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3.105. National Security Exceptions

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3.105.1 Trade agreements and invoking a national security exception

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The national security exception (NSE) provided for in all of Canada’s trade agreements allow Canada to exclude a procurement from some or all of the obligations of the relevant trade agreement(s), where Canada considers it necessary to do so in order to protect its national security interests specified in the text of the NSE. The purpose of the NSE is to ensure that parties to the agreements are not required in any way to compromise their national security interests through application of the obligations of the trade agreements.

3.105.5 Texts of the national security exceptions

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  1. The relevant text for each trade agreement can be found as follows:
    1. for CETA, Article 19.3: Security and general exceptions in Chapter 19;
    2. for WTO-AGP, Article III: Security and General Exceptions;
    3. for CPTPP, Article 29.2: Security Exceptions in Chapter 29;
    4. for the Canada-Chile Free Trade Agreement, Article Kbis-16: Exceptions;
    5. for the Canada-Colombia Free Trade Agreement, Article 1402: Security and General Exceptions in Chapter 14;
    6. for the Canada-Honduras Free Trade Agreement, Article 17.3: Security and General Exceptions in Chapter 17;
    7. for the Canada-Korea Free Trade Agreement, Article 22.2, National Security in Chapter 22;
    8. for the Canada-Panama Free Trade Agreement, Article 16.03: Security and General Exceptions in Chapter 16;
    9. for the Canada-Peru Free Trade Agreement, Article 1402: Security and General Exceptions in Chapter 14.
    10. for the Canada-Ukraine Free Trade Agreement (CUFTA), Article 10.4: Security and General Exceptions in Chapter 10;
    11. for the CFTA, Article 801: National Security.
  2. The Canadian International Trade Tribunal (CITT), in its decision PR-98-005, has found that "the most senior level of substantive policy formulation and advice to the department on all Acquisition Branch activities..." has the authority to invoke the use of the National Security Exception (NSE), to exclude a procurement from Canada's trade agreements. For Public Works and Government Services Canada (PWGSC), that authority rests with the Assistant Deputy Minister(s) of the Acquisitions Program (ADM/AP).
  3. Furthermore, on the basis of the authority given to the Minister under section 6 of the Department of Public Works and Government Services Act, in conjunction with paragraph 24(2)( d) of the Interpretation Act, PWGSC has decided that this specific authority will not be delegated to a lower level official because of the nature of the exception. PWGSC has further decided that an NSE will not be invoked by anyone other than the ADM/AP, where PWGSC/Acquisitions Program is the contracting authority. See the procedures for invoking an NSE in section 3.105.10.
  4. Invoking an NSE under the trade agreements does not affect the obligation to comply with the Government Contracts Regulations (GCRs), including such matters as sole source justifications, other sourcing strategy issues and contracting officer limits. Procurements for which an NSE is invoked and applied remain subject to other relevant regulations and governmental and departmental policies, which may include posting a Notice of Proposed Procurement (NPP) or an Advance Contract Award Notice (ACAN) on the Government Electronic Tendering Service (GETS) where appropriate, though the security requirements may, in some cases, preclude such actions.
  5. If the NSE has been invoked and applied to a procurement, the contracting officers must insert the following statement in all notifications to suppliers and in all tender documents: "This procurement is subject to national security exception and is, therefore, excluded from all of the obligations of the trade agreements."

3.105.10 Procedures for invoking a national security exception

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  1. All requests to invoke an NSE to exclude a procurement from a trade agreement, or any combination of the agreements, will normally be submitted by the client department to the ADM/AP for approval, regardless of dollar value, where PWGSC/AP is the contracting authority.
  2. A request must be in the form of a letter from the responsible ADM level equivalent at the client department. The letter must explain the nature of the proposed procurement and, depending upon which trade agreement(s) applies, how it relates to:
    1. Canada's "national security interests" or, pursuant to Canada's international obligations, "the maintenance of international peace and security". (CFTA: Article 801); and/or
    2. Canada's "essential security interests relating to the procurement of arms, ammunition or war materials, or to procurement indispensable for national security or for national defence purposes". (CETA: Article 19.3 (1) / WTO-AGP: Article III (1) / CPTPP: Article 29.2 / Canada-Chile: Article Kbis-16 (1) / Canada-Colombia: Article 1402 (1) / Canada-Honduras: Article 17.3 (1) / Canada-Korea: Article 22.2 / Canada-Panama: Article 16.03 (1) / Canada-Peru: Article 1402 (1) / Canada-Ukraine: Article 10.4 (1)).
  3. In reviewing requests to invoke the NSE, the ADM/AP will consider only the issue of whether or not to invoke the NSE and will not consider at that time, other matters such as procurement methods, procurement plans or authority to enter into the contract. Client departments should work with the PWGSC contracting officer to determine which method of procurement be used, in parallel with any request for approval of an NSE. In situations where the NSE is invoked and applied to the procurement, it remains government policy to compete the requirement, subject to the exceptions to competitive contracting provided in the Government Contracts Regulations(GCRs).
  4. Requests for an NSE are reviewed by the Specialized Services for Procurement Group (SSPG) of the Procurement Support Services Sector (PSSS) before the approval of the ADM/AP is sought. Once the ADM/AP has made a decision whether or not to invoke an NSE, the ADM/AP will advise the client department in writing of the decision. For the approval process for NSE, see section 1.1.4 of Annex 6.4.1: Approval Authorities and Additional Signing Authorities in Support of Clients' Programs Only - Other than for Canadian Commercial Corporation.
    Note: Contracting officers seeking advice to aid client departments in properly framing and requesting an NSE should contact SSPG via email at tpsgc.ersnceasns-nsensscc.pwgsc@tpsgc-pwgsc.gc.ca. It is strongly recommended that a draft of the NSE request letter be forwarded to SSPG for review before having it signed by the responsible ADM at the client department. For a template of the NSE request letter, contact SSPG.
  5. Following the invocation of an NSE, the contracting officer must state in all procurement documents that an NSE has been invoked and is being applied to the requirement. The rationale for the invocation, and the specific trade agreements from which the procurement is being excluded, are to be identified in the procurement approval documents. A copy of the NSE approval letter must be kept on file.