On July 29, 2016, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued General License J to the Iranian Transactions and Sanctions Regulations (ITSR), 31 C.F.R. Part 560, authorizing the re-exportation by non-U.S. persons of certain civil aircraft to Iran on “temporary sojourn”, as well as certain related transactions. By providing such license authorization, foreign air carriers are now generally authorized to fly commercial routes to Iran using either U.S.-origin aircraft or foreign-made aircraft that contains more than 10% U.S. controlled content by value.

Surprising to some, such flights to Iran were previously prohibited absent specific license authorization from OFAC. Whether parties were fully aware of these restrictions is unclear, as foreign air carriers have long flied routes into Tehran with U.S.-origin aircraft or with aircraft containing more than 10% U.S. controlled content by value.  Few believe that air carriers had express authorization from OFAC to do so, suggesting that they were acting in non-compliance with provisions of the ITSR.

Specifically, the ITSR prohibits the export from the United States or by a U.S. person, wherever located, of aircraft or aircraft parts to Iran, including cases where the aircraft is exported to a person in a third country (say, Turkey) with knowledge or reason to know that the aircraft is intended specifically for re-exportation to Iran or the Government of Iran or where the aircraft parts are intended specifically for use in the production of, for commingling with, or for incorporation into a foreign-made aircraft (say, an Airbus passenger jet) to be supplied or re-exported to Iran or the Government of Iran. By virtue of this provision, U.S. leasing companies had recently proven hesitant to engage in transactions with foreign airliners should those airliners handle commercial routes into and out of Iran.

Moreover, the ITSR prohibits non-U.S. persons from re-exporting U.S.-origin aircraft or foreign-made aircraft that contains more than 10% U.S. controlled content by value to Iran or the Government of Iran. This includes flights on temporary sojourn into Iran. As such, by means of illustration, license authorization is required for Turkish Airlines to fly a U.S.-origin aircraft (e.g., Boeing) or a foreign-made aircraft containing more than 10% U.S. controlled content (e.g., Airbus) into Tehran as part of its normal commercial routes.

General License J seeks to address concerns that some parties may have about leasing aircraft to air carriers that undertake routes to Iran, etc., by providing general license authorization for non-U.S. persons to re-export to Iran U.S.-origin fixed-wing civil aircraft or non-U.S.-origin fixed-wing civil aircraft containing more than 10% U.S. controlled content by value, so long as such aircraft is on temporary sojourn. For purposes of a temporary sojourn, the aircraft can be located in Iran for no more than 72 hours per a given “sojourn” to Iran or else it would fall outside the scope of the license authorization.

Certain strict conditions attach to the permissible re-export of the U.S.-origin aircraft or non-U.S.-origin aircraft containing more than 10% U.S. controlled content by value. These include restrictions on the performance of maintenance on the aircraft; on the registration of the aircraft; on the transfer of technology to an Iranian citizen ordinarily resident in Iran; on the color, livery, and logo of the aircraft; and on the uses to which the aircraft is put while traveling to and from Iran.

General License J also authorizes non-U.S. persons to re-export to Iran all “usual and reasonable quantities of industry standard onboard supplies of civil aircraft equipment, spare parts, components, and technology for permanent use on the aircraft,” so long as such goods and technology are ordinarily incident and necessary for the operation of the aircraft and are classified under ECCN 9A991.c, d, or e, or 9E991. However, all such aircraft equipment, spare parts, components, or technology licensed for re-export to Iran pursuant to this general license must be stored on board the aircraft and not in Iran.

To ensure the safety of Iranian skies as well, General License J further authorizes non-U.S. persons to re-export to Iran technology for purposes of emergency maintenance on and repairs to any aircraft re-exported to Iran, so long as the re-exported technology is “necessary to restore the aircraft to an airworthy condition.” OFAC notes that all transactions related to non-emergency and/or line maintenance in Iran of re-exported aircraft to Iran will require separate license authorization.

While not directly compelled by the JCPOA, the issuance of General License J signals proactive efforts on the part of OFAC to ensure that U.S. commitments regarding Iranian civil aviation under the JCPOA are fully observed. Leasing companies had exhibited concern about providing U.S.-origin aircraft to non-U.S., non-Iranian air carriers handling routes into Iran – a problem of recent origination from what I understand. Despite the fact that foreign air carriers have been less than strictly observant of the ITSR’s prohibitions regarding the export of U.S.-origin aircraft to Iran on temporary sojourn, OFAC chose to address this issue via general license authorization rather than providing guidance as to the inapplicability of ITSR provisions to the subject activities. In this manner, OFAC resolved an issue of concern to commercial parties while also taking steps to maintain the integrity of its sanctions program.