Washington, D.C. (October 26, 2023) - On October 12, 2023, the G7 Price Cap Coalition (Australia, Canada, the European Union, France, Germany, Italy, Japan, the United Kingdom, and the United States) released an Advisory for the Maritime Oil Industry and Related Sectors ("Advisory"), outlining best practices for the maritime oil industry to ensure compliance with price caps on crude oil and petroleum products put in place by the G7, European Union, and Australia. The Advisory builds upon previous governmental guidance, including OFAC's February 2023 Guidance on Implementation of the Price Cap Policy and April 2023 Alert on Possible Evasion of the Russian Oil Price Cap, among others. (See our previous alert, "OFAC Issues Warning on Practices That Could Result in Evasion of Price Cap on Russian Crude Oil").
The Advisory emphasizes increased risks in the maritime oil trade, largely driven by a "shadow" trade, characterized by transactions with sanctioned countries, vessels, and individuals. Specifically, the Advisory cautions the maritime industry that, following the imposition of crude oil and petroleum price caps, transactions with parties may be non-compliant with maritime safety and marine environment obligations; have insufficient protection and indemnity insurance; conceal their true identity through complex corporate structures; and circumvent international sanctions. Consequently, the Advisory suggests seven best practices for affected industry members:
(1) Require that vessels have "continuous and appropriate" maritime insurance through legitimate providers with coverage for CLC liabilities;
(2) Ensure that counterparts have received classification from an International Association of Classification Societies;
(3) Promote, document, and monitor the use of Automatic Identification Systems;
(4) Monitor ship-to-ship transfers, particularly outside of safe and sheltered waters or other high-risk areas;
(5) Require itemized breakdowns of all costs in contracts or invoicing models to identify possible inflation of shipping and ancillary costs, which may indicate the purchase of oil above the price cap;
(6) Conduct increased due diligence, especially when dealing with opaque intermediaries or ships with numerous administrative changes; and
(7) Report ships with known or suspected concerning behaviors to relevant authorities.
Also on October 12, 2023, the Department of the Treasury's Office of Foreign Assets Control (OFAC) issued General License (GL) 73, "Authorizing Limited Safety and Environmental Transactions Involving Certain Persons or Vessels." The GL authorizes, subject to other sanctions laws or regulations, certain ordinarily incident and necessary transactions with Ice Pearl Navigation Corp or Lumber Marine SA. Specifically, the GL allows for specified vessels, through January 8, 2024, the safe docking and anchoring in port; preservation of the health and safety of the crew; and emergency repairs or environmental mitigation or protection activities relating to any of the blocked vessels.
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