On November 22, 2022, the U.S. Office of the Treasury’s Office of Foreign Assets Control (“OFAC”) released a Determination pursuant to Executive Order 14071, “Prohibiting New Investment in and Certain Services to the Russian Federation in Response to Continued Russian Federation Aggression.” The Determination states that E.O. 14071 will apply to trading and commodities brokering, financing, shipping, insurance, flagging, and customs brokering (the “Covered Services”) related to “the maritime transport of crude oil” originating in the Russian Federation (“Russia”).

OFAC also released guidance for companies and other service providers that may be affected by E.O. 14071 and the Determination to assist with compliance. The guidance provides an overview of the policy, key components and definitions, a breakdown of the safe harbor provided for good faith transactions, general compliance information, and information on both general and specific licensing. Each section has been summarized below:

I. Overview of the Determination and the Price Cap

The United States has agreed with multiple other countries to implement a price cap policy relating to the “maritime transport of crude oil and petroleum products of Russian federal origin” (the “Price Cap Policy”). This guidance is intended for the transport of crude oil products, and OFAC plans to release guidance on the price cap policy for petroleum products at some point in the future. The goal of the Price Cap Policy is to reduce Russia’s ability to earn revenue from the exportation of oil while still maintaining a “reliable supply of oil to the global market.” The Price Cap Policy authorizes U.S. persons, including U.S. corporations, to provide Covered Services to the maritime transport of Russian crude oil[1] so long as the Russian oil was “purchased at or below a certain price” (the “Price Cap”). The Determination takes effect at 12:01 am EST on December 5, 2022. Russian crude oil loaded onto a vessel prior to this time, and unloaded prior to 12:01 am EST on January 19, 2023, is not subject to the Determination.

II. Key Components and Definitions

a. The Price Cap

The Price Cap will not include shipping, freight, customs, and insurance costs, but these costs must be reasonable and invoiced separately from any oil purchase transactions. Unreasonable pricing for any of these costs will be viewed by OFAC as a potential evasion of the Price Cap.

b. When does the Price Cap “start” and “stop’?

The Price Cap applies from the commencement of the maritime transport of Russian crude oil until the Russian crude oil has cleared customs in the jurisdiction of the first sale outside of Russia. Once this occurs, any further onshore sale is not subject to the Price Cap.

If a company or entity would like to put the Russian oil back into maritime transport, then the Price Cap may or may not apply. If the Russian oil has not be substantially transformed “such that the product loses its identity and is transformed into a new product having a new name, character, and use” before it is put back into maritime transport, the Price Cap once again applies. The Price Cap would also apply to crude oil that has merely been blended, as OFAC does not consider oil blending to be a substantial transformation. However, if the Russian oil has been substantially transformed, it can be placed back into maritime transport without being subject to the Price Cap.

U.S. companies and entities can reasonably rely on certificates of origin to determine whether crude oil is of Russian origin but should exercise caution if there is reason to suspect that a certificate may be fraudulent.

b. Covered Services

The guidance provides an in-depth definition of each Covered Services that can be found on page 4 of the guidance, and specifies that the term “financing” does not include “the processing or clearing of payment by intermediary banks.” These services are not included so long as the bank is operating solely as an intermediary and does not have a direct relationship with any party servicing a maritime transport of Russian oil.

OFAC also notes that medical evacuation or other emergency services for crew members, health, travel, or liability insurance for crew members, and classification, inspection, bunkering, and pilotage are specifically not covered by the Determination.

III. Safe Harbor

The guidance also establishes a safe harbor from OFAC enforcement for U.S. service providers that comply with the prescribed recordkeeping and attestation process in good faith, as this permits authorities to confirm that the oil was purchased at or below the price cap. This safe harbor is intended to protect service providers from strict liability when they inadvertently violate the Price Cap Policy due to falsified records or other misrepresentations. All U.S. service providers must execute industry-standard due diligence practices on customers in order to qualify for the safe harbor.

OFAC has divided service providers into three “tiers” of actors, and has created different safe harbor compliance requirements for each tier. Each tier must retain the required records for five years:

  1. Tier One (Traders and commodities brokers): Actors who regularly have direct access to price information in the ordinary course of business must retain documents showing that Russian oil was purchased at or below the relevant price cap, including but not limited to invoices, contracts, or receipts.
  2. Tier Two (Financial institutions, ship/vessel agents, customs brokers): Actors who are sometimes able to request and receive price information from their customers in the ordinary course of business must request and retain the documents required in Tier One when practicable, and obtain and retain customer attestations regarding compliance with the Price Cap when Tier One documents are not practicable.
  3. Tier Three (Shipowners/carriers, insurers/reinsurers/P&I clubs, flagging registries): Actors who do not regularly have direct access to price information in the ordinary course of business must obtain and retain customer attestations regarding compliance with the Price Cap. This can be done through a sanctions exclusion clause written into or already included in policies or contracts.

The guidance contains further information on the safe harbor policy, including industry specific advice for requesting the required documents and a sample attestation. OFAC also notes that all Tiers should consider a customer’s refusal to comply with any of these document requests may indicate that the entity has purchased Russian oil above the Price Cap.

IV. Compliance

OFAC has broad authority to take action against actors that evade the Price Cap, and states that any U.S. person, including corporations, who evades, avoids, causes a violation of, or attempts to violate the Determination is likewise in violation of the prohibition and could be subject to civil or criminal enforcement action. U.S. service providers who actively evade the Price Cap, provide false documentation to another service provider, use side dealt to obfuscate the actual purchase price of Russian oil, or engage in other deceptive activity all may be targeted by OFAC.

OFAC will not pursue penalty against a U.S. service provider that reasonably relies on the documents required by the safe harbor, unless the service provider knew or had good reason to know that the documentation was falsified.

V. Licensing

Finally, the guidance provides information on certain general (and potential specific) licenses for transactions that would otherwise be prohibited.

  1. Sakhalin 2

GL 55 authorizes transactions related to the maritime transport of crude oil originating from the Sakhalin-2 project provided that the crude oil is solely for importation into Japan.

  1. EU derogations

GL 56 authorizes certain transactions related to the importation of Russian oil into the Republic of Bulgaria, the Republic of Croatia, or landlocked European Union member states as described in Council Regulation (EU) 2022/879 of June 3, 2022. These transactions by U.S. persons do not require a separate OFAC license.

  1. Emergency services for vessels

GL 57 authorizes otherwise-prohibited transactions when necessary to address vessel emergencies related to the health or safety of the crew or environmental protection, including safe docking or anchoring, emergency repairs, or salvage operations. This only authorizes offloading of Russian oil if the offloading is normally incident and necessary to address the specified emergencies.

  1. Specific Licensing

In certain cases, U.S. persons who comply with the attestation process may subsequently discover that someone has caused them to inadvertently provide covered services for Russian oil purchased above the relevant price cap. U.S. persons that seek to continue to provide covered services prohibited by the Determination may request a specific license from OFAC to continue providing these services.

On December 1, 2022, the European Union (“EU”) tentatively agreed to set the initial Price Cap to $60 a barrel and stated that they plan to revisit the set value of the Price Cap on a bimonthly basis. On December 5, OFAC released a Determination likewise setting the price cap at $60 for U.S. sanctions purposes.

It is critical that any U.S. companies or other entities providing the Covered Services ensure compliance with Price Cap Policy in order to avoid potential civil or criminal penalties. It is also important for non-U.S. service providers to be aware of the Price Cap Policy restrictions on U.S. service providers, as these restrictions will apply even when a U.S. company or entity in indirectly involved in the maritime transfer of Russian oil.


We will continue to monitor developments in this area and encourage you to subscribe to be kept informed of the latest developments. Please contact the authors or your usual Herbert Smith Freehills contacts for more information.

Jonathan Cross
Jonathan Cross
Partner, New York
+1 917 542 7824
Christopher Boyd
Christopher Boyd
Associate, New York
+1 917 542 7821
Brittany Crosby-Banyai
Brittany Crosby-Banyai
Associate, New York
+1 917 542 7837
Kelechi Okengwu
Kelechi Okengwu
Associate, New York
+1 917 542 7636
Kelly Adams
Kelly Adams
Law Clerk, New York
+1 917 542 7854



[1] The Determination does not authorize the importation of non-crude Russian oil into the U.S. This import is prohibited pursuant to E.O. 14066.