National Security Exception (NSE) Criteria

The National Security Exception (NSE) criteria are the conditions under which Canada may exclude a procurement from some or all of the obligations in an applicable trade agreement, because doing so is necessary to protect its essential national-security interests. The exact scope and wording depend on the trade agreement involved. The NSE is a provision found in most of Canada's domestic and international trade agreements, as described in National Defence's directive on the national security exception.

The exception exists so that trade-agreement obligations never require Canada to compromise its security interests. It is not a general preference for domestic suppliers and it is not a sole-source justification. Public Services and Procurement Canada (PSPC) explains the exception on the Office of the Procurement Ombud's NSE page, and the CanadaBuys trade agreement principles set out when it may be invoked.

Conditions that must be met before the NSE is invoked

Federal rules set out a clear sequence of steps. The NSE cannot be applied after the fact.

• The client department must request the invocation, generally at the Assistant Deputy Minister (ADM) level.
• The request must explain how the procurement relates to Canada's national-security or essential-security interests.
• The appropriate ADM, or an equivalent-ranking official responsible for awarding the contract, must approve the NSE in writing before the contract is awarded.
• The procurement record must document the approval letter, the rationale for invoking the NSE, and the justification for the chosen procurement strategy.

These requirements appear in the CanadaBuys guidance on trade agreements, the Treasury Board procurement policy instrument and Treasury Board Policy Notice 2025-1.

The test applied by National Defence and the Canadian Armed Forces

The Department of National Defence (DND) and the Canadian Armed Forces (CAF) have their own instructions for the exception. They must use the NSE only where compliance with a trade agreement could be expected to pose a risk to Canada's essential security interests. The Defence Administrative Order and Directive 3016-0 sets out this threshold.

Where the NSE shows up in federal procurement

Once properly invoked, the NSE can support limited competition or a non-competitive approach where that is justified, according to PSPC's published procurement guidance. It also changes how other rules apply.

• Bid requirements: A contract for which an NSE has been properly invoked under subsection 10(3) of the Canadian International Trade Tribunal Procurement Inquiry Regulations is exempt from the bid requirements of the Government Contracts Regulations, as published in the Canada Gazette.
• Industrial and Technological Benefits: The ITB Policy identifies procurements with an invoked NSE as not subject to international trade agreements.
• U.S. Foreign Military Sales: PSPC's defence procurement function responds to client requests about an NSE in these procurements, as described on the CanadaBuys Foreign Military Sales page.

Invoking the NSE does not exempt a procurement from all other federal requirements. Sole-source justifications and departmental policies still apply.

What the NSE means for a supplier

A solicitation tied to an NSE may be limited, non-competitive, or excluded from trade-agreement procedures. The exception does not exempt a supplier from technical, security, integrity, contracting or other requirements. Bid teams should read the stated conditions of each solicitation closely and meet them in full. Suppliers cannot invoke the NSE themselves. The decision, the written approval and the supporting rationale all sit with the client department and its responsible official.