Russian Temporary Denial Orders are Being Renewed

The Temporary Denial Orders for Aeroflot, Azur, and UTair are scheduled to be renewed in the Federal Register, tomorrow. This means that the heightened transaction prohibitions continue to apply to them.

As we previously reported, the United States Bureau of Industry and Security (BIS) has issued temporary denial orders (TDOs) against several Russian air carriers. These TDOs effectively prevent both exports to, and acquisitions from, these carriers. The original TDOs were scheduled to expire, but they are being renewed by the U.S. Government. The renewals extend the TDOs for another 180 days.

If the Iran-related TDOs are any guide, BIS will automatically extend each of these TDOs until the conflict that gave rise to the sanctions is over. This could mean that the TDOs stay in place until the conflict in Ukraine is over, but it could also mean that the TDOs stay in place until other conditions are met, like the return by Russia of effective sovereignty and control over territory previously identified as part of Ukraine. Or a new administration could simply decide not to renew them as a matter of policy.

What do the denial orders say? They say that there is an enhanced area of exclusion for these named parties. They preclude applying for many licenses – a major exception to this is that you are allowed to apply for a license for an export that is directly related to safety-of-flight (so there is a licensing path for the aircraft parts industry). … But you still have to obtain the license before you can engage in the transaction.

You are also precluded from taking “any action to acquire from or to facilitate the acquisition or attempted acquisition from <the denied party> of any item subject to the EAR that has been exported from the United States.” When you see this clause in the TDO, it prohibits purchases from the denied party – including purchases that would reflect imports! This is an important element that makes the temporary denial orders different from mere export limits. In order to fit this under an “export” order, the acquisition exclusions are tied to transactions that involved a past export (like Boeing equipment that was previously exported) or to transactions that anticipate a future export or re-export. Because of the global nature of the aviation market, this is effective in covering almost all transactions in part subject to the EAR.

The TDOs typically prevent servicing on behalf of any named <denied party>. This can include installation, maintenance, repair, modification, and/or testing.

If you are considering business that may be affected by a TDO, then read the TDO carefully and identify your compliance path. While there are exceptions for “safety-of-flight,” those exceptions typically require BIS to license the transaction.