Reported by Richard J. Gibbon Of Squire Patton Boggs (US) LLP  –  Global Investigations And Compliance Review

Updated OFAC Guidance on Implementation of the Price Cap Policy

On December 20, 2023, OFAC updated its Guidance on the implementation of the price cap policy that was first issued on February 3, 2023.[2] In addition to clarifying details of the price cap policy, the Guidance established a recordkeeping and attestation process that offers a safe harbor from OFAC enforcement for U.S. service providers who in good faith inadvertently participate in the sale, purchase or transfer of Russian crude oil and/or petroleum products above the relevant price cap. OFAC clearly states the rationale for the safe harbors in the Guidance:

“OFAC would not pursue a penalty against a U.S. service provider that reasonably relies on the documentation or attestations described above, unless the U.S. provider knew or had reason to know that such documentation was falsified or erroneous or that the Russian oil was purchased above the relevant price cap . . . . OFAC intends to focus its enforcement responses on those actors who willfully violate or evade the price cap.”[3]

In the Guidance, OFAC divides service providers into three “tiers” of actor, depending upon their access to price information in the ordinary course of business, and provides direction to each tier of actor regarding the requirements with which they must comply in order to be afforded safe harbor relief:

• Tier 1 actors are those that typically have direct access to price information, such as commodities brokers and traders. To be afforded safe harbor protection, they mut retain documents showing that Russian oil or Russian petroleum products were purchased at or below the relevant price cap, including itemized ancillary costs, and provide such information to other actors (or attest to the same) as needed or upon request. Such documentation may include invoices, contracts, or receipts/proof of payment.
• Tier 2 actors are those that are sometimes able to request price information, such as financial institutions involved in deals in a trade financing capacity, customs brokers, and shipping agents. To be afforded safe harbor protection, they must request and retain documents that show that Russian oil or Russian petroleum products were purchased at or below the relevant price cap, including itemized ancillary cost information, or if not practical, attestations of the same from other actors.
• Tier 3 actors are those without direct access to price information, such as insurers, Protection and Indemnity (“P&I”) clubs, ship owners/carriers, and flagging registries. They must obtain and retain attestations in which other actors commit that for the service being provided, the Russian oil or Russian petroleum products were purchased or will be purchased at or below the relevant price cap.

OFAC also recommended various risk-based measures for compliance with the price cap. For example, service providers should update their standard documentation such as contractual terms and conditions, invoice structures, or requests for information or sanctions questionnaire templates. Service providers should also provide compliance training to employees.

Read full report: https://natlawreview.com/article/price-cap-russian-oil-part-2-updated-ofac-guidance?amp

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[2] OFAC, “OFAC Guidance on Implementation of the Price Cap policy for Crude Oil and Petroleum Products of Russian Federation Origin” (issued on February 3, 2023, and revised December 30, 2023), https://ofac.treasury.gov/media/931036/download?inline.

[3] OFAC, “OFAC Guidance on Implementation of the Price Cap policy for Crude Oil and Petroleum Products of Russian Federation Origin” (issued on February 3, 2023, and revised December 30, 2023), pp. 12-13, https://ofac.treasury.gov/media/931036/download?inline.