2023 has proven to be another dynamic year under the Government of Canada’s trade agenda, which showed no signs of slowing over the summer. From May to August 2023, the Government passed into law novel supply chain transparency legislation and introduced amendments and legislative proposals that are impacting, or will impact, compliance with Canadian customs, export controls, and economic sanctions legislation.
Baker McKenzie’s Canadian trade and customs team continues to monitor the following key sanctions and export controls developments throughout the remainder of 2023:
- Sanctions: Amendments to the Special Economic Measures Act (SEMA) and the Justice for Victims of Corrupt Foreign Officials Act (JVCFOA), and various amendments to country-specific sanctions regulations.
- Export controls: Commitments to enhanced enforcement and amendments to General Export Permit 41.
Sanctions
Watch the video below highlighting our sanctions compliance tips.
New Deeming Provision under the SEMA and JVCFOA
Canadian persons (e.g. Canadian citizens, Canadian incorporated entities, and persons physically present in Canada) are prohibited from dealing in property owned, held or “controlled” by or on behalf of a designated person under the SEMA and the JVCFOA. These are broad prohibitions, akin to asset freezes.
In June 2023, the Government enacted a “deeming provision” in the SEMA and the JVCFOA, which establishes how to determine whether a designated person “controls” an entity using three criteria:
- The designated person holds, directly or indirectly, 50% or more of the shares or ownership interests in the entity or 50% or more of the voting rights in the entity;
- The designated person is able, directly or indirectly, to change the composition or powers of the entity’s board of directors; or
- It is reasonable to conclude, considering all the circumstances, that the sanctioned person is able, directly or indirectly and through any means, to direct the entity’s activities.
Should a designated person “control” an entity under any of these criteria, property of that entity is deemed to be owned by the controlling designated person. Accordingly, the broad dealings prohibition would apply to that property, greatly expanding the scope of application of the dealings prohibition. These amendments complicate sanctions due diligence by necessitating a review of information, which is not typically publicly available, to determine the issue of “control”.
A detailed summary of the deeming provision and related amendments is outlined in our prior blog, available here.
Amendments to Existing Sanctions Regulations
Since June 2023, the Government has continued to amend Canada’s unilateral sanctions. A list of the amendments to the country-specific SEMA regulations, including links to Baker McKenzie’s prior blogs, are as follows:
- Haiti (June 2023, June 2023 and September 2023)
- Iran (June 2023 , August 2023 and September 2023)
- Russia (July 2023, August 2023 and September 2023)
- Belarus (August 2023)
Additionally, for the first time since 2019, the Government amended the JVCFOA to designate Lebanese nationals in August 2023.
Export Controls
Watch the video below highlighting our export controls compliance tips.
While undertaking routine amendments to Canada’s export controls regime to reflect changes in multilateral arms control and anti-proliferation agreements, the Government has also promised enhanced enforcement, and has amended elements of Canada’s export controls regime to respond to geopolitical developments.
Since May 2023, the Government has announced the following developments:
- Canada agreed to formally cooperate on enforcing its export controls measures with the Five Eyes;
- Canada updated its Guide to Canada’s Export Control List;
- Canada amended its Export Permits Regulations to align them with existing permit application processes and to increase regulatory clarity and certainty; and
- Canada amended General Export Permit No. 41 (GEP-41) to prohibit use of the permit for the export or transfer of goods or technology intended for the development, production or use of rocket systems or unmanned aerial vehicles with a range of 300 km or greater. Generally, GEP-41 permits the export or transfer of certain Group 1 items and ECL no. 5504 items to consignees located in eligible destinations.
These developments are outlined in our prior blog, available here.
