Canada Eases Iran Sanctions and Opens Trade for Key Industrial Sectors

February 05, 2016

The Government of Canada today announced important amendments that loosen its economic sanctions against Iran. The amendments follow on the successful implementation of the Joint Comprehensive Plan of Action on January 16 by the P5+1 and Iran. (See Implementation Day for the P5+1 Iran Nuclear Agreement: What It Means for Canadian and International Businesses for more details.) The amendments will create market openings for key industrial sectors in Canada, including oil and gas services, exploration and production, aerospace, engineering and construction, automotive parts and technology, and financial services.

Canada first introduced targeted sanctions against Iran in July 2010 in response to Iran's nuclear proliferation activities. The targeted sanctions were subsequently expanded on several occasions until May 2013, when they were further amended to encompass almost all trade in goods with Iran.

Today's amendments lift the sanctions with respect to the majority of goods and services, including financial services, although restrictions remain on trade in certain goods, and business dealings more generally with certain individuals and entities. The prohibitions that have been removed include:

• the near blanket restriction on imports from and exports to Iran and the transfer or provision of related technical data and services;
• the prohibitions on providing financial and correspondent banking services to Iran and sending and receiving payments to or from Iran (although dealings with a number of Iranian banks remains prohibited);
• the prohibition on Canadian investment in Iran;
• the prohibitions on providing maritime services to Iranian vessels.

The only unilateral Canadian economic sanctions on Iran that remain in place are prohibitions on:

• transactions involving property with certain listed individuals and entities (Listed Persons);
• the export, sale, supply or shipment of certain goods listed in Schedule 2 of the Iran Regulations (certain products with potential military or nuclear applications) to Iran, any person in Iran, or any person for the purpose of a business carried on in or operated from Iran; and
• transferring, providing or disclosing to Iran or any person in Iran any technical data related to the goods listed in Schedule 2.

The number of Listed Persons has been reduced to 161 entities and 41 individuals from 508 entities and 79 individuals previously. However, it is important to note that a number of prominent Iranian entities including certain financial institutions remain on the list. Similarly, although the broad export prohibition has been lifted, Schedule 2 contains an extensive list of scientific and industrial items that still cannot be supplied to Iran, in addition to those already subject to Canada's general export controls. These include certain items that may not be obvious, such as aluminum products, precious metals, vacuum pumps, stainless steel valves, piping, tubing and fittings (and even paint ball guns). There are also a number of new items added to the list that were not on Schedule 2 previously.

Canada also amended its Regulations Implementing the United Nations Resolutions on Iran to implement the decisions of the United Nations Security Council under Resolution 2231 in relation to nuclear-related sanctions against Iran. However, Canada (like other countries) continues to maintain restrictions on the export of certain military, missile and nuclear-related goods and technology to Iran as well as export controls of general application on sensitive and security-related goods, technology and software.

Today's amendments open significant scope for enhanced trade between Canada and Iran. Nevertheless, companies should carry out adequate due diligence to make sure that they are not inadvertently dealing with any of the numerous listed persons with whom business is prohibited, including certain listed banks. Similarly, in light of the fact that most international transactions implicate multiple jurisdictions, it is important to ensure that all potentially applicable sanctions and export restrictions are considered.

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