The impact of sanctions on your plans for expansion

April 4th, 2018

By Dominique Babin, Lawyer and BCF Business Law Partner

We explained in a recent article how some export controls applied to certain types of products, depending on their features and origin, irrespective of their destination. We will now turn to the controls that apply to exports or transactions involving specific destinations or individuals.

Not surprisingly, North Korea is currently subject to very heavy sanctions, which include an embargo on all exports intended to reach its borders. Restrictions also apply to exports towards Iran, Burma, Eritrea, Iraq, Lebanon, Libya, Myanmar, Central African Republic, Democratic Republic of Congo, Russia, Somalia, Sudan, South Sudan, Syria, Tunisia, Ukraine, Venezuela, Yemen and Zimbabwe.

The types of sanctions vary according to the countries and individuals involved. Sanctions may include an arms embargo, asset freeze, financial restrictions, export or import restrictions (more or less broad), or technical assistance bans. They are introduced under the Export and Import Permits Act, the Defense Production Act, the United Nations Act, the Special Economic Measures Act and the Freezing Assets of Corrupt Foreign Officials Act. The new Justice for Victims of Corrupt Foreign Officials Act was also adopted in October 2017, following the Sergei Magnitsky case. US extraterritorial laws may also be applicable, for example, if goods of US origin are exported to Cuba.

Some of the sanctions only target individuals or entities in the identified countries. It is therefore necessary to check the lists of individuals targeted by these sanctions. Other sanctions only target specific transactions, such as financial transactions, or products with specific features, or for specific uses, such as enriching uranium.

To further complicate matters, sanctions frequently vary according to political and economic events. As such, targeted sanctions against Myanmar were adopted in February 2018 in response to military actions against the Rohingya. The sanctions against North Korea were also amended in January 2018. The lists of individuals designated by the various laws and regulations are regularly modified. Our neighbours to the south also frequently use economic sanctions to carry out their foreign policy, which can have an impact on the operations of Canadian businesses.

It is therefore essential, before engaging in an international transaction, to fully understand the sanctions that may apply against the countries toward which you export, or to the persons involved, while taking into account the features of your products and the nature of the transactions in question. It is also important to keep up to date and to establish appropriate processes and policies. In addition, it is prudent -- if not necessary -- to conduct due diligence to ensure the ultimate destination and use of our products, not just their immediate destination or their most common use. We will discuss these points in another article.

Note: BCF Business Law provides technical and legal experts for carrying out technical assessments, developing your export plan, implementing the suitable agreements, policies and processes, and resolving the issues and challenges connected to your exports.