The New UK: What Does Brexit mean for US-UK Aircraft Parts Transactions?

December 3, 2020 by Leave a comment

Many companies rely on UK-based manufacturers and repair stations. What happens to these companies after the end of the Brexit transition on December 31?

Yesterday, we laid out the legal underpinnings of Brexit (as they apply to aircraft parts transactions) and if you haven’t already read that post, then you should take a look at it as background for today’s post.

Installation of New Parts Produced in the UK on US-Registered Aircraft (and other third-country nations)

Until the end of the transition period (after December 31, 2020), the UK continues to benefit from the laws and agreements of the EU. This means that United States acceptance of UK-produced parts is subject to normal rules that apply to all EU-US transactions, and to resolve conflicts we should look to the existing US-EU BASA and the FAA-EASA IPA. Thus, nothing has appreciably changed, yet.

This same rule applies to other nations. Their existing agreements with the EU continue to apply to UK transactions until the end of the transition period (after December 31, 2020).

After the end of the transition period, starting January 1, 2021, new parts produced under UK production approval and imported into the United States aviation system will be subject to the US-UK bilateral agreement. The Implementation Procedures for Airworthiness (“IPA”) between the US FAA and UK CAA can be found here. As you can see, that IPA is substantially similar to the comparable FAA-EASA Technical Implementation Procedures. The reason for this is to make the transition as smooth as possible, so we can continue with “business as usual.”

One minor difference is that UK CAA producers will issue UK CAA Form 1 instead of EASA Form 1 after the end of the transition period.

Another minor difference worth mentioning is found in the definition of the term “article” in the US-UK IPA, which explains that the US definition includes a material, part, component, process or appliance, while the UK definition is limited to a component, part or appliance. Unless you are dealing in materials or processes that have been treated as articles in the United States, this distinction should not be a concern for most transactions (note that the FAA-EASA TIP relies on the FAA definition of “article”).

As discussed in yesterday’s post, the UK CAA has also signed comparable agreements with Canada and Japan.

Note that many UK-based manufacturers are seeking EASA Part 21 approvals. EASA maintains a list of these certificate holders on their website. These manufacturers will receive their EASA Part 21 credentials at the end of the transition period (after December 31, 2020); and they will be able to continue issuing EASA Form 1 for their articles.

These entities will be considered to be EASA certificate holders by the EU and it is likely that the FAA will continue to treat them as subject to the US-EU agreements, but there are some minor changes that may be necessary in the US-EU agreements to properly implement this situation [like changing the scope language that applies to “articles … eligible for import to the U.S. from EASA and each EU member state” which will need to be broadened to include imports from third country states where the producer is subject to an EASA POA].

Installation of Parts Maintained by a UK Part 145 MRO on US-Registered Aircraft

As with new parts, during the transition period (through December 31, 2020), the laws and agreements of the EU continue to apply to the UK, and thus the United States accepts parts maintained under US FAA certificates in the UK and released on an EASA Form 1 that denotes dual-release (under EASA 145 and FAA 145).

As with new parts, nothing has appreciably changed, yet. In this situation, the date that matters is the date of the maintenance release, and that date will need to be assessed to identify whether the release was signed before or after the end of the transition period

For work that was released by a UK-based repair station (holding FAA approval, as well), after December 31, 2020, the legal basis for installation on a US-registered aircraft may depend on the nature fo the certificates held by the MRO. Some MROs will continue to hold the same UK CAA 145 and US FAA 145 certificates that they have always held. The work of these MROs will be subject to the Maintenance Implementation Procedures (MIP) between the US FAA and the UK CAA. But many other MROs in the UK will obtain EASA 145 certification as a third country MRO. This will mean that they (typically) hold UK, US and EU approvals. The list of those UK repair stations who have applied for EASA Part 145 approval can be found on the EASA website. These repair stations will receive their EASA Part 145 credentials at the end of the transition period (after December 31, 2020).

Where the work of the work of the MRO is subject to the Maintenance Implementation Procedures (MIP) between the US FAA and the UK CAA (e.g. the MRO has UK CAA 145 and FAA 145 approvals, but not an EASA 145 approval), such work will no longer be released on an EASA Form 1. Instead it will be released on an UK CAA Form 1. As with the other form, if it is a dual-release then the remarks block will indicate that the work is performed under FAA regulations if the work is intended to be acceptable in the United States.

There is also a clause in the US-UK MIP that permits holders of FAA Part 145 privileges in the UK to release work on a single-release 8130-3 tag (this would only certify approval for return to service for US FAA regulatory purposes, but it would be acceptable in the US market).

What About EU-registered aircraft?

EU-registered aircraft are a more complicated matter, and we will deal with those in the next post.

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Major Changes Involving 8130-3 Tags

December 18, 2015 by 2 Comments

Any ASA member who has attended an ASA Board Meeting or an ASA Quality Assurance Committee meeting in the past three months knows that an important topic of discussion has been the recent FAA and EASA changes affecting 8130-3 tags.

Two significant changes in the regulations and policy have affected 8130-3s this Fall.  Both have the potential to impact the business models of distributors.  This post analyzes the two sets of changes and provides guidance for aircraft parts distributors who may be impacted by those changes.

International Agreements

The first significant change was published in the latest revision to the Maintenance Annex Guidance (revision 5). The United States has a Bilateral Airworthiness Safety Agreement (BASA) with the European Union (EU). The EU-BASA explains how the United States and the European Union will share safety duties and permit products and articles to be freely moved between jurisdictions.

The EU-BASA is interpreted by several guidance documents. One of those guidance documents is the Maintenance Annex Guidance (MAG). The MAG explains how the US and EU will share oversight of repair stations that hold authority from both jurisdictions. Under the MAG, repair stations in the US that hold EASA 145 acceptance will be subject to oversight by the FAA, and the FAA will assess compliance to both the US and the EU regulatory requirements.

In order to facilitate compliance to both standards, the MAG includes two sample supplements for the repair station manual (for US-based repair stations) or the Maintenance Organization Exposition (for EU-based repair stations). Repair stations are expected to adopt such supplements in order to ensure that their work will meet the requirements of both jurisdictions; however they are expected to be able to make changes to the sample supplement; in fact the guidance explains that:

“The applicant must customise [sic] the supplement to reflect the specific repair station operation and related procedures.”

Although the supplements are explicitly described as “samples,“ experience has shown that many FAA employees treat these samples as the only acceptable language (this was most recently re-confirmed by repair station personnel at the ASA Quality Assurance Committee Meeting in Dallas who continue to experience this phenomenon).  This is not a new phenomenon – many complaints were raised when the FAA had an advisory circular that featured sample language for the repair station’s Inspection Procedures Manual (IPM) – and ultimately the FAA found it necessary to cancel the IPM AC because safety inspectors were requiring adherence to the sample as if it were a legal requirement.  The net result in cases like this is that the “samples” become de facto regulations, because they are being enforced as if they were required by regulation. I won’t get into all of the Federal laws that are being violated when the FAA enforces a domestic record-keeping requirement that imposes new regulatory standards not previously found in US law.

With the Supplement “samples” being treated as if they were requirements, we find a number of requirements being imposed that are not required under US law, and a few that are not required under either US law or EU law (thus making MAG rev. 5 a source of brand new quasi-legal obligations).

The most significant elements for distributors are found in the MAG rev. 5 requirements for acceptance of new parts.  The language that applies to US based repair stations (who need the supplement to retain their EASA privileges) includes this text:

New components must be traceable to the OEM as specified in the Type Certificate (TC) holder’s Parts Catalogue and be in a satisfactory condition for installation. A release document issued by the OEM or Production Certificate (PC) holder must accompany the new component. The release document must clearly state that it is issued under the approval of the relevant AA under whose regulatory control the OEM or PC holder works.

The acceptance language that applies to standard parts provides an exception for those parts, but PMA parts enjoy no such exception which means that independent PMA parts (which are typically are not included in the type certificate holder’s parts catalogue) appear to be unacceptable (violating EASA standards and conflicting with the existing Technical Implementation Procedures).

More importantly, all new components will have to be accompanied by a “release document issued by the OEM or Production Certificate (PC) holder.”  Today, most 8130-3 tags are issued by the FAA (usually through its designees).  This provision would cause the rejection of existing FAA 8130-3 tags because they were not issued by the OEM or Production Certificate holder (instead, until now, they have always been issued by the FAA, directly or through designees).  This could have a tremendous impact on existing inventories, which would not meet the acceptance requirements described in the supplement even if they were accompanied by 8130-3 tags issued by the FAA.

The FAA and EASA have agreed to delay the implementation of MAG rev. 5 until March 29, 2016.  This was meant to permit time for manufacturers to start issuing 8130-3 tags for new parts.

8130-3 Tag Regulations

Under the new regulations, a production approval holder (PAH) will be permitted to issue its own 8130-3 tags. These tags will be known as “authorized release documents.”  This privilege will be permissive and not mandatory, so some manufacturers may choose not to issue authorized release documents.  The FAA has issued guidance that says that once a production approval holder has set up a system for issuing authorized release documents, the production approval holder will be required to surrender its ODA privileges or other designated privileges that permit issuance of an FAA 8130-3 tag.  Thus, for manufacturers, the choice of issuing 8130-3 tags under the manufacturer’s own authority or obtaining them through designees will be an ‘either-or’ choice, without the opportunity to use both systems.

The FAA implies that these documents can be used for export purposes, by explaining that when an authorized release document is issued for export purposes, the production approval holder must follow the procedures specified in § 21.331 and must comply with the responsibilities of exporters specified in § 21.335.  One of the many problems with these authorized release documents is that although they appear to now be potentially acceptable for European repair stations, our bilateral agreement with the rest of the world all require FAA-issued 8130-3 export tags.  So manufacturer’s authorized release documents would not meet the requirements of our other bilateral agreements.  In addition, the BASA Technical Implementation Procedures (TIP) with the EU anticipates that EASA can expect FAA-issued 8130-3 tags (it repeatedly uses language explaining that the FAA must certify facts on the 8130-3 tag, such as in section 5.1.6(a)(1) for TSOAed articles).

On December 17, the FAA published a correction to the final rule that explained that PAHs are permitted to start issuing 8130-3 tags as early as January 4, 2016. This is specifically intended to permit PAHs to issue 8130-3 tags to support the new requirements for 8130-3 tags that are needed for domestic repair stations that possess EASA privileges (the preamble to the rule specifically mentions MAG rev. 5 as a motivating factor for the correction).

There are already manufacturers who rely on their own certificates of conformity and do not obtain 8130-3 tags for domestic transactions.  We have spoken with manufacturers who are not sure whether they will begin issuing 8130-3 tags because of some of the problems and limits associated with the PAH-authorized release document policy; so distributors may be unable to obtain PAH authorized release documents for some parts; and will likely have extreme difficulties obtaining PAH authorized release documents for existing inventory.

How Big of an Issue is this in the United States?

According to EASA, there are 1474  valid repair stations in the US with EASA privileges (EASA Table dated Nov. 12, 2015 – this does not include ‘not valid’ and invalid EASA repair station approvals in the US).  This is about one-third of the domestic US repair stations; but as a practical matter, it is nearly all of the US repair stations that service commercial aircraft customers.  This means that most repair stations that purchase parts from ASA members will be affected by the MAG rev. 5 requirements.  Because it is easier for FAA employees to simply enforce the MAG rev. 5 sample as if it were a requirement, we should expect most of these repair stations to adopt supplements that are consistent with the language of MAG rev. 5.  This will have a very significant affect on the business of aircraft parts distribution.

What Does This Mean for Distributors?

Distributors should expect to have problems selling aircraft parts without 8130-3 tags after March 31, 2016.  This could result in devalued inventory as a consequence of the FAA’s actions (There are months yet to go before this implementation date so ASA can do little to predict, today, what the actual devaluation will be).

The authorities (FAA and EASA) have agreed that for parts released by production approval holders before April 1, 2016, those parts will not be expected to be accompanied by 8130-3 tags.  The fact that an aircraft part produced by a PAH is in a distributor’s inventory as of that date is prima facie evidence that the part was released by the production approval holder before that date.  This means that aircraft parts in a distributors inventory as of close of business on March 31, 2016 or start of business on April 1, 2016 are grandfathered from the provisions of MAG rev. 5 (although, of course, parts intended to be used on European-registered aircraft will be expected to meet the requirements of the BASA TIP).  Distributors may wish to find a way in their inventory database systems to identify all parts held as of COB March 31, 2016 in order to be able to certify that the part was released by the production approval holder before April 1, 2016.

What Can You Do to Make Things Better?

1) Communicate with your repair station customers and ask them to ensure that their EASA Supplements permit them to accept parts without 8130-3 tags (e.g. parts with a manufacturer C of C) consistent with US policy in documents like FAA AC 00-56B.  Nothing in either US or EU law should prevent them from being able to receive a demonstrably airworthy part in new condition under their FAA 145 privileges and then issuing a single release certificate for their domestic U.S. customers.

2) Communicate with your repair station customers and ask them to ensure that their EASA Supplements are consistent with EASA regulations instead of using the MAG rev. 5 language, which adds limits that are not required under EASA regulations;

3) Communicate with your repair station customers and ask them to ensure that their EASA Supplements accept all 8130-3 tags that are acceptable by European 145s under the BASA Technical Implementation Procedures;

4) Communicate with your manufacturer business partners and encourage them to release their parts with 8130- 3 tags;

5) To the greatest extent possible, obtain 8130-3 tags for parts.  Even though they are not required by law in the US, the FAA is going to impel repair stations to reject parts that do not have 8130-3 tags, which will make the 8130-3 tag a de facto requirement for selling to repair stations.

6) Share your thoughts!  ASA is eager to hear your thoughts about potential problems and solutions.

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