On September 19, 2022, the EU published new FAQs which reverse
the controversial expansion of restrictions imposed on certain
coal, fertilizer and other Russian-origin goods on August 10, 2022.
These FAQs clarify that restrictions on certain fertilizer and coal
products (among others) do not include a ban on their transfer to
third countries, and associated insurance and brokering
arrangements.
As part of the EU's fifth sanctions package of April 8,
2022, restrictive measures were imposed under Article 3j(1) of
Council Regulation (EU) 833/2014 on the purchase, import or
transfer of Annex XXII coal products. The restrictions state
(emphasis added):
"(1) It shall be prohibited to
purchase, import, or transfer, directly or indirectly, coal and
other solid fossil fuels, as listed in Annex XXII into
the Union if they originate in Russia or are exported
from Russia."
There are also similarly worded restrictions under Article 3i,
which targets inter alia certain fertilizer products under Article
3i(1). The restrictions state (emphasis added):
"(1) It shall be prohibited to
purchase, import, or transfer, directly or indirectly, goods which
generate significant revenues for Russia thereby enabling its
actions destabilising the situation in Ukraine, as listed in Annex
XXI into the Union if they originate in
Russia or are exported from Russia."
Given the reference to "into the Union", it was
initially widely interpreted that these restrictions only
prohibited the purchase, import or transfer of Annex XXII
coal/fertilizer products where they were destined for an EU Member
State.
On April 17, 2022, the EU issued a FAQ stating that
"transfer is a broad concept covering a wide range of
operations: not only the movement of goods through customs
controls, but also the transport of goods, including (but not
exhaustively) their loading and trans-shipment." Whilst this
made clear that "transfer" included transportation, for
the reasons given above, Articles 3j(1) and 3i(1) still ostensibly
required goods to be destined for the EU.
On June 14, 2022, the EU published a further FAQ under the
heading "Imports & Purchase of Goods," which stated,
among other things (emphasis added):
"Is the purchase of
goods listed in Annexes XVII, Annex XXI and XXII of Council
Regulation 833/2014 by an EU company allowed when the goods are
exported from Russia towards a third country and are not transiting
Union territory?
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 XII if they originate in Russia or are exported from Russia.
The prohibition on purchase applies irrespective of the
final destination of the goods. Provided the purchase
falls within the scope of Article 13 of Regulation 833/2014, it is
not relevant whether the goods are destined for the EU or
not."
With this, the EU seemingly sought to clarify that EU persons
were restricted from purchasing restricted
Russian-origin coal regardless of its destination. However, there
remained some uncertainty as to whether the restrictions on
importing and transferring restricted coal products only applied to
imports and transfers "into the Union" (and not third
countries). Given the distinction between Articles 3j(1) and 3g(1),
the title given to the relevant FAQ ("Imports & Purchase
of Goods" – which was subsequently reorganized under the
heading "Purchase of Listed Goods" in the EU's Consolidated FAQs) and the precise
wording of the FAQs, this appeared the most likely position.
To confuse matters, on August 10, 2022, the EU issued a revised
FAQ under the title "Import, purchase and transfer of listed
goods" which stated (emphasis added):
"2. Is the transfer of
goods listed in Annexes XVII, Annex 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: 10 August
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...."
Per our last alert that related to the above
FAQs, we noted that in doing so the EU had also appeared to
unintentionally restrict the transfer of certain products to third
countries that went against the spirit of the regulations,
particularly in relation to fertilizers.
Nevertheless, on August 29, 2022 and notwithstanding industry
outcry, the EU reiterated its position with the promulgation of
further FAQs, which confirmed:
a) The transfer of targeted goods to
third countries was prohibited; and
b) The provision of financial
assistance, including brokering and insurance related to the
transfer of such goods, was prohibited.
The above FAQs have now been amended as of September 19, 2022,
and this has reversed the position in relation to certain
restricted goods, as follows (emphasis added):
"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;
- All the items listed in
Annex XXII (coal and related products)."
In summary, the EU has therefore clarified that certain goods,
such as the above-mentioned fertilizers, animal feeds, essential
goods, and coal and related products, are now permitted to be
transferred (including transported) to non-EU countries to mitigate
food and energy insecurity. The EU has also amended FAQ 4 to
clarify that relevant services (such as financial assistance
including brokering or insurance) tied to the transfer under
Articles 3i and 3j of the above-listed goods to third countries via
EU operators or the EU territory are now permitted.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.