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While Canada-U.S. trade relations have been historically close, and cross-border trade greatly liberalized since the entry into force of the Canada-U.S. Free Trade Agreement in 1988 and the NAFTA in 1994, the complex area of trade in defense products remains highly regulated and subject, in certain respects, to important restrictions. Significant regulatory pitfalls exist for companies with continentally integrated operations in the form of export permit requirements for items that are transferred across (and frequently back across) the U.S.-Canada border. Corporate non-compliance with these requirements, even though unintentional, can lead potentially to heavy penalties under both U.S. and Canadian law.
Background
At the end of the 1990s, it looked for a time as though cross-border trade in strategic goods and services might be substantially reduced as a result of heightened U.S. export restraints, prompted by increased fears in Washington of leakages through Canada of goods and technologies to unfriendly foreign parties.
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