OFAC issues preliminary guidance regarding price cap policy for Russian-origin petroleum products

On December 30, 2022, the Department of the Treasury’s Office of Foreign Assets Control issued preliminary guidance on implementation of the price cap policy for petroleum products of Russian Federation origin, similar to the policy that was implemented for crude oil of Russian origin.  The policy will be implemented by the Price Cap Coalition, a group comprised of the US, the G7, the EU, and Australia, and will ultimately prohibit US service providers from furnishing a broad range of services related to the maritime transport of Russian-origin petroleum products, unless they are sold at or below a specified price cap.

OFAC plans to publish a final, combined guidance for both Russian oil and Russian petroleum products prior to February 5, 2023, and the Secretary of the Treasury intends to issue, in consultation with the Secretary of State, a determination pursuant to Executive Order 14071 for the price cap policy for Russian petroleum products.  The determination will cover the same categories of services as the crude oil determination, and set price caps for Russian petroleum products.  OFAC will also amend General Licenses 56 and 57 to extend price cap policy authorizations to the petroleum products determination.

The price cap policy on Russian petroleum products will not apply to products that are loaded onto a vessel at the port of loading prior to February 5, 2023 and unloaded at the port of destination before April 1, 2023.  The guidance describes several circumstances under which the price cap will not apply.  However, the price cap will apply to Russian petroleum products from the embarkment of maritime transport through the first landed sale in a jurisdiction other than the Russian Federation, which means that the price cap will not apply to the further onshore sale of Russian petroleum products that have cleared customs in a jurisdiction other than Russia.  In addition, OFAC indicates that Russian petroleum products or oil that have been “substantially transformed” in a jurisdiction other than Russia would not be considered of Russian origin and would therefore not be subject to the price cap. The guidance also indicates that US persons may reasonably rely upon the certificate of origin when assessing whether petroleum products are of Russian origin, but warns that caution should be used if there is reason to believe that the certificate has been falsified or is otherwise erroneous.

OFAC urges anyone with questions about the preliminary guidance to email the agency or contact the OFAC Compliance Hotline at 1-800-540-6322.

Preliminary Guidance

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