Monthly Archives: July 2013

Universities may need to accesss controlled goods and technologies

Universities sometimes have a need to examine, possess and/or transfer controlled goods and technologies. This will almost always occur in applied research projects rather than undergraduate studies.

There are three factors to consider; public domain, general research and applied research.

Anything in the public domain is exempt from controlled goods regulations. The Controlled Goods Directorate defines the public domain as:

Information which is published and which is generally accessible or available to the public through sales at newsstands, through subscriptions that are available without restriction to any individual who desires to obtain or purchase the published information, through second class mailing privileges granted by the Canadian or U.S. Governments, at libraries open to the public or from which the public can obtain documents, through patents available at any patent office, through unlimited examination at a conference, meeting seminar trade show or exhibition, generally accessible to the public in Canada or the United States, through public release (i.e., unlimited examination) in any form after approval by the cognizant Canadian or U.S. Government department or agency and through general research in science and engineering at accredited institutions of higher learning in Canada or the United States where the information is ordinarily published and shared broadly in the scientific community. Such research will not be considered general research if the institution or its researchers accept other restrictions on the publication of scientific and technical information resulting from the project or activity, or the research is funded by the Canadian or U.S. Government and specific access and dissemination controls that protect information resulting from the research are applicable.

Undergraduate studies are clearly in the public domain as the courses are drawn from standard texts and resources and presented in a public university forum. It is possible, though, for an undergraduate student to become involved in a research project along with graduate students.

There are two types of research, general research and applied research. The Controlled Goods Directorate defines general research as:

Experimental or theoretical work undertaken principally to acquire new knowledge of the fundamental principles of phenomena or observable facts, not primarily directed towards a specific practical aim or objective. It does not include applied research and is subject to the following restrictions:

• The research is conducted without an application in mind
• The sponsor has no control over publication
• No material goods are transferred

That is to say, research that seeks only knowledge and not the creation something specific. General research projects are exempt from the controlled goods regulations, but they can lose their exemption if, as in the definition of public domain, the university has accepted restrictions on publication or the project is funded by the government which has placed access and dissemination controls on it. If either of these conditions apply, the general research project is no longer exempt from the regulations.

The second kind of research is applied research. The Controlled Goods Directorate defines this as:

A systematic study to gain knowledge or understanding necessary to determine the means by which a recognized and specific need may be met toward the goal of producing useful materials, devices and systems or methods, including design, development and improvement of prototypes and new processes to meet specific requirements.

That is to say, a project that attempts to build something tangible, such as a helicopter rotor or an encryption algorithm to decode the military band of a GPS satellite.

It is this type of research, usually conducted in partnership with industry or government that has the potential of encountering controlled goods and/or technologies. The designated official must investigate and monitor these types of projects for possible inclusion of controlled goods. If such items or technologies are present, the project must be included in the scope of the security plan.

ITAR and Controlled Goods Restrictions on Canadian Dual Nationals is Lifted

Before 2011, Canadian businesses and universities dealing with ITAR related controlled goods and technologies, referred to as “defense articles” by the U.S., had a serious problem. Employees, researchers, students and others who held dual nationality with specific U.S. restricted countries were not allowed to access these items and had to be removed from projects dealing with them. These countries are listed in ITAR §126.1 and include “…Belarus, Cuba, Eritrea, Iran, North Korea, Syria, and Venezuela. This policy also applies to countries with respect to which the United States maintains an arms embargo (e.g., Burma, China, and the Republic of the Sudan)…”

One of the provisions of the controlled goods regulations is that Canadian firms and universities dealing with ITAR items and technologies are required to follow all of the ITAR specifications and any associated export licenses. In this case, it wasn’t that the U.S. government was just forbidding the shipment of their defense articles to restricted countries. They were prohibiting any citizen of these countries from possessing defense articles, including persons holding dual nationality with Canada and one of the restricted countries. This caused outrage among dual national employees and was seen both as a discriminatory insult and a threat to their career paths by excluding them from important projects. Some barred employees sued their employers, claiming violations of the Charter of Rights and Freedoms. This left Canadian employers in a difficult position. If they violated the ITAR restrictions and allowed dual nationals of restricted countries access, they faced losing the controlled goods or technologies. If they removed these individuals from the projects, they risked legal action.

The Government of Canada was long aware of this problem and had been in negotiations with the United States to find a solution. In 2011, the two parties reached an agreement. A new section was added to the ITAR, §126.18, effective May of 2011. It states, in part, “…nationality does not, in and of itself, prohibit access to defense articles…” This stipulates that the ability to examine, possess or transfer controlled goods is based solely on a person’s security assessment and removes the former restrictions on dual nationals, news that was enthusiastically received by both dual national employees and employers alike.

But, of course, there’s no free lunch. The new access comes with the price of increased diligence in security assessments conducted by designated officials.

According to ITAR §126.18, a foreign [Canadian] business that receives a defense article “…must have effective procedures to prevent diversion to destinations, entities or for purposes other than those authorized by the applicable export license or other authorization (e.g. written approval or exemption) in order to comply with the applicable provisions of the Arms Export Control Act and the ITAR.” This is accomplished by “A security clearance approved by the host nation government for its employees.” or “…a process to screen its employees and to have executed a Non-Disclosure Agreement that provides assurances that the employee will not transfer any defense articles [controlled goods] to persons or entities unless specifically authorized by the consignee or end-user.”

The Americans continue to be concerned about dual nationals of restricted counties. In making a security assessment, the designated official must consider “substantive contact” with any such country with respect to “”…travel to such countries, recent or continuing contact with agents, brokers and nationals of such countries, continued demonstrated allegiance to such countries, maintenance of business relationships with persons from such countries, maintenance of residence in such countries, receiving a salary or other continuing monetary compensation from such countries, or acts otherwise indicating a risk of diversion.” Substantive contact does not forbid the possession of ITAR regulated controlled goods, but a designated official must take these factors into account in conducting a security assessment and may return a negative assessment or place restrictions on a positive one because of the findings. ITAR §126.18 goes on to state, “… an employee who has substantive contacts with persons from countries listed in §126.1(a) shall be presumed to be a risk of diversion…”

As the “…host nation government for its employees…” the Canadian Controlled Goods Directorate has made changes to the regulations in the form of an Enhanced Security Strategy. As the directorate states, this was “developed in consultation with Canadian industry and other government stakeholders. The ESS is a more robust approach to meeting domestic industrial security needs and will be implemented through a phased-in approach over three years beginning October 1, 2011.” This effects applications for registration, security assessment applications for owners, authorized individuals, designated officials, officers, directors and employee as well as security assessment applications for temporary workers. These forms are more detailed in the data retrieved. There are enhanced consideration of foreign contacts, the use of a risk matrix assessment procedure and the requirement to conduct a criminal background check on all applicants whether they report criminal activity or not. These new rules apply to every applicant, not just those holding dual nationality.

Enhanced security requires more work on the part of a designated official and more expense for criminal background checks, but it allows dual nationals of restricted countries access to controlled goods and establishes a more secure environment to protect controlled goods in Canada.

Domestic Courier Services and Controlled Goods

The controlled goods regulations specifically state that persons who examine, possess or transfer controlled goods must either be assessed or exempted. It would seem to follow, therefore, that courier services transporting controlled goods or technologies would have to be registered with the Controlled Goods Directorate and its employees assessed by their designated official.

However, that is not the case. Companies can only become registered persons if they  demonstrate that they handle controlled goods as a part of their primary business. That is why cleaning services cannot become registered, even if their employees might work in an area where controlled goods are stored. In the case of the cleaning service, or other similar contractors, they must be escorted at all times and controlled goods stored safely away while they are working. As cleaning services generally work after hours, registered businesses and universities often hire permanent workers who are assessed by the organization’s designated official.

The Controlled Goods Directorate has taken a different stand In the case of domestic couriers. In conversations with Avidaid, they stated that as long as the courier only transports controlled goods and never stores them, they do not have to be registered. A package containing controlled goods or technologies could be picked up at a university in Ontario and delivered to a business in Alberta as long as it was never warehoused. Packages that are warehoused must be transported by a registered courier company or customs brokerage firm, as is the case when exporting items from Canada.