EU Restrictions On Transfer Of Russian Coal And Other Goods Globally

The EU published new FAQs on 10 August 2022 which state that restrictions on coal products exported from Russia include a ban on their transport to third countries. Certain fertiliser products may also be 'caught in the cross-fire', contrary to the EU's apparent intentions.

As part of the EU's fifth sanctions package of 8 April 2022, restrictive measures were imposed under Article 3j(1) of Council Regulation (EU) 833/2014 on the purchase, import or transport of Annex XXII coal products. The restrictions state:

"(1) It shall be prohibited to purchase, import, or transfer, directly or indirectly, coal and other solid fossil fuels, as listed in Annex XXII into the Union if they originate in Russia or are exported from Russia."

There are also similarly worded restrictions under Article 3i, which targets inter alia certain fertiliser products.

Given the reference to 'into the Union', it was widely interpreted that these restrictions only prohibited the purchase, import or transfer of Annex XXII coal products where they were destined for an EU Member State. Supportive of this was the distinction in drafting between Article 3j(1) and the restrictions under Article 3g(1) affecting iron and steel products, which contained separate restrictions on the transport of such goods to third countries (emphasis added):

"Article 3g

1. It shall be prohibited:

(a) to import, directly or indirectly, iron and steel products as listed in Annex XVII into the Union if they: (i) originate in Russia; or (ii) have been exported from Russia;

(b) to purchase, directly or indirectly, iron and steel products as listed in Annex XVII which are located or which originated in Russia;

(c) to transport iron and steel products as listed in Annex XVII if they originated in Russia or are being exported from Russia to any other country."

On 17 April 2022, the EU issued a FAQ stating that "transfer is a broad concept covering a wide range of operations: not only the movement of goods through customs controls, but also the transport of goods, including (but not exhaustively) their loading and trans-shipment". Whilst this made clear that 'transfer' included transport, for the reasons given above, Article 3j(1) still ostensibly required goods to be destined for the EU.

On 14 June 2022, the EU published a further FAQ under the heading 'Imports & Purchase of Goods', which stated, amongst other things (emphasis added):

"Is the purchase of goods listed in Annexes XVII, Annex XXI and XXII of Council Regulation 833/2014 by an EU company allowed when the goods are exported from Russia towards a third country and are not transiting Union territory?

No. Articles 3g, 3i and 3j of Council Regulation 833/2014 prohibit the purchase, import, or transfer, directly or indirectly, of the goods listed in Annexes XVII, XXI and XII if they originate in Russia or are exported from Russia. The prohibition on purchase applies irrespective of the final destination of the goods. Provided the purchase falls within the scope of Article 13 of Regulation 833/2014, it is not relevant whether the goods are destined for the EU or not."

With this, the EU seemingly sought to clarify that EU persons were restricted from purchasing restricted Russian-origin coal regardless of its destination. However, there remained some uncertainty whether the restrictions on importing and transferring restricted coal products only applied to imports and transfers 'into the Union' (and not third countries). Given the distinction between Articles 3j(1) and 3g(1), the title given to the relevant FAQ ('Imports & Purchase of Goods' – which was subsequently re-organised under the heading 'Purchase of Listed Goods' in the EU's Consolidated FAQs) and the precise wording of the FAQs – this appeared the most likely position.

By way of further development, on 10 August 2022, the EU issued a revised FAQ under the title 'Import, purchase and transfer of listed goods' which states (emphasis added):

"2. Is the transfer of goods listed in Annexes XVII, Annex XXI and XXII of Council Regulation 833/2014 by an EU company allowed when the goods are destined for a third country and are not transiting Union territory?

Last update: 10 August 2022

No. Articles 3g, 3i and 3j of Council Regulation 833/2014 prohibit the purchase, import, or transfer, directly or indirectly, of the goods listed in Annexes XVII, XXI and XXII if they originate in Russia or are exported from Russia. The prohibition on transfer applies irrespective of the final destination of the goods, whereas the prohibition on the import applies by nature to goods moving 'into the Union'. Provided the transfer falls within the scope of Article 13 of Council Regulation 833/2014, it is not relevant whether the goods are destined for the EU or not."

It is unclear whether the purpose of the latest FAQ is to clarify the previous scope of Article 3j(1) or, in fact, broaden it. In any event, this effectively means that EU persons are now clearly prohibited from (i) purchasing Annex XXII coal products of Russian origin or that are exported from Russia; (ii) transporting such goods irrespective of their destination; and (iii) importing them into the EU. In effect, then, Article 3j is to be read in the same manner as the better-drafted Article 3(g).

The FAQ also applies to Article 3i, which restricts inter alia certain fertiliser products (as listed in Annex XXI). As a result, these products are ostensibly also subject to a transportation ban in respect of third countries. However, this should be set against recent statements made by the EU that any sanctions on Russia are not intended to target the trade of agricultural and food products between third countries and Russia. These are best summarised in Recitals 11 and 12 to Council Regulation (EU) 2022/1269.¹

It therefore seems likely that this may have been an unintended consequence of the latest FAQs, and we expect further revisions may be made to the relevant legislation to clarify this.

Footnote

1. Council Regulation (EU) 2022/1269

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