Special Rules for Aircraft Parts Exports

Do you export aircraft parts? If you do, then you may need to complete the EXTRA compliance checks that apply to foreign aircraft. Often, the export compliance analysis required leads to a need to specifically identify the foreign aircraft on which the parts will be installed.

When you export aircraft parts from the U.S., and the parts are intended for installation on a foreign registered aircraft, you need to perform an extra layer of analysis to ensure export law compliance. The U.S. export regulations specify that you need to identify and check all of these locations:

• The country to which the part is being exported (which is part of the normal export assessment);
• Any intermediate nations (also part of the normal export assessment);
• The country in which the foreign aircraft is located (15 C.F.R. § 744.7(a)(1));
• The country in which the aircraft is registered – you can often check the tail number against the country’s aircraft registry to confirm this information (15 C.F.R. § 744.7(a)(2));
• The country which is currently controlling, leasing, or chartering the vessel or aircraft (this applies if a nation has operational control of the aircraft) (15 C.F.R. § 744.7(a)(3)); and
• The country of the person who is currently controlling, leasing, or chartering the aircraft (this applies if a person has operational control of the aircraft – this country can be the incorporation location of a business or the nationality of a natural person) (15 C.F.R. § 744.7(a)(3)).

For each of the locations that you identified based on the bullet points above, you need to assess whether you can export to that location without a license (“No License Required” or “NLR”), or under an applicable license exception. If the answer is “no” for any of the locations, then the transaction typically needs to be licensed.

As an example, assume that you are exporting a garden-variety aircraft part for installation in a private aircraft that is registered in Ireland and owned by an Irish leasing company. The part is controlled under ECCN 9A991. The aircraft is currently located in Ireland, where it is awaiting service at an Irish repair station. The aircraft is leased and operated by a Russian citizen. You need to perform an analysis of this export as if it were going to Ireland (which it is) and also as if it were going to Russia. There is typically no license required to export this part to Ireland, but exporting the same part to Russia is restricted under the Russia/Belarus rules. Because of the interaction between the Russia/Belarus rules (15 C.F.R. § 746.8) and the foreign aircraft rules (15 C.F.R. § 744.7), a license would be required to export this part for installation on an aircraft controlled/leased by a Russian citizen. Note that this transaction would not be able to benefit from license exception AVS under the limits of the Russia/Belarus rules (15 C.F.R. § 746.8) because of the specific limits imposed on AVS under that rule.

What about a foreign airline that wants to obtain parts for stock? If that airline only flies non-U.S. registered aircraft, and the part is destined for installation on their fleet, then you reasonably know that the part is destined for installation on a non-U.S. registered aircraft and you ought to be performing this analysis. Ask the airline to verify that the part will only be used on their fleet (confirm the countries of registry for their fleet), and ask them to identify where their maintenance is performed (location of aircraft at time of installation). The jurisdictions identified (registry, aircraft location and operator’s nationality) can be scrutinized to determine whether the requirements of 744.7 are met for the entire fleet; this allows you to support the airline without knowing the specific identity of the target aircraft.

What about domestic transactions? The foreign aircraft rule only applies to export transactions to, or for the use of, a foreign aircraft. So it does not apply to domestic (non-export) transactions, including domestic transactions that anticipate installation on a foreign aircraft while it is legally in the United States. But there are exceptions, including the one we will cover in the next paragraph.

What if I am selling to someone that I know will violate the export laws? It is important to remember that if you support someone else’s export, while knowing that they intend to violate the export laws, then this is also a violation. This restriction is known as General Prohibition Ten. It means that if you sell a part to someone else, knowing that they intend to export it illegally, then you have committed a violation, yourself.

Let’s look at an example: S7 Airlines is currently subject to a temporary denial order under the Export Administration Regulations. You are contacted by a U.S.-based distributor who tells you that it is buying parts for export to S7 Airlines. The part that the distributor is seeking from you is subject to the Export Administration Regulations (most civil aircraft parts are subject to the Export Administration Regulations). This distributor asks you to engage in a wholly domestic transaction by shipping the part to their location in New Jersey. If you sold a part entirely within the United States, to a domestic distributor, after that distributor had said that it intends to export the part to S7 Airlines (who is subject to a BIS denial order), then you would have violated General Prohibition Ten, even though your transaction was not an export. The reason for this is because your sale is made with knowledge that the aircraft part will be exported in violation of the Export Administration Regulations.

Conclusion

Exporting aircraft parts is tricky and sometimes an aircraft part export transaction requires special research and analysis to identify the correct compliance path. There can be more than one regulatory regime that applies to the transaction. If you are not sure whether you are doing the right thing, then take a step back and make sure that you are complying with the correct laws and regulations.

ASA has a number of resources to support your efforts. We provide export compliance training on a regular basis – ASA is next planning to hold export compliance training for its members in October.

My law firm also supports export compliance by helping companies to build compliance systems, by auditing their existing compliance systems, and by analyzing tough transactions to help identify the correct compliance path (we also support companies in seeking licenses from the US government, as necessary).