you would have to consider that due to that Indian Engineer – US Trade Law deems that you are automatically exporting to India. Even if your product is a Canada only item.

Unfortunately, there is not yet a clear picture on the one question that I was looking for an an answer. Namely, In this technology generation of Software as a Service (SaaS) and Application Service Providers (ASP) what are the export and legal status of the data sitting in those ASP or Saas servers? I had the opportunity to sit with Mr. Levy and ask the question, of what jurisdiction the the data belongs to, the “owners” jurisdiction, or the ASP / SaaS providers? His off the cuff response was “Maybe all of them” Mr. Levy stated that the laws have not yet caught up with technology, and that until case law catches up that you may get three different answers if you ask three different people.

So it seems there will be some time before a clearer picture of this emerges.

The Speakers at this event;

Christopher Kent
Partner, Fraser Milner Casgrain LLP Chris Kent is a partner in the law firm of Fraser Milner Casgrain LLP and is the National head of the firm’s International Trade Group. He has been involved in a large number of the highest profile international trade disputes of the past decade, including softwood lumber, steel, appliances, sugar, laminate flooring and tobacco.

Jack Levy
Founder, Trade Law International Jack A. Levy established the law firm of Trade Law International, Chartered (TLI) in January 2008, and currently serves as a Strategic Advisor to DLA Piper. Prior to founding TLI, Mr. Levy was a partner in DLA Piper’s international trade practice.

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