Canada Gazette, Part I, Volume 158, Number 51: Order Amending the Export Control List

December 21, 2024

Statutory authority
Export and Import Permits Act

Sponsoring department
Department of Foreign Affairs, Trade and Development

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Order.)

Issues

New sensitive technologies with potential military applications continue to evolve and emerge.

For example, quantum computers with sufficient capability may be able to break information security tools releasing national security secrets as well as vast amounts of the general public’s personal and private information. Equipment that will allow production of advanced semiconductor devices could be used to develop more advanced military systems and expose Canada and its allies to more challenging conflicts. Metal additive manufacturing machines (i.e. very capable 3D printers) will provide the ability to produce novel metal parts in shapes that are not possible with traditional manufacturing machines, enabling rapid prototyping of new designs and imparting the ability to maintain equipment on the battlefield without needing stores of spare parts. High temperature coating technology will allow the development of improved aircraft engines, which will enhance military capability.

While the development of these technologies has been closely monitored by the international community for the past years, there has been an increasing desire to regulate their transfer. Efforts must be strengthened to keep pace with the rapid development of these cutting-edge technologies and ensure that gaps in the export control framework cannot be exploited.

Some countries, such as the United States, the United Kingdom, Germany and Italy have already implemented controls on these technologies. Given the risks to international and national peace and security, and the fact that export controls are most effective when applied in a coordinated manner, these technologies must be subject to Canadian export permit requirements.

Background

The Export Control List (ECL) is a regulation made under the Export and Import Permits Act (EIPA). The ECL identifies specific goods and technologies that are controlled for export from Canada to other destinations. Exports of items controlled in the ECL may only be made under the authority of a permit issued by the Minister of Foreign Affairs.

The ECL is generally amended as a result of commitments Canada has made to its international partners in the various multilateral export control and non-proliferation regimes. The four main multilateral export control regimes are the following: the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies, the Nuclear Suppliers Group, the Missile Technology Control Regime and the Australia Group. Recent changes in the geopolitical landscape, coupled with the rapid development of technologies with military applications, have prompted Canada to adopt an agile approach when it comes to regulating the transfer of these technologies. In May 2024, Canada adopted, along with key partners and allies (such as France, the United Kingdom, Finland and Spain), five controls related to quantum computing and advanced semiconductor devices. These items were added under Group 5 of the ECL, which contains goods and technology (e.g. fusion reactors, radiation hardened microelectronics, and space-related items) that Canada choses to control outside of the above-mentioned regimes for various reasons.

Quantum computing

The emerging field of quantum computing can have a significant impact in many commercial and military areas. Quantum computers are powerful computers that take advantage of quantum physics to solve mathematical problems that traditional devices would take a very long time to solve, and sometimes not be able to solve at all. While the technology could bring important advances in chemistry, simulation, medicine and many other civilian applications, its potential for use in cryptanalysisfootnote 1 wide-ranging implications in the national and international security arenas. A quantum computer of sufficient power and scale could have the ability to break virtually all forms of public-key cryptography in current use and compromise the most secure communications and transactions conducted over encrypted networks, as well as the integrity of the software used on such networks. While quantum computers are controlled for export many critical components and tools used in quantum computers are not, these include cryogenic refrigeration systems, parametric signal amplifiers, isotopically enriched silicon and germanium, and cryogenic wafer probers.

Advanced semiconductor manufacturing technology and equipment

Semiconductor devices or microchips are essential components of all modern electronic systems, ranging from computers and telephones for commercial use to military technology and weapons of mass destruction. Advanced semiconductors devices can improve radar and electronic warfare military capabilities along with a wide variety of other military systems. The next generation of semiconductor devices are being produced with extreme ultraviolet (EUV) lithography techniques, which will allow these devices to be smaller and have improved performance. While systems for EUV lithography are controlled, certain critical components designed to produce integrated circuits using EUV lithography machines, such as EUV masks, reticles and pellicles are not.

Metal additive manufacturing machines

Metal additive manufacturing (AM) machines, sometimes called 3D printers, are used to produce parts and components. While current machines have limited capabilities, the next generation of 3D printers that can produce metal parts will unlock significant improvements in the manufacturing of parts, providing capabilities that are not achievable with traditional machine tools. These improvements include faster prototyping of parts, development of parts with better performance and properties, and the ability to produce spare parts in the field.

Technology for development of high temperature coatings

Gas turbine engines are used in aircraft, ships and for a variety of industrial applications. Advanced engines can greatly improve aircraft performance and provide a significant military advantage. High temperature coating technology is expected to provide an opportunity for gas turbine engines to perform better and be more efficient by protecting components used in the hot sections of those engines. High temperature coatings can also improve the performance of certain missile structures.

Objective

The objective of the proposed amendments is to add key technologies with military applications to the ECL in order to maintain a coordinated and robust export control framework that safeguards Canada’s national security and that of its allies and partners. Canada’s addition of export permit requirements for items related to quantum computing, advanced semiconductors, metal additive manufacturing and high temperature coatings aims to ensure their responsible development and transfer, strengthen the export control regime and align with actions taken by our allies and partners. Cooperation in the introduction of export controls helps to ensure their effectiveness.

Description

Under the proposed amendments, the following technologies would be added to the ECL under Group 5:

Respecting quantum computing and related technology and equipment:

1. Isotopically enriched silicon and germanium, which are raw ingredients used in the production of qubits for certain architectures of spin-based quantum computers. Specific parameters will apply to these controls in order to ensure that they only apply to isotopically enriched silicon and germanium, by specifying an isotopic impurity of less than 0.08%.

2. Cryogenic cooling systems that allow the qubits used in quantum computers to achieve the extremely low temperatures needed for them to exhibit their quantum phenomena or behaviour. The control will apply to certain two-stage pulse tube coolers that can maintain a temperature at or below 4 kelvins and cooling systems with a cooling power greater than 600 microwatts at or below 0.1 kelvins.

3. Cryogenic wafer probers necessary to test, or probe, the performance and verify the manufacturing of qubit devices at the cryogenic temperatures at which they function. This control will apply to probing equipment designed to test wafers of 100 mm diameter or more at temperatures of 4.5 kelvins or below.

4. Parametric signal amplifiers, also called quantum-limited amplifiers (or QLA), that provide the ability to read out very weak signals from qubits at cryogenic temperatures and are critical components of quantum computers. The control will apply to parametric signal amplifiers that operate below 1 kelvin at any frequency from 2 GHz to 15 GHz with a noise figure below 0.015 dB.

Respecting advanced semiconductor manufacturing technology and equipment:

5. Masks, reticles, and pellicles designed for the production of integrated circuits using EUV lithography.

Respecting metal additive manufacturing machines:

6. Additive manufacturing equipment designed to produce metal parts and meeting a specific set of metrics. These metrics include having a laser, electron beam or electric arc consolidation source, a controlled process atmosphere, in-process monitoring equipment like a coaxial imaging camera, and a closed-loop control system.

Respecting high temperature coatings:

7. Coating technology designed to protect ceramic matrix composite materials from corrosion and to operate at high temperature (above 1 100 °C).

Once the proposed amendments are in force, Canadians seeking to export items meeting the specific sets of criteria described above would need authorization to do so by an export permit before these items may be exported from Canada to any country, other than to the United States (U.S.), as is currently the case for many items under Group 5 and for items agreed upon under the Wassenaar Arrangement.

Regulatory development

Consultation

The key Canadian stakeholders for this proposed regulatory amendment are Canadian industry members, including from the quantum computing, semiconductors, metal additive manufacturing machines, and high temperature coatings industry, as well as researchers exporting dual-use items (having both civilian and military applications). The parameters surrounding the proposed controls were established by leveraging the existing and ongoing work undertaken within the multilateral export control regimes, which takes into account the feedback we received from the industries listed above. They were also developed in cooperation with Canada’ allies and partners, with the goal of establishing a common understanding of where the threshold of concern lies. Some countries, such as the United States, the United Kingdom, Germany and Italy, have already put in place similar controls, or have publicly announced their intention to do so, while others are working on implementing them.

Additionally, targeted re-consultations were conducted in September 2024 with members of the industries listed above that are known to Global Affairs Canada. Thirteen Canadian organizations were provided an advanced copy of elements of the control text and had the opportunity to submit their comments. Of these 13 stakeholders, four responded. The responses suggest that the proposed controls would have no impact on current business operations, and that there would be no significant numbers of export transactions for the listed technologies in the near future. That said, some members of the quantum industry indicated that the technology is advancing rapidly, and aspects of the future quantum landscape are difficult to predict. Canada will need to remain nimble and be ready to adjust implementation of the regulations to ensure that future impacts to legitimate trade are minimised while maintaining rigorous oversight of transactions with potential national security implications. Various expedited permit processing schemes and exceptions are available within the permit processing system and can be implemented as warranted.

The proposed amendments will be prepublished in the Canada Gazette, Part 1, for a period of 30 days. This will provide industry members and researchers, as well as the general public, with the opportunity to review the proposed amendments and submit their comments as necessary.

Modern treaty obligations and Indigenous engagement and consultation

In accordance with the Cabinet Directive on the Federal Approach to Modern Treaty Implementation, an analysis was undertaken to determine whether the proposed amendments give rise to modern treaty implications. Global Affairs Canada conducted an initial assessment that examined the geographical scope and subject matter of the initiative in relation to modern treaties in effect and did not identify any potential modern treaty impacts.

Instrument choice

Items falling outside of the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies, the Nuclear Suppliers Group, the Missile Technology Control Regime, the Australia Group and the Arms Trade Treaty that Canada deems necessary to control must directly be listed into the ECL, under Group 5 (Miscellaneous goods and technologies). Group 5 includes a range of items from softwood lumber to strategic goods and technology.

The authority to add items to the ECL lies with the Governor in Council, as per sections 3 and 6 of the EIPA. As such, no other instrument, including a policy instrument, would have been suitable.

Regulatory analysis

Benefits and costs

The proposed amendment will help protect Canada and its allies by limiting the export of these advanced technologies and ensuring careful review and oversight of proposed export transactions. By vetting end-users of these technologies, Canada will contribute to ensuring that they are only used for safe and responsible purposes.

The proposed amendment would update Canada’s ECL to include seven additional items. Exporters would therefore require a permit prior to export those items from Canada. As with many ECL controlled goods and technologies, Canadians would not need a permit to export the proposed items to the U.S. This would also lower the overall impact of this proposal, as the U.S. are amongst Canada’s primary collaborators in the field of quantum computing.

This proposal is not expected to have significant impacts on the Canadian exporting landscape. EUV masks reticles and pellicles, as well as high temperature coatings are unlikely to be made or used in Canada in the near future. As such, no application is expected to be received for these items, including these items on ECL. The list will allow Canada to align its controls with its closest allies, ensuring that it will not be used as a transit point for exporters in other jurisdictions seeking to circumvent their national legislation. Fewer than 10 companies are currently manufacturing or using these quantum computing and related technologies and equipment. In total less than 100 permit applications are expected to be received annually, which represents a low administrative burden for Global Affairs Canada.footnote 2At present, Canada does not export metal additive manufacturing machines (3D printers), but these are used domestically, and their usage is likely to increase overtime. Maintenance and repair of parts and components of these 3D printers is expected to be performed abroad, which would likely require a permit to export these items. Nevertheless, less than 10 permit applications are expected per year.

Some universities and researchers would also apply for a permit to export technical information to continuing to develop these items. However, few applications are expected since, under the ECL, the proposed controls would not apply to technology in the public domain, to basic scientific research or to the minimum necessary information for patent applications. Basic scientific research means 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.

In cases where a permit requirement is imposed as a result of an item being added to the list, there would be a cost to apply for an export permit, as well as a cost for government to process the applications. The timeline to acquire a permit varies depending on the item being exported and the destination. Complete applications for low-risk destination countries, which are those with whom the quantum industry generally collaborates, are usually reviewed within 10 business days. Destination countries that require broader consultation are generally reviewed within 40 business days. As such, the incremental costs to industry members are expected to be low. Denial of export permit applications only occurs in situations where the export would be injurious to Canada’s foreign or defence policies or would violate the other assessment criteria in the EIPA.

Small business lens

Analysis under the small business lens concluded that the proposed regulations will impact small business. Some of the businesses working with the technology proposed to be added to the list are small businesses. The process of applying for an export permit is the same for each applicant, regardless of the size of their business. Each application is reviewed on a case-by-case basis to ensure consistency with the EIPA requirements, as well as Canada’s foreign, defence and security policies.

Permit applications are simple and straightforward to complete. Since 2006, all applicants can leverage Export Controls On-Line (NEXCOL), a user-friendly web-based application that facilitates the process. Export permits are issued free of charge (except for certain commercial items that are not subject to a change in their control status in this regulatory amendment).

One-for-one rule

The one-for-one rule applies since there is an incremental increase in administrative burden on business. The proposal is considered burden IN under the rule, and no regulatory titles are repealed or introduced.

The amendments related to applications of export permits represent an annualized total cost of $150 for affected businesses. Up to four businesses would spend 10 minutes to complete the task 25 times per year. The average wage (including overhead) of the responsible individual is estimated to be $36/hour.

As per the Red Tape Reduction Regulations, the assessment of administrative impacts was conducted for a period of 10 years commencing from registration. All values listed in this section are presented in 2012 dollars, discounted to 2012 at a rate of 7%.

Regulatory cooperation and alignment

Many of Canada’s allies and partners, such as the United States, the United Kingdom, Germany and Italy, have already put in place national controls related to the items described in this proposal. The proposed amendments would ensure alignment with these countries, strengthening the overall effectiveness of the controls.

Canada and its allies and partners affirm the importance of cooperation on export controls related to critical and emerging technologies and are committed to working together on implementing the necessary national controls. The G7 Leaders reiterated the need to strengthen efforts in the fields of export controls and dual use technology in the June 2023 Leaders’ Statement on Economic Resilience and Economic Security, and in the December 2023 Leaders’ Statement. Canada will continue to actively support and participate in export control regimes to ensure a coordinated approach to export controls.

Effects on the environment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus

A gender-based analysis plus (GBA+) was conducted. No impacts based on gender and other identity factors have been identified for the proposed amendments.

Under the EIPA, all export permit applications for controlled military items must be assessed against the potential risk that the export could be used to commit or facilitate serious acts of gender-based violence and violence against women and children. The Minister of Foreign Affairs cannot issue a permit if there is a substantial risk that the new export would be used to commit or facilitate serious acts of gender-based violence. This requirement is extended to all other controlled items under the Department’s policy.

Implementation, compliance and enforcement, and service standards

Implementation

The proposed amendments would come into force 30 days after the day it is published in Part II of the Canada Gazette, to provide sufficient time for exporters to become familiar with the new controls before they are implemented. The proposed amendments would be published on the Department’s website and a notice will also be communicated to stakeholders through NEXCOL.

Upon implementation, Canadians seeking to export items meeting the specific sets of criteria described above would need authorization to do so by an export permit before these items may be exported from Canada to any country, other than to the U.S. This is consistent with most goods and technology listed under the ECL.

Compliance and enforcement

All exports or transfers of items controlled under the ECL must be authorized by an export permit. The Canada Border Services Agency and the Royal Canadian Mounted Police are responsible for the enforcement of export controls. In addition, through the Safeguarding Science Initiative, Global Affairs Canada, in collaboration with Public Safety Canada, performs regular outreach to academia and relevant stakeholders to inform on and raise awareness of Canada’s export controls regime. The Safeguarding Science Initiative provides information on what technology is controlled and why, explains how organizations may be subject to export controls, and explains the permitting process. This proactive outreach helps ensure that the relevant stakeholders remain up to date with the regulatory requirements which in turns, help improve compliance.

The physical export of goods, as well as the disposal or disclosure by any means (i.e. transfer) of technical data, technical assistance, and information necessary for the development, production, or use of an item included in the ECL from a place in Canada to a place outside Canada, is subject to the EIPA and requires an export permit (exceptions do exist for many items to the U.S.).

Service standards

Complete applications for low-risk destination countries are generally reviewed within 10 business days, while destination countries that require broader consultation are generally reviewed within 40 business days. For more information on the processing times for permit applications to export controlled items, please consult the latest version of the Export and Brokering Controls Handbook.

Contact

Jason Mounzer
Trade Policy Analyst
Export Controls Policy Division – ITR
Global Affairs Canada
125 Sussex Drive
Ottawa, Ontario
K1A 0G2
Email: expctrlpol@international.gc.ca

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council proposes to make the annexed Order Amending the Export Control List under paragraph 3(1)(a) and section 6footnote a of the Export and Import Permits Act footnote b.

Interested persons may make representations concerning the proposed Regulations within 30 days after the date of publication of this notice. They are strongly encouraged to use the online commenting feature that is available on the Canada Gazette website but if they use email, the representations should cite the Canada Gazette, Part I, and the date of publication of this notice, and be sent to the following email address: expctrlpol@international.gc.ca.

Ottawa, December 13, 2024

Wendy Nixon
Assistant Clerk of the Privy Council

Order Amending the Export Control List

Amendments

1 (1) Subitem 5506(1) of the schedule to the Export Control List footnote 3 is replaced by the following:

5506 (1) In this item, composite, development, electronic assembly, Gate-All-Around Field-Effect Transistor (GAAFET), laser, matrix, production, software, substrate, substrate blanks, technology and use have the same meaning as in the Guide under the heading “Definitions of Terms Used in Groups 1 and 2”.

(2) Subparagraph 5506(2)(a)(i) of the schedule to the List is replaced by the following:

(3) Paragraph 5506(2)(a) of the schedule to the List is amended by striking out “and” at the end of subparagraph (ii), by adding “and” at the end of subparagraph (iii) and by adding the following before paragraph (b):

(4) Subparagraph 5506(2)(b)(i) of the schedule to the List is replaced by the following:

(5) Subitem 5506(2) of the schedule to the List is amended by adding the following before paragraph (c):

(6) Subitem 5506(2) of the schedule to the List is amended by adding the following before paragraph (d):

(7) Paragraph 5506(2)(d) of the schedule to the List is amended by adding the following after the notes that follow clause (iv)(G):

Coming into Force

2 This Order comes into force on the 30th day after the day on which it is published in the Canada Gazette, Part II.

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