US Changes Export Licensing Requirements for Certain Aircraft Parts Transactions

May 1, 2024 by Leave a comment

The United States has changed the export licensing standards for aircraft parts bound for Australia and/or the United Kingdom (“UK”). This is being accomplished under the recently-published AUKUS rules. There are two main changes:

  • Elimination of most destination-based licensing restrictions when exporting to Australia or the UK (in the Commerce Country Chart)
  • Expansion of the AVS exception for aircraft parts bound for Australia and the UK

Commerce Country Chart Changes

Under the exporting rules, the exporter must look at the export destination and compare it to the reason for control in the Commerce Country Chart. The licensing obligations for Australia and the UK have changed dramatically!

The United States has removed the licensing obligations for all articles being exported to Australia or the UK except for articles controlled for chemical or biological weapons reasons under column “CB1” (which still require a license).

One of the common aircraft articles that may be affected by this rule change is inertial reference units (IRUs) which are export-controlled for missile technology (“MT1”) reasons. Until the recent rule change, an article controlled under the MT1 provisions needed an export license when exported to any jurisdiction other than Canada. The new rule adds Australia and the UK to the list of exceptions where the destination does not drive a license obligation for MT1 exports (this is also codified at 15 C.F.R. § 742.5(a)(1)).

This would also affect many 600-series articles (defense articles) destined for Australia or the UK, because the Australian and UK restrictions on exports controlled for reasons of regional stability (RS) and national security (NS) have also been removed.

Other licensing provisions may still apply! For example, if the aircraft parts is ordered by a business on the BIS entity list then a license will be required for the transaction, even if that company is located in the UK.

License Exception AVS

The rule change also expands the utility of license exception “AVS.”

Previously, license exception AVS applied (inter alia) to exports of aircraft parts for use on U.S. or Canadian registered airplanes, as long as they are ordered by the owner/operator and the aircraft is not located in Cuba or a Country Group D:1 nation (excluding China). This has been expanded to include parts ordered by the owners/operators of Australian-registered aircraft and UK-registered aircraft. See 15 C.F.R. § 740.15(c)(1).

AVS also allowed US and Canadian airlines to order aircraft parts to be exported to their installations (e.g. airline-operated line stations) and their agents (such as an MRO). This exception has been expanded to include Australian airlines and UK airlines. This may not be used to export to Cuba or a Country Group D:1 nation (excluding China). See 15 C.F.R. § 740.15(c)(2).

Hot Section Technology

As an additional relevant note, the United States has also removed restrictions on the export of certain engine technology to Australia or the UK. This is limited to hot section technology for the development, production or overhaul of commercial aircraft engines controlled under certain subsections of ECCN 9E003. This matches Australia and the UK with the export treatment of Canada for this technology.

Public Comments

These changes are part of an interim final rule. This means that the rule was published and becomes immediately effective, but the rule is open to public comment. Public comment remains open until June 4.

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BIS Expands Sanctions Against Russia and Belarus

April 15, 2022 by Leave a comment

Yesterday, BIS announced its latest round of sanctions against Russia and Belarus arising from Russia’s invasion of Ukraine. We have written about previous BIS sanctions against Russia and Belarus over the past several weeks. The previous rounds of sanctions imposed, among other things, a license requirement for all articles controlled under CCL categories 3 through 9 under a new § 746.8 of the EAR.

The latest sanctions expand that license requirement under § 746.8 to now include CCL categories 0 through 2 as well. Thus, any item specified under any ECCN is subject to an export license requirement. Although this may not seem like a broad expansion of the licensing requirements as far as aircraft parts distribution is concerned, it is important to note that many bearings are controlled under CCL 2 and certain seals, gaskets, sealants and fuel bladders specially designed for aircraft or aerospace are controlled under CCL 1. These items now require a license to Russia or Belarus.

The sanctions also further limit the availability of License Exception AVS paragraphs (a) and (b) to aircraft registered in, owned or controlled by, or under charter or lease by Belarus or a national of Belarus (bringing it in line with limitations on the exception already applicable to Russia and Russian nationals). We can therefore not rely on License Exception AVS–a commonly used license exception–to support a Russian or Belarusian aircraft.

The United States continues to impose additional sanctions as a result of the war in Ukraine. We will keep members updated as new sanctions that affect distributors arise.

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Hong Kong is China: No Longer Entitled to Special Treatment

July 20, 2020 by Leave a comment

President Trump has signed an executive order declaring that the Hong Kong Special Administrative Region (SAR) is no longer sufficiently distinct from China to warrant special treatment, and therefore it shall be treated as the same as the rest of China for U.S. legal purposes.

This is import for members of the ASA community who are exporting goods to Hong Kong, because the executive order is intended to affect both ITAR-controlled articles and EAR-controlled articles.  Exporters will have to make sure that they meet the regulatory requirements as those requirements change.

Here are just a few examples of the differences between Hong Kong and China for export purposes (these are the differences that are expected to be eliminated by impending regulatory change):

  • China was excluded from certain exceptions because it is in country group D:1; while Hong was treated as country group B and exporters to Hong Kong could take advantage of those exceptions that excluded country group D:1 participants – one important provision affected by this change is the AVS license exception that is widely used by aircraft parts exporters;
  • Commerce-controlled exports subject to CB column three need a license when exported to China, but did not necessarily need a license when exported to Hong Kong;
  • Hong Kong is considered to be a Computer Tier 1 Eligible Destination, while China is considered to be a Computer Tier 3 Eligible Destination; this distinction means that one could use the License Exception APP for exports of computer commodities to Hong Kong, but not to China;
  • For purposes of the GOV License Exception, Hong Kong was considered to be a cooperating government (and China was not);
  • Re-exports from Hong Kong were treated like re-exports from a country group A:1 nation under License Exception APR (re-exports from China are not treated the same way).

Consequences for the ASA Community

By July 29th, the export-controlling agencies like BIS, OFAC and DDTC are required to begin changing the regulations (including license exceptions) where China and Hong Kong are treated differently.

These changes do not change our commitment to safety; nor does it change our commitment to supporting the Chinese aviation community in any way that is legal and safe.

This does NOT change the broader mechanisms for exporting to China, although the White House has added some conditions for blocking transactions with certain individuals in Hong Kong and China.  So always carefully check your transaction partners through the consolidated screening list before your ship to them.

This executive order directs agencies to make changes to the Hong Kong provisions and exceptions, so make sure that the provisions and exceptions on which you rely have not changed before each transaction.  They will be changing, soon.

The rules are not yet changed, but this executive order signals that they will change; and they may change soon.  This is a difficult time for the ASA community and anything that hinders aviation safety trade can impede an important sale.  It will typically still be possible to engage in transactions with ChIna (including the Hong Kong SAR), but the compliance path for aircraft parts destined for Hong Kong may change for certain transactions.  We plan to keep the community apprised of changes as they are developed.

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Exporting During the Shutdown

October 14, 2013 by Leave a comment

The Federal Government continues to be shut down while our elected officials debate how to tackle our nation’s debt.  This has the potential to adversely affect exports, so it is important to have strategies for ensuring you can export in the absence of new licenses.

As a result of the shutdown, the Department of Commerce Bureau of Industry and Security (BIS) is no longer accepting export license applications.  All pending export license applications are being held without action by BIS until the shutdown ends.  This can have a significant effect on some distributors who need export licenses in order to support their customer base.

If you are an applicant who needs a license for national security reasons, then you can request emergency processing of your export license application by submitting an email request to Deputy Assistant Secretary for Export Administration Matthew Borman at Matthew.Borman@bis.doc.gov; however most civil aviation export licenses are not related to national security.

So what can you do to support a non-US customer need for parts that does NOT have national security implications, but that would ordinarily require a license?

The best way to approach the transaction is to think about how to structure it to make use of a license exception.  There are a number of license exceptions that can apply to common aircraft parts transactions, including the Replacement Parts/Servicing and Replacement Exception [RPL] (15 C.F.R. 740.10) and the Aircraft and Vessel Exception [AVS] (15 C.F.R. 740.15).  We’ve covered the use of these exceptions in ASA Workshops and during the ASA Annual Conference, but if you’ve missed the presentations, then we ordinarily advise potential exception-users to read the regulatory language carefully before using the exceptions.  Make sure that you can meet each and every requirement for the use of the exceptions.

For example, use of the AVS exception is often limited based on details related to the aircraft on which the part is expected to be installed. If the aircraft on which the part is to be installed is identified, then you should collect the following information:

  • The country in which the aircraft is located, and
  • The country in which the aircraft is registered, or will be registered in the case of an aircraft being manufactured, and
  • The country of citizenship of whoever currently owns, controls, leases, and/or charters the aircraft (more the one country may be implicated by this analysis).

These data will serve as an important foundation for the analysis implied by the requirements for the AVS exception.

If no exception would apply to your transaction, then another option might be to find someone with an existing license that will permit the export of your article, and include that party in your transaction as the exporter of record.  While you cannot use a third party exporter for purposes that circumvent the law (for example, a Denied Party cannot use a third party to circumvent their Denied Party status), it is permissible to sell the parts to an intermediary and have the intermediary export to your customer under the intermediary’s existing (applicable) license, as long as it is not for the purpose of circumventing legal prohibitions that would have prohibited you from getting a license.  The danger of this advice is that an intermediary who is also a copmetitor may use this as an opportunity to steal customers, so be careful to only deal with an intermediary whose business ethics are trustworthy.

Once you are in a position to be able export, you may run into some problems in assembling the data that you need to complete the electronic export information requirements on AESDIrect.  For example, the the Schedule B search engine on http://www.census.gov is not available. During this time you may use the following alternate address to identify schedule B numbers: https://uscensus.prod.3ceonline.com/.

As always, the Washington Aviation Group continues to provide export advice.  So if you need to get really creative, please give the Washington Aviation Group a call and let them work with you to find a solution.

Another issue that is facing the industry is the new release of the 600-series ECCNs that becomes effective tomorrow (to facilitate the movement of certain articles from the US Munitions List (USML) to the Commerce Control Lists (CCLs).  We will talk about that in tomorrow’s blog post.

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