Export Compliance Costs, Awareness Likely to Increase for Aircraft Transactions Following Indictment
Export compliance costs and awareness will likely rise for aircraft transactions due to increased compliance by aircraft sellers following the seizure of 12 aircraft on export violation charges, Vedder Price's David Hernandez said. In an April 5 report, Hernandez looked at the impacts of the indictments of eight individuals charged with drug trafficking and export violation conspiracies, including the owner of Aircraft Guaranty Corporation (see 2103010028). The indictments arose from a series of investigations into the customs export practices of U.S.-based trust companies serving as trustees in aircraft ownership trusts with non-U.S. citizens, called Non-Citizen Trusts.
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Some aircraft owners mistakenly don't believe their planes required export compliance since there was no requirement for a Federal Aviation Administration export certificate of airworthiness. Many aircraft owners are also unaware of the Federal Trade Regulations' aircraft customs exporting requirements or simply believe that the customs exporting requirements are an administrative task to be ignored. It was also a widely held view that customs compliance was the foreign buyer's concern, Hernandez said. It is also possible some exporters ignored compliance to remain anonymous and avoid disclosure requirements.
“A common industry joke was that it was easier to find a leprechaun with a pot of gold than an aircraft customs broker, because the services of a customs broker were rarely required,” Hernandez said. “Aircraft customs brokers will likely be a growth industry going forward.” The indictments have altered the risk dynamic for aircraft owners, which will lead to increased regulatory compliance costs and a reevaluation of the entire NCT business model, he said. At a bare minimum, the aviation industry must be sure to complete the Electronic Export Information documents, he said. The failure to complete the EEI requirements may result in the seizure of the aircraft.