DAOD 3016-0, National Security Exception Under Trade Agreements

Table of Contents

1. Introduction
2. Definitions
3. Policy Direction
4. Consequences
5. Authorities
6. References

1. Introduction

Date of Issue: 2003-09-12

Date of Last Modification: 2021-04-12

Application: This is a directive that applies to employees of the Department of National Defence (DND employees) and an order that applies to officers and non-commissioned members of the Canadian Armed Forces (CAF members).

Approval Authority: Assistant Deputy Minister (Material) (ADM(Mat))

Enquiries: Director Industry Relations, Analysis and Policy (DIRAP)

2. Definitions

essential security interests (intérêts essentiels de sécurité)

Interests relating to the quintessential functions of the state, namely, the protection of  its territory and its population from external threats, and the maintenance of law and public order internally. (Section 7.130 of the Report of the Panel 19-2105 of the World Trade Organization, 5 April 2019)

national security (sécurité nationale)

The condition achieved through the implementation of measures that ensure the defence and maintenance of the social, political and economic stability of a country. (Defence Terminology Bank record number 31720)

3. Policy Direction

Context

3.1 Canada is a party to domestic and international trade agreements and generally relies on the competitive process to determine the outcome of its procurements. Procurements need to be consistent with the protection of the essential security interests of Canada

3.2 The national security exception (NSE) is a provision found in most of Canada’s domestic and international trade agreements that allows Canada to exclude a procurement from some or all of the obligations of relevant trade agreements. Canada may invoke the NSE if considered necessary to protect its essential security interests. The exact scope and language of the NSE is set out in each trade agreement.

3.3 The following are examples of prominent trade agreements and their relevant NSE provisions:

1. Canadian Free Trade Agreement, article 801, National Security;
2. World Trade Organization Revised Agreement on Government Procurement, article III(1), Security and General Exceptions; and
3. Comprehensive Economic and Trade Agreement, article 19.3(1), Security and general exceptions.

Policy Statement

3.4 The DND and CAF must only invoke the NSE if compliance with a trade agreement could be expected to pose a risk to the essential security interests of Canada. Invoking the NSE under a trade agreement does not affect the obligation to comply with the Government Contracts Regulations, including such matters as sole source justifications and other sourcing strategy issues. Procurements for which the NSE is invoked and applied remain subject to relevant laws and Government of Canada, DND and CAF policies. The DND and the CAF remain committed to competitive contracting to the maximum extent possible, consistent with the protection of the essential security interests of Canada.

Requirements

3.5 The DND and the CAF must:

1. ensure rigour and consistency with regard to the invocation of the NSE in Canada’s trade agreements;
2. exercise due diligence to ensure that DND employees and CAF members:
   1. respect federal and international laws and agreements applicable to the NSE;
   2. make recommendations to invoke the NSE in accordance with applicable instructions, directives and guidelines; and
   3. interpret what constitutes essential security interests in good faith; and
3. ensure that DND employees and CAF members request the invocation of the NSE for procurement on a case-by-case basis to the appropriate contracting authority in DND, Public Works and Government Services Canada (PWGSC) or other applicable department.

4. Consequences

General

4.1 Should clarification of the policy statement, requirements or authorities set out in this DAOD be required, DND employees and CAF members may seek direction through their channel of communication or chain of command, as appropriate. The anticipated results set out in the policy statement may not be achieved by the DND and the CAF if the requirements specified in this DAOD are not properly implemented. Not achieving the anticipated results could affect the ability of the DND and the CAF to ensure that the CAF is prepared to undertake missions for the protection of Canada and Canadians and the maintenance of international peace and stability.

5. Authorities

Authority Table

5.1 The following table identifies the authorities associated with this DAOD:

6. References

Acts, Regulations, Central Agency Policies and Policy DAOD

• Canadian Free Trade Agreement
• Comprehensive Economic and Trade Agreement
• World Trade Organization Agreement – Revised Agreement on Government Procurement
• Canadian International Trade Tribunal Procurement Inquiry Regulations
• Government Contracts Regulations
• Framework for the Management of Compliance, Treasury Board
• Contracting Policy, Appendix C – Contracts Directive, Treasury Board

Other References

• A-PP-005-000/AG-002, Procurement Administration Manual, article 3.1.1.1.3.3, Invoking the National Security Exception (NSE)
• Supply Manual, paragraph 3.105.1, Trade agreements and invoking a national security exception, Public Works and Government Services Canada