Regulations Amending the Special Economic Measures (Russia) Regulations: SOR/2022-67

Canada Gazette, Part II, Volume 156, Number 8

Registration
SOR/2022-67 March 24, 2022

SPECIAL ECONOMIC MEASURES ACT

P.C. 2022-263 March 24, 2022

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

Regulations Amending the Special Economic Measures (Russia) Regulations

Amendments

1 The Special Economic Measures (Russia) Regulations footnote 1 are amended by adding the following after section 3.5:

Restricted goods

3.6 (1) It is prohibited for any person in Canada and any Canadian outside Canada to export, sell, supply or ship any good, wherever situated, to Russia or to any person in Russia if the good is described in the Restricted Goods and Technologies List.

Restricted technologies

(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 technology that is described in the Restricted Goods and Technologies List.

Non-application — goods

(3) Subsection (1) does not apply to

Non-application — technologies

(4) Subsection (2) does not apply to technology provided in relation to a good if the export, sale, supply or shipment of that good is authorized by subsection (3).

Definitions

(5) The following definitions apply in this section.

consumer communication device
means any of the following items:
  • (a) computers;
  • (b) disk drives, solid-state storage equipment and other memory devices;
  • (c) input/output control units, other than industrial controllers designed for chemical processing;
  • (d) graphics accelerators and graphics coprocessors;
  • (e) monitors;
  • (f) printers;
  • (g) modems, network access controllers and communications channel controllers;
  • (h) keyboards, mice and similar devices;
  • (i) mobile phones, including cellular and satellite telephones, personal digital assistants, subscriber identity module (SIM) cards and similar devices;
  • (j) information security equipment and peripherals;
  • (k) digital cameras and memory cards;
  • (l) television and radio receivers;
  • (m) recording devices;
  • (n) batteries, chargers, carrying cases and accessories for a good referred to in paragraphs (a) to (m); and
  • (o) software, other than encryption source code, for use with a good referred to in paragraphs (a) to (n). (dispositif de communication)
Restricted Goods and Technologies List
means the Restricted Goods and Technologies List, prepared by the Department of Foreign Affairs, Trade and Development and published on the Department’s website, as amended from time to time. (Liste des marchandises et technologies réglementées)
technology
means technical data and any form of technical assistance, such as providing instruction, training, consulting or technical advice services or transferring know-how or technical data. (technologie)

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

Assisting in prohibited activities

5 It is prohibited for any person in Canada and any Canadian outside Canada to knowingly do anything that causes, facilitates or assists in, or is intended to cause, facilitate or assist in, any activity prohibited by sections 3 to 3.6.

3 The Regulations are amended by adding, after Schedule 5, the Schedule 6 set out in the schedule to these Regulations.

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.

SCHEDULE

(Section 3)

SCHEDULE 6

(Paragraphs 3.6(3)(a), (c) and (f))

Partner Countries

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

Following Russia’s illegal occupation and attempted annexation of Crimea in March 2014, the Canadian government, in tandem with partners and allies, enacted sanctions under the Special Economic Measures Act. These sanctions impose dealings prohibitions (an effective asset freeze) on designated individuals and entities in Russia and Ukraine 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 listed persons.

In late fall of 2021, after months of escalatory behaviour, Russia began massing troops, military equipment and military capabilities on Ukraine’s borders and around Ukraine. The build-up lasted into February 2022, eventually totalling 150 000–190 000 troops. On February 15, 2022, the Russian Duma (equivalent to the Canadian Parliament) voted to ask President Putin to recognize the so-called Luhansk and Donetsk People’s Republics in eastern Ukraine, further violating Ukraine’s sovereignty, as well as the Minsk agreements intended to bring about a peaceful resolution to the conflict in eastern Ukraine. On February 18, 2022, Russia-backed so-called authorities ordered the evacuation of women and children from the region, as well as the conscription of men aged 18 to 55. On February 20, 2022, Russia extended a joint military exercise with Belarus and announced that Russian troops would not leave Belarus. On February 21, 2022, following a meeting of the Russian Security Council, President Putin signed decrees recognizing the “independence” and “sovereignty” of the so-called Luhansk People’s Republic (LNR) and Donetsk People’s Republic (DNR). Immediately following this, President Putin ordered Russian forces to perform “peacekeeping functions” in the so-called LNR and DNR regions. He also expressly abandoned the Minsk agreements, declaring them “non-existent.” On February 22, 2022, Russia’s Duma and Federation Council granted President Putin permission to use military force outside the country. Uniformed Russian troops and armoured vehicles then moved into the Donetsk and Luhansk regions for the first time under official orders. On February 24, 2022, President Putin announced a “special military operation” as Russian forces launched a full-scale invasion of Ukraine. The invasion began with targeted strikes on key Ukrainian military infrastructure and the incursion of Russian forces into Ukraine in the north from Russia and Belarus, in the east from Russia and the so-called LNR and DNR regions, and in the south from Crimea.
The deterioration of Russia’s relations with Ukraine has paralleled the worsening of its relations with the United States (U.S.) and the North Atlantic Treaty Organization (NATO), which has led to heightened tensions.

International response

Since the beginning of the current crisis, Canada and the international community have been calling on Russia to de-escalate, pursue diplomatic channels, and demonstrate transparency in military activities. Diplomatic negotiations have taken place along several tracks, including via (1) United States–Russia bilateral talks (e.g. the Strategic Stability Dialogue); (2) NATO; (3) the Organization for Security and Cooperation in Europe (OSCE); and (4) the Normandy Four format (Ukraine, Russia, Germany, France) for the implementation of the Minsk agreements.

G7 Foreign Affairs ministers released a statement on February 21, 2022, condemning Russian recognition of the so-called LNR and DNR regions and stating that they were preparing to step up restrictive measures to respond to Russia’s actions, while reaffirming their unwavering commitment to Ukraine’s sovereignty and territorial integrity. On March 17, 2022, G7 Foreign Affairs ministers reaffirmed their commitment and demanded that the Russian leadership immediately comply with the order of the International Court of Justice to stop the assault on Ukraine. This follows a similar statement made in December 2021, and another by NATO Foreign Affairs ministers in January 2022.

On February 24, 2022, the United States Commerce Department implemented a series of significant new export control measures on exports of broad classes of goods and technologies to Russia, targeting the Russian defence, aerospace and maritime sectors. To facilitate the cooperation and coordination of its allies in restricting the export of such goods and technologies to Russia, the U.S. will not apply its measures extraterritorially to its allies such as Canada, the United Kingdom (U.K.), Australia and Japan so long as similar export restrictions are adopted and enforced through the domestic legislation of these allies.

Canada’s financial and military contributions

Between January 2014 and January 2021, Canada has provided Ukraine with more than $890 million in multifaceted assistance to support Ukraine’s security, prosperity, and reform objectives. Canada is currently considering a number of potential response options to further support Ukraine and respond to Russian aggression, in close coordination with Canada’s allies and partners.

On January 27, 2022, Canada announced the extension and expansion of Operation UNIFIER, Canada’s non-combat military training and capacity-building mission to Ukraine. In addition, Canada has announced over $145 million in humanitarian assistance for Ukraine and an additional $35 million in development funding. This assistance is in addition to the sovereign loan of up to $620 million offered to Ukraine since January 21, 2022, to support its economic resilience and governance reform efforts.

Canada also recently announced that it will send weapons such as rocket launchers, hand grenades, anti-armour weapons, and ammunition to support Ukraine. These contributions are in addition to more than $57 million in military equipment that Canada has provided Ukraine from 2015 to 2021. Canada will also extend its commitment to Operation REASSURANCE, the Canadian Armed Forces’ contribution to NATO assurance and deterrence measures in Central and Eastern Europe. Canada is deploying an additional 460 troops to the approximately 800 currently deployed.

Conditions for lifting sanctions

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. The U.S., the U.K., the European Union (EU) and Australia have continued to update their sanction regimes against individuals and entities in both Ukraine and Russia.

Objectives

  1. Impose further costs on Russia for its unprovoked and unjustifiable invasion of Ukraine; and
  2. Align Canada’s actions with those taken by its international partners in relation to restricting the export of certain goods and technologies to Russia to underscore the shared security interests and continued unity with allies and partners in responding to Russia’s actions in Ukraine.

Description

In close alignment and cooperation with the U.S., the U.K., and the EU, the Regulations Amending the Special Economic Measures (Russia) Regulations (the amendments) impose new measures that prohibit any person in Canada and any Canadian outside Canada from exporting, selling, supplying or shipping any good, wherever situated, to Russia or to any person in Russia, if the good is described in the Restricted Goods and Technologies List. The list, with items of potential military and civilian applications, includes a broad range of items in the areas of electronics, computers, telecommunications, sensors and lasers, navigation and avionics, marine, aerospace and transportation. The Restricted Goods and Technologies List, which is prepared by Global Affairs Canada and published on its website, is incorporated into the amendments by reference, per section 18.1 of the Statutory Instruments Act.

Regulatory development

Consultation

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

With respect to the amendment of sanctions lists, public consultation would not be appropriate, given the urgency to impose these measures in response to the ongoing breach of international peace and security in Ukraine.

Modern treaty obligations and Indigenous engagement and consultation

An initial assessment of the geographical scope of the amendments was conducted and did not identify any modern treaty obligations to the Indigenous peoples of Canada, as the amendments 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

In close alignment with export restrictions of similar goods and technologies by the U.S., the U.K. and the EU, these sanctions will harm the Russian economy, limit Russia’s defence and aerospace manufacturing capability, and prevent Canada from becoming a trans-shipment point for items sanctioned by our partners. Canada is using the Special Economic Measures Act to prevent the export of a wide range of goods and technologies to Russia that could benefit the military and government of Russia. This decision will help to undermine and erode the capabilities of the Russian military.

The amendments will create additional costs for businesses seeking to verify if they are in compliance or to obtain permits that would authorize them to carry out specified activities or transactions that are otherwise prohibited. Exporters will also forego future business opportunities and profits if their established market becomes inaccessible or less accessible due to complying with the additional sanctions. However, the list of restricted materials will be accessible on the sanctions page of the Global Affairs Canada website, and will be accessible to businesses looking to export goods to Russia.

Small business lens

The amendments potentially create additional costs for small businesses seeking to verify if they are in compliance (i.e. departmental advice to companies to seek private legal counsel) or to obtain permits that would authorize them to carry out specified activities or transactions that are otherwise prohibited. In 2020, the latest data available, there were approximately 840 Canadian companies that exported to Russia, most of which were small and medium enterprises (SMEs). Canadian merchandise exports to Russia in 2020 were just over $632 million. The exact share that would be impacted by these measures could not be determined.

One-for-one rule

As there are no administrative costs associated with these regulatory amendments, the one-for-one rule does not apply. The permitting process for businesses meets the definition of ’administrative burden” in the Red Tape Reduction Act and would need to be calculated and offset within 24 months. However, the amendments address an emergency circumstance and are exempt from the requirement to offset administrative burden and regulatory titles under the one-for-one rule.

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 like-minded partners, such as the EU.

Strategic environmental assessment

The amendments 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 Special Economic Measures Act can nevertheless have an unintended impact on certain vulnerable groups and individuals. Although these prohibitions on the export of items to Russia could affect Canadian exporters and Russia as a whole, their purpose is to reduce the ability of the Russian government to take military action against other countries. Military actions often have a greater impact on vulnerable populations.

Rationale

On February 24, 2022, the U.S. imposed significant export control measures in direct response to the Russian invasion of Ukraine, with the intended goal of imposing a direct economic cost on Russia and to negatively impact Russia’s military capabilities. One element of these measures imposed severe restrictions on exports to military end-user entities. A second element imposed a Russia-wide denial of exports of sensitive technology, primarily targeting the Russian defence, aviation, and maritime sectors in order to cut off Russia’s access to cutting-edge technology. A third element imposed a Foreign Direct Product rule related to the first two elements, which extends U.S. control measures to items produced outside the U.S. that are the direct product of certain U.S. software or technology. Canada has been granted an exemption from this Foreign Direct Product rule, on the basis of Canada’s commitment to impose similar measures on Russian goods and Russian military end-users. Canada has already imposed similar measures on Russian military end-users on March 10, 2022, and the present amendments seek to align Canada’s regulations with the second element of the U.S. measures.

The amendments are in direct response to the Russian invasion of Ukraine that began on February 24, 2022, which continues Russia’s blatant violation of Ukraine’s territorial integrity and sovereignty under international law. In coordination with actions being taken by Canada’s allies, the amendments seek to deny Russia’s access to vital technological inputs and impose a direct economic cost on Russia, signalling Canada’s strong condemnation of Russia’s latest violations of Ukraine’s territorial integrity and sovereignty.

The additional export restrictions on the goods and technologies found in these amendments have been or are in the process of being implemented by the EU, the U.K., Japan, Australia and the U.S., among others. By substantively aligning with these new U.S. measures, Canadian companies will be exempted from extra-territorial application of U.S. law restricting exports of U.S. goods and technologies.

Implementation, compliance and enforcement, and service standards

The items in the Restricted Goods and Technologies List will be available online on the sanctions page of the Global Affairs Canada website for businesses to review. This will help to facilitate compliance with the amendments.

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 knowingly contravenes or fails to comply with the Special Economic Measures (Russia) 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

Andrew Turner
Director
Eastern Europe and Eurasia Relations Division
Global Affairs Canada
125 Sussex Drive
Ottawa, Ontario
K1A 0G2
Telephone: 343‑203‑3603
Email: Andrew.Turner@international.gc.ca