Reports indicate that Boeing has signed a Memorandum of Understanding (MOU) with Iranian authorities for the sale and export of more than 100 passenger aircraft. Because the deal requires prior license approval from the U.S. Department of the Treasury’s Office of Foreign Assets Control, as well as significant trade finance support, it is likely to be some time before the MOU translates to a binding agreement.

Nonetheless, the pending commercial deal has its detractors. Those detractors allege that, by selling passenger aircraft to Iran, Boeing is effectively providing the transport vehicles by which Iran will ship weapons and personnel to forces fighting on behalf of Syrian President Bashar al-Assad in Syria. This places significant reputational pressure on Boeing, which has however shown a newfound willingness to strike back at such detractors and defend its decision to sell aircraft to Tehran.

From a legal standpoint, however, detractors have certain important facts wrong – the elucidation of which highlights both the ingenuity of the U.S.’s negotiating stance during the nuclear talks and the commitment it agreed as part of the JCPOA.

As part of the nuclear accord between the U.S., other major world powers, and Iran, the United States committed to:

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… (§ 5.1.1)

In a footnote to this Annex II paragraph, the JCPOA stated that “[l]icenses issued…will include appropriate conditions to ensure that licensed activities do not involve, and no licensed aircraft, goods, or services are re-sold or re-transferred to, any person on the SDN List.” Furthermore:

Should the [U.S.] determine that licensed aircraft, goods, or services have been used for purposes other than exclusively civil aviation end-use, or have been re-sold or re-transferred to persons on the SDN List, the United States would view this as grounds to cease performing its commitments under [this section] in whole or in part.

In other words, the JCPOA outlined two conditions under which the United States would cease the performance of its commitments under the above paragraph: (1) when licensed aircraft, goods, or services have been used for purposes other than civil aviation end-use, such as trafficking arms to Bashar al-Assad and his allied forces in Syria; and (2) when licensed aircraft, goods, or services have been re-sold or re-transferred to persons listed on OFAC’s SDN List.  These would be grounds for revoking any such licenses that the U.S. has issued for the export and sale of commercial passenger aircraft to Iran and refusing to issue any such new licenses.

OFAC implemented this particular commitment via its Statement of Licensing Policy for Activities Related to the Export or Re-Export to Iran of Commercial Passenger Aircraft and Related Parts and Services. In Note 2 to its Statement of Licensing Policy, OFAC states:

Licenses issued pursuant to the Statement of Licensing Policy will include appropriate conditions to ensure that licensed activities do not involve, and no licensed aircraft, goods, or services are re-sold or re-transferred to, any person on the SDN List.

Those who are familiar with OFAC licensing know that such licenses contain a provision under which OFAC reserves for itself the right to revoke the license authorization at any time and for any reason.  While that will presumably remain true for these licenses as well, we can also expect OFAC to outline the conditions under which such revocation would be immediately triggered — including those outlined in more specific detail in Annex II of the JCPOA.  As such, should OFAC or other U.S. government authorities learn that commercial passenger aircraft are being used in a manner that is perceived to be detrimental to U.S. interests, then Boeing’s license authorization will be revoked and Iran will lose the concession granted it under the nuclear accord.

In this manner, the fear evoked by Boeing’s detractors is without warrant. U.S. negotiators were keen to avoid the very pitfalls detractors note by including a provision stating that the transfer of planes to persons or entities listed on OFAC’s SDN List or used in such a manner as to be detrimental to U.S. interests would be grounds to terminate the U.S. commitment under the JCPOA, as well as grounds to revoke any licenses issued under the Statement of Licensing Policy and reject the issuance of any further licenses. It is this precise feature of the JCPOA that gives it its beauty and signals a potential way ahead for U.S. licensing in the future..