On March 24, 2016, OFAC issued General License I (“GL I”) to authorize US persons to engage in transactions that are “ordinarily incident” to the negotiation of and entry into “contingent contracts” for the export or re-export to Iran of commercial passenger aircraft and related parts and services. GL I requires that the performance of such a contract is made “expressly contingent” upon OFAC issuing a specific license to authorize the activities under the contract. OFAC also issued FAQs (J.9-J.12) on GL I. The General License contains an expansive definition of contingent contracts, to include executory contracts, executory pro forma invoices, agreements in principle, executory offers capable of acceptance such as bids or proposals in response to public tenders, binding memoranda of understanding, or any other similar agreement.
OFAC had previously issued a Statement of Licensing Policy (“SLP”), effective on January 16, 2016 (i.e., Implementation Day under the JCPOA), establishing a favorable licensing policy regime to permit US persons and non-US persons –where there is a US nexus – to request and receive permission to export, re-export, sale, lease or transfer of commercial passenger aircraft and related parts and services to Iran, provided that the licensed items are used exclusively for commercial passenger aircraft. (See our previous advisory for details.) Prior to the issuance of GL I, US persons had to seek a separate authorization from OFAC to engage in activities to pursue contracts that fell within the SLP. GL I should increase the efficiency in processing specific license applications under the SLP because US persons can now undertake activities necessary to enter into a contingent contract, without seeking OFAC approval and without placing a burden on OFAC licensing resources.
GL I has several limitations. First, it does not authorize transactions involving individuals or entities on the SDN List. Second, GL I’s authorization does not extend to non-US persons presumably because such persons, acting without the involvement of US persons, do not need an authorization to pursue contingent contracts under the ITSR. Third, a specific license is still needed for the actual supply of any aircraft or related parts or services to Iran.
