Regulations Amending the Special Economic Measures (Russia) Regulations: SOR/2023-46
Canada Gazette, Part II, Volume 157, Number 7
Registration
SOR/2023-46 March 10, 2023
SPECIAL ECONOMIC MEASURES ACT
P.C. 2023-215 March 9, 2023
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 subsections 4(1)footnote a, (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 Special Economic Measures (Russia) Regulations footnote 1 are amended by adding the following after section 3.13:
Steel and aluminum — import
3.14 (1) It is prohibited for any person in Canada and any Canadian outside Canada to import, purchase or acquire any good referred to in column 1 of Schedule 11 from Russia or from any person in Russia.
Non-application
(2) Subsection (1) does not apply to goods if a contract for the import, purchase or acquisition of the goods is entered into before the day on which this section comes into force.
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 3.14.
3 The Regulations are amended by adding, after Schedule 10, the Schedule 11 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 11
(Subsection 3.14(1)
| Item | Column 1 Goods |
Column 2 Harmonized Commodity Description and Coding System code table 1 note a |
|---|---|---|
| 1 | Iron and steel | 72 |
| 2 | Sheet piling of iron or steel, whether or not drilled, punched or made from assembled elements; welded angles, shapes and sections, of iron or steel | 7301 |
| 3 | Railway or tramway track construction material of iron or steel, the following: rails, check-rails and rack rails, switch blades, crossing frogs, point rods and other crossing pieces, sleepers (cross-ties), fish-plates, chairs, chair wedges, sole plates (base plates), rail clips, bedplates, ties and other material specialized for jointing or fixing rails | 7302 |
| 4 | Tubes, pipes and hollow profiles, of cast iron | 7303 |
| 5 | Tubes, pipes and hollow profiles, seamless, of iron (other than cast iron) or steel | 7304 |
| 6 | Other tubes and pipes (for example, welded, riveted or similarly closed), having circular cross-sections, the external diameter of which exceeds 406.4 mm, of iron or steel | 7305 |
| 7 | Other tubes, pipes and hollow profiles (for example, open seam or welded, riveted or similarly closed), of iron or steel | 7306 |
| 8 | Aluminum and articles thereof | 76 |
Table 1 note(s)
|
||
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
Issues
Russian exports of aluminum and steel products continue to generate revenues that are a source of material support to Russia’s invasion 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 through 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 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.
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. The war has become a grinding war of attrition which sees little prospect of a quick victory for either side, and both continue to incur heavy losses. The Russian military has committed horrific atrocities against civilians, including in Izium, Bucha, Kharkiv and Mariupol. Experts, including the Organization for Security and Co-operation in Europe (OSCE) Moscow Mechanism fact-finding missions, the Independent International Commission of Inquiry on Ukraine and the United Nations Office of the High Commissioner for Human Rights (OHCHR), 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) is mined. 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’s (NATO) support. The deterioration of Russia’s relations with Ukraine has paralleled the worsening of its relations with the United States and the NATO, which has led to heightened tensions.
International response
The coalition of countries supporting Ukraine includes, but is not limited to, G7 and European countries and some of Ukraine’s neighbours. This group is working to support Ukraine across a number of 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. Canada and G7 countries are engaged in intense diplomacy with the broader international community to encourage support for Ukraine and counter false Russian narratives. Key votes in multilateral forums have effectively isolated Russia, including resolutions in the United Nations General Assembly condemning Russian aggression against Ukraine (March 2022), deploring the humanitarian consequences of Russian aggression against Ukraine (March 2022), suspending Russian membership in the United Nations Human Rights Council (April 2022) and condemning Russia’s illegal annexation of Ukrainian territories (October 2022). Many developing 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. Russia continues to use its position as a permanent member of the United Nations Security Council (UNSC) to block UNSC action on its war on Ukraine and its corrosive disinformation policies.
Canada’s response
Since February 2022, Canada has committed or delivered over $5 billion in assistance to Ukraine. This includes military aid, cyber defence and training to Ukrainian troops in the United Kingdom and Poland under the aegis of Operation UNIFIER. Economic resilience support includes new loan resources, a loan guarantee, and Ukraine Sovereignty Bonds. Canada is helping Ukraine repair its energy infrastructure and has temporarily removed trade tariffs on Ukrainian imports. Canada has also committed development and humanitarian assistance, and is countering disinformation through the G7 Rapid Response Mechanism. Canada is also providing security and stabilization programming, including support for civil rights organizations and human rights defenders. Canada announced two new immigration streams for Ukrainians coming to Canada: the temporary Canada-Ukraine Authorization for Emergency Travel and a special permanent residence stream for family reunification.
In coordination with its allies and partners, Canada has imposed sanctions on more than 1 800 individuals and entities in Russia, Belarus and Ukraine who are complicit in the violation of Ukraine’s sovereignty and territorial integrity. In addition, Canada 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, which limits the provision of maritime services to Russian crude oil and petroleum products above a price set by the coalition. These amendments to the Regulations build upon Canada’s existing sanctions by further impeding Russian dealings with Canada. Canada is taking these measures in coordination with partners, including the United States, the United Kingdom, the European Union, Australia, New Zealand, Japan and Ukraine.
Conditions for imposing and lifting sanctions
Pursuant to SEMA, the Governor in Council may impose economic and other sanctions against foreign states, entities and individuals when, among other circumstances, a person has participated in gross and systematic human rights violations in Russia.
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 United States, the United Kingdom, the European Union and Australia have continued to update their sanction regimes against individuals and entities in both Ukraine and Russia.
Objective
- Impose further costs on Russia for its unprovoked attack and aggression against Ukraine;
- Ensure that Canada does not import Russian aluminum and steel products; and
- Underscore continued unity with allies (specifically the United States) and partners in responding to Russia’s ongoing actions in Ukraine.
Description
The amendments to the Regulations will prohibit the import of aluminum and steel products originating from Russia. This includes all aluminum products classified under Chapter 76 of the World Customs Organization Harmonized Commodity Description and Coding System, such as unwrought aluminum, aluminum sheets, and finished products, including containers and household items made from aluminum. The amendments add these products to Schedule 11. The amendments also include steel products classified under Chapter 72 and codes 7301, 7302, 7303, 7304, 7305, 7306 of the Harmonized Commodity Description and Coding System, including iron and non-alloy steel, semi-finished, and finished products, such as tubes and pipes. The amendments add these products to Schedule 11. These prohibitions do not apply to goods if a contract for the import, purchase or acquisition of the good is concluded before the day on which this section comes into force.
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. Global Affairs research also draws from analysis from pro-democracy movements inside and outside of Russia.
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, 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
The aluminum and steel products added to Schedule 11 that will be banned from importation to Canada from Russia represented $98.4 million in 2022. The amendments could create additional costs for businesses that will be forced to source imports from other sources or to seek permits that would authorize them to carry out specified activities or transactions that are otherwise prohibited. However, these costs are expected to be minimal given the effectiveness of the Most-Favoured-Nation withdrawal in March 2022. Over the past year, Canadian imports of Russian aluminum and steel products have effectively ceased. It is unclear what impacts Canadian and U.S. actions will have on broader steel and aluminum global markets.
Small business lens
Likewise, the amendments could create additional costs for small businesses that will be forced to source imports from other sources or to seek permits that would authorize them to carry out specified activities or transactions that are otherwise prohibited. However, costs will likely be low given significant decreases of imported Russian products as the results of other recent trade measures (e.g. withdrawal of Most-Favoured-Nation tariff preferences). No significant loss of opportunities for small businesses is expected as a result of the amendments.
One-for-one rule
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 therefore 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 the objectives of similar actions taken by Canada’s allies.
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. 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, and limit the collateral effects to those dependent on those targeted individuals and entities.
Rationale
The amendments ban the importation of Russian aluminum and steel products into Canada to ensure that revenues cannot be generated from such trade to support Russia’s invasion of Ukraine. The amendments will also ensure that Russian aluminum and steel will not be diverted to Canada due to the actions of other allies and partners to similarly block or constrain trade with Russia, in particular the United States. An import ban will also align Canada with the actions of the United States and others as we collectively pressure industries critical to Russia’s war in Ukraine.
Implementation, compliance and enforcement, and service standards
The amendments come into force on the day on which they are registered.
Canada’s sanctions regulations are enforced by the Royal Canadian Mounted Police and the Canada Border Services Agency (CBSA). 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 CBSA has enforcement authorities under SEMA and the Customs Act, and will play a role in the enforcement of these sanctions.
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