EU Considers Listing US as Tax Haven

Looking for a Tax Haven?  Maybe the Answer is in the United States!

The European Commission is developing a list of jurisdictions that are considered to be risks for tax avoidance.  They are in the process of updating this list and the United States has been flagged as a risk in the area of tax good governance.

To be fair, the United States enters the list as one of 90 countries that the EU views as potential problems, and in 2017 the EU will winnow that list down to its final resolution.  Only 160 countries were initially assessed so more than half the world is subject to this next-level EU scrutiny.  Countries are identified based on three risk factors:

  • Transparency of the tax system (this seems to be focused more on automatic exchange of information on tax rulings and the automatic exchange of information between tax authorities, as opposed ot making taxation easy to understand)
  • Tax advantages for corporations
  • No corporate income tax or zero-percent income tax

The United States was identified in two out of the three categories: Transparency and corporate tax advantages.

This is just the first step in a three step process.  Now that the European Commission has produced a scoreboard of indicators, they still need to engage in screening and listing.  Under the screening process, EU Member States will identify nations that must be formally screened by the EU.  This screening will include a dialogue between the EU and the country in question, to allow the country to react to any concerns raised (perhaps this could be considered in any tax package that the new Administration proffers).  Then, when the screening process is complete, nations that refused to cooperate or engage with the EU regarding tax good governance concerns would be put on the EU list of ujsidictions without good tax governance.  Presumably this could lead to EU impediments against transfer of funds to or from those tax havens.

The EU will create a map that shows a full consolidated overview of countries and territories ‘listed’ by Member States for tax purposes.  The US is unlikely to be listed on the final list of bad actors, but it is unclear who may finally make that list.  It will be important to gauge whether this effort impacts international payments for members of the aerospace community.

A full review of the EU work program for this effort is available online.

Suspected Unapproved Parts (SUPs) Reporting on Form 8120-11

The FAA has republished the Form 8120-11. This is the form for reporting suspected unapproved parts (SUPs).

The new version of the form was approved by the White House in 2016.  One new feature is that the completion instructions are on the first page of the standard PDF – before the actual form.  This means that people will typically see the instructions before they start to complete the form.

The 2009 version of the form put the instructions on the second page, between the primary form and the continuation sheet.  It is natural for people to .  ASA has received many questions from members about how to complete the 8120-11 form, and many of those questions were answered in the instructions (found on the second page of the PDF).  This is because it is natural for people to start at the top of page one and work their way through completing the form, without skipping ahead to examine the later parts of the form.  Moving the instructions to page one will hopefully answer many of the questions that arise in completing the form.

If you encounter a Suspected Unapproved Parts, or SUP, then reporting is typically voluntary under the regulations; however many aviation companies have imposed mandatory SUPs reporting requirements on themselves through their quality manuals or operations manuals.  Be sure to follow your own internal guidance when considering whether to report a SUP!

Should ASA Support a Repeal of the Estate Tax?

ASA has the opportunity to sign onto a letter supporting a bill that would repeal Subtitle B of the Internal Revenue Code of 1986 that relates to estate, gift, and generation-skipping taxes. The Bill is entitled the Death Tax Repeal Act of 2017.

Although it is typically thought of as only affecting the very wealthy, the estate tax can also have an effect on small and family-owned businesses; particularly those that are land- or asset-rich but cash poor. One oft-cited example is that of the family farmer, whose is land-rich (the value of his real property is high) but operating on very thin margins and doesn’t have a large amount of cash saved or other liquid assets. The family of the farmer may be forced to sell off a piece of the farm land in order to raise the money to pay the estate tax assessed against the total value of the farm upon the farmer’s death.

More close to home, in the aerospace distribution community, companies may have millions or even billions of dollars in inventory on the shelf that would be counted toward the value of a family business owner’s estate. This sort of vast parts inventory cannot be quickly liquidated upon a business owner’s death to cover an estate tax assessed against the value of the business (that includes that inventory). Additionally,  because many businesses rely on their inventory as collateral against which to take out loans or lines of credit, they cannot simply depreciate the value of the inventory to zero to minimize the value of the business for estate tax purposes, or they risk also minimizing the apparent value of the business as a whole, thus making it difficult to borrow in the future.

On the other hand, many people feel that the estate tax is something that only effects the very wealthy and thus repeal should not be a high priority (or a priority at all).

I would like to hear what ASA’s members think. Is a letter supporting the Death Tax Repeal Act of 2017 something ASA should sign on to? The deadline to sign on to the letter is Monday, January 23, so please let us know what you think before then.  You can email your thoughts to Ryan Aggergaard at

BIS Revises Sudan Licensing Policy

The U.S. Department of Commerce Bureau of Industry and Security (BIS) issued a final rule today revising its policy for review of applications for the export of parts in support of Sudan’s civil aviation industry from a policy of presumptive denial to one of presumptive approval.  This change makes it possible for exporters of aircraft parts to obtain a license to export parts “intended to ensure the safety of civil aviation or the safe operation of fixed-wing, commercial passenger aircraft.”

Prior to this rule change BIS maintained a general policy of denial of export license applications for “[a]ll aircraft (powered and unpowered), helicopters, engines, and related spare parts and components.” 15 C.F.R. § 742.10(b)(1)(iv).  The rule revision replaces that policy “to a general policy of approval for parts, components, materials, equipment, and technology that are controlled on the CCL only for anti-terrorism reasons and that are intended to ensure the safety of civil aviation or the safe operation of fixed-wing, commercial passenger aircraft.” The new rule goes into effect January 17, 2017.

The rule explains that these changes are being made “in connection with ongoing U.S.-Sudan bilateral engagement, and with the aim of enhancing the safety of Sudan’s civil aviation” in furtherance of U.S. goals to improve regional peace and security. The support and enhancement of safety in civil aviation was one of the carrots the United States used during its negotiations of the Iran nuclear deal as well.

One important caveat to the rule change is that a general policy of denial of export (or reexport) license applications has been retained if the transaction would “substantially benefit a sensitive end user.” Sensitive end users include (but are not limited to) Sudan’s military, police, and intelligence services, or persons owned or controlled thereby. Should you be contacted by a potential customer from Sudan it is therefore important to ensure that you follow your export compliance procedures to establish the identity of the ultimate end users.

The relevant text of the new rule is as follows:

15 C.F.R. § 742.10(b)(3)(ii) General policy of approval. Applications to export or reexport to Sudan the following for civil uses by non-sensitive end-users within Sudan will be reviewed with a general policy of approval.

(A) Parts, components, materials, equipment, and technology that are controlled on the Commerce Control List (Supp. No. 1 to part 774 of the EAR) only for anti-terrorism reasons that are intended to ensure the safety of civil aviation or the safe operation of fixedwing commercial passenger aircraft.

. . .

Note to paragraph (b)(3)(ii). Applications will generally be denied for exports or reexports that would substantially benefit a sensitive end user. Sensitive end users include Sudan’s military, police, and intelligence services and persons that are owned by or are part of or operated or controlled by those services.

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) has simultaneously amended its Sudanese Sanctions Regulations to authorize these exports.

Remember, this policy change does not mean that you can ship to Sudan without a license; rather, it means that as a general rule an export license will be granted for the export of aircraft parts in support of Sudan’s civil aviation industry. Sudan remains the only country on the Commerce Country Chart controlled under column Anti-Terrorism 1 (AT1), and AT1 applies to ECCN 9A991.d, under which most aircraft parts are categorized.

As always, anyone seeking to engage in new, complex, or unfamiliar export transactions should consult an export compliance attorney.

ASA Argues 8130-3 Tags Before the DC Circuit

ASA appeared in court this morning to argue that the FAA’s new MAG-based documentation requirements violate US law and should be enjoined.  This is an important case for distributors whose parts sales have been impacted by the MAG.

The three judge panel consisted of Judge Tatel, Judge Millet and Judge Williams. Most judges are pretty smart, but these are three of the top jurists in the country.

We tried to focus the written briefs on the simple legal issues, but the underlying issues – those that involve questions like “just what is an 8130-3 tag, anyway,” and “why is the government doing this”? – are very complicated. Copies of our written briefs are available here:

As you might expect from three very smart judges, they wanted to know what the case was really all about.  This was difficult because the case is limited to the record on appeal and the FAA’s official ‘record’ was very sparse.  Last summer, ASA had tried to supplement the record with additional facts (affidavits from our members), but the FAA opposed our efforts (they standard approach is to limit the appeal to the record, so the court denied our efforts to supplement the record, but did take the member affidavits into account in analyzing our motion for a stay).  So we found ourselves having to describe a set of facts that were not well-documented in the record (and a lawyer is not supposed to testify as to new facts).

We did our best to try to explain how documentation works in the industry and when parts might enter a system without an 8130-3 tag, but with other indicia of airworthiness.

Questioning ran long this morning, as the judges tried to understand how 8130-3 tags work, and when (if ever) a part is allowed to enter a repair station without an 8130-3 tag.  The FAA’s attorney did not help matters by suggesting that parts without 8130-3 tags “lack provenance,” but we were able to explain that parts can be identified using other means and that the FAA has endorsed the use of other means of identification in AC 20-62E.

The Court was very much focused on FAA Notice 8900.380.  This is the Notice that reminds repair stations that they can inspect a part that doesn’t have an 8130-3 tag.  ARSA has put together an excellent checklist for that sort of inspection.  But even that FAA Notice 8900.380 appears to fall short, as some FAA inspectors have suggested that the Notice does not remedy the MAG requirement for a left-side signatures (“release must be documented on an FAA Form 8130-3 as a new part”).  So we have run into a problem with the Notice (which was supposed to at least provide a temporary solution) being ignored by the FAA’s own inspectors (who would not permit their repair station charges to adopt the terms of the Notice.

Judge Williams closed out the argument by suggesting the Europeans “snookered the US.”

The next step in the case is for ASA to wait for the opinion from the Court. There is no specific timetable for an opinion but often opinions are issued about 60-90 days after argument.  ASA remains engaged with the FAA in an effort to resolve some of the underlying issues in a way that allows airworthy parts to be accepted and used

An audio recording of the oral argument is available on line; you can hear the lawyers but unfortunately the Judges are difficult to hear on the recording (this is unfortunate indeed as their questioning demonstrated a keen thought process for each).


New ITAR Export Reporting Requirements Now in Effect

For those who may have missed it over the busy holiday season, a new method for submitting export and temporary import reporting information for ITAR-controlled articles went into effect as of December 31, 2016.  This change was part of the DDTC’s efforts to conform reporting requirements to the International Trade Data System “single window” administered by  U.S. Customs and Border Protection in accordance with the SAFE Port Act and Executive Order 13659.

Readers should already be familiar with the “single window,” better known as the Automated Commercial Environment (“ACE”) that has subsumed AESDirect for the purpose of most of your export filings.  Exporters will have been using ACE for their export filings for several months now, so the change to your systems and procedures should be minimal.  The revision to the ITAR effective December 31 harmonized those regulations by removing references to AESDirect and replacing them with references to CBP electronic filings and systems.

In theory this should make filing the appropriate reports for export of ITAR-controlled articles easier. Using the single window, an exporter of ITAR-controlled goods reports the required information to CBP via ACE, and CBP relays the relevant and necessary information directly to the DDTC. There is no need for the exporter to notify DDTC directly. This should help to eliminate confusion as to which reports must go to which government entity, and also eliminate the cost and burden of duplicative reporting requirements.

Exporters should note, however, that this does not eliminate all your requirements to correspond with the DDTC. You will still need to ensure you are obtaining the appropriate licenses for your ITAR-controlled exports, and ensuring your registration remains current. The new rule also did not amend any part of 22 CFR part 130, so your reporting requirements related to fees and commissions remains unchanged, for now.

As always, when in doubt, consult your export compliance attorney to ensure you are acting in accordance with the ITAR and all other export compliance laws and regulations.


Treasury Department is Updating Internet Security – Check Your Export Compliance Links to Ensure they Continue to Work Properly

Many ASA members have established automated systems to check their business partners against US sanctions and restricted parties lists.  This is to ensure their continued compliance with US export laws.

For those who have established such automatic protocols, you may need to know that the the Treasury Department will be implementing new computer security protocols that could impact the way that your own software interfaces with Treasury Department restriction lists.

A 2015 White House Office of Management and Budget (OMB) mandate required internet security and recommended reliance on HTTPS protocols.  In accordance with this mandate, the Treasury Department will be implementing HTTP Strict Transport Security (HSTS) headers on the website on Thursday, January 12 during an evening maintenance window.

There is no anticipated downtime associated with this change; however, the change affects multiple domains and sub-domains, and will force users to the HTTPS site, as opposed to allowing browsers to redirect from HTTP to HTTPS.  This has the potential to impact scripts that users may have developed to poll for data, like OFAC compliance lists (e.g. specially designated nationals).  The integrity of these scripts should be verified (or updated) to ensure that they continue to work properly after the change.

In addition to this change, the Treasury Department will also be updating the HTTPS certificate it uses for the domain during the aforementioned maintenance window.   Treasury warns that users may have to reinstall the root certificate for the site if they experience connection problems.  Treasury has stated that the root certificate (the G3 certificate) can found at the following URL:

Please contact OFAC technical support at 1-800-540-6322 Option #8 or with any questions that you may have about this change.

%d bloggers like this: