As noted in our prior alerts (concerning OFAC’s September 9, 2022 preliminary guidance, an October 31, 2022 follow-on FAQ clarifying the applicability of the price cap policy, and the December 5, 2022 effective date of the crude oil ban) the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has implemented a ban on covered categories of services related to the maritime transportation of additional Russian oil petroleum products. While the ban already took effect with respect to maritime transportation of crude oil on December 5, 2022, the ban on maritime transportation of petroleum products has been implemented as of February 5, 2023.

Specifically, as of 12:01 a.m. eastern standard time on February 5, 2023, the price cap on Discount to Crude petroleum products of Russian Federation origin is $45 per barrel, and the price cap on Premium to Crude petroleum products of Russian Federation origin is $100 per barrel. “Discount to Crude” products include naphtha, residual fuel oil, and waste oils; and “Premium to Crude” products include gasoline, motor fuel blending stock, gasoil and diesel fuel, kerosene and kerosene-type jet fuel, and vacuum gas oil. Russian petroleum products that were loaded onto a vessel at the port of loading prior to 12:01 a.m. eastern standard time, February 5, 2023, and unloaded at the port of destination prior to 12:01 a.m. eastern daylight time, April 1, 2023, are not subject to the price cap policy.

The categories of services covered by the price cap on petroleum products are the same as those covered under the crude oil price cap, namely:

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

In guidance released on February 3, OFAC also clarified that Russian petroleum products that are “substantially transformed” in a jurisdiction other than the Russian Federation are no longer considered to be of Russian Federation origin, and thus the price cap no longer applies. For the purposes of the petroleum products determination, OFAC will only consider blending operations to be substantial transformation if a blending operation results in a tariff shift of the Russian petroleum product (e.g., a change in the applicable Harmonized Tariff code).