June 24, 1948 (20th Parliament, 4th Session)


Douglas Charles Abbott (Minister of Finance and Receiver General)



Mr. Speaker, the purpose of this bill is to close what appears to be a sort of loophole in the Foreign Exchange Control Act. When the Foreign Exchange Control Act was enacted the intention was that its provisions should have extraterritorial effect in so far as they relate to transactions by Canadian residents. In other words it was intended, and is indeed essential to the proper operation of exchange control, that certain transactions by Canadian residents should be subject to control whether those transactions are entered into in Canada or elsewhere. In most of the relevant sections of the act, this intention w-as made clear by the use of the words "either in Canada or elsewhere", but through an oversight these words were omitted from sections 21, 22 and 23.
The omission in the case of sections 21 and 22 has recently been disclosed by a decision of a magistrate in Toronto in a prosecution against a Canadian resident for failing to sell to the foreign exchange control board through his bank about $15,000 in United States funds and disposing of them without a permit. The evidence established that the resident was personally in possession of these funds in Niagara Falls, New York, where he used them to buy certain goods which were subsequently smuggled into Canada. The magistrate held in effect that sections 21 and 22 of the Foreign Exchange Control Act did not apply, since the receipt and disposition of the funds took place entirely outside of Canada while the resident himself was outside of Canada.
The effect of this decision-I may say that an appeal has been taken-if maintained, is that any Canadian resident who obtains payment of United States funds while in the United States could dispose of the funds there without committing an offence. This would, of course, defeat one of the primary purposes of the Foreign Exchange Control Act, which is to ensure that United States dollars and other foreign exchange earned by Canadian residents from exports, services rendered for non-residents and from other sources must be sold to the foreign exchange control board where they will be available to meet Canada's foreign expenditures.
Because of the serious consequences which might follow as a result of the apparent defects in sections 21, 22 and 23 the government feels it necessary to ask now for the amendments contained in the bill. They are purely

of a technical nature, and merely will enable those sections to be applied as originally intended.

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