In the past couple of weeks, Canada has continued to apply pressure against Russia by way of economic sanctions, announcing two additional rounds of sanctions. The most recent round of amendments to the Special Economic Measures (Russia) Regulations ("Russia Regulations") came into force on July 14, 2022. In these amendments, Canada significantly expanded its ban on services to Russia or persons in Russia to include additional services and industries, with a focus on the manufacturing sector.
Another round of amendments came into force on July 7, 2022.1 These amendments created a sourcing ban for gold products and added 29 individuals and 15 entities to Schedule 1, who were identified by the Government of Canada as Russian disinformation and propaganda figures or entities involved in disinformation activities.
For further details regarding Canada's recent rounds of sanction measures, please refer to our client alerts from February 28, 2022, March 2, 2022, March 14, 2022, March 29, 2022, April 7, 2022, May 2, 2022, June 3, 2022, June 8, 2022, and July 5, 2022.
Canada significantly expands the scope of the services ban, targeting the manufacturing sector
On June 8, 2022, we described Canada's then-newly introduced services ban, which covered a broad array of services related to the oil, gas, mining and chemical industries. According to Global Affairs Canada's ("GAC") press release, the services ban would affect the provision of 28 services vital for the operation of the oil, gas and chemical industries, including technical, management, accounting, computer and advertising services and would target "an industry that accounts for about 50% of Russia's federal budget revenues". In our June 8th client alert, we remarked on the narrow scope of Canada's services ban, at least from an industry-related perspective, relative to its international peers, namely the United States, United Kingdom, and the European Union.
On July 14, 2022, however, Canada broadened the scope of this services ban to include eight additional industries, as well as a few additional services, with a focus on industrial manufacturing. As highlighted in GAC's press release, these amendments are expected to put further pressure on the Russian economy and Russia's federal budget reserves, "which it uses to wage its illegal and unprovoked war in Ukraine".
The July 14th amendments brought eight new industries within the scope of the services ban:
- Manufacture of basic metals;
- Manufacture of fabricated metal products, except machinery and equipment;
- Manufacture of computer, electronic and optical products;
- Manufacture of electrical equipment;
- Manufacture of machinery and equipment not elsewhere classified;
- Manufacture of motor vehicles, trailers and semi-trailers;
- Manufacture of other transport equipment; and
- Land transport and transport via pipelines.
The July 14th amendments further brought two new services within the scope of the services ban:
- Services incidental to manufacturing, except to the manufacture of metal products, machinery and equipment; and
- Services incidental to the manufacture of metal products, machinery and equipment.
As a result of this latest amendment, Canada now prohibits the provision of 28 services to Russia or persons in Russia in relation to 15 industries.
These changes take effect 60 days after July 14, 2022, which is the day on which this amendment came into force. This means that Canadian businesses will have 60 days to conclude services contracts that fall within the expanded scope of the services ban.
Given the broad scope of Canada's services prohibitions, it is strongly recommended that the activities of any Canadian company or any Canadian nationals, including those employed by non-Canadian companies, who may be involved in matters with Russia or Russian entities be very carefully scrutinized to ensure compliance with these new measures. In many respects, these Canadian service prohibitions are broader than those of the United States, the European Union and the United Kingdom.
Disinformation and propaganda figures added to Schedule 1
On July 7, 2022, Canada added 29 individuals and 15 entities to Schedule 1 who were identified as state-sponsored "Russian disinformation agents" and "Russian disinformation entities" who "bear the responsibility for enabling and supporting Russia's unprovoked and unjustified invasion of Ukraine".
GAC's press release highlights Sumbatovich Gasparyan as one of the individuals added to Schedule 1. Gasparyan is the Head of the International Department at Russia Today state media holding, making him a powerful and influential figure in Russia. The entities targeted are Russian news agencies and TV stations, including Channel One Russia JSC and the National Media Group.
This amendment brought the total number of individuals listed under Russia Regulations to 849 and the total number of entities to 239.
Canada prohibits dealings in property owned, held or controlled by or on behalf of these listed persons, entering into or facilitating directly or indirectly any transactions relating to such property, and providing financial or related services to or for the benefit of listed persons.
Canada introduces new souring ban for certain gold products from Russia
On July 7, 2022, Canada also introduced a new sourcing ban applicable to prescribed gold products coming from Russia. In particular, the new subsection 3.11 of the Russia Regulations prohibits any person in Canada or Canadian outside of Canada from importing, purchasing or acquiring the gold products listed in the new Schedule 9 from Russia or any person in Russia.
The gold products specified in Schedule 9 are as follows:
- Gold, non-monetary, unwrought, powder;
- Gold, non-monetary, unwrought, other than powder;
- Gold, non-monetary, semimanufactured forms, other than powder;
- Gold, monetary, unwrought or in semimanufactured forms, or in powder form;
- Articles of jewelry and parts thereof, of precious metal other than silver, whether or not plated or clad with precious metal; and
- Articles of goldsmiths' or silversmiths' wares and parts thereof, of precious metal other than silver, whether or not plated or clad with precious metal.
Importantly, there are two exceptions to this import ban. The ban does not apply to prescribed gold products that are: (i) in transit through Russia from a third country; and (ii) personal effects leaving Russia that are solely for the use of the individual or the individual's immediate family.
This ban comes into effect 30 days after July 7, 2022, which is the day on which this amendment came into force.
As new sanctions continue to be announced on a regular basis, it remains essential that Canadian businesses continue to monitor amendments to Canadian sanctions legislation closely. As the situation continues to evolve, the McCarthy Tétrault International Trade and Investment team will continue to monitor and report on changes announced by the Canadian government.
Footnote
1 These amendments were implemented in three separate versions of the Regulations Amending the Special Economic Measures (Russia) Regulations, available here (SOR/2022-172), here (SOR/2022-171), and here (SOR/2022-170).
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