DOT Expands SMS to Include Hazmat Safety

April 11, 2024 by Leave a comment

A new regulation has included hazmat safety within the scope of provisions expected to be addressed in an air carrier’s SMS. This could be the first step in a steady expansion of the scope of the FAA’s SMS regulation.

The FAA’s SMS regulation applies to operators and it was originally published to help them manage aviation safety issues. The SMS regulation is found in the FAA’s Part 5 regulations.

The FAA pledged to limit their oversight of SMS to only aviation safety issues under the FAA’s own regulations. If an air carrier chooses to extend their SMS to a safety issue that is not an aviation safety related activity, then the FAA would only conduct oversight of the SMS activities related to the carrier’s aviation operations conducted in accordance with the provisions of part 121. See Safety Management Systems for Domestic, Flag, and Supplemental Operations Certificate Holders, 80 FR 1307, 1311-12 (Jan. 8, 2015). In this pledge, the FAA offered examples such as security and occupational safety and health issues. Id.

There is good reason to limit the scope of the SMS. Air carrier resources are not unlimited, and in order to make SMS useful, there has to be a clear scope to the SMS, so the air carrier is not diverting safety resources to projects that do not add aviation safety value, because those projects had been identified within the “scope” of the SMS.

The Pipeline and Hazardous Materials Safety Administration (PHMSA) has a regulation that prescribes the requirements that apply to the transportation of hazmat aboard aircraft (49 C.F.R. 175.1 et seq.). PHMSA has just added text to that regulation that says:

“(e) In addition to the requirements of this part, air carriers that are certificate holders authorized to conduct operations in accordance with 14 CFR part 121 are also required to have a Safety Management System that meets the conditions of 14 CFR part 5 and is acceptable to the Federal Aviation Administration (FAA) Administrator.”

Hazardous Materials: Harmonization With International Standards, 89 FR 25434, 25488 (April 10, 2024)

For clarity, the PHMSA explained that their intent in adding this regulatory language was to ensure that this added reference would cause air carriers to add hazmat safety to their SMS focus.

“PHMSA expects that adding a reference to these requirements in the HMR will provide additional clarity for Part 121 aircraft operators, particularly with SMS applicability to the acceptance and transport of hazardous materials at the aircraft level”

Hazardous Materials: Harmonization With International Standards, 89 FR 25434, 25459 (April 10, 2024)

To be clear, Part 121 does require hazmat training, but the direct regulation of hazmat carriage is covered outside of Part 121 (in Title 49). So this is an expansion of the stated scope of SMS for air carriers. If the U.S. Department of Transportation can expand the scope once, then they can do it again.

This is a particular concern when you consider that the FAA is working on finalizing a proposed rule that will expand SMS to other parties in the aviation industry. What other foci will be added to SMS? Could the Department of Labor add OSHA to SMS Part 5, even though OSHA rules were originally intended to be excluded from Part 5?

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United States Indicts Four in Alleged Aircraft Parts Scheme

June 30, 2022 by Leave a comment

The United States has indicted four people for fraud related to aircraft parts transactions. The indictment alleges that an air carrier employee directed aircraft parts transactions to the other defendants in exchange for kickbacks.

According to the indictment, the air carrier employee would text a part number and a “price ceiling” to the other defendants, and then the defendants would know to quote below or at the price ceiling in order to win the business. The indictment alleges that a percentage of the parts sales was paid as a kickback to the air carrier employee.

The government has accused the defendants of conspiracy to commit fraud (in that the air carrier was denied the honest services of its employee) as well as wire fraud (18 U.S.C. 1343) for using wire services to transmit the proceeds of the scheme.

The indictment names four individuals, bu not their companies, as defendants. It is important to remember that an indictment is just the government’s allegations. These factual allegations have not yet been tested against the defendants’ stories, and the actual facts adduced at trial could differ substantially from the facts alleged in the indictment.

Regardless of the facts of this matter, the matter illustrates the importance of having corporate rules that prevent buyers from taking things of substantial value from seller, and corporate rules that prevent sales agents from providing undisclosed gifts or kickbacks to buyers. If you think that a transaction could be characterized as unethical or as unfair, or if you identify any other red flags, then it is always best to consult with an attorney to ensure that the transaction does not violate any laws.

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New White House Policy on Anti-Competitive Behavior Could Affect Aviation

July 9, 2021 by Leave a comment

The President is expected to sign a new Executive Order on competition, today. Although the Order is not yet available,the Administration has already released a Fact Sheet about the planned Executive Order. The title of the new Executive Order is expected to be “Executive Order on Promoting Competition in the American Economy.”

The official purpose of this Executive Order is to promote competition. The Administration says it is taking aim at large companies that adversely impact competition. But every new policy has the potential for unintended consequences, so we will be carefully watching this Executive Order and the regulations that are generated to implement it.

Here are some highlights from the Fact Sheet of items that could potentially affect aviation businesses:

  • The Executive Order encourages DOT to issue rules requiring that air carriers offer certain ancillary fee refunds to consumers.
  • The Executive Order encourages DOT to issue rules requiring greater clarity and disclosure of ancillary fees (including baggage, change, and cancellation fees).
  • The Executive Order encourages the FTC to ban or limit non-compete clauses that affect the labor market. Such clauses are fairly normal for employees who have access to economically-sensitive confidential information in our industry. A ban on such clauses could affect existing relationships and cause companies to pursue other strategies for protecting sensitive data.
  • The Executive Order encourages the FTC and DOJ to prevent employers from sharing wage and benefit information with one another.
  • The Executive Order encourages the FTC to establish rules on surveillance and the accumulation of data. This is meant to apply to “Big-Tech” but it could easily spill-over into obligations on anyone who collects data and uses the internet (i.e. everyone).
  • The Executive Order encourages the FTC to issue rules against restrictions on using independent repair shops. This is meant to apply to cell phones, but this could set a precedent that applies to aviation repair.
  • The Executive Order calls for passage of the “Protecting the Right to Organize Act.” This Act would expand the reach of the Fair Labor Standards Act, would permit secondary strikes (under which a union can strike in support of someone else’s rights, even when it does not have a direct interest in the issue), and expanding whistleblower protection.
  • The Executive Order describes an Administration policy of greater scrutiny of mergers, including acquisition of small companies. This is meant to apply to internet service companies but it could easily be applied to other industries (including aviation).

It often takes several days after an Executive Order is announced for it to be published in the Federal Register. We will be watching carefully for this one, as well as watching the regulations and policies that are generated in its wake.

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