OFAC Suspends General License J-1 and Grounds Iran's Aviation Sector

The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) on September 8, 2026, announced new sanctions targeting Iran's aviation sector under "Operation Economic Outcast." Although several major Iranian airlines have long been subject to U.S. sanctions, this action leveraged the August 24, 2026, aviation sector determination under Executive Order (EO) 13902 to sanction the remaining active Iranian airlines and intensify efforts to isolate the Iranian regime. These actions have far-reaching implications for airlines, aircraft lessors, financial institutions and logistics providers worldwide.

Aviation Sector Designation Under EO 13902

EO 13902, signed on January 10, 2020, authorizes the imposition of sanctions on persons determined to operate in specified sectors of the Iranian economy. Although EO 13902 initially imposed sanctions on Iran's construction, mining, manufacturing and textiles sectors, it was expanded by the Secretary of the Treasury to include Iran's financial sector in October 2020. On August 24, 2026, the OFAC Director issued a determination extending EO 13902 to five additional sectors: aviation, digital asset, gold, shipping and technology.

Although the determination does not automatically impose blocking sanctions on companies in a specified sector, it empowers U.S. authorities to quickly scale up sanctions on a vast number of targets in an identified sector. Moreover, it exposes foreign financial institutions (FFIs) to the risk of secondary sanctions for knowingly conducting or facilitating any significant transaction for the sale supply, or transfer to or from Iran of any significant goods or services used in connection with a specified sector, or on behalf of a person whose property and interests in property are blocked pursuant to EO 13902.

In addition to OFAC's action, the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) issued an alert asking financial institutions to report procurement networks supporting Iran's aviation industry.

Designation of 27 Iranian Airlines

OFAC designated 27 Iranian airlines under EO 13902 for operating in the aviation sector of the Iranian economy. These entities are now added to the Specially Designated Nationals and Blocked Persons List (SDN List), and all property and interests in property of these entities that are in the U.S. or within the possession or control of U.S. persons are blocked.

These 27 airlines are now effectively cut off from the international financial system. All transactions involving these entities are prohibited for U.S. persons, and non-U.S. persons face secondary sanctions risk for engaging in transactions with them. In addition to the risk of secondary sanctions facing FFIs, other persons may be designated for providing the designated airlines with material assistance, financial, material, technological support, or goods and services.

Notably, the list of 27 newly designated airlines does not include several major Iranian carriers that were previously sanctioned under separate authorities, including Mahan Air and Iran Air. The September 8, 2026, sanctions capture the remaining Iranian carriers that had not yet been sanctioned, further attempting to isolate Iran's aviation sector from the global financial system.

In addition, OFAC designated eight third-country entities and one individual under EO 13224 for providing support to Mahan Air, including companies based in the United Arab Emirates, United Kingdom, Turkey, Malaysia and Kazakhstan.

Suspended Authorizations

General License J-1 (GL J-1), issued on December 15, 2016, authorized the reexportation by non-U.S. persons of certain civil aircraft to Iran on "temporary sojourn." Under GL J-1, non-U.S. airlines could fly U.S.-origin aircraft, or non-U.S.-origin aircraft with U.S.-controlled content constituting 10 percent or more of total value, into and out of Iran, subject to certain conditions. Virtually all commercial aircraft are typically considered to have 10 percent or more U.S.-controlled content, given most commercial aircraft incorporate U.S.-origin components, such as avionics, engines and other critical subsystems. As a practical matter, this means that foreign airlines can no longer fly on temporary sojourns to Iran without significant sanctions risks.

In addition to the suspension of GL J-1, OFAC simultaneously suspended three Iranian Transactions and Sanctions Regulations (ITSR) regulatory provisions:

• 31 C.F.R. § 560.522, which authorized payments for overflights of Iranian airspace
• 31 C.F.R. § 560.528, which set forth a licensing policy for aircraft safety
• 31 C.F.R. § 560.529, which authorized bunkering and emergency repairs

Alongside the suspensions, OFAC issued General License DD (GL DD), which provides a 15-day wind-down authorization for certain previously authorized activities through 12:01 a.m. ET on September 23, 2026, provided that any payment to a blocked person must be made into a blocked, interest-bearing account located in the U.S. The narrow 15-day window raises practical questions about whether and how parties can unwind complex aviation agreements, including aircraft repositioning and financial settlements.

OFAC has indicated it will consider aviation safety-related requests previously covered by the licensing policy in 31 C.F.R. § 560.528 on a case-by-case basis.

Key Takeaways

The following is a list of considerations for companies in the aviation, financial services and logistics sectors:

Airlines and Aircraft Operators

• Cease any operations relying on suspended authorizations, including temporary sojourn flights to Iran, by or before the expiration of GL DD on September 23, 2026.
• Review all route networks and codeshare arrangements for any direct or indirect Iranian aviation sector exposure.

Aircraft Lessors and Financiers

• Confirm that no leased aircraft are being operated on routes to Iran or by operators with Iranian sector exposure.
• Review existing lease agreements for compliance provisions triggered by the suspension of GL J-1.
• Assess secondary sanctions risk associated with lessees operating in jurisdictions with continued Iranian aviation connections.

Financial Institutions

• Screen transactions, counterparties and payment messages against the SDN List to identify exposure to sanctioned persons.
• Review correspondent banking, trade finance and letter of credit relationships for indirect exposure to Iran's aviation sector, including aircraft leasing, insurance and fuel-related payments.
• Confirm that any wind-down payments to blocked persons under GL DD are directed into a blocked, interest-bearing account in the U.S. as required by the ITSR.

Logistics, Ground Handling and Maintenance, Repair and Overhaul Providers

• Assess any services being provided directly or indirectly to Iranian carriers, including at airports outside Iran.
• Review contracts with third-country operators for potential Iranian sector touchpoints.

Compliance Steps

The September 8, 2026, actions are the latest in a series of measures targeting the Iranian economy. Following the August 24 "Economic D-Day" sector determinations, which also targeted the digital asset, gold, shipping and technology sectors, OFAC has now moved to operationalize those determinations with specific designations and the revocation of existing authorizations related to Iran's aviation sector.

OFAC is expected to continue pursuing enforcement actions against parties that seek to circumvent these restrictions. Companies should proactively review their compliance programs and seek legal counsel if they identify exposure to the Iranian aviation sector.

Holland & Knight's International Trade Group is continuing to monitor these developments closely. If you have any questions about the potential impact to your business, contact the authors.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.