TAC 2000 Removed from FAA Accreditation Program

April 30, 2024 by Leave a comment

The FAA announced the removal of Transonic Aviation Consultants as an accreditation organization. The FAA is also removing the associated standard (TAC 2000) from the AC 00-56B list of acceptable standards. This has been announced through an FAA “Information for Operators:” Removal of Transonic Aviation Consultants from Advisory Circular (AC) 00-56B, Voluntary Industry Distributor Accreditation Program, InFO 24004 (04/23/24). This FAA InFO provides an explanation for why this has happened.

Advisory Circular (AC) 00-56B has been revised to reflect change one. One of the most significant changes in this revision is that the list of accepted Quality System Standards and their associated Accreditation Organizations has been moved online. This makes it easier for the FAA to make changes to this list.

The FAA’s online listing of accepted Quality System Standards and their associated Accreditation Organizations no longer lists TAC-2000 nor Transonic Aviation Consultants.

What Does This Mean for Distributors?

The FAA has said that “[a]t this time, no action is recommended for owners of parts obtained from distributors who were previously accredited by Transonic.” This means that there is no FAA-recall for parts that came through those distribution channels.

The FAA has determined all existing TAC-2000 accreditations will expire on the earlier of (a) the expiration date indicated on their certificate, or (2) January 24, 2025. This means that all TAC-2000 certificates will expire (for AC 00-56B purposes) in less than 9 months, and no later than January 24, 2025.

Companies accredited to TAC-2000 will have until the expiration date to pass an audit by another authorized accreditation party, if they want to enjoy seamless listing on the AC 00-56 database.

ASA serves as the accreditation database manager. The FAA has directed ASA to notify the FAA if ASA receives a new request to add a TAC-2000-accredited distributor to the program’s database, with an accreditation date after January 23, 2024. The FAA will review these requests on a case-by-case basis and if the accreditation is acceptable, then the FAA will allow ASA to add the distributor to the database.

In all cases, the FAA has directed ASA to remove all TAC-2000-accredited-distributors when their accreditation expires or on January 24, 2025, whichever is sooner.

Want to learn more? Join us at the ASA Quality Committee meeting in June!

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First Position: Priority in Security Interests

July 27, 2020 by Leave a comment

As the global COVID pandemic continues to substantially crimp air travel, we continue to see operators and other industry partners succumb to the economic realities of bankruptcy. As an industry, we’ve seen this before, and we will see it again. But that also means we know that we will come out the other side stronger than ever. One important way to make sure we do is to protect our interests when we extend credit to sell parts.

Last month we discussed steps to attach and perfect our security interest to guard against a customer’s bankruptcy. Perfecting a security interest gives us priority to the asset over any other later-perfecting creditors. Priority is important in deciding who takes proceeds of assets first when more than one secured party has a perfected security interest in the same goods or other assets. The goal is always to be first in priority with respect to the asset.

Generally, security interests are subject to a “first to file” rule (see UCC 9-322(a)), so whoever perfected their security interest first is first in line to the proceeds of those specific debtor assets in the event of bankruptcy. In many commercial instances this means that a bank or other lender that provided financing for the company will have a perfected security interest over not just the business’s assets at the time of the loan, but over all after-acquired assets as well. This so-called “floating lien” is a common way to secure loans to businesses.

Obviously, this sort of “all future assets” perfected security interest is problematic for a distributor who seeks to sell inventory to a customer on net 30 (or other credit) terms, because the inventory sold by the distributor, even upon perfection of a security interest by the distributor, would mean the distributor was secondary (or “junior”) to the lender even with respect to its own goods sold. As we have previously discussed, when assets are liquidated to satisfy all a business’s creditors there is generally not going to be enough money to go around. Securing first priority is therefore very important to a distributor seeking to protect against insolvent customers.

As you might have guessed, knowing that they could be subordinate to a previously secured lender (with the mega-resources to fight for its position in bankruptcy court) could easily discourage a business’s suppliers from selling to that business on anything other than a cash basis if the business hits a bumpy patch or the entire economy takes a negative turn. Reticence on the part of suppliers worried about getting paid can hurt a struggling business’s ability to continue in its ordinary course, creating a feedback loop that can doom the already struggling business, which likely does not have the cash on hand to buy inventory on cash terms.

Fortunately, the UCC anticipates this problem and has built in provisions to encourage suppliers to a struggling business to continue supplying (on credit) without sacrificing to a large lender priority in the goods they sell. Enter: the Purchase-Money Security Interest (“PMSI”).

Remember, to have a security interest we need attachment and perfection. And as we just discussed, perfection is generally subject to the first-to-file principle. A PMSI allows a seller of goods that sells on credit terms to gain a first-priority security interest—essentially jumping ahead of all other creditors regardless of when they perfected their security interests—in specific goods sold when the customer/debtor incurs a purchase money obligation to the seller of the goods in order to purchase the goods.

There are several variations on PMSIs, but for our purposes we are concerned with PMSI in inventory sold. (PMSI in equipment may also be important.) PMSIs in inventory sold can be slightly complex, so it is important to pay attention to the details and make sure each step is taken to secure your interests in your goods sold.

The key complication in a PMSI for inventory is the requirement that the security interest be perfected before the goods are received by the debtor. Ordinarily, perfection allows for the filing of a financing statement (usually the UCC-1) after the debt is incurred. This is also true of PMSIs in consumer goods, which allow a PMSI to be perfected if a financing statement is filed within 20 days. Distributors, however, are not generally viewed as selling consumer goods. Distributors sell inventory to their customers. Thus, special rules for PMSI must be followed (see UCC § 9-324).

As we said, for the PMSI in inventory to be effective we must perfect prior to the goods being delivered to the customer. This means filing our UCC-1 before delivery. Ideally, this will occur before the goods even leave our facility.

Next, we need to notify any other higher priority secured party in writing. So, if a lender has provided financing for our customer and has a floating lien over all of the customer’s assets, we are required to notify that lender in writing of our PMSI in the specific inventory (more on this in a moment).  You can find previously secured lenders and other parties with security interests by searching the UCC-1 filings in the state where the customer is incorporated or headquartered. (It is generally best to search both locations to ensure all your bases are covered, as well as, for companies with locations in multiple states, the state in which the actual destination facility is located.)

The notice to other secured parties should be sent by a secure, trackable system, like certified mail, return-receipt requested and—like PMSI perfection—the notice must be received before the goods are delivered to the customer. (Notice must also be renewed every five years in the event the security interest is held that long.)

Finally, the notice must state that the distributor has or expects to acquire a purchase-money security interest in inventory of the debtor (again, this is your customer) and describe specifically the inventory affected. This can be done directly in the notice, or by referencing and attaching a copy of the commercial invoice if it provides enough specificity to identify the inventory secured.

A PMSI in non-consumer goods takes much more effort than perfecting an ordinary security interest, so factors like the value of the credit extended, customer payment history, and current financial strength of the customer (or the economy more broadly) will all factor in deciding whether the additional steps to a PMSI are worthwhile.

Remember, priority of security interest is key to payment when a customer becomes insolvent. When the economy is rocky it is important to pay attention to the financial health and track record of your customers and the customers of your customers. Our industry has and will continue to see its fair share of liquidations and restructurings. By monitoring the health of your customers and taking the steps to meticulously secure your interests, you put your company in the strongest position to fight through troubling times.

As always, these things can be complex. When in doubt, contact your lawyer.

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Hazmat System (and Training) for “No-Hazmat” Distributors

July 13, 2020 by Leave a comment

Some of the companies accredited to the ASA-100 standard have struggled with the AC 00-56B requirement for a hazmat system because they have a “no-hazmat” policy (as a matter of company policy, they neither ship nor receive hazmat). This article addresses how to build a hazmat system that complies with the AC 00-56B requirement, while also meeting the limited needs of the “no-hazmat” company.

The FAA published its “Voluntary Industry Distributor Accreditation Program” in FAA AC 00-56B.  The accreditation program requires that accredited distributors have “[a] system for hazmat control and transport that meets Title 49 of the Code of Federal Regulations (49 CFR) requirements.” This is listed as one of the required quality system elements described in the advisory circular.

Each of the required quality system elements described in the advisory circular must be adequately addressed in the accredited distributor’s quality manual. This means that the accredited distributor’s hazmat control and transport “system” must be described in the quality manual. ASA has implemented this requirement in its own quality standard, ASA-100, and the implementation can be found in sections 1(E)(16) and 15.

If an accredited distributor knows that it does not ship hazmat, then it still has an obligation to meet the requirements for the hazmat control and transport system (including a “system” in the manual).

Even if the accredited distributor does not ship hazmat, there is still a risk of hazmat getting into the business’ system. In the 1990s, the FAA published Handbook Bulletins that explained that certificate holders, like repair stations, could reasonably receive unintended hazmats, based on industry shipping norms. This was later the rationale for requiring that repair stations must provide hazmat training to their personnel (14 C.F.R. 145.53(c)) and that accredited distributors must have hazmat transport and control systems under AC 00-56B.  On a more personal note, I have received many calls and emails, over the years, from ASA members and accredittees who’ve adopted “no-hazmat” policies and then received an unwanted hazmat.  This is a problem that really does occur.

ASA has taken the position that a minimum system must include appropriate training.  ASA also requires the system to be published in the quality manual.  For an accredited distributor that plans to adopt a “no-hazmat” policy, I recommend that the manual include:

  • A statement of the company policy of not receiving and/or shipping hazardous material;
  • Requirements concerning hazardous materials recognition training (to support the company policy); and
  • A process for addressing inadvertently received (or otherwise discovered) hazardous materials.

Of course, the distributor’s record-keeping program should include records of the hazardous materials recognition training.  But what about the details of that training?

When a company knows that it does not ship hazardous materials, then I feel that the training should be focused on preventing such shipments (and preventing such items from entering the system to mitigate the danger of them being pulled from stock for shipment). This means training appropriate personnel in (1) how to recognize hazardous materials, (2) the company policy of not shipping hazardous materials, and (3) what to do if hazardous materials are inadvertently received into, or discovered in, the system.

ASA has provided hazmat recognition training to the ASA community on several occasions. Most recently, we provided a live, online webinar addressing hazmat recognition in an aircraft parts environment (on April 14, 2020). That webinar was recorded and the recording is available to ASA members who need to provide training to their personnel.

When a company maintains a “no-hazmat” policy,” I have recommended that at least five classifications of personnel should receive hazmat identification training:

(1) Quality Personnel who are responsible for drafting, publishing, auditing, and managing the procedures associated with the hazmat system;
(2) Purchasing Personnel, so they will be aware of company limits and forbear from purchasing articles that would contravene those limits;
(3) Sales Personnel, so they will be aware of company limits and forbear from selling articles that would contravene those limits;
(4) Receiving Personnel, so they can recognize hazmats if they are inadvertently received, quarantine them pending appropriate disposition, and notify appropriate decision-makers within the company;
(5) Shipping Personnel, so they can recognize hazmats and forbear from shipping them in violation of company policy and/or regulatory limits.

By training these five classifications of personnel, you help to ensure that the company’s “no-hazmat” policy can be successful.

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Steps to Perfection: Security in a Time of Insolvency

June 12, 2020 by 1 Comment

Last week we had a brief overview of some bankruptcy issues and talked about the some of the risks presented by bankruptcy filings in these uncertain times. Today we are going to expand on ways to mitigate some of those risks when we aren’t in a position to demand and receive cash in exchange for goods.

The most important step to take to ensure you are protected against the risks of an insolvent customer is to attach and perfect a security interest in the goods sold to the customer. A security interest in the goods you sold on credit helps you to get paid first (before unsecured creditors, shareholders, and others, who often get nothing) in the event your customer enters bankruptcy.

Many companies are good at attaching a security interest to goods sold on credit by including terms that state the buyer grants the seller a security interest in the goods sold to secure the purchase price. If your sales agreements do not include such a provision you should work with a lawyer to make sure that they do.

An attached security interest on its own, however, has little effect in truly securing you as the seller (and more importantly, as creditor). In order to be effective, a security interest must be perfected. A perfected security interest gives notice to the world that you have a security interest in the particular goods so that others who may attempt to attach a security interest later know that they are behind you in priority.

Let’s drill down a bit deeper on the ideas of “attachment” and “perfection.”

Attachment

The Uniform Commercial Code (UCC) provides that “[a] security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral . . . .” (UCC § 9-203). The debtor in this case is your customer. The UCC goes on to explain what it means for a security interest to become “enforceable.” (We have limited the text to be relevant for our purposes, because some very specific things, like descriptions of timber to be cut, simply don’t apply!)

Under the UCC, “a security interest is enforceable against the debtor and third parties with respect to the collateral only if:”

(1) value has been given

In this case, the goods sold in exchange for the promise to pay the purchase price in the future—for instance on net 30 terms—is value given.

(2) the debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party

Here, the debtor (your customer) gains the rights in the collateral and power to transfer rights when they receive the goods.

And finally, (3) one of the following conditions is met (only one is applicable for the purposes of this discussion):

(A) the debtor has authenticated a security agreement that provides a description of the collateral

A security agreement is any agreement that provides a security interest, for instance our sales agreement (with appropriate terms, as mentioned above). To authenticate the agreement, the debtor (customer) merely needs to sign it (or otherwise accept the record through electronic sound, symbol, or process). The security agreement must also provide a reasonably detailed description of the collateral. The part number, nomenclature, and quantity that appears on our documentation is an example of a reasonably detailed description.

Although verbose, the process of attaching a security interest is relatively straight forward and many or most of you may be doing it now. You should review the terms and conditions that appear on your quotes, confirmations, invoices, and other sales documents to be sure. If there are questions, remember to consult your attorney.

Perfection

Merely attaching a security interest, though, is not enough to protect you. In fact, an attached security interest without more provides little security indeed. In order to protect your interests, you must perfect the security interest. This gives notice to others that you have a security interest (in the form of a lien) against the goods. That way if they attempt to attach their own security interest to the goods or other assets to protect their extension of credit (for instance in the form of a loan), they know that they are behind you in order of priority with respect to those goods. (We’ll have more to say about priority in our next post—sometimes a previous secured lender like a bank may have priority for even newly acquired goods).

The exact details of perfecting a security interest are a matter of state law, but in general the primary method of perfecting a security interest is by filing a financing statement with the relevant public office—usually the Secretary of State. The UCC specifies the elements required in a financing statement in § 9-502:

  • The name of the debtor
  • The name of the secured party
  • An indication of the collateral

Typically, you can use as your financing statement a Form UCC-1, which is a standardized form that is widely available online, often via the very state agency with which it must be filed.

The most important thing to note in completing the financing statement is that the name of the debtor (your customer) must be precise. The UCC explains that it should be the name that is listed on the company’s most recently filed document in its jurisdiction of registration. (See UCC § 9-503). Put another way, the debtor name on the financing statement should be the most up-to-date name of the organization as filed in its state of incorporation. This level or precision is necessary because the financing statement is recorded under the debtor’s name and it must be of sufficient detail to put other potential secured parties on notice.

The secured party’s name is more straight forward (your company) and the indication of the collateral can be the same as appeared on the security agreement we discussed above, for instance, part number, nomenclature, and quantity.

The financing statement is generally filed where the debtor is incorporated, so make sure you are identifying the appropriate jurisdiction’s requirements. You can often kill two birds with one stone because the Secretary of State is typically where the financing statement is filed (and can be found) and you should also be going there to identify the correct name of the debtor for the financing statement anyway. As always, if you have any questions, you should consult an attorney.

As a secured creditor you can have confidence you will get paid (at least in part) even if a company becomes insolvent, because the liquidated assets of an insolvent company are first used to pay secured creditors. Specifically, the money raised from the liquidation of your secured goods is used to pay your security interest. This also applies to proceeds from those goods when the proceeds are directly identifiable. Creditors with no security are often left hoping for a share of what little is left after the secured creditors are paid.

Attaching and perfecting a security interest in goods sold is a valuable risk mitigation strategy. While it may not be as relevant when the economy is hot, when the economy gets rocky and the industry sees upheaval it is an important way to protect yourself against the unpredictability of the global aviation market.

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New EASA Guidance on Supplier Evaluation: Who is a “Supplier?”

May 1, 2019 by 5 Comments

EASA has published new guidance directing Part 145 organizations to have procedures for accepting components, standard parts and materials (EASA 145.A.42(b)(i)), and to ensure that those procedures include supplier evaluation (EASA AMC1 145.A.42(b)(i)).  Full details on the new supplier evaluation requirement are in yesterday’s blog post.

Who needs to be evaluated?  It is not just the traditional distributors.  The definition of supplier connected to this guidance is a very broad one:

“A supplier could be any source that provides components, standard parts or materials to be used for maintenance. Possible sources could be: Part-145 organisations, Part 21 Subpart G organisations, operators, stockist, distributors, brokers, aircraft owners/lessees, etc.” EASA GM2 145.A.42(b)(i).

This means that manufacturers, repair stations, operators, and aircraft owners are all suppliers, for purposes of the new guidance and rules.  And they all need to be evaluated by Part 145 organizations when they are being used as suppliers of components, standard parts and materials.  Evaluation should be based on the 16 elements of the supplier’s quality system, that were published by EASA.  EASA GM3 145.A.42(b)(i).

Luckily, EASA established a reasonable mechanism for supplier evaluation.  While it is possible for a repair station to perform its own evaluations to the standards set in the EASA guidance material, EASA has also permitted reliance on accredited distributors.  This allows Part 145 organizations to purchase components, standard parts and materials from accredited distributors and to rely on the accreditation to meet the supplier evaluation requirements.

Note that relying on accreditation does not relieve the Part 145 organization of its other obligations to ensure that the component, standard part or material is acceptable for installation.

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ASA Petitions FAA for Extension of DAR-56 Program

August 18, 2017 by 1 Comment

Last week ASA submitted a petition to the FAA formally requesting the indefinite extension of the Limited DAR-F Program for Accredited Distributors–commonly known as the DAR-56 program–that is scheduled to expire September 30, 2017.  ASA further requested an expansion of the program to better reflect the needs of the distribution community.  You may also recall that ASA recently led an industry effort that secured the reissuance of FAA Notice 8900.380 for another year. Both of these efforts are in response to the 8130-3 tag requirements arising out of MAG 6, which put billions of dollars of distributor inventory at risk.

ASA explained in its petition to extend DAR-56 indefinitely that the facts that gave rise to the need for the DAR-56 program have not changed and that the need for the program to continue was therefore very important to distributors.  The DAR-56 program permits Limited DAR-F’s to issue 8130-3 tags for parts on the basis of specific indicia of sourcing from the PAH.

As attendees of the ASA conference heard from members, distributors have so much inventory that needs to be tagged under the DAR-56 program that it could literally take years to tag every part.  This includes vast numbers of small, low-dollar-value parts for which hiring an independent designee would be economically infeasible.  ASA therefore proposed an indefinite extension of the program with semi-annual meetings between the FAA, ASA, and interested parties to discuss the ongoing need for the program so that it can be discontinued after a permanent solution is developed.

In addition to proposing an indefinite extension of the DAR-56 program (rather than annual extensions requiring yearly petitions and discussions), ASA also recommended changes that would improve the effectiveness of the program and help distributors.

At present, the DAR-56 program permits Limited DAR-F’s to issue 8130-3 tags under the following criteria:

  1. The aircraft part was received by the distributor prior to November 1, 2016 and
  2. The aircraft part must bear specific indicia of production under 14 C.F.R. Part 21:
    1. A certificate or statement of conformity that was issued by the production approval holder (any documentation part numbers and serial numbers, if applicable, must match any part markings); or,
    2. A certificate or statement of conformity that was issued by the production approval holder’s supplier, and a verification of direct shipment authorization; or,
    3. Markings regulated under 14 C.F.R. 45.15 and describing the PAH’s name or other identification (for parts, this would typically be limited to PMA, TSOA or critical parts).

ASA recommended that the program be extended as follows:

  1. The program be expanded to include any aircraft part that was received by the distributor at any time when the distributor was accredited under the AC 00-56 program.
  2. Expand the acceptable indicia of production under an FAA production approval to include other documentation the FAA has previously recognized:
    1. For an aircraft part that was accepted into an air carrier’s inventory system as new article, and then subsequently released from that air carrier’s inventory system, a document from the air carrier identifying the part by part number, and by serial number where appropriate, and identifying the part as new (including new surplus); or
    2. A maintenance release document showing (i) that the part was inspected under 14 C.F.R. Part 43 by a person authorized to approve such work for return to service, (ii) that the part was found to be in new condition, and (iii) a part number that matches a number known to be a PAH part number, and that matches the part number on the part, where applicable.

These proposed expansions reflect the fact that the November 1, 2016 receipt date appeared wholly arbitrary and neither supported nor required by any regulatory basis, and that the two additional forms of documentation are commonly accepted in the industry under Part 21 of the regulations.  This would solve the problem of those parts that are currently still being received without tags (as they continue to be released from PAH’s who do not issue tags, or as new surplus from air carriers without tags) and those parts that currently have PAH documentation but are nonetheless excluded under the terms of the current program.

ASA appreciates the FAA’s collaborative efforts to work with us to extend the DAR-56 program as we work toward a permanent solution to the MAG 6 8130-3 tag issue.  We will keep our members updated as we hear more from the FAA.

 

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FAA Extends Policy Patching MAG Tag Challenges

August 14, 2017 by 1 Comment

Today the FAA notified ASA that it will extend for another year the MAG policy patch, Notice 8900.380, which allows repair stations to inspect and approve parts for return to service that are not accompanied by the MAG-mandated documentation. The extension technically cancels notice 8900.380 and reissues the policy as Notice 8900.429 (as opposed to literally extending 8900.380).

Although this doesn’t solve all of the problems wrought by MAG 6, it gives distributors and repair stations another year while the FAA works with EASA on a permanent solution to the documentation problems created by MAG 6.

On August 2, ASA spearheaded a petition joined by 12 other industry groups to seek an extension of the policy, which was scheduled to expire on August 26, 2017.  ASA is thankful to have the support of industry in seeking to solve the challenges of MAG 6’s 8130-3 tag requirements, and is appreciative of the FAA’s efforts to work with us.

We previously wrote on the blog about the ways in which notice 8900.380 (now notice 8900.429) helps distributors with un-tagged inventory sell to repair stations by explicitly recognizing repair stations’ right to receive, inspect, and approve for return to service any article for which they are rated.

The inspection authority in the notice still recognizes the original October 1, 2016 date distinguishing between parts already in inventory, and parts received on or after that date, but as we are well beyond 2016, that should not change any procedures or outcomes:

b. Inspections. For the purposes of this notice, inspections may be performed on:
(1) New parts received before October 1, 2016, that are not accompanied by FAA Form 8130-3, a dated certificate of conformance, or similar documentation issued by a U.S. PAH or supplier with direct ship authority in accordance with the notes in the MAG CHG 6, Section B, Appendix 1, subparagraph 10k)(1)(a) and Section C, Appendix 1, subparagraph 7c)(1)(a); and
(2) New parts received on and after October 1, 2016, that are not accompanied by FAA Form 8130-3.

We encourage you to review Notice 8900.429 to re-familiarize yourself with the policy, its requirements, and its limitations.  The notice has a duration of one year and is set to expire August 9, 2018.  It is the expectation of the FAA that this policy will ultimately be incorporated into MAG 7 when that document is ultimately issued.  ASA will continue to work with industry, the FAA, and EASA to craft a permanent and workable solution to this issue.

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License Issues for Distributors of Explosive Materials

June 22, 2016 by Leave a comment

We often receive questions from distributors about their obligations to comply with regulations beyond those of the FAA or industry standards specifically addressing the aerospace distribution community. In many of these cases, distributors may not be perfectly clear on how to comply with certain regulations, or that those regulations even exist. Some examples of these scenarios include export licensing requirements, export reporting requirements, and hazmat or dangerous goods shipping requirements.

Recently, we have received a number of questions regarding regulatory requirements surrounding explosives regulated by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF).  Some people are not even aware that regulated explosive materials are present in a variety of aircraft parts or that they may be handling these parts or that the ATF imposes license and permit requirements on a wide range of people who handle such explosives. It is therefore important to understand what ATF licensing obligations apply when distributors are handling explosive materials.

In general, anyone who imports, manufactures, or deals in explosive materials must obtain a license from the ATF. Because “dealing” under the regulation means distributing explosive materials at wholesale or retail the license requirement casts an extremely wide net that encompasses any type of sales model.

The ATF explosives license is obtained by applying to the ATF using forms ATF F 5400.13, ATF F 5400.28 to identify employees authorized to possess explosive materials as applicable, and submitting the appropriate fee. Each license is valid for three years.

So where do regulated explosives appear in aircraft parts? Frequently explosives will appear in safety apparatus.  Fire suppression systems may contain explosive actuators (or “squibs”); similarly, emergency escape systems like door slides may also contain explosive squibs. Other articles that may contain explosives include the flares or other signaling devices found in survival kits. These explosives may be present in certain assemblies and components, so it is important to identify and ship them properly once they have been identified.

Although regulated explosive materials generally required the distributor to have a license in order to deal in those products, certain aviation articles may be exempted from the regulations. These exemptions are typically sought by the manufacturer of a particular article and when granted are specific to the article by part number. One common example of articles often subject to exemption is signaling devices.

Unfortunately, the ATF does not offer a searchable database of issued exemptions, but instead recommend that manufacturers provide a copy of the exemption with their exempted products. As a matter of practice, however, this is not always done, whether because the manufacturer is unaware that they are permitted to do provide the exemption, are unaware that the exemption follows the product, or even possibly for competitive reasons.  The net result is that some distributors may be handling exempt materials as though they were subject to the ATF licensing requirements. When dealing with exempt materials it is important to remember that it is the article itself that is exempted, and the exemption is not limited only to the manufacturer, so everyone can take advantage of the product’s exemption.

Finally, it is important to remember that the ATF licensing regime is separate from DOT hazmat shipping regulations.  An explosive article can be exempt from the ATF licensing provisions but still be regulated as a class one explosive for the purposes of hazmat shipping. It is always necessary to ensure compliance to each applicable regulatory regime, and that separate regulatory regimes are not necessarily consistent.

Overlapping regulatory regimes—ATF, DOT, FAA, BIS, DDTC, OFAC—can become quite confusing.  When in doubt about your licensing and compliance regulations always remember to consult an attorney who can help you make sense of these conflicting regimes and develop systems to help your business ensure ongoing compliance.

If you have questions about your compliance obligations be sure to visit us while you are at the ASA conference in Las Vegas, June 26-28!

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ICA Guidance Open for Comment

August 27, 2015 by Leave a comment

The FAA has released for comment two guidance documents pertaining to Instructions for Continued Airworthiness (ICA): Draft FAA Order 8110.54B and Draft Advisory Circular 20-ICA. ICA availability is an issue that has a direct effect on repair stations and distributors, and ASA has done a significant amount of work to ensure that ICA are available and accurate in accordance with the Federal Aviation Regulations.

Draft Order 8110.54B is guidance directed at FAA personnel and persons responsible for administering the requirements for ICA.  Among other changes, the draft reorganizes the Order to reflect material moved to AC 20-ICA (below), and importantly incorporates guidance implementing the FAA’s Policy Statement PS-AIR-21.50.01, Type Design Approval Holder Inappropriate Restrictions on the Use and Availability of Instructions for Continued Airworthiness.  ASA has been supportive of the FAA in the adoption that Policy Statement that is intended to protect the industry from anti-competitive ICA restrictions.

Draft AC 20-ICA is a new Advisory Circular that removes industry-specific guidance from the internal FAA Order and places it in a stand-alone AC.  This effort is similar to the FAA’s actions in revising other Orders, which are directed to FAA employees, and removing guidance that is actually intended to be directed outward toward industry and properly placing it in an Advisory Circular.  Like Draft Order 8110.54B, the draft AC implements the FAA policy on ICA established in the Policy Statement.  The proposed AC provides guidance to design approval holders (DAH) and design approval applicants for developing and distributing ICA.

Not only does the availability of ICA directly effect repair stations, the availability of parts lists that are included as a part of the ICA is an important issue for the supplier community.

After a preliminary review these documents appear to offer very positive guidance for the aviation maintenance and distribution industries.  ASA will be reviewing both of these documents closely and offering comments and support for these policies to the FAA.  We encourage repair stations and distributors to review both documents as well.

Comments on both guidance documents must be submitted by October 6, 2015, and may be submitted to the FAA via email to 9-AVS-ICA@faa.gov.  If you have comments or observations that you feel ASA should include in its comments to the FAA, email them to Ryan Aggergaard at ryan@washingtonaviation.com so the we can include them.

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SUP Program Guidance Revision Comment Window Closing Soon

August 11, 2015 by Leave a comment

Earlier this year the FAA released Draft FAA Order  8120.16A – Suspected Unapproved Parts Program intended to replace the previous SUP program guidance, Order 8120.16 – Processing Reports of Suspected Unapproved Parts.  ASA is reviewing the draft to determine if the revised guidance may have an affect on ASA members.

The primary changes made by the draft Order include transferring policy responsibility for the SUP program from AFS-300 to AIR-100, and clarifying the responsibility for initiating, investigating, and closing a SUP case.  Other minor changes include changing the title of the Order, moving definitions to an appendix, removing definitions that are already defined by the FAA regulations, and moving the “Objectives and Responsibilities” section to its own chapter.

ASA members are encouraged to review the draft Order to make sure there are no surprises or inadvertent changes that might adversely affect member companies or the SUP program.  Comments are due August 17, 2015, so we encourage anyone who identifies noteworthy issues to contact us quickly so we can file comments and work with the FAA to address your concerns.

Email your comments to Ryan Aggergaard at ryan@washingtonaviation.com.

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