Tuesday, August 17, 2010

Exporting Software and Technology Abroad – Controls on Ancillary Encryption to be Liberalized

(John W. Boscariol, McCarthy Tétrault LLP)

In what will come as welcome news to Canadian tech companies, Canada is planning on easing export controls over "ancillary encryption" items. These are items designed to work with encryption but encryption is not their primary function. Recently, the Canadian government agreed to implement an exemption to the current export permit requirement for these goods, software and related technology, provided they meet certain criteria.

Canadian companies must currently apply for and obtain export permits in order to export information security items or transfer any related technology from Canada to destinations other than the United States. Canada’s Export Control List identifies the goods and technology covered by these requirements, and imposes a very low threshold of control – encryption with key lengths in excess of 64 bits (in the case of symmetric algorithms). Further, the available exemptions for mass market items and technology and software in the public domain may only be relied upon in very limited circumstances.

Canadian authorities have been consulting with the business community on how the mass market exemption for encryption items is interpreted and administered in jurisdictions outside of Canada. They have also recently announced industry consultations on the export control permit process.

These consultations appear to be part of an effort to address concerns that, because of the burdens imposed by the permit regime, Canadian companies are not on a level playing field with their competitors in the United States and other countries when it comes to the sale of their products and technology in international markets. Read more here.