Canadian Exporters Seeing Licensing Delays, Shifting Exports to US, Lawyer Says

Canadian exporters are increasingly seeing delays when applying for and receiving export permits, especially for shipments to Turkey, the United Arab Emirates and Saudi Arabia, said John Boscariol, a trade lawyer with McCarthy Tétrault. Boscariol, speaking during a virtual event this week hosted by the American Bar Association, said none of those countries are “prohibited destinations” under Canadian export regulations, but the government has still been taking “extra time” in evaluating permits.

The Canadian government is sometimes taking “a very long time, well beyond the published service standards for doing those things,” Boscariol said.

Although he said the Canadian export control officials work hard and are “good people to deal with,” he’s not “optimistic” the long processing times will get better anytime soon, adding that the government doesn’t seem to be committing a lot of resources to its export control work. “When we're thinking about where money and resources are being spent by the Canadian government, if anywhere, it's going to be spent on the sanctions side,” he said. The country is prioritizing funding “on the sanctions side with respect to Russia and other geopolitical hotspots,” Boscariol said, “and not so much on the export control side.”

Boscariol also said more Canadian companies are shifting their supply chains to run through the U.S. so their products can be exported from America rather than Canada. He said U.S. export rules are more flexible than Canadian ones, and companies are finding it easier to sell certain items to U.S. consignees rather than ship directly from Canada to another foreign country.

“That's raised the opportunity now for a number of companies that have found that they are facing difficulties in getting Canadian permits, or getting Canadian permits more importantly on a timely basis,” he said. “They will rearrange their supply chains to move those products to the United States, have them subject to the U.S. export control regime, and therefore find that process actually more efficient than exporting from Canada.” Boscariol said this arrangement is “all done with the blessing” of Canadian export control authorities as long as the product is sold to a U.S. consignee and isn’t simply moving “in transit” through the U.S.