New Sanctions Against Belarus

March 4, 2022 by 1 Comment

The United States is issuing new sanctions against Belarus. In practice, they will prevent – or make very difficult – most aircraft parts transactions in support of commercial aviation in Belarus. In fact, they will generally prevent a wide range of transaction in goods that would be exported to Belarus.

The new sanctions will probably limit transactions with Belarusian air carriers like Belavia.

The Federal Register Notice will begin with the phrase “In response to Belarus’s substantial enabling of the Russian Federation’s (Russia)’s further invasion of Ukraine …” so there is no question about why these sanctions are being issued. And this also suggests that we can expect Belarus to be treated to a similar level of sanctions as Russia. You can see this being implemented through the addition of Belarus directly to the new Russia-specific sanctions programs.

Here is an outline of the new sanctions leveled against Belarus

  • General licensing requirement for most exports
  • Limit on the use of license exceptions
  • Added to country groups D:2 and D:4
  • New MEU sanctions
  • New MEIU sanctions

Discussion of Belarusian Sanctions Programs

Recently, the US Government added a new regulation at 15 C.F.R. § 746.8. This new regulations applied a broad set of sanctions against Russia. In summary, anyone exporting aircraft parts (and many other BIS-controlled articles) now requires a license to export those goods to Russia (a license that will likely be denied). That same set of sanctions has been applied against Belarus. The new rule will apply 15 C.F.R. § 746.8 to Belarus, as well as to Russia.

In practice this means:

  1. Aircraft parts that are controlled under an CCL categories 3 through 9 (like ECCN 9A991) will need a BIS license to be exported to Belarus or to Russia;
  2. There is a presumption of denial for most such licenses;
  3. Generally, license exceptions will not be permitted to be used, BUT a short list of exceptions can be used in specific cases; and
  4. Among the license exceptions permitted to be used, most of them cannot be used to export aircraft parts to Belarusian and/or Russian customers.

This license requirement is the most important change for aircraft parts exporters. It means that you cannot export aircraft articles to Belarus (nor to Russia) without a BIS license, and because of the presumption of denial it will be difficult to obtain such a license.

Licensing and License Exceptions

For those who want to pursue a BIS license for exports to Belarus or Russia, the U.S. government has opened the door to license sin support of “safety of flight,” but the burden will be on the applicant to demonstrate that the transaction will not benefit the Russian or Belarusian government or defense sector. The presumption of denial, though, makes any license application an uphill battle, so we recommend using a law firm with experience in export licensing to pursue such a license (yes, a firm like ours).

The license exceptions that typically can be available are mostly forbidden. Only a short list of exceptions is available and for most civil aircraft article transactions there are limitations that will prevent them from being used to support Belarusian aircraft. The available license exceptions look like this:

  • TMP: Temporary exports for use by the news media only.
  • GOV: exports in support of the US government.
  • TSU: software updates for US-related companies.
  • BAG: for personal baggage.
  • AVS: this applies to aircraft parts but it excludes exports for aircraft registered in D:1 nations, or owned/operated by nationals of D:1 nations. Both Belarus and Russia are D:1 nations.
  • ENC: encryption hardware and software for US-related companies.
  • CCD: applies to consumer devices like computers, TVs, phones and cameras.

If one of these license exceptions looks like it might apply to your fact pattern then read the regulation and get legal help before using it! There are plenty of details that potentially limit the applicability of each of these license exceptions. Note that the loopholes that are left are generally for supporting non-Belarusian parties who happen to be in Belarus; for example AVS may permit exports for an aircraft that is AOG in Belarus as long as the aircraft has no other connections to Belarus or Russia.

BIS maintains country groups in order to better manage sanctions programs and to limit exceptions. Belarus has been added to country groups D:2 and D:4 for additional nuclear and missile technology restrictions. Belarus was also removed from country group A:4, which was a nuclear suppliers group.

Belarus has been added to the MEU restrictions of 15 C.F.R. § 744.21 and the MEIU restrictions of 15 C.F.R. § 744.22. This imposes an additional restriction on exports for military end uses (or destined for military end users), including military intelligence end use and end users.. Remember that the list of military end users typically includes private companies who represent a “threat of diversion” to military end use, so the coverage of this rule is broader than just strict military entities.

Implementation is Now

The Belarusian sanctions Federal Register notice is expected to be published on March 8. It was posted for public inspection on the evening of March 2, though. It is expected to be effective for all transactions beginning on the public inspection date of March 2, 2022.

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BIS Issues New Regulations Implementing Sanctions Against Russia

February 25, 2022 by 3 Comments

We have written over the last few days about the implementation of new rounds of sanctions against Russia. Effective February 24, and to be published March 3 in the Federal Register, BIS has finalized its own regulation implementing sanctions measures against Russia. The goal of the sanctions is to restrict Russia’s access to items it needs to project power and includes “sophisticated technologies designed and produced in the United States, as well as certain foreign-produced items that contain or are based on U.S.-origin technology.” These controls primarily target Russia’s defense, aerospace, and maritime sectors. The following is a brief summary of BIS’s sanctions implementation.

ECCN License Requirements

The most significant change for aircraft parts distributors appears in new § 746.8(a)(1) of the EAR, which imposes a license requirement on any item subject to an ECCN in categories 3 through 9 of the CCL. This would obviously include common industry ECCNs like 9A991.d and 7A994, as well as more tightly controlled CCL 7 and CCL 9 ECCNs. Further, license applications are subject to a presumption of denial, making licenses difficult to obtain. The preamble to the regulation specifically cites ECCN 9A991.d as an example of an item subject to a low level of control that did not previously require an export license to Russia that will now require a license.

However, two notes to this general policy are important to aircraft parts distributors. First, BIS will apply a case-by-case review policy to export license applications intended to ensure inter alia safety of flight. Second, License Exception AVS paragraph (b) remains available to overcome the new license requirement. AVS paragraph (b) provides:

Equipment and spare parts for permanent use on an aircraft, when necessary for the proper operation of such aircraft, may be exported or reexported for use on board an aircraft of any registry, except an aircraft registered in, owned or controlled by, or under charter or lease to a country included in Country Group D:1, Cuba, or a national of any of these countries.

Note that Russia is a D:1 country, so AVS would not be allowed for Russian registered, owned, or operated aircraft, but non-Russian operators in AOG situations in Russia may be able to be supported under this exception.

This license exception and case-by-case review policy should allow distributors to continue to serve some civil operators in Russia (again, with the note that to support a Russian operator will require an export license), but we caution anyone seeking to use such an exception to consult with their export compliance counsel.

Additional Restrictions

Foreign Direct Product

The sanctions create two new “foreign direct product”(FDP) rules: one applicable to Russia as a whole and one applicable to Russian military end users. These restrictions apply to the export or re-export of foreign-produced items that are the product of U.S.-controlled technology or software. In the case of the FDP rule applying to Russia broadly, the relevant foreign produced products are those produced from controlled technology or software in CCL 3-9, and are subject to comparable license requirements, presumptions, and exceptions as the ECCN rule above. In the case of FDP to military end-users, all CCL chapters are restricted and no license exceptions are available (with certain very case-specific exceptions).

Expanded Military End-Use and Military End User Control

The sanctions expand the restrictions on items that can be exported without a license to Russian military end users and end-uses. Previously, those items listed in Supplement No. 2 to part 744 required a license for export to a military end use or military end user. The sanctions expand the ECCNs that require a license to a Russian military end use/user to all items subject to the EAR except food and medicine designated EAR99 and items subject to ECCNs 5A992.c and 5D992.c (and even those not to Russian government end users or state-owned enterprises). In short, practically every item subject to the EAR will require a license for export to a Russian military end user or for a Russian military end-use, and those licenses will be presumptively denied.

Russian MEU Listed Entities to the Entity List

Finally, BIS transitioned 45 Russian entities from the Military End User (MEU) list (Supplement No. 7 to part 744) to the Entity List (Supplement No. 4 to part 744; 15 C.F.R. § 744.16) to reflect the heightened restrictions and licensing requirements reflected by the expanded military end-user and end-use controls described above. BIS also added and modified certain entities.

Conclusion

This is a highly complex and dynamic regulatory environment. The baseline presumption is that all aerospace exports to Russia of virtually anything subject to the BIS regulations will require a license. For the purposes of civil aviation, license exception AVS (to non-Russian aircraft) and case-by-case license review may offer some limited relief, but make sure to consult with your export compliance counsel before undertaking any new transactions. Also remember that the sanctions and regulations continue to change: what was a legal export yesterday may not be legal tomorrow. Keep your eye on this space for more updates.

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U.S Announces new Russia Sanctions. What it means for Distributors.

April 16, 2021 by Leave a comment

Yesterday, as you are no doubt aware, the United States announced a new round of sanctions against the Government of the Russian Federation for

efforts to undermine the conduct of free and fair democratic elections and democratic institutions in the United States and its allies and partners; to engage in and facilitate malicious cyber-enabled activities against the United States and its allies and partners; to foster and use transnational corruption to influence foreign governments; to pursue extraterritorial activities targeting dissidents or journalists; to undermine security in countries and regions important to United States national security; and to violate well-established principles of international law, including respect for the territorial integrity of states.

The effect of the sanctions are to block the interests in property of certain persons (including both individuals and companies) in the technology or defense and related materiel sector, persons who have engaged in malign activities, and other persons and entities holding key roles in the Russian government or blocked entities (the full list is described in the Executive Order).

Sanctions against Russia are not a new concern for aircraft parts distributors. For many years, companies exporting to Russia have been required to review their customer and end users–as well as the individuals and entities that own or control the customers and end users–to determine whether they are subject to any of the existing sanctions regimes arising out of the situation in the Crimea region of Ukraine or other sanctions regimes imposed by the U.S. Treasury Department and administered by OFAC.

In limited cases, sanctioned persons have been corporations with a direct nexus to aviation, e.g., Rostec, Avia Group, and Avia Group Nord. In other cases, exports to entities like Aeroflot and United Aircraft Corporation may require a license depending upon facts of the transaction due to the ownership or control exercised by a sanctioned entity, like Rostec, or a high-powered individual.

The latest round of sanctions is likely to have both effects. A company called Unijet–which offers on-demand VIP business jet service–was added to the list, as well as a range of individuals and large institutions that could indirectly have a controlling interest in or position with aerospace and aviation companies.

What does all this mean for aircraft parts distributors? Unless you are doing business with one of newly listed parties, not much has changed. You already should be performing a review of your customer and obtaining detailed end user information when exporting aircraft articles to ensure compliance with OFAC sanctions (as well as BIS export regulations). When a customer, end user, or person or entity with control (more than a 50% stake) appears on the OFAC Sanctions List, you must obtain a specific license or identify an appropriate authorization prior to export.

Exports to persons in nations subject to U.S. sanctions can be tricky. Due to the nature of state-owned enterprises and monopolies, and the powerful individuals that control them, you must often dig through many layers of ownership and control to determine whether or not a blocked person is involved in the transaction. Such diligence should be memorialized in writing and kept with the other records retained for the transaction so that you can demonstrate the efforts you took to clear any red flags if the government ever asks.

Whenever you have questions about export compliance–and especially when you are dealing with customers in countries that have been subject to U.S. or international sanctions–we always recommend you consult with an export compliance attorney to help you .

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Export Compliance Just Got More Complicated (Here are Links to Make it Easier)

January 25, 2019 by Leave a comment

Normally, the consolidated screening list is found on export.gov; but now that entire website simply returns the message “Due to the lapse in government funding Trade.gov and Export.gov and all associated online activities will be unavailable until further notice.”  For exporters who rely on the consolidated screening list as a compliance tool, this is a significant problem.

Interestingly enough, export enforcement – the ongoing conduct of criminal investigations, and prosecutions, and coordination with other law enforcement and intelligence agencies – has been deemed to be an essential service for the Commerce Department so even though compliance resources are missing, export enforcement will still be available to punish anyone who makes a mistake because of the missing resources.

Due to the lapse in government funding
Trade.gov and Export.gov
and all associated online activities
will be unavailable until further notice

So how do we ensure continued compliance for our exports?  If you’ve been to one of ASA’s export workshops, then you know that the consolidated list is supported by separate iterations of the lists that are consolidated. Some of these lists are still available for review.  Here are some that are particularly useful for civil aircraft parts transactions:

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New ITAR Export Reporting Requirements Now in Effect

January 11, 2017 by Leave a comment

For those who may have missed it over the busy holiday season, a new method for submitting export and temporary import reporting information for ITAR-controlled articles went into effect as of December 31, 2016.  This change was part of the DDTC’s efforts to conform reporting requirements to the International Trade Data System “single window” administered by  U.S. Customs and Border Protection in accordance with the SAFE Port Act and Executive Order 13659.

Readers should already be familiar with the “single window,” better known as the Automated Commercial Environment (“ACE”) that has subsumed AESDirect for the purpose of most of your export filings.  Exporters will have been using ACE for their export filings for several months now, so the change to your systems and procedures should be minimal.  The revision to the ITAR effective December 31 harmonized those regulations by removing references to AESDirect and replacing them with references to CBP electronic filings and systems.

In theory this should make filing the appropriate reports for export of ITAR-controlled articles easier. Using the single window, an exporter of ITAR-controlled goods reports the required information to CBP via ACE, and CBP relays the relevant and necessary information directly to the DDTC. There is no need for the exporter to notify DDTC directly. This should help to eliminate confusion as to which reports must go to which government entity, and also eliminate the cost and burden of duplicative reporting requirements.

Exporters should note, however, that this does not eliminate all your requirements to correspond with the DDTC. You will still need to ensure you are obtaining the appropriate licenses for your ITAR-controlled exports, and ensuring your registration remains current. The new rule also did not amend any part of 22 CFR part 130, so your reporting requirements related to fees and commissions remains unchanged, for now.

As always, when in doubt, consult your export compliance attorney to ensure you are acting in accordance with the ITAR and all other export compliance laws and regulations.

 

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Treasury Department is Updating Internet Security – Check Your Export Compliance Links to Ensure they Continue to Work Properly

January 10, 2017 by Leave a comment

Many ASA members have established automated systems to check their business partners against US sanctions and restricted parties lists.  This is to ensure their continued compliance with US export laws.

For those who have established such automatic protocols, you may need to know that the the Treasury Department will be implementing new computer security protocols that could impact the way that your own software interfaces with Treasury Department restriction lists.

A 2015 White House Office of Management and Budget (OMB) mandate required internet security and recommended reliance on HTTPS protocols.  In accordance with this mandate, the Treasury Department will be implementing HTTP Strict Transport Security (HSTS) headers on the Treasury.gov website on Thursday, January 12 during an evening maintenance window.

There is no anticipated downtime associated with this change; however, the change affects multiple domains and sub-domains, and will force users to the HTTPS site, as opposed to allowing browsers to redirect from HTTP to HTTPS.  This has the potential to impact scripts that users may have developed to poll Treasury.gov for data, like OFAC compliance lists (e.g. specially designated nationals).  The integrity of these scripts should be verified (or updated) to ensure that they continue to work properly after the change.

In addition to this change, the Treasury Department will also be updating the HTTPS certificate it uses for the Treasury.gov domain during the aforementioned maintenance window.   Treasury warns that users may have to reinstall the root certificate for the site if they experience connection problems.  Treasury has stated that the root certificate (the G3 certificate) can found at the following URL:

https://www.geotrust.com/resources/root-certificates/index.html

Please contact OFAC technical support at 1-800-540-6322 Option #8 or O_F_A_C@treasury.gov with any questions that you may have about this change.

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ASA Fall Workshop Series

September 15, 2015 by Leave a comment

The dates and locations for the Fall ASA Workshop have been published:

  • Sep 29, 2015 – Miramar, FL Workshop – Hilton Garden Inn-Ft. Lauderdale/SW Miramar
  • Nov 02, 2015 – Singapore Workshop  – Hilton Singapore
  • Nov 19, 2015 – Chicago, IL Workshop – Hilton Garden Inn-Chicago O’Hare Airport
  • Dec 01, 2015 – Seattle, WA Workshop – Courtyard By Marriott Seattle/SEATAC

This workshop is designed for YOU – we typically develop the program based on the input of members and based on the issues that appear to be important to members.  We expect this Fall’s domestic workshops to address issue that continue to generate calls among our members, like recent changes in US export compliance, changes in the FAA’s SUPs program, and changes to the accreditation advisory circular.  The current agenda for the Fall Workshop looks like this:

Time Topic
9:00 – 10:00 Approved Parts in the US and Europe
10:15 – 11:00 Traceability Documentation: What Documents Does the FAA Recommend? What Documents Does EASA Recommend?
11:15 – 12:00 Building Your C of C: Customizing from a SPEC 106 Template or from a Narrative Format – What Should You Include? What Pitfalls Should You Avoid?
12:00 – 13:00 LUNCH
13:00 – 14:30 Export Compliance – the Rules and Exceptions that Apply to Aircraft Parts
14:45 – 15:30 Hazmat Awareness: Identifying Hazmats in Your Inventory
15:45 – 16:30 Magic Words: Drafting Your Commercial Documents to Promote Your Own Commercial Advantage

The Singapore workshop will be a little different, as it will include issues that are important to non-US companies that are doing business with the US and Europe.

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