Executive Summary
Canada continues to face compelling evidence that components manufactured domestically are entering U.S. supply chains and subsequently reaching Israeli military systems, despite government assurances that export controls prevent such risks. The newly released Exposing the U.S. Loophole report reveals direct traceability between Canadian-made explosives, aircraft parts, and other controlled goods and their eventual incorporation into weapons platforms deployed by Israeli forces in Gaza. This occurs through a regulatory and legislative gap commonly known as the “U.S. loophole,” which exempts most transfers to the United States from meaningful human rights assessments, end-use monitoring, or transparency.
CMPAC maintains that Canada has clear international legal obligations, including under the Arms Trade Treaty (ATT), customary international law, and obligations arising from the International Court of Justice’s provisional measures, to prevent arms transfers where there is a substantial risk of their being used in genocide, crimes against humanity, or war crimes. The evidence presented in the aforementioned report, coupled with ongoing Israeli violations documented by UN bodies and international human rights organizations, demonstrates such a risk beyond any reasonable dispute.
Accordingly, CMPAC urges Parliament to:
- Support and strengthen Bill C-233 (the No More Loopholes Act) to eliminate exemptions and require full human-rights due diligence on all U.S.-bound exports.
- Immediately impose a two-way arms embargo on Israel under the Special Economic Measures Act (SEMA).
- Require mandatory transparency and parliamentary reporting on all defence-related transfers and supply-chain movements involving Canadian-origin components.
- Implement regulatory amendments under the Export and Import Permits Act (EIPA) to close diversion pathways, require end-use certificates, and suspend all permits that pose demonstrable risk.
Anything less leaves Canada complicit in grave international law violations and undermines its credibility as a state committed to global human rights and rule-of-law principles.
1. Background: Evidence of Diversion and the Operation of the U.S. Loophole
The report Exposing the U.S. Loophole (Arms Embargo Now, 2025) documents that hundreds of shipments from Canadian companies are sent to U.S. defence firms, only for those products, such as F-35 fighter jets, 2,000-lb bombs, and other explosive systems, to be transferred onward to Israeli military forces. The authors trace 34 separate onward transfers that are directly tied to Israeli military actors.
Many of the Canadian-origin components enter critical U.S. supply chains; for example, for the F-35 program and then find their way to Israel under pre-existing procurement frameworks. These components are not trivial: they are used in systems linked to large-scale civilian harm in Gaza, including weapons associated with widespread destruction of infrastructure and civilian casualties.
These transfers happen largely because exports from Canada to the U.S. fall under a regulatory gap. Under section 7(1.1) of the Export and Import Permits Act, such shipments do not require individualized permits, meaning no risk assessment is done on whether the components will be re-exported to high-risk destinations. As a result, Canadian officials lack the legal authority to verify where these parts will ultimately go; even when the risk of re-export to places like Israel is publicly known.
2. Canada’s International Legal Obligations
2.1 Arms Trade Treaty (ATT) Obligations
As a State Party to the Arms Trade Treaty (ATT), Canada is legally obligated to deny any export where there is a “substantial risk” that the arms may be used to commit or facilitate serious violations of international humanitarian law (IHL), serious violations of international human rights law, genocide, crimes against humanity, or war crimes.
Article 6 of the ATT requires denial where the state has “knowledge” of such potential use, while Article 7 mandates a comprehensive risk assessment covering diversion, civilian harm, and violations of IHL. The evidence presented in Exposing the U.S. Loophole, combined with the International Court of Justice’s January 2024 finding of a “plausible risk of genocide” in Israel and Gaza, creates an overwhelming legal requirement for Canada to halt these transfers.
2.2 Domestic Human-Rights Assessment Requirements
Under Canadian law, Global Affairs Canada must refuse export permits when there is a “substantial risk” of misuse. Yet because most shipments destined for the United States are exempt from permit requirements under section 7(1.1) of the Export and Import Permits Act, no risk assessment occurs at all. This regulatory gap means that Canadian authorities are unable to meet their obligations under the ATT, which requires an assessment for every transfer of military components.
2.3 Duty to Prevent Complicity
International jurisprudence further establishes a clear duty to prevent complicity in violations of international law. Decisions such as the ICJ’s Bosnia v. Serbia ruling confirm that states must take all reasonable measures to prevent complicity in genocide and serious violations of IHL. By allowing the continued export of Canadian-made components that are subsequently used in Israeli airstrikes and ground operations in Gaza, Canada risks violating this principle and being complicit in acts that could constitute war crimes and crimes against humanity.
3. Parliamentary Debate and Government Response
Debate on Bill C-233 has highlighted the Canadian government’s position on the U.S. export exemption, which it defends as necessary due to integrated continental defence production. Government representatives have argued that existing controls already “meet or exceed” Arms Trade Treaty requirements and that closing the loophole could disrupt supply chains and negatively affect jobs.
CMPAC’s response emphasizes that integration and economic convenience cannot override legal obligations. Allowing exports to proceed without proper risk assessment effectively enables war crimes, which cannot be justified on the basis of industrial or economic considerations. Evidence demonstrates that current controls do not satisfy ATT standards, as compliance requires individualized risk assessments, and the U.S. exemption eliminates these assessments entirely.
Furthermore, targeted regulatory measures are feasible without creating broad disruption. Mandatory end-use certificates, restrictions on specific high-risk items, and other targeted interventions could ensure legal compliance while maintaining essential continental cooperation. The government’s reliance on general assurances of “strong safeguards” is therefore untenable in light of documented, specific evidence of diversion and misuse of Canadian-origin components.
4. CMPAC Policy Recommendations
Based on the evidence of diversion, regulatory gaps, and Canada’s legal obligations under the Arms Trade Treaty, CMPAC recommends a series of urgent policy actions to ensure compliance with international law and prevent complicity in violations of human rights and humanitarian law. These recommendations focus on halting current risks, strengthening legal frameworks, and increasing transparency and accountability.
- Impose an Immediate Two-Way Arms Embargo Under SEMA: CMPAC calls on Canada to suspend all exports, imports, brokering, and transit of military goods and dual-use items to or from Israel until violations cease and the Canadian government can certify that risks of diversion and misuse have been effectively mitigated. An immediate embargo would prevent further Canadian components from contributing to weapons used against civilians and signal Canada’s commitment to upholding its international legal obligations.
- Strengthen and Support Bill C-233: Bill C-233 provides a legal framework to address the loophole that currently allows U.S.-bound shipments to bypass permit requirements. CMPAC recommends removing automatic permit exemptions for U.S.-bound exports, mandating detailed end-use certificates and due diligence assessments, and requiring annual public reporting to Parliament on all defence-related transfers involving U.S. intermediaries. Additionally, the definition of “controlled goods” should be expanded to include key parts, components, and intellectual property, ensuring that all items with potential military use are subject to scrutiny.
- Amend EIPA Regulations: Existing Export and Import Permits Act regulations should be strengthened by suspending general export permits for all high-risk munitions and aerospace components. CMPAC also recommends introducing a diversion-monitoring framework with clear penalties for non-compliance and requiring companies to disclose downstream supply-chain relationships for controlled goods. These measures would close the regulatory gaps that currently allow Canadian-made components to be re-exported without oversight.
- Transparency and Accountability Measures: To ensure accountability and public trust, CMPAC urges the government to order Global Affairs Canada to release full data on all defence transfers to the U.S. since October 2023. In addition, an independent forensic audit should be conducted on Canadian-origin components appearing in weapons used in Gaza, providing an objective assessment of how Canadian exports are being utilized and highlighting any ongoing risks of diversion.
5. Conclusion
The report Exposing the U.S. Loophole demonstrates unequivocally that Canadian-made components continue to reach Israeli military platforms and that these systems are being used in ways widely recognized as violating international humanitarian law. Canada’s ongoing failure to close known regulatory gaps renders it complicit in these violations. CMPAC therefore calls on Parliament to adopt urgent legislative, regulatory, and sanctions-based measures to ensure that Canada no longer enables or facilitates mass civilian harm. A full arms embargo, combined with a strengthened Bill C-233, represents the minimum action necessary to bring Canada into compliance with its legal, ethical, and human-rights obligations.
Source: Exposing the U.S. Loophole, Arms Embargo Now, 2025
