A commodities trader operating between North America and Asia-Pacific arranges a charter for a bulk-cargo vessel. The vessel's registered manager appears on a screening report. One flag-state registry shows a prior port-state control detention. A co-investor in the charterer holds shares through a layered holding structure with ties to a listed person. Every element is legally distinct. Under OFAC, the ownership arithmetic is the first question. Under Canadian sanctions law – the Special Economic Measures Act ("SEMA") and the Justice for Victims of Corrupt Foreign Officials Act ("JVCFOA"), administered through Global Affairs Canada ("GAC") – the answer turns on different prohibitions, different defences, and a different relationship between the civil and criminal tracks. The chart is navigable. But the gap between the two regimes is wide enough that a ship, a cargo, or a financing can comply with one and breach the other simultaneously.
As of January 2026, maritime and shipping sanctions under OFAC and under the Canadian sanctions regime share common objectives – denying the use of the international maritime system to designated persons and programmes – but diverge materially on the ownership and control test, the scope of vessel-specific prohibitions, port and service obligations, the licensing architecture, and enforcement. A business that is compliant with OFAC is not automatically compliant with Canada, and vice versa. The stricter prohibition governs in any transaction that touches both jurisdictions.
This analysis maps the key points of divergence across seven criteria, identifies the risk flags that experienced compliance counsel look for, and sets out a decision sequence for businesses operating in both regimes.
What legal authority governs each regime, and who administers it?
OFAC derives its authority primarily from the International Emergency Economic Powers Act ("IEEPA") and, in some older programmes, the Trading with the Enemy Act ("TWEA"). It designates individuals and entities to the SDN List (OFAC's list of Specially Designated Nationals and blocked persons), and may also list specific vessels as blocked property. OFAC administers all economic-sanctions programmes for the United States and issues binding regulations, general licences, and specific licences. The agency sits within the US Department of the Treasury.
Canada operates through two principal statutory instruments. SEMA authorises the Governor in Council to impose economic measures against foreign states and associated persons. JVCFOA authorises targeted measures against foreign officials and their associates linked to gross human-rights violations or significant corruption. GAC (Global Affairs Canada) leads the policy and designation process; the Royal Canadian Mounted Police and the Canada Border Services Agency handle border-enforcement elements. There is no single Canadian equivalent of OFAC's SDN List: Canadian designated persons and entities are scheduled to the applicable country-specific or thematic regulations enacted under SEMA or JVCFOA.
Both regimes can list vessels directly. OFAC lists vessels on the SDN List with identifying detail – flag, IMO number, and type. Canadian regulations schedule named vessels or can catch vessels through ownership attribution. In our cross-border practice, vessel-level designations are the fastest-moving category: a ship can be added with little public notice, and a charterparty signed on Monday may be void by Friday.
How do the ownership and control tests compare?
The single sharpest divergence between OFAC and the Canadian regime is the test for whether a non-listed entity – including a non-listed vessel owner or operator – is nonetheless caught by a designation.
Under OFAC, the 50 percent rule (OFAC's rule treating entities owned 50 percent or more in the aggregate by blocked persons as themselves blocked) is the primary gateway. Ownership is assessed in the aggregate across all blocked persons with an interest, whether directly or through intermediate layers. If the combined blocked-person interest in a shipowner reaches 50 percent or more, the shipowner is blocked regardless of whether it is itself listed. OFAC does not require that the blocked person exercise control; the arithmetic of ownership is sufficient. This creates a mechanical, screen-checkable threshold – but also a systematic blind-spot when ownership is dispersed below 50 percent and control is exercised informally.
The Canadian regime does not have a direct statutory equivalent of the 50 percent rule expressed in those terms. SEMA regulations typically prohibit dealings with a "person" who is listed or acting on behalf of a listed person. GAC guidance and judicial interpretation have developed a de facto attribution approach, but it is less mechanically precise than OFAC's. The key phrase "acting on behalf of" introduces a purposive, fact-specific inquiry: is this entity, in this transaction, serving the interests of a listed person? That test is both broader and narrower than the US rule – broader because it can capture entities with minimal ownership links if the transaction is directed by a listed person; narrower because an entity majority-owned by a listed person but genuinely operating independently may not automatically be caught.
What does this mean in practice? A tanker owned 50 percent or more by a blocked person is itself blocked under OFAC without further inquiry. The same tanker may not be automatically prohibited under SEMA unless the charterparty or the transaction is being conducted on behalf of the listed owner. A compliance programme built only to the Canadian standard will under-screen for OFAC purposes. Have you reviewed the ownership attribution methodology your screening tool applies?
Where do vessel-specific prohibitions diverge?
OFAC vessel-specific prohibitions attach to the ship as an asset: a vessel listed on the SDN List is itself blocked property, and any US person who deals with it – chartering it, providing bunkers, offering port services, financing the cargo – violates the relevant programme unless authorised. The prohibition is in rem in economic effect, binding the vessel wherever it sails, and it extends to non-US persons under secondary-sanctions provisions that are operative in several OFAC programmes.
Canadian vessel-level prohibitions operate through asset-freezing and dealing prohibitions attached to the owner or operator. A vessel owned by a Canadian-listed person is caught because the owner is listed, not because the vessel itself is independently designated. In practice this distinction matters. If a vessel is sold from a listed owner to a clean buyer and the transfer is genuine, Canadian exposure should clear. Under OFAC, a vessel listed directly on the SDN List remains blocked after a transfer unless OFAC delists or issues a licence; the prior ownership of the sanctioned person is not the operative legal hook – the designation of the vessel itself is.
This divergence is most acute in ship finance and in charter arrangements for vessels that have passed through the ownership of a sanctioned person. In a recent matter, a shipping-finance institution held a mortgage over a vessel whose operator was added to an OFAC programme list mid-term. The vessel was not itself SDN-listed, but the operator's blocked status made performance of the charter agreement a US-sanctions issue. The position under SEMA was different: the Canadian prohibition attached to dealings with the operator, but the institution's security interest in the vessel itself was analysable as a distinct property right. Early engagement of cross-border counsel allowed the institution to map the two exposure profiles separately and take structured protective steps within the permitted scope of each regime.
How do port-service and bunkering prohibitions apply under each regime?
Under OFAC, providing port services, bunkering, ship-chandlering, insurance, or reinsurance to a blocked vessel or a blocked person is itself a dealing in blocked property or a prohibited service. The prohibition extends to US persons globally and, under secondary-sanctions provisions in certain programmes, creates significant exposure for non-US entities that provide those services. The extraterritorial reach of OFAC's secondary-sanctions provisions is a live risk for any port operator, bunker supplier, or P&I club with US-dollar business or US-person counterparties.
Canada does not currently operate a formal secondary-sanctions regime of the OFAC type. Canadian prohibitions are primary: they bind Canadian persons and entities, activities occurring in Canada, and Canadian-flag vessels. A non-Canadian bunker supplier with no Canadian nexus is not exposed under SEMA simply by servicing a Canadian-listed vessel. However, the analysis changes where the bunker supplier has Canadian operations, Canadian customers, or routes cargo through Canadian ports. And it changes further where the same vessel is blocked under OFAC: a non-US, non-Canadian bunker supplier with US-dollar payment flows for the transaction is potentially back inside OFAC's reach through the dollar.
The US dollar's role as the dominant settlement currency for maritime transactions is the mechanism by which OFAC's reach extends well beyond US-nexus transactions. A commodity trade settled in US dollars, processed through a US correspondent bank, brings OFAC into transactions that have no other US connection. This point is central to any cross-border maritime compliance analysis. We regularly advise charterers and operators who assume that non-US flag, non-US port, and non-US cargo mean no OFAC exposure – but if the payment is in dollars, the assumption does not hold.
For related analysis of the dollar-clearing exposure and its effect on financial-institution risk, see our work on correspondent banking and de-risking under OFAC.
How do licensing and authorisation structures differ?
OFAC maintains a structured licensing architecture. A general licence (a standing authorisation that permits a defined category of transactions without a separate application) may cover certain wind-down periods, humanitarian activities, or specific classes of transaction. A specific licence (a case-by-case authorisation to conduct an otherwise prohibited transaction) requires a written application to OFAC, a statement of the facts and the transaction, a legal basis, and supporting documentation. OFAC's processing time for specific licences varies by programme and complexity; there is no guaranteed statutory timeframe, but applicants should expect a process measured in weeks to months in most cases, and materially longer for complex or sensitive matters. General licences require no application but must be read carefully: their scope is often narrower than the summary description, and compliance depends on satisfying all conditions.
Canada's licensing architecture under SEMA is less developed than OFAC's and, in the view of practitioners, less frequently used. Ministerial permits can authorise transactions that would otherwise breach a SEMA regulation. The criteria for permit issuance are discretionary. In our experience, the Canadian permit process has historically been used in humanitarian contexts and for wind-down transactions rather than as a routine commercial tool. The result is that a business with OFAC-licensed activity may find no comparable Canadian authorisation pathway, or may find that the Canadian pathway is slower and less predictable.
One practical consequence: when a maritime operator is winding down a contractual relationship following a new designation, the OFAC wind-down general licence (where available) provides a defined safe harbour for a defined period. No equivalent automatic wind-down licence exists under SEMA. This asymmetry can leave a business caught between an OFAC authorisation to wind down and a Canadian prohibition on continuing the steps needed to execute the wind-down. The interaction must be mapped before the wind-down is initiated.
How does enforcement differ, and what are the key risk flags?
OFAC enforcement in the maritime sector has been among the most active areas of US sanctions enforcement in recent years. OFAC has used a combination of civil monetary penalties, disgorgement, and compliance commitments against shipowners, operators, managers, commodity traders, financial institutions, and flag-state intermediaries. Civil penalties can be substantial – assessed on a per-transaction, per-day, or per-violation basis depending on the programme – and the base-penalty amounts can be significant even before aggravating factors are applied. A VSD (voluntary self-disclosure to a regulator) is a recognised mitigant: OFAC's enforcement guidance treats timely VSD as a significant mitigating factor and typically results in a reduced penalty. Failure to disclose where disclosure was warranted can be treated as an aggravating factor.
Canadian enforcement under SEMA operates on a different model. Criminal penalties for breach of a SEMA regulation can include custodial sentences and financial penalties; the criminal standard of proof applies. Civil penalty regimes are more limited compared with OFAC's civil track. Enforcement has historically been lower in volume than OFAC's, though legislative attention to sanctions enforcement has increased.
The risk flags that recur in maritime and shipping sanctions work across both regimes include:
- Vessel name changes, flag-state switches, and IMO number irregularities – known indicators of attempts to obscure a vessel's identity
- Ownership structures that aggregate at or near the OFAC 50 percent threshold without triggering it, combined with informal control indicators
- Ship-to-ship transfers in international waters with no documented legitimate commercial purpose
- Automatic identification system ("AIS") gaps or manipulation in high-risk trade lanes
- Cargo documentation that does not align with the vessel's declared port calls or cargo manifest
- Payments routed through multiple correspondent banks in non-obvious currencies, which can be an indicator of layering
- Charter and management structures that interpose multiple layers between the beneficial owner and the vessel
These flags apply under both regimes. What differs is the legal consequence: under OFAC, the 50 percent rule and secondary-sanctions exposure mean the business-level consequence of one flag can be severe. Under SEMA, the consequence turns on whether the transaction is for, on behalf of, or in direct benefit to a listed person.
If a transaction has already been flagged, or a filing has been refused, an early review can preserve options that narrow with time. Contact Calder & Vance at info@caldervance.com for a confidential review of a potential breach.
What is the cross-border decision sequence for a shipping business?
A shipping business or financial institution managing maritime-sanctions exposure across OFAC and Canada should work through a structured sequence rather than a single-regime screen.
First, identify the jurisdictional nexus for the transaction. Is there a US person, a US-dollar payment, a US port call, a US-flag vessel, or a US-incorporated entity in the chain? If yes, OFAC applies. Is there a Canadian person, a Canadian port call, a Canadian-dollar payment, or a Canadian-incorporated entity? If yes, SEMA applies. Both may apply simultaneously.
Second, screen all parties – counterparty, vessel, cargo, port agents, and financial intermediaries – against both the SDN List and the Canadian designated-persons schedules. These lists are not identical. A person may appear on one and not the other. A vessel may be SDN-listed without being scheduled under SEMA, and vice versa.
Third, apply the ownership and control test for each regime separately. Aggregate blocked-person ownership toward the OFAC 50 percent threshold. Assess separately whether any party is acting on behalf of a listed person for Canadian purposes.
Fourth, if either analysis is unclear, obtain legal advice before proceeding. The cost of pre-transaction advice is a fraction of the cost of an OFAC penalty or a SEMA criminal investigation.
Fifth, document the analysis. Both OFAC and GAC treat documented due diligence as a factor in enforcement and penalty reduction. A contemporaneous record of what was screened, what was found, and what decision was made is your principal defence if the transaction is subsequently questioned.
Sixth, if either screening analysis produces a hit or a near-hit, do not proceed without specialist advice. The question of whether a transaction is blocked, whether a licence is available, and whether voluntary disclosure is appropriate should not be answered by the compliance officer alone.
For detailed analysis of a parallel jurisdiction comparison, see our extended treatment of maritime and shipping sanctions across OFAC and Canada. For a comparison of how OFAC and OFSI handle the same issues in maritime contexts, see our OFAC vs OFSI maritime sanctions analysis.
A common misconception: "if there is no US nexus, OFAC does not apply to our shipping deal"
The myth runs: a non-US shipowner, with a non-US flag, carrying non-US cargo on a non-US route, settled in a non-US currency, faces no OFAC risk. The correction is more nuanced.
OFAC's secondary-sanctions provisions, operative in several of its most active maritime programmes, reach non-US persons who engage in significant transactions with sanctioned persons or sectors. The trigger is not always a US nexus in the traditional sense. A non-US shipping group that provides material services to a party subject to a secondary-sanctions provision can face OFAC enforcement action, correspondent-banking restrictions, and effective exclusion from the US financial system – even if no US person was directly involved in the transaction.
Furthermore, the US-dollar settlement point – a factor entirely separate from the parties' nationalities – frequently creates the US nexus that brings OFAC into play. Dollar-clearing transactions pass through US-regulated financial institutions, and those institutions' own OFAC compliance obligations create a choke point in the payment chain. We have acted for non-US maritime operators who first became aware of OFAC exposure not through a direct OFAC communication, but through a correspondent bank's refusal to process a payment.
Canada, by contrast, operates a territorial model without a formal secondary-sanctions layer. This means that a business with no Canadian nexus faces no direct SEMA exposure. It does not mean, however, that Canada can be ignored: where Canadian counterparties, ports, or financing are involved, the SEMA position must be assessed alongside OFAC.
Related practices
Related practices
- Correspondent banking and de-risking under OFAC – sanctions exposure in US-dollar correspondent banking and the risk of de-risking for maritime clients
- OFAC vs OFSI maritime sanctions analysis – a direct comparison of US and UK maritime-sanctions obligations for cross-border shipping businesses
Frequently asked questions: maritime and shipping sanctions – OFAC vs Canada
Where do the regimes diverge on maritime and shipping sanctions?
The sharpest divergences are: the ownership and control test (OFAC's mechanical 50 percent rule versus Canada's purposive "acting on behalf of" standard); the licensing architecture (OFAC's detailed general-licence and specific-licence system versus Canada's more limited ministerial-permit route); the secondary-sanctions reach (OFAC has it; Canada does not currently); and enforcement posture (OFAC maintains an active civil-penalty programme for maritime violations, while Canadian enforcement under SEMA operates primarily on a criminal track). A business that screens only against one list, or applies only one ownership methodology, will have systematic gaps.
Which regime is stricter on maritime and shipping sanctions?
The answer is programme- and fact-specific. OFAC's secondary-sanctions provisions make it the more expansive regime for non-US businesses without any US nexus: OFAC can reach a non-US shipping transaction in ways that Canada cannot. On the criminal-liability side, SEMA's criminal track can produce outcomes that OFAC's civil programme does not. For a cross-border business, the stricter prohibition governs each element of the transaction independently. This means a transaction can be simultaneously OFAC-compliant and SEMA-non-compliant, or vice versa. Relying on one regime's clearance as a proxy for the other is a known compliance failure mode.
What should a cross-border business do about maritime and shipping sanctions?
A cross-border maritime business should first establish which regimes apply by mapping every jurisdictional nexus in the transaction – party nationality, flag state, port calls, payment currency, and financial intermediaries. It should then screen against both the SDN List and the Canadian designated-persons schedules, apply each regime's ownership and control test independently, document the analysis contemporaneously, and seek specialist advice before proceeding if either analysis produces an unclear result. Where a transaction is already under way and a sanction hits, preserving options requires early engagement: the available authorisations, wind-down periods, and disclosure routes differ materially between OFAC and SEMA.
About the author
J. M. Aldridge advises multinationals and financial institutions on US sanctions and export controls, with a focus on OFAC licensing, secondary-sanctions risk, and BIS classification. Calder & Vance – International Sanctions & Export Control Counsel.
About Calder & Vance
Calder & Vance is an independent international sanctions and export-control boutique. We advise multinationals, financial institutions, exporters, and individuals on the major regimes – OFAC and BIS in the United States, OFSI and ECJU in the United Kingdom, the EU Council regulations and the EU General Court, the United Nations Consolidated List, and the regimes of Switzerland, Canada, Australia, the UAE, Singapore, and Japan. Our work is limited to lawful compliance, licensing, delisting, enforcement defence, and due diligence. To discuss a matter, contact info@caldervance.com.
Disclaimer: This material is general information, not legal advice, and is not a substitute for advice on your specific facts. Sanctions and export-control rules change frequently and differ by regime; verify the current position before relying on anything stated here. Calder & Vance does not advise on circumventing or evading sanctions. For advice on your situation, contact info@caldervance.com.