Archive for the ‘Canada’ Category

Huawei CFO Arrested at Request of US


By: Danielle Hatch

On December 1, 2018 Huawei Chief Financial Officer Meng Wanzhou was arrested in Vancouver, Canada at the request of the United State. Huawei is the world’s biggest supplier of telecom network equipment and the second biggest smartphone seller across many countries in Europe, Asia and Africa.

The US is accusing Meng and Huawei of defrauding several banks such as HSBC and Standard Chartered, by hiding payments from Iran in violation of US sanctions regulations. US officials believe that Huawei was trying to use the banks to move money out of Iran in addition to possible illegal exports to Iran and other sanctioned countries since 2016. The US case against Meng involves Skycom Tech Co. Ltd, which has been described as one of Hauawei’s “major local partners” in Iran, the company often used Skycom Tech’s Tehran office to provide mobile network equipment to major telecommunications companies in Iran. Reuters has reported that Skycom was more of an “unofficial subsidiary” of Huawei and basically conducted business in Iran for Huawei. The US believes that Meng and other Huawei representatives misled banks about Huawei’s control of Skycom so that they could gain access to more than $100 million worth of transactions related to Skycom.

Huawei has said that its Iran operations were “in strict compliance with applicable laws, regulations and sanctions” of the United Nations, United States and European Union, according to Canadian court documents that were released earlier this month. Chinese Vice Foreign Minister Le Yucheng said, “The actions of the US seriously violated the lawful and legitimate rights of the Chinese citizen, and by their nature were extremely nasty.”

If the case makes it to the US (depending on Canada), it will likely involve several government forces including the Department of Justice (DOJ), the Office of Foreign Assets Control (OFAC), the Commerce Department’s Bureau of Industry and Security (BIS), and US Customs Enforcement.

More information:

Canada GA Posts Annual Report to Parliament on the Administration of the Export and Import Permits Act


(Source: Canada GA, 8 June 2018.)

The Annual Report to Parliament on the administration of the Export and Import Permits Act (EIPA) for the year 2017 has been published and is now available at

Key Developments in Canada’s Economic Sanctions and Export Controls During 2017 & What to Expect in 2018


By: John W. Boscariol, Robert A. Glasgow, Martha Harrison, Claire Seaborn

Over the past year, there have been major changes to Canada’s export controls and economic sanctions regimes that will have a significant impact on companies doing business abroad during 2018 and beyond. Firms will need to familiarize themselves with these changes and, if they have not already, ensure they are incorporated into their compliance polices and controls. More than ever before, companies should carefully track and monitor the parties they have direct and indirect dealings with and where their products and technology end up.

This article begins with a summary of parliamentary recommendations to improve Canada’s sanctions regime, and then launches into reforms that have already taken shape, such as the creation of a publicly-accessible sanctions database and the adoption of a new Magnitsky Law. Second, it discusses recent updates to Canada’s export controls and economic sanctions laws. Third, we explore Canada’s preparations to join the Arms Trade Treaty with Bill C-47, including expected developments in 2018.

(1) Parliamentary Committee Proposes Sanction Regime Reforms

On April 6, 2017, the Standing Committee on Foreign Affairs and International Development (the “Committee”) issued a Report entitled “A Coherent and Effective Approach to Canada’s Sanctions Regimes: Sergei Magnitsky and Beyond” (the “Report”).[1] The Report is a result of a year-long comprehensive parliamentary review of Canada’s economic sanctions regime. Over the course of 13 meetings, the Committee heard 43 witnesses, including government officials, academics, practitioners, victims and their relatives, and scrutinized numerous written briefs and other documents.

In the Report, the Committee noted the extreme complexity of Canada’s sanctions regime and the very significant challenges facing Canadian banks, exporters and others seeking to do business abroad, acknowledging that multiple legislative acts, regulations and actors often cause confusion for compliance and enforcement. The Committee found that more government guidance was necessary to fight over-compliance – companies often take a conservative and cautious approach, leading to increased costs and a negative impact on export business. Ultimately, the Report makes 13 recommendations for reform that are detailed below, some of which have already been adopted.

(a) Committee makes 13 recommendations for reform

As a result of this extensive study, the Committee came up with 13 recommendations to improve the effectiveness of Canada’s sanctions regime. The recommendations are that the Government of Canada should:

  1. ensure that sanctions imposed using more than one of the United Nations Act (“UNA”)[2], the Special Economic Measures Act (“SEMA”)[3] or the Export and Import Permits Act (“EIPA”)[4] are imposed in a complementary and coherent manner, and amended concurrently when necessary;
  2. implement the decisions of the United Nations Security Council regarding its mandated sanctions regimes through the timely enactment, amendment, and repeal of regulations under the UNA;
  3. properly resource and reform the structures responsible for its sanctions regimes, in order to effectively impose sanctions on targeted states and persons;
  4. provide comprehensive, publically available, written guidance to the public and private sectors regarding the interpretation of sanctions regulations in order to maximize compliance;
  5. produce and maintain a comprehensive, public and easily accessible list of all individuals and entities targeted by Canadian sanctions containing all information necessary to assist with the proper identification of those listed;
  6. transfer responsibility for the issuance of permits under the SEMA and the UNA to the section of Global Affairs Canada that already issues similar permits under the EIPA, i.e., the Export Controls Division;
  7. ensure that law enforcement agencies highly prioritize the enforcement of sanctions measures and are given the necessary resources to fulfil their duties;
  8. amend SEMA and the Freezing Assets of Corrupt Foreign Officials Act (“FACFOA”)[5] to allow for an independent administrative process by which individuals and entities listed under these Acts can challenge such listings in a transparent and fair manner;
  9. provide a clear rationale for the listing and delisting of persons under SEMA and ensure that the information is easily accessible to the public through the Global Affairs Canada sanctions website;
  10. amend SEMA to require the production of an annual report by the Minister of Foreign Affairs, to be tabled in each House of Parliament within six months of the fiscal year end, which would detail the objectives of all orders and regulations made pursuant to SEMA and actions taken for their implementation;
  11. amend SEMA and FACFOA to require a mandatory legislative review of this legislation by a parliamentary committee within five years of the amendments becoming law;
  12. in honour of Sergei Magnitsky, amend SEMA to expand the scope under which sanctions measures can be enacted, including in cases of gross human rights violations; and
  13. amend the Immigration and Refugee Protection Act (“IRPA”)[6] to designate all individuals listed by regulations under SEMA as inadmissible to Canada.[7]

In the Report, the Committee emphasised that Canada’s sanctions laws should be consistent, easily-accessible, and sufficiently clear so as to avoid over-compliance. Additionally, the Committee wanted to ensure that a clear rationale was provided for listing and delisting of persons, and that targeted persons may defend themselves on procedural fairness grounds. While this client alert does not propose to review each of the 13 recommendations listed above in detail, below we elaborate on key recommendations that have already been adopted.

(b) Minister Freeland’s response to the Report

Canada’s Minister of Foreign Affairs, Chrystia Freeland, responded to the Report in a public letter dated July 17, 2017.[8] In her response, Minister Freeland emphasizes to importance of economic sanctions as a strategic foreign policy tool and focused primarily on the recommendation to expand the use of sanctions measures in the context of gross human rights violations through the Magnitsky Law, described below. She also recognized potential improvements to the processes and structures for administering and operating economic sanctions, including through the use of a consolidated list, also described below.

(c) Canada publishes Consolidated SEMA Sanctions List

On October 13, 2017, Global Affairs Canada published an online tool, known as the “Consolidated SEMA Sanctions List”, that can be used by members of the public to search for individuals and entities named in the schedules of sanctions regulations made under SEMA. The Committee proposed the creation of a “consolidated list of persons targeted by sanctions” as “Recommendation 5” in the Report. Although the Committee’s objective was to create consolidated lists similar to those in Australia, the EU and the US, the Committee did not specify whether that consolidated list should include SEMA sanctions only or sanctions under other legislation, such as FACFOA or the Magnitsky Law.

The Consolidated SEMA Sanctions List was primarily driven by the Committee’s desire to make Canada’s sanctions regime more streamlined and accessible. The Committee found that vagueness as to the scope of the restrictions and their exemptions has led to over-compliance, which not only increases the cost of regulatory compliance, but also can have the effect of a quasi-blanket embargo for certain regions and entities. The Committee suggested that a consolidated list would lessen compliance costs and reduce over-compliance.

Although the adoption of a Consolidated SEMA Sanctions List is a step forward, users must be aware of three primary limitations. First, despite being “consolidated”, the Consolidated SEMA Sanctions List does not cover sanctions issued under the JVCFOA, FACFOA, the Criminal Code, or the UNA. The Office of the Superintendent of Financial Institutions (“OSFI”) maintains unofficial separate consolidated lists for sanctions issued under each of the Criminal Code, terrorism-related regulations, and FACFOA. The Secretariat of the United Nations Security Council maintains a consolidated list for individuals and entities subject to sanctions measures imposed by the Security Council. Additional trade and travel restrictions are set out in the EIPA and IRPA.

Second, although the Consolidated SEMA Sanctions List is a helpful administrative tool, it does not have the force of law and should not be relied upon as a legal authority. Users reviewing this list should always make sure it is the current version, cross-check against the sanctions’ legal authority, and consider relationships with related legislation. Further, because the consolidated list does not provide any guidance on what companies may be owned or controlled by listed persons, companies are still responsible for undertaking significant due diligence on their counterparties in this regard.

Third, there have already been errors in creating this list from the existing SEMA regulations. For example, the Russian entity designated under Schedule II of the Special Economic Measures (Russia) Regulations, “Sberbank” is incorrectly named as “Sperbank” in the Consolidated SEMA Sanctions List. There may be other such typographical errors – especially where a person is named in a language which is transcribed into English imprecisely (such as with Arabic or Russian), which allows for different derivations of a common name.

(d) Canada adopts Magnitsky Law and amends SEMA

On October 18, 2017, Canada adopted the Justice for Victims of Corrupt Foreign Officials Act (“JVCFOA”)[9], which, along with amendments to SEMA expands the scope under which sanctions can be enacted against states, entities or individuals, including in cases of gross human rights violations and significant corruption. The JVCFOA is known as Canada’s “Magnitsky Law”, named after anti-corruption lawyer, Sergei Magnitsky, who discovered Russian officials’ embezzlement of state funds amounting to $230 million USD and soon after was arrested, tortured, and died in a Russian prison.

The Committee suggests at “Recommendation 12” of the Report that Canada amend SEMA to “allow for the expanded use of sanctions against human rights violators”.[10] In response, not only did the Government of Canada amend SEMA, but it also adopted the JVCFOA as entirely new legislation to demonstrate their commitment human rights protection as part of Canada’s foreign policy strategy.

The JVCFOA now allows Canadian officials to deny visas for and freeze assets of foreign nationals that are involved in gross violations of internationally recognized human rights or are public officials or associates who are responsible for or complicit in acts of significant corruption. The federal government has already adopted regulations under the JVCFOA to place asset freezes on 52 officials from Russia, Venezuela, and South Sudan, including Venezuelan President Nicolás Maduro Moros.

(2) Updates to Canadian export controls and sanctions

During 2017, Canada’s existing export control and economic sanctions regimes saw several amendments, the most significant of which are summarized below.

(a) Additions to SEMA regulations

On April 14, 2017, Minister Freeland announced amendments to the Special Economic Measures (Syria) Regulations, enacted under SEMA,to list 27 additional individuals who are now subject to an asset freeze and dealings prohibition.[11] The persons listed are high-ranking officials in the Assad regime.

On September 22, 2017, Minister Freeland, announced sanctions against 40 Venezuelan officials and individuals who have played a key role in undermining the security, stability and integrity of democratic institutions of Venezuela in the Special Economic Measures (Venezuela) Regulations, enacted under SEMA. [12] These regulations impose asset freezes and dealings prohibitions with or for the benefit of listed persons, although certain exemptions apply.

(b) New Version of the Export Controls Guide

On August 11, 2017, a new version of the Guide to Canada’s Export Control List (the “Guide”) came into effect.[13] The new version of the Guide, now referred to as the “December 2015 version”, bring Canada’s export control regime into compliance with its international obligations as of December 31, 2015.[14]

The Guide lists the goods and technology subject to export and technology transfer controls and reflects many new additions, deletions and clarifications. The transfer from Canada of any items listed in the Guide must be made under the authority of an export permit, including transfers via physical export, telephone discussions, email, server access, upload and download, technical assistance and services, and other forms of information transmission.

Companies doing business abroad, whether in connection with sales, sourcing or research and development, should be carefully reviewing the latest changes to the Guide to ensure full compliance with Canada’s export control regime.

(c) Addition to Automatic Firearms Country Control List

On December 13, 2017, Canada announced that Ukraine will be added to the Automatic Firearms Country Control List (“AFCCL”), enacted under the EIPA.[15] In October 2017, Canada also considered and began consultations for adding Mexico and Japan to the AFCCL; however, to date Ukraine is only new addition.[16]

The EIPA requires that a person, prior to a shipment, obtain an export permit from the Minister of Foreign Affairs to export from Canada an item that is found on the Export Control List. Since the EIPA contains strict controls on the export of firearms, weapons and devices defined as prohibited in the Criminal Code of Canada, the AFCCL is an additional export control measure that prohibits export of automatic firearms unless the country of end-use is listed on the AFCCL.[17]

Currently the AFCCL lists 40 countries, including Ukraine. Global Affairs Canada continues to evaluate export permit application on a case-by-case basis, and does not automatically grant export permits where the destination country is listed on the AFCCL.

(3) Canada Prepares to Join Arms Trade Treaty

On April 13, 2017, the Canadian government announced its commitment to accede to the Arms Trade Treaty and introduced Bill C-47, An Act to amend the Export and Import Permits Act and the Criminal Code (amendments permitting the accession to the Arms Trade Treaty and other amendments (“Bill C-47”).[18] The Arms Trade Treaty is a multilateral treaty that regulates the international trade in conventional weapons that entered into force on December 24, 2014.

Most significantly, Bill C-47 proposes the creation of a Brokering Control List comprised of certain Export Control List goods and technology the brokering of which is prohibited unless authorized by a permit. Brokering is a new concept in Canadian export control law and refers to the arranging or negotiating of a transaction that relates to the movement of Brokering Control List goods or technology from one foreign country to another foreign country, including by way of acquisition, disposition or disclosure. Bill C-47 passed second reading in the Canadian House of Commons on October 3, 2017 and has been referred to the Committee. A revised version of the Bill C-47 with commentary from the Committee is expected in early 2018.


2017 was busy year for changes to Canada’s export controls and economic sanctions regimes, complete with a major parliamentary committee report, adoption of the Magnitsky Law, launch of a new Consolidated SEMA Sanctions List, additions to the SEMA regulations, a new version of the Export Controls Guide, additions to the Automatic Firearms Country Control List, and progress on Bill C-47 regarding the Arms Trade Treaty. Still, the Government of Canada has more work to do if it is to accomplish the balance of the Committee’s recommendations for a more transparent and efficient economic sanctions regime.

In 2018, we expect to see further efforts to implement recommendations in the Report, including improvements to the Consolidated SEMA Sanctions List. Further progress on Bill C-47 is expected in early 2018, particularly with the creation of a Brokering Control List and associated permitting process. Over the next year, companies should stay apprised of these fast-paced changes to Canada’s export controls and economic sanctions regimes and how they will impact their business abroad.

At the present time, in addition to its export and technology transfer controls, Canada imposes trade controls of varying degrees on activities involving the following countries (and over 2,000 listed entities and individuals associated with them): Burma (Myanmar), the Central African Republic, the Crimea Region of Ukraine, Cuba, the Democratic Republic of the Congo, Eritrea, Guinea, Iran, Iraq, Lebanon, Libya, North Korea, Pakistan, Russia, Somalia, South Sudan, Sudan, Syria, Tunisia, Ukraine, Venezuela, Yemen and Zimbabwe. Any involvement of these countries or any listed person (or entities they own or control) in proposed transactions or other activities should raise a red flag for further investigation to ensure compliance with export and technology transfer controls and economic sanctions.

[1] “A Coherent and Effective Approach to Canada’s Sanctions Regimes: Sergei Magnitsky and Beyond” Government of Canada Publications (April 2017), online: (the “Report”).

[2] United Nations Act, R.S.C., 1985, c. U-2 (“UNA”).

[3] Special Economic Measures Act, S.C. 1992, c. 17(“ESMA”).

[4] Export and Import Permits Act, R.S.C., 1985, c. E-19 (“EIPA”).

[5] Freezing Assets of Corrupt Foreign Officials Act, S.C. 2011, c. 10 (“FACFOA”).

[6] Immigration and Refugee Protection Act, S.C. 2001, c. 27 (“IRPA”)

[7] The Report, supra note 1, at pages 11-12.

[8] Letter to the Standing Committee on Foreign Affairs and International Development from the Minister of Foreign Affairs, Global Affairs Canada (July 17, 2017), online:

[9] Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law), S.C. 2017, c. 21.

[10] The Report, supra note 1, at p. 40.

[11] Special Economic Measures (Syria) Regulations, S.C. 1992, c. 17.

[12] Special Economic Measures (Venezuela) Regulations, S.C. 1992, c. 17.

[13] A Guide to Canada’s Export Controls: December 2015 version (updated 2017-08-11) Global Affairs Canada, online:

[14] John W. Boscariol et al., “Major Changes to Canada’s Export and Technology Transfer Controls Coming into Force Shortly”, August 4, 2017, available online:

[15] Automatic Firearms Country Control List, SOR/91-575.

[16] “Consulting Canadians on proposed addition of Japan and Mexico to the Automatic Firearms Country Control List (AFCCL), Global Affairs Canada (October 12, 2017), online:

[17] “Order Amending the Automatic Firearms Country Control List”, Global Affairs Canada (November 23, 2017), online:

[18] Bill C-47, An Act to amend the Export and Import Permits Act and the Criminal Code (amendments permitting the accession to the Arms Trade Treaty and other amendments (First Reading, April 13, 2017), online:

US Oil & Gas Company Fined $25 Million from BIS & OFAC


National Oilwell Varco, Inc., a Delaware corporation, and its Canadian subsidiaries, Dreco Energy Services, Ltd (Dreco) and NOV Elmar (NOV) have agreed to pay a combined $25 Million for violations of the Cuban Assets Control Regulations, the Iranian Transactions and Sanctions Regulations, and the Sudanese Sanctions Regulations.

The charges are as follows:

  • Between 2002 and 2005, National Oilwell Varco approved four Dreco commission payments to a UK based entity related to the sale and exportation of goods from Dreco to Iran. The four commission payments had a combined value of $2,630,091.
  • Between 2006 and 2008 National Oilwell Varco was involved in two transactions involving the sale and exportation of goods to Iran that totaled $13,596,980.
  • Between 2003 and 2007, Dreco knowingly exported (indirectly) goods from the US to fill seven orders from Iranian customers. The transactions totaled $526,480.
  • During 2007 and 2009, Dreco engaged in 45 transactions involving the sale of goods to Cuba totaling $1,707,964.
  • NOV engaged in two transactions between 2007 and 2008 involving the sale of goods or services to Cuba that totaled $103,119.
  • Finally, between 2005 and 2006 NOV engaged is a $20,928 transaction involving the exportation of goods from the US to Sudan.

OFAC considered the violations to be egregious since senior-level executives approved the commission payments and the NOV “willfully blinded” itself of the regulation violations by continuing to approve payments and communications. NOV will pay OFAC a settlement of $5,976,028, this will be deemed satisfied with its payment of $25,000,000 in relation to its settlement agreement between OFAC, BIS, and a Non-Prosecution Agreement (NPA).

OFAC considered the following to be aggravating factors:

  1. NOV’s conduct that gave rise to the Apparent Violations demonstrated at least reckless disregard for U.S. sanctions requirements;
  2. Senior managers at National Oilwell Varco, Inc. and Dreco knew or had reason to know that their respective business transactions giving rise to the ITSR-related apparent violations involved Iran;
  3. NOV’s conduct caused harm to sanctions program objectives by providing a significant and sustained economic benefit to the petroleum industries in Cuba, Iran, and Sudan;
  4. NOV is a large and sophisticated company that is engaged in the business of providing oilfield services around the world, including regions with high sanctions risk; and
  5. NOV’s compliance program at the time of the Apparent Violations was wholly inadequate.

OFAC considered the following to be mitigating factors:

  1. NOV had not received a Penalty Notice or Finding of Violation in the five years preceding the date of the earliest transaction giving rise to the Apparent Violations;
  2. NOV cooperated with OFAC’s investigation, including by agreeing to toll the statute of limitations for more than 2,600 days; and
  3. NOV has made efforts to remediate its compliance program and agreed to further compliance enhancements.

More Information:

Another Contract Bites the Dust


By: Danielle McClellan

The United States Naval Air Warfare Center (NAVAIR) Aircraft Division awarded Tactical Lighting Systems Inc. (Tactical) with a contract to develop landing lights. Tactical announced on May 19, 2015 that they planned to add Carmanah Technologies Corporation (Carmanah) of Victoria, BC as a subcontractor to the contract.

Fast forward about 6 months, after struggles with the International Traffic in Arms Regulations (ITAR), Tactical and Carmanah have mutually agreed to stop working together on the project. The decision was based on significant operational challenges related to the ITAR under the contract with NAVAIR. The two companies agreed that the ITAR placed such significant barriers for the two to work together on the project that they could not jointly work together and comply with the export controls required.

More information:

CBSA Will Be Penalizing for Noncompliance of Arrival Notifications


By: Danielle McClellan

On May 6, 2015 The Canada Border Service Agency (CBSA) began requiring the electronic warehouse arrival certification message to be transmitted by registered participants in the CBSA’s Release Notification System using an electronic data interchange method when unreleased commercial shipments physically arrive at the sufferance warehouse to which they are destined. It also became mandatory for air, marine and rail carriers who operate conveyances arriving in Canada from a foreign country to transmit electronic conveyance arrival certification messages to CBSA.

The CBSA has announced that from July 10, 2015 to January 10, 2016, noncompliance with the new arrival notification requirements may be met with zero-rated (non-monetary) penalties under the Administrative Monetary Penalty System (AMPS). Noncompliance after January 10, 2016 will be met with monetary AMPS penalties.

The following information provides policy requirements for CACM messages for each mode of transport:

Marine – The CACM must be transmitted electronically when the vessel lands at a CBSA office upon arrival in Canada; i.e., when it first comes to rest in Canada, whether at anchor, at dock or berthed alongside at the nearest CBSA office designated for that purpose. The CACM can be transmitted and received within a two-hour window prior to arrival, allowing carriers to transmit their arrival request up to two hours in advance of their actual arrival at a Canadian port, provided the vessel is within Canadian waters at the time the request is submitted.

Air – The CACM must be transmitted electronically without delay after the aircraft that is transporting cargo is cleared by NAV Canada to land at an airport following arrival in Canada.

Rail – The CACM must be transmitted electronically up to 30 minutes in advance of the actual arrival of the conveyance at the Canadian border.

The CBSA notes that marine and air conveyances exempt from transmitting electronic conveyance data are also exempt from transmitting CACMs. This exemption will also apply to rail conveyances for an appropriate period of time.

More Information:

CANADA: Key Developments in Economic Sanctions and Export Controls and What to Watch for in 2015


By: John Boscariol (Source:

In recent years, Canada has significantly expanded its multilateral and unilateral trade control measures. Broader scope and increased enforcement in the areas of economic sanctions, export and technology transfer controls, and defence trade controls have raised the stakes for Canadians engaged in cross-border activities. Enforcement and reputational risk is higher than ever and it is critical for any Canadian company doing business abroad to ensure it has internal controls in place to mitigate the growing risk exposure.

During 2014, developments in Russia, the Ukraine and Middle East brought into focus the sanctions risk exposure of Canadian companies regardless of where they do business. In addition, new developments in export and technology transfer controls as well as defence trade controls highlight the importance of keeping apprised of these evolving rules. The following summarizes the most significant of these developments and what they mean for trade control enforcement and compliance in 2015.

Economic Sanctions

Russia and Ukraine

Without a doubt, Russia’s invasion of Ukraine was the big sanctions story of 2014. Canada has been particularly vociferous in its opposition to the Putin regime, being among the first of any country to threaten sanctions over Russian interference in the Ukraine even before the departure of former President Viktor Yanukovych.

Beginning in March and continuing throughout 2014, Canada implemented broad listed-based sanctions in response to Russian aggression towards Ukraine and the annexation of the Crimea region. Under the Special Economic Measures (Russia) Regulations (the “Russia Regulations”), persons in Canada and Canadians outside Canada are prohibited from engaging in a broad range of dealings with listed Russian individuals and entities, generally referred to as “Designated Persons” under Canadian sanctions law. The Special Economic Measures (Ukraine) Regulations applies similar restrictions in respect of listed Designated Persons in Ukraine. The Freezing Assets of Corrupt Foreign Officials (Ukraine) Regulations prohibits dealings involving listed persons associated with the former Yanukovych regime. Currently, Canada has listed more individuals and entities than either the United States or the European Union under their respective Russia/Ukraine sanctions.

Under the Russia Regulations, Canada also now prohibits providing financing for or dealing in new debt of longer than 30 or 90 days’ maturity (depending on the entity) in relation to certain listed entities, their property or any interests or rights in their property. Dealing in new securities, including shares or any other ownership interest in relation to certain listed entities, their property or any interests or rights in their property is also prohibited.

On December 19, 2014, Canada implemented restrictions on the supply of certain goods and technology to Russian oil exploration and production activities. Persons in Canada and Canadian outside Canada are now prohibited from exporting, selling, supplying or shipping any listed goods, wherever situated, to Russia or to any person in Russia for use in offshore oil exploration or production at a depth greater than 500 metres, oil exploration or production in the Arctic, or shale oil exploration or production. The new measures also prohibit the provision to Russia or to any person in Russia of any financial, technical or other services related to such prohibited goods.


Although no new measures have been imposed by Canada against Iran since a comprehensive trade embargo was put in place on May 29, 2013, Canada has made it clear that it will continue to enforce its sanctions measures aggressively even as the United States and other members of the P5 +1 seek to negotiate the cessation of Iran’s nuclear program in return for the relaxation of economic sanctions.

The investigation and conviction of Lee Specialties Ltd. (“Lee”) for violation of Canada’s Iran sanctions is an example. On April 14, 2014, Lee pled guilty to violating the Special Economic Measures (Iran) Regulations (“Iran Regulations”) by attempting to export to Iran a shipment containing 50 Viton O-rings worth approximately 30 cents apiece. These items are listed as prohibited goods under Schedule 2 of the Iran Regulations. According to the Agreed Statement of Facts, Lee’s customer had locations in Dubai and Iran. Although there was some confusion with respect to the shipping address, the shipment eventually went out addressed to the customer’s Tehran location. The shipment was seized by the Canada Border Services Agency and, as a result of a plea, Lee was convicted and fined $90,000.


The December 17, 2014 announcement by the Obama administration that it would be seeking normalization of US relations with Cuba and the spectre of potential relaxations in the trade embargo has reignited interest in Cuban business opportunities. Although a complete repeal of the US embargo does not appear to be the cards at this time, the pursuit of Cuba-related business brings in to focus longstanding conflicts between Canadian and US law in this area.

An order issued under Canada’s Foreign Extraterritorial Measures Act make it a criminal offence for companies in Canada and their officers, directors and employees in a position of authority to comply with the US trade embargo of Cuba – this includes Canadian companies that are owned or controlled from the United States and are therefore prohibited from doing business with Cuba under the Cuban Assets Control Regulations. Further, the FEMA order requires immediate written notification to the Attorney General of Canada of any communication relating to the US trade embargo. Companies dealing with Cuban trade or investment opportunities should be treading carefully to mitigate risk on both sides of the border.

Other Countries

During 2014, Canada also imposed new economic sanctions measures under its Special Economic Measures Act against South Sudan and under its United Nations Act against Yemen and the Central African Republic. These are all list-based measures targeting identified Designated Persons. Canada also intensified its existing sanctions measures against Syria by prohibiting various activities relating to chemicals that can be used as precursors to chemical weapons agents and dual-use equipment that can be used in a chemical weapons program.

What to Watch For in 2015

Russia, Ukraine and Iran will continue to be Canadian sanctions “hotspots”. At the present time, Canada imposes trade controls of varying degrees on activities involving 22 other countries and well over 2,000 listed entities and individuals associated with them, including Belarus, Burma (Myanmar), the Central African Republic, Côte d’Ivoire, the Democratic Republic of the Congo, Cuba, Egypt, Eritrea, Guinea, Iran, Iraq, Lebanon, Liberia, Libya, North Korea, Pakistan, Somalia, Sudan, Syria, Tunisia, Yemen and Zimbabwe. In addition to monitoring their activities as they may relate to sanctioned countries, Canadian companies need to be screening their international business partners and end-users against the lists of designated entities and individuals under Canada’s sanctions measures regardless of where they are doing business.

A lack of written and verbal guidance from the Canadian government continues to present significant challenges for those seeking to understand and comply with Canadian economic sanctions law. In his February 11, 2014 Budget, the late Finance Minister Jim Flaherty recognized significant improvements to the sanctions regime were required, including making available a consolidated list of Designated Persons. Although DFATD’s sanctions website has undergone some mostly cosmetic changes, the Canadian business community continues to wait for more substantive changes and assistance akin to what their competitors benefit from in the United States, the European Union, Australia and elsewhere.

Export and Technology Transfer Controls

Export and technology transfer controls are more narrow in scope than economic sanctions as they only apply to transfers of goods and technology from Canada to a place outside of Canada. However, they continue to present significant compliance challenges for Canadian businesses across all sectors of the economy.

Keeping Up With Changes in International Regimes

Canada made significant amendments to its controls governing the export and transfer of goods and technology twice during 2014 – on April 10 and December 5. In both instances, the changes were intended to bring Canada’s Export Control List (“ECL”) into conformity with its commitments under international export control regimes, including the Wassenaar Arrangement, the Nuclear Suppliers Group, the Missile Technology Control Regime, and the Australia Group.

Notably, the most recent changes introduce new export and technology transfer controls on intrusion software and related technology and systems and IP network communication surveillance systems.

Israel and Kuwait Cleared for Firearms Exports

Canada maintains strict controls over the transfer of certain prohibited firearms, weapons, and devices and their components and parts – including, for example, fully automatic weapons, electric stun guns and large-capacity magazines. Applications for export permits for these items may be submitted only if they are for transfers to one of the 37 countries listed on the Automatic Firearms Country Control List. Effective January 14, 2015, Israel and Kuwait have been added to that list. The government is currently in consultations for adding the United Arab Emirates as well.

What to Watch for in 2015

Over the last few years, the Canadian government has been releasing new General Export Permits (“GEPs”) to facilitate the transfer of controlled items from Canada to “safe” destinations. These GEPs differ from individual export permits in that exporters may rely upon them by meeting specified conditions, including reporting and record keeping, without having to prepare and submit an export permit application. GEP 45 and GEP 46 were issued in 2012 and 2013, respectively, for certain transfers of certain encryption goods and technology to eligible destinations.

The government continues to work on GEP No. 41 which is expected to allow for the export of a broad range of dual-use items (Group 1 and item 5504 of the ECL) to countries that are members of the four multilateral export regimes noted above. We understand that the government is also preparing GEPs for goods exported for repair abroad as well as for goods exported after repair in Canada. The government has also advised that it is reviewing all existing GEPs to ensure their continued relevance.

Canadian companies should also expect further changes to the ECL to bring it in line with commitments under the four multilateral export regimes negotiated after 2013. To get a head-start on this, the websites for those regimes, including the Wassenaar Arrangement, will be a key resource.

Canadian companies engaged in cross-border activities should continue to carefully monitor compliance with these complex rules. The reputational impact of export control violations, even alleged violations, is evident from the recent reports of a $10 million plus settlement against the Canadian government related to its investigation against two Vancouver business people, Stephen and Perienne de Jaray. On April 29, 2010, the CBSA Criminal Investigations Division charged them for their failure to obtain export permits for the shipment of 5,100 dual-use electronic chips and circuit boards to Hong Kong, charges that carry with them the possibility of unlimited penalties and up to 10 years in jail. Those charges were later withdrawn but with their reputations and business destroyed, the de Jarays filed a $17 million suit against the Canadian government. In January 2015, it was reported that the claim was settled with the second largest payout of its kind in Canadian history.

Defence Trade Controls

New “Two Stream” Definition of Controlled Goods

On June 4, 2014, significant changes were made to the scope of goods and technology subject to the Controlled Goods Program (“CGP”), Canada’s domestic security regime for listed defence, satellite, space and aerospace goods and technology.

The Schedule to the Defence Production Act was amended to create two streams of goods and technology subject to the rigorous security and screening controls of the CGP. This regime now applies to the possession, examination, and transfer in Canada of:

  1. all US-origin goods and technology that are “defense articles” as defined under section 120.6 of the US International Traffic in Arms Regulations (“ITAR”) and all non-US-origin items that are manufactured using US-origin “technical data”, as defined in US ITAR section 120.10 if the “technical data” is a “defense article”, and
  2. certain goods and technology, regardless of origin, listed in Groups 2 (military), 5 (strategic), and 6 (missile technology) of the Export Control List.

In incorporating explicit reference to goods and technology classified under the US ITAR, these changes are intended to ensure that as the United States proceeds with export control reforms that are transferring ITAR-controlled items to dual-use Department of Commerce controls, the coverage of the CGP remains in step with US defence trade controls under the ITAR. The second stream covers items, regardless of their origin, considered by Canada to have strategic significance or pose national security concerns.

New Non-Disclosure Statement

Canada is still experiencing growing pains with the interaction between the CGP and US ITAR section 126.18 – “Exemptions regarding intra-company, intra-organization, and intra-governmental transfers to employees who are dual nationals or third-country nationals”. Section 126.18 provides that, under certain conditions, approval of the US Department of Defense Trade Controls (“DDTC”) is not required for the transfer of ITAR defence articles to foreign business entities that are approved end-users, including the transfer to bona fide regular employees who are dual or third-country nationals.

Those conditions include implementation of an employee screening process by the recipient of such ITAR defence articles. Security enhancements made to the CGP in 2011 were specifically intended to ensure that Canadian CGP-registered companies would also meet the requirements of ITAR section 126.18 and thereby alleviate the human rights concerns that had historically plagued those Canadian employers seeking to comply with ITAR restrictions based on nationality and country of birth. However, there has been significant uncertainty over whether CGP registrants are also required to have their employees sign the separate non-disclosure agreement (“NDA”) required by section 126.18(c)(2) in addition to employee screening. DDTC has published a suggested NDA form, however, it specifically refers to compliance with US laws, including ITAR, and dealings with US embargoed countries, including Cuba.

To address this uncertainty, in October of 2014 Public Works and Government Services Canada’s Controlled Goods Directorate (“CGD”) issued a new “Notice of Security Assessment, Authorization and Acknowledgment Relating to Controlled Goods” that is required to be signed by all directors, officer, employees and students screened under the CGP. Although it makes no reference to the ITAR or compliance with US laws, it includes a statement that the signatory agrees not to disclose or transfer a controlled good to another person, company or individual, or permit the examination of a controlled good by a person, company or individual who is not registered or exempt from registration with the CGP. The CGD has stated that “this acknowledgement may be used to meet the requirements of ITAR 126.18(c)(2),” however there has been no such confirmation from DDTC.

What to Expect for 2015

Adjusting to the new two-stream definition of controlled goods, which distinguishes between US-origin and “any-origin” goods and technology, may present challenges for CGP-registrants attempting to track the origin of these items within their inventory and other systems. Those companies may find it easier to treat all items identified in both streams as controlled goods regardless of their origin. Also, issues with the relationship between the US ITAR and Canadian CGP will likely continue through 2015.

There are also new CGP initiatives that are expected to be implemented in the coming year. Whether the 2011 security enhancements are permitted under the Controlled Goods Regulations has been an issue of controversy for some time. CGD has indicated that amendments will be made to these regulations this year for purposes of clarification. Further, following rounds of consultations in 2013 and 2014, CGD is expected to implement a service fee regime for CGP-registrants in 2015 or 2016. Annual fees are expected to be $690 for sole proprietorships (businesses with one employee), $920 for businesses with up to 99 employees and $2,230 for businesses with 100 or more employees.


2015 promises to be as busy, if not busier, than 2014 in the area of economic sanctions, export controls and defence trade controls. Although the risks and consequences of non-compliance are higher than ever, those companies that take the time and effort to develop and implement efficient and effective compliance programs will enjoy a substantial advantage over their competitors by avoiding the significant costs of enforcement action, including monetary penalties, border delays, and reputational damage.

Canada Expands Sanctions against Russia to Target Russian Oil Industry


By: Brooke Driver

In solidarity with U.S. and EU energy sector restrictions placed on Russia, Canada announced this December its decision to impose restrictions on the export of certain goods and services related to Artic shale oil exploration or production. The December order reflects the August 6, 2014 Harper government announcement that it would impose export restrictions on technologies used in Russian oil exploration activities. Specifically, the sanction prohibits entities located in Canada or Canadian entities located outside the country from exporting or supplying any listed goods that to a Russian entity that would be used in offshore oil exploration or production at a depth greater than 500 meters, in oil exploration or production in the Arctic or in shale oil exploration or production. Canada has also added 20 Russian and Ukrainian individuals to its lists of designated persons.

Chinese Man Attempts to Smuggle 51 Turtles in His Pants across the Canadian Border


By: Brooke Driver

Now here’s one you don’t hear every day, folks. Recently, Kai Xu, a Chinese-born Canadian citizen and engineering student at the University of Waterloo, attempted—unsuccessfully, of course—to smuggle 51 turtles of various species across the Detroit-Windsor border into Canada…in his pants.

And while the incident sounds more like a Road Runner episode than an export enforcement case, turtle smuggling is apparently a more common problem than you’d think, with a high demand for turtles as food or pets and one species—which was represented in the unfortunate hostages in Xu’s sweatpants—worth as much as $800 a pop.

And apparently, this is not the first time Xu has attempted to smuggle these animals (although, for his sake, we hope this was the first time the turtles were strapped to his legs and groin—ouch!). This is one in a series of incidents involving the 26-year-old Xu, who was also recently arrested, along with accomplice Lihua Lin, for attempting to fly to Shanghai with over 200 turtles hidden in Lin’s suitcase.

And while the crime is rather funny, the potential consequences aren’t. Xu, charged with smuggling, illegal trading and exporting could serve up to ten years behind bars for his crimes.

The (assuredly traumatized) turtles in question have been seized and placed with Fish and Wildlife Service agents, where they will hopefully lead a peaceful and pants-free life from now on.

Bass Pro Fined for Illegal Rifle Scope Exports


By: John Black

What? Bass Pro Shops, the favorite store for all my redneck buddies and family members got busted for sending scopes to the Chinese Communists? What in the world can be next?

BIS announced on the 10th of June that it has settled with the outdoors retail giant Bass Pro over its nine alleged violations of the Export Administration Regulations. According to BIS, during the period between June 2, 2010 and June 29, 2011, Bass Pro exported controlled optical sighting devices with a total value of $3,513 to end users in Canada, China and Cyprus without first attaining the necessary licensure. These items are controlled for Firearms Conventions reasons when exporting to Canada and Crime Control reasons when exporting to the two other countries.

Although the total amount of the shipments was fairly low, BIS has decided to enforce a $25,000 penalty, likely due to the number of countries involved in the illegal transactions.