Regulations Amending the Special Economic Measures (Russia) Regulations: SOR/2023-258
Canada Gazette, Part II, Volume 157, Number 26
Registration
SOR/2023-258 December 5, 2023
SPECIAL ECONOMIC MEASURES ACT
P.C. 2023-1190 December 5, 2023
Whereas the Governor in Council is of the opinion that the actions of the Russian Federation constitute a grave breach of international peace and security that has resulted in a serious international crisis;
Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Foreign Affairs, makes the annexed Regulations Amending the Special Economic Measures (Russia) Regulations under paragraph 4(1)(a)footnote a and subsections 4(1.1)footnote b, (2)footnote c and (3) of the Special Economic Measures Act footnote d.
Regulations Amending the Special Economic Measures (Russia) Regulations
Amendments
| Item | Column 1 Goods |
Column 2 Harmonized Commodity Description and Coding System code |
|---|---|---|
| 166.1 | Non-industrial diamonds, unworked or simply sawn, cleaved or bruted, but not mounted or set | 710231 |
| 166.2 | Non-industrial diamonds, not mounted or set, other than diamonds that are unworked or simply sawn, cleaved or bruted | 710239 |
| Item | Column 1 Goods |
|---|---|
| 170 | Synthetic or reconstructed diamonds, unworked or simply sawn or roughly shaped |
| Item | Column 1 Goods |
|---|---|
| 172 | Synthetic or reconstructed diamonds, other than diamonds that are unworked or simply sawn or roughly shaped |
| Item | Column 1 Goods |
Column 2 Harmonized Commodity Description and Coding System code |
|---|---|---|
| 180.1 | Articles of goldsmiths’ or silversmiths’ wares and parts thereof, of silver, whether or not plated or clad with other precious metal | 711411 |
| Item | Column 1 Goods |
|---|---|
| 183 | Articles of precious metal or of metal clad with precious metal not elsewhere specified in this list, other than platinum catalysts in the form of wire cloth or grill |
| Item | Column 1 Goods |
|---|---|
| 189 | Articles of iron or steel wire for climbing or mountaineering or for use in the manufacture or repair of engines or parts of engines for commercial fishing vessels |
| Item | Column 1 Goods |
Column 2 Harmonized Commodity Description and Coding System code |
|---|---|---|
| 26 | Unsorted diamonds, whether or not worked, but not mounted or set | 710210 |
| 27 | Non-industrial diamonds, unworked or simply sawn, cleaved or bruted, but not mounted or set | 710231 |
| 28 | Non-industrial diamonds, not mounted or set, other than diamonds that are unworked or simply sawn, cleaved or bruted | 710239 |
| 29 | Synthetic or reconstructed diamonds, unworked or simply sawn or roughly shaped | 710421 |
| 30 | Synthetic or reconstructed diamonds, other than diamonds that are unworked or simply sawn or roughly shaped | 710491 |
| 31 | Articles of jewellery and parts thereof, of precious metal or of metal clad with precious metal | 7113 |
| 32 | Articles of goldsmiths’ or silversmiths’ wares and parts thereof, of precious metal or of metal clad with precious metal | 7114 |
| 33 | Articles of precious metal or of metal clad with precious metal not elsewhere specified in this list, other than platinum catalysts in the form of wire cloth or grill | 711590 |
| 34 | Articles of precious or semi-precious stones (natural, synthetic or reconstructed) | 711620 |
| 35 | Wristwatches, pocket-watches and other watches, including stopwatches, with cases of precious metal or of metal clad with precious metal | 9101 |
8 The English version of the Regulations is amended by replacing “jewelry” with “jewellery” in the following provisions:
- (a) the portion of item 173 of Part 1 of Schedule 6 in column 1;
- (b) the portion of items 178 to 180 of Part 1 of Schedule 6 in column 1;
- (c) the portion of item 186 of Part 1 of Schedule 6 in column 1; and
- (d) the portion of item 5 of Schedule 9 in column 1.
Application Before Publication
9 For the purpose of paragraph 11(2)(a) of the Statutory Instruments Act, these Regulations apply according to their terms before they are published in the Canada Gazette.
Coming into Force
10 These Regulations come into force on the day on which they are registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
Issues
Revenue earned by state-owned Russian industry from exports of Russian diamonds and related jewellery products is a source of financial support to Russia’s invasion of Ukraine. Russia is the world’s largest natural diamond producer by volume and is estimated to have earned over $4 billion in 2022.
Background
Following Russia’s illegal occupation and attempted annexation of Crimea in March 2014, the Government of Canada, in tandem with partners and allies, enacted sanctions through the Special Economic Measures (Russia) Regulations (the Russia Regulations) under the Special Economic Measures Act (SEMA). These sanctions impose dealings prohibitions (an effective asset freeze) on designated individuals and entities in Russia and Ukraine supporting or enabling Russia’s violation of Ukraine’s sovereignty. Any person in Canada and Canadians outside Canada are thereby prohibited from dealing in the property of, entering into transactions with, providing services to, or otherwise making goods available to listed persons.
On February 24, 2022, Russian President Putin announced “a special military operation” as Russian forces launched a full-scale invasion of Ukraine from Russian and Belarusian territory. The war has become a grinding war of attrition which sees little prospect of a quick victory for either side, and both continue to incur heavy losses. The Russian military has committed horrific atrocities against civilians, including in Izium, Bucha, Kharkiv and Mariupol. Experts, including the Organization for Security and Cooperation in Europe (OSCE) Moscow Mechanism fact-finding missions, the Independent International Commission of Inquiry on Ukraine and United Nations (UN) Office of the High Commissioner for Human Rights (OHCHR), have concluded that Russia is committing serious human rights violations, war crimes, possible crimes against humanity, and conflict-related sexual violence. These studies have linked Russian external aggression with systematic repression and human rights abuses domestically. According to Ukraine’s State Emergency Department, 30% of Ukrainian territory (approximately the size of Austria) has been mined by Russia.
President Putin’s military invasion has been paired with significant malicious cyber operations and disinformation campaigns that falsely portray the West as the aggressor, and claim Ukraine is developing chemical, biological, radiological and/or nuclear weapons with North Atlantic Treaty Organization (NATO) support. The deterioration of Russia’s relations with Ukraine has paralleled the worsening of its relations with the United States and NATO, which has led to heightened tensions.
International response
The coalition of countries supporting Ukraine includes, but is not limited to, G7 and European countries and some of Ukraine’s neighbours. This group is working to support Ukraine across a number of areas, including energy security, nuclear safety, food security, humanitarian assistance, combatting Russian disinformation, sanctions and economic measures, asset seizure and forfeiture, military assistance, accountability, recovery and reconstruction. Canada and other G7 countries are engaged in intense diplomacy with the broader international community to encourage support for Ukraine and counter false Russian narratives.
Key votes in multilateral forums have effectively isolated Russia, including resolutions in the UN General Assembly condemning Russian aggression against Ukraine (March 2022), deploring the humanitarian consequences of Russian aggression against Ukraine (March 2022), suspending Russian membership in the UN Human Rights Council (April 2022) and condemning Russia’s illegal annexation of Ukrainian territories (October 2022). Many developing countries have refrained from openly criticizing Russia or imposing penalties due to geopolitical considerations, commercial incentives, or simply fear of retaliation, with some also arguing the conflict is less of a priority for their regions. Russia continues to use its position as a permanent member of the UN Security Council (UNSC) to block UNSC action on its war on Ukraine and its corrosive disinformation policies.
Canada’s response
Canada continues to condemn in the strongest possible terms Russia’s actions against Ukraine. Canada has announced several contributions to support Ukraine, including humanitarian, development, resilience, security, human rights and stabilization programming. Since February 2022, Canada has committed or delivered over $9.5 billion in assistance to Ukraine. This includes military aid, cyber defence and training to Ukrainian troops in the United Kingdom and Poland under the aegis of Operation UNIFIER. Economic resilience support includes new loan resources, a loan guarantee, and Ukraine Sovereignty Bonds. Canada is helping Ukraine repair its energy infrastructure and has temporarily removed trade tariffs on Ukrainian imports. To support Ukraine’s economic resilience, Canada has offered up to $1.45 billion in additional loan resources to the Ukrainian government through a new Administered Account for Ukraine at the International Monetary Fund (IMF), which have been fully disbursed.
Canada has also committed development and humanitarian assistance and is countering disinformation through the G7 Rapid Response Mechanism. Canada is also providing security and stabilization programming, including support for civil rights organizations and human rights defenders. Canada announced two new immigration streams for Ukrainians coming to Canada: the temporary Canada Ukraine Authorization for Emergency Travel and a special permanent residence stream for family reunification.
In coordination with its allies and partners, since 2014 Canada has imposed sanctions on more than 2 700 individuals and entities in Russia, Belarus, Ukraine and Moldova who are complicit in the violation of Ukraine’s sovereignty and territorial integrity. The duration of sanctions by Canada and like-minded partners has been explicitly linked to the peaceful resolution of the conflict, and the respect for Ukraine’s sovereignty and territorial integrity, within its internationally recognized borders, including Crimea, as well as Ukraine’s territorial sea.
In addition, Canada implemented targeted restrictions against Russia and Belarus in financial, trade (goods and services), energy and transport sectors. Canada is part of the Oil Price Cap Coalition, which limits the provision of maritime services to Russian crude oil and petroleum products above a price set by the coalition.
G7 commitment to implement Russian import diamond ban
In February and May 2023, G7 Leaders issued statements committing to implement economic measures aimed at reducing Russia’s revenue to finance its illegal war. Given the significant revenues that Russia extracts from the export of diamonds, leaders agreed to develop economic measures to reduce revenue from the sale of Russian diamonds, including rough and polished ones. G7 members are currently working towards a phased approach by implementing a direct ban on imports of Russian diamonds by January 1, 2024, and an indirect ban (to cover diamonds mined or produced in Russia and processed or polished in a third country) within the year 2024.
The G7 countries represent 70% of the world diamond market. Russia is the world’s largest rough diamond producer (over US$3.5 billion in value in 2022) and a significant global exporter of diamond products, with 2021 total exports worth more than $1 billion. Its state-owned diamond mining conglomerate, Alrosa, accounts for 95% of Russian diamond production and is the number one diamond producer in the world by volume and number two by value. The European Union remains the centre of the global diamond trade, with an estimated 86% of the world’s rough diamonds passing through Belgium and 25% of these estimated to come from Russia.
Currently, the Russia Regulations prohibit the import and export of certain luxury items as outlined in Schedule 6 using the World Customs Organization Harmonized Commodity Description and Coding System (HS). Under Part 2 of Schedule 6 only one diamond-related item is subject to this luxury goods import ban: synthetic or reconstructed diamonds, other than unworked or simply sawn or roughly shaped (HS 710491). Under Part 1 of Schedule 6, there are multiple diamond-related luxury goods that are subject to an export ban. This includes the following: unsorted diamonds, whether or not worked, but not mounted or set (HS 710210); synthetic or reconstructed diamonds, unworked or simply sawn or roughly shaped (HS 710421); and synthetic or reconstructed diamonds, other than unworked or simply sawn or roughly shaped (HS 710491).
Objective
- Impose further costs on Russia for its unprovoked attack and aggression against Ukraine by banning Russian diamonds and diamond jewelry–related products from Canada, in line with all other G7 members.
- Underscore continued unity with G7 members in responding to Russia’s ongoing actions in Ukraine.
- Ensure that Russian diamonds banned in other markets are not diverted to Canada.
Description
In-line with the G7 commitment, the amendments to the Russia Regulations will prohibit the direct import of diamond and diamond-related products originating from Russia. This will be done by adding the following diamond products to Part 2 of Schedule 6 of the Russia Regulations as classified under Chapters 71 and 91 of the World Customs Organization Harmonized Commodity Description and Coding System:
- diamonds, whether or not worked, but not mounted or set (HS 7102) [excluding industrial diamonds of HS 7102.21 and HS 7102.29];
- synthetic or reconstructed diamonds, unworked or simply sawn or roughly shaped (HS 710421);
- articles of jewellery and parts thereof, of precious metal or of metal clad with precious metal (HS 7113);
- articles of goldsmiths’ or silversmiths’ wares and parts thereof, of precious metal or of metal clad with precious metal (HS 7114);
- articles of precious metal or of metal clad with precious metal not elsewhere specified in this list, other than platinum catalysts in the form of wire cloth or grill (HS 711590);
- articles of precious or semi-precious stones (natural, synthetic or reconstructed) [HS 711620]; and
- wristwatches, pocket-watches and other watches, including stopwatches, with case of precious metal or of metal clad with precious metal (HS 9101).
The amendments also include necessary changes to the existing luxury export ban (Part 1 of Schedule 6) and import ban (Part 2 of Schedule 6) in the Russia Regulations to ensure consistency with the new additions to the import ban on diamond and diamond-related products.
These prohibitions do not apply to goods if a contract for the import, purchase or acquisition of the good is entered into before the day on which the amendments come into force.
Regulatory development
Consultation
Global Affairs Canada regularly engages with relevant stakeholders, including civil society organizations, cultural communities, and other like-minded governments, regarding Canada’s approach to sanctions implementation.
Modern treaty obligations and Indigenous engagement and consultation
An initial assessment of the geographical scope of the amendments was conducted and did not identify any modern treaty obligations, as the amendments do not take effect in a modern treaty area.
Instrument choice
Regulations are the sole method to enact sanctions in Canada. No other instrument could be considered.
Regulatory analysis
Benefits and costs
Canadian imports of products that will be subject to this ban from Russia totalled $4.1 million in 2021. Following Russia’s full-scale invasion of Ukraine in 2022, Canada sanctioned Russia’s state-owned enterprise, diamond conglomerate Alrosa, and removed Most Favoured Nation status (which effectively imposed a 35% tariff on all imports to Canada). This led to a drastic decrease in of all import including imports of products that will be subject to this ban to $327,224 in 2022 and $13,440 for the first eight months of 2023.
The amendments could create additional costs for businesses that will be forced to source imports from other sources or to seek permits that would authorize them to carry out specified activities or transactions that are otherwise prohibited. However, these costs are expected to be minimal given the effectiveness of the Most-Favoured-Nation withdrawal in March 2022. Over the past year, Canadian imports of Russian diamonds and diamond jewellery–related products have effectively ceased. The trade impact of adding these items to the list of banned imports is expected to be minimal.
Small business lens
The amendments could create additional costs for small businesses that will be forced to obtain imports from other sources or to seek permits that would authorize them to carry out specified activities or transactions that are otherwise prohibited. However, costs will likely be low given significant decreases of imported Russian products as the results of other recent trade measures (e.g. withdrawal of Most-Favoured-Nation tariff preferences). As for the products added to the export ban for consistency purposes, Canada exports to Russia were nil to negligible over the years. No significant loss of opportunities for small businesses is expected as a result of the amendments.
One-for-one rule
The one-for-one rule does not apply, as there is no incremental change in administrative burden on business.
Regulatory cooperation and alignment
While the amendments are not related to a work plan or commitment under a formal regulatory cooperation forum, these amendments are being made to implement commitments made by the Prime Minister in the context of Canada’s membership in the G7.
Strategic environmental assessment
The Russia Regulations are unlikely to result in important environmental effects. In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.
Gender-based analysis plus (GBA+)
The subject of economic sanctions has previously been assessed for effects on gender and diversity. Although intended to facilitate a change in behaviour through economic pressure on individuals and entities in foreign states, sanctions under SEMA can nevertheless have an unintended impact on certain vulnerable groups and individuals. Rather than affecting Russia as a whole, these targeted sanctions impact Russia’s ability to export diamonds and ensure that revenue cannot be generated from Canada that could support Russia’s war efforts. Therefore, these sanctions are unlikely to have a significant impact on vulnerable groups as compared to traditional broad-based economic sanctions directed toward a state.
Implementation, compliance and enforcement, and service standards
The amendments come into force on the day on which they are registered.
Under the SEMA, both Royal Canadian Mounted Police (RCMP) and Canada Border Services Agency (CBSA) officers have the power to enforce sanctions violations through their authorities as defined under the Customs Act, the Excise Act or the Excise Act, 2001, and sections 487 to 490, 491.1 and 491.2 of the Criminal Code.
In accordance with section 8 of the SEMA, every person who knowingly contravenes or fails to comply with the Russia Regulations is liable, upon summary conviction, to a fine of not more than $25,000 or to imprisonment for a term of not more than one year, or to both; or, upon conviction on indictment, to imprisonment for a term of not more than five years.
Contact
Andreas Weichert
Director
Eastern Europe and Eurasia Relations Division
Global Affairs Canada
125 Sussex Drive
Ottawa, Ontario
K1A 0G2
Telephone: 613‑203‑3603
Email: Andreas.Weichert@international.gc.ca