Iran Sanctions: Civil Aviation

The US has imposed both primary and secondary sanctions against the Iranian civil aviation industry. However, there is currently a statement of licensing policy in the Iranian Transactions and Sanctions Regulation (ITSR) supporting the exportation of certain aircraft parts to Iran, if those parts are related to the safe operation of civilian aircraft in Iran and the recipient of the aircraft parts is not a person on the SDN list.

JPOA Sanctions Relief on Civil Aviation

The JPOA provides for the temporary licensing of the supply and installation in Iran of spare parts for flight safety in Iranian civil aviation. Temporary licensing is also provided for associated services and safety-related inspections, and for repairs and their associated services, in Iran. Also included is a narrow expansion of the statement of licensing policy favoring exports to Iran Air, an SDN-listed entity.

To implement the JPOA relief, OFAC issued a statement of licensing policy, suspended certain secondary sanctions on payable-through accounts, and suspended certain blocking sanctions related to the civil aviation industry.

The Statement of Licensing Policy on Civil Aviation in Iran

OFAC issued its third amended statement of licensing policy on activities related to the safety of Iran’s civil aviation industry to extend the date of the previously issued statements of licensing policy to the end of the JPOA relief period. The third amended statement of licensing policy will continue during the JPOA relief period. This is a favorable licensing policy regime under which US persons, US owned or controlled foreign entities, and non-US persons involved in the export of US origin goods, can request specific authorization from OFAC to engage in transactions to ensure the safe operation of Iranian commercial passenger aircraft. The transactions can involve Iran Air, which is an entity on the SDN list. Activities undertaken pursuant to the specific licenses issued under the third amended statement of licensing policy must be initiated and completed within the timeframe established in those specific licenses. In addition, OFAC announced on its website on July 14th, 2015, that licenses granted under the second amended statement of licensing policy on Iran civil aviation industry safety activities which expire on or before July 14, are authorized to remain in effect according to their terms until Implementation Day of the JCPOA.

Correspondent and Payable-Through Accounts

Under Section 3(a)(i) of Executive Order 13645 and Section 561201(a)(vii) of the IFSR, the U.S. government will not impose correspondent or payable-through account sanctions on foreign financial institutions which facilitate financial transactions for the type of activities covered by the third amended statement of licensing policy. These transaction must be conducted on behalf of non-U.S. persons not otherwise subject to the ITSR, and must be initiated and completed entirely within the JPOA relief period. Further, the transactions may not involve persons on the SDN list other than Iran Air or Iranian banks listed solely pursuant to Executive Order 13599.

Blocking Sanctions

Under Section 1(a)(iii) of Executive Order 13382, Section 2(a)(i) and (ii) of Executive Order 13645, and Section 544201(a)(iii) of the Weapons of Mass Destruction Proliferators Sanctions Regulations, the US government will not impose blocking sanctions with respect to persons who materially assist, sponsor, or provide financial, material, or technological support for, or goods or services to or in support of Iran Air, in connection with activities intended to ensure the safe operation of Iranian commercial passenger aircraft. These are applicable provided that the activities are outlined in the JPOA, are initiated and completed entirely within the JPOA relief period, and do not involve persons on the SDN list other than Iran Air or any Iranian depository institution listed solely pursuant to Executive Order 13599. Both the blocking sanctions relief and the correspondent payable-through account sanctions relief implemented by the statement of licensing policy are expected to remain largely in place after Implementation Day of the JCPOA.

JCPOA Impact on Civil Aviation

Iran Air will be removed from the SDN list as part of the JCPOA relief, which is an expansion of the sanctions relief under the JPOA. Additionally, the U.S. will allow:

1. the sale of commercial aircraft and related parts and services to Iran by licensing the export, re-export, sale, lease, or transfer to Iran of commercial passenger aircraft exclusively for civil aviation end use,
2. the export, re-export, sale, lease, or transfer to Iran of spare parts and components for commercial passenger aircraft, and
3. The provision of associated services including warranty, maintenance, repair services, and safety-related inspections for all the foregoing, provided that licensed items and services are used exclusively for commercial passenger aviation.

These changes will take effect on Implementation Day.