Maritime Block Logo

OFAC Issues Determination and Guidance For Russian Oil Price Cap Policy Commencing Today

December 5, 2022

As noted in our prior alerts (concerning OFAC’s September 9, 2022 preliminary guidance and October 31, 2022 follow-on FAQ clarifying the applicability of the impending price cap policy) the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has been taking steps toward an impending ban on covered categories of services related to the maritime transportation of seaborne Russian oil that is taking effect today, December 5, 2022.1 The price cap has been set at $60 per barrel.

Most importantly, on November 22, 2022, OFAC published its Determination, pursuant to Section 1(a)(ii) of Executive Order 14071, identifying the categories of prohibited services (“Covered Services”) that fall within the price cap policy. Those services are:

  • Trading/commodities brokering;
  • Financing;
  • Shipping;
  • Insurance, including reinsurance and protection and indemnity;
  • Flagging; and
  • Customs Brokering.

OFAC’s issuance of the Determination prohibits the “exportation, reexportation, sale or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of any of the Covered Services to any person located in the Russian Federation,” unless such services are in compliance with the relevant price cap as determined by the Secretary of the Treasury, in consultation with the Secretary of State. The Determination in any event also does not authorize the import of Russian oil into the United States.

OFAC has also issued additional Guidance on the Determination which provides additional information on the price cap, the Covered Services, and the safe harbor process, including a discussion of the types of due diligence and attestations that OFAC is likely to require of different participants in the industry in order to qualify for the safe harbor.

OFAC stated that shipping, freight, customs, and insurance costs are not included in the price cap and must be invoiced separately and at a commercially reasonable rate. OFAC noted that it would view the billing of commercially unreasonable shipping, freight, customs, or insurance costs as a sign of potential evasion of the price cap.

Notably, the Covered Services described within the Guidance, among other services, include both “transaction-specific trade finance related to the maritime transport of Russian oil” as well as non-transaction specific financing. Depending on the category of Covered Service or the party’s role in the industry (as either a Tier 1, Tier 2 or Tier 3 actor), parties may need to update the terms and conditions of their contracts and invoices, revise their due diligence questionnaires or other policies and procedures, including the terms of their lending or financing arrangements, and provide additional training or guidance to their applicable staff.

As noted in the Guidance, OFAC has broad authority to take action against actors that evade the price cap, whereas shipowners and service providers that act in good faith and institute compliance policies and procedures – including due diligence of counterparties, obtaining attestations from their counterparties where appropriate or implementing other updates to their business practices as suggested by OFAC’s Guidance – will be likely to qualify for the safe harbor. OFAC has advised that it “intends to focus its enforcement responses on those actors who willfully violate or evade the price cap.”

We will continue to closely monitor developments in this space. If you have any questions or concerns about U.S. sanctions, please contact Bruce Paulsen or Brian Maloney at Seward & Kissel's Sanctions Practice Group.

1 As noted in OFAC FAQ 1094, crude oil of Russian Federation origin that is loaded onto a vessel at the port of loading prior to 12:01 a.m. eastern standard time, December 5, 2022, and unloaded at the port of destination prior to 12:01 a.m. eastern standard time, January 19, 2023, is not subject to the Determination.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


Fill out the following form to receive our maritime law news and analysis.