Civil Aircraft Temporary License in Iran

The General License, civil aircraft temporary license, allows for Eligible Aircrafts that include less than 10 percent US-origin parts to be flown into and out of Iran, and for there to be domestic flights as well by non-US persons and entities, that would control the aircraft. For information on these recent provisions, contact a distinguished OFAC attorney.

Defining Re-Exportation Conditions

July 29, 2016, the Office of Foreign Assets Control (“OFAC”), released General License J, Authorizing the Re-exportation of Certain Civil Aircraft to Iran on Temporary Sojourn and Related Transactions. It allows for the re-exportation by a non-US person of Eligible Aircraft to Iran on a temporary sojourn, provided that various conditions are met.

Some of these conditions include:

• The right to hire and fire the cockpit crew remains with the non-US person re-exporter
• The right to dispatch the Eligible Aircraft remains with the non-US person re-exporter
• The right to determine the Eligible Aircraft routes remains with the non-US person re-exporter
• The right to perform or obtain the principal maintenance on the Eligible Aircraft remains with the non-US person re-exporter, and principal maintenance will take place outside of Iran under the control of a party who is not an Iranian national ordinarily resident in Iran
• The place of registration of the Eligible Aircraft will not change to Iran
• There is no transfer of technology to an Iranian national ordinary resident in Iran

Important Factors of the Iran Nuclear Deal

One of the key components of the Joint Comprehensive Plan of Action (the “JCPOA”), also known as the Iran Nuclear Deal, was a provision that the United States would commit to allowing for the sale of civilian and commercial aircrafts to Iran. The largest airline in Iran was removed from the Specially Designated National List, (the “SDN List”), to allow Iran Air and other smaller airlines to be able to obtain US origin, US manufactured American aircrafts.

The provision in the JCPOA produced what is known as a Favorable Specific Licensing Policy for civilian aircraft as well as the general license for entry into contingent contract and that is General License I. General License I entitled, “Authorizing Certain Transactions Related to the Negotiation of, and Entry into, Contingent Contracts for Activities Eligible for Authorization Under the Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircrafts and Related Parts and Services.”

Understanding Recent Provisions

The main provision states “(a) US persons are authorized to enter into, and to engage in all transactions ordinarily incident to the negotiation of and entry into, contracts for activities eligible for authorization under the Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircraft and Related Parts and Services, provided that the performance of any such contract is made expressly contingent upon the issuance of a specific license by the Office of Foreign Assets Control authorizing the activities to be performed (’contingent contracts’).”

This General License allowed, in all practical terms, a person to engage in negotiation to enter into a contingent contract that would allow, under the circumstances of obtaining a specific license, for the sale and the continued services under that sale of civilian passenger or commercial passenger aircrafts to Iran and airlines that are not blocked in Iran. US persons can conduct negotiations under certain legal parameters.

The key words are ordinarily incident to the negotiation of, and entry into. OFAC does not necessarily exactly define what ordinarily is incident to the negotiation of, and entry into is, and it leaves it up to the person conducting or working under the General License to decide whether what they are doing is ordinarily incident and necessary. If a person does step out of the boundaries, OFAC could file an action against that person.