LexSage

Canada’s Economic Sanctions
Against Iran Pose Difficulties For
Some Canadian Companies

January 24, 2017

Canada continues to impose unilateral economic sanctions against Iran.  Most Canadian companies believe that the economic sanctions do not impact their business activities.  However, when I ask “Do the goods you wish to export to Iran include aluminum, stainless steel or silver?”, I see shocked faces.  The reason why this question is important is that aluminum and silver components could result in the goods being subject to Canada’s economic sanctions against Iran. The exports/sale may be prohibited under Canadian law.  Exporting first and asking questions later may result in significant fines and/or imprisonment.

Some of Canada’s economic sanctions against Iran target particular types of goods, rather than designated persons.  For example, section 4 of the Special Economic Measures (Iran) Regulations sets out the following two prohibitions relating to sales of goods:

1. It is prohibited for any person in Canada or any Canadian outside Canada to export, sell, supply or ship any of 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.
2. It is prohibited for any person in Canada or any Canadian outside Canada to transfer, provide or disclose to Iran or any person in Iran any technical data related to the goods listed in Schedule 2.

It is important to review the Schedule 2 list carefully and to ask questions whether components of the goods to be shipped cause the goods as a whole to be caught by the sanctions.  Item #3 on Schedule 2 is “Aluminum and aluminum alloy products” including “piping, tubing, fittings, flanges, forging, castings, valves, any unfinished products in any form and any waste or scrap that are made of aluminum and its alloys”. Item #33 is “Gold, silver, platinum, palladium, ruthenium, rhodium, osmium and iridium” including “all raw, semi-finished or finished forms of those metals or their alloys”. Item #36 is “Stainless steel valves, piping, tubing and fittings” of type 304, 316 or 317.

Canada is concerned about the possibility that Iranian companies will purchase goods that include listed items in order to obtain a sanctioned good.  If an Iranian company cannot purchase aluminum tubes or stainless steel pipe, they might try to buy aluminum or stainless steel canes in order to obtain the aluminum/stainless steel tube. Years of sanctions by many countries and jurisdictions causes Iranian companies to consider making strategic purchases.  Many Canadian companies do not think in this manner – to their detriment.

It is necessary to prepare a bill of materials (a list of all component parts of the goods) when analyzing Canada’s economic sanctions against Iran.  Each item on the bill of materials needs to be compared against the Schedule 2 list.  If an item appears on the Schedule 2 list, the Canadian company must stop and consider whether the sale cannot be made.  It is always appropriate to talk to management and potentially err on the side of caution.

If you have any questions or concerns, please contact Cyndee Todgham Cherniak at 416-307-4168 or cyndee@lexsage.com.