A Canadian exporter holds a signed purchase order for goods destined for a counterparty with ties to a designated entity. The transaction touches both the United States – because the goods contain US-origin components – and Canada, because the seller is domiciled in Toronto. Two licensing regimes now apply simultaneously. Which authority do you approach first? What does each require? How do the timelines compare? For a General Counsel managing a live deal, these are not theoretical questions.
Specific licence applications (case-by-case authorisations to conduct an otherwise prohibited transaction) exist under both OFAC and Canada's sanctions regime administered by Global Affairs Canada (GAC). The core test under each is whether the proposed transaction meets a defined public-policy ground for relief. The two regimes share that structural logic – but diverge substantially on governing authority, procedural form, assessment criteria, timelines, and the consequences of a denial. As of May 2026, a cross-border business that treats the two processes as interchangeable does so at material legal risk.
This analysis sets out how specific licence applications work under each regime, maps the principal points of divergence, identifies the risk flags that practitioners see most often, and explains when early counsel makes the difference between a deal proceeding and a deal dying.
Governing authority: who administers each regime?
Under US law, OFAC – the Office of Foreign Assets Control within the US Department of the Treasury – administers the economic-sanctions programmes and is the authority to which all specific licence applications must be directed. OFAC derives its authority principally from IEEPA (the International Emergency Economic Powers Act) and, for older programmes, from the Trading with the Enemy Act. The legal instruments that prohibit a given transaction are the programme-specific regulations; the licence process is the administrative mechanism through which OFAC can authorise an exception to those prohibitions.
In Canada, the primary sanctions legislation is the Special Economic Measures Act (SEMA) and, for UN-mandated measures, the United Nations Act. The day-to-day licensing authority sits with Global Affairs Canada, which issues permits under the relevant country-specific regulations made under SEMA. For goods with strategic or dual-use characteristics, Export and Import Permits Act (EIPA) controls may also apply, requiring a separate Export Permit from GAC's trade-controls directorate. The interaction between the two Canadian regimes – sanctions permits and export permits – is a recurring complexity in practice.
A business subject to US secondary-sanctions risk should note that OFAC's reach is not limited to US persons. Non-US companies that process US-dollar transactions through US correspondent banks, use US-origin goods or technology, or have US-person employees can be drawn into OFAC jurisdiction even without a US presence. The Canadian regulatory perimeter is narrower; it focuses on Canadian persons and activities in Canada. That divergence in jurisdictional scope is the first structural difference the licence applicant must understand.
What is the legal standard for granting relief?
OFAC evaluates specific licence applications against a national-interest standard. The agency asks whether authorising the transaction serves US foreign-policy or national-security objectives, and it assesses the applicant's representations against the broader policy purpose of the programme. There is no exhaustive statutory list of grounds; OFAC retains wide discretion. In practice, commonly stated grounds include humanitarian need, protection of existing contractual rights, wind-down of pre-designation business, or the transaction's beneficial effect on a third-country ally. OFAC may issue a licence with conditions, a licence limited to a defined scope, or a denial with no explanation beyond the programme policy.
Under SEMA, the Canadian regulations typically prescribe a list of permissible grounds for a ministerial permit. Those grounds vary by programme and are set out in the schedule to the relevant country regulations. Common grounds include humanitarian assistance, legal fees for the designated person's defence, and pre-existing contractual obligations. Because the grounds are enumerated, a Canadian applicant faces a threshold question – does the proposed transaction fit a listed ground at all? – before the merits of the specific case are assessed. That enumerated structure makes the Canadian process in some respects more predictable, but also less flexible for novel fact patterns that do not fit neatly into a listed category.
The position above covers the standard case. Your facts – the counterparty's ownership structure, the goods involved, the route of the transaction, and the regime in play – change the analysis materially. For an assessment of your eligibility under OFAC or the Canadian regime, contact Calder & Vance at info@caldervance.com.
How does the application procedure differ in practice?
An OFAC specific licence application is submitted through OFAC's online licensing portal. The application requires a detailed statement of the facts, identification of the sanctioned parties, a description of the proposed transaction, the legal basis for the requested authorisation, and supporting documentation. OFAC has no statutory deadline by which it must respond. In our experience advising on OFAC licensing matters, processing times range from a matter of weeks for straightforward humanitarian requests to many months – sometimes longer – for commercially complex applications. OFAC may issue requests for additional information, which pause the informal clock and can extend the process considerably.
In Canada, the permit application is submitted to Global Affairs Canada using a prescribed form, accompanied by a covering letter and supporting documentation. The relevant Canadian sanctions regulations specify the permissible grounds; the covering letter must map the facts to one or more of those grounds explicitly. GAC processes applications on a rolling basis. Formal timelines are not published in the way that some other jurisdictions publish them, and processing time depends on programme complexity, the sensitivity of the subject matter, and GAC's current caseload. What is clear in practice is that neither OFAC nor GAC offers a fast-track commercial licence track; urgency of business need is not, by itself, a ground for expedited processing under either regime.
One procedural difference with significant practical weight: OFAC will generally communicate directly with the applicant (or its counsel) through the portal. GAC's process involves more correspondence-based interaction, and the permit, when issued, is addressed to the Canadian person. For a transaction involving both US and Canadian regulatory exposure, the two applications must be managed in parallel, with careful sequencing of representations to avoid inconsistency between filings.
Where do the regimes diverge on specific licence applications?
The divergences between OFAC and the Canadian regime are more numerous than a headline comparison suggests. Four are worth examining in depth.
First, jurisdictional trigger. OFAC's jurisdiction turns on the nexus to a US person, US-origin goods or technology, or a US financial system transaction. The Canadian trigger is Canadian-person activity. A transaction between two non-US, non-Canadian counterparties may still require an OFAC licence if it involves US-origin components, but it will not require a Canadian permit unless a Canadian person is involved. Mapping which licences are actually required – and which authority or authorities must be approached – is a threshold step that determines the shape of the entire application process.
Second, the assessment standard. OFAC's national-interest test gives the agency broad discretion; the Canadian enumerated-grounds model does not. A fact pattern that sits outside the Canadian regulatory schedule cannot be authorised by a ministerial permit, regardless of its merits. The same fact pattern might qualify under OFAC's broader discretionary standard. Conversely, a ground that GAC has listed (for example, a specific humanitarian carve-out in a given programme) may not have a corresponding OFAC general licence or obvious licensing ground, requiring the OFAC applicant to make a more developed policy case.
Third, the treatment of existing contracts. Both regimes can accommodate applications to honour pre-designation contracts, but the mechanics differ. Under OFAC, wind-down transactions and pre-existing contractual obligations are a recognised policy basis for relief; the strength of that basis depends on the specific programme. Canadian regulations often list "pre-existing contractual obligations" as an enumerated ground, but the conditions attached to that ground – including proof of the obligation, the date of the contract, and the absence of any opportunity to exit – are more prescriptive. A business that assumed OFAC's relatively flexible contractual-wind-down practice would translate directly into Canada has, in our experience, been surprised by GAC's more structured evidentiary requirements.
Fourth, duration and conditions. OFAC licences can be issued with time limits, transaction caps, and reporting conditions. Conditions must be monitored and met for the licence to remain valid. The Canadian permit similarly may carry conditions, but the condition-types reflect the enumerated grounds and the specific programme. A cross-border business holding both an OFAC licence and a Canadian permit for the same underlying transaction must track compliance with both sets of conditions, which may not be identical.
If a transaction has already been flagged, or a filing has been refused, the time to act is short. Early review can preserve options that narrow quickly. Write to us at info@caldervance.com.
Which regime is stricter on specific licence applications?
Strictness is a function of the specific programme and the specific ground sought, not a global characteristic of either regime. That said, several patterns emerge from practice. OFAC's broader discretionary standard can work in the applicant's favour for commercially-driven transactions that present a genuine policy case: the agency can take a nuanced view. But that same breadth means OFAC can deny without detailed explanation, leaving applicants uncertain whether to reapply, to challenge, or to restructure. The Canadian enumerated system is in some ways stricter – you cannot be licensed on a ground that is not listed – but where a ground is listed, the outcome of a well-prepared application is somewhat more predictable.
Programme-level stringency matters at least as much as the regime's general approach. Certain OFAC programmes carry near-zero licensing exceptions in practice, reflecting US foreign-policy positions. Canadian sanctions on the same jurisdiction may carry a more developed humanitarian licensing track, or vice versa. The programmes do not mirror each other, and a blanket assumption that the US position is always stricter – or always more permissive – is not warranted.
Secondary-sanctions risk adds a further layer. A Canadian business that receives a GAC permit for a transaction may still be exposed to OFAC consequences if the transaction involves US-dollar clearing, US-origin goods, or a US-person employee signing off on the deal. The GAC permit does not shield against OFAC jurisdiction. And conversely, an OFAC licence authorising a US-person's participation in a transaction does not mean the Canadian leg of the same transaction is authorised under Canadian law. A strict reading of the OFAC position is therefore a necessary but not sufficient condition for managing cross-border exposure.
Risk flags practitioners see most often
Across the specific licence applications we handle, certain risk patterns appear repeatedly. They are worth naming explicitly, because each one has caused a transaction to be delayed or refused at a stage where earlier intervention would have been possible.
- Incomplete ownership mapping. An application describing a counterparty without mapping its ownership chain through to ultimate beneficial owners is likely to attract a request for additional information. Both OFAC and GAC will want to understand whether a designated person sits above, beside, or downstream of the transacting entity. Incomplete mapping also risks the applicant making representations that are inadvertently inconsistent with the actual structure – a serious problem if the application is later scrutinised in an enforcement context.
- Misidentifying the applicable programme. Several OFAC programmes may run concurrently in relation to the same country or sector. An application that identifies only one of three applicable programmes, or that seeks authorisation under a programme whose scope does not actually cover the proposed transaction, will be misdirected. The equivalent error in Canada is failing to identify whether the SEMA permit, an EIPA export permit, or both are required.
- Overlooking general licences. Before submitting a specific licence application under either regime, the applicant should check whether a general licence (a standing authorisation permitting a defined category of transactions without a separate application) already covers the proposed activity. A specific licence application for a transaction covered by a general licence is unnecessary and adds delay. More importantly, the existence of a general licence imposes conditions that the applicant must observe; proceeding under a general licence without reviewing those conditions is itself a compliance failure.
- Inconsistent parallel filings. Where both OFAC and GAC applications are required, factual representations must be consistent across filings. A discrepancy between the description of the transaction in the OFAC portal and the description in the GAC correspondence – even one that arises from a difference in regulatory vocabulary rather than from any intent to mislead – can complicate the position substantially if either agency compares notes or if an enforcement review follows.
- Treating a denial as final without review. A denial by OFAC or by GAC is not necessarily the end of the process. OFAC can be approached for reconsideration; the position in Canada allows for representations to GAC and, ultimately, for judicial review of a decision. Neither route is quick, but both exist. We regularly advise clients who have received an initial denial on whether a reconsideration or challenge route is viable.
The myth that a US licence covers the Canadian leg
A common assumption among in-house teams at multinationals is that obtaining an OFAC licence for a transaction resolves the regulatory position globally, or at minimum for the North American portion of the deal. This is incorrect. An OFAC licence authorises the US-nexus elements of the transaction – the US-person involvement, the US-origin goods, the US financial system clearing. It does not authorise a Canadian person to perform their part of the same transaction. GAC's jurisdiction is independent, and its permit is required separately.
The assumption runs in the other direction too. Canadian subsidiaries of US multinationals sometimes proceed on the basis that the parent's OFAC licence covers the Canadian subsidiary's activity. Unless the OFAC licence explicitly names the Canadian entity and covers the specific activity, that assumption is not warranted. The Canadian entity remains subject to Canadian law; the OFAC licence is a US regulatory instrument that speaks to US-jurisdiction elements only.
Correcting this assumption early – before a transaction is structured and certainly before any licence application is filed – is one of the most straightforward interventions that cross-border compliance counsel can provide.
What should a cross-border business do about specific licence applications?
The practical sequence for a business facing both OFAC and Canadian licensing exposure runs as follows.
- Map the jurisdictional triggers. Identify, for each element of the transaction – seller, buyer, intermediary, goods, payment route – which jurisdiction's rules are engaged and why. This step often reveals that fewer licences are required than initially feared, or that a general licence already covers part of the activity.
- Identify applicable general licences. Before preparing a specific licence application, confirm that no standing authorisation covers the transaction under either regime. If a general licence applies, document your reliance and ensure you meet its conditions.
- Assess the grounds available. Under OFAC, identify the strongest policy case for the national-interest analysis. Under the Canadian regime, identify which enumerated grounds in the relevant programme's regulations apply. If no listed ground applies in Canada, a specific licence application will fail at the threshold; the transaction may need restructuring rather than a licence.
- Prepare consistent filings. Draft the OFAC portal submission and the GAC application to be factually consistent. Where regulatory vocabulary differs, ensure the underlying facts are described the same way in substance. Have counsel review both before submission.
- Plan for the timeline. Neither OFAC nor GAC publishes binding response deadlines. Build the regulatory timeline into the transaction timetable. A deal that requires closing within weeks should not depend on a specific licence application whose processing time is measured in months.
- Monitor and comply with conditions. Once issued, track all licence conditions under both regimes. Conditions can include transaction value caps, reporting obligations, counterparty certifications, and expiry dates. A licence whose conditions are not met is not a valid authorisation.
Related practices
- Frozen account management under BIS/EAR – unblocking export-controlled assets and managing account-freeze consequences
- OFAC vs OFSI: specific licence applications compared – a parallel analysis of the UK licensing route alongside the OFAC process
- OFAC vs OFSI: specific licence applications – further analysis – extended treatment of OFSI licensing grounds and ownership-and-control questions