Today, Congress published proposed legislation (known as the AIRR Act) to reauthorize the FAA. The biggest headline in that bill is air traffic control privatization. But there is plenty in this bill that could affect the PMA industry.
Typically, FAA Reauthorization Bills affect higher-level elements of the law and the FAA is more likely to directly affect PMA Manufacturers; but the AIRR Act has a large number of elements that could affect the PMA community:
Sec. 302. Safety Oversight and Certification Advisory Committee. Congress is establishing an advisory committee that will be responsible for advising the Secretary of Transportation on policy-level issues related to FAA safety certification and oversight programs and activities.
Sec. 311. Aircraft certification performance objectives and metrics. The FAA shall establish metrics for progress toward increasing certification efficiency, increasing accountability, “achieving full utilization of FAA delegation and designation authorities,” implementing risk management and systems safety principles, increasing transparency, training personnel in auditing systems and maintaining the leadership of the United States in international aviation and aerospace. All of these foci could be good for the PMA community.
Sec. 312. Organization designation authorizations. Establishes a new provision in the US Code for ODAs. ODAs shall have a procedures manual, shall be entitled to full delegation of functions approved in the manual, but shall be subject to regular FAA inspection. ODA holders shall cooperate fully with the FAA oversight activities. FAA shall establish an ODA Office to coordinate ODA policy and oversight.
Sec. 314. Type certification resolution process. Requires FAA to set policies and timelines for resolving type certification issues, and for elevating them when they cannot be resolved at the lower levels of the FAA. [*** It would be nice to see this provision expanded to all design approvals, including PMAs ***]
Sec. 315. Safety enhancing equipment and systems for small general aviation
airplanes. Requires FAA to streamline the installation of safety enhancing equipment and systems for small general aviation airplanes in a manner that reduces regulatory delays and significantly improves safety. This is something that the FAA has been working on already so they should be prepared to meet Congressional deadlines.
Sec. 317. Additional certification resources. If the FAA needs to travel to a foreign country to help expedite the process of acceptance or validation of a US certificate, then the US applicant can reimburse the FAA for travel expenses (which makes it easier for the FAA to contribute to such efforts). The FAA will have to keep metrics on this, including how often requests from US applicants to enter into such an arrangement were denied.
Sec. 351. Promotion of United States aerospace standards, products, and services abroad. This section gives the FAA promotion responsibilities, which were taken out of the law a number of years ago. This limited promotion authorization is focused on international promotion, like promoting United States aerospace safety standards abroad, and facilitating and vigorously defending approvals of United States aerospace products and services abroad. It will also reiterate our commitment to working with bilateral partners.
Sec. 352. Bilateral exchanges of safety oversight responsibilities. Includes a requirement for the FAA to accept foreign airworthiness directives (ADs) issued by bilateral partners. This could impose an unworkable burden on smaller US companies to track foreign AD proposals, because it will mean that the US companies will have to comment on the foreign AD, because it will have no reasonable opportunity to comment on a US version if the FAA is required to accept foreign ADs. Because ADs can sometimes be worded to exclude PMA alternatives, it is important that the PMA community have some redress with respect to proposed ADs.
Sec. 353. FAA leadership abroad. This will require the FAA to better support US companies in foreign acceptance or validation projects. one clear element of this will be through increased US engagement with foreign authorities.
Sec. 615. Air transportation of lithium cells and batteries. The government will establish a committee, and try to make sure that people actually comply with lithium battery shipping requirements.
Reauthorization is often a slow process, but the last reauthorization bill was a six month extension that went into effect October 1, 2015. That means that the new reauthorization bill is needed by April 1, 2016. It is possible that this ATC privatization may be contentious (General Aviation groups contend that it is an effort to shift the expense of maintaining the system into their pockets) and that could slow down the progress of the AIRR Act. If the AIRR Act cannot be passed by April then we could see another temporary reauthorization (e.g. for another six months). But it is possible that the AIRR Act could move on a fast track, and become law, later this Spring.
The FAA has published an update to Advisory Circular (AC) 120-106A,on the Scope and Recommended Content for a Contractual Agreement Between an Air Carrier and a Contract Maintenance Provider. This advisory circular provides guidance on the terms of the relationship between an air carrier and its contract maintenance providers.
The new revision expands on the guidance and includes elements that are important to the PMA community as well.
FAA Policy Statement PS-AIR-21.50-01 is an important FAA policy statement that precludes Design Approval Holder’s from using their monopoly over the Instructions for Continued Airworthiness to exact additional anti-competitive concessions. A reason for this was because those anti-competitive concessions could undermine safety, as well as inhibiting third party development of safety improvements.
My mention of PS-AIR-21.50-01 is not the non-sequitur it might seem to be. That guidance is now directly referenced in AC 120-106! Section 5 of the guidance discusses elements of the contractual agreement between the air carrier and the maintenance provider. Subsection 5(b)(4) recommends a contract clause on proprietary data, but makes it clear that this means the air carrier’s own data, and stresses that the ICAs are not proprietary data.
4) Proprietary Data. Many times, air carrier general maintenance manuals are designed for in-house maintenance. These manuals may contain proprietary or other confidential information that an air carrier may not want to share with an MP. In many cases, the MP also works on competitors’ aircraft. This has a tendency to make air carriers reluctant to share this information, and therefore they do not. The proper handling of proprietary data issues should be addressed in the contractual agreement between the air carrier and the MP.
NOTE: The proprietary or other confidential information referred to in this paragraph refers only to that information developed by an air carrier for purposes of its in-house maintenance. Proprietary or confidential information does not refer to other data to which the MP is entitled, such as instructions for continued airworthiness (ICA) under 14 CFR part 21, § 21.50(b), and in accordance with FAA Policy Statement PS-AIR-21.50-01, Type Design Approval Holder Inappropriate Restrictions on the Use and Availability of Instructions for Continued Airworthiness. Such data that is required to be made available under the regulations may not be restricted by design approval holders (DAH) with respect to an air carrier’s approved maintenance manuals, through restrictive language in the ICA, or through restrictive access or use agreements.
Some manufacturer have used ICA restrictions to preclude use of PMAs, and PS-AIR-21.50-01 helps to address those restrictions in a positives and pro-competitive manner.
Some air carriers find themselves getting conflicting information about whether ICAs are proprietary data. We’ve written in the past about why ICAs cannot be proprietary data (e.g. they are required to be made available and this federal requirement preempts state-law trade secret protections). Because they cannot be proprietary data, one shouldn’t use a license of that information to perpetrate anti-competitive restrictions. This recently-published NOTE helps to emphasize the point.
The Small Business Administration has adjusted the size standards for small businesses that perform research and development in the aerospace field (including businesses that are required to deliver manufactured product as part of a research and development contract).
Research and Development in the Physical, Engineering, and Life Sciences is currently categorized under NAICS 541712. This NAICS code has three sub-industries or “exceptions.” The SBA feels that the small business standard for these companies should be consistent with that of peer companies that manufacture parts. SBA is therefore modifying the titles of the three exceptions, and the size thresholds associated with them.
|NAICS code||NAICS industry title||Current size standard (number of employees)||New size standard (number of employees)|
|541712||Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)||500||1000|
|except||Aircraft Engine and Engine Parts||1000||1500|
|except||Other Aircraft Parts and Auxiliary Equipment||1000||1250|
|except||Guided Missiles and Space Vehicles, Their Propulsion Units and Propulsion Parts||1000||1250|
This rule change becomes effective on February 26, 2016. Full details of this change are available in the Federal Register.
The U.S. Bureau of Industry and Security has issued an order denying the export privileges of:
This is a temporary denial order that is only valid for 180 days, unless extended. Although published in today’s Federal register, the order is actually dated January 19, 2016. The Order prohibits the denied parties from engaging in export transactions, and it includes a prohibition against third parties exporting from the U.S. to any of these denied parties.
Absent a license that authorizes sales to these denied parties, sales of US-origin FAA-PMA parts to such denied parties may violate the temporary denial order.
MARPA members with a history of doing business with any of these parties should ensure that their future transactions remain consistent with U.S. law. While the Order remains effective, those who are approached by any of these denied parties should exercise caution in their dealings.
Earlier this year, MARPA joined with other trade associations to express support for H.R. 636, the America’s Small Business Tax Relief Act of 2015, sponsored by Rep. Pat Tiberi.
The legislation seeks to make permanent the higher thresholds for section 179 expensing. This is the tax law that allows a small business to treat certain capital investment as expenses (which means that it can be fully deducted in the year of the expense, instead of depreciating it over a period of years). It started at just $25,000 and over the years, has been ‘temporarily’ extended on a recurring basis at increasingly higher levels (it has been set annually at $500,000 since 2010).
Industry has come to rely on this expensing provision in order to immediately deduct investments in equipment like production equipment and test equipment. This allows small manufacturing companies to better invest in modern production and test equipment.
This issue was discussed at the Annual Conference in October.
The section 179 expensing provision has been an important tax issue for many years. Because it has been around for many years, many manufacturing companies rely on the deduction provision as the basis for their own investment decisions.
The section 179 expensing provision has not yet been extended for 2015. This means that your 2015 limits on section 179 expensing are $25,000 (not $500,000) and the ability to use the provision begins to phase-out when the business invests $200,000 and fully phases out at $225,000. If it were extended as proposed, then it would apply to up to $500,000 in equipment investment, and would not phase out until the annual investment amount exceeded $2,000,000.
There is a very good chance that permanent Section 179 expensing at $500,000 could be included in the year-end tax extenders package, which Congress expects to debate and pass very soon. This would be a huge victory for small businesses, and the culmination of a lot of work by many trade associations and lobbyists to raise the profile of this issue and get it addressed by Congress.
If this is an important issue to your business, then you may wish to send letters or emails to your own members of Congress (House and Senate) expressing your opinion on the permanent extension of Section 179 expensing at $500,000.
As we discussed at the MARPA Annual Conference, Part 21 has been amended in some ways that will impact the PMA community.
The amendments can be found in the October 1 Federal Register. There are three main amendments that drive change in a PMA company’s production quality system:
MARPA has drafted compliance guidance that explains what the change are, and provides checklists to aid in compliance with each of the changes that significantly affect the PMA community.
The MARPA compliance guidance will be mailed to MARPA members with the next MARPA Supplement. if you are a MARPA member and do not receive the MARPA Compliance Guide with the November 25 MARPA Supplement, then please contact the Association.
What do you think of AC 33-8?
AC 33-8 is the “Guidance for Parts Manufacturer Approval of Turbine Engine and Auxiliary Power Unit Parts under Test and Computation.” This guidance has been out in the industry for six years now. A number of our members have reported that this guidance has been useful for them.
MARPA will be meeting with the FAA in four weeks and one of the topics will be AC 33-8.
Please get us your comments – positive or negative – on this document. Let us know if it has been useful (and what has been useful, if possible). Let us also know whether any of the AC language poses problems or could be improved. Also, if you think that the guidance is missing anything, then let us know what additional information could be useful in the guidance. Please send your comments to us by email or leave a response in the blog comments.
One of our members recently reported that his company has been offering cabin interior PMA parts to several Chinese airlines, only to be told that they are already using CAAC PMAs for many of these cabin parts. CAAC PMAs are Parts Manufacturer Approvals issued by the Civil Aviation Authority of China. CAAC PMAs are acceptable for installation on Chinese-registered and Hong Kong-registered aircraft but they do not appear to be currently acceptable for installation on any other aircraft.
Our member asked whether there is a master list of CAAC PMA parts that MARPA members could review. This would help MARPA members know which parts have not been PMAed in China which in turn will help to reveal which FAA-PMA parts might be most valuable and useful to Chinese air carriers.
As far as we know, the master list of CAAC PMAs is only maintained as an advisory circular. Because it is an advisory circular, it is not maintained in real time, but rather it is updated annually. This link is to the 2015 revision of the CAAC PMA Catalog.
Hong Kong has a separate aviation authority. Hong Kong’s Civil Aviation Department also issues its own PMAs. Hong Kong has issued PMA authority to Taikoo (Xiamen) Aircraft Engineering Co. Ltd. There is a Schedule of Implementation Procedures between China and Hong Kong under which each accepts the PMAs of the other.
ACCEPTANCE OF CHINESE PMAs
Remember, the current US-China bilateral permits entry of US PMAs into China, but it is currently a one way only: it does not permit installation of Chinese PMAs onto US-registered aircraft. Without an explicit acceptance of CAAC PMAs through a US document (such as the US-Chinese bilateral agreement), CAAC PMAs are not currently eligible for installation on US registered aircraft as replacement or modification parts (under 14 C.F.R. 21.9).
FAA PMA FOR CHINESE MANUFACTURERS
There is a mechanism for Chinese companies to obtain US PMA. Chinese companies wishing to set up final production sites in the US could apply for US PMA and could use that as a mechanism to create FAA-PMA parts that are accepted all over the world. For many Chinese companies, the most efficient and effective way to accomplish this would be to partner with an existing FAA-PMA holder in the United States that has experience navigating the FAA regulatory system.
I just got off the phone with senior leadership at the FAA and all I can say is “WOW.”
The FAA is talking very seriously about a new model of certification for the aerospace industry focusing on approval of design processes and risk-based oversight in order to better leverage the FAA’s resources to ensure safety of the growing aerospace marketplace.
I shouldn’t be surprised. The models are there, and they’ve worked. We’ve sat on Federal Advisory Committees that have made these recommendations to the FAA. The industry has been talking about this for years. But sometimes when you talk about projects for too long, you start to lose hope that they will ever come to fruition.
But this idea has the support of the FAA’s senior management and that is what will make the difference.
The new model of certification will likely rely on paradigms like:
Under this new paradigm, a company that specializes in PMAs for landing gear (for example) would have a library of compliance methods – test and procedures that are designed to show compliance to the regulations (including ways to demonstrate true identicality with an existing compliant design). By following the compliance methods from the library, the company would be able to demonstrate compliance for future landing gear parts. This would allow the company to more readily develop compliant designs that can be readily PMAed based on the methods that are already known to be sound.
This would involve a major restructuring of how the FAA oversees design approval. Moving to a TSOA-like self certification should permit small businesses to react very nimbly to market forces and it allows the FAA to more readily focus its resources on real safety issues based on risk assessment. This paradigm could be supported by FAA Centers of Excellence that would be able top provide support to the design approval community on technical issues.
This paradigm could also impose more responsibility on the design approval applicant. It would likely be reflected in design systems that would be subject to FAA surveillance. This would replace the current model in which designs are reviewed. It would be analogous to the modern approval to production quality systems, in which the FAA approves system rather than approving each individual part and product that comes out of the system.
For PMA companies, this could help companies bring part to market faster, when those parts fall within the compliance library, because it would limit the FAA’s involvement in projects where compliance can clearly be shown based on known and accepted methods.
We are currently working with the FAA on a presentation (“challenge session“) about this new paradigm; we hope to add this to the program for the 2015 MARPA Conference.
MARPA and the Korean Trade Promotion Agency (KOTRA) delivered a PMA workshop in Seoul this week. Hosted at KOTRA Headquarters in Seoul, the workshop provided an opportunity to begin educating the Korean aerospace community about the value of FAA-PMA parts. It also afforded the PMA community an opportunity to begin strengthening business relationships with the Korean aerospace industry.
MARPA’s President, Jason Dickstein, spent the first day of the workshop laying the goudnwork for understaing the PMA process.
The room was packed with about 60 participants from all sectors of the Korean aeroaspace community. MARPA discussed issues like the parts approval process, the safety, reliability and economic advantages afforded by FAA-PMA, and strategies for partnering with US PMA companies in order to increase trade and increase the profis of both companies.
Three of our members attended the workshop. Representatives from Heico, Jet Parts Engineering, and the Wencor Group joined us at the workshop and had an opportunity to network with potential suppliers from Korea’s manufacturing community as well as potential customers from MROs and airlines.
We were honored to be joined by Ha Girl Chung, the Deputy Director of Aircraft Certification for Korea’s Ministry of Land, Infastructure and Transportation. Mr. Chung was a key negotiator in the recently updated technical implementation procedures for the US-Korean bilateral aviation safety agreement. He reviewed the elements of Korean law that permit the acceptance of US PMA parts in Korea, and he also explained Korea’s own ability to issue PMA for parts made in Korea.
Privately, Mr. Chung told MARPA that Korea would like to begin issuing domestic PMA. This was foreshadowed by last years update to the US-Korean technical implementation procedures, which left a specific reservation (a place holder) for US acceptance of Korean PMA parts.
Asiana and Korean Air Lines were both well-represented at the event. Hoon Yong Kim, from Korean Air, delivered a presentation about his air carrier’s PMA policy. He explained that his carrier does not currently use critical PMA parts, but that they would like to expand their current use of non-critical PMA (critical PMAs are less than 1% of all PMAs). Mr.Kim said that they are particularly targeting interiors parts, right now, but they would like to increase both the quantity and the scope of the PMAs that they use.
What specific qualities does Korean Air seek? Mr. Kim explained that parts partners need to hold FAA PMA (other nations’ systems are currently not on his radar) and they should be prepared to support Korean Air in cooperative analysis. He described one situation where a supplier helped Korean Air perform a root cause analysis. Despite the fact that the root cause was unrelated to the supplier, the supplier provided continued engineering support. During subsequent conversations, Mr. Kim confirmed that he is looking for companies that have established systems like MARPA’s Continued Operational Support (COS) program.
All three of the MARPA members who were on hand had an opportunity to meet and speak with the attendees. Steve Johnson from Jet Parts Engineering added some insightful questions to the workshop. Joe DePaoli of Heico explained that his company and his peers from other PMA companies were interested in opportunities to work with Korean manufacturing companies with specialized technologies, and also with Korean manufacturing companies that are already making certain types of parts and who could use those skills to manufacture parts that could be approved under FAA-PMA.
Mark Powell of the Wencor Group delivered the anchor presentation at the end of the workshop, and he summarized the process that helped to ensure that PMA parts met the highest standards.
KOTRA and MARPA have begun a partnership to promote US-Korean aerospace trade with a focus around PMA parts. MARPA members should expect – and should look forward to – future oppotunities to increase their trade with Korean businesses.