Exporting Aircraft Parts in an Increasingly

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Exporting Aircraft Parts in an Increasingly Complicated World 2023 Air Carrier Purchasing Conference August 20, 2023 2:30 pm 3:30 pm Who is this Guy? Aviation attorney since 1992 General Counsel to the Aviation Suppliers Association since

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Exporting Aircraft Parts in an Increasingly Complicated World 2023 Air Carrier Purchasing Conference
August 20, 2023
2:30 pm – 3:30 pm

Who is this Guy? Aviation attorney since 1992
General Counsel to the Aviation Suppliers Association since 1997
Our law firm represents and counsels air carriers, manufacturers, repair stations and distributors
Advise businesses on export and airworthiness compliance Exporting Aircraft Parts in a Complicated World (ACPC 2023) 2 Aviation Suppliers Association

Some Export Regulators BIS – Bureau of Industry and Security
Commerce Department office responsible for the regulation of most exports
DDTC – Directorate of Defense Trade Controls
State Department office responsible for the regulation of exports of defense-related articles
OFAC - Office of Foreign Asset Control
Treasury Department office responsible for certain additional export controls meant to advance particular interests of the United States 3 Exporting Aircraft Parts in a Complicated World (ACPC 2023) Aviation Suppliers Association

Definitions: Export What is an export?
Actual shipment or transmission of items out of the U.S.
Includes software
Includes technology
Can include technical documents in some cases
Includes repaired items!

This differs from the FAA definition of export!! 4 Exporting Aircraft Parts in a Complicated World (ACPC 2023) Aviation Suppliers Association

Compliance Can Be a Process Look at Treasury restrictions
Identify whether the article is State or Commerce restricted
Examine appropriate destination restrictions
Check party-level restrictions
Identify other regulatory issues
Obtain licenses as necessary
Document the transaction 5 Exporting Aircraft Parts in a Complicated World (ACPC 2023) Aviation Suppliers Association

First, Can I Transact Business Here At All? Are there General Treasury
Restrictions that Regulate
Transfer of Assets?

Consolidated Screening List Commerce, State, and Treasury lists
https://www.trade.gov/data-visualization/csl-search
If you have problems managing the consolidated list, then use the individual lists Please note that lists and regulations are updated frequently by the government, and should be checked for each transaction 7 Exporting Aircraft Parts in a Complicated World (ACPC 2023) Aviation Suppliers Association

OFAC Lists Sanctions Programs List:
https://ofac.treasury.gov/sanctions-programs-and-country-information
Typically directed at countries, but may also serve more targeted purposes e.g., Counter Terrorism.
Specially Designated Nationals List:
https://sanctionssearch.ofac.treas.gov/ [Search Engine]
https://home.treasury.gov/policy-issues/financial-sanctions/specially-designated-nationals-and-blocked-persons-list-sdn-human-readable-lists
Sectoral Sanctions List
https://www.treasury.gov/ofac/downloads/ssi/ssilist.pdf
These lists change, and entities can move from one list to another, so do the search every time! 8 Exporting Aircraft Parts in a Complicated World (ACPC 2023) Aviation Suppliers Association

Sample Sanctioned Parties as of August 14, 2023 Aero Continent
Aero Courier Cargo
Aero Express Intercontinental
Aero Sky One
Aerocaribbean Airlines
Aerocomercial Alas De Colombia
Aerocondor
Aeronautica Condor
Aerospace Industries Organization
Aerospace Research Institute
Aerovias Atlantico Ltda Capacitacion Aeronautica Profesional
Caspian Airlines
Cham Wings Airlines
Cubana Airlines
Dart Airlines
Dena Airways
Empresa Cubana de Aviacion
Fars Air Cargo Airline
Hors Airlines Ltd
Intercontinental de Aviacion
Int’l Airline Consulting
Iran Air 9 AFAGIR
Air Alanna
Air Koryo
Aircraft Avionics Parts and Support Ltd
Airfix Aviation OY
Al-Naser Airlines
Al-Nasar Wings Airline
Al-Sham Wings
Avia Group LLC
Avia Import
Avia Trust FZE
Aviation Capital Solutions, Ltd
Butembo Airlines Exporting Aircraft Parts in a Complicated World (ACPC 2023) Kyrgyztransavia Airlines
Mahan Air
Mantenimiento, Aeronautica, Transporte, Y Servicios Aereos
Pouya Airlines
Sky Blue Airlines
Syrian Air Force Intelligence
Syrian Airlines
TAE Avia
Ukrainian-Mediterranean Airlines (UM Air) [certain aircraft]
Yasair Cargo Airline Aviation Suppliers Association

What Does it Mean to be on a Treasury List? Persons on the Sectoral Sanctions List or the Specially Designated Nationals (SDNs) List are blocked

Blocked:
a U.S. person may not procure goods, services, or technology from, or engage in transactions with, a blocked person directly or indirectly (including through a third-party intermediary)

This typically means no export and no imports with blocked parties
It also means no acceptance of funds from (or payments to) a blocked party Exporting Aircraft Parts in a Complicated World (ACPC 2023) 10 Aviation Suppliers Association

Can I buy from a Subsidiary? ISSUE: The parent company is on the OFAC sanctions list, but the subsidiary is not. Can I buy from the subsidiary?

If a blocked person owns or controls another entity, then that entity is blocked as well
Example: Rostec was sanctioned under the Ukraine/Russia related sanctions in 2014. They own most of United Engine Corp. United Engine Corp. was not on the OFAC sanctions list, but it was still treated as a blocked party because of the ownership.
NOTE: United Engine Corp. was added two years later; United Engine Corp. is also on the BIS entity and MEU lists.
If two or more blocked persons own 50% or more of another entity, then the owned entity is also blocked (substantial control is assumed) Exporting Aircraft Parts in a Complicated World (ACPC 2023) 11 Aviation Suppliers Association

Can I Get Paid? ISSUE: An export was completed before any sanctions could limit it, but the payment is still owed. Can I accept payment?
If the party is sanctioned by OFAC (e.g. on the SDN or SSI lists) then assets are frozen and transactions are blocked.
Example: AVIATION EQUIPMENT HOLDING (on the sectoral sanctions list)
You will need a license!
If the party is NOT sanctioned by OFAC and if no other published restriction applies, then you may be permitted to receive funds
Example: SAMPLE AIRLINES (not yet sanctioned by OFAC)
CAVEAT 1: be wary because the standards and lists are constantly changing
CAVEAT 2: significant banking restrictions may limit the sources of funds Exporting Aircraft Parts in a Complicated World (ACPC 2023) 12 Aviation Suppliers Association

Nations Restricted by OFACCurrent as of August 14, 2023 Afghanistan
Balkans
Belarus
Burma (Myanmar)
Central African Republic
China (Military Companies and Hong Kong-related)
Congo (Dem. Rep.)
Cuba
Ethiopia
Iran
Iraq
Lebanon
Libya
Mali Nicaragua
North Korea
Russia
Somalia
Sudan and Darfur
South Sudan
Syria/Syria Related
Ukraine/Crimea/Russia
Venezuela
Yemen
Zimbabwe 13 Exporting Aircraft Parts in a Complicated World (ACPC 2023) Aviation Suppliers Association

Practical Advice – OFAC Compliance Gather information – do not be willfully blind to the facts
Always check your export business partners on the consolidated screening list and the OFAC sanctions list for every transaction
If you identify a party who appears to be blocked, then do not engage in any transaction without first identifying your compliance path
Consult with a lawyer!
Remember that there may be a compliance path, including through licensing, if the proposed transaction does not conflict with U.S. interests Exporting Aircraft Parts in a Complicated World (ACPC 2023) 14 Aviation Suppliers Association

Steps to Compliance Look at Treasury restrictions
Identify whether the article is State or Commerce restricted 15 Exporting Aircraft Parts in a Complicated World (ACPC 2023) Aviation Suppliers Association

A Structured Approach to Exporting: Second Step Distinguish the U.S. Department with jurisdiction
Is it a US Munitions List Item?
Defense articles (many dual-use items have been removed from the USML!!)
Check ITARs
State has export jurisdiction
Otherwise subject to BIS restrictions
Identify the ECCN
Check BIS export administration regulations
Commerce has export jurisdiction 16 Exporting Aircraft Parts in a Complicated World (ACPC 2023) Aviation Suppliers Association ITAR EAR

Most Civil Aircraft Parts ARE NOT Covered Under the ITARs Effective October 15, 2013 many articles were removed from the ITAR and moved into the Commerce Department’s regulations
Most dual use items were transferred to Commerce
Transferred items typically were assigned to “600” series ECCNs
This is for parts and articles; most completed defense aircraft remain on the USML and subject to ITAR 17 Exporting Aircraft Parts in a Complicated World (ACPC 2023) Aviation Suppliers Association

Examples of USML Articles Certain articles (and their subcomponents) that are specially designed for USML/9A610-controlled aircraft:
Inertial Navigation Systems (INS)
Inertial Measurement Units (IMUs)
Attitude and Heading Reference Systems (AHRS)
Parts for DoD-funded developmental aircraft
Parts for B-1B, B-2, B-21, F-15SE, F/A-18E/F/G [parts for earlier models are subject to the EAR], F-22, F-35, F-117
Parts found in a positive list
Published at 22 C.F.R. 121.1 - VIII(h)
Articles with defense-specific purposes, like threat-adaptive flight control systems, wing folding systems, etc. 18 Exporting Aircraft Parts in a Complicated World (ACPC 2023) Aviation Suppliers Association

Defense Item Analysis: What Next? If it is regulated by State Department
Register with State Department
Assess whether particular State Department Restrictions apply
Obtain appropriate licenses

Most civil aircraft parts, including avionics for civil aircraft, will not be subject to ITAR 19 Exporting Aircraft Parts in a Complicated World (ACPC 2023) Aviation Suppliers Association

But What if it is Not a Munitions List Item? If State Doesn’t Regulate It, Then Commerce May
Most Civil Aircraft Articles will Fall Within Commerce’s Jurisdiction – This Means You Must Use the Bureau of Industry and Security (BIS) Regulations

Two Significant Rules to be Aware of for RIGHT NOW Foreign Aircraft Rule
Russia Rule Aviation Suppliers Association Exporting Aircraft Parts in a Complicated World (ACPC 2023) 21

Foreign Aircraft Rule If you know that the part is being exported and is going to be installed on a foreign aircraft, then this rule applies Aviation Suppliers Association Exporting Aircraft Parts in a Complicated World (ACPC 2023) 22

Scope This rule applies to articles destined for foreign aircraft
This means aircraft registered in any foreign country
Example: article sold to a foreign operator for their end use with only non-US registered aircraft in their fleet – foreign aircraft
Even if it is purchased “for stock”
Example: article sold to a foreign operator for their end use with only US registered aircraft in their fleet – not foreign aircraft

This rule applies to export, re-exports and transfers in-country Aviation Suppliers Association Exporting Aircraft Parts in a Complicated World (ACPC 2023) 23

Articles for Foreign Aircraft General Rule for Foreign Aircraft (15 C.F.R. § 744.7)

In addition to the normal license requirements, we may not export an aircraft article subject to the export administration regulations for use on a foreign aircraft, unless a License Exception or NLR permits the shipment to be made:
To the country in which the aircraft is located, and
To the country in which the aircraft is registered, and
To the country, including a national thereof, which is currently controlling, leasing, or chartering the aircraft.

Collect this data! Exporting Aircraft Parts in a Complicated World (ACPC 2023) 24 Aviation Suppliers Association

Articles for Foreign Aircraft: Analyze the Data General Rule for Foreign Aircraft (15 C.F.R. § 744.7)

Identify the reason for control based on the Export Commodity Classification Number (ECCN)
Collect the end user data (from the previous page)
Treat each identified location as a destination and check on the Commerce Country Chart (15 C.F.R. Part 738, Supplement 1) Exporting Aircraft Parts in a Complicated World (ACPC 2023) 25 Aviation Suppliers Association

Why is this Important? Theme for the Day: There are Serious Efforts at Sanctions Diversion
US sanctions on Russia are resulting in effort to circumvent the sanctions
Circumvention violates US law

Checking 744.7 compliance helps to identify efforts to circumvent BIS-issued sanctions programs

Some companies are not performing adequate scrutiny to comply with 744.7; nonetheless, it is required by the regulations Aviation Suppliers Association Exporting Aircraft Parts in a Complicated World (ACPC 2023) 26

Russia-Belarus Aviation Suppliers Association Exporting Aircraft Parts in a Complicated World (ACPC 2023) 27

The Russia-Rule (Belarus, too) 15 C.F.R. § 746.8
Restricted Items cannot be exported to Russia or Belarus without a license
“Restricted Items” means anything classified in any ECCN on the CCL
This encompasses most aircraft parts
If an aircraft part is not restricted under the BIS rules then it is probably restricted under someone else’s rules
Be wary of intermediaries who might accept in a third country for the benefit of a forbidden target
The Russia Rule also limits availability of license exceptions Exporting Aircraft Parts in a Complicated World (ACPC 2023) 28 Aviation Suppliers Association

Can I Use a License Exception? There are a limited set of license exceptions that can be used for transactions subject to § 746.8, and the ones most useful for exporting aircraft parts are:

GOV (for supporting U.S. government operations)
AVS (for exporting aircraft parts)
Excluding any aircraft registered in, owned by, controlled by, or under charter or lease to Russia or to a national of Russia (or any other D:1 nation)
You may be able to export an aircraft part to Russia to support a non-Russian aircraft that was AOG at a Russian airport
Note: RPL is not available for exports restricted under the Russia Rule Exporting Aircraft Parts in a Complicated World (ACPC 2023) 29 Aviation Suppliers Association

Combine the Russia Rule (§ 746.8) with the Foreign Aircraft Rule (§ 744.7): We may not export an aircraft part subject to the EAR for use on a foreign aircraft,
If the aircraft is located in Russia, or
If the aircraft is registered in Russia, or
If the aircraft is controlled, leased, or chartered by Russia or a national of Russia;
unless the export is covered by a license or a license exception.
Most exports to Russia cannot be licensed … it is possible for “safety of flight” (aircraft parts) transactions to be licensed on a case-by-case basis Exporting Aircraft Parts in a Complicated World (ACPC 2023) 30 Aviation Suppliers Association

Temporary Denial Orders Aviation Suppliers Association Exporting Aircraft Parts in a Complicated World (ACPC 2023) 33

Temporary Denial Orders – Pay Special Attention Aeroflot
Aviastar
Azur Air
Belavia Belarusian Airlines
Nordwind Airlines
Pobeda Airlines
Rossiya Airlines
Siberian Airlines (S7)
UTair Aviation Aviation Suppliers Association Exporting Aircraft Parts in a Complicated World (ACPC 2023) 34

Temporary Denial Orders – Extended Application Can Include Imports It is important to read the entire TDO
Acquisition of parts from TDO parties can be illegal
Typically tied to exports due to the limits of BIS jurisdiction
Parts previously exported
Parts subsequently exported
Parts intended to be exported
There is an opportunity to obtain a license to support flight safety, but even then, the license is needed
Providing services to TDO parties can be illegal
This can include maintenance on parts owned by a TDO party Aviation Suppliers Association Exporting Aircraft Parts in a Complicated World (ACPC 2023) 35

Example: Azur Air Azur Air, Sharypovo Airport, 404/1 Kozhevnicheskiy Lane, Moscow, Russia; Order Temporarily Denying Export Privileges, 87 F.R. 21614 (April 12, 2022)
No person may, directly or indirectly, do any of the following:
Export to or on behalf of Azur any item subject to the EAR except directly related to safety of flight and licensed by BIS;
Facilitate Azur obtaining any item subject to the EAR;
Acquire (or facilitate) from Azur any item subject to the EAR
Service any item subject to the EAR that will be exported and which is owned, possessed or controlled by Azur.
Also applies to successors or assigns, agents, or employees
Any other person, firm, corporation, or business organization related to Azur by ownership, control, position of responsibility, affiliation, or other connection in the conduct of trade or business may also be made subject to the provisions of this Order Aviation Suppliers Association Exporting Aircraft Parts in a Complicated World (ACPC 2023) 36

Export Compliance and the Russian Sanctions We continue to recognize numerous efforts to circumvent the Russian sanctions programs
We have discussed with members a number of transactions that are problematic, including those where the members are affirmatively mislead about the destination
Conversations with DHS revealed that they are investigating multiple freight forwarders
Export training and education continues to be a priority for ASA
This includes other sanctions programs, as well Aviation Suppliers Association Exporting Aircraft Parts in a Complicated World (ACPC 2023) 37

Performing Due Diligence Check out the lists
Check out the ownership of your export customer
If an OFAC-sanctioned party controls the business , then the sanctions may flow down to the business
If the OFAC-sanctioned owners own 50% or more of the business, then there is a presumption of control (and sanctions may flow down to the business)
BIS-sanctioned ownership may reflect a red flag that must be cleared (e.g. to ensure no diversion to the sanctioned party)
Be prepared to obtain data to support a 15 CFR 744.7 analysis! Aviation Suppliers Association Exporting Aircraft Parts in a Complicated World (ACPC 2023) 38

Due Diligence Resources Whois lookup (https://lookup.icann.org) for websites
Publicly available civil aircraft registration databases (not every registry is available) typically identify the aircraft and owner
Several databases show flight information and you can look up aircraft by registration number and serial number
Check social media for the company officers
If you identify a red flag (a fact that suggests a potential export violation) then you must clear it. Consider talking to your customer to gather sufficient facts.
I recently had an issue with a registration number that seemed bogus. I asked for a picture of the target aircraft. The number given was not the registration number (it was a flight operation number)! I was able to identify the registration number from the picture and perform due diligence around that information Aviation Suppliers Association Exporting Aircraft Parts in a Complicated World (ACPC 2023) 39

Thank You! Jason Dickstein
Aviation Suppliers Association General Counsel
Washington Aviation Group
2233 Wisconsin Avenue, Suite 503
Washington, DC 20007

Tel: (202) 628-6776
Jason@WashingtonAviation.com 40 Exporting Aircraft Parts in a Complicated World (ACPC 2023) Aviation Suppliers Association

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