No.12 2022/2023 - updated EU FAQs - carriage of certain Russian cargoes inc. coal and fertilisers

The provision of insurance, brokering services or other financing or financial assistance by EU operators for the transport or transfer of good or products listed in Annexes XVII, 195 XXI or XXII to third countries is prohibited. Regardless of whether the transfer of these goods or products is performed by an EU or a non-EU operator, where the provider of assistance related to such a shipment is an EU operator, they remain bound by the prohibition.

However, the Union is committed to avoiding that its sanctions impact food and energy security of third countries around the globe, in particular of the least developed ones. In light of this commitment, which is clearly stated in recitals 11 and 12 of Council Regulation 2022/1269, the transfer to third countries of certain goods listed in Annex XXI and XXII should be allowed “to combat food and energy insecurity around the world” and “in order to avoid any potential negative consequences therefor” in third countries.

In order to ensure energy security, transfer to third countries of specific energy-related goods, as well as the financing or financial assistance related to such transfer, carried out by EU operators should be allowed. Given their specific supply chains and the available transport options, such transfer should only be permitted from point to point (e.g., from Russia to a third country), without transiting via the EU territory. The relevant goods are the following:

2. Is the transfer of goods listed in Annexes XVII, XXI and XXII of Council Regulation 833/2014 by an EU company allowed when the goods are destined for a third country and are not transiting Union territory?

Last update: 19 September 2022

No. Articles 3g, 3i and 3j of Council Regulation 833/2014 prohibit the purchase, import, or transfer, directly or indirectly, of the goods listed in Annexes XVII, XXI and XXII if they originate in Russia or are exported from Russia. The prohibition on transfer applies irrespective of the final destination of the goods, whereas the prohibition on the import applies by nature to goods moving “into the Union”. Provided the transfer falls within the scope of Article 13 of Council Regulation 833/2014, it is not relevant whether the goods are destined for the EU or not. This supports the aim of the sanctions which is to significantly weaken Russia's economic base, depriving it of critical markets for its products and to significantly curtail its ability to wage war. Any other interpretation would render the prohibition largely devoid of purpose and create significant loopholes.

However, the Union is committed to avoiding that its sanctions impact food and energy security of third countries around the globe, in particular of the least developed ones. In light of this commitment, which is clearly stated in recitals 11 and 12 of Council Regulation 2022/1269, the transfer to third countries of certain goods listed in Annex XXI and XXII should be allowed “to combat food and energy insecurity around the world” and “in order to avoid any potential negative consequences therefor” in third countries. This applies to the transfer to third countries, as well as financing or financial assistance related to such transfer, carried out by EU operators or via the EU territory (including in transit) of the following goods:

- Fertilisers falling under CN codes 310420, 310520; 310560; ex31059020 and ex31059080

related, as listed in Annex XXI;

- Animal feed falling under CN code 2303, as listed in Annex XXI;

- Certain hydrocarbons falling under CN codes ex2901 and 2902, as listed in Annex XXI;

- Essential goods falling under CN codes 44 (wood); 2523 and 6810 (cement products), as

listed in Annex XXI;

The texts of Annex XXI and Annex XXI as referred to above can be found in Council Regulation 2022/576.

It should be noted that certain types of fertilisers (of which Russia is a major producer) are included in the list of commodities said to generate significant revenues for Russia as set out in Annex XXI and thus subject to prohibitions in Article 3i.

It seemed clear to Clubs and their advisors that on a plain reading of both Articles 3i and 3j the prohibitions around the carriage of Russian fertilisers and coal and other solid fossil fuels related only to their import into the EU and not to carriage to non-EU destinations. The provisions were subject to a wind-down period in any event until 10 July 2022 and 10 August 2022 respectively for sale contracts concluded before 9 April.

The EU issued FAQs on 17 April and 14 June 2022 but these appeared to clarify only that EU entities were prohibited from purchasing Russian such cargoes intended for delivery both into and outside the EU but not otherwise being involved in their carriage.

Further FAQs were issued on 10 August however – i.e. the date on which the wind-down period for coal and other solid fossil fuel cargoes expired – which cast significant doubt on the previous interpretation industry had placed on the wording of Articles 3i and 3j. The text of these latest FAQs can be found here. They appeared to suggest that the prohibitions in these Articles were in fact intended to have wider impact than just carriage into the EU and could impact of the carriage of such cargoes from Russia to any other country.

The International Group (IG) consequently sought immediate clarification from the EU Commission regarding the meaning of these latest FAQs, the scope of the EU prohibitions and potential impacts on both Members and Clubs.

The EU have made it clear to the IG that whilst the reference to “import” in the Articles is indeed just limited to import into the EU, the other restrictions on direct or indirect transfers are intended to equally apply to non-EU destinations. It therefore now the case that the involvement of an EU entity in the carriage of Russian fertilisers and coal or other solid fossil fuels to any destination whatsoever and whether inside or outside the EU would be in breach of EU sanctions.