Originally published in Blakes Bulletin on International
Trade & Investment, April 2010
The Department of Foreign Affairs and International Trade is
currently engaged in consultations relating to export controls of
goods or technology employing cryptography. The government is
seeking information on the way in which different countries are
interpreting the scope of an export licence exemption for products
sold at the retail level to the general public. The consultation is
in regards to those that have obtained a ruling or have received
other supplementary information from the U.S., European or other
Wassenaar Arrangement participating states on the operation of the
exemption in that foreign country. These consultations are ongoing,
with submissions by interested parties due by April 30, 2010.
Canada restricts the export of certain goods and technology.
Many such restrictions are found in Canada's Export Control
List. When a good or technology is captured by the Export
Control List, the exporter must first obtain an export permit
before shipping the good or technology abroad, although many
restrictions do not apply to exports to the U.S. provided the goods
or technology are used in the U.S. and not merely transferred to a
third country through the U.S. Among other things, the government
uses the Export Control List to bring into force
commitments made by Canada as a party to various international
agreements regulating the export of goods and technology. One such
agreement is the Wassenaar Arrangement, which was first established
in the mid-1990s and currently has 40 states as parties. The
Wassenaar Arrangement requires the parties to restrict the export
of certain strictly military goods and technology and such items
that may have both a military or commercial "dual-use."
Canada has included several categories of items to its Export
Control List as a result of its participation in this
arrangement. One such "dual-use" category is
"Information Security," which is listed in Group 1
Category 5 Part 2 of the Export Control List. It
encompasses items employing cryptography with, in the case of a
symmetric algorithm, a key-length greater than 56 bits. As a
consequence of these restrictions, Canadian exporters must obtain
export permits for many goods containing cryptography prior to
exporting such items to locations other than the U.S.
A significant aspect of the Wassenaar provisions is an exemption
from the requirement to obtain an export permit for certain
commercial cryptography items sold to the general public. This is
known as the Wassenaar Arrangement Cryptography Note (the Note) and
has existed in its present form since 2000. In general, the Note
exempts items where the item is sold to the public at a retail
level, can be installed by the user without substantial support,
and where the cryptographic function cannot be easily altered by
While the Note is implemented by the other Wassenaar Arrangement
countries, including the U.S. and countries of the European Union,
the Canadian government has recognized that, over time, divergent
interpretations of the Note may have developed. In particular,
Canada has recognized that its interpretation of the export licence
exemption may be different than that applied by other Wassenaar
Arrangement countries. As such, the government is now in the
process of gathering information on the way in which other parties
have interpreted this clause. Specifically, the government has
asked for input from Canadian companies and individuals who have
received either a former ruling or received some other supplemental
information on this issue from another Wassenaar Arrangement
While the government has not explicitly stated any purpose for
these consultations other than to collect information on the issue
of interpretation of the Note, it is possible that the consultation
process could lead the government to adopt a broader interpretation
of the Note should this be consistent with how other Wassenaar
Arrangement countries are interpreting the Note. This would allow
more Information Security goods or technology to qualify for the
exemption and allow exporters to ship such items abroad without
applying for a permit. In consequence, Canadian companies and
individuals who export or may export goods or technology containing
cryptography and have a relevant foreign country ruling or
supplementary information on this issue may want to consider
participating in the consultations by making representations to the
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.
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