Economic sanctions are measures imposed by national governments on specific countries, organizations or individuals that threaten certain interests or violate international norms of behaviour, in order to try to alter their decisions or actions.
Iran sanctions origins
Canada originally imposed economic sanctions against Iran in response to its nuclear proliferation program. As a result of the application of these sanctions, there was an effective blanket prohibition on trade with Iran.
These types of sanctions can have an impact on your business in a number of ways, including prohibiting trade or other economic activity with a foreign market, and prohibiting or restricting foreign financial transactions.
Therefore, it is important to know whether your business is transacting with countries, organizations or individuals which may be subject to economic sanctions.
Canada makes “Amendments”
The Government of Canada has recently made important changes to its economic and trade sanctions against Iran (via the “Amendments”) to allow for a controlled economic re-engagement between the two countries.
Through significant roll-backs on prior commercial and trade activity restrictions, the Amendments, which modify both the Special Economic Measures (Iran) Regulations (“SEMA Regulations”) and the Regulations Implementing the United Nations Resolutions on Iran (“UN Regulations”), have resulted in an effective repeal of the blanket prohibition on trade with Iran.
The few surviving restrictions have a much narrower scope, focusing primarily on nuclear-related activity, ballistic missile activity, and transactions involving designated or listed persons.
As a result of the Amendments, business between Canada and Iran will generally be permitted unless:
- The consumer, or any intermediary in the transaction, is a Listed Person in Schedule 1 of the SEMA Regulations, or is a restricted party designated by the United Nations;
- The product being sold is listed in Schedule 2 of the SEMA Regulations; or
- The transaction is prohibited by restrictions under the UN Regulations.
It is also important for Canadian businesses to keep in mind that the SEMA Regulations still contain:
- A prohibition for any person in Canada or any Canadian outside Canada to provide any financial or related service to a Listed Person (which includes both individuals and corporate entities appearing in Schedule 1 of the SEMA Regulations) or to a person acting for the benefit of a Listed Person (Special Economic Measures (Iran) Regulations SOR/2010-165 (s.3(d));
- A prohibition against any person in Canada or any Canadian outside of Canada to export, sell, supply or ship any of the goods listed in Schedule 2, or to transfer, provide, or disclose any technical data related to the goods listed in Schedule 2, wherever situated, to Iran, to a person in Iran, or to a person for the purposes of a business carried on in or operated from Iran (Special Economic Measures (Iran) Regulations SOR/2010-165 (s.4(1) and (2));
- Most of the goods listed in Schedule 2 are nuclear-related materials and technology, weapons, arms and related materials, as well as goods or technology in relation to Iran’s ballistic missile program.
The UN Regulations contain restrictions on:
- The provision of nuclear-related material and technology to Iran;
- The provision of goods, technology, technical assistance, financial or related services in relation to Iran’s ballistic missile program and to the development of nuclear weapon delivery systems;
- The availability of property or financial services to Iran for the purpose of investing in specified nuclear-related activities in Canada;
- The provision of heavy arms and related material to Iran or services related to Iran’s use of such arms and related materials; and
- The procurement of arms and related material from Iran.
Canadian businesses, proceed with caution
Although it seems as though the doors may be open for Canadians looking to do business with or in Iran, it is important for Canadian businesses to keep in mind that despite the Amendments, certain restrictions and prohibitions are still very much applicable.
Ignorance of these restrictions and actions taken that violate the existing prohibitions under the sanctions could lead to serious consequences for those involved.
It is critical for businesses to keep in mind that diligence will absolutely be required in screening potential suppliers, partners and/or customers against Listed Persons to ensure proper compliance.