Written By Jessica Horwitz, Alison FitzGerald and Andrei Mesesan

On July 20, 2024, an Order Amending Canada’s Export Control List (ECL) (SOR/2024-112, or the Order) came into effect. This amendment adds five new controls under Item 5506 of the ECL, extending Canada's export regulation of certain advanced semiconductors and quantum computing technology.

These changes are unilateral strategic export controls implemented by Canada, but they are aligned with similar controls in force or in development by international allies such as the United States, France, Spain and the United Kingdom, amid concerns of strategically sensitive technology transfer risk to geopolitical rivals and non-state threat actors that have not been satisfactorily addressed through multilateral treaty-based control lists such as the Wassenaar Arrangement.

The following types of quantum computing and advanced semiconductor technology and equipment, including certain software, are now subject to export controls when transferred or shipped from Canada to any country other than the United States:

• Quantum computers with the capability to confine, control, measure and process the quantum information embodied in 34 or more physical qubits with a small margin of error. It includes circuits and devices specially designed for quantum computers, such as certain components and devices made to control and measure these quantum computers.
• Cryogenic Complementary Metal Oxide Semiconductor (CryoCMOS) integrated circuits that operate at a temperature of 4.5 Kelvin or below.
• Technology used for the development or production of semiconductor devices or microchips using Gate-All-Around Field-Effect Transistor (GAAFET) structures (i.e., nanosheet, nanowire, and gate-all-around transistor technology)
• Equipment designed or modified for isotropic and anisotropic dry etching, which are critical in the making of GAAFET structures.
• Advanced Scanning Electron Microscope (SEM) equipment for imaging semiconductor or integrated circuits, or to perform chip design recovery meeting a specific set of metrics.

A list of the technical specifications of the particular technology items that are subject to export control are listed in the Order. 

Canadians who wish to export goods or technology, including transfers of intangible technology, IP, technical data or know-how through electronic means, to any destination other than the United States must apply for authorization from the Minister of Foreign Affairs, in the form of an export permit issued by the Export Controls Division of Global Affairs Canada, before exporting any of the items. Note that at present, no existing General Export Permits are available to export these items and individual permit applications are required.

As explained in the Government of Canada's Regulatory Impact Analysis Statement for the Order, these goods and technologies pose a risk to national security because they can be used to either compromise sensitive information in Canada’s possession, or to develop more advanced military systems if they remain uncontrolled. In particular:

• The unprecedented power and speed of quantum computers represent important potential for advances in chemistry, simulation, medicine and many other civilian applications. However, their potential for use in cryptanalysis creates significant national security and information privacy concerns by making encrypted secure networks more vulnerable to breach.
• CryoCMOS are integrated circuits capable of functioning at cryogenic temperatures that are included in the expanded controls because quantum computers require extremely cold temperatures to function without overheating.
• Semiconductors (a.k.a. microchips) are essential components in almost all modern electronic systems, such as computers, smartphones, vehicles and appliances, as well as for military and drone technology and weapons of mass destruction. Gate-all-around field-effect-transistors (GAAFET) are a next generation semiconductor technology that will allow microchips and their devices to run faster and consume less power, which could enable more powerful and efficient artificial intelligence applications.
• SEM equipment are powerful microscopes that can used to identify the details of semiconductors to reverse-engineer these devices and their proprietary technology designs.

The newly created Item 5506 is located in Group 5 of the Schedule to the ECL which covers “Miscellaneous Goods and Technology”. This Group is reserved for Canada's autonomous export controls: Goods and technology that Canada deems necessary to control but that fall outside of the various multilateral export control and non-proliferation regimes such as 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, which are represented in other Groups within the ECL.

Other examples of miscellaneous goods and technologies controlled for strategic reasons under Group 5 include nuclear fusion reactors and blinding laser weapons, spacecraft and satellite technology, anti-personnel mines, certain agricultural goods and commodities, the export of which Canada has committed to moderating under free trade agreements, and goods and technology of U.S. origin (although many U.S. origin items that are not otherwise controlled are eligible for re-export to most destinations under General Export Permit No. 12). Group 5 also contains certain end use-based control restrictions that apply irrespective of product to goods or technology that will be used in any way to support the development of nuclear, chemical or biological weapons or their delivery systems.

Companies that deal in semiconductor or quantum computing technology should review the technical classifications of their products and IP with reference to the new control items to evaluate whether technology that was once uncontrolled for export from Canada may now require a permit before it is transferred internationally, including within a company.

For more information on how Canadian export controls affect your business or for assistance applying for export permits, please contact the authors or any member of the Bennett Jones International Trade and Investment group.