On March 22, 2021, Canada imposed new economic sanctions against four officials and one entity under the new Special Economic Measures (People’s Republic of China) Regulations, based on Canada's assessment of their participation in gross and systematic human rights violations in the Xinjiang Uyghur Autonomous Region (XUAR) affecting Uyghurs and other Muslim ethnic minorities.
Implemented in coordination and solidarity with sanctions imposed by Canada's allies, the United States, the United Kingdom and the European Union, these new sanctions follow expressions of concern in January 2021 by Canada (and other international partners) in response to reports and evidence of repressive surveillance, mass arbitrary detention, torture and mistreatment, and the use of forced labour in Xinjiang.
Here is a look at the details of the new sanctions and what they mean for Canadian businesses with dealings in China.
Effective immediately, Canada has imposed a dealings prohibition and an asset freeze on the listed persons under the Special Economic Measures Act and the Special Economic Measures (People’s Republic of China) Regulations. Any person in Canada, (including individuals and corporate entities), and any Canadian outside of Canada (including Canadian citizens and Canadian corporations or businesses with activities abroad), is prohibited from directly or indirectly participating, causing, facilitating, or assisting in the following activities:
A number of exceptions to the above prohibitions are listed in section 4 of the regulations. Canadians may, for example, receive payments from a listed person that are due under a contract entered into before the person was listed, or obtain financial services that enable a listed person to obtain legal services in Canada with respect to the application of any of the sanctions prohibitions. Canadians may also continue to have dealings with a listed person for the purposes of loan repayments and enforcement and realization of security of loan repayments, where the loan was entered into before the person was listed or where the loan recipient is not a listed person.
The four newly-sanctioned Chinese individuals, who are also inadmissible to enter Canada under section 35(1)(d) of the Immigration and Refugee Protection Act, and the one entity, are as follows:
Individuals:
Entity:
It is also notable that Canada chose to use the Special Economic Measures Act (SEMA) which imposes sanctions on a country basis, for the new economic sanctions against China rather than the Justice for Victims of Corrupt Foreign Officials Act (Magnitsky Act). In contrast, the previous U.S. sanctions related to Xinjiang and additional sanctions against Chinese officials announced on March 22, 2021, were imposed under the U.S. Magnitsky legislation. Canada's choice of the nationally-focused and more flexible SEMA as the legal mechanism for these sanctions sends a political message to the Government of China and raises the possibility that the scope of Canadian sanctions against China could be expanded in the future, including to address issues of concern broader than the human rights situation in Xinjiang.
As noted, on January 18, 2021, the Government of Canada announced several measures to respond to its concern about reports and evidence of human rights violations, including the use of forced labour in Xinjiang. For example, Global Affairs Canada issued a business advisory related to Xinjiang that urged businesses to, among other things, conduct due diligence and examine their supply chains to ensure that their activities do not support human rights abuses, whether they be the use of forced labour to produce products imported into Canada, or the sale of technology or services by Canadian businesses that may be used to commit human rights abuses. Canadian companies that source directly or indirectly from Xinjiang are now also required to sign an Integrity Declaration when engaging with the Trade Commissioner Service.
That said, the measures announced in January were relatively limited and largely in line with existing government policies (e.g., reiterating the prohibition on importing goods produced with forced labour into Canada, and advising that companies applying for permits to export certain technology or services to Xinjiang that could be used to facilitate government surveillance, repression, arbitrary detention or forced labour will face "particular scrutiny"). Accordingly, the introduction of targeted economic sanctions is a notable step that heightens the legal and business risk faced by companies with supply chains and business relationships in Xinjiang.
These new economic sanctions could signal the possibility of broadened Canadian restrictions against China in the future. Businesses with dealings in China should:
More broadly, companies with supply chains and business relationships in Xinjiang should be assessing their risk and ensuring that they have adequate information, including through the exercise of audit rights and contractual clauses, to mitigate risk and conduct all business activities in compliance with their obligations under Canadian law.
If you have any questions about Canada's new economic sanctions against China or supply chain risks, please contact Bennett Jones' International Trade & Investment group.