Oil price cap policy — Customs and ship-tracking anomalies
A recent report in local Chinese media outlets reported that an importer received 100,000 metric tons of oil product via tanker Borey G (IMO: 9199127) arriving at Qingdao, mainland China, in October 2023. The cargo was declared as "other fuel oil" under HS Code 2710.19.29; however, it turned out to be utilized for refining purposes, therefore, implying a shipment of crude oil that should technically be reported under HS 2709. Mainland China customs data shows that in October 2023, the import volume under "other fuel oil" HS code 2710.19.29 exceeded its full-year volume in 2022. Additionally, the value of mainland China’s oil imports classified under the HS Code 2710.19.29 increased by $2.6 billion in 2023.
In this context, it is important that the classification of petroleum products is done with care, ordinarily for local tax and customs regulation but also in respect to the G7 oil price cap policy for crude oil and petroleum products. Crude oil within the price cap policy falls under HS codes beginning 2709.00. Petroleum products fall under the premium-to-crude and discount-to-crude categories within the HS codes of 2710.
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These key compliance elements will be explored in this paper to understand how potential risk can be identified and how using appropriate information as part of a wider risk and compliance screening tool can help to mitigate the identified risks:
- Misreporting within the attestation process and the submission of incorrect details to obscure the nature or origins of the cargo
- Hidden vessel tracks whereby a ship’s route is not entirely visible
- Potential consolidation of price cap avoidance in certain geographical locations
- Complex ownership structures obscuring group owners and relationships with unknown maritime actors
- Using incorrect product classification codes to hide the true state of the cargo or its potential usage
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