Canada Expands Sanctions Against China: A Harbinger of Escalating Restrictions

On December 9, 2024, the Government of Canada (Government) announced amendments to the Special Economic Measures (People’s Republic of China) Regulations (Regulations), adding eight Chinese individuals to the list of sanctioned persons. The newly listed persons are current or former Chinese officials implicated in human rights violations in Xinjiang and Tibet or against practitioners of the spiritual practice of Falun Gong.

The Government’s announcement links the new sanctions to human rights abuses in Xinjiang and recent measures to combat the import of goods made with forced labour. By doing so, Canada is signalling a broader strategy to address human rights violations in China through a range of trade restrictions. Businesses should be prepared for further restrictions on trade with China.

1. Canadian Sanctions Against China 

The new sanctions mark the first expansion of Canadian sanctions against China since 2021, when Canada imposed sanctions on four individuals and one Chinese entity.

The sanctions under the Regulations prohibit dealings with listed persons (effectively, an asset freeze) by banning persons and entities in Canada, and Canadian persons and entities outside Canada, from participating in transactions related to any property of these listed persons, or providing goods or financial-related services to them.

The Regulations also prohibit knowingly doing anything that facilitates or is intended to facilitate a prohibited transaction.

2. Wider Trade Restrictions to Combat Forced and Child Labour 

The recent sanctions against China are the latest to be linked to Canada’s broader legislative and policy measures to combat forced and child labour. Among other things:

• In July 2020, Canada amended the Customs Tariff to prohibit the import of goods produced with forced labour. The change was cited by the Government as providing a basis for enforcement against forced labour goods from Xinjiang, China.
• In January 2021, Canada announced a range of measures to address human rights abuses in China and prevent the risk of forced labour goods entering global Canadian supply chains. These included issuing a Business Advisory and Responsible Business Conduct expectations for Canadian businesses related to Xinjiang, issuing a Xinjiang Integrity Declaration for businesses using Canada’s Trade Commissioner Service, and increased scrutiny on applications for export permits to China.
• In May 2023, Canada passed Bill S-211 enacting the Fighting Against Forced Labour and Child Labour in Supply Chains Act, requiring Canadian companies to file public reports on forced and child labour in their supply chains. The Blakes International Trade group has written extensively on this topic, including two recent bulletins from November 2024: From Challenges to Compliance: A Look at the Inaugural Reporting Period Under Canada’s Forced and Child Labour Legislation and Public Safety Canada Updates Guidance on Forced and Child Labour Legislation.

By targeting senior Chinese officials coupled with escalating forced labour measures that reference China specifically, Canada has signaled its intent to address human rights violations through a range of trade restrictions and direct sanctions.

3. The Potential for Further Import Restrictions From China 

The timing of the Regulations suggests that the Government is aligning its sanctions regime with broader trade policy initiatives aimed at combating human rights violations and unfair trade practices in China.

The new sanctions were announced shortly after Canada imposed new tariffs on China, and after a separate 30-day consultation concluded in November 2024 on measures to strengthen Canada’s import ban on forced and child labour goods. As discussed in our November 1, 2024 bulletin, Canada Opens Public Consultation on Strengthening Its Forced Labour Import Ban, forced labour measures under consideration include:

• The publication of a list of specified goods or regions at risk of forced labour
• A “reverse-onus” mandatory traceability process, in which importers of goods appearing on the public list would be required to provide documentation showing a supply chain free of forced labour

These policies would bring Canada closer to the United States’ forced labour legislation, which imposes a reverse-onus ban on imports of goods from Xinjiang, China unless importers are able to demonstrate a supply chain free of forced labour.

This policy direction also aligns with the increasingly hardline approach to China in the United States’ trade and foreign policies more generally. Additional restrictive measures against Chinese goods may follow, including new tariffs on manufactured goods.

4. Preparing for Regulatory Changes 

The expansion of new measures raises the prospect of new disputes, border seizures and other regulatory controversies. Canadian businesses should take proactive measures to navigate this shifting regulatory landscape, such as:

• Monitoring supply chains to ensure compliance with forced and child labour prohibitions
• Reviewing contractual arrangements to evaluate who bears the costs or risks of non-performance if new sanctions or import restrictions are imposed
• Diversifying sourcing and alternative domestic and international supply chain options, including under Canada’s extensive network of international trade agreements (see our Doing Business in Canada Guide: Trade Investment Regulation for more information on this)

Businesses should seek legal counsel if they are concerned about how these measures will affect them. We encourage businesses to contact the authors of this bulletin or any other member of our International Trade group.