Vol. 148, No. 27 — December 31, 2014

Registration

SOR/2014-316 December 19, 2014

SPECIAL ECONOMIC MEASURES ACT

Regulations Amending the Special Economic Measures (Russia) Regulations

P.C. 2014-1498 December 19, 2014

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 or is likely to result in a serious international crisis;

Therefore, His Excellency the Governor General in Council, on the recommendation of the Minister of Foreign Affairs, pursuant to subsections 4(1) to (3) of the Special Economic Measures Act (see footnote a), makes the annexed Regulations Amending the Special Economic Measures (Russia) Regulations.

REGULATIONS AMENDING THE SPECIAL ECONOMIC MEASURES (RUSSIA) REGULATIONS

AMENDMENTS

1. (1) The portion of subsection 3.1(1) of the Special Economic Measures (Russia) Regulations (see footnote 1) before paragraph (a) is replaced by the following:

New debt financing — 30 days

3.1 (1) It is prohibited for any person in Canada and any Canadian outside Canada to transact in, provide financing for or otherwise deal in new debt of longer than 30 days’ maturity, including bonds, loans, debentures, extensions of credit, loan guarantees, letters of credit, bank drafts, bankers’ acceptances, discount notes, treasury bills, commercial paper and other similar instruments, in relation to

(2) The portion of subsection 3.1(1.1) of the Regulations before paragraph (a) is replaced by the following:

New debt financing — 90 days

(1.1) It is prohibited for any person in Canada and any Canadian outside Canada to transact in, provide financing for or otherwise deal in new debt of longer than 90 days’ maturity, including bonds, loans, debentures, extensions of credit, loan guarantees, letters of credit, bank drafts, bankers’ acceptances, discount notes, treasury bills, commercial paper and other similar instruments, in relation to

(3) Subsection 3.1(2) of the Regulations is replaced by the following:

Non-application

(2) Subsections (1) and (1.1) do not apply if the activities referred to in those subsections were undertaken before the designated person was listed in Schedule 2 or 3.

2. (1) The portion of subsection 3.2(1) of the Regulations before paragraph (a) is replaced by the following:

New equity financing

3.2 (1) It is prohibited for any person in Canada and any Canadian outside Canada to transact in, provide financing for or otherwise deal in new securities, including shares or any other ownership interest, in relation to

(2) Subsection 3.2(2) of the Regulations is replaced by the following:

Non-application

(2) Subsection (1) does not apply if the activities referred to in that subsection were undertaken before the designated person was listed in Schedule 2.

3. The Regulations are amended by adding the following after section 3.2:

Oil exploration or production

3.3 (1) It is prohibited for any person in Canada and any Canadian outside Canada to export, sell, supply or ship any good referred to in column 1 of Schedule 4, wherever situated, to Russia or to any person in Russia for use in

Services

(2) It is prohibited for any person in Canada and any Canadian outside Canada to provide to Russia or to any person in Russia any financial, technical or other services related to any good whose export, sale, supply or shipment is prohibited by subsection (1).

Non-application

(3) Subsections (1) and (2) do not apply to goods or services if a contract for the export, sale, supply or shipment of the good or for any related service set out in subsection (2) is entered into before the day on which this section comes into force.

4. Section 5 of the Regulations is replaced by the following:

Prohibited act

5. It is prohibited for any person in Canada and any Canadian outside Canada to do anything that causes, assists or promotes, or is intended to cause, assist or promote, any act or thing prohibited under any of sections 3 to 3.3.

5. Part 1 of Schedule 1 to the Regulations is amended by adding the following after item 66:

6. The Regulations are amended by adding, after Schedule 3, the Schedule 4 set out in the schedule to these Regulations.

APPLICATION PRIOR TO PUBLICATION

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

COMING INTO FORCE

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

SCHEDULE
(Section 6)

SCHEDULE 4
(Subsection 3.3(1))

GOODS

Note: The Harmonized Commodity Description and Coding System codes (published by the World Customs Organization) set out in column 2 are provided for reference purposes only.

Item Column 1





Goods		 Column 2

Harmonized Commodity Description and Coding System code
1. Seamless stainless steel line pipe of a kind used for oil or gas pipelines 730411
2. Seamless iron or steel line pipe of a kind used for oil or gas pipelines, other than line pipe made of stainless steel or cast iron 730419
3. Seamless iron or steel drill pipe of a kind used in drilling for oil or gas, other than drill pipe made of cast iron 730422 and 730423
4. Seamless iron or steel tubing of a kind used in drilling for oil or gas, other than tubing made of cast iron 730429
5. Iron or steel line pipe of a kind used for oil or gas pipelines that has circular cross-sections and an external diameter exceeding 406.4 mm 730511, 730512 and 730519
6. Iron or steel casing of a kind used in drilling for oil or gas that has circular cross-sections and an external diameter exceeding 406.4 mm 730520
7. Welded iron or steel line pipe of a kind used for oil or gas pipelines that has an external diameter not exceeding 406.4 mm, other than line pipe made of cast iron 730611 and 730619
8. Welded casing and tubing of a kind used in drilling for oil or gas that has an external diameter not exceeding 406.4 mm and is made of flat-rolled steel or iron products, other than casing and tubing made of cast iron 730621 and 730629
9. Interchangeable rock-drilling or earth-boring tools that have working parts made of sintered metal carbides, cermets, diamond or agglomerated diamond 820713 and 820719
10. Power-driven reciprocating positive displacement pumps for liquids, other than pumps with measuring devices, concrete pumps and fuel, lubricating or cooling medium pumps for internal combustion piston engines 841350
11. Power-driven rotary positive displacement pumps for liquids, other than pumps with measuring devices and fuel, lubricating or cooling medium pumps for internal combustion piston engines 841360
12. Liquid elevators and their parts, other than pumps 841382 and 841392
13. Non-hydraulic or non-self-propelled boring or sinking machinery, and their parts, for boring earth or extracting minerals or ores, other than tunnelling machinery and hand-operated tools 843049 and 843143
14. Parts for lifting, handling, loading or unloading machinery 843139
15. Parts for (a) derricks, cranes, mobile lifting frames and other lifting machinery; (b) self-propelled bulldozers, scrapers, graders, levellers, shovel loaders and tamping machines; and (c) other moving, grading, scraping, levelling, excavating and extracting machinery 8431
16. Parts for hydraulic or self-propelled boring or sinking machinery 843143
17. Mobile drilling derricks 870520
18. Floating or submersible drilling or production platforms 890520
19. Fire-floats, lightships and floating docks or cranes, other than dredgers 890590

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The Russian Federation continues to violate the sovereignty and territorial integrity of Ukraine.

Background

Acting in coordination with the United States and the European Union, the Governor in Council has found that the actions of the Russian Federation constitute a grave breach of international peace and security that has resulted or is likely to result in a serious international crisis. As a result, the Special Economic Measures (Russia) Regulations were approved on March 17, 2014. Amendments to these Regulations were made on March 19, 2014, March 21, 2014, April 28, 2014, May 4, 2014, May 12, 2014, June 21, 2014, July 24, 2014, August 6, 2014, and September 16, 2014.

There continues to be ongoing reported violations of the ceasefire agreements made in Minsk, Belarus on September 5 and 19, 2014. Briefing the United Nations Security Council on November 12, 2014, Assistant Secretary-General ad interim for United Nations (UN) Political Affairs Jens Anders Toyberg-Frandzen stated that the security situation in Donetsk and Luhansk now “almost rivals” the period immediately preceding the ceasefire agreement. There is also grave international concern that Russia is not implementing the 12-point peace plan that was agreed upon by the Presidents of Ukraine and Russia. These items include the release of prisoners, permanent observation of the ceasefire by the Organization for Security and Cooperation in Europe (OSCE), the full withdrawal of Russian soldiers and weapons from the region, and self-determination by the Donetsk and Luhansk provinces on their future status. Russia has violated previous commitments, including agreements reached in Geneva in April 2014 and in Berlin in July 2014.

On November 2, 2014, the Donetsk and Luhansk “People’s Republics” held so-called “presidential and legislative elections,” in violation of the Minsk agreements. Canada, as well as the United States and the European Union, have condemned these “elections,” which contravened Ukraine’s constitution as well as the terms of the Minsk agreements, and were conducted in the presence of armed gunmen, as illegitimate. The following days, Russia announced its recognition of the “elections,” including through a statement by its Permanent Representative to the OSCE, announcing that it “respects the will of the voters” in the militant- controlled regions.

Russia’s direct military involvement in the conflict, which the Russian government continues to deny, has resulted in a significant reversal of gains made by Ukrainian forces over the summer. On November 12, 2014, NATO Supreme Allied Commander Philip Breedlove cited multiple reports of large convoys crossing the border from Russia into Ukraine over a period of days, and assessed that this significant military build-up included Russian artillery, tanks and troops. OSCE monitors have also reported these significant movements. Ukraine’s National Security and Defence Council has estimated that a total of 33 000 Russian and pro-Russian militants are operating in eastern Ukraine, including 7 700 Russian soldiers.

According to the United Nations, over 4 000 persons have been killed, over 6 000 wounded and hundreds of thousands displaced since the Russian-backed militants launched their violent campaign in April 2014. The humanitarian situation is likely to continue to deteriorate with the onset of winter. Briefing the United Nations Security Council on November 12, 2014, Assistant Secretary-General ad interim for UN Political Affairs Jens Anders Toyberg-Frandzen noted that the number of internally displaced persons is expected to increase.

Canada, along with its partners and allies, continues to collaborate in imposing additional coordinated sanctions on Russia, including sanctions targeted at key sectors of the Russian economy, and sanctions against individuals responsible for the situation in Ukraine. These actions have been taken to demonstrate to the Russian leadership that it must end its support to militant separatists in eastern Ukraine and tangibly participate in creating the necessary conditions for the political process to advance peacefully.

Objectives

The proposed Regulations amend the Special Economic Measures (Russia) Regulations by adding 11 individuals to Schedule 1.

The Regulations also add a prohibition on the export, sale, supply or shipment to Russia or any person in Russia of specified goods listed in Schedule 4 and services that are critical to deep water and Arctic oil exploration and production projects, as well as shale oil exploration and production. Finally, the Regulations amend the debt and equity provisions to clarify their scope.

Description

The Regulations add 11 individuals to the list of designated persons under Schedule 1 of the Special Economic Measures (Russia) Regulations. Any person in Canada and any Canadian outside Canada are prohibited from

Exceptions to the above-noted prohibitions are available for the following:

The Regulations also prohibit the export, sale, supply or shipment of goods described in Schedule 4 to Russia or any person in Russia where those goods are to be used in the following purposes:

The Regulations also prohibit the provision of any financial, technical or other services related to any goods for which the export, sale, supply or shipment would be prohibited by the proposed amendments. The prohibitions do not apply in respect of goods or services provided pursuant to a pre-existing contract.

Finally, the Regulations clarify the scope of the new debt financing and new equity financing provisions by spelling out the instruments or interests, respectively, which are intended to be captured by these provisions.

“One-for-One” Rule

The “One-for-One” Rule applies to this proposal, as there are minimal administrative costs to business, because of the reporting requirement. However, the administrative burden associated with these Regulations is carved out from the “One-for-One” Rule, as they address unique, exceptional circumstances.

Small business lens

The small business lens does not apply to this proposal, as there are no costs (or insignificant costs) to small business, and small businesses would not be disproportionately affected.

Consultation

Foreign Affairs, Trade and Development Canada drafted the Regulations in consultation with the Department of Justice and Citizenship and Immigration Canada.

Rationale

The measures contained in the Regulations demonstrate Canada’s concern about the continuing violation of Ukraine’s sovereignty and territorial integrity.

Implementation, enforcement and service standards

Canada’s sanctions regulations are enforced by the Royal Canadian Mounted Police and the Canada Border Services Agency. In accordance with section 8 of the Special Economic Measures Act, every person who wilfully contravenes these 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.

Contact

Kevin Hamilton
Director
Eastern Europe and Eurasia Division
Foreign Affairs, Trade and Development Canada
125 Sussex Drive
Ottawa, Ontario
K1A 0G2
Telephone: 343-203-3603
Fax: 613-995-1277
Email: Kevin.Hamilton@international.gc.ca