In a March 30 press release, the U.S. Department of Commerce updated its March 18 list of planes that flew to Russia in apparent violation of Export Administration regulations by adding 73 planes and removing 12 planes. which have been authorized by the BIS to return to their owners. in the “partner countries”.
The press release reiterates the risk discussed in our previous aviation advisory of violating US law, even for lessors and lenders whose planes continue to fly only within Russia.
The BRI has acknowledged that several companies have already filed voluntary disclosures of potential violations, to allow the plane to leave Russia.
As we discussed in our March 21 advisory, on February 24, in response to Russia’s invasion of Ukraine, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) released new rules (the Rules). The rules effectively prohibit the export, re-export, or transfer or domestic use of Boeing aircraft (or other U.S.-made products) (as well as other aircraft and aircraft components containing at least 25% US content) in Russia or to Russia without a license. On March 2, the BIS extended the Rules to Belarus. On March 18, the BIS issued a press release identifying nearly 100 American-made planes (all Boeing except for one Gulfstream), most apparently leased to Russian airlines, as having broken the rules because these aircraft had flown since the rules were published. from third countries to Russia (See press release). The effect of such violation is that such aircraft are then prohibited from being sold, transferred, exported, re-exported, financed, ordered, purchased, retired, concealed, stored, used, loaned, assigned, transported, reshipped or otherwise maintained by anyone anywhere with knowledge of the breach (which BIS has just made public). 15 CFR § 736.2(b)(10). Thus, the continued leasing and financing of such aircraft by a person with knowledge of the offense would be prohibited without a license. However, this prohibition is not limited to aircraft that have flown in Russia since the publication of the Rules. It also extends to aircraft flying in Russia since the publication of the Rules. On March 30, the BIS updated the list of identified planes by adding 73 and removing 12 planes “which have been cleared to return to owners in partner countries” (see statement). The added planes have also been identified by the BRI as having flown from third countries to Russia since March 2. The aircraft withdrawn belonged to the fleets of AirBridgeCargo, Azur Air and Nordwind. The BRI granted these permits in order to allow these planes to leave Russia, thus preventing the Russian government from retaining operational control of the aircraft. The BRI warned that the updated list is not exhaustive and will continue to be updated, and is part of “the BRI’s ongoing effort to identify and publicly list aircraft in likely violation” of the Rules and as “notice to the public” that any form of “service” to these aircraft requires BIS authorization. The BRI also warned that the restrictions apply whether or not an aircraft is on the list. Importantly, the BIS also noted that its March 18 announcement has led to several companies voluntarily disclosing possible rule violations and seeking permission to take actions that may be prohibited by administrative regulations on exports (EAR). This led the BRI to allow these planes to leave Russia.
The rules also affect aircraft operated only in Russia
The BIS has now identified some 170 aircraft by owner or operator, registration mark, manufacturer serial number and aircraft type as having apparently breached the rules. The violations identified by the BRI consisted of flights of such aircraft from third countries to Russia. However, the transfer or use of any aircraft in Russia is also a violation of the Rules. This includes flights entirely within Russia. Any violation described in this paragraph gives rise to prohibitions under the Rules against leasing, financing and other activities with respect to the affected aircraft by parties with knowledge of the violation. Thus, unless an aircraft in Russia has remained grounded since the publication of the rules, the continued leasing or financing of that aircraft (among other activities) by a party with knowledge that it had operated in Russia may be prohibited by US law.
Although the latest press release identifies flights from third countries to Russia as trigger events for the application of the ban on leasing, financing and other activities prohibited by the rules, the press release (and the original March 18 press release) and related documents indicate that US export restrictions also cover flights within Russia. It also clarifies that the BRI will grant clearances for aircraft to leave Russia if voluntary disclosures are submitted to it regarding possible violations of the rules.
As we pointed out in our previous notice, please note that other rules may apply to the leasing and financing of commercial aircraft in Russia, including the rules of the Office of Foreign Assets Control (OFAC) of the US Department of Treasury and the rules issued by the European Union in response to the Russian invasion. Lessee parties to a lease transaction, including majority airline shareholders, should be vetted against sanctions regimes to ensure OFAC violations do not occur regardless of export license issues covered here.