Regulations Amending the Special Economic Measures (Russia) Regulations: SOR/2024-130

Canada Gazette, Part II, Volume 158, Number 14

Registration
SOR/2024-130 June 12, 2024

SPECIAL ECONOMIC MEASURES ACT

P.C. 2024-684 June 12, 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 (1) Item 1203 of Part 1 of Schedule 1 to the Special Economic Measures (Russia) Regulations footnote 1 is replaced by the following :

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

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

3 (1) 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
35.01 Machining centres for working metal 8457.10
35.02 Numerically controlled horizontal lathes (including turning centres) for removing metal 8458.11
35.03 Numerically controlled lathes (including turning centres) for removing metal, other than horizontal lathes 8458.91
35.04 Numerically controlled milling machines for metals, other than lathes (including turning centres) of heading 8458 of the Harmonized Commodity Description and Coding System published by the World Customs Organization, way-type unit head machines, drilling machines, boring-milling machines, boring machines, and knee-type milling machines 8459.61
35.05 Parts and accessories suitable for use solely or principally with the machines of headings 8456 to 8461 of the Harmonized Commodity Description and Coding System published by the World Customs Organization, other than tool holders and self-opening dieheads, work holders and dividing heads and other special attachments for machines 8466.93
(2) The portion of item 35.1 of Schedule 7 to the French version of the Regulations in column 1 is replaced by the following:
Article

Colonne 1

Marchandises
35.1 Unités de traitement autres que celles des nos 8471.41 ou 8471.49 du Système harmonisé de désignation et de codification des marchandises, publié par l’Organisation mondiale des douanes, pouvant comporter, sous une même enveloppe, un ou deux des types d’unités suivants : unité de mémoire, unité d’entrée et unité de sortie

(3) Item 38 of Schedule 7 to the Regulations is repeealed.

(4) The portion of item 38.7 of Schedule 7 to the French version of the Regulations in column 1 is replaced by the following:
Article

Colonne 1

Marchandises
38.7 Machines et appareils visés à la note 11 C) du chapitre 84 du Système harmonisé de désignation et de codification des marchandises, publié par l’Organisation mondiale des douanes (machines et appareils des types utilisés exclusivement ou principalement pour : 1) la fabrication ou la réparation des masques et réticules, 2) l’assemblage des dispositifs à semiconducteur ou des circuits intégrés électroniques, 3) le levage, la manutention, le chargement et le déchargement des lingots, des plaquettes ou des dispositifs semiconducteurs, des circuits électroniques intégrés et des dispositifs d’affichage à écran plat)
(5) The portion of item 39.2 of Schedule 7 to the French version of the Regulations in column 1 is replaced by the following:
Article

Colonne 1

Marchandises
39.2 Parties reconnaissables comme étant exclusivement ou principalement destinées aux appareils des n°s 85.24 à 85.28 du Système harmonisé de désignation et de codification des marchandises, publié par l’Organisation mondiale des douanes; autre
(6) The portion of item 53.1 of Schedule 7 to the French version of the Regulations in column 1 is replaced by the following:
Article

Colonne 1

Marchandises
53.1 Lunettes de visée pour armes; périscopes; lunettes pour machines, appareils ou instruments du chapitre 90 ou de la section XVI du Système harmonisé de désignation et de codification des marchandises, publié par l’Organisation mondiale des douanes

Application Before Publication

4 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

5 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

Situation in Ukraine

On February 24, 2022, Russian President 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. Russia has recently opened a new front in Ukraine’s northeast. 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. As of February 2024, the UN Human Rights Monitoring Mission in Ukraine has confirmed at least 10 000 civilians have been killed and that 20 000 were injured since February 24, 2022. Furthermore, 444 medical facilities and 1 055 educational facilities in Ukraine have been damaged or 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.

International response

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.

As the war continues, G7 members and 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 will meet in Switzerland in June 2024 for a peace summit. However, Russia consistently uses its position as a permanent member of the UNSC to block action against 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 arguing the conflict is less of a priority for their regions.

At the 2018 G7 Leaders Summit in Charlevoix, Quebec, the G7 established the Rapid Response Mechanism (G7 RRM) to strengthen G7 coordination in identifying and responding to foreign threats to democracies, including Russian disinformation. In 2022, the G7 Multi-Agency Donor Coordination Platform was established. Also in 2022, the G7 established the Oil Price Cap Coalition, aimed at maintaining stability in global oil markets while limiting Russia’s ability to profit from oil sales. 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

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 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 prohibited from dealing in the property of, entering into transactions with, providing services to, or otherwise making goods available to persons listed under Schedules 1, 2 or 3 of the Special Economic Measures (Russia) Regulations (the Russia Regulations).

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 partners, Canada has imposed sanctions on more than 3 000 individuals and entities in Russia, Belarus, Ukraine and Moldova. In addition, Canada has implemented targeted restrictions against Russia and Belarus in financial, trade (goods and services), energy and transport sectors. Canada is part of the Oil Price Cap Coalition, the G7 diamond import ban and ongoing efforts to use the proceeds from Russian sovereign assets to help Ukraine.

Military-industrial complex

Russia’s Ministry of Defence is serviced by a network of companies that provide equipment and technology. Canada’s sanctions are meant to undermine Russia’s military-industrial complex to make it more difficult for Russia to wage its illegal war in Ukraine.

Sanctions circumvention

Russia faces a historically unprecedented number of sanctions and Russian officials, individuals and entities have consequently deployed various methods to circumvent the prohibitions. Russia has used its logistics companies to transport prohibited goods from third countries and set up businesses in third countries to facilitate this evasion. Supply chains and technologies are used to provide Russian soldiers with western goods while they attack Ukraine. In the case of the G7 Oil Price Cap, Russia’s tactics include using a so-called shadow fleet of oil tankers that service Russian oil sold above the price set by the Oil Price Cap coalition. Russian insurance companies offer products that appear legitimate but do not in fact insure sanctioned Russian oil. This creates significant environmental risks globally and specifically for countries whose waters and ports the shadow fleet has access to. To address sanction evasion, amendments were made to the Russia Regulations in February 2024 to 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.

Disinformation agents

Russia is using disinformation and propaganda to weaken the resolve of Ukrainians to oppose Russia’s illegal aggression. Russia also targets Canadians to weaken national resolve to support Ukraine and undermine our democratic institutions. In response to Russia’s use of disinformation, Canada has sanctioned over 120 individuals and entities that are complicit in spreading Russian disinformation. These persons are instrumental to the Russian regime in undermining state sovereignty, and responsible for spreading false narratives that serve as pretexts for the Russian regime’s illegal war. Canada has established Rapid Response Mechanism Canada (RRM Canada), the permanent secretariat to the G7 RRM, which is a team dedicated to understanding, monitoring and detecting Russian and other state-sponsored disinformation.

Common high priority 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’s sanctions partners developed a list of Common High Priority Items (CHPL) that are produced in western countries but known to be used in Russian military systems and have been found on the battlefield in Ukraine or are critical to the development, production, or use of those Russian military systems. The CHPL is a useful tool to support effective sanctions compliance and efforts to address circumvention. In February 2024, Canada’s international partners added five more HS Codes to prohibit the export of Computer Numerical Controlled (CNC) Machines, an automatic technology that uses a computer program to control mechanical tools.

Objective

The specific objectives of imposing these measures are to

Description

Amendments to the list of sanctioned persons

The amendments add 11 individuals and 16 entities to Schedule 1 of the Regulations, who have been engaged in activities that support Russia’s invasion of Ukraine.

These persons include

Any person in Canada or Canadians outside Canada is thereby prohibited from dealing in the property of, entering into transactions with, providing services to, transferring property to, or otherwise making goods available to listed individuals and entities (persons). These measures will also render listed individuals inadmissible to Canada under the Immigration and Refugee Protection Act. Under the Russia Regulations, listed persons may apply to the Minister of Foreign Affairs to have their name removed from the Schedule of designated persons. The Minister must determine whether there are reasonable grounds to make a recommendation to the Governor in Council for removal.

Amendments to the list of prohibited goods

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 Russia Regulations as classified under the World Customs Organization Harmonized Commodity Description and Coding System, as categorized by the Common High Priority List as follows:

Tier IV (B): Computer Numeric Controlled (CNC) machine tools and components.

Technical amendments

The amendments also include corrections to the French version of certain items listed in Schedule 7 and a correction to the published date of birth for Vladislav Alexandrovich Tretiak.

Regulatory development

Consultation

Global Affairs Canada engages regularly 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. Publicizing the names of the persons targeted by sanctions would have potentially resulted in asset flight prior to the coming into force.

Modern treaty obligations and Indigenous engagement and consultation

An initial assessment of the geographical scope of the initiative 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 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. The newly listed individuals and entities have limited linkages with Canada. Prohibiting business dealings with those individuals and entities would not impose significant cost on the Canadian economy. If some Canadians and businesses in Canada and abroad are dealing with the newly listed individuals and entities, they will incur some cost to find substitute suppliers or purchasers, depending on the nature of the connection.

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. As of 2023, total Canadian merchandise exports to Russia were 92.6% lower compared to their 2021 (pre-invasion) levels. Canadian exports of the CHPL Tier 4B products to Russia have always been low and fell to virtually zero after Russia invaded Ukraine in 2022. Of the five Tier 4B products, only two products showed meaningfully positive historical export values prior to sanctions: milling machines (HS 845961) and parts for machine tools (HS 846693). For the three remaining products, Canadian exports to Russia were near zero between 2014 and 2023. Overall, Canada exports a small amount of Tier 4B products. Canadian exports of Tier 4B products to the world totalled $175 million in 2023, of which nearly 90% were destinated for the United States.

Small business lens

Analysis under the small business lens concluded that the regulation 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 Russia 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. Canadian small businesses are also subject to the duty to disclose under the Russia Regulations, which would represent a direct compliance requirement. However, as the newly listed individuals have limited known linkages with Canada, Global Affairs Canada does not anticipate any disclosures resulting from the amendments.

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 partners. Sanctions are most effective when they are applied in a coordinated manner.

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. Canada’s international partners continue to update their sanction regimes against individuals and entities in Russia and enforce far-reaching trade and investment prohibitions on Russia.

Countries and jurisdictions that have sanctioned individuals and entities related to Russia’s military efforts, including circumvention and disinformation, include Australia, the European Union, Japan, New Zealand, Switzerland, the United Kingdom and the United States.

Strategic environmental assessment

The Russia 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

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 they are registered.

Consequential to being listed in the Russia 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.

The Trade Commissioner Service (TCS) at Global Affairs Canada, 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. Global Affairs Canada 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.

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 to ensure exports do not flow to Russia directly or via third countries.

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.

Contact

Global Affairs Canada
Sanctions Policy and Operations Coordination Division (PER)
125 Sussex Drive
Ottawa, Ontario
K1A 0G2
Telephone (toll-free): 833‑352‑0769
Telephone (local): 343‑203‑3975
Fax: 613‑995‑9085
Email: sanctions@international.gc.ca