Russia-Sanctions Aimed at Aviation Businesses

March 9, 2022 by Leave a comment

Today, the Bureau of Industry and Security (BIS) published its new additions to the sanctioned entities list. Note that even though it was published today (March 9), it is effective as of March 3, 2022! We reported on this last week, so you should have had a little notice. That list includes aviation as one of the target industries.

Tomorrow, the Federal Register is scheduled to print new Treasury Department Sanctions against Russia. These sanctions include an A340-300 aircraft (MSN 955; registry # M-IABU). Other sanctioned aircraft include a Gulfstream G650 (MSN 6207; registry LX-MOW).

Last week, the Treasury Department Office of Foreign Asset Control (OFAC) updated their lists of Specially Designated Nationals to include aviation maintenance facilities, like JSC 558 Aircraft Repair Plant and airlines, like JSC Transaviaexport Airlines. Both of these companies are in Belarus. OFAC also added SDNs that have not yet been published in the Federal Register – these companies are listed in the SDN list, so they will appear in the government’s consolidated screening list; however the announcement was made in an OFAC press release rather than a Federal Register notice (these are just highlights):

  • ALTITUDE X3 LTD
  • AVANFORT OOO
  • AVIASTAR-SP AIRCRAFT MANUFACTURING ENTERPRISE
  • IRKUTSK AVIATION PLANT
  • IZHMASH-UNMANNED SYSTEMS COMPANY
  • JSC NOVOSIBIRSK AIRCRAFT PRODUCTION ASSOCIATION PLANT
  • KOMSOMOLSK-ON-AMUR AVIATION PLANT
  • ALL-RUSSIAN SCIENTIFIC RESEARCH INSTITUTE OF AVIATION MATERIALS

Remember, if you have property that belongs to any person or entity that has been blocked under the new OFAC Russian sanctions (pursuant to Executive Orders 14024 and 14065), then that property is blocked. The fact that the property is blocked means it may not be transferred, paid, exported, withdrawn, or otherwise dealt in under U.S. law. If, for example, you are managing a U.S. repair for a Russian business who gets added to the OFAC list of Specially Designated Nationals (under the authority of the Executive Order), then you may not return the part to the sanctioned party, nor may you participate in a work-around designed to circumvent the sanctions.

For most members of the ASA community, the BIS prohibitions on unlicensed exports to Russia will put a stop to unlicensed export transactions. But even if you get a BIS license, if your business partner is on the SDN list or is otherwise subject to the limitations of the Russia-related and Ukraine-related Executive Orders then you may also need a license from OFAC, as well.

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Protect Your Exports – Screen Your Business Partners, Every Time

October 13, 2019 by Leave a comment

Looking for some tips on how to ensure you remain in compliance with the US export regulations (including the re-export regulations as they apply to goods re-exported to a third country after being first exported from the United States)?

My law firm has helped build compliance programs for aviation companies for decades.  When we are helping a company build an export compliance program, we always recommend developing a mechanis to ensure that you can compare all of the relevant businesses and individuals involved in each transaction to the US Government lists that regulate exports.  Specifically, we recommend searching the business and individual names through the US Government consolidated screening list.  This list consolidates a number of different US Government lists into one screening tool: https://www.export.gov/csl-search.

We recommend searching all of the relevant parties for every transaction, every time.  The problem that arises is one of human nature battling against the company’s procedures.  If you just searched a name last week then you might decide not to search that same name again, this week.  If you’ve done business with someone for years you might feel that you have no worries about thath person.  But the lists change almost every day.  So someone who was not on the lists yesterday might have been added this morning; and if you don’t know this, then you might export to that forbidden party in violation of the law.

In order to avoid the risks that complacency can breed, we recommend to companies that they integrate an electronic search of all partners for every transactions.  This can be done by tying some aspect or your computerized system to the US Government consolidated screening list (which is designed to be a searchable database that can be integrated with outside search systems).  Make sure you tie the search to something that is enterred for EVERY transaction. Because we like to see the search done as early as possible, we sometimes recommend tying the search to the quoting system, but unless you issue a quote for EVERY transaction, this cannot be your only search.  Sometimes it also makes sense to build your system so that documents like shipping tickets and invoices cannot be generated without a completed search on the consolidated screening list.

It also helps to build a system where you must enter the names of the individuals involved in your transaction (or else have them mined from your electronic correspondence) so those names are part of the search process.

For example, imagine you get a purchase order from Cham Wings Airline.  Before responding to the purchase order, you run a search on the consolidated screening list.  A search for “Cham Wings Airline” would yield this result:

Source Specially Designated Nationals (SDN) – Treasury Department
Entity Number 21244
Type Entity
Name CHAM WINGS AIRLINES
Remarks (Linked To: SYRIAN ARAB AIRLINES)
Source List URL http://bit.ly/1I7ipyR
Source Information URL http://bit.ly/1MLgpye
Programs
  • SYRIA
Alternative Names
  • AJNEHAT AL SHAM
  • SHAM WING AIRLINES
  • CHAM WINGS
  • AL-SHAM WINGS
Addresses Al Fardous Street
Damascus
SYSaadoon Street
Baghdad
IQ8 March Street
Lattakia
SY

Hai Al Gharbi-Alraees Street
Kamishli
SY

P.O. Box 1620 Tal-Kurdi, Adra
Damascus
SY
IDs
  1. Type: Registration ID
    Number: 14683
    Country: SY

You can see from this that Cham Wings Airline is listed as a specially designated national.  The next step is typically to perform a more direct and in-depth investigation.  In this case,  Cham Wings Airline is listed as a specially designated national so we should check the Treasury Departments list of specially designated nationals.  That list is found online at https://www.treasury.gov/ofac/downloads/sdnlist.pdf.  In that list, you will find that one of the relevant entries reads:

AJNEHAT AL SHAM (a. k.a. AL-SHAM WINGS; a.k.a . CHAM WINGS (Arabic:  أجنحة الش ام); a.k. a. CHAM WIN GS AIR LINES  (A ra bic: أجن حة الشام );  f.k.a. SHAM WING AIRLINES, Al Fardous Street, Damascus, Syria; Saadoon Street, Baghdad, Iraq; 8 March Street, Lattakia, Syria; Hai Al Gharbi -Alraees Street , Kamishli, Syria; P. O. Box 1620 Tal-Kurdi, Adra, Damascus, Syria; Registration ID 14683 (Syria) [SYRIA] ( Linked To : SYRIAN ARAB AIRLINES).

This provides more information about the specially designated national in order to help distinguish it from another party with a similar name.

How common is it to find aviation companies who are listed in restricted lists like the Treasury Department’s list of specially designated nationals?  More common than you might think.  Here is a list of just some of the airlines and aviation companies included on the SDN list (this list changes, and companies go on-and-off the list, so always confirm a company remains on the SDN list – do not rely on this as your sole source of SDN information):

  • Aero Continent
  • Aero Continente
  • Aero Courier Cargo
  • Aero Express Intercontinental
  • Aero Sky One
  • Aerocaribbean Airlines
  • Aerocomercial Alas De Columbia
  • Aerocondor
  • Aerolineas Aeroamanecer
  • Aeronautica Condor
  • Aerospace Industries Organization
  • Aerospace Research Institute
  • Al-Naser Airlines
  • Al-Sham Wings
  • Avia Group LLC
  • Avia Import
  • Aviation Capital Solutions, Ltd
  • Butembo Airlines
  • Caspian Airlines
  • Cham Wings Airlines
  • Cubana Airlines
  • Dart Airlines
  • Dena Airlines
  • Empresa Cubana de Aviacion
  • Fars Air Cargo Airline
  • Hors Airlines Ltd
  • Intercontinental de Aviacion
  • International Airline Consulting
  • Iran Air
  • Khors Air
  • Kyrgyztransavia Airlines
  • Mahan Air
  • Pouya Airlines
  • Sky Blue Airlines
  • Syrian Arab Airlines
  • Ukrainian-Mediterranean Airlines
  • UM Air
  • Yasair Cargo Airline

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Treasury Offers New Ways to Search for Export Compliance Risks

December 10, 2014 by Leave a comment

In an effort to make it easier to monitor sanctions programs, the Treasury Department has consolidated several sanctions lists.  This consolidation should make it easier to search to ensure compliance, whether you are searching on line or using a computer program to automatically research your customers.

The Treasury Department office with jurisdiction over export programs is the Office of Foreign Asset Control (OFAC).

OFAC has a list of Specially Designated Nationals (SDNs) as well as other (non-SDN) sanctions lists.  OFAC  is now offering all of its non-SDN sanctions lists in a consolidated set of data files called the Consolidated Sanctions List.  This consolidated list will include the following:

  • Non-SDN Palestinian Legislative Council List
  • Part 561 List
  • Non-SDN Iran Sanctions Act List
  • Foreign Sanctions Evaders List
  • Sectoral Sanctions Identifications List

OFAC announced that it plans to discontinue some of these lists as separate lists, so they will only be available as part of the consolidated list.

Persons seeking to check whether there are OFAC sanctions that might apply to their transaction should be sure to check their export business partners (by personal name and company name) against the Specially Designated Nationals List and the Consolidated Sanctions List. 

One can also use the Sanctions List Search which consolidates both lists into a single searchable database. This tool is useful because it can automatically search for names that are close (bot not exact matches) and can be set to find matches with different levels of confidence (which will then be reviewed by a human to assess whether they actually match).

Exporters should also check the details of their transaction (including destination country) against the Sanctions Programs and Country Information page, which list sanctions programs based on country and on certain other criteria.

 

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Exporting under Russia-Ukraine Sanctions

August 19, 2014 by

Recently, we have had several questions from members regarding export of aircraft parts to Russia and the Ukraine. As most readers no doubt know, the United States and the EU, in response to the conflict in eastern Ukraine, have imposed various economic sanctions on certain persons and businesses in Russia.  When sanctions like these are imposed, those companies doing business with customers in Russia and Ukraine wisely want to know whether and what type of affect these sanctions may have on their business.

Questions regarding business relations in Russian and Ukraine typically take one of two forms: The first, can I do business with the customer at all?  The second, can I export this particular part to the customer?

To answer these questions, we first need to know what sanctions have been imposed and to whom they apply. We then need to recall our basic export compliance principles and apply those principles to determine whether the part itself can be exported.  Those who have attended ASA workshops in the past may recognize these steps as part of the process of export compliance.

The United States, through the Treasury Department, has issued several rounds of sanctions directed at specific industries and parties.  For the most part, the targeted industries have been companies in the Russian financial and energy sectors, while the individuals mainly officials and individuals with ties to Vladimir Putin.

However, companies in the financial and energy sectors are the only ones that have been targeted.  Importantly, Avia Group and Avia Group Nord, business aviation groups, were also targeted with U.S. sanctions.  This means that although not yet a focal point, the aviation industry can by targeted if the United States deems it necessary, and so is a good reminder that exporters of aircraft parts need to be aware.  The Treasury Department maintains an up to date list of Ukraine-related sanctions on its website.

Although it appears that the Russian aviation sector has not been highly targeted by the United States yet, these sanctions illustrate the importance of knowing your customer. Further, simply because the United States has not sanctioned an organization does not mean they may not be sanctioned by another body.  For instance, the EU recently issued sanctions against Dobrolet, a low-cost Russian carrier.  If you are based in the the EU, you should review the European Union’s restrictive measures in force to ensure you remain compliant with EU sanctions.

As our industry well knows, wealthy entities and individuals, such as those named in sanctions, frequently own or operate their own aircraft.  Given the wealth and high-ranking status of individuals and companies named, it is  important to review the Treasury Department Office of Foreign Asset Control’s Specially Designated Nationals list.  Furthermore, it is important to take this step with every transaction, because new individuals and entities can be added at any time, whether announced as a new round of sanctions or not.

Once we have determined whether sanctions apply to our prospective customer, we can rely on our export compliance program to take us the rest of the way.  The exporter must determine whether the article it plans to export is ITAR or EAR controlled.  Once the appropriate export regime is determined the exporter must determine whether an export license is required for the particular part or whether any license exceptions apply.  If a license is required, the exporter should apply as usual.  Be aware that both the State Department DDTC and the Commerce Department BIS may deny export license applications for high-tech items that could contribute to Russian military capability.  In most cases, however, articles for civil aviation may still be exported.

The highly publicized nature of these sanctions rightfully causes many companies to hesitate before undertaking an export transaction to the listed countries.  This hesitation is appropriate, given the already complex nature of export compliance. But these delays can also help the exporter to ensure that the transaction is undertaken correctly and legally.

The good news is that an effective export compliance system will enable you to easily comply with whatever sanctions and restrictions are enacted.  An effective compliance system should find the exporter following the same steps, reviewing the same lists, and performing the same analyses with every export transaction.  An export compliance program that is second nature to the exporter’s employees will ensure that no matter what sanctions are issued, or against whom, your company will remain compliant. Our law firm has helped many companies establish effective export compliance programs.  If you have questions regarding compliance, please feel free to contact us.

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