Export Regulations Are Changing! Is Your Export License Still Valid?

We have previously written on this blog about the upcoming changes to the State Department’s International Traffic in Arms Regulations (ITAR) and Bureau of Industry and Security’s Export Administration Regulations (EAR).  The transition of many United States Munitions List (USML) items (controlled by the State Department’s DDTC) to the Commerce Control List (CCL) 600 Series ECCNs (controlled by the Commerce Department’s BIS) is intended to ease export compliance and allow the State Department to better focus its resources on those items with the greatest national security implications.

The amendments to the regulations concerning the export of these certain defense-related articles articles go into effect on October 15, as a significant number of articles formerly found on the USML transition to the CCL, and the USML itself transitions to a positive list of controlled articles.

With the pending transition of articles formerly exported under a DDTC permanent export license (DSP-5) to BIS control, we have had a number of members ask about the status of DDTC-issued export licenses after the new rules become final on October 15.  Export licenses issued by the DDTC are typically valid for four years, so it will be important for distributors with DDTC-issued export licenses to know for how long, and under what circumstances, those licenses authorizing export of new 600 Series ECCNs remain valid.  (Previously issued BIS export licenses will not be affected by the change.)

Because the ITAR is generally more restrictive than the EAR, the BIS has largely deferred to the transition plan established by the DDTC in its final rule.  The DDTC transition plan contemplates the two possible scenarios in which articles covered by a DDTC export license transition to the 600 Series ECCNs such that they be regulated by the EAR in the future.

The first scenario considers an export license in which ALL articles that are included on the issued export license transition to the CCL. Such a license will remain valid for two years from the effective date of the final rule (October 15, 2013), which means October 15, 2015, or until the license expires, whichever occurs first.  Until that time, there is no need to apply for a new export license and the distributor may rely on the export license as usual.

The second scenario considers an export license in which only some of the articles included on the license transition to the CCL, but others remain on the USML and subject to the ITAR.  In this case, the export license will remain valid until it expires, whether the expiration date is prior to October 15, 2015 or not.  This means that those distributors who find a DSP-5 now lists a mix of USML and CCL items may continue exporting pursuant to that license beyond the October 15, 2015 cutoff date, assuming the license has not previously expired.

Of course, in both cases a license may still be voluntarily returned to the DDTC or otherwise suspended, revoked, or terminated.

Ultimately, in the short term, those distributors exporting pursuant to a DDTC export license issued prior to October 15, 2013 may continue to export under the terms of their validly issued export licenses.  The key factor is that if it is determined that all articles authorized on the license have transitioned to the CCL, then the distributor may only continue to export under the license until October 15, 2015 at the latest.  After October 15, 2015, distributors wishing to continue to export those articles must apply to BIS for the appropriate export licenses, or ship under a valid exception.  Export licenses that continue to authorize at least one article still on the USML will be valid until expiration, at which point application must be made to BIS for future export licenses.

Export issues can often be confusing, even without the challenges of new amendments to the governing regulations.  We have significant experience in handling export compliance matters, so if you have any questions regarding the October 15 transition, or regarding export compliance in general, feel free to call our office with your export concerns.

Advertisements

EASA 145 outside the EU: New Guidance Open for Comment

The European Aviation Safety Agency has issued for comment a Notice of Proposed Amendment, NPA 2013-12, that is meant to clarify the process of issuing Part-145 approvals to maintenance organizations outside of EASA’s Member States.  The guidance is targeted at both base and line maintenance organizations, and as such has the potential to affect anyone who holds EASA Part-145 certificates for such organizations, as well as distributors doing business with those organizations.

The stated purpose of the NPA is to provide and update Acceptable Means of Compliance (AMC) and Guidance Material (GM) to address inconsistencies that have arisen when the EASA acts as a competent authority for Part-145 organizations located outside of Member States.  Some of the amendments will also touch maintenance organizations within Member States.  Organizations that perform maintenance on aircraft (or components) registered in a Member State or used by an operator overseen by a Member State must be approved in accordance with Part-145 (also known as Annex II).

One area targeted for clarification is AMC 145.A.30.(d) addressing personnel requirements.  The new proposal reiterates the importance of having adequate personnel to perform an organization’s planned scope of work. However, the proposed new language seems vague and unhelpful in terms of providing useful compliance guidance:

The objective of this provision is to ensure the stability of the maintenance organisation approved under Part-145 in order to perform their planned scope of work.

If most of the staff were contracted, the organisation which employs those persons may decide to remove them from the maintenance organisation approved under Part-145 and relocate them to another organisation if, for example, there is a better offer. In such a case, the maintenance organisation approved under Part-145 would suffer a sudden and very significant reduction of the workforce until they are able to recruit new staff, with the corresponding negative effect on its activities.

However, if most of the staff are employed by the maintenance organisation approved under Part-145, the risk of this happening is much lower.

Nevertheless, there are cases where a percentage higher than 50 % contracted staff may not negatively affect the stability of the maintenance organisation approved under Part-145 and could be allowed by the competent authority. This may be the case where the maintenance personnel are employed by a parent company of the maintenance organisation approved under Part-145.

Such language does not provide guidance (in fact it appears somewhat contradictory) but rather presents hypothetical scenarios that are commercial in nature and should be addressed by the organizations themselves, not by regulators.

The NPA also provides new guidance pertaining to the qualification of certifying staff at facilities registered in non-Member States.

Certification of maintenance performed on aircraft is another area that is clarified.  The new guidance explains that the requirements apply only to aircraft covered by the Basic Regulation, and specifically lists those to which it does not apply:

  • aircraft carrying out military, customs, police, search and rescue, firefighting, coastguard or similar activites or services;
  • aircraft listed in Annex II of the Basic Regulation;
  • aircraft registered in a non-Member State and not being used by a Community operator;
  • aircraft for which the regulatory safety oversight has been transferred to a non-Member State and which are not used by a Community operator.

Such clarifications are helpful in establishing which regulations govern certification of maintenance performed on the aircraft.  The proposed change also helpfully clarifies that for engines, propellers, and other components, an EASA Form 1 may generally be issued due to the fact that the next aircraft on which the part will be installed is often unknown.

The NPA also adds a new AMC describing a proper corrective action plan to perform a root cause analysis of Level 1 findings- those findings of non-compliance that are a serious hazard to flight safety.

Finally, the proposed amendment makes small changes to guidance related to initial approvals, changes, and revocations, suspensions and limitations.

As with all NPAs, these changes warrant a close review and comment to ensure your business is protected.  Comments for this NPA may be submitted through EASA’s Comment-Response Tool (CRT) at http://hub.easa.europa.eu/crt/, and please share your comments with ASA as well.  Comments are due October 11, 2013.

New Export Rules Released – Should Provide Clearer Guidance to Aircraft Parts Exporters

The rules for exporting aircraft parts are changing!

This morning, the State and Commerce Departments released sweeping new regulations that should make it easier for exporters to identify which regulatory regime applies to dual-use parts and other parts that have caused aircraft parts distributors to be confused about compliance.

The International Traffic in Arms Regulations (ITARs) have traditionally applies to all aircraft parts that are designed, manufactured or modified for use on defense related aircraft (this language comes from Category VIII of the United States Munitions List or USML).  The problem with this definition has been that it often leaves no way for a aircraft parts distritor to conclusively identify which parts really are ITAR-controlled.  For example, a component that was designed for a defense related aircraft but then was later used in civilian aircraft might be ITAR-controlled.  This has included component that was designed for a defense related aircraft but then never used on defense related aircraft (e.g. where the designer lost a bid for a defense contract, and later manufactured the component solely for civilian aircaft).  Another class of problem parts is parts that are dual-use (the part fits on both civilian and defense related aircraft).

This has been a priority for the aviation community – changing the regulations to provide clearer guidance abouut which regulations control the export of any given aircraft part.

Non-Engine Parts

The new regulations, while not perfect, nonetheless do seem to provide clearer guidance.  The revised regulations modify USML Category VIII (the USML Category that applies to aircraft and aircraft parts).  The new langauge creates a “positive list” of parts that will continue to be regulated under the ITARs.  This positive list will include ():

  • Parts for the B–1B, B–2, F–15SE, F/A–18E/F/G, F–22, F–35 and the F–117;
  • Certain high velocity gearboxes;
  • Defense-specific parts, like tail hooks, wing folding systems and bomb racks;
  • Certain technical related to export-controlled items;
  • Classified items;
  • “Commodities, software, and technical data subject to the EAR (§ 120.42 of this subchapter) used in or with defense articles controlled in this category.”

This last category could prove to be a problem if it serves as a back-door to State Department assertion of control over parts that do not seem to fit the other USML-regulated categories but that the State Department argues are “used … with defense articles.”  Otherwise, though, the shift to a positive list should provide much clearer guidance to exporters of aircraft parts.

Note that there is another category of aircraft parts that are regulated under the ITARs.  Inertial navigation systems (INS), aided or hybrid inertial navigation systems, Inertial Measurement Units (IMUs), and Attitude and Heading Reference Systems (AHRS) that are designed for defense aircraft and their parts will be regulated under the ITAR.

Engine Parts

Certain engines and their parts will be controlled under USML Categopry XIX.  Most of these engines appear to have characteristics that are uniquely associated with (1) defense related aircraft and/or (2) armed or military unmanned aerial vehicle systems, cruise missiles, or target drones.

  • Certain engines are called-out by designation: GE38, AGT1500, CTS800, TF40B, T55, TF60, and T700 engines.  These will all be ITAR-controlled engines;
  • Digital engine control systems controls (FADEC) and Digital Electronic Engine Controls (DEEC) that are specially designed for engines controlled Category XIX will be controlled;
  • Parts for any of these engines: AE1107C, F101, F107, F112, F118, F119, F120, F135, F136, F414, F415, J402, GE38, TF40B, and TF60;
  • Hot section parts, uncooled turbine blades, vanes, disks, tip shrouds, combustor cowls, diffusers, domes, shells and engine monitoring systems specially designed for any engine controlled under Category XIX;
  • Certain technical related to export-controlled items;
  • Classified items.

To address the many items that are being moved from State Department’s export control to the Commerce Department’s export control, the Commerce Department has established a new set of ECCNs – the 600 series ECCNs.  Items subject to these ECCNs will have heightened restrictions associated with them – they will often require licenses and the will generally always be required to be disclosed through AESDirect (common exceptions will not apply).

The regulations will require that exports of items on the CCL be accompanied by a Destination Control Statement (DCS) identifying the items as subject to the EAR.  The recommended language for this DCS is:

‘‘These commodities, technology, or software were exported from the United States in accordance with the Export Administration Regulations. Diversion contrary to U.S. law is prohibited.’’

For each ‘‘600 Series’’ item being exported, in addition to the DCS, the ECCN must be printed on the invoice and on the bill of lading, air waybill, or other export control document that accompanies the shipment from its point of origin in the United States to the ultimate consignee or end-user abroad.

The Commerce Department regulations can be found online at http://www.gpo.gov/fdsys/pkg/FR-2013-04-16/pdf/2013-08352.pdf.

The State Department regulations can be found online at http://www.gpo.gov/fdsys/pkg/FR-2013-04-16/pdf/2013-08351.pdf.

These new rules will be effective as of October 15, 2013.  Remember that you must remain in compliance with the current regulations until the new regulations take effect!

How Will EASA SMS Rules Affect DIstributors?

The European Aviation Safety Agency (EASA) has formally begun the process of implementing Safety Management System (SMS) regulations.  Because past practice has been for certificate holders to “flow-down” a portion of their regulatory obligations to distributors, SMS and the manner in which it is implemented internationally remains an important issue for distributors.

EASA issued the Terms of Reference (TOR) for task number MDM.055 on July 18, 2011. This task anticipates the creation of adequate rules and guidance material to permit EASA to implement a set of SMS rules.

The Terms of Reference do not specifically explain to whom the SMS rules created under this project would apply – they merely mention some of the parties to whom ICAO has recommended apply it. This is a more important omission than some people may understand, and it provides EASA with the ability to dynamically change the scope of application as necessary during the course of the rulemaking project without amending the TOR. Under current ICAO recommendations, SMS should apply to air carriers, repair stations, manufacturers and airports. In the United States, the FAA made the decision to create two different SMS rules – one for airports, and then a second one for air carriers that is intended to be later applied to repair stations and manufacturers. EASA has said that it is amending COMMISSION REGULATION (EC) No 2042/2003 of 20 November 2003. This regulation applies to design and production organizations as well as maintenance organizations (but not to air carriers). EASA is clearly leaving itself open to any reasonable implementation strategy.

The final shape of SMS rules in EASA will be important to distributors who do business with both Europe and other parts of the world, because the data requirements of SMS could lead to reporting requirements from distributors to their SMS-compliant customers.

EASA intends for the internal EASA task group to do the following , as part of this task:

  • Review the existing rules and advisory guidance;
  • Adopt provisions for application for, and processing of, alternative means of compliance, to support standardization;
  • Implement management systems requirements to support compliance with the relevant ICAO standards on SMS;
  • Implement in the SMS standards new guidance on human factors for maintenance;

This SMS project will be worked internally within EASA, although EASA has reserved to itself the right to call informal meetings with industry or National Aviation Authorities for additional feedback. This internal project mechanism is consistent with the process recently used by Japan to create its SMS rules for repair stations (they offered the proposed rules for notice and comment but did not otherwise seek input from the international community). It is different from the FAA’s approach in the United States … the FAA formed an Aviation Rulemaking Committee (ARC) made up of industry and FAA and took advice from the ARC on how to formulate the air carrier SMS rules.

EASA has a very aggressive timetable set for the SMS project. They expect to issue a Notice of Proposed Amendment (NPA) to seek public comment in the second quarter of 2012.

%d bloggers like this: