Destroyed Aircraft – FAA Guidance Comment Period Closes Soon

July 26, 2023 by Leave a comment

As we discussed at the ASA Quality meeting and in our prior article, the FAA has released a new draft Advisory Circular for public comment. The draft provides guidance on what constitutes a “destroyed aircraft” but some of the details in the draft have the potential to wreak unwanted consequences. This draft may impact anyone who (1) buys or sells used aircraft parts or (2) owns an aircraft.

ASA plans to issue comments on this draft, and we continue to seek input from our members. A review of our position (and our concerns about this draft) can be found in the prior article.

In summary, we are concerned that imprecise language in the draft Advisory Circular could open the door to FAA employees making determinations that are contrary to their statutory authority. The result of such determinations could effectively deregister an aircraft that was intended to remain on the registry, as well as shifting the registry analysis so that it relies on elements that are not part of the statutory tests for registration. This topic was discussed at the ASA Conference earlier this month. ASA is asking members review the draft and to let us know your concerns, so we can make sure that the ASA comments reflect all of our members’ concerns.

The comment period ends August 16, 2023, so please look at this draft and get your comments into ASA, ASAP.

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Destroyed Aircraft – New FAA Guidance, Open for Comment

June 20, 2023 by Leave a comment

The FAA has released a new draft Advisory Circular for public comment. The draft addresses destroyed aircraft and it has the potential to impact anyone who (1) buys or sells used aircraft parts or (2) owns an aircraft. ASA plans to issue comments on this draft, and is asking the ASA community for their opinions on the draft guidance.

There is existing guidance in the form of an FAA Order that addresses this topic. The Order explains that “The regulations do not set forth specific criteria that can be used to determine whether an aircraft is
repairable or whether it is destroyed or scrapped.” Had this Order been published for public comment, ASA would have reminded the FAA that the airworthiness standards published in the regulations do establish standards that may be used as metrics for repairability. An aircraft that cannot comply with the FAA’s published airworthiness standards is not airworthy (unless the FAA has issued a special condition, exemption, or other variance from the regulations).

The Order explains that the regulations do “not specify who makes the determination that an aircraft is destroyed or scrapped.” Nonetheless, the Order seems to delegate such a responsibility to the FAA, and the draft Advisory Circular also seems to assign to the FAA the power to declare an aircraft as destroyed, and to force a deregistration on this basis. This is a dangerous power, and it is one that is not assigned to the FAA under either the statute nor the regulations.

The FAA has the power to make a determination concerning airworthiness. The FAA has the power to revoke a certificate of airworthiness when the aircraft is not airworthy. This revocation is subject to due process, and there is a formal mechanism for defending against a certificate revocation when the owner disagrees with the FAA’s decision. This is different from the destroyed-aircraft process which does not offer any due process under the FAA’s regulations.

The registration statute requires the FAA to register an aircraft when it is eligible. In summary, the owner must be a U.S. person and the thing that is getting registered must be an aircraft. The regulations provide a summary of what is not an aircraft, and they explain that when the aircraft is destroyed it is no longer an aircraft, so it is no longer eligible to be registered.

The draft Advisory Circular provides parameters under which the FAA can determine that an aircraft is not repairable, and on this basis declare it destroyed. This power to declare an aircraft destroyed assumes a power to the FAA that the FAA does not have under either statutes nor under regulations. Because the power does not exist, there is no due process established in the regulations for refuting a declaration of destruction.

The draft Advisory Circular suggests that FAA employees use their “knowledge, expertise, and judgment” and admits that the result may be subjective – this is not a matter left to the FAA’s discretion under the statutes nor under the FAA’s regulations so it appears to be an invitation for FAA employees to act in an arbitrary and capricious manner. The draft Advisory Circular provides some guidance but largely leaves the standard as the FAA employee’s subjective determination about repairability. So if the wing of a 787 is damaged and an FAA employee believes that the wing cannot be repaired the FAA employee could declare the 787 to be “destroyed.”

Also, the draft Advisory Circular shifts the burden of proof from the FAA to the aircraft owner. Upon a determination by any FAA employee that the aircraft is unrepairable and is therefore destroyed (remember, that an FAA employee can make this determination based on his or her subjective judgment), it is incumbent on the aircraft owner to sue the FAA to force the FAA to re-establish the registration, and it imposes on the owner the obligation to prove that the aircraft is repairable (rather than the normal airworthiness burden in which the FAA bears the burden of proof to justify a certificate action).

In whole, this draft Advisory Circular appears to open the door to FAA arbitrary determinations that an aircraft is unrepairable, having the de facto consequence of eliminating much of the value of the aircraft when it is consequently deregistered, and it imposes a heavy burden on the aircraft owner that will be difficult to meet at trial without a speculative investment in engineering analysis and repair justification that might be rendered valueless if the owner cannot prove to the court that the aircraft is repairable.

This topic was discussed at the ASA Conference earlier this month. ASA is asking members review the draft and to let us know your concerns, so we can make sure that the ASA comments reflect all of our members’ concerns.

The comment period was originally set for just 30 days but the FAA granted our request for an extension. Comments are now due to the FAA by August 16, 2023.

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Proposed ITAR Amendment Would Change the Regulations that Apply to Brokers

January 26, 2012 by Leave a comment

The Department of State has published a proposed rule that seeks to to amend the International Traffic in Arms Regulations (ITARs) as they apply to brokers and brokering activities.

Brokering is distinguished under the regulations from exporting. Thus, those who might negotiate a deal as an agent, or finance a deal, but who never get involved in the actual exporting of ITAR-controlled articles and services, are nonetheless subject to the State Department’s regulations.

Under the current rules, persons who broker exports of ITAR-controlled articles and services are required to register, and also in many cases to obtain licenses before they engage in brokering. This is meant to curb arms-dealing, but in practice it affects export of many aircraft parts that are controlled under the ITARs.

The recently-proposed changes to the ITARs would help by removing many dual-use parts as well as defense-related parts that do not serve a unique defense purpose from the scope of the ITARs.

The proposed rule would change (“clarify”) the definitions of the terms “broker” and “brokering activities.” It would also provide additional exemptions from the regulations for certain brokering activities. Here are the proposed new definitions:

§ 129.2 Definitions.
(a) Broker means any person (as defined by § 120.14 of this subchapter) who engages in brokering activities.

(b) Brokering activities means any action to facilitate the manufacture, export, reexport, import, transfer, or retransfer of a defense article or defense service. Such action includes, but is not limited to:

(1) Financing, insuring, transporting, or freight forwarding defense articles and defense services, or
(2) Soliciting, promoting, negotiating, contracting for, arranging, or otherwise assisting in the purchase, sale, transfer, loan, or lease of a defense article or defense service.

(c) For the purposes of this subchapter, engaging in the business of brokering activities requires only one action as described above.

(d) The activities subject to part 129 include brokering activities:

(1) by any U.S. person wherever located;
(2) by any foreign person located in the United States;
(3) by any foreign person located outside the United States involving a U.S.-origin defense article or defense service;
(4) by any foreign person located outside the United States involving the import into the United States of any defense article or defense service; or
(5) by any foreign person located outside the United States acting on behalf of a U.S. person.

(e) Brokering activities do not include:

(1) Activities by a U.S. person in the United States that are limited exclusively to U.S. domestic sales or transfers (e.g., not for export, which includes transfer in the United States to a foreign person);
(2) Activities by employees of the U.S. Government acting in an official capacity; or
(3) Activities that do not extend beyond administrative services, such as providing or arranging office space and equipment, hospitality, advertising, or clerical, visa, or translation services, or activities by an attorney that do not extend beyond providing legal advice to a broker.

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