Canada: Sanctions Update: Canada's Ban On Trade With Iran

In its most recent sanctions measures, Canada has imposed a nearly complete ban on imports from and exports to Iran, including restrictions on the provision of certain services to individuals and businesses in Iran. The recent measures, announced on May 29, 2013, follow a steady increase in Canada's sanctions against Iran under the Special Economic Measures Act (SEMA) in recent years. In a statement made on May 29, 2013, Foreign Affairs Minister John Baird attributed the need for further sanctions to an absence of progress, stating that in "round after round of talks with both the International Atomic Energy Agency and the P5+1 [the five permanent members of the UN Security Council and Germany], Iran has failed to engage meaningfully while the risk posed by its enrichment activities only increases." The impact of these new measures should be reviewed by all Canadian persons and entities involved in trade with Iran.

Sanctions Under SEMA

SEMA enables Canada to impose sanctions by enacting orders or regulations in two situations:

  • For the purpose of implementing a decision, resolution or recommendation of an international organization of states or association of states, of which Canada is a member, that calls on its members to take economic measures against a foreign state, or
  • Where the federal Cabinet is of the opinion that a grave breach of international peace and security has occurred that has resulted or is likely to result in a serious international crisis

In recent years, SEMA has been used to implement Canadian sanctions against several countries, including Burma, Libya, North Korea, Syria, and Zimbabwe.

Canada's Existing Sanctions Against Iran

The United Nations Security Council has imposed various rounds of sanctions against Iran, which have been implemented in Canada pursuant to the United Nations Act. In addition to the UN sanctions (and in co-ordination with other states), Canada first imposed its own sanctions on trade with Iran under SEMA in 2010. The existing sanctions under SEMA prohibit:

  • Dealing with designated individuals and entities listed in the Special Economic Measures (Iran) Regulations (the Designated Persons List)
  • Exporting or otherwise providing to Iran arms and related materials; items that could contribute to Iran's nuclear proliferation activities; and items used in refining oil and gas (Prohibited Goods)
  • Providing technical data related to Prohibited Goods
  • Making any new investment in the Iranian oil and gas sector, or providing or acquiring financial services for this purpose
  • Providing or acquiring financial services to allow an Iranian financial institution to be established in Canada (including a branch, subsidiary or office), or providing or acquiring financial services to allow a Canadian financial institution to be established in Iran
  • Establishing banking relationships with Iranian financial institutions, or purchasing any debt from the Government of Iran
  • Providing services for the operation or maintenance of a vessel owned or controlled by, or operating on behalf of, the Islamic Republic of Iran Shipping Lines

Canada has gradually enhanced its sanctions in tandem with other international efforts. Additions to the sanctions in 2011 and 2012 included:

  • A prohibition on virtually all financial transactions with Iran, subject to limited exceptions
  • The expansion of the list of Prohibited Goods to include all items that could be used in Iran's nuclear program; goods used in the shipbuilding, mineral exploration, mining, metal production and telecommunications industries; vessels designed to transport or store crude oil or its products; and hard currency totalling more than C$40,000
  • The addition of new individuals and entities to the Designated Persons List

May 29, 2013 Measures

Significant changes imposed by the latest amendments to Canada's Special Economic Measures (Iran) Regulations (the Regulations) include:

  • A general prohibition, subject to limited exceptions (mostly humanitarian), on exports to and imports from Iran
  • A prohibition on Canadian investment in an entity in Iran
  • Several additions to the Designated Persons List

General prohibition on trade. The Regulations now prohibit, subject to certain enumerated exceptions, the export, sale, supply, or shipping of all goods to Iran, to a person in Iran, or to a person for the purposes of a business carried on in or operated from Iran. Previously, this prohibition applied only to specific types of goods. It also now extends to prohibit the provision of goods "to a person for the purposes of a business carried on in or operated from Iran". Similarly, the Regulations now prohibit any person in Canada and any Canadian outside Canada from importing, purchasing, acquiring, or shipping any goods that are exported, supplied, or shipped from Iran after May 29, 2013, subject to certain enumerated exceptions.

The prohibition also applies to prevent the provision to Iran of certain technical data (mostly relating to the petrochemical industry) as well as the provision of marketing, financial and other services related to that industry.

Prohibition on investment. The Regulations now prohibit any Canadian investment in an entity in Iran. Previously, this section prohibited Canadian investment in certain entities in Iran engaged in the oil or natural gas industry, as well as the Canadian provision or acquisition of services for the purpose of investing in the oil or natural gas industry in Iran.

Addition of designated persons. The latest amendments to the Regulations add a substantial number of names to the Designated Persons List. The Regulations prohibit a broad range of dealings with designated persons and impose disclosure obligations on all Canadians relating to property owned or controlled by or on behalf of designated persons. Additionally, certain entities are required to determine on a continuing basis whether they are in possession or control of property owned or controlled by or on behalf of a designated person.

Implications for Canadian Businesses

It appears that the sanctions are having an increasingly significant effect on both the Iranian economy and those who trade with Iran. As discussed above, previously Canada's sanctions were limited to financial services and certain industry sectors as well as nuclear and military activities. The most recent changes impose a broad-based prohibition on Canadian trade with and investment in Iran. These are significant changes that impact all industries involved in economic activity with Iran. Companies engaged in such activity should review the new measures and the amended Designated Persons List immediately.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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