A recent documentary by W5, a Canadian documentary and investigative media program, reported that Steve de Jaray, a Canadian businessman from Vancouver, was paid millions of dollars by the Canadian government in a confidential settlement – purportedly the second highest in Canadian history – after the Canada Border Services Agency ("CBSA") charged him, his daughter, and his company Apex-Micro Electronics with exporting military technology to China in alleged breach of export controls only to stay the charges one year later.
In December of 2008, the CBSA seized a Hong Kong-bound shipment of computer chips and circuit boards at Vancouver International Airport on the grounds the items were military technology prohibited from export without an appropriate permit. The shipment in question was an order for a subsidiary of Apex-Micro Electronics called Caliber Solutions for electronics used to tune motorcycle fuel injectors. The parts were being shipped to Kowloon, Hong Kong for assembly and after which they were to be returned to North America. W5 reported that the Department of Foreign Affairs and International Trade (DFAIT) concluded the computer chips were military standard related to U.S. Strategic Bombers.
On April 29, 2010, Mr. de Jaray, his daughter (who managed the American operation of the business) and the company were charged with two counts of exporting goods in breach of the Customs Act and the Export and Import Permits Act and "Export Control List" thereunder. This was preceded on February 13, 2009 by a CBSA SWAT team raiding the Apex-Micro Electronic's factory and de Jaray's personal residence.
The Export and Import Permit Act allows the Minister of International Trade to issue an export permit to authorize the export of items specified on an "Export Control List" or items to a country specified on an "Area Control List." Without an export permit, items listed on the "Export Control List" are prohibited exports, and the export of any item to a country on the "Area Control List" is prohibited. Many of the goods and technology listed in the "Export Control List" are military products and technologies. For this reason, there is no surprise that such items cannot be exported without an export permit. That said, other goods and technologies that have a variety of lawful commercial applications are also subject to export controls. Prosecutions of export violations can result in fines (there is no cap on the amount), imprisonment for up to ten years, or both. Moreover, directors and officers of corporations who do as little as "acquiesce" to the commission of the offence are personally exposed to conviction and punishment regardless of whether the corporation has been prosecuted or convicted.
In his interview with W5, Mr. de Jaray asserted that the charges and ensuing negative publicity surrounding the charges caused him to lose his business, home, business network and friends. The charges, Mr. de Jaray reported to W5, "effectively branded" him "an arms dealer and an international terrorist." Mr. de Jaray and his lawyers could not understand why he had been targeted given that the components he was shipping were openly available on the Internet and could be purchased anywhere, including China. Mr. de Jaray hired two former DFAIT employees as experts. One had assisted in drafting the "Export Controls List" and the other had conducted numerous alleged export violation investigations. Both concluded the goods in question were not controlled goods. The charges were stayed shortly after their expert report was delivered.
Mr. de Jaray went on to sue the Canadian Government. W5 has reported that, the settlement, reached in 2013, is confidential, but reportedly is the second highest paid in Canada's history. There is no way to confirm the accuracy of this report. The highest is $15 M.
This highlights the importance for Canadian businesses to ensure compliance with Canada's export control regime. It also demonstrates the importance of retaining experts when export-related investigations by CBSA or RCMP are commenced.
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