Sanctions for Aircraft Parts Transactions: Exercise Due Diligence With Your Business Partners

It remains important for aircraft parts exporters to check their customers against the U.S. government export databases.

In today’s Federal Register, restrictions were renewed against an individual and her companies for supporting an Iranian airline, Mahan Airways, that has been designated by the United States as a Global Terrorist.

  • Gulnihal Yegane, Merkez Mah. Hasat Sok. No: 52/6, Sisli, Istanbul, Turkey;
  • Trigron Lojistik Kargo Limited Sirketi, Yanibosna Merkez Mah., Degirmenbah[ccedil]e Cad. No. 11, Airport Hill Sitesi Blok D.6,
    Bah[ccedil]elievler, Istanbul, Turkey;
  • Ufuk Avia Lojistik Limited Sirketi, Merkez Mah. Hasat Sok., No: 52/6, Sisli, Istanbul, Turkey;
  • RA Havacilik Lojistik Ve Tasimacilik Ticaret Limited Sirketi, Yesilce Mah. Dalgic SK., 3/101 Kagithane, Istanbul, Turkey

According to the Federal Register, Ms. Yegane was originally one of 19 persons accused of procuring parts to support the operation of Mahan Airways in Iran. 78 FR 75,463 (Dec. 12, 2013).  Mahan Airways is designated by the United States as a Specially Designated Global Terrorist. 77 FR 64,427 (Oct. 18, 2011).  Most recently (in 2017), Ms. Yegane was accused of obtaining CFM-56 engines and gaskets and isolators used on Boeing aircraft for shipment to Iran.  83 FR 4897 (Feb. 2, 2018).

Aircraft parts distributors should be cautious in their business dealings to ensure that they are not supporting persons or entities members in violation of the law, and this includes forbidden business dealings with parties subject to export restrictions.

As we’ve discussed in our export classes, one efficient way to identify parties who might be subject to export restrictions is to search the consolidated screening list found online at https://www.export.gov/csl-search.  The Consolidated Screening List is a list of parties for which the United States Government maintains restrictions on certain exports, reexports or transfers of items.  The restrictions are drawn from eleven export screening lists published by the U.S. Departments of Commerce, State and the Treasury.

We recommend that you check your business partners with every transaction, because a previously “clean” partner could be added to the lists at any time.  Linking your computer-based transactions system to the Consolidated Screening List is one way to automatically ensure that every transaction is scanned.  If you choose to do this, then make sure that other parties who are not entered into the system, but who are nonetheless part of the transaction, are also checked by hand.  You can link to the database using the Application Programming interface (API), which enables computers to freely access the CSL in an open, machine-readable format. From this API, any company can build a search engine to quickly find names, aliases, and other screening information. Developers can find more information about the API online at https://developer.export.gov/consolidated-screening-list.html.

 

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Updates to Lithium Battery TSOs Available for Comment

The FAA has issued two new draft TSOs related to lithium batteries.  Draft TSO-C142b Non-Rechargeable Lithium Cells and Batteries, and Draft TSO-C179b Rechargeable Lithium Batteries and Battery Systems, each inform applicants for TSOAs or LODAs of the minimum performance standards articles must meet in order to receive approval and identification with the applicable TSO marking.

These TSOs will cancel the old versions of the TSOs (C142a and C179a) six months after the effective date of the new revisions. After that point, all applications for TSOA or LODA must be made under the new TSO revision.  However, the draft TSOs make clear that articles “approved under a previous TSOA may still be manufactured under the provisions of its original approval.”

ASA has reviewed the draft revision TSOs and they do not appear revoke or amend already-approved TSOAs. This means older equipment manufactured to the old TSOs under previously issued TSOAs remain usable, which should give distributors with articles manufactured in accordance with the old TSOs in their inventory a measure of comfort in the face of the revised standards.

If you think these draft TSOs warrant comment we would love to hear from you.  Email ryan@washingtionaviation.com with your feedback.  Comments are due January 31, 2018 so we need to hear from you before then.

DAR Privileges, During the Shutdown

We have been receiving queries about what the Government Shutdown means for DARs who issue 8130-3 tags.  The Government Shutdown began Friday night after midnight, when the appropriations continuing resolution expired.

Some people have received notification that their DAR needs pre-approval from their FAA Advisor before doing any DAR work; in the absence of working FAA employees, such pre-approval may be impossible. This means that those DARs may be unable to function during the shutdown because of the absence of FAA employees to issue such pre-approval.

But this does not mean that all DARs are inhibited in this way.  In fact, many DARs should be able to issue 8130-3 tags during the government shutdown.

What is the Legal Effect of the Shutdown?

The U.S. Constitution limits the ability of the government to use funds by stating that money can only be spent if it is permitted under an “Appropriation.”

No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time. U.S. Constitution, Article I, Section 9, Clause 7

The government is shut down because the government no longer has the authority to spend funds (because the appropriated funding from the most recent continuing resolution ran out on Friday, January 19).

The continuing resolutions that have been discussed in the press have appropriated funds for temporary periods, in order to keep the government functioning at its prior appropriated levels during the temporary funding period. Congress did not pass any sort of extension by the deadline, so the U.S. Government no longer has authority to spend money.

The government shutdown does not mean that the government can’t function – it means that the government can’t spend money.  DARs do not draw any appropriated funds from the U.S. Treasury for their DAR activities, and thus their activities are not curtailed merely as a consequence of the government shutdown.

What Rules Apply to DARs?

There are other rules that apply to DARs that might curtail their activities, or some of their activities, depending on the specific written authority that they’ve been granted.

FAA guidance explains that:

“DARs may perform authorized functions only within the limits of their authority.” FAA Order 8100.8D – Designee Management Handbook ¶ 1410(b).

DARs cannot perform functions outside the authority.  So if you couldn’t perform a function before the shutdown, you still cannot do it during the shutdown.  This also means that if the DAR’s written instructions required him or her to obtain FAA-Advisor approval before beginning a project, that the government shutdown may inhibit that DAR from starting new projects (due to lack of pre-approval).  Similarly if the DAR received appropriate approval before the shutdown (e.g. on Friday the 19th), then the DAR would still be eligible ,

The same FAA guidance also explains that the FAA needs to obtain authorization before accepting “certification or inspection activity.”

“DARs must contact their managing office for authorization BEFORE accepting any certification or inspection activity requested by an applicant and obtain any special directions or instructions deemed necessary.” FAA Order 8100.8D – Designee Management Handbook ¶ 1410(c).

This means that DARs need be authorized to perform DAR work before they start it.  For projects involving complete aircraft, this can mean going back to the FAA Advisor for each aircraft, which permits the FAA Advisor to review any special conditions applicable to that aircraft.  But typically, DARs are provided with general authorization to issue 8130-3 tags for articles, and the DAR’s instructions will be issued with that general authorization.  It would be extremely impractical for DARs to go back to their FAA advisors for form-by-form instructions for each 8130-3 tag that they issue.  It is not unusual for the FAA to insist on annual or quarterly activity reports showing the 8130-3 tags issued (thus permitting review of the use of the authority as it has been exercised).

DAR Advice

What does this mean for DARs who issue 8130-3 tags for articles?  It means that they should go back to their authorizing documents and ensure that they do not have any restrictions that would forbid exercise of authority during the shutdown.  As long as there is no limitation/prohibition, and as long as the DAR has general authority to issue 8130-3 tags, it should be acceptable for the DAR to continue issuing 8130-3 tags during the government shutdown in the same manner that the DAR did before the shutdown.

For DARs who are exercising authority under the FAA’s policy memos, be sure that you are operating under the authority of the appropriate FAA guidance, including the policy memos, which impose additional limits beyond those in the FAA Orders.  For more on this authority, see our past articles:

And also be sure to review the FAA’s policy memo guidance and remain in compliance with the terms and conditions found therein:

Limited DARs (DAR-56): Apply for Function Code 19 NOW! The Deadline to Apply is January 2, 2018!

We have written previously in this space about the importance of current Limited DARs (L-DAR-F), also known as DAR-56s, to apply to transition to permanent function code 19 status. If you or a person in your company currently holds DAR-56 privileges and an application for function code 19 has not yet been submitted, that must be done as soon as possible! The deadline to apply for this transition is January 2, 2018.

On October 4, 2017, the FAA issued Memo Number AIR-600-17-6F0-DM08.  The memo outlines the process by which holders of the existing DAR-56 privilege can be issued Function code 19 privileges as the Limited DAR program comes to an end. That limited DAR program is scheduled to end on September 30, 2018. This specific Function Code 19 delegation will be limited to the issuance of domestic airworthiness approvals at the holder’s distributor location. The key benefit of the function code 19 privilege is that it is not subject to the DAR-56 program’s limitation to new parts and articles that were in inventory prior to November 1, 2016.

As we’ve previously written in the blog, the application process is as follows:

For Current DAR-56 Holders

If you currently hold DAR 56 privileges, then you should apply to your local (“geographic”) Manufacturing Inspection District Office (MIDO) for appointment as a DAR-F with function code 19.  You can find your geographic MIDO on the FAA’s website.  Using the “select the state” function at the bottom of the page (but above the blue footer), enter your state where you operate and find which MIDO is your geographic MIDO.

Then, apply to your geographic MIDO using the on-line Designee Management System tool.

In order to be appointed as a DAR-F under this program an applicant must meet the minimum qualifications provided in FAA Order 8000.95. Look within 8000.95 for the criteria – specifically in Volume 1, Chapter 2 and in Volume 8, Chapter 2.

There is one significant difference from the standards found in FAA Order 8000.95 and the transitioning DAR 56s.  That is the experience provision.  Under the FAA memo, the applicant who has applied for a timely transition from DAR 56 privileges does not need to meet the normal 36 month experience  requirement.  Instead, the applicant must

“[h]ave a minimum of 12-months actual working experience for the accredited distributor under the quality system at the accredited distributor location(s), specifically:

a. Experience in either receiving inspection and/or quality assurance processes; and,

b. Experience reviewing documentation and/or part markings which can be used to verify that parts and articles are traceable to the PAH.”

Application checklist:

  • Identify your geographic MIDO;
  • Complete the required FAA training (you will need to submit the training certificate as part of your application package);
  • Obtain a letter of reference from the accredited distributor (signed by someone who can represent the business); a sample can be found in attachment 1 to the memo;
  • Ensure that your application details match those already filed for you under the DAR-56 program;
  • Apply through the DMS system, and include:
    1. Evidence of completion of the required FAA training;
    2. The letter of reference from the accredited distributor;
  • Notify FAA Headquarters that you currently hold function code 56 privileges and that you have filed an online application seeking function code 19 privileges.  Perform this notification by ending an email to the AIR-6F0 mailbox at AIR160-limiteddarf@faa.gov.  AIR-6F0 will notify the appropriate MIDO of the application, and let them know that it is subject to the provisions of the policy memo.

Once this process is complete, if the FAA reviews your package and finds that you can be transitioned to function code 19, then they will cancel your DAR 56 privileges and assign function code 19 privileges for issuing 8130-3 tags.  Don’t just rely on this checklist – be sure to study the policy memo!

Once you get the new function code privileges, you should expect that you will be limited to only exercising the privilege at the accredited facilities of the AC 00-56 accredited distributor.  This is not a “portable” credential, because it relies on the distributor’s AC 00-56B system as part of the basis for knowing that the part is in an appropriate condition to receive an 8130-3 tag.

For Those Without DAR-56 Privileges:

We advised all of our members to obtain DAR-56 privileges.  But we recognize that some members did not–or were not able to–follow this advice.  We also recognize that some function code 56 holders may allow the 90 day period to come and go without filing their application to transition.

If you do not hold DAR-56 privileges, or if you waited too long, then there is still a path!

The new guidance permits other persons to apply for function code 19 privileges under the terms of the memo; however such applicants are not entitled to the same presumptions enjoyed by transitioning DAR-56 holders.  If you fall into this category, then you will only be considered if the MIDO can independently establish that the FAA has a need and ability to manage the delegation; this means that you are going to need to convince the MIDO!  You also need to meet conditions that are comparable to those imposed on DAR 56 applicants.  You will still benefit from the alternative experience requirement (12 months experience with the quality system of the accredited distributor).

The Limited DAR program has been a useful tool to work through some of the challenges created by MAG 6. ASA has worked closely with the FAA to develop solutions to help distributors and their repair station customers continue to receive parts that did not enter inventory with an 8130-3 tag. This has included working with the FAA to develop the program initially, and having it extended until September 30, 2018. But the program was never intended to be a permanent solution. It is therefore absolutely critical to apply to transition your DAR-56 privileges to Function Code 19 privileges AS SOON AS POSSIBLE.  Remember, the deadline to apply is January 2, 2018!

Recordkeeping for Aviation Exports – What Do You Need to Retain?

Exporters must maintain records as proof of compliance with U.S. government regulations for a minimum of 5 years.  During this retention period, these retained records may be requested by Customs and Border Protection (CBP), or the Bureau of Industry and Security (BIS), Census, or any other U.S. Government Agency that has jurisdiction over your export.  This can be a daunting task and I have seen businesses that failed to retain such records.  This article seeks to provide some guidance on the scope and length of your recordkeeping obligations as an exporter.

What records should be kept, you ask? The Export Administration Regulations (EAR) provides a list of records that must be retained.

  1. Export control documents.  Examples include license and license application, AES record, dock receipt, 7512 forms, and antiboycott reports. The only exception is a party that submits documents electronically to BIS via the SNAP-R system; these parties are not required to retain copies of submitted documents. Note:  I would not count on this and I would be sure to keep all copies for reference purposes.
  2. Memoranda.  Examples include written records of business communications, reminders, agreements, and contracts.
  3. Notes.
  4. Correspondences.  Chances are, there are emails concerning your transaction.  These are supposed to be retained.
  5. Contracts.  A series of communications that result in an agreement may be considered a contract.
  6. Invitations to bid.  This could include any RFP/RFQ.
  7. Books of account.  This means accounting records, which may be used to defend against an audit.
  8. Financial records.  All formal records of the financial activities of a business or person.
  9. Restrictive trade practice or boycott documents and reports.
  10. Notifications from BIS.  This includes notification from BIS of an application being returned without action, of an application being denied, of the results of a commodity classification or encryption review request conducted by BIS.
  11. Other records pertaining to any other transaction subject to BIS regulations (pursuant to 15 C.F.R. § 762.1).
  12. Any other record that is required to be retained under other BIS regulations.  There is a partial list of these regulations in 15 C.F.R. § 762.2(b).

I said that you have to retain these documents for at least five years.  What does this mean?  Export Regulations state 5 years from the latest of the following times:

  1. The date of export from the U.S.
  2. The date of any known re-export, transshipment, or diversion. If you are shipping to a overseas broker, then you may need to start the clock when the broker re-exports the articles.
  3. The date of the termination of the transaction, whether formally in writing or by any other means. If the articles are returned under an RMA, then you still need to keep the records for five years from the return.
  4. In the case of records of pertaining to transactions involving restrictive trade practices or boycotts, the date the regulated person receives the boycott-related request or requirement.

Another caveat: if any U.S. government agency makes a formal (or informal) request for records before that 5 year period is up, or give you any reason to believe that the record may be relevant to a court action, then that record may not be destroyed or disposed-of.  If this happens, make sure you get legal advice about the disposition of the records, in order to avoid an allegation of spoliation.

There is a list of records that are exempt from the recordkeeping requirements; however  some of these records may need to be retained because of other reasons (including other regulatory systems and your own quality assurance system).  These include:

  • Inspection certificate (but some documents like a raw materials certification may need to be retained under other provisions like your written quality system);
  • Warranty certificate (but if it is part of the contract then it may need to be retained);
  • Packing material certificate (but certificates like a shipper’s declaration of dangerous goods may be required to retained under other laws);
  • Goods quality certificate (but some documents like 8130-3 tags may need to be retained under other provisions like your written quality system);

Don’t forget that other agencies may have other overlapping retention requirements and you must comply with all such requirements.  For example, under the State Department regulations, 22 C.F.R. § 123.22 of the International Traffic in Arms Regulations (ITAR) explains that the exporter of ITAR-controlled defense articles must file information prior to export and then under 22 C.F.R. § 122.5 must retain records for a period of five years from the expiration of the license or other approval.

As always, if you need help, contact us and we can work with you on developing the right systems for compliance!

Source of Parts for Repair Stations – Does it Matter?

An ASA member recently asked us to answer a MAG 6 question.  MAG 6 refers to revision 6 of the Maintenance Annex Guidance between the Federal Aviation Administration and the European Aviation Safety Agency.

QUESTION: The ASA member (a dual-certificated repair stations subject to the MAG 6 requirements) asked:

We are an FAA and EASA dual-certificated repair station.  We would like to install a part.  Does it matter if the part was procured from outside sources or the replacement part comes from our own shelf and we perform the required inspections in house?

ANSWER: The first question is ‘how and when did the part enter your system?’  Remember that MAG 6 grandfathered parts that were already in a repair station’s inventory.  The relevant language from MAG 6 states:

“New parts that were received into inventory prior to October 1, 2016 must, at a minimum, have a document or statement (containing the same technical information as an FAA Form 8130-3) issued by the PAH or supplier with direct ship authority. These parts in inventory, documented with the required information, will be grandfathered and remain suitable for installation into EU articles, provided the certification/release date of these parts is prior to October 1, 2016.”

So if the parts were new, received into the repair station’s inventory prior to October 1, 2016, and had the requisite documentation, then they are acceptable for use.  If they did not have the requisite documentation (described above) when they were received into the repair station’s inventory, then you may need to inspect them for airworthiness before installation, pursuant to the guidance found in FAA Notice 8900.429.  In addition, this grandfathering process did not apply to used parts, so those will also need to be processed appropriately before use.

Ultimately, the second question is going to be “can you make a finding of suitability/airworthiness consistent with the regulations?”

The process you use for identifying the suitability of the part may be different depending on the source.  If you bring in the part from outside, then it must meet the MAG 6 documentation requirements or it must be subject to the FAA Notice 8900.429 inspection provisions.  If the part is selected from an in-house shelf, and was not brought in through your standard receiving inspection mechanism (e.g. a part removed by your repair station from a larger component during a tear-down of the new component for the purpose of separating parts needed for overhaul), then you will need to rely on your own internal mechanisms to assure airworthiness.  EASA regulations anticipate this but the MAG does not, which is why Notice 8900.429 was necessary.  In that sense the source of the part does matter (to the extent it drives a particular process that will be used to identify the suitability of the part).

The process you use for identifying the suitability of the part may also differ depending on the nature of the part.  The installer needs to ascertain the airworthiness of the part, so a part that is more likely to have major or catastrophic failure mode is likely to have more airworthiness conditions that need to be checked in order to gauge airworthiness of the part.  On the other hand, a part whose failure could have no safety affect on the aircraft is more likely to be subject to a mere “form, fit and function” check.

In a broad sense, though, it does NOT matter whether you procured the part from outside sources (e.g. with appropriate documentation) or you selected a part from your own shelf and performed appropriate inspections to verify airworthiness (as permitted under FAA Notice 8900.429).  The reason is because in each case, the installer has an obligation to ensure the part meets the prerequisites for being fitted during maintenance, and if it meets those prerequisites then it is eligible to be fitted (and if it fails to meet those prerequisites, then it cannot be fitted no matter the source … until and unless it is maintained to return it to an airworthy condition).

Thus, you can rely on documentation meeting the MAG 6 standards (e.g. documentation described in MAG 6, Section B, Appendix 1, paragraph 10(k)) or you can use the alternative mechanism described in FAA Notice 8900.429.  If the part meets the applicable requirements under either of these standards, and is otherwise airworthy, then it should be eligible to be fitted for maintenance in an appropriate installation.  Even though the way the part was shown to be eligible might have been different, the end result is the same.

If you intend to rely on documentation as part of the process for identifying suitability for installation, then it is a good idea to rely on an AC 00-56 accredited distributor.  AC 00-56 distributors provide a level of documentation that has been found acceptable by the FAA and other aviation authorities, and they are regularly audited for compliance to the AC 00-56 standards.  AC 00-56 accredited distributors can be found on every continent except Antarctica.

Shipping PBEs: They Aren’t Always Chemical Oxygen Generators

A member identified to us a new type of Protective Breathing Equipment (PBE) and sent us a copy of the Safety Data Sheet (SDS).  The member was confused because the manufacturer classified the unit as UN3072 (life saving equipment) and not the usual UN3356 (chemical oxygen generator).  The U.S. Regulations affirmatively recognize that PBEs may contain chemical oxygen generators (49 C.F.R. 172.101 – Table Entry for “oxygen generator, chemical”).

The member frequently ships smoke hoods and PBE’S as ‘’CARGO AIRCRAFT ONLY’’ and is used to seeing them designated as UN3356.  He asked whether it is OK (under US law) to ship the PBE as UN3072 (as per the manufacturer’s SDS).

The US regulations permit classification of a unit that will be shipped by air according to ICAO Technical Standards.  49 C.F.R. 171.24.  These are republished in the IATA Dangerous Goods regulations book.

It is important to look at the actual composition of the unit in order to classify it the right way.  For clarity, oxygen generators are defined in Appendix A (the glossary) of the ICAO Technical Instructions.  The definition explains that this proper shipping name reflects “[a] device containing chemicals which upon activation releases oxygen as a product of chemical reaction.”  Typically such devices have an oxidizing salt (like a peroxide or a perchlorate) that releases both heat and oxygen when mixed with one or more other chemicals in the oxygen generator.

UN 3356 is the UN number for “chemical oxygen generators.”  Many PBEs use chemical oxygen generators to efficiently produce oxygen for the unit.  So it is natural to assume that a PBE would include an oxygen generator.  However, an oxygen generator is not necessary in a PBE – in fact FAA TSO C116A describes the oxygen generator as an acceptable alternative to an oxygen tank.   So it is possible to have a PBE that does not include a chemical oxygen generators.

In this case, the SDS made it clear that the PBE used compressed oxygen gas as the mechanism for delivering oxygen.  This means that there is a tank of oxygen, which is a compressed gas regulated as a class two hazardous material (and a class five oxidizer).  based on the SDS information, it was clear that the unit was appropriately described under UN 3072 (“life saving appliances, not self inflating”).

One important note – under US regulations (49 C.F.R. 171.24), if you ship any package containing compressed oxygen, you are subject to the “superpack” requirements – this means that the outer packaging must resist thermal and flame penetration according to the standards published at 49 C.F.R. Part 178 appendices D and E.  That holds true even if shipped under the proper shipping name “life saving appliances, not self inflating.”

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