On March 18, 2022 and in response to Russia’s invasion of Ukraine, the US Department of Commerce’s Bureau of Industry and Security (“BIS”) publicly identified 100 commercial and private aircraft that have recently flown into Russia in apparent violation of the Export Administration Regulations (“EAR”). As summarized in our prior blog posts (see here and here), the US has also issued restrictions that effectively ban any aircraft with a nexus to Russia from using US airspace.
As described in our prior blog posts (see here and here), on February 24, 2022, BIS substantially expanded export controls targeting Russia, requiring a license for exports, reexports, and transfers (in-country) of essentially all aviation-related items classified under Commerce Control List Category 9, including specified aircraft or aircraft parts, when destined for Russia (“Final Rule”). As a result, any aircraft manufactured in the United States or in a foreign country but incorporating more than 25% controlled US content, are subject to the new license requirement if destined for Russia. There are limited license exceptions available, and license applications are reviewed under a policy of denial.
Since March 2, 2022, BIS has identified 100 commercial and private aircraft exported from third countries to Russia in apparent violation the EAR, all of which are owned or controlled by, or under charter or lease to, Russia or Russian parties. Currently, the list of identified aircraft includes 99 Boeing aircraft operated by Russian carriers, including Aeroflot, AirBridge Cargo, Aviastar-TU, Azur Air, Nordwind, and Utair, and an aircraft used by Russian businessman Roman Abramovich. The list of identified aircraft can be found here. As explained by BIS the list is not exhaustive, and may be updated.
Under Section 736.2(b)(10) of the EAR (General Prohibition Ten), any person anywhere, including within Russia, may not “sell, transfer, export, reexport, finance, order, buy, remove, conceal, store, use, loan, dispose of, transport, forward, or otherwise service, in whole or in part, any item subject to the EAR and exported […] with knowledge that a violation of the [EAR] […] has occurred…” Accordingly, any action taken, whether by a US party or a non-US party, with respect to any subject aircraft, including but not limited to, leasing, financing, refueling, maintenance, repair, or the provision of spare parts or services could violate the EAR.
Importantly, General Prohibition 10 could also apply to the use of an aircraft or other activities within Russia. As such, for aircraft exported to Russia since the Final Rule, continued leasing, financing, or other activities related to such an aircraft by any party having knowledge that the aircraft operated in Russia could be a violation of the EAR. BIS warns that a violation of the EAR may be subject to BIS enforcement actions, which may include criminal and/or civil penalties and other restrictions.
As detailed in our prior blog post, the US, EU and over 30 other countries have banned Russian aircraft from using their airspace, placing significant limitations on international flights from Russia. Russia has responded with reciprocal flight bans for such countries. Due to the EAR prohibition on providing any services to the subject aircraft, all international flights from Russia involving these aircraft are now effectively grounded.
Baker McKenzie will continue closely monitoring developments related to the Russia-Ukraine situation and will update this blog accordingly.
