Window of Opportunity for Doing Business in Iran

For a limited time, Iran could be a great source of business for the aircraft parts distribution community.

Two weeks ago, we posted about the relaxation of sanctions against Iran, particularly as those sanctions apply to civil aircraft parts.

Yesterday,  AviationPros reported that Iran will start importing aircraft parts in two weeks (this was based on a February 1 article from Trend News).  The article explains that Iran’s Civil Aviation Organization head Alireza Jahangirian has asked the Iranian National Development Fund to release $400 million to purchase aircraft parts.

The AviationPros article also carries an implicit warning for anyone who sells to Iran – it quotes Managing Director of Qeshm Airline, Hefzollah Ataherian as saying “Most of the [Iranian] airlines are indebted and their revenues are not enough to pay their debts.”  This suggests that aircraft parts sellers should be particularly cautious about the payment arrangements for parts to ensure they are among those who get paid.

Licenses from the Treasury Office of Foreign Asset Control (OFAC) are likely to be necessary for most aircraft parts being shipped to Iran. Treasury has already issued guidance on its Iran Licensing Policy; the guidance clarifies that licenses are still necessary but that “license applications will also be evaluated in light of the Iran-Iraq Arms Non-Proliferation Act and any other relevant statutes, as appropriate.”  The guidance also notes that the authority is temporary – licenses issued under this authority will expire June 20 of this year (so right now there is a limited window for these transactions).

OFAC has also released guidance explaining that the U.S. Government “will not impose correspondent or payable-through account sanctions on foreign financial institutions that … conduct or facilitate financial transactions relating to [covered aircraft parts transaction].”  One important caveat is that these payments will only be authorized if the exporting activities are initiated and completed entirely within the period covered by the agreement (the six-month period beginning on January 20, 2014, and ending July 20, 2014).

Another important factor in the payment licensing policy is that the favorable treatment of payments will only be granted if the transaction does not involve any party on the Specially Designated Nationals (SDN) list.  As a special exception, SDN-party Iran Air *is* permitted to engage in transactionsm as is any Iranian depository institution that is listed as an SDN solely pursuant to Executive Order 13599.

The Commerce Department’s Bureau of Industry and Security (BIS) has published its regulations on Iran at 15 C.F.R. § 746.7.  This section continues to impose restrictions on shipments to Iran; however it also permits a single license from OFAC to cover BIS requirements as well as OFAC requirements.  15 C.F.R. § 746.7(a)(2).  There are limitations on this authority – for example the subject of the license must be an article subject to OFAC limitations – but most aircraft parts that are licensed for export to Iran by OFAC ought to be exempt from any further licensing obligations under the BIS regulations.

About Jason Dickstein
Mr. Dickstein is the President of the Washington Aviation Group, a Washington, DC-based aviation law firm. He represents several aviation trade associations, including the Aviation Suppliers Association, the Aircraft Electronics Association, the Aircraft Fleet Recycling Association and the Modification and Replacement Parts Association.

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