On December 20, 2023, nearly eleven months after publishing its finalized guidance on the implementation of the twin price caps on Russian oil and Russian petroleum products, the Department of the Treasury (“Treasury”) published a revised Guidance on Implementation of the Price Cap Policy for Crude Oil and Petroleum Products of Russian Federation Origin. The two price caps stem from the broader “price cap policy” developed by an international coalition consisting of the United States, the G7, the European Union, and Australia not only to prohibit the importation of crude oil and petroleum products of Russian origin, but also to limit the availability of a broad range of services as they relate to the maritime transport of crude oil and petroleum products of Russian origin (see Update of December 5, 2022). The earlier version of the guidance was published on February 3, 2023 (see Update of February 8, 2023).
The changes in the revised guidance focus on service providers seeking to continue benefiting from the price cap policy safe harbor, which shields providers from strict liability for breach of sanctions by complying, in good-faith, with a recordkeeping and attestation process. Specifically, to ensure the safe harbor’s continuous protection, the revised December 2023 guidance outlines two new expectations for service providers: (1) to receive attestations within a specified timeframe for each lifting or loading of Russian oil or Russian petroleum products, and (2) to retain, provide, or receive itemized ancillary cost information as required.
Notably, the revised guidance anticipates service providers satisfy these two new expectations differently, depending upon their designation in a novel, three “tier” system of actors:
- Tier 1 Actors: Actors who regularly have direct access to price information in the ordinary course of business, such as commodities brokers and oil traders. Tier 1 Actors must retain documents to show Russian oil or Russian petroleum products were or will be purchased at or below the relevant price cap, including itemized ancillary cost information (e.g., shipping, insurance, and freight costs);
- Tier 2 Actors: Actors who are sometimes able to request and receive price information from their customers in the ordinary course of business, such as financial institutions, ship/vessel agents, and customs brokers. To the extent practicable, Tier 2 Actors must retain documentation conveying the same information Tier 1 Actors must preserve. However, when not practicable to request and receive such information, Tier 2 Actors must obtain and retain customer attestations, in which the customer commits that the Russian oil or Russian petroleum products were or will be purchased at or below the relevant price cap, and such attestations should be obtained within 30 days of a counterparty’s lifting or loading of Russian oil or Russian petroleum products; and
- Tier 3 Actors: Actors who do not regularly have direct access to price information in the ordinary course of business, such as insurers, protection/indemnity clubs, shipowners, and flagging registries. Given their handicap, Tier 3 Actors should obtain customer attestations that Russian oil or Russian petroleum products were or will be purchased at or below the relevant price cap each time a counterparty loads or lifts the Russian oil or Russian petroleum product. Further, Tier 3 Actors should require counterparties to share additional information, including itemized ancillary cost information, especially after gleaning information that raises suspicion of a violation of the price cap policy.
Service providers seeking to continue benefiting from the safe harbor must be in compliance with these new expectations—and the entire, updated guidance in general—by February 19, 2024.