Doing Business With Iran Under a JCPOA License? Get Your Transactions Completed by August 6, 2018.

As we reported on May 8, the United States’ decision to end the JCPOA agreement with Iran means that existing JCPOA-based licenses will be revoked on August 6.  A number of ASA members have these export licenses, which permit aircraft-parts-business with the specified Iranian parties.

On May 8, the President announced his decision to discontinue the United States’ participation in the Agreement with Iran, and to reimpose sanctions against Iran.

The Treasury has published a document explaining the wind-down process, including answers to frequently asked questions.  The wind-down document explains that the United States government plans to revoke JCPOA-related authorizations, such as the aircraft and aircraft parts-related export licenses that were issued pursuant to the US-Iran Agreement.  Those export licenses are scheduled to be terminated as of August 6, 2018.

Those ASA members who hold JCPOA export licenses (which are being terminated) may consider applying for replacement licenses under the safety of flight statement of licensing policy found in 31 C.F.R. § 560.528. That provision permits licenses on a case-by-case basis for exporting to Iran in order to ensure the safety of civil aviation and safe operation of U.S.-origin commercial passenger aircraft.  Historically, the United States government has not issued many of these licenses, but if the transaction is valuable to the United States then the transaction might be considered for licensing.

Advertisements

Watch Out for Brexit – That EASA Form One Might Have a Shelf Life!

How will Brexit affect the typical ASA member?  Although the full details are as yet unknown, the prima facie thoughts have been published by the European Commission (EC), and these thoughts could reflect future problems for ASA members.  In summary, UK-originated EASA Form 1 will be considered invalid in the EU after Brexit.

The European Commission published a Notice to Stakeholders detailing the consequences of the UK’s withdrawal from the European Union’s aviation safety rules.  The Notice explains that when the UK leaves the European Union (EU), then from an EU perspective, this action will (1) invalidate all certificates issued by the UK CAA, and (2) invalidate all certificates issued by the UK CAA certificate holders.  Certificates will be invalid as of the withdrawal date, which is currently set for 11pm on March 29, 2019.

The Notice explains that “[t]he products, parts and appliances concerned will no longer be considered as certified in accordance with Article 5 of the Basic Regulation.”  Article 5 of the Basic Regulation provides the legal foundation for the issue of an EASA Form 1 for a part or appliance.  In a practical sense, if you have an EASA Form 1 for a new part, and it was issued in the UK, then the EU will no longer recognize it as a valid document after Brexit.  This means that parts in your inventory that bear EASA Form 1 may have to be segregated and identified as “UK” and “EU,” in order to ensure that if they are still in inventory after Brexit, that they can be directed to customers who are legally able to use those parts.
There is an grandfather-clause that applies to parts that are already installed on an aircraft.  It does not provide any safe harbor for parts already in a distributor’s inventory.
What about release to service documents issued by 145 organizations located in the UK?  These are issued on EASA Form 1 tags, but they are arguably do not reflect certification “in accordance with Article 5 of the Basic Regulation.”  This technical argument is unlikely to save those tags.  Another provision in the Notice makes it clear that:
“Certificates confirming compliance with the provisions of the Basic Regulation and its implementing rules issued before the withdrawal date … will no longer be valid.”
This would appear to apply to maintenance release documents, as well, because they are described in Annex IV of the basic regulation (and also because disallowing UK certificates as “third-party certificates” is consistent with the message of the Notice).
How do you know if a Form 1 is subject to these conditions?  Look in block one (in the upper left had corner).  That block identifies the aviation authority under whose legal authority the form was issued (usually by identifying the name of the nation and/or the name of the aviation authority).  As an example, here is a link to a form issued under the legal authority granted by France’s DGAC; and here is a link to an overhaul tag issued under the legal authority granted by the UK CAA.
It is possible that further negotiations will result in an agreement between the EU and the UK to change this declaration.  It is also possible that Brexit could be reversed.  But, absent some other agreement, the EU will no longer accept UK-based EASA Form 1 for new parts, even if the Form was issued while the UK was still part of the EU, after the withdrawal date.

New aliases for Al-Naser Airlines and Dart Airlines added to Treasury’s list of Specially Designated Nationals

The U.S. Department of the Treasury (Office of Foreign Asset Control) has added some new airline names to the list of Specially Designated Nationals (SDNs).  In particular they have added some new airline aliases.  The full listing for Al-Naser Airlines and Dart Airlines are both listed below – the new additions to the listings are in bold face type and underlined to highlight the changes:
AL-NASER AIRLINES (a.k.a. ALNASER AIRLINES), Al-Karrada, Babil Region – District 929, St. 21, Home 46, Baghdad, Iraq; P.O. Box 28360, Dubai, United Arab Emirates; P.O. Box 911399, Amman 11191, Jordan; Additional Sanctions Information – Subject to Secondary Sanctions [SDGT] [IFSR] (Linked To: MAHAN AIR). -to- AL-NASER AIRLINES (a.k.a. AL NASER WINGS; a.k.a. AL NASER WINGS AIRLINES; a.k.a. ALNASER AIRLINES), Al-Karrada, Babil Region – District 929, St. 21, Home 46, Baghdad, Iraq; P.O. Box 28360, Dubai, United Arab Emirates; P.O. Box 911399, Amman 11191, Jordan; Additional Sanctions Information – Subject to Secondary Sanctions [SDGT] [IFSR] (Linked To: MAHAN AIR).
 
DART AIRLINES (a.k.a. DART AIRCOMPANY; a.k.a. DART UKRAINIAN AIRLINES; a.k.a. TOVARYSTVO Z OBMEZHENOYU VIDPOVIDALNISTYU ‘DART’; a.k.a. “DART, LLC”; a.k.a. “DART, TOV”), 26a, Narodnogo Opolchenyia Street, Kiev 03151, Ukraine; Kv. 107, Bud. 15/2 Vul.Shuliavska, Kyiv 01054, Ukraine; Ave. Vozdukhoflostsky 90, Kiev 03036, Ukraine; Additional Sanctions Information – Subject to Secondary Sanctions; Tax ID No. 252030326052 (Ukraine); Government Gazette Number 25203037 (Ukraine) [SDGT] [IFSR]. -to- DART AIRLINES (a.k.a. AIR ALANNA; a.k.a. DART AIRCOMPANY; a.k.a. DART UKRAINIAN AIRLINES; a.k.a. TOVARYSTVO Z OBMEZHENOYU VIDPOVIDALNISTYU ‘DART’; a.k.a. “ALANNA”; a.k.a. “ALANNA LLC”; a.k.a. “DART, LLC”; a.k.a. “DART, TOV”), 26a, Narodnogo Opolchenyia Street, Kiev 03151, Ukraine; Kv. 107, Bud. 15/2 Vul.Shuliavska, Kyiv 01054, Ukraine; Ave. Vozdukhoflostsky 90, Kiev 03036, Ukraine; Additional Sanctions Information – Subject to Secondary Sanctions; Tax ID No. 252030326052 (Ukraine); Government Gazette Number 25203037 (Ukraine) [SDGT] [IFSR] (Linked To: CASPIAN AIRLINES).
Typically, companies will need a Treasury license before accomplishing most aircraft parts transactions involving an SDN.  This includes transactions in which you are selling parts to a MRO that you know intends to install the parts on an aircraft belonging to, or operated by, an SDN.  The U.S. has jailed people who’ve sold aircraft parts to SDNs.  The U.S. has enforced its export regulations against non-US companies, so even non-US companies should be cautious about doing business with an SDN.
You should seek legal advice before doing business with any Specially Designated National (SDN).

DARs – Where Can They Work? From Home?

I have heard from quite a few ASA members that their DARs are being told that they can no longer work from their own facilities.  This is a problem for many DARs who receive parts at their home or office, review each part and its paperwork, and then if the part is eligible the DAR issues an 8130-3 tag for the part.

The source of the issue appears to be an FAA email that stated:

It has come to the attention of the FAA some designees are unclear on where FAA Form 8130-3 may be issued when performing authorized work at the request of a distributor.  As defined in FAA Order 8130.21, any certification work when performed on a distributor’s inventory must be performed at the distributor’s place of business.  This policy does not allow for a designee to perform these functions at their personal home location.  In addition, the Designee Management Policy in FAA Order 8000.95 requires the designee to define the location of where the activity is going to take place, prior to the FAA delegating the function.

Contrary to the email, there is no general requirement in FAA Order 8130.21H that 8130-3 tags must be issued “at the distributor’s place of business.”  We’ve been in touch with FAA Headquarters about this, and they have pledged to examine the situation.

Different Type of DARs

In examining the guidance situation, it is important to remember that there are different types of DARs with different privileges.  There are DARs who received their privileges under FAA Policy memos:

Those DARs are typically restricted to only working at the facility of the sponsoring distributor.  The reason for this is because their privileges are tied to the AC 00-56B system of the distributor. They use a systems approach based on the accredited system to support their findings.

These ‘limited-DARs’ should be contrasted with traditional DARs who are not specifically tied to an accredited distributor.  Traditional DARs are typically limited to the geographical range of the office from which they received their credentials (the managing office).  If the DAR needs to work outside of that range, then there is a well-documented process for expanding those geographic limitations (it involves assurances that the FAA is able to adequately monitor and supervise the designee, as well as coordination between geographically relevant offices).

Note of course that a DAR who lives in a geographic district different from that of his or her FAA managing office should consider transferring to a more geographically-suitable FAA managing office if he or she plans to work from (and issue tags from) a home office.  Designee operations outside of the geographic territory of the managing office are typically not permitted without written permission from the FAA.

Limit on ‘Traditional’ DARs

The recent email received by some DARs appears to have been sent to traditional DARs.  But it appears to have confused the restrictions placed on the special category DARs who work on for distributors (and who must operate within the AC 00-56 quality system of the distributor), with the privileges of ‘normal’ DARs, who may operate anywhere within their prescribed geographic limitations.

This is more than just a matter of confusion of standards.  There are problems with this directive, including:

(1) Order 8130.21H states that when a tag is issued at a distributor’s facility then the distributor’s name and address should be placed in block 4 – but this does not limit where the tag can be issued – it only sets a rule for how to complete block 4 (this is consistent with the guidance in para 2-5(b) of that same order, which requires block 4 to state the name and address where the tag is issued;

(2) There is no restriction in Order 8130.21H that forbids a DAR from operating out of his or her home, even when reviewing parts that belong to a distributor;

(3) Many DARs are both semi-retired and aged, so it is not unusual for many of them to operate out of their home offices,

(4) When the DAR operates out of his or her home office, the distributor must bring the parts to the DAR for review prior to issue of the tag; and,

(5) Order 8130.21H requires that the 8130-3 state where the tag was issued, so it is supposed to list the DAR’s home office address, if that is where the tag was issued.

The recent language is already causing problems for several distributors, whose DARs feel that they can no longer accept and review parts at their home offices.

ASA has brought this to the attention of FAA management, and they rapidly pledged to examine the situation.

Business With Iran – Grinding to a Halt?

Several ASA members have looked into doing business with Iranian air carriers and other Iranian customers.  Some have even applied for export licenses to support such business.  But those efforts appear to be wasted as the US prepares to begin enforcing sanctions against Iran, once again.

Today (May 8, 2018), the President announced his decision to discontinue the United States’ participation in the Agreement with Iran, and to reimpose sanctions against Iran.

The Treasury has published a Frequently Asked Questions document explaining the upcoming process for Iranian sanctions.  The FAQ, consistent with the President’s announcement, requires the Secretaries of State and of the Treasury to take immediate steps to re-impose all United States sanctions lifted or waived in connection with the JCPOA, including those under the National Defense Authorization Act for Fiscal Year 2012, the Iran Sanctions Act of 1996, the Iran Threat Reduction and Syria Human Rights Act of 2012, and the Iran Freedom and Counter-proliferation Act of 2012.  These steps shall be accomplished as expeditiously as possible, and in no case later than 180 days from May 8, 2018.

As part of this process, the U.S. government plans to revoke JCPOA-related authorizations such as the aircraft and aircraft parts-related licenses issued pursuant to the US-Iran Agreement; expect to see these permits terminated as of August 6, 2018,

Applicants whose pending license applications are denied may resubmit their applications for consideration under the safety of flight statement of licensing policy found in 31 C.F.R. § 560.528. That provision permits licenses on a case-by-case basis for exporting to Iran in order to ensure the safety of civil aviation and safe operation of U.S.-origin commercial passenger aircraft.

Scrapped Parts – What Evidence of Destruction Should I Expect?

An Association member recently asked me what sort of documentation is appropriate to provide evidence of destruction when aircraft parts are being scrapped.

In 2012, ASA published ASA Best Practice: Disposition of Unsalvageable Aircraft Parts.  That guidance recommends:

“Persons disposing of unsalvageable aircraft parts and materials should maintain a record keeping system which identifies the part number, serial number (as applicable) and description of the part.”

This recommendation is advisory only – it is not required by law.

Under US law, there is no legal obligation to scrap commercial aircraft parts, and therefore there is no legal requirement to maintain documentation or other evidence of that activity.  Nonetheless, there may be some risk-mitigation-reasons for maintaining such records.

Aircraft parts that are not airworthy – and cannot be made airworthy – can be a hazard to aviation safety if their condition is misrepresented and they are subsequently used inappropriately.  Because of this potential hazard, many companies will scrap aircraft parts that they deem to be valueless (including those identified as “beyond economic repair”).  They do so in order to help to mitigate any potential liability (including product liability) associated with a future use (or misrepresentation) of the parts.  If the part has been scrapped, then it is less likely that someone will mistake it for a good, airworthy, part.

This means that while there is no legal obligation for scrapping, there may be risk mitigation and/or legal liability reasons to scrap certain parts.  Therefore, a company’s decisions about scrapping, and evidence thereof, should be guided by sound commercial practices and the business’ plan for mitigating its own liability (and for protecting the aviation community from parts-related hazards).

I have heard that some companies ask their scrap facility to photograph mutilated material, but this appears to be an unusual request at this point in time.  Such documentation can be costly and time consuming.

It is more normal for businesses that scrap aircraft parts to provide a certificate of destruction.  In other countries, where the disposal of certain materials is more heavily regulated, a certificate of destruction may be more regulated; but in the US, an aircraft parts certificate of destruction is a commercial document that is typically not subject to direct FAA regulation.

I drafted the AFRA Best Management Practices for Disassembly of Aircraft Assets and Recycling and we recommended obtaining a Certificate of Destruction in that standard.  This recommendation was based on these facts:

  1. Many third parties that were providing such services to the aviation industry provided such a certificate;
  2. Many aviation industry parties that were obtaining such services asked for such a certificate; and,
  3. The practice of obtaining evidence of destruction of parts could be useful to mitigate liability in the event such parts (or counterfeits of such parts) later were involved in a loss event, such as an aircraft incident or accident.

Because it is not legally required in the United States, I cannot describe a specific legal minimum standard for evidence of scrapping (e.g. documentation, photographs, etc.); but I can provide some tips related to scrapping of parts identified as being appropriate for destruction.  These following points are only suggestions to consider when developing your scrapping policy.  An actual decision should be based upon your business’ needs and desires, and upon your risk mitigation strategy.

  1. Your business may have obligations imposed by contract.  This is particularly true when disposing of defense aircraft parts.  You should ensure that your practices are consistent with your contractual obligations, and then subsequently you should ensure that you do not adopt new contractual obligations related to scrapping without updating your practices to support those new obligations.
  2. If you are not going to scrap parts yourself, on-site, then use a facility that you trust to perform the scrapping activity.
  3. You may want to consider periodic audits of your scrapping vendor, to ensure they continue to have a secure environment for intake, scrapping and security of the scrap result.  many reputable facilities have a procedures-based system for handling material.  This sort of system allows you to audit the procedures (as written) to ensure they meet your need, and then permits you to audit the implementation of the procedures to ensure that they are being implemented consistent with the expectations generated by the written procedures.
  4. Consider maintaining a record keeping system that identifies the part number, serial number (as applicable) and description of each part.  This system should be sufficiently robust to allow you to pull evidence of destruction from your files if it becomes necessary.
  5. As discussed above, consider obtaining a Certificate of Destruction for the parts that are scrapped, and retaining the Certificate as part of your records.  This may identify the material based on an attachment (which may be your manifest that accompanied the material to the scrap facility).  This represents current normal practice for identifying material that has been destroyed.
  6. In the future, photographs documenting the destruction of material may become an industry norm.  If this becomes a norm, then:
    1. You may want to adopt that norm; and,
    2. You ought to find it easier to find scrap facilities willing to offer photographic evidence, if market forces are requiring such documentation.

Condition Codes on Parts with Multiple Tags

An association member recently asked about the “correct” condition code to use when selling a component with multiple tags.

This answer is limited to commercial condition codes, such as those used on listing services like ILSmart or PartsBase.  If one is looking for the condition code to list on an 8130-3 tag or other government tag then the answer may be different!  For example, one may not describe an article as overhauled on an 8130-3 (approval for return to service) unless the article was disassembled, cleaned, inspected, repaired as necessary, reassembled, and tested.  All of this must be performed using methods, techniques, and practices acceptable to the FAA.

The specific question involves a hypothetical fuel pump bearing two 8130-3 tags.  The first tag is an earlier overhaul tag.  we will assume for this hypothetical that the tag is in good order and that the overhaul was properly completed.  The second tag is a more recent one stating “Modified” in the status/work block, and explaining in the remarks block of the tag that the fuel pump was modified according to instructions in a manufacturer’s service bulletin. The part has remained unused and uninstalled since the overhaul.  Which condition code is appropriate for identifying the unit?

A part that is marketed as “overhauled” may be perceived as having a different value than a part that is marketed as “modified,” so knowing which condition code is commercially appropriate for marketing the part can have a real dollars-and-cents effect.

We are talking about condition codes in commercial communications (and not codes on a regulated document, like an 8130-3 tag).  These condition codes may be governed by instructions associated with the commercial medium.  Therefore, if you are using a commercial medium for this communication then you should follow the rules set by that medium.  Typically, online inventory locator services will have their own definitions and standards.  If you are communicating via a SPEC 106 form, then that specification provides some guidance about condition codes for use in the associated form.

In the hypothetical that we’ve posed, the fact that this is for a fuel pump may mean that the age of the earlier overhaul tag is relevant.  Fuel pumps include seals that could degrade over time.  This is a rather specific issue connected to the hypothetical that may not be applicable to other parts with more recent overhaul tags, or that do not have elements that are susceptible to degradation over time.

Setting those issues aside, though, it is generally acceptable for a distributor to describe an aircraft part as overhauled if the maintenance records reveal that it was properly overhauled, and has not been used or installed since the overhaul.  If there is an applicable Service Bulletin, then the customer will likely want to know about the Service Bulletin status, but that can be discussed directly with the customer (or disclosed in a remarks field, if such a field is available).  One reason that this is acceptable is because the Service Bulletin should not have done anything to the part to change the fact that it was overhauled – obviously, if the service bulletin modification undermines the overhaul, or provides alternative instructions for identification, then the service bulletin that was incorporated should take precedence over this advice.

Note that there are a variety of unusual circumstances that can change this rule-of-thumb-advice.  For example, where the subsequent service bulletin requires a part number change, it may become inappropriate to list the part under its new part number as “overhauled,” because it was overhauled under the prior part number (causing a mismatch between the part number on the overhaul tag and the new part number on the part).  In such a case, it may be more appropriate to list the new part number’s condition as modified or altered on the grounds that the new part number was not associated with the earlier maintenance, and the new part number could have different overhaul requirements.

 

 

 

%d bloggers like this: