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 The fact that the property is blocked means it may not be transferred, paid, exported, withdrawn, or otherwise dealt in under U.S. law.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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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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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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US Rolling Back Cuba Sanctions – Permits Expanded Payment Options

January 26, 2016 by Leave a comment

The Treasury Department will publish a final rule tomorrow that rolls back more of the Cuba sanctions by amending the Cuban Assets Control Regulations, 31 C.F.R. part 515 (the “CACR”), to make it easier to receive payments for aircraft parts (and other commodities) that are sold to Cuban business partners.  The new rule comes out of the Treasury Department’s Office of Foreign Asset Control (OFAC).

The changes appear to permit US persons to receive funds from Cuban customers for non-agricultural export transactions.  This does not permit all transactions, but it does lay the foundation for receiving payment for transactions that that are permitted.  In September, we reported that ASA members wishing to sell aircraft parts to Cuban business partners could now apply for a license from the Bureau of Industry and Security (BIS) in order to legally sell and export such commercial aircraft parts.

Don’t forget that there is an OFAC general license that authorizes the export from the United States to Cuba in those cases where the export is already licensed or otherwise authorized by the Commerce Department’s Bureau of Industry and Security (BIS). 15 C.F.R. § 515.533(a)(1). This means that if you can obtain a BIS license, and you do not run afoul of other US restrictions, then you do not need to obtain a separate OFAC license.

As of today, the forms of allowable payment are limited by the OFAC general license provisions (15 C.F.R. § 515.533(a)(2)); but when the new final rule is published, it is expected that payment and financing terms for authorized (e.g. licensed) exports will no longer be restricted.

In summary, aircraft parts being exported to Cuba will still be subject to BIS licensing, but the OFAC restrictions on payment methods will be removed by this new rule.

A draft of the final rule is available online now, and it is expected to be available at http://federalregister.gov/a/2016-01559 tomorrow or shortly after tomorrow, once it is published.

 

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