Change in China Tariffs Add Aircraft Seats to the Mix, But Offer No Relief to the US Importers of Aircraft Parts from China

On August 13th, the United States Trade Representative (USTR) announced a change in the net round of anticipated China tariffs.

In May, the USTR announced a set of tariffs expected to go into effect on September 1.  Each tariff would apply a 10% duty (which must be paid by the importer) on certain goods.  The May announcement reflected tariffs applying duties to about $300 billion worth of US imports from China.  This list of tariffs had been identified as list 4.

List 4 has been split into list 4A and list 4B.  The tariffs described in list 4A will go into effect September 1, 2019, as scheduled; but the tariffs described in list 4B will be delayed until December 15, 2019  The official reason for this delay is to mitigate the effect on US consumers in advance of Christmas.  Products in this group 4B include cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.

  • List 4A (Effective September 1, 2019).
  • List 4B (Effective December 15, 2019).

Note that this change does not affect the aircraft parts that are already subject to 25% tariffs; however list 4A will add aircraft seats to the list of goods from China that are subject to tariffs (tariff codes 9401.10.40 and 9401.10.80).  US importers of aircraft seats from China should take note of this September 1 date!

The USTR has stated that “Certain products are being removed from the tariff list based on health, safety, national security and other factors and will not face additional tariffs of 10 percent.”  It is unclear at this time which articles will be removed from the lists, but the USTR has promised to publish additional details in the Federal Register, soon.

US Imposes New Sanctions on Cuba – Affect on Aircraft Parts Exports is Unclear

The President announced today that the United States would impose new sanctions on Cuba.  Rough details are available through the White House Fact Sheet, but we are still awaiting complete details.  It is unclear what effect this might have on current licenses to sell aircraft parts to entities in Cuba, which are permitted under BIS policy.  ASA will continue to monitor this situation to ascertain whether the new sanctions adversely affect aircraft parts export licenses.

Government-Sourced Parts: Why Do We Care?

We are periodically asked about parts that have been sourced from “government” aircraft.  The concern is raised because standard industry documentation frequently recommend certifications about government sourcing (or lack thereof).  This can cause confusion, sometimes, about what represents a government source and what does not.

The root cause for this disclosure is a recognition that most aircraft are maintained to common civil standards in accordance with ICAO standards, but that the ICAO civil aircraft maintenance standards do not apply to public use aircraft.  E.g. Maintaining Public AircraftFAA Advisory Circular 91.91 § 1.3 (Oct. 19, 2016) (explaining that the FAA has no statutory authority to regulate public aircraft, and the government operator therefore remains responsible for ensuring adequacy of maintenance).

Consequently, used aircraft parts that have been removed from public aircraft might not have been maintained according to the standards that are commonly used for civil aviation maintenance.


What is a Public Aircraft?


U.S. law defines a public aircraft as an aircraft used exclusively for United States Government purposes, or state government purposes.  The definition includes any aircraft exclusively leased by the government of a state or U.S. territory for at least 90 continuous days and an aircraft owned or operated by the armed forces or chartered to provide transportation or other commercial air service to the armed forces.  49 U.S.C. § 40102(a)(41).  The reason that the aircraft parts community cares about public aircraft is because public aircraft do not need to be maintained to the same standards as civil aircraft.


What Has the FAA Recommended About Parts from Public Aircraft?


Because parts from public aircraft may not have been maintained to normal civil standards, the FAA has expressed concerns over them.  It is not illegal to use them, but the FAA wants their nature disclosed, so that an installer can ensure airworthiness at the time of installation (or an overhauler can ensure airworthiness at the time of overhaul).

The FAA has recommended that where a part was obtained from a non-certificated aircraft, including a public aircraft, then that fact should be so-identified by some type of documentation. Eligibility, Quality, and Identification of Aeronautical Replacement Parts, FAA Advisory Circular 20-62E, chg 1, § 10(c)(1) (Sept. 14, 2018).


Industry Standards for Parts from Public Use Aircraft


The FAA’s recommendation in AC 20-62E has been implemented through certain industry standards – most notably ASA-100.  ASA-100 recommends that the seller provide a statement disclosing whether the aircraft parts were “previously installed in a public aircraft, such as a government use aircraft or a military aircraft.”  Aviation Suppliers Association Quality System Standard, ASA-100 § 10(b)(2) (rev. 4.0).

In similar language, ATA Specification 106 recommends that used aircraft parts obtained from non-certificated aircraft be disclosed , unless the part is already accompanied by an 8130-3 that was completed as an approval for return to service.  The guidance provides examples of the sort of sources that should be disclosed, including “public use, non-U.S., and military surplus aircraft.


Mitigating Factor


A mitigating factor in all of this is that today, many public aircraft in the United States are operated and maintained as if they civil aircraft.  Through the 1980s, the United States has begun to recognize that they were not receiving adequate value on aircraft and aircraft parts that were sold at auction.  One reason was the significant expense associated with verifying airworthiness on such aircraft before they could be used for civil purposes. To remedy this, the U.S> government started maintaining its aircraft consistent with FAA (civil aviation) standards.

This eliminates the differences that caused the industry to be cautious about such public-aircraft-sourced parts.  It makes the affected public-use aircraft parts technically equivalent to comparable parts used in civil aviation.

Despite this, under current federal standards, a federal agency that sells or transfers aircraft parts to a non-federal party must provide the buyer with the following statement:

Warning to purchasers/recipients. The aircraft parts you are purchasing or receiving in an exchange may not be in compliance with applicable Federal Aviation Administration (FAA) requirements. You are solely responsible for bringing the aircraft into compliance with 14 CFR Chapter I, or other applicable standards, by obtaining all necessary FAA inspections or modifications..”

41 C.F.R. § 102-33.360(a)(2).

In addition, the purchaser must sign the a lengthy warning and disclaimer statement at the time of sale – this statement is supposed to be retained by the government seller.  Id.  These steps are meant to ensure that the U.S. government has adequately warned the buyer of the potential for non-compliance.


“Government Aircraft”


People in the industry often use the term “government aircraft.”  They come by this term honestly – the Office of Management and Budget publication OMB Circular No. A-126 (Improving the Management and Use of Government Aircraft) (May 22, 1992) uses the term “Government Aircraft” to mean the federal government’s public aircraft.  OMB Circular No. A-126. at 5(a).

The term “public aircraft,” alone, is well-understood.  But the use of the shorthand term “government aircraft” as a proxy for the concept of public aircraft has led a number of people to ask me whether the term “government aircraft” applies to airlines that are government owned. This is an obvious point of confusion.

Typically, in order for the air carrier to hold itself out to the public and offer carriage, it must be certificated under the home nation’s civil aviation rules.  This means that the air carrier’s aircraft are not (typically) flown as public aircraft. Thus, the mere fact that the air carrier is owned by the government does not imply an airworthiness question requiring a specific disclosure.

Obviously there are potential exceptions, such as where an airline wet-leases an aircraft (on an exclusive basis) to the government (this may be a public operation).



More FAA Guidance Creates More Confusion

The FAA has issued new guidance that interprets the Maintenance Annex Guidance (MAG).  At first, it looks like it is going to fix some of the problems.  And just when it looks like the problems might be fixed, it throws us a curve ball with a limitation that appears to once again work to the disadvantage of distributors with new and new surplus parts.

The new guidance is FAA Notice 8900.380.  The key language in this new guidance states:

“b. Inspections. For the purposes of this notice, inspections may be performed on:

(1) New parts in inventory prior to October 1, 2016, that are not accompanied by FAA Form 8130-3, a dated certificate of conformance, or similar documentation issued by a U.S. PAH or supplier with direct ship authority in accordance with the notes in MAG CHG 6, Section B, Appendix 1, subparagraph 10k)(1)(a) and Section C, Appendix 1, subparagraph 7c)(1)(a); and
(2) New parts released by a U.S. PAH on and after October 1, 2016, that are not accompanied by FAA Form 8130-3.”

The problem language is the “in inventory” phrase in section (b)(1).  Does it mean parts in a repair station’s inventory?  Or is it broader, applying to parts in anyone’s inventory? If it is limited to parts in a repair station’s inventory prior to October 1, 2016, then this still seems to prevent a distributor from selling a part without an 8130-3 or Form One to a repair station as of October 1, as implied by the MAG.  Repair stations would not be able to accept new parts with manufacturer’s certificate of conformity (but no 8130-3) and inspect them to confirm airworthiness, as they have done for many years in the past.

In essence, aircraft parts that were released by a U.S. PAH before October 1, 2016 (today, this means ALL parts) and that are ‘not in the right inventory’ as of October 1, 2016 would not be eligible to be inspected by a repair station.

On the other hand, if the terminology is broader, and it applies to all inventories, then this would return us to the position that we’ve always been in – where EASA 145 repair stations can accept parts without an 8130-3 as “unserviceable” parts and then inspect them to satisfactory condition (which inspection can be supplemented by review of the PAH certificate of conformity or other PAH documentation).  This interpretation would be much better for the industry.

So which one is it? Unfortunately, this phrase, “in inventory,” was discussed in a June meeting among FAA, EASA and industry.  The meeting was called to discuss the MAG.   ASA raised the term and suggested that it be interpreted to include parts in a distributor’s inventory.  This suggestion was soundly rejected by EASA.  EASA explained that the context of the MAG was that it applied to repair stations and therefore “in inventory” must be read to only include repair station inventories (and not distributor inventories).  ASA explained that such an interpretation closed an important safety valve for parts in distributors’ inventories.  The matter seemed final in the meeting, with the FAA acquiescing to the EASA interpretation.

In recent conversations, an ARSA representative suggested that the term “in inventory” should apply to any inventory, anywhere.  He suggested that the prior EASA interpretation might be ignored for the Notice because the Notice is a separate document.  The problem is, the Notice interprets the MAG (and explicitly states that it will be incorporated into the MAG in the next revision).  It therefore appears to be subject to the same interpretations and limitations as those associated with the MAG.

On the same day that we received a copy of this FAA Notice, ASA made a request for interpretation to the FAA, asking how to interpret the term “in inventory.”  The request remains pending.  We are hoping that the FAA will issue a response explaining that parts in a distributor’s inventory are “in inventory” and can be sent to a dual-certified repair station for purchase and inspection by that repair station.  To do so, though, might require the FAA to exercise some political courage, because such an interpretation would contradict the EASA statements. We also hope for a rapid response from the FAA, because these questions are interfering with commerce in aircraft parts from the United States.

But even if we get the interpretation that we want, there will still be perfectly good aircraft parts that remain ineligible for inspection under the peculiar limitations imposed by the MAG and Order 8900.380.  We continue to hear stories from members about necessary and safe aircraft parts that are excluded from the system by the new rules.  ASA will continue to work with the FAA and the courts to obtain a remedy that returns some sanity to the system.

Aircraft Articles, and Eligibility for an Export 8130-3 tag

An ASA member was recently told by a DAR that the DAR could no longer issue export 8130-3 tags based on traceability paperwork, and that the DAR would have to perform a full conformity on the aircraft part before issuing an export 8130-3 tag.

As you might expect, the ASA member was disturbed by this news, and asked us whether the rules had changed.  They have not.  While it is true that the FAA’s rules, policy and standards are constantly changing, there has been no change that would forbid issue of an export 8130-3 tag for a demonstrably airworthy part.

It is important to remember that issuing an export 8130-3 tag is NOT exactly the same thing as conforming a part to design data.  The export 8130-3 tag documents an airworthiness finding, which can be made in a number of different ways.  The applicant has an obligation to demonstrate conformity to type design and condition for safe operation at the time of application for the export 8130-3 tag, but this showing can be made in several ways and conformity inspection is just one of those ways.

Here are just a few of the ways that an FAA designee with the right privileges can find that a new aircraft part is eligible for an export 8130-3 tag (all assume that the new part is still in a condition for safe operation):

  • Establish positive traceability to the production approval holder and then determine that the airworthiness of the part has not been compromised;
  • Identify a new production part based on Part 45 PMA markings (the PMA article cannot be so-marked and released from the production quality system unless the manufacturer ensured that the article conformed to its approved design and was in a condition for safe operation);
  • Identify a new production part accompanied by identifying documentation from the production approval holder such as a shipping document, a manufacturer’s certificate of conformance or material certification, or an FAA Airworthiness Approval Tag, Form 8130-3;
  • If a designee with appropriate privileges performs a successful conformity inspection to FAA-approved design data, then the designee has made a finding of airworthiness of the article and can obtain issue an 8130-3 tag. This is typically not necessary except in those cases where the article cannot be found airworthy based on documentation or markings.

These four ways are taken from just one FAA guidance document.  Other ways to find airworthiness are listed in other guidance documents, so this is not a complete list.

Don’t forget that a designee needs to follow the FAA guidance related to issue of the export 8130-3 tag, such as the rules found in FAA Order 8130.21H.  So mere eligibility for an 8130-3 tag may be insufficient if some other requirement cannot be met.

It is equally important to remember that an FAA designee cannot issue an 8130-3 tag for a part if he or she is unable to make a finding of airworthiness.  For example, used parts that have not yet been returned to an airworthy condition (e.g. through overhaul) are not yet eligible for an export 8130-3 tag.  There are special requirements for issuing export 8130-3 tag for used parts, so even after an overhaul, an export 8130-3 tag might be inappropriate in some situations.

So there is NOT a new FAA policy requiring a full conformity as a prerequisite to issue of an 8130-3 tag.  Such a policy would not be consistent with FAA policy, nor would it be consistent with the purpose of the 8130-3 tag, which is merely to document an airworthiness finding.

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