The legal framework
Canada controls the export of certain goods and technology under the Export and Import Permits Act. The Act gives the government power to maintain lists of controlled items and destinations, and to require a permit before those items can leave the country. It is administered by Global Affairs Canada, which receives and assesses permit applications.
The main list for exporters is the Export Control List. It sets out the goods and technology that need a permit for export from Canada, subject to certain exemptions and exceptions. A separate Area Control List identifies countries to which all exports require a permit, regardless of the item. Sanctions measures made under other legislation can add further restrictions on particular countries, entities and individuals.
The system reflects Canada's commitments under several international arrangements that coordinate controls on conventional arms, dual-use items and weapons of mass destruction. Many of the entries on the Export Control List mirror those agreed among participating states, which is why items controlled in Canada are often controlled in other allied countries too.
What the Export Control List covers
The Export Control List is organised into groups. Broadly, these cover dual-use goods and technology that have both civilian and military applications, munitions and military items, nuclear items, items related to missile technology, chemical and biological items, and certain other goods that Canada controls for its own policy reasons.
The munitions group captures items specially designed or modified for military use. It goes well beyond weapons and ammunition. Components, spare parts, specialised software, training equipment and technical data for military systems can all be controlled.
The dual-use group captures items designed for civilian use that could also serve military purposes because of their performance or characteristics. Examples include certain electronics, sensors, lasers, navigation equipment, encryption products, machine tools and materials. Whether a dual-use item is controlled usually depends on technical parameters, so classification requires careful reading of the specifications against the list. Our article on dual-use goods and payments looks at classification in more detail.
Technology and technical data are controlled as well as physical goods. Transfers can include sending drawings by email, giving access to files on a server or providing technical assistance.
How export permits work
Where an item is on the Export Control List and no exemption applies, the exporter must obtain an export permit before shipping. Permits are applied for through Global Affairs Canada and are typically specific to the goods, quantities, consignee, end user and destination described in the application.
An application usually needs a technical description of the items and their classification, the value and quantity, details of every party in the transaction, the intended end use and supporting documents such as an end-user certificate or statement where required. The government assesses applications against a range of considerations, including the destination, the end user, the nature of the goods and the risk that they could be used to commit or facilitate serious violations of human rights or international law, or be diverted.
Permits come in different forms. Individual permits cover a specific transaction or series of shipments. General permits allow certain exports to eligible destinations without an individual application, subject to conditions, registration and reporting. Exporters using a general permit must make sure every shipment fits its terms and keep records to show that it did.
Planning around the permit process
Permit processing times vary with the sensitivity of the goods, the destination and the completeness of the application. Applications for sensitive items or destinations may involve consultation across government and can take considerably longer than routine ones.
Exporters should build the permit process into their sales and contract planning. A contract signed before a permit is in hand should make delivery and payment milestones conditional on the permit being granted, and should address what happens if it is refused or delayed. Payment terms that require the buyer to pay a large deposit before the permit is issued can create problems if the deal cannot proceed, including the need to return funds across borders.
It also helps to talk to the buyer early about documentation. If an end-user certificate from a foreign government is needed, obtaining it can take time, and an application submitted without it will stall. See our guide to end-user certificates for what these documents contain.
Related Canadian controls
Export permits are one part of a wider set of controls that defence and technology businesses deal with.
- Brokering controls. Since 2019, people in Canada, and Canadians abroad, may need a brokering permit to arrange transactions in certain controlled items between foreign countries, even if the goods never touch Canada. See Canadian brokering permits.
- Controlled Goods Program. Domestic registration is required for people who examine, possess or transfer certain controlled goods within Canada. See the Controlled Goods Program.
- Sanctions. Canadian sanctions can prohibit dealings with particular countries, entities and individuals, including payments, regardless of whether goods are controlled.
- Import controls. Some items need an import permit to bring them into Canada.
Exporters dealing with items of US origin may also need to consider US export rules, which can follow goods and technology after they leave the United States. Equivalent questions can arise with items from other countries.
Building an internal compliance programme
Exporters that handle controlled items regularly usually maintain a written export compliance programme. While the exact shape depends on the size of the business, most programmes contain the same core elements.
- A senior person accountable for export compliance, with authority to stop a shipment.
- A classification process, so that every product and item of technical data has a documented control status.
- Screening of customers, consignees, end users and intermediaries against sanctions and restricted party lists.
- A permit management process that tracks permits, their conditions, quantities used and expiry dates.
- Controls on technology transfers, including email, cloud storage and visits by foreign nationals.
- Record keeping that links each shipment to its permit, classification and screening results.
- Training for sales, engineering, logistics and finance staff.
- A process for identifying, investigating and disclosing possible breaches.
Finance teams are often left out of export compliance training, yet they see things others miss: a payment from an unexpected country, a request to pay a third party or a sudden change in invoicing entity. Including finance in the programme closes that gap.
How payment partners view exporters
For a payment provider, a defence or dual-use exporter is a business whose transactions carry legal conditions. The provider needs to know that the trade behind each payment is permitted, that no sanctioned party is involved and that the money is going to, or coming from, the parties named in the underlying contract and permit.
Providers that work with this sector generally assess the exporter's compliance programme at onboarding and then look at individual transactions as they occur. They are less interested in the technical details of the goods than in whether the business has done the work to classify them, obtain the right permits and screen the parties. They will want to see that the controls operate consistently, and that payment flows match what the permits describe.
A provider will usually decline payments where it cannot connect the transaction to a valid permit when one is required, where a party or destination is sanctioned or embargoed, or where the payment route suggests the goods may be going somewhere other than the stated destination.
What payment partners will ask for
The exact requests vary, but defence and dual-use exporters should be ready to provide the following.
| Item | Why it is requested |
|---|---|
| Description of products and their control status | Shows which items are controlled and under which list |
| Export compliance policy | Shows the business has a working programme |
| Copies of relevant export or brokering permits | Confirms that specific trades are authorised |
| Controlled Goods Program registration, where applicable | Confirms domestic handling is authorised |
| Contract or purchase order for a transaction | Links the payment to a specific trade |
| End-user certificate or statement | Confirms who will finally use the goods |
| Commercial invoice and shipping documents | Shows goods moved as permitted |
Provide documents that match one another. The names, quantities and destinations on the invoice should agree with the permit and the contract. Inconsistencies are the most common reason a payment is held for review.
Good payment practice for exporters
A few habits make payments in this sector smoother. Receive funds from the buyer named in the contract and permit, rather than from an affiliate or third party. If a third party must pay, explain why in writing in advance and expect closer scrutiny. Use payment references that identify the contract and invoice. Avoid splitting payments in ways that do not follow the contract milestones.
On outgoing payments to foreign suppliers and subcontractors, apply the same discipline. Screen the supplier, confirm the work or goods are covered by any permits required, and pay the contracted entity in its own name. Keep a file for each contract that brings together the permit, the end-user documentation, invoices, shipping records and payment confirmations. That file is what a payment partner, an auditor or a government inspector will want to see.
General information only
This article gives a general overview of Canadian export controls. It is not legal advice. Control status, permit requirements and exemptions depend on the specific goods, technology, parties and destinations involved, and you should take advice from qualified trade controls counsel.
CCYFX handles international supplier payments and contract receipts for defence businesses that hold the export and brokering permits their trade requires, with embargo and sanctions screening on every transaction. Read more on our defence industry page.
