MORE Sanctioned Aviation Companies

Recently, the Treasury Department added a number of aviation companies to the list of Specially Designated Nations (SDNs).  This is important because of the broad range of limits that apply to transactions involving SDNs.

SDNs are individuals and entities that are blocked pursuant to the various sanctions programs administered by the Treasury Department’s Office of Foreign Asset Control (OFAC).  U.S. persons are prohibited from engaging in any transactions with SDNs and must block any property in their possession or under their control in which an SDN has an interest.  31 C.F.R. §§ 587.201-02.  U.S. persons must likewise forbear from transactions that would benefit SDNs.

The official language of “blocking” as it applies to OFAC’s Russian Sanctions is found in executive order 14024 which explains :

“All property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person of the [blocked persons] are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in … [the prohibitions include] the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any person whose property and interests in property are blocked pursuant to this order; and [] the receipt of any contribution or provision of funds, goods, or services from any such person.”

Blocking Property With Respect To Specified Harmful Foreign Activities of the Government of the Russian Federation, Executive Order 14024 (April 15, 2021).

The most recent batch of SDNs were added because of the Russia sanctions.  Many of them are not in Russia so it is important to check your business partners against the consolidated screening list in every transaction!

As you can see from the highlighted language, the prohibitions are quite broad. They apply to anything that a blocked person might have an interest in. They generally prohibit U.S. persons from transacting in such goods without a U.S. Government license authorizing the transaction (whether the U.S. person received goods or services or provides them).

Here is a partial list of the recently-added SDNs that are most likely to be involved in aviation. This is NOT a complete list: please look at the OFAC SDN list for a more complete list of OFAC-sanctioned parties. Also please look up each of these companies before applying sanctions – some companies can have similar names and you don’t want to apply sanctions against the wrong business.

• AKTSIONERNOE OBSHCHESTVO AVIA FED SERVICE
• ALBATROS OOO
• CRYNOFIST AVIATION FZCO
• CUBIT SEMICONDUCTOR LIMITED
• JSC 558 AIRCRAFT REPAIR PLANT
• LINKER FZE
• LLC ADDITIVE ENGINEERING
• LLC Angar
• LLC RESOURCE
• MIRAGE AIRCRAFT SERVICES SOLE PROPRIETORSHIP LLC
• POLARSTAR LOGISTICS LLC
• RBG SOLUTION FZE
• S 7 ENGINEERING LLC
• SPS ME FZCO

I have produced a few FAQs related to the SDNs added to the SDN list because of the Russia sanctions.  Please note that sanctions programs can be administered differently based on the country or program involved, so it is important to examine the facts and assess those facts in light of the applicable laws. 

QUESTION: What if I took money from a company that was subsequently added to the SDN list before I could deliver the aircraft parts?

ANSWER: When a U.S. person holds funds subject to the OFAC Russia sanctions, then those funds are required to be placed in a blocked, interest-bearing, account in the United States.  31 C.F.R. § 587.203.  The rate must be commercially reasonable, meaning that it is the same as the rate offered to other depositors.  31 C.F.R. § 587.203(c).

QUESTION: What if I was holding onto an aircraft part that belongs to a company that was just added to the SDN list and now the SDN rules prohibit me from delivering the part to the SDN-customer?

ANSWER: If a U.S. person holds goods subject to the OFAC Russia sanctions, then those goods are required to be blocked from being returned to the SDN.  All expenses incidental to the maintenance of these blocked goods are the responsibility of the owner of such property; however the expenses may not be paid out of blocked funds.  31 C.F.R. § 587.204(a).  As a practical matter, the U.S. person holding the goods is responsible for ensuring their continued condition, so the U.S. person should record the expenses of maintaining the goods in order to later seek reimbursement.  The U.S. person holding the goods might not be able to recoup the expenses until the funds are unblocked, or a license otherwise permits recoupment.

At some point in time, if the U.S. person holding the goods decides that it does not want to retain this property, then that U.S. person may apply for an OFAC license that permits the goods to be sold.  31 C.F.R. § 587.204(b).  In such a case, the net proceeds would be placed in a blocked interest-bearing account in the name of the owner of the property, as described above.  As long as it is blocked property, though, the goods may not be sold without an OFAC license!

QUESTION: What if an SDN is on the AC 00-56 accreditation list?

ANSWER: At present, there are no known SDNs on the AC 00-56 accreditation list. AC 00-56 establishes quality standards for distribution companies. It typically does not examine conformity to US export law. Therefore a company could be added to the AC 00-56 accredited distributor list and then subsequently be listed as an OFAC SDN. AC 00-56 accreditation organizations like ASA are typically US persons so they will be precluded from performing services for an SDN after the distributor has been added to the SDN list. US persons are precluded from offering services to an OFAC SDN.