On November 21, 2011, Canada announced expanded sanctions against Iran under the Special Economic Measures Act (this statute has recently been used to impose sanctions on Syria). According to the Department of Foreign Affairs and International Trade ("DFAIT") news release dated November 21, 2011:

The new sanctions prohibit financial transactions with Iran, expand the list of prohibited goods to include all goods used in the petrochemical, oil and gas industry in Iran, amend the list of prohibited goods to include additional items that could be used in Iran's nuclear program, and add new individuals and entities to the list of designated persons found in Schedule 1 of the SEMA regulations. The amendments also remove certain entities that no longer present a proliferation concern. The new prohibitions on financial transactions and goods used in the petrochemical, oil and gas industry in Iran do not apply to contracts entered into prior to November 22, 2011. [emphasis added]

Recall that this is the third set of Canadian sanctions against Iran since July 2010. These combined sanctions prohibit any and all of the following:

  • dealing in the property of persons designated under Schedule 1 of the Special Economic Measures (Iran) Regulations ("Regulations").
  • exporting or otherwise providing to Iran arms and related material not already banned, all goods used in the petrochemical, oil and gas industry in Iran, and items that could contribute to Iran's proliferation activities;
  • providing or acquiring financial services to allow an Iranian financial institution (or a branch, subsidiary or office) to be established in Canada, or vice versa;
  • conducting financial transaction with Iran, subject to certain exceptions;
  • making any new investment in the Iranian oil and gas sector;
  • establishing correspondent banking relationships with Iranian financial institutions, or purchasing any debt from the government of Iran; and
  • providing a vessel owned or controlled by, or operating on behalf of the Islamic Republic of Iran Shipping Lines (IRISL) with services for the vessel's operation or maintenance.

Note that the Special Economic Measures (Iran) Permit Authorization Order authorizes the Minister of Foreign Affairs to issue a permit to carry out a specified activity or transaction, or any class of activity or transaction, that would otherwise be restricted or prohibited pursuant to the Regulations.

Companies doing business in this region should familiarize themselves with the new requirements of the Canadian sanctions. Given their breadth and complexity, interaction with DFAIT may be necessary.

These measures will undoubtedly increases scrutiny by the Canada Border Services Agency ("CBSA") for shipments of most goods destined to the region. CBSA has broad discretionary powers to detain and seize goods for export if they believe a violation of the Regulations and other related laws has occurred, including a transhipment of prohibited goods through a third country. Companies shipping to the region must exercise care and due diligence given these latest developments.

The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.

© Copyright 2011 McMillan LLP