In implementing the Joint Comprehensive Plan of Action, the U.S. has opened the door for sales of U.S. aircraft and related parts and services to Iran.
On Jan. 16, 2016, the U.S. Office of Foreign Assets Control issued a "Statement of Licensing Policy for Activities Related to the Export or Reexport to Iran of Commercial Passenger Aircraft and Related Parts and Services" (the SLP).
establishes a favorable licensing policy under which U.S. and non-U.S. persons may request specific authorization from [the U.S. Office of Foreign Assets Control] to engage in transactions for the sale of commercial passenger aircraft and related parts and services to Iran, provided such transactions do not involve any person on OFAC's Specially Designated Nationals and Blocked Persons List (SDN List).
Under the SLP, U.S. companies and, where there is a nexus to U.S. jurisdiction, non-U.S. companies may apply for licenses to engage in transactions for the (i) export, reexport, sale, lease or transfer to Iran of commercial passenger aircraft for exclusively civil aviation end use, (ii) export, reexport, sale, lease or transfer to Iran of spare parts and components for commercial passenger aircraft; and (iii) provision of 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.
Within days of the SLP, Airbus announced an order by Iran Air for 118 new aircraft (made up of 21 A320ceo family, 24 A320neo family, 27 A330ceo family, 18 A330-900neos, 16 A350-1000s and 12 A380s) in a deal worth $25 billion at list price. The first deliveries are said to be scheduled to take place as early as July 2016, with the entire order to be fulfilled by 2022. Iran's flagship carrier, Iran Air, has said that it will require as many as 580 new aircraft (including the Airbus order) over the next 10 years, with 300 of those required in the next five years.
Despite the deputy head of Iran's Civil Aviation Organization being quoted as specifying that 80 new aircraft will be purchased each year, to be split between Airbus and Boeing, it is unclear how soon a deal with Boeing would be agreed.
Aside from Airbus and Boeing, Iran Air has agreed to purchase 20 turboprops from ATR, a French-Italian manufacturer and domestic carriers are said to be considering the Boeing 737 narrow-body jet and smaller planes from Bombardier Inc. and Embraer SA.
It is important to note that OFAC has not issued a general license, which would have allowed the above-referenced transactions without any further authorization from OFAC. Rather, OFAC will evaluate and provide case-by-case licensing of the export, reexport, sale, lease or transfer to Iran of commercial passenger aircraft, spare parts and components for such aircraft, and associated services, all for exclusively commercial passenger aviation. Specific licenses issued pursuant to the SLP will include appropriate conditions to ensure that licensed activities do not involve, and no licensed aircraft, goods or services are resold or retransferred to, any person on OFAC’s SDN List.
The SLP addresses U.S.-origin commercial passenger aircraft or commercial passenger aircraft that contains 10 percent or more U.S.-controlled content. The affected aircraft include: wide-body, narrow-body, regional and commuter aircraft used for commercial passenger aviation. The types of aircraft not eligible for licensing under the SLP include cargo aircraft, state aircraft, unmanned aerial vehicles, military aircraft and aircraft used for general aviation or aerial work.
U.S. persons are authorized to engage in transactions that are "ordinarily incident to a licensed transaction and necessary to give effect thereto." According to the FAQs issued by OFAC, such services include transportation, legal, insurance, shipping, delivery and financial payment services provided in connection with the licensed export transaction. An example provided by OFAC of a service ordinarily incident to the licensed export transaction service would be where a U.S. person provides insurance to cover the shipment of a licensed component from a U.S. manufacturer to an Iranian customer. In contrast, a U.S. person’s provision of insurance to cover the component over a period of years after it has been exported to Iran would not be ordinarily incident to the licensed export transaction and would require separate authorization from OFAC.
Transactions authorized by OFAC pursuant to the SLP generally do not need separate authorization from the Department of Commerce, which regulates exports of U.S.-origin and U.S.-content goods.
Finally, the SDN List and the Department of Commerce’s Denied Persons List and Entity List should be consulted in connection with compliance due diligence procedures.
It is clear from Iran's recent orders with Airbus and ATR that its appetite for new aircraft is high and, with the recent lifting of sanctions, there is a clear opportunity for U.S. manufacturers of both aircraft and aircraft parts and providers of related services to do business with Iran.
U.S. companies interested in pursuing opportunities for new business in Iran should, in the first instance:
- Submit a license application in order to take advantage of the U.S. favorable licensing policy established by the SLP;
- Ensure that any other rules that might apply to U.S. companies when dealing with Iran are capable of being (and are) adhered to; and
- Seek legal advice to ensure that their dealings with Iran are undertaken in accordance with those rules or regulations.
Click here to view this article on Law360.