The International Traffic in Arms Regulations ("the
ITAR") issued by the U.S. Government have been the subject of
significant controversy in Canada. They can result in Canadian
aerospace and defence companies excluding individuals born in
certain countries from work opportunities, and therefore raise
human rights law concerns. The U.S. has recently decided to address
these concerns by proposing amendments to the existing ITAR. The
following memorandum provides an overview of the ITAR, the
controversy surrounding their enforcement in Canada and the nature
of the proposed amendments. It is clear that the amendments
represent a significant improvement; however, the ITAR will
continue to impose strict requirements on Canadian companies.
International Traffic in Arms Regulations (ITAR)
The ITAR restrict the export of defence materials from the United States. They are administered by the U.S. State Department, Directorate of Defense Trade Controls. The ITAR require, among other things, that individuals or corporations with access to U.S. defence articles, data and services be registered and licensed by the State Department. At minimum, this results in a lengthy licensing process. In other instances, however, where the nationality of an individual or corporation is on a proscribed list of embargoed countries, access to U.S. defence materials will not be granted. There are approximately 25 countries on this list. Failure to comply with these regulations results in the imposition of costly fines by the U.S. State Department. In the past, these fines have been imposed on U.S. as well as on foreign corporations.
Impact in Canada
Given that North American defence production is highly integrated, the ITAR have had a significant impact on Canadian companies. Despite periodic exemptions having been put in place for Canada for some aspects, they do not cover individuals from proscribed countries. Many Canadian aerospace and defence companies rely on U.S. materials or contracts for the majority of their business. If they fail to comply with the regulations and maintain these contracts, they risk serious financial consequences.
Until now, implemention of the ITAR restrictions may have caused Canadian companies to violate the human rights of current and prospective employees. The Canadian Charter of Rights of Freedoms and provincial human rights codes prohibit discrimination on the basis of nationality. Since the ITAR require that foreign nationals from proscribed countries be denied access to defence materials, this becomes problematic for defence companies employing immigrants, permanent residents, or dual citizens. Even those individuals who were born outside Canada in the proscribed countries and subsequently became naturalized citizens are considered non-Canadian for the purposes of the ITAR and have been denied access to defence materials by the U.S. Government. Canadian aerospace and defence companies have been forced to adopt measures to prevent non-citizens or dual citizens from coming into contact with U.S. defence materials in order to achieve ITAR compliance. This has resulted in instances where employees have been laid off or excluded from important projects. Some companies went so far as to create job advertisements indicating that applicants must be able to meet ITAR requirements, resulting in discrimination in hiring practices against individuals from particular countries.
Not surprisingly, these measures have come before various provincial human rights bodies. In one prominent case, General Motors Canada Limited ("GMCL") sent landed immigrant employees home with pay. This was done in response to fines amounting to $20 million (USD) being imposed by the U.S. State Department for violating the ITAR while producing military vehicles at its plant in London, Ontario. The employees claimed they were discriminated against on the basis of their citizenship and accused GMCL of failing to apply for security clearances on their behalf. A settlement was reached between GMCL and the employees allowing them to return to work under new access to information restrictions and to receive monetary compensation.
Similarly, a complaint was brought before the Quebec Human Rights and Youth Rights Commission against Bell Helicopter. A Haitian-born Canadian alleged that having successfully secured an internship with the company, he was later disqualified from the position on notifying the employer of his place of birth. Bell Helicopter agreed to a settlement. The Commission conducted an analysis of the ITAR rules indicating that they were inconsistent with the Québec Charter of Human Rights and Freedoms by infringing the right to equality without discrimination based on ethnic or national origin.
Proposed amendments
The amendments proposed by the United States on August 11, 2010
respond directly to human rights issues stating that this has
"become a focus of contention between the U.S. and allies and
friends without a commensurate gain in national security."
Should these amendments be put in place, no approval will be
required from the U.S. State Department to transfer defence
materials within a foreign business entity that is an approved
end-user or consignee of these items. This encompasses "the
transfer to dual nationals or third-country nationals who are bona
fide, regular employees, directly employed by the foreign business
entity." The transfer of these materials must also take place
within the physical territory where the end-user is located or the
consignee operates.
These changes would allow approved Canadian aerospace and defence
companies to transfer defence materials to foreign-origin employees
from proscribed countries without a license, provided they meet
additional requirements. The approved end-user must adhere to the
following conditions:
- ensure that a security clearance is approved by the Government of Canada; and
- develop a process to screen employees that includes the execution of a Non-Disclosure Agreement providing that employees will not transfer any information to persons or entities unless specifically authorized by the consignee or end-user.
In addition, employees from the listed countries must be screened
for "substantive contacts" such as recent travel to or
continuing contact with agents of proscribed countries. The
employer must maintain records of all screening performed.
Conclusion
The United States' ITAR have had a significant impact on
Canadian aerospace and defence companies. Compliance does, however,
pose human rights challenges when dealing with employees who are
non-citizens and dual nationals. The proposed amendments would
represent a positive new development. Companies that are approved
end-users or consignees of these materials will no longer require a
license, even when non-citizens or dual nationals will be part of
the defence material transfers. Nevertheless, strict security
screening requirements continue to impose obligations on Canadian
companies. Achieving the appropriate balance between compliance
with the ITAR and Canadian human rights law will be an ongoing
challenge.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.