Brexit Update: EASA Makes Things a Little Easier

The European Commission published a Notice to Stakeholders detailing the consequences of the UK’s withdrawal from the European Union’s aviation safety rules.  That Notice to Stakeholders had painted a bleak picture of the near future between the UK CAA and EASA, cancelling all UK approval and refusing to recognize any UK-sourced EASA Form One after March 29.  Recent updates to Brexit policy, though, have set much more reasonable short-term policies for the EU.

We’ve discussed the fact that one of the biggest problems facing aircraft parts professionals in the wake of Brexit will be getting parts from the UK (parts made in the UK or overhauled in the UK) onto aircraft registered in EU nations.  Europe has recognized that this is an issue whose effect is worse for the EU than it is for the UK.  This recognition has resulted in authority for EASA to do something about it.  EASA executives has been sitting on the edge of their seats, waiting for an opportunity to do the right thing, and they have published new guidance that countermands the earlier Notice to Stakeholders.  The official European Commission position suggests that EASA will recognize continued validity for some approval documents.  The caveats are that (1) this is a limited time offer, and (2) EASA insists on UK CAA reciprocity for recognition of EU approvals [which the UK CAA has already stated it intends to offer].

The Commission will propose measures ensuring continued validity of such certificates for a limited period of time. These measures will be subject to the condition that the United Kingdom applies similar measures. Likewise, the Commission will propose measures ensuring that parts and appliances placed on the Union market before the withdrawal date based on a certificate issued by a legal and natural person certified by the UK Civil Aviation Authority may still be used under certain circumstances.

European Commission Communication – Contingency Plan

How limited is the offer to accept approvals after March 29? It appears likely that the EU will continue to recognize certain EASA-issued approvals in the UK for nine months.  This includes type certificates (TCs), supplemental type certificates (STCs), repair design approvals (RDAs), European Technical Standard Order Authorizations (ETSOAs), and design organization approvals (DOAs).  In addition, they will recognize certain approvals issued by UK approval-holders – this mostly means that EASA Form One issued by a UK-based approved maintenance organization (AMO, a.k.a. MRO).  This last provision needs to have some details filled-in by EASA, like when the EASA Form One can have been issued and still remain acceptable in the EU (is there a sunset?).

Here is the text that EASA has published on the subject:

On 19/12/2018 the Commission has adopted two measures that will avoid full interruption of air traffic between the EU and the UK in the event of no deal. These measures will only ensure basic connectivity and in no means replicate the significant advantages of membership of the Single Aviation Market. This is subject to the UK conferring equivalent rights to EU air carriers, as well as the UK ensuring conditions of fair competition.

  • A proposal for a Regulation to ensure temporarily (for 12 months) the provision of certain air services between the UK and the EU.
  • A proposal for a Regulation to extend temporarily (for 9 months) the validity of certain aviation safety licences.

This second proposal provides the validity extension of the following safety certificates and approvals:

The following certificates issued by EASA to natural or legal persons having their principal place of business in the UK shall remain valid for 9 months from the date of application of the Regulation:

  • Type certificates and restricted type certificates,
  • Approval of changes to type certificates and restricted type certificates,
  • Supplemental type certificates,
  • Approval in respect of repairs,
  • European Technical Standard Order authorisations,
  • Design organisation approvals.

The following certificates issued by any natural or legal persons certified by the competent authorities of the UK concerning the use of products, parts and appliances shall remain valid:

  • Authorised Release Certificates for products, parts and appliances,
  • Certificates of release to service in respect of completion of maintenance,
  • Airworthiness review certificates for ELA 1 aircraft,
  • Certificates of release to service on completion of maintenance,
  • Airworthiness review certificates for ELA 1 aircraft,
  • Airworthiness review certificates and extensions thereof.

 

In addition to the plan to contnue to recognize certain UK approvals after March 29, EASA has also reiterated that it will be willing to issue third-county approvals to UK-based approval holders (like holders of POA and MOA).  Third-county EASA approvals would permit UK-based approval holders to continue to operate under EASA jursidiction, and to enjoy the benefits of EASA’s regulations and  agreements.  This could help to ensure that the goods and services of such UK approval holders continued to be acceptable in the EU.

 

When Will EASA Issue Third Country Approvals?

EASA cannot issue third country approval for UK-based businesses until the UK is actually a third country; but our sources have said that for UK-based businesses whose applications have been processed by or before March 29, EASA intends to email the approval to the applicant on March 30 and mail a hard-copy approval to follow shortly afterward.

The European Commission Communication – Contingency Plan Annexes states the need to wait until the UK is a third-country:

Regarding aviation safety, for certain aeronautical products (ʻtype certificatesʼ) and companies (ʻorganisation approvalsʼ), the European Aviation Safety Authority (EASA) will only be able to issue certificates once the United Kingdom has become a third country. The Commission will propose measures ensuring continued validity of such certificates for a limited period of time. These measures will be subject to the condition that the United Kingdom applies similar measures. Likewise, the Commission will propose measures ensuring that parts and appliances placed on the Union market before the withdrawal date based on a certificate issued by a legal and natural person certified by the UK Civil Aviation Authority may still be used under certain circumstances. The Commission has invited EASA to start processing certain applications from UK entities in preparation of the withdrawal of the United Kingdom.

How Much Will Third Country Approvals Cost?

Cost represents some of the best news from EASA.  Normally, third country approvals are prohibitively expensive, but EASA has capped the initial cost for UK approval holders who wish to obtain EU third country approvals.  The fee will be capped at eight hours, times the authorized rate.  The base authorized rate appears to be € 221 per hour, but it is modified by inflation adjustments so the final figure appears to be € 230.18 Euro per hour for calendar year 2019.  This appears to allow a qualified UK applicant to obtain an EASA third country approval for about € 1841.44.  Be sure to check with EASA, as these figure are subject to change at the EU’s discretion.

EASA stresses that the fee is non-refundable, regardless of the outcome of the application, and regardless of the outcome of Brexit negotiations.  If you need to send in a revised application, after initial payment of the fee, then the revised application will be considered as a new application, and you will have to pay a second fee for the ‘new’ application.

Because the UK applicants will be entities that were previously fully recognized by EASA, EASA intends to apply a “desk review procedure.”  Because it is an abbreviated review, EASA expects to process these applications in a matter of weeks (EASA sources have suggested two weeks as a target).

Subsequent recurrent charges will follow the fee schedule found in Commission Regulation (EU) No 319/2014, Annex Part I (Table 8 for POAs, and Table 9 for MOAs).

 

What Do I Get, if I Apply for a Third Country Approval as a UK Approval Holder?

EASA is permitting a wide variety of certificates to fall within this program.  The two most important to our readers are Production Organisation Approvals (POA) and Maintenance Organisation Approvals (MOA).

As a successful applicant, you would get an MOA or POA (depending on what you sought) with identical scope and privileges as your base UK approval.  If your application includes a variance from your UK approval , then you still can only obtain an EASA approval that correlates to your UK privileges.

As long as the application processing is complete by March 29, EASA expects to send a copy of the approval by email on March 30th.  The certificate will be valid as of March 30th .

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FAA Extends Designees Deadlines to April 30 – Offers Plan for Next Shutdown

During the last government shutdown, ASA asked the FAA to issue guidance extending the termination dates of all designees who expired during the shutdown, in order to allow them to continue providing critical safety-related services to the aviation industry.  This was due to the fact that as they were expiring, there was no FAA staffing to renew their designations during the shutdown.

The FAA was unable to do this (it was outside the scope of the Antideficiency Act and the DOT guidance).  But they did the next best thing. When FAA safety personnel returned to work before the end of the shutdown, they made designee oversight a priority. And then as soon as they could issue useful guidance, they did so.

On the first work day that the government was opened after the shutdown, the FAA published guidance explaining that designees in good standing may continue to perform authorized functions in an active status without regard to the status shown on the various designee databases (DIN, DMS or VIS). It also specifically allows designees to extend certain due dates for (1) designee recurrent training, (2) oversight, and (3) renewal. Those training, oversight and renewal dates are extended to April 30, 2019.

 

Which Designees are Affected by the Memo?

The memo applies to both Flight Standards Service designees (like DAR-T) and Aircraft Certification Service designees (like DAR-F, DMIR, and DER).  It does not apply to Air Carrier Check Pilot observations.

 

Which Due Dates are Affected by the Memo?

The memo applies to deadlines for required designee recurrent training, for required designee oversight, and/or for required designee renewal, when those deadlines arise during the period from December 22, 2018 through April 29, 2019.  The deadlines that fall during this period are extended to April 30, 2019.

 

What about ODA Unit Members?

The memo also applies to ODA unit members.  The may continue to perform authorized functions during this period.

 

How Does This Affect A Future Shutdown?

In the event the FAA experiences another lapse in funding, the memo wil continue to apply to that shutdown.  Such a subsequent shutdown has already been threatened and could arise after February 15, 2019.  If a subsequent shutdown lasts beyond April 30, 2019 then the FAA would have to find another solution (but no government shutdown has ever lasted than long).

Government to Reopen Temporarily; Get Your FAA Services in Order NOW!

The President announced this afternoon that he had struck a deal to reopen the government.  The deal will reopen the government for three weeks.

During his announcement, the President made it clear that “we really have no choice but to build a powerful wall or steel barrier.”  He made it clear that the government will shut down on February 15 if he does not get the funding that he desires for this project.

The President suggested, optionally, that he may declare state of emergency; but we still have to see any legal scholar suggest a way that either Title 6 (Domestic Security, including FEMA’s laws) or Title 50 (National Emergencies and International Emergency Economic Powers) permits the President to order unappropriated spending on capital projects.  If the President can’t find a legal way to circumvent the Constitutional requirement for appropriations, then the emergency declaration gambit may ring hollow – which means that we should anticipate the possibility of another government shutdown on February 15.

Because this agreement is only for three weeks, the industry should focus its attention on the US government and on services that are necessary.  For example, designees should ensure that their privileges are renewed during this window. Designees are an important part of the safety assurance process in our industry, so we should prioritize efforts to ensure that they can provide safety-related approval andcertification services in the event of a subsequent government funding lapse.

Designees may want to work with their FAA-Advisors to seek ’emergency clause’ authority, in which any extended government shutdown would enable emergency procedures.  Such emergency procedures could include:

  • where project-level permissions are typically required, the designee would have temporary permission to provide approvals or other support within certain pre-described parameters
  • permission for the designee to engage in normal (pre-defined) activities during the shutdown;
  • tolling of any expiration of authority that occurs during the shutdown period until a reasonable time after the lapse in funding is remedied (privileges should continue at the level immediately before the shutdown);
  • an obligation for the designee to make a full accounting to the FAA Advisor of any emergency authorities used, so the FAA Advisor can engage in appropriate post-shutdown oversight; and,
  • any other provisions that the designee and FAA-Advisor agree are reasonably necessary to protect safety in the event of a lapse in government funding.

Export Compliance Just Got More Complicated (Here are Links to Make it Easier)

Normally, the consolidated screening list is found on export.gov; but now that entire website simply returns the message “Due to the lapse in government funding Trade.gov and Export.gov and all associated online activities will be unavailable until further notice.”  For exporters who rely on the consolidated screening list as a compliance tool, this is a significant problem.

Interestingly enough, export enforcement – the ongoing conduct of criminal investigations, and prosecutions, and coordination with other law enforcement and intelligence agencies – has been deemed to be an essential service for the Commerce Department so even though compliance resources are missing, export enforcement will still be available to punish anyone who makes a mistake because of the missing resources.

Due to the lapse in government funding
Trade.gov and Export.gov
and all associated online activities
will be unavailable until further notice

So how do we ensure continued compliance for our exports?  If you’ve been to one of ASA’s export workshops, then you know that the consolidated list is supported by separate iterations of the lists that are consolidated. Some of these lists are still available for review.  Here are some that are particularly useful for civil aircraft parts transactions:

China Aviation Parts Management Forum Releases Draft 2019 Agenda

Many Americans are pessimistic about business with China because of the rhetoric between President Trump and President Xi, and the tariffs that have arisen from that rhetoric.  But neither the tariffs nor the fiery rhetoric will last forever; now might be just the time for Americans to reach out to their Chinese colleagues and to develop the relationships that will lead to business in the near future.

As we said in December, one of the best conferences for meeting Chinese air carriers and MROs is the Aviation Parts Management Forum.  This year, it will be help in Xiamen, China on March 28-29.

The Forum has released their first draft agenda for the 2019 event.  While it is not yet complete, it gives you a good idea of what topics will be covered.

If China is a part of your business strategy, or if you are wondering whether it should be a part, then you should examine the agenda and consider joining ASA in attending the Forum.

IRS Relaxes the 2018 Penalty Threshold for Individuals Who Pay Estimated Tax

IRS has announced a new policy relaxing the estimated tax rules and their penalties for individuals.  They are doing this because of the complexity of the tax law changes from the Tax Cuts and Jobs Act (TCJA), which was enacted in December 2017.  In addition, the IRS has been unable to issue some of their anticipated guidance due to the lapse in government funding.  The policy is fully described in IRS Notice 2019-11, and it applies only to the 2018 tax year.  The policy does not apply to corporations – only to individuals.

This policy is particularly important to members of our community who pay estimated taxes, including owners who take a draw or dividend from the company, outside salespeople and consultants paid as 1099 contractors, and others who get paid without tax being withheld.

Generally, taxpayers are required to pay tax obligation during the year (rather than waiting until the end of the year). This can be done by either having tax withheld from paychecks, or by making quarterly estimated tax payments.  If too little tax is withheld or paid, then a penalty may apply.

Normally, in most years, the penalty would not apply if tax payments during the tax year met one of the following tests:

  • The person’s tax payments were at least 90 percent of the tax liability for the year or
  • The person’s tax payments were at least 100 percent of the prior year’s tax liability (the 100 percent threshold is increased to 110 percent if a taxpayer’s adjusted gross income is more than $150,000, or $75,000 if married and filing a separate return).

The special rule for 2018 taxes will lower the threshold for the first bullet to 85%.  Thus, if you withhold or otherwise pay (as estimated taxes) 85% of your 2018 tax liability on time, then you will not owe a penalty for underpayment of 2018 federal personal income taxes.

The last 2018 estimated tax payment for natural persons was due on January 15, 2019.  IRS issued the new policy on January 16.

Please read the IRS policy fully in IRS Notice 2019-11, because there are specific details about how to claim the threshold relief.

 

ASA Members Confirm that Designee Oversight is Restarting

We have been communicating with senior FAA management about the issue of FAA designees whose privileges expire during the government shutdown.  While renewal is usually a straight-forward process, the shutdown has prevented the FAA from renewing designee privileges that are essential to the continued safe functioning of the aviation system.  Designee oversight is an important part of the FAA’s safety oversight system, and FAA has identified it as one of the important functions that should be conducted during the shutdown.

Yesterday, we reported that nearly 3000 additional FAA aviation safety staff had been ordered back to work. We are already seeing the results of this return.

Today, members began to confirm that the FAA was confirming renewal of designee privileges through their online system.  We know that some flight standards designees who were awaiting renewal have received their renewal notifications.

Aircraft certification designees should start enjoying the same oversight, as well.  The FAA has confirmed that some Aircraft Certification staff are among the safety personnel being recalled.

As of today the MIDO’s are nearly up to full strength. The FAA’s focus is on returning the MIDO employees to work, restructuring oversight plans, and starting surveillance up again.  This should be good news for DARs whose delegated privileges are issued via a MIDO.  FAA senior management has clarified that one of the focal areas for the returning aviation safety staff is designee oversight (including both ODAs and individual designees).  The FAA is also recalling a small number of Aircraft Certification engineers, who will be focused on continued airworthiness tasks, including designee oversight (e.g. DERs).

These returning FAA employees will continue to work without pay until the lapse in funding has ended. Congress passed a bi-partisan bill to ensure payment of back-pay to the federal employees, and that bill was signed by the President yesterday, so we know they will be paid, eventually. ASA continues to empathize with the FAA staff whose pay remains withheld, but we also remain proud of the dedicated FAA staff who are returning to their safety mission during the funding lapse.

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