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December 2019

The London P&I Club News Alert: US Sanctions relating to Russia - Ventspils and Latvian SDNs

The European Union’s Emissions Trading System (EU ETS) was extended to cover emissions from shipping as of 1st January 2024.

The EU ETS is limited by a 'cap' on the number of emission allowances. Within the cap, companies receive or buy emission allowances, which they can trade as needed. The cap decreases every year, ensuring that total emissions fall.

Each allowance gives the holder the right to emit:

  • One tonne of carbon dioxide (CO2), or;
  • The equivalent amount of other powerful greenhouse gases, nitrous oxide (N2O) and perfluorocarbons (PFCs).
  • The price of one ton of CO2 allowance under the EU ETS has fluctuated between EUR 60 and almost EUR 100 in the past two years. The total cost of emissions will vary based on the cost of the allowance at the time of purchase, the vessel’s emissions profile and the total volume of voyages performed within the EU ETS area. The below is for illustration purposes:
  • ~A 30.000 GT passenger ship has total emissions of 20.000 tonnes in a reporting year, of which 9.000 are within the EU, 7.000 at berth within the EU and 4.000 are between the EU and an outside port. The average price of the allowance is EUR 75 per tonne. The total cost would be as follows:
  • ~~9.000 * EUR 75 = EUR 675.000
  • ~~7.000 * EUR 75 = EUR 525.000
  • ~~4.000 * EUR 75 * 50% = EUR 150.000
  • ~~Total = EUR 1.350.000 (of which 40% is payable in 2024)
  • For 2024, a 60% rebate is admitted to the vessels involved. However, this is reduced to 30% in 2025, before payment is due for 100% with effect from 2026.
  • Emissions reporting is done for each individual ship, where the ship submits their data to a verifier (such as a class society) which in turns allows the shipowner to issue a verified company emissions report. This report is then submitted to the administering authority, and it is this data that informs what emission allowances need to be surrendered to the authority.
  • The sanctions for non- compliance are severe, and in the case of a ship that has failed to comply with the monitoring and reporting obligations for two or more consecutive reporting periods, and where other enforcement measures have failed to ensure compliance, the competent authority of an EEA port of entry may issue an expulsion order. Where such a ship flies the flag of an EEA country and enters or is found in one of its ports, the country concerned will, after giving the opportunity to the company concerned to submit its observations, detain the ship until the company fulfils its monitoring and reporting obligations.
  • Per the EU’s Implementing Regulation, it is the Shipowner who remains ultimately responsible for complying with the EU ETS system.

There are a number of great resources on the regulatory and practical aspects of the system – none better than the EU’s own:

‍https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02003L0087-20230605

‍https://climate.ec.europa.eu/eu-action/transport/reducing-emissions-shipping-sector_en

‍https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets/what-eu-ets_en‍

IG Klüplerinden London P&I Klüpten alınan sirküleri ekte iletiriz.

Rusya’ya uygulanan ABD yaptırımları kapsamında Letonya’nın Ventspil ili Belediye Başkanı Aivars Lembergs; insan hakları ihlali ve yolsuzluk iddiaları ile SDN listesine OFAC tarafından dahil edilmiştir. Belediye başkanının kontrölünde olan ya da sahibi olduğu aşağıdaki kurumlar da SDN listesine dahil edilmiştir. Mevcut iş bağlantıları için 30 gün süre (winding down period) verilmiştir. Bu süre 8 Ocak 2020’de dolmaktadır. Bu tarihe kadar olan mevcut kontratların tamamlanması önerilmektedir.Ventspil limanına bu tarihten sonra yapılacak olan ödemeler de yaptırıma tabi olacaktır.

  • Ventspils Freeport Authority
  • Attistibas Agentura (also known as Ventspils Development Agency),
  • Biznesa Attistibas Asociacija (also known as Business Development Association), and
  • Latvijas Tranzita Biznesa Asociacija (also known as Latvian Transit Business Association).

 

US Sanctions relating to Russia – Ventspils and Latvian SDNs

US law firm Freehill Hogan & Mahar (“Freehills”) advise that due to alleged serious human rights abuses and corruption, Aivars Lembergs, mayor of Ventspils, has been made a SDN by the US Department of Treasury’s Office of Foreign Assets Control (OFAC) under Executive Order 13818. OFAC has also designated as SDNs four Latvia-based entities that are owned or controlled by him:

  • Ventspils Freeport Authority
  • Attistibas Agentura (also known as Ventspils Development Agency),
  • Biznesa Attistibas Asociacija (also known as Business Development Association), and
  • Latvijas Tranzita Biznesa Asociacija (also known as Latvian Transit Business Association).


Members, either due to call or arranging calls to Ventspils, should particularly note that one of the designated entities is Ventspils Freeport Authority. This may result in calls at the Port and payments to the Port Authority being in breach of US sanctions.

Winding Down Period

Trade with Ventspils is currently permitted for a 30-day period (ie until 12:01 am US Eastern Standard Time on 8 January 2020) under an OFAC General License. Freehills advise that this is “generally understood” to apply to both US and non-US persons/entities. With regard to the winding down period, Members calling at Ventspils should be aware that:

  1. Any call at Ventspils must actually be pursuant to the winding down of a contract concluded prior to the imposition of sanctions;
  2. Payments made to the Port after the end of the winding down period (even if the call was prior to that) may also be a breach of sanctions.

After the End of the Winding Down Period

In relation to calls at the Port or payments to the Port Authority, Freehills advise that “U.S. persons will be prohibited as of January 8 from engaging in any transactions with Ventspils Freeport Authority absent authorization or exemption. Further, any person providing “material” assistance to, or goods or services in support of Ventspils Freeport Authority beyond the wind-down period risks the imposition of sanctions. “Material” is not defined, and it is not yet clear whether OFAC will consider routine port calls to Ventspils beyond the expiration of the wind-down period to be “material” assistance or goods or services to Ventspils within the meaning of the E.O. Without further clarity from the authorities, we cannot say that trade to Ventspils Freeport is without risk.”

To access a copy of the full Client Alert from Freehills, click here.

Best regards

The News Alerts Team

If you have a colleague who would like to receive News Alerts by email, please click subscribe and provide their details.

www.londonpandi.com

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