On July 23, 2019, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued an Iran-Related Civil Aviation Industry Advisory that discusses “deceptive practices by Iran with respect to the Civil Aviation Industry.” The advisory does not announce any new or modified sanctions, but summarizes the sanctions regimes now in place and cautions persons to be aware of Iran’s use of deceptive practices to circumvent prohibitions regarding the unauthorized transfer of U.S.-origin aircraft (including aircraft with 10 percent or more U.S.-origin content) or related goods, technology, or services to Iran. The full text of OFAC’s advisory can be found here.
Scope of Existing Prohibitions
In particular, the advisory reminds aviation industry participants about the potential consequences of doing business with various operators such as Mahan Air, Caspian Air, Syrian Air, Dart Airlines, Kyrgyz Trans Avia, and others. It also cautions against transactions involving any Iranian individual or entity on OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List).
The advisory further reminds sector participants that the sanctions are not limited to air carriers. Rather, OFAC’s regulations apply to a broad range of aviation-related industries, including:
- financial services providers;
- reservations and ticketing agencies;
- freight booking and handling companies;
- entities that procure aircraft parts and equipment;
- maintenance providers;
- ground handling providers;
- catering services;
- interline transfer and codeshare partners; and
- refueling service providers.
Examples of Deceptive Practices
The advisory describes a number of examples of practices employed by Iran to deceive aviation-related service providers in order to acquire aircraft and related goods, technology, or services. Such Iranian efforts, which have resulted in illicit business activities, include:
- Using front companies and/or third party suppliers in Europe, the Middle East, Africa, and Asia to conceal the ultimate Iranian beneficiary of U.S.-origin aircraft, parts or services.
- Misrepresenting to suppliers, dealers, brokers, re-insurers, and other intermediaries that certain sanctions against Iran have been lifted.
- Claiming activities are authorized by OFAC without providing copies of any OFAC licenses purportedly held by the parties.
- Placing orders for U.S.-origin aircraft parts or components from firms in one country for delivery to freight forwarding or logistics firms in a second country.
Existing Export Policies and Licenses Remain in Place
Some good news for the industry is that existing policies and authorizations remain in effect for the time being. This includes the “safety of flight statement of licensing policy” by which OFAC will consider issuing specific licenses to authorize exports needed to ensure the safe operation of U.S.-origin commercial passenger aircraft. It also includes General License J-1, which authorizes non-U.S. persons to fly fixed wing civil aircraft of U.S. origin or containing greater than 10 percent U.S. content to Iran on a “temporary sojourn” basis. (More information regarding General License J-1 can be found here.)
The stated purpose of the advisory is to inform the civil aviation industry of potential exposure to U.S. enforcement actions and economic sanctions for engaging in or supporting unauthorized exports to Iran or to designated Iranian airlines. While no new restrictions have been announced, the publication of the advisory could be a signal that OFAC will be taking a greater interest in the Iranian aviation sector.
Sanctions violations can result in a variety of penalties including civil monetary penalties, criminal prosecution, restrictions from U.S. markets, and/or being placed on the SDN list. U.S. and non-U.S. participants in the aviation sector must remain vigilant to avoid deceptive practices by Iran and its surrogates, which could result in a violation of U.S. sanctions.