Iran Sanctions are Still Active!

Iran has reached Implementation Day – but what does this mean? We’ve been receiving a number of inquiries about Iranian sanctions.

The news media has been reporting that US sanctions against Iran have been eliminated. This is not (yet) true.  Conversations with European companies have suggested that Europe is permitting unfettered trade with Iran, and in fact Airbus announced a plan to sell 100 aircraft to Iran as soon as sanctions are formally lifted.  Iranian Transport Minister Abbas Akhoondi announced that Iran would buy 114 aircraft from Airbus.

In the U.S., there are still live sanctions against Iran (like 31 C.F.R. Part 560) that continue to preclude the sale of aircraft parts without a license.  The Treasury Department is the lead US organization for Iran sanctions.  U.S. Treasury Department regulations still prohibit the export, sale, or supply of any services to Iran, unless there is a specific exception in the regulations that permits that export, sale, or supply.  31 C.F.R. §§ 560.204, 560.204(a)(2), 560.410; see, e.g., Guidance Relating to the Lifting of Certain U.S. Sanctions Pursuant to the Joint Comprehensive Plan of Action On Implementation Day, p. 3, fn 4 and p. 38 (published jointly by U.S. Department Of The Treasury and U.S. Department Of State January 16, 2016) (reminding the reader of the general prohibition on provision of goods and services to Iran except where explicitly permitted).  So, until the restrictive regulations are removed, we should expect the government to issue specific exceptions on an occasional basis.

Treasury has published their initial plan for the abatement of sanctions – the first set of exceptions.  This abatement plan is available for public review but it is not valid until published in the Federal Register!  But the plan is primarily focused on importing food items and carpets from Iran so it is of little use to aircraft parts distributors.

Under the post-Implementation Day plan, we should not expect free trade in aircraft parts to Iran.  Instead, aircraft parts will be subject to a favorable licensing policy, similar to what they’ve enjoyed in recent years.

“[L]icenses may be issued on a case-by-case basis to authorize U.S. persons and, where there is a nexus to U.S. jurisdiction, non-U.S. persons to (1) export, re-export, sell, lease, or transfer to Iran commercial passenger aircraft for exclusively civil aviation end-use, (2) export, re-export, sell, lease, or transfer to Iran spare parts and components for commercial passenger aircraft, and (3) provide associated services, including warranty, maintenance, and repair services and safety-related inspections, for all the foregoing, provided that licensed items and services are used exclusively for commercial passenger aviation.”

This new licensing program is effective immediately under the new licensing policy.  Under the new licensing program, there will be an expectation of controls to prevent re-transfer of goods to parties on the Specially Designated Nationals (SDN) list.  The US has warned that if aircraft, goods, or services licensed for export to Iran are used for purposes other than exclusively for commercial passenger aviation, or have been transferred to SDNs, then the United States could view this as grounds to cease performing its commitments under the agreement with Iran.

Sanctions are not going away, totally.  The fact that there is a favorable licensing policy shows that the US will maintain a presumption against trade that must be overcome with licenses.  And new sanctions are always a possibility: on Sunday, the Treasury Department announced new sanctions against parties involved in Iran’s ballistic missile program (who will be added to the SDN list).

So really, for aircraft parts distributors it remains ‘business as usual.’  Treasury licenses will still be necessary for aircraft parts transactions to Iran that are subject to US jurisdiction.