Opportunities in Iran Extended Indefinitely

One of the biggest news stories this week was the announcement of the agreement between the P5+1 countries and Iran intended to prevent Iran from developing a nuclear weapon.  Naturally there has been vocal discussion from both sides of the aisle about the pros and cons of the deal; but one of the more immediate issues relevant to the distribution community is what the agreement means for distributors’ ability to continue selling civil aircraft parts to Iran.

As readers of this blog know, since November 24, 2013, the United States operated under a Joint Plan of Action (JPOA) with Iran that has permitted the export of commercial aircraft parts to Iran (when licensed by the US Treasury Department’s Office of Foreign Asset Control). Over the past two weeks that permission has been incrementally extended to allow sales to continue during the ongoing negotiations.

On July 14 the parties to the Iran talks announced that a Joint Comprehensive Plan of Action (JCPOA) had been reached. Included among the provisions is a provision that will permit the sale of commercial aircraft, parts, and services to Iran.  Annex II Section 5.1.1 states that the United States shall:

Allow for the sale of commercial passenger aircraft and related parts and services to Iran by licensing the (i) export, re-export, sale, lease or transfer to Iran of commercial passenger aircraft for exclusively civil aviation end-use, (ii) export, re-export, sale, lease or transfer to Iran of spare parts and components for commercial passenger aircraft, and (iii) provision of associated serviced, 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 provision, however, does not take effect until what is termed “Implementation Day” by the agreement.  Implementation Day occurs when the IAEA reports that Iran has implemented the nuclear-related measures required of it under the agreement, and the US and EU simultaneously take certain actions prescribed by the agreement. Based on the language of the JCPOA Implementation Day is not a hard and fast date, therefore it cannot be stated with specificity when the provision allowing the sale of commercial aircraft, parts, and services, official takes effect.

In order to bridge the gap between this week’s announcement of the JCPOA and the effectiveness of the provisions on Implementation Day, the Treasury Department has once again extended the JPOA, this time indefinitely.  The Treasury Department also again extended previously issued licenses.  The most recent Announcement from the Treasury Department states that:

Effective July 14, 2015, all specific licenses that:

(1) were issued pursuant to OFAC’s Second Amended Statement of Licensing Policy on Activities Related to the Safety of Iran’s Civil Aviation Industry, and

(2) have an expiration date on or before July 14, 2015, are hereby authorized to remain in effect according to their terms until Implementation Day.

This is further good news for those have licenses issued under the Second Amended Statement of Licensing Policy. As we have previously stated, please look carefully at your license language to ascertain whether it is extended with the JPOA extension.

This is generally good news for aircraft parts distributors.  Between the Treasury Department Announcement extending the JPOA under which companies have been permitted to sell to Iran (with the appropriate license) for the last year and a half, and the trade provision of Annex II Section 5 specifically providing for the sale of commercial aircraft, parts, and services, the Iran commercial aircraft market continues to be open for business.

As always, be sure before engaging in any export that the parties are allowed and that you have satisfied all the necessary license requirements mandated by the Treasury Department and other regulators.  When in doubt, consult an export compliance professional.

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