Civil Aircraft Parts Continue to Enjoy Exceptions from New Tariffs (With Some Exceptions)

July 27, 2026 by Leave a comment

Many of you have read about the new United States tariffs on products from 59 countries (Hong Kong is listed separately from China even though they are now one country). The new tariffs are levied under the authority of section 301 of the Trade Act. Products of these countries will be subject to chapter 99 tariffs that impose 10% or 12.5% duties on imported goods. The new tariffs are expected to be published this week. They are also expected to apply to goods entered into the United States on or after July 24, 2026.

The good news for aviation is that there is a specific aviation exception for certain civil aircraft parts. Details about which aircraft parts are covered are included below, but there will certainly be some parts – like certain fasteners – that do not benefit from the exception and that will be subject to import duties.

The affected source countries and jurisdictions are as follows:

AlgeriaChileGuyanaKuwaitPakistanSwitzerland
AngolaChinaHondurasLibyaPeruTaiwan
ArgentinaColombiaHong Kong, ChinaMalaysiaPhilippinesThailand
AustraliaCosta RicaIndiaMexicoQatarTrinidad and Tobago
The BahamasDominican RepublicIndonesiaMoroccoRussiaTürkiye
BahrainEcuadorIraqNew ZealandSaudi ArabiaUnited Arab Emirates
BangladeshEgyptIsraelNicaraguaSingaporeUnited Kingdom
BrazilEl SalvadorJapanNigeriaSouth AfricaUruguay
CambodiaEuropean UnionJordanNorwaySouth KoreaVenezuela
CanadaGuatemalaKazakhstanOmanSri LankaVietnam

Many aviation products will be excluded from these new chapter 99 tariffs. Those aircraft parts that are excluded should be declared under tariff code 9903.05.88. This is the tariff code that excludes civil aircraft parts from the newest Chapter 99 tariffs.

Normally aircraft parts that are exempt from duties under the Agreement on Trade in Civil Aircraft are identified with a “C” in the “special” column of the Harmonized Tariff Schedule of the United States (HTSUS). That is not the rule for the tariff code 9903.05.88 exception. Instead, in order to benefit from tariff code 9903.05.88, the base tariff code for the article must be in this list (the master version of this list can be found in Chapter 99, subchapter III, U.S. note 52, subdivision (d)):

3917.21.00 3917.22.00 3917.23.00 3917.29.00 3917.31.00 3917.33.00
3917.39.00 3917.40.00 3926.90.45 3926.90.94 3926.90.96 3926.90.99
4008.29.20 4009.12.00 4009.22.00 4009.32.00 4009.42.00 4011.30.00
4012.13.00 4012.20.10 4016.10.00 4016.93.50 4016.99.35 4016.99.60
4017.00.00 4504.90.00 4823.90.10 4823.90.20 4823.90.31 4823.90.40
4823.90.50 4823.90.60 4823.90.67 4823.90.70 4823.90.80 4823.90.86
6812.80.90 6812.99.10 6812.99.20 6812.99.90 6813.20.00 6813.81.00
6813.89.00 7007.21.11 7304.31.30 7304.31.60 7304.39.00 7304.41.30
7304.41.60 7304.49.00 7304.51.10 7304.51.50 7304.59.10 7304.59.20
7304.59.60 7304.59.80 7304.90.10 7304.90.30 7304.90.50 7304.90.70
7306.30.10 7306.30.30 7306.30.50 7306.40.10 7306.40.50 7306.50.10
7306.50.30 7306.50.50 7306.61.10 7306.61.30 7306.61.50 7306.61.70
7306.69.10 7306.69.30 7306.69.50 7306.69.70 7312.10.05 7312.10.10
7312.10.20 7312.10.30 7312.10.50 7312.10.60 7312.10.70 7312.10.80
7312.10.90 7312.90.00 7322.90.00 7324.10.00 7324.90.00 7326.20.00
7413.00.90 7608.10.00 7608.20.00 8302.10.60 8302.10.90 8302.20.00
8302.42.30 8302.42.60 8302.49.40 8302.49.60 8302.49.80 8302.60.30
8307.10.30 8307.90.30 8407.10.00 8408.90.90 8409.10.00 8411.11.40
8411.11.80 8411.12.40 8411.12.80 8411.21.40 8411.21.80 8411.22.40
8411.22.80 8411.81.40 8411.82.40 8411.91.10 8411.91.90 8411.99.10
8411.99.90 8412.10.00 8412.21.00 8412.29.40 8412.29.80 8412.31.00
8412.39.00 8412.80.10 8412.80.90 8412.90.90 8413.19.00 8413.20.00
8413.30.10 8413.30.90 8413.50.00 8413.60.00 8413.70.10 8413.70.20
8413.81.00 8413.91.10 8413.91.20 8413.91.90 8414.10.00 8414.20.00
8414.30.40 8414.30.80 8414.51.30 8414.51.90 8414.59.30 8414.59.65
8414.80.05 8414.80.16 8414.80.20 8414.80.90 8414.90.10 8414.90.30
8414.90.41 8414.90.91 8415.10.60 8415.10.90 8415.81.01 8415.82.01
8415.83.00 8415.90.40 8415.90.80 8418.10.00 8418.30.00 8418.40.00
8418.61.01 8418.69.01 8419.50.10 8419.50.50 8419.81.50 8419.81.90
8419.90.10 8419.90.20 8419.90.30 8419.90.50 8419.90.85 8421.19.00
8421.21.00 8421.23.00 8421.29.00 8421.31.00 8421.32.00 8421.39.01
8424.10.00 8425.11.00 8425.19.00 8425.31.01 8425.39.01 8425.42.00
8425.49.00 8426.99.00 8428.10.00 8428.20.00 8428.33.00 8428.39.00
8428.90.03 8443.31.00 8443.32.10 8443.32.50 8479.89.10 8479.89.20
8479.89.65 8479.89.70 8479.89.95 8479.90.41 8479.90.45 8479.90.55
8479.90.65 8479.90.75 8479.90.85 8479.90.95 8483.10.10 8483.10.30
8483.10.50 8483.30.40 8483.30.80 8483.40.10 8483.40.30 8483.40.50
8483.40.70 8483.40.80 8483.40.90 8483.50.40 8483.50.60 8483.50.90
8483.60.40 8483.60.80 8483.90.10 8483.90.20 8483.90.30 8483.90.50
8483.90.80 8484.10.00 8484.90.00 8501.20.50 8501.20.60 8501.31.50
8501.31.60 8501.31.81 8501.32.20 8501.32.55 8501.32.61 8501.33.20
8501.33.30 8501.33.61 8501.34.61 8501.40.50 8501.40.60 8501.51.50
8501.51.60 8501.52.40 8501.52.80 8501.53.40 8501.53.60 8501.61.01
8501.62.01 8501.63.01 8501.71.00 8501.72.10 8501.72.20 8501.72.30
8501.72.90 8501.80.10 8501.80.20 8501.80.30 8502.11.00 8502.12.00
8502.13.00 8502.20.00 8502.31.00 8502.39.00 8502.40.00 8504.10.00
8504.31.20 8504.31.40 8504.31.60 8504.32.00 8504.33.00 8504.40.40
8504.40.60 8504.40.70 8504.40.85 8504.40.95 8504.50.40 8504.50.80
8507.10.00 8507.20.80 8507.30.80 8507.50.00 8507.60.00 8507.80.82
8507.90.40 8507.90.80 8511.10.00 8511.20.00 8511.30.00 8511.40.00
8511.50.00 8511.80.20 8511.80.40 8511.80.60 8514.20.40 8516.80.40
8516.80.80 8517.14.00 8517.61.00 8517.69.00 8517.71.00 8518.10.40
8518.10.80 8518.21.00 8518.22.00 8518.29.40 8518.29.80 8518.30.10
8518.30.20 8518.40.10 8518.40.20 8518.50.00 8519.81.10 8519.81.20
8519.81.25 8519.81.30 8519.81.41 8519.89.10 8519.89.20 8519.89.30
8521.10.30 8521.10.60 8521.10.90 8522.90.25 8522.90.36 8522.90.45
8522.90.58 8522.90.65 8522.90.80 8526.10.00 8526.91.00 8526.92.10
8526.92.50 8528.42.00 8528.62.00 8529.10.21 8529.10.40 8529.10.91
8529.90.04 8529.90.05 8529.90.06 8529.90.09 8529.90.13 8529.90.16
8529.90.19 8529.90.21 8529.90.24 8529.90.29 8529.90.33 8529.90.36
8529.90.39 8529.90.43 8529.90.46 8529.90.49 8529.90.55 8529.90.63
8529.90.68 8529.90.73 8529.90.77 8529.90.78 8529.90.81 8529.90.83
8529.90.87 8529.90.88 8529.90.89 8529.90.93 8529.90.95 8529.90.97
8529.90.98 8531.10.00 8531.20.00 8531.80.15 8531.80.90 8536.70.00
8539.10.00 8539.51.00 8543.70.42 8543.70.45 8543.70.60 8543.70.80
8543.70.91 8543.70.95 8543.90.12 8543.90.15 8543.90.35 8543.90.65
8543.90.68 8543.90.85 8543.90.88 8544.30.00 8801.00.00 8802.11.01
8802.12.01 8802.20.01 8802.30.01 8802.40.01 8805.29.00 8806.10.00
8806.21.00 8806.22.00 8806.23.00 8806.24.00 8806.29.00 8806.91.00
8806.92.00 8806.93.00 8806.94.00 8806.99.00 8807.10.00 8807.20.00
8807.30.00 8807.90.90 9001.90.40 9001.90.50 9001.90.60 9001.90.80
9001.90.90 9002.90.20 9002.90.40 9002.90.70 9002.90.85 9002.90.95
9014.10.10 9014.10.60 9014.10.70 9014.10.90 9014.20.20 9014.20.40
9014.20.60 9014.20.80 9014.90.10 9014.90.20 9014.90.40 9014.90.60
9020.00.40 9020.00.60 9025.11.20 9025.11.40 9025.19.40 9025.19.80
9025.80.10 9025.80.15 9025.80.20 9025.80.35 9025.80.40 9025.80.50
9025.90.06 9026.10.20 9026.10.40 9026.10.60 9026.20.40 9026.20.80
9026.80.20 9026.80.40 9026.80.60 9026.90.20 9026.90.40 9026.90.60
9029.10.80 9029.20.40 9029.90.80 9030.10.00 9030.20.05 9030.20.10
9030.31.00 9030.32.00 9030.33.34 9030.33.38 9030.39.01 9030.40.00
9030.84.00 9030.89.01 9030.90.25 9030.90.46 9030.90.66 9030.90.68
9030.90.89 9031.80.80 9031.90.21 9031.90.59 9031.90.91 9032.10.00
9032.20.00 9032.81.00 9032.89.20 9032.89.40 9032.89.60 9032.90.21
9032.90.41 9032.90.61 9033.00.90 9104.00.05 9104.00.10 9104.00.20
9104.00.25 9104.00.30 9104.00.40 9104.00.45 9104.00.50 9104.00.60
9109.10.50 9109.10.60 9109.90.20 9401.10.40 9401.10.80 9403.20.00
9403.70.40 9403.70.80 9405.11.40 9405.11.60 9405.11.80 9405.19.40
9405.19.60 9405.19.80 9405.61.20 9405.61.40 9405.61.60 9405.69.20
9405.69.40 9405.69.60 9405.92.00 9405.99.20 9405.99.40 9620.00.50
9620.00.60 9802.00.40 9802.00.50 9802.00.60 9802.00.80 9818.00.05
9818.00.07

Section 301 is now codified at 19 U.S.C. §§ 2411-2420.

The Congressional Research Service has published a history of Section 301 and its past uses.

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Aircraft Parts Tariffs: Good News About Aircraft Parts from Brazil

July 17, 2026 by Leave a comment

Several recent developments could once again cause confusion with respect to aircraft parts imported into the United States.

The good news is that the new 25% tariff imposed on goods from Brazil will NOT apply to most aircraft parts. For the past year, the U.S. Trade Representative (USTR) has been investigating Brazil and its trade practices. The USTR determined that
certain of Brazil’s acts, policies, and practices are unreasonable or discriminatory and they burden or restrict United States commerce. On this basis, the USTR recommended a 25% tariff on goods of Brazil. This is expected to be published as a notice of action on Monday.

The 25% tariff will not apply to certain HTSUS codes. In particular, HTSUS codes identified by the administration as aviation parts are exempt from the tariff if the parts are actually intended for use on civil aircraft. Some civil aircraft parts are NOT identified in the HTSUS as aircraft parts and will be subject to the additional chapter 99 duties (even though they may be only used on civil aircraft). In the Federal Register notice this is expected to be described as an “Aircraft” scope limitation that will be implemented in subdivision (a)(iv) of U.S. note 50 (as found in subchapter III of chapter 99, HTSUS), which states:

As provided in heading 9903.05.05, the additional duty imposed by heading 9903.05.01 shall not apply to articles the product of Brazil that are civil aircraft (all aircraft other than military aircraft); their engines, parts and components; their other parts, components and subassemblies; and ground flight simulators and their parts and components, that otherwise meet the criteria of general note 6 of the HTSUS and are classifiable in the following provisions of the HTSUS, but regardless of whether a product is entered under a provision for which the rate of duty “Free (C)” appears in the “Special” sub-column: [a long list of tariff codes follows this text]

When entering civil aircraft parts from Brazil (like Embraer parts), the importer will want to enter them under their base tariff number, and then confirm that the base tariff number is listed in subdivision (a)(iv) (as described above). It is important to check this list of tariff numbers because some aircraft parts, like most fasteners (as just one example) will NOT be subject to this exemption. If you can confirm that the base tariff code for your Brazilian goods is listed among the exemption list, then you will need to record an additional tariff code number of 9903.05.05 to reflect that the parts are civil aircraft parts at are exempt from the newest 25% tariff on Brazilian goods.

If your base tariff code is not listed on the exemption list in subdivision (a)(iv), then your Brazilian-origin aircraft parts are likely to be subject to the additional 25% tariff on goods from Brazil.

BUT make sure you read our other article about the section 232 tariffs!

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Can an Air Carrier Remove an Article from a Flight Simulator and Install it on an Aircraft?

June 22, 2026 by Leave a comment

I received many interesting questions during the ASA/AFRA Conference last week.  Today I wanted to address the question: “Can an air carrier remove a part from a flight simulator and install it an aircraft?”

Simulators are approved under 14 C.F.R. Part 60.  This sort of approval is a device approval for simulator use.  It is NOT the same as a Part 21 approval (which is the approval process for products and articles)   Thus, simulator parts are not inherently “approved parts” for purposes of installation in aircraft, because they are not naturally subject to the design and production approvals associated with “approved parts.”

We have to recognize that flight simulators can be purpose-built (so they are not subject to the Part 21 rules at all), but sometimes flight simulators are built from existing fuselages.  When the parts are purpose-built for the simulator, then there is typically no need to build them according to type design nor is there a need to produce them under a production approval; consequently, there is no evidence that they meet type design (and thus no evidence of airworthiness). When a simulator is built from an existing fuselage, though, then articles taken from the existing fuselage may, in fact, be approved parts.

Knowing that an article meets approved design parameters before installing it on a type certificated aircraft is a legal requirement under the installation rules of Part 43.

Approval sets the baseline for airworthiness, because an approved part is presumed to be airworthy at the time of release from the quality assurance system (and remains airworthy, subject to damage or degradation).  If you think you might want to take an approved part off of a simulator for use on a type certificated aircraft, then it is also important to ensure that any such parts that might be removed from a simulator remain airworthy.  Such parts may have been subject to damage or degradation that does not matter when used in a simulator, but would create unwanted risk in an aircraft.  If the parts are subject to normal maintenance cycles, then they may not have receive such normal maintenance when used within a simulator.

In summary, it may be possible to remove a part from a simulator for use in an airworthy aircraft, if:

  1. The installer confirms that the original part was produced under a production approval, or is otherwise known to meet the applicable airworthiness standards (this is different from being approved for use on a simulator);
  2. The installer confirms that the part has been subject to appropriate maintenance when maintenance is normal for such parts;
  3. The installer confirms that the part has not been subject to damage or degradation while installed on the simulator (as well as before such installation).

While there is a theoretical path for possible use of some simulator parts on type certificated aircraft, we generally do not recommended such use, except where non-simulator parts are otherwise unavailable, because of the amount of analysis that would be necessary to confirm airworthiness.

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Special Rules for Aircraft Parts Exports

July 27, 2023 by Leave a comment

Do you export aircraft parts? If you do, then you may need to complete the EXTRA compliance checks that apply to foreign aircraft. Often, the export compliance analysis required leads to a need to specifically identify the foreign aircraft on which the parts will be installed.

When you export aircraft parts from the U.S., and the parts are intended for installation on a foreign registered aircraft, you need to perform an extra layer of analysis to ensure export law compliance. The U.S. export regulations specify that you need to identify and check all of these locations:

  • The country to which the part is being exported (which is part of the normal export assessment);
  • Any intermediate nations (also part of the normal export assessment);
  • The country in which the foreign aircraft is located (15 C.F.R. § 744.7(a)(1));
  • The country in which the aircraft is registered – you can often check the tail number against the country’s aircraft registry to confirm this information (15 C.F.R. § 744.7(a)(2));
  • The country which is currently controlling, leasing, or chartering the vessel or aircraft (this applies if a nation has operational control of the aircraft) (15 C.F.R. § 744.7(a)(3)); and
  • The country of the person who is currently controlling, leasing, or chartering the aircraft (this applies if a person has operational control of the aircraft – this country can be the incorporation location of a business or the nationality of a natural person) (15 C.F.R. § 744.7(a)(3)).

For each of the locations that you identified based on the bullet points above, you need to assess whether you can export to that location without a license (“No License Required” or “NLR”), or under an applicable license exception. If the answer is “no” for any of the locations, then the transaction typically needs to be licensed.

As an example, assume that you are exporting a garden-variety aircraft part for installation in a private aircraft that is registered in Ireland and owned by an Irish leasing company. The part is controlled under ECCN 9A991. The aircraft is currently located in Ireland, where it is awaiting service at an Irish repair station. The aircraft is leased and operated by a Russian citizen. You need to perform an analysis of this export as if it were going to Ireland (which it is) and also as if it were going to Russia. There is typically no license required to export this part to Ireland, but exporting the same part to Russia is restricted under the Russia/Belarus rules. Because of the interaction between the Russia/Belarus rules (15 C.F.R. § 746.8) and the foreign aircraft rules (15 C.F.R. § 744.7), a license would be required to export this part for installation on an aircraft controlled/leased by a Russian citizen. Note that this transaction would not be able to benefit from license exception AVS under the limits of the Russia/Belarus rules (15 C.F.R. § 746.8) because of the specific limits imposed on AVS under that rule.

What about a foreign airline that wants to obtain parts for stock? If that airline only flies non-U.S. registered aircraft, and the part is destined for installation on their fleet, then you reasonably know that the part is destined for installation on a non-U.S. registered aircraft and you ought to be performing this analysis. Ask the airline to verify that the part will only be used on their fleet (confirm the countries of registry for their fleet), and ask them to identify where their maintenance is performed (location of aircraft at time of installation). The jurisdictions identified (registry, aircraft location and operator’s nationality) can be scrutinized to determine whether the requirements of 744.7 are met for the entire fleet; this allows you to support the airline without knowing the specific identity of the target aircraft.

What about domestic transactions? The foreign aircraft rule only applies to export transactions to, or for the use of, a foreign aircraft. So it does not apply to domestic (non-export) transactions, including domestic transactions that anticipate installation on a foreign aircraft while it is legally in the United States. But there are exceptions, including the one we will cover in the next paragraph.

What if I am selling to someone that I know will violate the export laws? It is important to remember that if you support someone else’s export, while knowing that they intend to violate the export laws, then this is also a violation. This restriction is known as General Prohibition Ten. It means that if you sell a part to someone else, knowing that they intend to export it illegally, then you have committed a violation, yourself.

Let’s look at an example: S7 Airlines is currently subject to a temporary denial order under the Export Administration Regulations. You are contacted by a U.S.-based distributor who tells you that it is buying parts for export to S7 Airlines. The part that the distributor is seeking from you is subject to the Export Administration Regulations (most civil aircraft parts are subject to the Export Administration Regulations). This distributor asks you to engage in a wholly domestic transaction by shipping the part to their location in New Jersey. If you sold a part entirely within the United States, to a domestic distributor, after that distributor had said that it intends to export the part to S7 Airlines (who is subject to a BIS denial order), then you would have violated General Prohibition Ten, even though your transaction was not an export. The reason for this is because your sale is made with knowledge that the aircraft part will be exported in violation of the Export Administration Regulations.

Conclusion

Exporting aircraft parts is tricky and sometimes an aircraft part export transaction requires special research and analysis to identify the correct compliance path. There can be more than one regulatory regime that applies to the transaction. If you are not sure whether you are doing the right thing, then take a step back and make sure that you are complying with the correct laws and regulations.

ASA has a number of resources to support your efforts. We provide export compliance training on a regular basis – ASA is next planning to hold export compliance training for its members in October.

My law firm also supports export compliance by helping companies to build compliance systems, by auditing their existing compliance systems, and by analyzing tough transactions to help identify the correct compliance path (we also support companies in seeking licenses from the US government, as necessary).

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Russian Temporary Denial Orders are Being Renewed

October 6, 2022 by Leave a comment

The Temporary Denial Orders for Aeroflot, Azur, and UTair are scheduled to be renewed in the Federal Register, tomorrow. This means that the heightened transaction prohibitions continue to apply to them.

As we previously reported, the United States Bureau of Industry and Security (BIS) has issued temporary denial orders (TDOs) against several Russian air carriers. These TDOs effectively prevent both exports to, and acquisitions from, these carriers. The original TDOs were scheduled to expire, but they are being renewed by the U.S. Government. The renewals extend the TDOs for another 180 days.

If the Iran-related TDOs are any guide, BIS will automatically extend each of these TDOs until the conflict that gave rise to the sanctions is over. This could mean that the TDOs stay in place until the conflict in Ukraine is over, but it could also mean that the TDOs stay in place until other conditions are met, like the return by Russia of effective sovereignty and control over territory previously identified as part of Ukraine. Or a new administration could simply decide not to renew them as a matter of policy.

What do the denial orders say? They say that there is an enhanced area of exclusion for these named parties. They preclude applying for many licenses – a major exception to this is that you are allowed to apply for a license for an export that is directly related to safety-of-flight (so there is a licensing path for the aircraft parts industry). … But you still have to obtain the license before you can engage in the transaction.

You are also precluded from taking “any action to acquire from or to facilitate the acquisition or attempted acquisition from <the denied party> of any item subject to the EAR that has been exported from the United States.” When you see this clause in the TDO, it prohibits purchases from the denied party – including purchases that would reflect imports! This is an important element that makes the temporary denial orders different from mere export limits. In order to fit this under an “export” order, the acquisition exclusions are tied to transactions that involved a past export (like Boeing equipment that was previously exported) or to transactions that anticipate a future export or re-export. Because of the global nature of the aviation market, this is effective in covering almost all transactions in part subject to the EAR.

The TDOs typically prevent servicing on behalf of any named <denied party>. This can include installation, maintenance, repair, modification, and/or testing.

If you are considering business that may be affected by a TDO, then read the TDO carefully and identify your compliance path. While there are exceptions for “safety-of-flight,” those exceptions typically require BIS to license the transaction.

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Exporting Parts for Foreign Aircraft – Additional Analysis is Required

August 16, 2022 by Leave a comment

Do you export aircraft parts? If you do, then you may need to complete the EXTRA compliance checks that apply to foreign aircraft.

When you export aircraft parts from the U.S., and the parts are intended for installation on a foreign registered aircraft, you need to perform an extra layer of analysis to ensure export law compliance. The U.S. export regulations specify that you need to identify and check all of these locations:

  • The country to which the part is being exported (which is part of the normal export assessment);
  • Any intermediate nations (also part of the normal export assessment);
  • The country in which the foreign aircraft is located (15 C.F.R. § 744.7(a)(1));
  • The country in which the aircraft is registered – you can often check the tail number against the country’s aircraft registry to confirm this information (15 C.F.R. § 744.7(a)(2));
  • The country which is currently controlling, leasing, or chartering the vessel or aircraft (this applies if a nation has operational control of the aircraft) (15 C.F.R. § 744.7(a)(3)); and
  • The country of the person who is currently controlling, leasing, or chartering the aircraft (this applies if a person has operational control of the aircraft – this country can be the incorporation location of a business or the nationality of a natural person) (15 C.F.R. § 744.7(a)(3)).

For each of the locations that you identified based on the bullet points, above, you need to assess whether you can export to that location without a license (“No License Required” or “NLR”), or under an applicable license exception. If the answer is “no” for any of the locations, then the transaction typically needs to be licensed.

As an example, assume that you are exporting a garden-variety aircraft part for installation in a private aircraft that is registered in Ireland and owned by an Irish leasing company. The part is controlled under ECCN 9A991. The aircraft is currently located in Ireland, where it is awaiting service at an Irish repair station. The aircraft is leased by a Russian citizen. You need to perform an analysis of this export as if it were going to Ireland (which it is) and also as if it were going to Russia. There is typically no license required to export this part to Ireland, but exporting the same part to Russia is restricted under the Russia/Belarus rules. Because of the interaction between the Russia/Belarus rules (15 C.F.R. § 746.8) and the foreign aircraft rules (15 C.F.R. § 744.7), a license would be required to export this part for installation in an aircraft controlled/leased by a Russian citizen. Note that this transaction would not be able to benefit from license exception AVS under the limits of the Russia/Belarus rules (15 C.F.R. § 746.8) because of the specific limits imposed on AVS under that rule.

What about a foreign airline that wants to obtain parts for stock? If that airline only flies non-U.S. registered aircraft, and the part is destined for installation on their fleet, then you reasonably know that the part is destined for installation on a non-U.S. registered aircraft and you ought to be performing this analysis.

What about domestic transactions? The foreign aircraft rule only applies to export transactions to, or for the use of, a foreign aircraft. So it does not apply to domestic (non-export) transactions, including domestic transactions that anticipate installation on a foreign aircraft while it is legally in the United States. But there are exceptions, including the one we will cover in the next paragraph.

What if I am selling to someone that I know will violate the export laws? It is important to remember that if you support someone else’s export, while knowing that they intend to violate the export laws, then this is also a violation. This restriction is known as General Prohibition Ten. It means that if you sell a part to someone else, knowing that they intend to export it illegally, then you have committed a violation, yourself.

Let’s look at an example: S7 Airlines is currently subject to a temporary denial order under the Export Administration Regulations. You are contacted by a U.S.-based distributor who tells you that it is buying parts for export to S7 Airlines. The part that the distributor is seeking from you is subject to the Export Administration Regulations (most civil aircraft parts are subject to the Export Administration Regulations). This distributor asks you to engage in a wholly domestic transaction by shipping the part to their location in New Jersey. If you sold a part entirely within the United States, to a domestic distributor, after that distributor had said that it intends to export the part to S7 Airlines (who is subject to a BIS denial order), then you would have violated General Prohibition Ten, even though your transaction was not an export. The reason for this is because your sale is made with knowledge that the aircraft part will be exported in violation of the Export Administration Regulations.

Export aircraft parts is tricky and sometimes the compliance path for an aircraft part requires special research and analysis to identify the correct compliance path. There can be more than one regulatory regime that applies to the transaction. If you are not sure whether you are doing the right thing, then take a step back and make sure that you are complying with the correct laws and regulations.

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Protecting Your Right to Get Paid Vol. 1: Security Interests

June 20, 2022 by Leave a comment

When you sell an aircraft part on credit, you want to make sure you will eventually get paid.  There are a variety of factors that can impede your payment.  This post offers one strategy for increasing the potential to get paid in adverse conditions (through security interests).

If you offer terms, then you are typically offering credit!  Offering credit to a customer is a normal business practice but it creates a risk of non-payment. 

In the most extreme situations, customers can find themselves seeking bankruptcy protection and this can result in their debts to you being reduced or even wiped out, depending on the nature of the proceedings. 

One way to increase your right to get paid is to establish a security interest in the article that is being sold.  One of the advantages of a security interest is if the debtor files for bankruptcy protection, then a security interest changes your payment recovery for the outstanding debts.  Security interests are given a “priority” in bankruptcy.  Typically, when there is a liquidation, certain priorities get paid (in the appropriate order) before unsecured debts.  With a security interest, the securing asset’s value will be applied to the debt. 

For example, let’s say you sell an aircraft asset to a customer for $1,000,000.  You secure the debt with a properly-perfected security interest.  The customer owes the entire purchase price on 90 day credit terms; but before the customer pays, the customer files a bankruptcy petition.

The bankruptcy trustee ultimately sells that asset at auction.  In scenario one, the unit fetches a price of $700,000.  That entire value is assigned to satisfy the security interest.  Which means that you get paid $700,000, and have a remaining unsecured debt of $300,000 (the unpaid balance).  You will get paid with the rest of the unsecured creditors, which might mean pennies on the dollar or it might mean nothing.   While $700,000 might be disappointing, it is a lot better than nothing. 

In scenario two, the unit fetches a price of $1,200,000.  That value is sufficient to fully satisfy the security interest.  Which means that you get paid the $1,000,000 that you are owed and the remaining proceeds of $200,000 will go into the bankruptcy estate (or pay any secondary liens).

Note that there are special bankruptcy rules that apply to certain aircraft and aircraft parts (and can allow for recovery of the complete asset). E.g. 11 U.S.C. § 1110.

You don’t have to wait for a bankruptcy to make use of your security interest. You can also foreclose your security interest upon a default in payment (specific procedures may depend on the language of your security agreement as well as applicable state law).

In my next post I will cover typical mechanisms for filing and perfecting security interests when selling aircraft parts.

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Change in China Tariffs Add Aircraft Seats to the Mix, But Offer No Relief to the US Importers of Aircraft Parts from China

August 14, 2019 by Leave a comment

On August 13th, the United States Trade Representative (USTR) announced a change in the net round of anticipated China tariffs.

In May, the USTR announced a set of tariffs expected to go into effect on September 1.  Each tariff would apply a 10% duty (which must be paid by the importer) on certain goods.  The May announcement reflected tariffs applying duties to about $300 billion worth of US imports from China.  This list of tariffs had been identified as list 4.

List 4 has been split into list 4A and list 4B.  The tariffs described in list 4A will go into effect September 1, 2019, as scheduled; but the tariffs described in list 4B will be delayed until December 15, 2019  The official reason for this delay is to mitigate the effect on US consumers in advance of Christmas.  Products in this group 4B include cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.

  • List 4A (Effective September 1, 2019).
  • List 4B (Effective December 15, 2019).

Note that this change does not affect the aircraft parts that are already subject to 25% tariffs; however list 4A will add aircraft seats to the list of goods from China that are subject to tariffs (tariff codes 9401.10.40 and 9401.10.80).  US importers of aircraft seats from China should take note of this September 1 date!

The USTR has stated that “Certain products are being removed from the tariff list based on health, safety, national security and other factors and will not face additional tariffs of 10 percent.”  It is unclear at this time which articles will be removed from the lists, but the USTR has promised to publish additional details in the Federal Register, soon.

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US Imposes New Sanctions on Cuba – Affect on Aircraft Parts Exports is Unclear

April 17, 2019 by Leave a comment

The President announced today that the United States would impose new sanctions on Cuba.  Rough details are available through the White House Fact Sheet, but we are still awaiting complete details.  It is unclear what effect this might have on current licenses to sell aircraft parts to entities in Cuba, which are permitted under BIS policy.  ASA will continue to monitor this situation to ascertain whether the new sanctions adversely affect aircraft parts export licenses.

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Government-Sourced Parts: Why Do We Care?

January 9, 2019 by Leave a comment

We are periodically asked about parts that have been sourced from “government” aircraft.  The concern is raised because standard industry documentation frequently recommend certifications about government sourcing (or lack thereof).  This can cause confusion, sometimes, about what represents a government source and what does not.

The root cause for this disclosure is a recognition that most aircraft are maintained to common civil standards in accordance with ICAO standards, but that the ICAO civil aircraft maintenance standards do not apply to public use aircraft.  E.g. Maintaining Public Aircraft,  FAA Advisory Circular 91.91 § 1.3 (Oct. 19, 2016) (explaining that the FAA has no statutory authority to regulate public aircraft, and the government operator therefore remains responsible for ensuring adequacy of maintenance).

Consequently, used aircraft parts that have been removed from public aircraft might not have been maintained according to the standards that are commonly used for civil aviation maintenance.

 

What is a Public Aircraft?

 

U.S. law defines a public aircraft as an aircraft used exclusively for United States Government purposes, or state government purposes.  The definition includes any aircraft exclusively leased by the government of a state or U.S. territory for at least 90 continuous days and an aircraft owned or operated by the armed forces or chartered to provide transportation or other commercial air service to the armed forces.  49 U.S.C. § 40102(a)(41).  The reason that the aircraft parts community cares about public aircraft is because public aircraft do not need to be maintained to the same standards as civil aircraft.

 

What Has the FAA Recommended About Parts from Public Aircraft?

 

Because parts from public aircraft may not have been maintained to normal civil standards, the FAA has expressed concerns over them.  It is not illegal to use them, but the FAA wants their nature disclosed, so that an installer can ensure airworthiness at the time of installation (or an overhauler can ensure airworthiness at the time of overhaul).

The FAA has recommended that where a part was obtained from a non-certificated aircraft, including a public aircraft, then that fact should be so-identified by some type of documentation. Eligibility, Quality, and Identification of Aeronautical Replacement Parts, FAA Advisory Circular 20-62E, chg 1, § 10(c)(1) (Sept. 14, 2018).

 

Industry Standards for Parts from Public Use Aircraft

 

The FAA’s recommendation in AC 20-62E has been implemented through certain industry standards – most notably ASA-100.  ASA-100 recommends that the seller provide a statement disclosing whether the aircraft parts were “previously installed in a public aircraft, such as a government use aircraft or a military aircraft.”  Aviation Suppliers Association Quality System Standard, ASA-100 § 10(b)(2) (rev. 4.0).

In similar language, ATA Specification 106 recommends that used aircraft parts obtained from non-certificated aircraft be disclosed , unless the part is already accompanied by an 8130-3 that was completed as an approval for return to service.  The guidance provides examples of the sort of sources that should be disclosed, including “public use, non-U.S., and military surplus aircraft.

 

Mitigating Factor

 

A mitigating factor in all of this is that today, many public aircraft in the United States are operated and maintained as if they civil aircraft.  Through the 1980s, the United States has begun to recognize that they were not receiving adequate value on aircraft and aircraft parts that were sold at auction.  One reason was the significant expense associated with verifying airworthiness on such aircraft before they could be used for civil purposes. To remedy this, the U.S> government started maintaining its aircraft consistent with FAA (civil aviation) standards.

This eliminates the differences that caused the industry to be cautious about such public-aircraft-sourced parts.  It makes the affected public-use aircraft parts technically equivalent to comparable parts used in civil aviation.

Despite this, under current federal standards, a federal agency that sells or transfers aircraft parts to a non-federal party must provide the buyer with the following statement:

“Warning to purchasers/recipients. The aircraft parts you are purchasing or receiving in an exchange may not be in compliance with applicable Federal Aviation Administration (FAA) requirements. You are solely responsible for bringing the aircraft into compliance with 14 CFR Chapter I, or other applicable standards, by obtaining all necessary FAA inspections or modifications..”

41 C.F.R. § 102-33.360(a)(2).

In addition, the purchaser must sign the a lengthy warning and disclaimer statement at the time of sale – this statement is supposed to be retained by the government seller.  Id.  These steps are meant to ensure that the U.S. government has adequately warned the buyer of the potential for non-compliance.

 

“Government Aircraft”

 

People in the industry often use the term “government aircraft.”  They come by this term honestly – the Office of Management and Budget publication OMB Circular No. A-126 (Improving the Management and Use of Government Aircraft) (May 22, 1992) uses the term “Government Aircraft” to mean the federal government’s public aircraft.  OMB Circular No. A-126. at 5(a).

The term “public aircraft,” alone, is well-understood.  But the use of the shorthand term “government aircraft” as a proxy for the concept of public aircraft has led a number of people to ask me whether the term “government aircraft” applies to airlines that are government owned. This is an obvious point of confusion.

Typically, in order for the air carrier to hold itself out to the public and offer carriage, it must be certificated under the home nation’s civil aviation rules.  This means that the air carrier’s aircraft are not (typically) flown as public aircraft. Thus, the mere fact that the air carrier is owned by the government does not imply an airworthiness question requiring a specific disclosure.

Obviously there are potential exceptions, such as where an airline wet-leases an aircraft (on an exclusive basis) to the government (this may be a public operation).

 

 

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