Regulations Amending the Special Economic Measures (Russia) Regulations: SOR/2024-32

Canada Gazette, Part II, Volume 158, Number 6

Registration
SOR/2024-32 February 21, 2024

SPECIAL ECONOMIC MEASURES ACT

P.C. 2024-159 February 21, 2024

Whereas the Governor in Council is of the opinion that the actions of the Russian Federation constitute a grave breach of international peace and security that has resulted in a serious international crisis;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Foreign Affairs, makes the annexed Regulations Amending the Special Economic Measures (Russia) Regulations under paragraph 4(1)(a)footnote a and subsections 4(1.1)footnote b, (2)footnote c and (3) of the Special Economic Measures Act footnote d.

Regulations Amending the Special Economic Measures (Russia) Regulations

Amendments

1 The definition designated person in section 1 of the Special Economic Measures (Russia) Regulations footnote 1 is repealed.

2 Section 3.04 of the Regulations is replaced by the following:

Ships

3.04 It is prohibited for any person to dock in Canada or pass through Canada any ship that is registered in Russia or used, leased or chartered, in whole or in part, by or on behalf of or for the benefit of Russia, a person in Russia or a person listed in Schedule 1, 2 or 3, unless such docking or passage is necessary to safeguard human life or to ensure navigational safety.

3 (1) Paragraph 4(e) of the Regulations is replaced by the following:

(2) Section 4 of the Regulations is amended by striking out “and” at the end of paragraph (f) and by replacing paragraph (g) with the following:

4 Subsection 8(1) of the Regulations is replaced by the following:

Application to no longer be listed

8 (1) A person may apply in writing to the Minister to have their name removed from Schedule 1, 2 or 3.

5 Section 9 of the Regulations is replaced by the following:

Mistaken identity

9 (1) A person whose name is the same as or similar to the name of a person listed in Schedule 1, 2 or 3 and who claims not to be that person may apply to the Minister in writing for a certificate stating that they are not that listed person.

Determination by Minister

(2) Within 30 days after the day on which the Minister receives the application, the Minister must

6 Schedule 1 to the Regulations is amended by replacing the references after the heading “SCHEDULE 1” with the following:

7 Part 1 of Schedule 1 to the Regulations is amended by adding the following in numerical order:

8 Part 2 of Schedule 1 to the Regulations is amended by adding the following in numerical order:

9 Schedule 2 to the Regulations is amended by replacing the references after the heading “SCHEDULE 2” with the following:

10 Schedule 3 to the Regulations is amended by replacing the references after the heading “SCHEDULE 3” with the following:

11 Schedule 7 to the Regulations is amended by adding the following after item 4:
Item

Column 1

Goods

Column 2

Harmonized Commodity Description and Coding System code
4.1 Explosives; pyrotechnic products; matches; pyrophoric alloys; certain combustible preparations 36
12 Schedule 7 to the Regulations is amended by adding the following after item 35:
Item

Column 1

Goods

Column 2

Harmonized Commodity Description and Coding System code
35.1 Processing units other than those of subheading 8471.41 or 8471.49 of the Harmonized Commodity Description and Coding System published by the World Customs Organization, whether or not containing in the same housing one or two of the following types of unit: storage units, input units, output units 8471.50
35.2 Other units of automatic data processing machines 8471.80
13 Schedule 7 to the Regulations is amended by adding the following after item 38:
Item

Column 1

Goods

Column 2

Harmonized Commodity Description and Coding System code
38.1 Ball bearings 8482.10
38.2 Tapered roller bearings, including cone and tapered roller assemblies 8482.20
38.3 Spherical roller bearings 8482.30
38.4 Other cylindrical roller bearings, including cage and roller assemblies 8482.50
38.5 Machines and apparatus for the manufacture of boules or wafers 8486.10
38.6 Machines and apparatus for the manufacture of semiconductor devices or of electronic integrated circuits 8486.20
38.7 Machines and apparatus specified in Note 11(C) to Chapter 84 of the Harmonized Commodity Description and Coding System published by the World Customs Organization (Machines and apparatus solely or principally of a kind used for: (i) the manufacture or repair of masks and reticles; (ii) assembling semiconductor devices or electronic integrated circuits; and (iii) lifting, handling, loading or unloading of boules, wafers, semiconductor devices, electronic integrated circuits and flat panel displays) 8486.40
14 Schedule 7 to the Regulations is amended by adding the following after item 39:
Item

Column 1

Goods

Column 2

Harmonized Commodity Description and Coding System code
39.1 Aerials and aerial reflectors of all kinds; parts suitable for use therewith 8529.10
39.2 Parts suitable for use solely or principally with the apparatus of headings 8524 to 8528 of the Harmonized Commodity Description and Coding System published by the World Customs Organization; other 8529.90
15 Schedule 7 to the Regulations is amended by adding the following after item 53:
Item

Column 1

Goods

Column 2

Harmonized Commodity Description and Coding System code
53.1 Telescopic sights for fitting to arms; periscopes; telescopes designed to form parts of machines, appliances, instruments or apparatus of Chapter 90 or Section XVI of the Harmonized Commodity Description and Coding System published by the World Customs Organization 9013.10
53.2 Other optical devices, appliances and instruments 9013.80
53.3 Instruments and appliances for aeronautical or space navigation (other than compasses) 9014.20
53.4 Other navigational instruments and appliances 9014.80
16 Schedule 7 to the Regulations is amended by adding the following after item 57:
Item

Column 1

Goods

Column 2

Harmonized Commodity Description and Coding System code
57.1 Other instruments and apparatus using optical radiations (ultraviolet, visible, infrared) 9027.50
57.2 Oscilloscopes and oscillographs 9030.20
57.3 Multimeters with recording device 9030.32
57.4 Other instruments and apparatus for measuring or checking voltage, current, resistance or power (other than those for measuring or checking semiconductor wafers or devices), with a recording device 9030.39
57.5 Other instruments and apparatus for measuring or checking semiconductor wafers or devices (including integrated circuits) 9030.82

17 The Regulations are amended by replacing “designated person” with “person” in the following provisions:

Application Before Publication

18 For the purpose of paragraph 11(2)(a) of the Statutory Instruments Act, these Regulations apply according to their terms before they are published in the Canada Gazette.

Coming into Force

19 These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

Background

Following Russia’s illegal occupation and attempted annexation of Crimea in March 2014, the Government of Canada, in tandem with partners and allies, enacted sanctions through the Regulations Amending the Special Economic Measures (Russia) Regulations (the Regulations) under the Special Economic Measures Act (SEMA). These sanctions impose dealings prohibitions (an effective asset freeze) on listed individuals and entities supporting or enabling Russia’s violation of Ukraine’s sovereignty. Any person in Canada and Canadians outside Canada are thereby prohibited from dealing in the property of, entering into transactions with, providing services to, or otherwise making goods available to persons listed under Schedule 1, 2 or 3 of the Regulations.

On February 24, 2022, Russian President Vladimir Putin announced “a special military operation” as Russian forces launched a full-scale invasion of Ukraine from Russian and Belarusian territory. Heavy fighting continues in eastern and southern Ukraine. As part of its military strategy, Russia continues to fire missiles and kamikaze drone attacks on essential civilian infrastructure. Experts, including the Organization for Security and Cooperation in Europe Moscow Mechanism fact-finding missions, the Independent International Commission of Inquiry on Ukraine and the United Nations (UN) Office of the High Commissioner for Human Rights, have concluded that Russia is committing serious human rights violations, war crimes, possible crimes against humanity, and conflict-related sexual violence. These studies have linked Russian external aggression with systematic repression and human rights abuses domestically. According to Ukraine’s State Emergency Department, 30% of Ukrainian territory (approximately the size of Austria) has been mined by Russia, which has led to calls for greater restrictions on exports of explosives. As of December 2023, the UN Human Rights Monitoring Mission in Ukraine has confirmed 10 000 civilians have been killed and 19 000 injured since February 24, 2022. Furthermore, 56 medical facilities and 223 educational facilities in Ukraine have been destroyed by Russia’s military since the invasion.

President Putin’s military invasion has been paired with significant malicious cyber operations and disinformation campaigns that falsely portray the West as the aggressor, and claim Ukraine is developing chemical, biological, radiological and/or nuclear weapons with North Atlantic Treaty Organization (NATO) support.

Continuing the unprecedented sanctions regime imposed by Canada and its partners against Russia is demonstrated by Russia’s continued invasion of Ukraine and its efforts to circumvent these sanctions. In 2023, various reports emerged of Iranian and Russian officials discussing establishing alternative routes (such as the International North-South Transport Corridor) for the shipment of goods, including oil, as a way to evade sanctions. Both Russian and Iranian officials have openly stated their intention to evade sanctions using new transport corridors, including through the Caspian Sea. The officials have also taken concrete steps in that direction. On December 5, 2023, Russia’s Foreign Minister Sergey Lavrov and his Iranian counterpart Hossein Amir-Abdollahian met in Moscow and signed an agreement to counter “unilateral sanctions.”

International response

As the war continues, G7 members and their partners continue to demonstrate resolve in supporting Ukraine through diplomacy with the broader international community to encourage support for Ukraine and to counter false Russian narratives. President Zelensky’s 10-point peace formula has attracted interest and participation from over 80 countries, which have met three times in 2023, and once in 2024. Key votes in multilateral forums such as the UN General Assembly and the UN Security Council (UNSC) have effectively isolated Russia. However, Russia consistently uses its position as a permanent member of the UNSC to block action on its war in Ukraine. Some countries have refrained from openly criticizing Russia or imposing penalties due to geopolitical considerations, commercial incentives, or simply fear of retaliation, with some also arguing the conflict is less of a priority for their regions.

The coalition of countries directly supporting Ukraine includes, but is not limited to, G7 and European countries. This group is working to support Ukraine across several areas, including energy security, nuclear safety, food security, humanitarian assistance, combatting Russian disinformation, sanctions and economic measures, asset seizure and forfeiture, military assistance, accountability, recovery, and reconstruction. During the NATO Leaders’ Summit in Vilnius in July 2023, NATO affirmed that Ukraine would be able to join the Alliance when conditions allow, and NATO Members agree. NATO Members also agreed to an upgraded Comprehensive Assistance Package (CAP) for Ukraine and established the NATO-Ukraine Council (NUC). The G7 Multi-Agency Donor Coordination Platform was established in 2022. In 2023, G7 Leaders committed to implementing a complete ban (direct and indirect) on imports of Russian diamonds. The direct ban has been in place in all G7 member states since January 1, 2024.

Canada’s response

In response to Russia’s full-scale invasion, Canada has committed over $9.7 billion in financial, military, humanitarian, development, security and stabilization and immigration assistance. Canada remains committed to supporting Ukraine’s stability, security, and sovereignty as it resists Russia’s war of aggression. Canada supports the made-in-Ukraine 10-point peace formula, a formula that respects Ukraine’s sovereignty and territorial integrity, the UN Charter, and international law.

Since 2014, in coordination with its allies and partners, Canada has imposed sanctions on more than 2 800 individuals and entities in Russia, Belarus, Ukraine and Moldova who are complicit in the violation of Ukraine’s sovereignty and territorial integrity. The duration of sanctions by Canada and like-minded partners has been explicitly linked to the peaceful resolution of the conflict, and the respect for Ukraine’s sovereignty and territorial integrity, within its internationally recognized borders, including Crimea, as well as Ukraine’s territorial sea. In addition, Canada has implemented targeted restrictions against Russia and Belarus in financial, trade (goods and services), energy and transport sectors. Canada is also part of the Oil Price Cap Coalition, which limits the provision of maritime services to Russian crude oil and petroleum products above a price set by the coalition.

Common High Priority Items List

On June 25, 2022, Canada amended the Regulations to prohibit the export of certain advanced technologies and goods that could be used in the production and manufacturing of weapons by Russia. In 2023, Canada and G7 partners identified a number of Common High Priority Items used in Russian military systems that have been found on the battlefield in Ukraine or are critical to the development, production, or use of those Russian military systems to support effective sanctions compliance and efforts to address circumvention.

Export ban on explosive devices and detonators

Canada is concerned that beyond the Common High Priority List, explosives used in the mining and construction industries and regulated under the Explosives Act could be repurposed for military use to attack Ukraine should they be exported from Canada to Russia.

Amendment on third-country listings

The Budget Implementation Act, 2023, No. 1, which entered into force on June 22, 2023, made amendments to the SEMA to provide the Governor in Council with the authority to list any person (individuals or entities) in that foreign state, a national of that foreign state who does not ordinarily reside in Canada “or a person outside Canada who is not Canadian.” Prior to this amendment, the authority was focused on persons (individual or entity) being based in the foreign country or possessing (currently or formerly) the nationality of the country of interest under the SEMA regulations.

Objective

Description

The amendments add 10 individuals and 153 entities to Schedule 1 of the Regulations who provide direct and indirect support to Russia’s aggression toward Ukraine through various means. These persons include individuals and entities: working on agreements with Iran to evade sanctions (or are related to or associates of individuals undertaking such actions); providing logistical and material support to Russia’s oil sector; and/or providing material support to the Russian military, including insurance services, the supply of goods, and the production of technical components for missiles, drones, and other military technology.

Canada is adding to Schedule 7 of the Regulations explosives classified under Code 36 of the World Customs Organization Harmonized Commodity Description and Coding System (HS). This includes explosives, including detonator devices and charges used in the mining and construction industries and regulated under the Explosives Act. This amendment prohibits persons in Canada and Canadians abroad from exporting these items to Russia or to any person in Russia.

HS Code 36

The amendments also prohibit persons in Canada and Canadians abroad from exporting certain goods that could be used in the production and manufacturing of weapons by Russia. This will be done by adding the following goods to Schedule 7 of the Regulations. The goods are classified under the World Customs Organization Harmonized Commodity Description and Coding System, as categorized by the Common High Priority List.

Tier III (A): Further electronic components used in Russian weapons systems, with a broader range of suppliers

Tier III (B): Mechanical and other components utilized in Russian weapons systems

Tier IV: Manufacturing, production and quality testing equipment for electric components, circuit boards and modules

Finally, the amendments align with the authority under SEMA to list any persons (individuals or entities) outside of Canada who are not Canadian, by removing the definition of “designated person” and changing in the Regulations the language related to “persons” as defined in the SEMA. These amendments strengthen Canada’s sanctions regime by allowing the listing of persons in third countries complicit in the violation of Ukraine’s sovereignty and territorial integrity, including persons that help Russia to evade or circumvent sanctions measures.

Regulatory development

Consultation

Global Affairs Canada regularly engages with relevant stakeholders, including civil society organizations, cultural communities, and other like-minded governments, regarding Canada’s approach to sanctions implementation.

With respect to the amendments targeting those individuals and entities, public consultation would not be appropriate, given the risk of asset flight.

Modern treaty obligations and Indigenous engagement and consultation

An initial assessment of the geographical scope of the Russia Regulations was conducted and did not identify any modern treaty obligations, as the Regulations do not take effect in a modern treaty area.

Instrument choice

Regulations are the sole method to enact sanctions in Canada. No other instrument could be considered.

Regulatory analysis

Benefits and costs

The incremental cost to the Government of Canada to administer and enforce these additional prohibitions vis-à-vis the 2 800 persons already sanctioned is minimal. Sanctions targeting specific individuals and entities have less impact on Canadian businesses than traditional broad-based economic sanctions and have limited impact on the citizens of the country of the listed individuals and entities. It is likely that the newly listed individuals and entities have limited linkages with Canada and, therefore, do not have business dealings that are significant to the Canadian economy.

Canadian banks and financial institutions are required to comply with sanctions. They will do so by adding the newly listed individuals and entities to their existing monitoring systems, which may result in a compliance cost.

The cost to Canadian exporters of the trade prohibitions in the amendments is minimal. Following Russia’s full-scale invasion of Ukraine in 2022 and Canada’s broad sanctions in response, Canadian exports to Russia in general have dropped by over 80%. Exports to Russia of the products in the amendments dropped from $9.2 million in 2021 to $1.8 million in 2022 and $60,000 in 2023. According to 2023 data, only one HS category still showed some values for exports to Russia: HS 9027.50 — Instruments and apparatus using optical radiations (Ultra Violet, visible, Infrared). There is no record of recent exports to Russia of any other good in the amendments.

Small business lens

With respect to the persons being listed under the Regulations, analysis under the small business lens concluded that the regulatory amendments will not impact Canadian small businesses. The amendments do not impose any new compliance or administrative burden on small businesses in Canada. The amendments prohibit Canadian businesses from dealing with, providing services to, or otherwise making goods available to listed persons, but do not create obligations related to them. While Canadian businesses may seek permits under the Regulations, they are granted on an exceptional basis. Global Affairs Canada does not anticipate any applications resulting from listing these persons, or including the additional goods in the export ban, given the minimal level of trade with Russia.

One-for-one rule

The one-for-one rule does not apply as there is no incremental change in the administrative burden on business. The permitting process for businesses meets the definition of “administrative burden” in the Red Tape Reduction Act; however, while permits may be granted under the Regulations, on an exceptional basis, given the minimal level of trade with Russia, Global Affairs Canada does not anticipate any permit applications with respect to the amendments.

Regulatory cooperation and alignment

While the amendments are not related to a work plan or commitment under a formal regulatory cooperation forum, they align with actions taken by Canada’s allies. Sanctions are most effective when they are applied in a coordinated manner.

Strategic environmental assessment

The Regulations are unlikely to result in important environmental effects. In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus (GBA+)

The subject of economic sanctions has previously been assessed for effects on gender and diversity. Although intended to facilitate a change in behaviour through economic pressure on individuals and entities in foreign states, sanctions under the SEMA can nevertheless have an unintended impact on certain vulnerable groups and individuals. Rather than affecting Russia as a whole, these targeted sanctions impact individuals believed to be engaged in activities that directly or indirectly support, provide funding for or contribute to a violation of the sovereignty or territorial integrity of Ukraine. Therefore, these sanctions are unlikely to have a significant impact on vulnerable groups as compared to traditional broad-based economic sanctions directed toward a state.

Implementation, compliance and enforcement, and service standards

The amendments come into force on the day on which they are registered.

Consequential to being listed in the Regulations, and pursuant to the application of paragraph 35.1(b) of the Immigration and Refugee Protection Act, the listed individuals would be inadmissible to Canada.

The names of the listed individuals and entities will be available online for financial institutions to review and will be added to the Consolidated Canadian Autonomous Sanctions List. This will help to facilitate compliance with the Regulations.

G7 states continue to enforce an export ban on various goods to Russia, including specific technologies, arms and related materials, and luxury goods. Global Affairs Canada collaborates with the Canada Border Services Agency for effective enforcement, activating a border lookout when a new prohibition is implemented, as they possess the essential on-the-ground expertise for enforcement.

Under SEMA, both Royal Canadian Mounted Police and Canada Border Services Agency officers have the power to enforce sanctions violations through their authorities as defined under the Customs Act, the Excise Act or the Excise Act, 2001, and sections 487 to 490, 491.1 and 491.2 of the Criminal Code.

In accordance with section 8 of the SEMA, every person who knowingly contravenes or fails to comply with the Regulations is liable, upon summary conviction, to a fine of not more than $25,000 or to imprisonment for a term of not more than one year, or to both; or, upon conviction on indictment, to imprisonment for a term of not more than five years.

The Department’s Trade Commissioner Service, abroad and in Canada, continues to assist clients in understanding Canadian sanctions regulations, and notably the impact of the regulations on any activities in which Canadians may be engaged. The Department is also increasing outreach efforts across Canada — including to engage with businesses, universities, and provincial/territorial governments — to enhance national awareness of and compliance with Canadian sanctions.

Contact

Andreas Weichert
Director
Eastern Europe and Eurasia Relations Division
Global Affairs Canada
125 Sussex Drive
Ottawa, Ontario
K1A 0G2
Telephone: 613‑203‑3603
Email: Andreas.Weichert@international.gc.ca