Canada: Applying The ITAR Rules And Managing Human Resources: Where Do Things Stand Today?

ITAR issues: a brief reminder

The International Traffic in Arms Regulations, commonly known as the ITAR rules, are a set of U.S. Government regulations passed under the Arms Export Control Act. The ITAR rules are primarily intended to keep technology with military applications out of the hands of countries or individuals posing a threat to U.S. national security. Defence-related technology, which includes both goods and the related technical data, is included in a part of the regulations called the United States Munitions List. For some Canadian companies, especially aerospace and defence companies, compliance with the ITAR rules is a precondition of receiving controlled goods and technologies from a U.S. company.

Section 126.1 of the ITAR rules prohibits exports of controlled articles to certain "proscribed" countries. The ITAR rules include a list, subject to amendment, of approximately 24 such countries, among them Afghanistan, China, Cuba, Iran and North Korea. The concept of export includes transferring or giving access to controlled articles to an individual, such as an employee. Rule 126.1 states that it is the policy of the United States to deny licenses, and other approvals, for the export and import of controlled articles, destined for or originating in proscribed countries.

Consequently, before the August 2011 ITAR amendment, a Canadian company had to exclude employees who were nationals of proscribed countries from participation in projects involving controlled articles even if the company had obtained all the authorizations required under the ITAR rules. In other words, employees who possessed dual citizenship (Canadian citizenship and citizenship of a proscribed country) could not work on ITAR projects. Therefore, in order to comply with the ITAR rules as well as Canadian regulations, Canadian companies could not give access to ITAR-controlled articles to Canadian employees who were also nationals of a proscribed country.

Obviously, this situation raised concerns and caused some problems, as the right to equality is protected by the charters and codes governing human rights and freedoms. In particular, the Ontario Human Rights Commission and the Commission des droits de la personne et de la jeunesse du Québec filed complaints, ultimately settled out of court, against Canadian companies for discrimination based on citizenship and place of origin. Canadian companies were faced with a dilemma: on the one hand, they were required to comply with U.S. and Canadian export rules; on the other hand, when they applied those rules, they were sued for discrimination.

On May 16, 2011, the U.S. Department of State published ITAR amendments that came into force on August 15, 2011. One of the objectives of the amendments was precisely to address the fact that the rules had raised human rights issues for certain allies and friends of the United States without a commensurate gain in national security.

New rules and the setting aside of the nationality test

The ITAR amendments include a new Section 126.18, which states that approval is no longer needed for the transfer by foreign companies, including Canadian companies, of controlled articles to dual national employees.

However, Section 126.18 includes several conditions:

  • The exemption only applies to "unclassified" articles.
  • The employees must be "bona fide, regular employees," a regular employee meaning:

1) an individual permanently and directly employed by the company; or

2) an individual in a long-term contractual relationship with the company where the individual works at the company's facilities and works under the company's direction and control. If the individual is provided by a staffing agency, the staffing agency must not have any role in the individual's work.

  • The company must have effective procedures to prevent the diversion of controlled articles to prohibited countries. It may satisfy this condition:

1) by obtaining a security clearance approved by the host nation – that is, Canadian – government for its employees; or

2) by

  • having in place a process to screen its employees for "substantive contacts" with proscribed countries and having employees execute a Non-Disclosure Agreement that provides assurances that they will not transfer any information to unauthorized parties; and
  • maintaining a technology security/clearance plan that includes procedures to screen employees for "substantive contacts" and by maintaining records that must be made available to the U.S. authorities upon request.

To determine whether an employee has "substantive contacts" that would disqualify him or her for the exemption, Section 126.18 lists seven criteria:

  • regular travel to a proscribed country;
  • recent continuing contacts with "agents, brokers and nationals from such countries";
  • continued "demonstrated allegiance" to such countries;
  • maintenance of a residence in such countries;
  • maintenance of business relationships with persons of such countries;
  • receiving salary or other continuing monetary compensation from such countries; and
  • acts otherwise indicating a risk of diversion.

The various criteria imposed by the new ITAR amendments are very vague and raise a number of enforcement issues. However, the Canadian government has actively been working to make the task easier for Canadian companies.

The Canadian government, through the Controlled Goods Directorate, an entity of Public Works and Government Services Canada (PWGSC), has adopted an "enhanced security strategy." As part of that strategy, it has introduced a new Security Assessment Application to collect information on employees who have access to controlled goods.

The Security Assessment Application is intended, among other things, to enable the application of the Canadian Controlled Goods Regulations (Regulations). Section 13 of the Regulations requires every registered person to, with the consent of the individual concerned, conduct a security assessment of its employees for the purpose of determining "the honesty, reliability and trustworthiness of a person and the extent to which the person poses a risk of transferring a controlled good to a person who is not registered or exempt from registration." (Section 15 of the Regulations). The assessment must take into account the following:

a) personal references;

b) criminal history;

c) in the case of an individual, their places of residence, and their employment and educational histories; and,

d) in the case of a corporation or other business, its ownership.

On August 29, 2011, the Government of Canada entered into an agreement through an exchange of letters with the U.S. Department of State concerning the process for implementing the new ITAR rules. As part of this exchange of letters, the Department of State endorses, according to the Government of Canada, the enhanced Controlled Goods Program as Canada's chosen avenue for Canadian industry to meet the new requirements of the ITAR rules.

It would therefore appear that, for Canadian industry, the ITAR requirement to adopt effective procedures to prevent the diversion of controlled articles can be met through compliance with the Canadian regulations and the tools developed by the Controlled Goods Programs.

The exchange of letters is also designed to ensure that processes are applied in a manner consistent with Canadian privacy legislation. If a Canadian company has concerns about a possible diversion of controlled articles to ITAR-proscribed countries, it is required to inform the Controlled Goods Directorate, which will investigate the matter further. The exchange of letters specifies that all requests by the Department of State for access to the information garnered from the security assessments must be made through the Controlled Goods Directorate.

Right to equality and right to privacy

By employing a neutral process, the new procedure may have addressed concerns that had been raised about discrimination. While it is not clear under the ITAR rules if all employees or only dual nationals are required to undergo a security assessment, it does seem that, at least under the Canadian Controlled Goods Program, all employees with access to controlled goods must be assessed. Consequently, there does not appear to be any direct discrimination.

However, it warrants mentioning that a seemingly neutral distinction may still be discriminatory if it disproportionately affects a protected group, in this instance, individuals of specific national origins. Should a security assessment procedure be contested on these grounds, the procedure may be justified since it is solely intended to exclude individuals who pose a risk of transferring controlled goods to a person not authorized to receive them.

In short, from a right to equality standpoint, the new rules are an improvement. Insofar as possible, companies will have to apply the security assessment procedure equally and follow the instructions provided by the Canadian authorities.

The new ITAR rules also raise a number of issues concerning the right to privacy of the employees involved.

In Canada, personal information protection legislation exists that protects the right to privacy of job applicants or existing employees. However, such legislation usually contains exceptions and allows a person's personal information to be collected and disclosed without his or her consent if such collection and disclosure is authorized by law.

A company that has access to controlled articles may therefore argue that collecting information using the Security Assessment Application is authorized by law, namely the Controlled Goods Regulations.

It would appear that the constitutional validity of the Controlled Goods Regulations cannot be challenged under the Canadian Charter of Rights and Freedoms (Canadian Charter) by referring to their impact on the right to privacy of applicants and employees. In Reference re: Federal Courts Act (Can.), the Federal Court of Appeal had to determine whether the Marine Transportation Security Regulations were contrary to the Canadian Charter. Those regulations required the port authorities to collect, for security questions, personal information on their employees. The information required was similar to what is required under the Controlled Goods Regulations. The Federal Court of Appeal, even while presuming that the collection of such information may constitute a search by the government (without, however, ruling on the matter), found that the regulations did not violate Sections 7 and 8 of the Canadian Charter.

In conclusion, Canadian employers subject to the ITAR rules should ensure that their hiring process complies with Canadian regulations and that those regulations are applied so as to avoid any right to equality or right to privacy violations.

Norton Rose Group is a leading international legal practice. We offer a full business law service to many of the world's pre-eminent financial institutions and corporations from offices in Europe, Asia, Australia, Canada, Africa, the Middle East, Latin America and Central Asia.

Knowing how our clients' businesses work and understanding what drives their industries is fundamental to us. Our lawyers share industry knowledge and sector expertise across borders, enabling us to support our clients anywhere in the world. We are strong in financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and pharmaceuticals and life sciences.

We have more than 2900 lawyers operating from 43 offices in Abu Dhabi, Almaty, Amsterdam, Athens, Bahrain, Bangkok, Beijing, Bogotá, Brisbane, Brussels, Calgary, Canberra, Cape Town, Caracas, Casablanca, Dubai, Durban, Frankfurt, Hamburg, Hong Kong, Johannesburg, London, Melbourne, Milan, Montréal, Moscow, Munich, Ottawa, Paris, Perth, Piraeus, Prague, Québec, Rome, Shanghai, Singapore, Sydney, Tokyo, Toronto and Warsaw; and from associate offices in Dar es Salaam, Ho Chi Minh City and Jakarta.

Norton Rose Group comprises Norton Rose LLP, Norton Rose Australia, Norton Rose Canada LLP, Norton Rose South Africa (incorporated as Deneys Reitz Inc), and their respective affiliates.

On January 1, 2012, Macleod Dixon joined Norton Rose Group adding strength and depth in Canada, Latin America and around the world. For more information please visit

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.