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.

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!

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