Pegas Touristik Update

October 11, 2023 by Leave a comment

I have answered a number of questions from members about Pegas Tourstik. We’ve talked about this in several of ASA’s meetings but I just realized that we have not yet written anything on it in the blog.

Pegas Tourstik was recently the target of US Government enforcement investigations.

In an order issued June 15, 2023, and then published in the Federal Register on June 21, 2023, the Government issued a Temporary Denial Order (TDO) against Pegas Touristik.  The stated basis was that Pegas Touristik is a “related person” relative to Nordwind Airlines (Pegas Touristik either owns Nordwind or has a commonality of ownership), and Nordwind Airlines was already subject to the TDO, which was issued against Nordwind on June 24, 2022.

A few days after the TDO was issued, on June 30, 2023, BIS announced that Pegas Touristik would  be removed from the TDO at the request of the BIS’ Office of Export Enforcement (OEE).  The reason given in the Federal Register for this removal was that “OEE has since requested that Pegas Touristik be removed from the TDO to allow the opportunity for additional administrative process under part 766 of the Regulations.”

Based on the statement, at the time, it appeared that the matter was under an ongoing enforcement process.  Today’s Federal Register confirmed this and provided a small measure of closure (but not necessarily finality) to the matter.

Today’s Federal Register published a decision confirming that Pegas Touristik is not currently subject to the Nordwind TDO. It explained that the removal of Pegas from the TDO happened “following discussions and an exchange of information between BIS and Pegas.”

The issue appears to have come before the administrative law system when Pegas sued to force the U.S. government to issue a statement that says (1) “Pegas Touristik was erroneously added as a related person to the June 15 Order and to the List of Denied Persons” and (2) “Pegas Touristik has never been subject to a valid denial order imposed by the U.S. Department of Commerce’s Bureau of Industry and Security.” The administrative law judge denied the request, and explained that “the regulations do not grant [the judge] authority to issue an order retroactively nullifying the addition of Pegas as a related party in the June 15, 2023, TDO.”

Ordering Federal Register publication of an administrative law judge’s order is an unusual step, but it is possible that the government is trying to send a clear message that Pegas Tourstik is NOT subject to sanctions.

It is unclear whether Pegas Tourstik might – in the future – be subject to a TDO, but today’s Federal Register clarifies that Pegas Tourstik is not currently subject to any TDO.

Filed under Uncategorized Tagged with , , ,

Watch the Temporary Denial Orders that Apply to Air Carriers

July 11, 2022 by 1 Comment

In addition to the normal sanctions, BIS has been issuing Temporary Denial Orders (TDOs) against certain parties who have been caught circumventing sanctions. TDOs impose additional restrictions, and have been issued against a number of Russian and Belarusian air carriers. Many of these TDOs are based on the fact that the license exception that permits aircraft operation into Russian airspace (AVS) does not apply to aircraft registered in, owned or controlled by, or under charter or lease by Russians or Belarusians (15 C.F.R. 746.8(c)(5)); and therefore each operation of an aircraft (that was originally exported from the United States) reflects a separate violation by these carriers.

Here is a short list of SOME of the TDOs issued against airlines. This is NOT intended to be a complete list so please do your own due diligence on every transaction. Each of these is hyperlinked to the relevant Federal Register notice.

What do the denial orders mean? They mean 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).

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.

The TDOs typically prevent servicing on behalf of the <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.

Finally, bear in mind that standard language in the TDOs explains that:

[A]fter notice and opportunity for comment as provided in section 766.23 of the EAR, any other person, firm, corporation, or business organization related to Nordwind by ownership, control, position of responsibility, affiliation, or other connection in the conduct of trade or business may also be made subject to the provisions of this Order.

Nordwind Airlines, Leningradskaya str., building 25, office 27. 28, Moscow region, Khimki city, 141402, Russia; Order Temporarily Denying Export Privileges, 87 F.R. 38704 (June 29, 2022).

This means that related companies can be added to the TDO restrictions. It also means that companies with a “connection in the conduct of trade or business” can be added. This offers an opportunity for BIS to issue a TDO against anyone that they discover circumventing the sanctions (or attempting to circumvent them). Note that even though the provision says “after notice and opportunity for comment,” the regulations permit a TDO to be issued immediately in response to an imminent threat of violation.

As always, use this article as the start for your due diligence; but it should not be the only part of your analysis. These TDOs are issued for 180 days and can be extended, but if more than six months have gone by without an extension, then the TDO may have expired.

Filed under Uncategorized Tagged with , , , , , , , , , , , ,