UK Maritime Services Prohibition and Oil Price Cap Guidance

Given the close degree of cooperation between the U.S. and the UK, it is no surprise that the UK Price Cap Guidance adopts concepts embedded in OFAC’s guidance of 9 September 2022. Following consultation with industry, it goes further than the preliminary U.S. guidance and clarifies certain previously unresolved issues. The key points are as follows:

• In respect of HS Code 2709 products, the guidance confirms that it is not an offence to carry product over the price cap to or between third countries if the oil was loaded onto a ship before 12.01am on 5 December 2022 and will be delivered and clear customs in a third country before 12.01am on 19 January 2023.
• The price cap will apply from shore to shore: i.e. from receipt of cargo on a ship up to the point where it is delivered and passes through customs controls in a non-UK country or is substantially transformed into a different good in line with the UK’s non-preferential rules of origin (e.g., the resulting product comes under a different HS code).
• Russian oil and oil products will be considered to be at or below the price cap when the unit price of the oil is at or below the price cap at the date of the most recent transaction:
  
  • The ‘unit price’ is the price per barrel of the oil or oil products.
  • The ‘most recent transaction’ is the most recent transaction in the period of time between the oil or oil products first being loaded onto a ship and the oil or product being offloaded in a third country (i.e., when the oil passes through customs control in that country).
• Whilst the three-tier system expounded by the U.S. has been adopted, there are differences, including as to the treatment of shipowners:
  • Tier 1: Commodity broker or trader, importer or refiner. These entities and individuals who regularly have direct access to price information must hold and share price information or provide attestations to Tier 2 or Tier 3 counterparties.
  • Tier 2: Trade or charterer. These entities that directly interact with Tier 1 parties but do not have direct access to price information must request price information or an attestation from a Tier 1 counterparty and conduct due diligence to satisfy themselves as to the reliability of the information provided.
  • Tier 3: Reinsurer, insurance broker, cargo/H&M insurer, P&I club or shipowner. These entities that do not receive price information are required to receive an attestation from relevant Tier 1 or Tier 2 counterparties.
• Tier 1 entities that are subject to the UK’s jurisdiction must report to OFSI each time they undertake an activity purporting to be permitted pursuant to a general licence by OFSI. Reports are to be made using a standardised reporting form to be published on the OFSI website and submitted via email.
• Tier 1 entities have record-keeping obligations. They must maintain any documentation relating to a transaction for which the general licence was utilised for a minimum of four years beyond the end of the calendar year in which the record was created.
• Key examples have been set out in the Annexes to the UK Price Cap Guidance which address the application of the price cap and obligations of the various actors in certain paradigm circumstances.

New UK Enforcement Unit

The UK’s HM Treasury have set up a new unit within OFSI to: (1) set up the licensing and enforcement system for the Oil Price Cap; (2) engage with industry to ensure readiness for the cap; and (3) monitor the level and impact of the cap on an ongoing basis.

Client Alert 2022-376