Can a Disassembler Convert U.S. Aircraft Paper Records to Electronic Format?

More and more of ASA’s members are parting-out aircraft.  Our members have asked, “when a distributor that intends to part-out an end-of-life aircraft receives paper records from the last owner/operator, what are the rules with respect to conversion of those records to electronic format?”

Short Answer

When a U.S. company – like a distributor – becomes the owner of an aircraft with the intent to disassemble it for parts (and not to operate the aircraft), it has certain record retention obligations for as long as the aircraft remains U.S.-registered; however those records may be converted into, and retained in, an electronic format so long as the electronic versions accurately reflect the correct information, and (b) remain reasonably accessible to those who are supposed to have access under the regulations (like the government).  This answer does not address the wide-range of industry commercial concerns, like the potential commercial desires of any subsequent owner of the parts removed from the aircraft.

Discussion

We typically think of “original records” as the paper records.  But companies that own aircraft and wish to disassemble them for their parts may wish to convert the paper records to electronic format, such as by scanning them.  Reducing the records to an electronic format allows them to be stored more conveniently, it facilitates management of record retention policies, and it also makes it easier to share information with potential buyers.

This article is limited only to those situations where a business that does not hold an FAA certificate takes possession of an aircraft (e.g. the aircraft is not listed on an operating certificate) with the intent to disassemble the aircraft and not to operate the aircraft.  This article is not legal advice with respect to any particular fact pattern.  Your actual fact pattern may vary, so you should use the article as a tool for recognizing issues to discuss with your aviation attorney.

US Rules on Records

There are a number of US laws and policies that encourage the use of electronic records and alternative information technologies.  Some of the applicable laws include:

These laws and policies typically require that the government must accept electronic records, but they permit the government agencies to develop standards for implementing electronic records systems.

US law today makes it clear that if a statute, regulation, or other rule of law requires retention of a transaction record then one way to meet the record retention policy is to retain an electronic record of the information that (a) accurately reflects the information set forth in the record, and (b) remains reasonably accessible to all persons entitled by law to access the record. 15 U.S.C. § 7001(d)(1).

The FAA has established policy for records that are required by FAA regulations.  They make it clear that their policy does not apply to records that are not required under FAA regulations.  E.g. FAA Order 8900.1 chg 466 vol. 3, Chap. 31, Section 2, ¶ 3-3001

Under FAA regulations, certificate holders need FAA approval for certain electronic manuals and/or other electronic records (e.g. 14 C.F.R. § 121.683(c)), and other electronic manuals and/or other electronic records need to be in systems that are acceptable to the FAA (e.g. 14 C.F.R. § 145.219(a)).

The FAA has clarified that when FAA rules require some sort of record to document an event, this is considered to be a “record” under FAA regulations, and the system for keeping that record is a recordkeeping system.  Under FAA guidance, though, a system that collects information that does not preserve the evidence of an event – that is not a “record” – is not a recordkeeping system; it is an information management system.  The FAA does not regulate such information management systems.

What makes this difficult is that there is some common data – some records – that are regulated by the FAA; and there are some data that are not.  For example, the owner of an aircraft must keep records of the current status of life-limited parts (14 C.F.R. § 91.417(a)(2)(ii)), current status of airworthiness directive implementation (14 C.F.R. § 91.417(a)(2)(v)), and copies of the maintenance records for major alterations (14 C.F.R. § 91.417(a)(2)(vi)).  On the other hand, there is some information that is commonly kept that is not directly regulated by the FAA.  For example, the FAA does not specifically regulate incident/accident statements (note that the FAA does require the owner/operator to keep flight recorder/voice recorder data for 60 days after an accident, but this is different from the traditional incident/accident statements).  Both of these sorts of information (regulated and unregulated) are going to be found in a typical aircraft data package.

The Part 91 record retention requirements apply as long as the aircraft is a US-registered civil aircraft.  14 C.F.R. § 91.401.  So one strategy for ending any FAA-record-keeping requirements is to de-register the aircraft.  One problem with this strategy is that commercially-typical removal tags indicate the registry number of the aircraft from which the part was removed.  In order to allow a relationship between the registry of the aircraft and the part that was removed from that aircraft, it is typical to wait to de-register the aircraft until after the expected disassembly process has been completed.  Which means that the owner continues to have regulatory record-keeping obligations.

Despite the fact that an owner typically retains both regulated “records” and unregulated “information” the retention mechanisms for both are largely unregulated for owners who do not hold certificates (like operating certificates).  The requirements for owners’ maintenance records are found in 14 C.F.R. § 91.417.  That regulation requires the records to be kept, but it does not specify a system for keeping the records, nor does it specify that such a system must be approved by or acceptable to the FAA.  It also does not require “original” records.  This means that an owner can convert records to an electronic format (such as by scanning them) and that owner will typically remain in compliance with the 14 C.F.R. § 91.417 (subject to the previously-mentioned caveats).

Commercial and Non-US Concerns

It is important to recognize that commercial norms may impose de facto requirements for additional record-keeping, and that different customers may have different commercial expectations.  It is therefore important to know and understand the marketplace expectations with respect to any parts that are removed from an aircraft for sale.

Some nations have laws or policies that may impose additional record-keeping expectations.  For example, under AC-120-FS-058 Rev. 3, China now requires that where parts have been removed from an aircraft and are subsequently intended to be installed on Chinese-registered aircraft, such parts must have been removed by a CCAR 145 organization (and thus must have the correlative removal documentation).

Similarly, there are laws and regulations concerning fraud that will prohibit any sort of material misrepresentation, so it is important to ensure that any electronic version of the data is an accurate portrayal of the underlying records.

The Electronic Records/Signature Law (ESIGN) turns 18

The Electronic Signatures in Global and National Commerce Act (ESIGN) was signed into law on June 30, 2000.  That makes the law 18 years old on Sunday.  If there was any justice in the world, we’d all be buying the law a cigar and allowing it to vote.

ESIGN established a general rule of validity for electronic records, electronic contracts, and electronic signatures.  Prior to the law, many courts had refused to recognize electronic signatures and they questioned electronic records.

ESIGN applies to transactions “in interstate commerce,” which is a term of art meaning that the transaction is open to being regulated by Congress under the Interstate Commerce Clause of the Constitution (most transactions, today, are subject to the Interstate Commerce Clause of the Constitution).  Generally, it explains that when records and agreements are required to be in writing, an electronic version of them counts as a “writing.”

ESIGN also applies to federal and state government agencies.  They are forbidden from adopting record-keeping rules that would “impose unreasonable costs on the acceptance and use of electronic records.”  The law explains that if an agency wants to require paper records (to the exclusion of electronic), then the agency needs to show “there is a compelling governmental interest relating to law enforcement or national security for imposing such requirement.”

Eighteen years after the law was enacted, the aviation industry still struggles with full implementation of the law.  Even though it is clear that aviation records can be recorded and transmitted electronically, the aviation industry remains wedded to paper.  Nowhere is this more clear than with respect to parts documentation.  While distributors are now more comfortable reducing paper 8130-3 tags, and paper material certifications to electronic format for archival storage, transactional records remains stubbornly rooted to a paper paradigm.

One reason for this paper paradigm is because most aircraft parts are unserialized, and therefore it can be difficult to uniquely tie an electronic record to a particular (unserialized) part. A paper record, on the other hand, can be literally, physically, connected to the part to which it applies.  In a world in which we deal with so many different parts coming and going through our warehouses, paper records provide a level of comfort that we are connecting the uniquely correct record to the uniquely correct part.

The FAA has repeatedly said  that commercial documentation paradigms (like back-to-birth traceability) are not required by FAA regulations.  They have specifically stated that there is no Federal Aviation regulation that requires traceability of an aircraft part to its origin, and the FAA does not require back-to-birth records even for life-limited parts.  The FAA has explained that a part may be identified as having been released by a manufacturer as an airworthy part using  “a shipping document, a manufacturer’s certificate of conformance or material certification, or an FAA Airworthiness Approval Tag, Form 8130-3,”  but that in the absence of such documentation, “the part may be submitted for inspection and testing to determine conformity.”

Despite the best efforts of the FAA’s lawyers, the industry remains stubbornly rooted to a paperwork paradigm.  There are many commercial reasons for this, but one important pseudo-regulatory reason is that FAA inspectors frequently insist that the manuals for FAA certificate holders feature documentation requirements.  Once these requirements are published in the manuals, then these FAA-approved manuals drive the documentation requirements which are flowed-down throughout the industry.  And because these documentation requirements are not directly tied to FAA regulations, there is no opportunity to apply the ESIGN mandates and protections to them.

Through recent conversations with both the FAA and EASA, we are starting to see a new understanding of the value of several important paperwork paradigms:

  • limiting documentation ‘requirements’ only to those that are actually valuable to safety;
  • making acceptable safety information more readily available through available (and trusted) industry channels; and
  • permitting greater reliance on electronic information where availability of such data supports safety.

This is likely to be related to the greater reliance of the rest of the world on electronic data (a reliance that was facilitated by ESIGN), but it is also related to the fact that senior decision-makers in the FAA and EASA are more comfortable with electronic records than were their predecessors (again, a comfort that was facilitated by the impact of ESIGN on other parts of the world of data).  And they are also thinking more critically about what information supports safety (and should be encouraged) and what information does not support safety (and therefore becomes unnecessary to the FAA’s mission).

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