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US Government Seeks to Remedy Unfair Competition Affecting Aerospace Trade

I had a great conversation today with the International Trade Administration (ITA).  They are concerned about non-US companies misusing intellectual property (“IP”) claims to in ways that give them an unfair commercial advantage.  I pointed out some situations where IP rights are claimed, but do not really apply, and this is used as justification for a foreign company failure to comply with regulations, causing commercial disadvantage to US companies who do comply with the regulations.

Our next step is to try to entice them to meet with some members to hear their concerns.  We focused in our initial discussion on IP because tat was the focus of the people who were present, but they felt that some of the issues amounted to technical barriers to trade and suggested that they might want to have a technical barriers to trade specialist hear about these issues, too.

I offered to assemble a few affected parties from US aerospace companies who could tell them “the whole story.”  That is where YOU come in.

   Are any of you interested in attending a meeting (not sure if it will be in-person or telephonic) where you would have an opportunity to discuss the details of IP situations with ITA representatives? 

Remember that ITA’s focus is not going to be on general unfair competition – just unfair competition that affects international trade and puts the US at a disadvantage – so we need to be focused on those issues.

Remember also that this meeting is still in the early planning stages – they have not committed to it yet and if it happens then I want to make sure that we have some strong issues to share with the ITA.

If you feel that your aerospace business is being affected by unfair competition from non-US competitors (especially as a consequence of intellectual property claims), please let us know as we work with ITA to set up the next meeting.

MARPA Attends 2017 Aviation Summit

On March 2, MARPA had the opportunity to attend the U.S. Chamber of Commerce 2017 Aviation Summit in Washington, DC.  The event featured addresses and panels by the presidents and CEOs of aerospace industry leading operators, manufacturers, and service providers. Although the focus was primarily on operational issues affecting air carriers like Open Skies, airport infrastructure, and air traffic control, there were a couple of points raised by speakers that are relevant to MARPA members and the PMA industry.

During the manufacturing panel, HEICO Corporation Co-President and past MARPA Annual Conference keynote speaker Eric Mendelson, discussed the importance of choice and competition without which it becomes difficult for carriers to operate cost effectively. He used the decrease in suppliers relied upon by Boeing for successive new aircraft to illustrate the challenges facing both operators and aftermarket parts manufacturers, as competition becomes more and more restricted. He noted that the original 777 had three engine options, and approximately 17 component suppliers provided 75% of components. For the 787, those numbers fell to two engine options, and about four component suppliers for 75% of components. In the case of the new 777 there will be only one engine option and fewer still component suppliers.

This on-going reduction in suppliers means that operators face fewer and fewer choices both at the initial purchase stage and in terms of maintenance over the life of the product. This also means that those suppliers have a great deal of leverage in locking operators into long-term service agreements, which threaten PMA manufacturers.

In order to fight this phenomenon, it is vitally important that our customers be educated through their organizations as to the value of ensuring PMA is viable replacement part option, to ensure that they aren’t locking themselves into unfavorable maintenance agreements that needlessly restrict their replacement part options and drive up their costs. This will become even more important if fuel prices begin to rise, causing operators to look more aggressively for areas to realize cost savings.

Another interesting point was made later in the day, by Dennis Muilenburg, Chairman, President, and CEO of Boeing. He noted the importance of the Ex-Im Bank to financing export of US-manufactured goods, and stated that there is approximately $30 billion in deals merely awaiting the Ex-Im Bank’s board to reach a quorum. This requires one more confirmed nominee (currently, only 2 of the 5 seats are filled, and a quorum is required to approve deals over $10 million).

Although MARPA’s members aren’t generally making deals that require that level of financing from Ex-Im, having Ex-Im move out of limbo would be valuable for MARPA’s members. We’ve talked previously at conferences about the various ways the Ex-Im Bank can support MARPA’s members in exporting goods to credit-worthy customers abroad who may otherwise lack the cash flow to complete a large purchase. If Boeing’s willingness to throw its weight behind Ex-Im results in securing the stability of the bank for the future, the benefits would ripple out to the rest of the industry.  This is something we will be keeping an eye on.

If you have questions about how Ex-Im can be leveraged help your PMA business, don’t hesitate to let MARPA know.

 

New Required Language for Exports

A new regulation has changed the destination control statement (“DCS”) that is required on all exports of PMA aircraft parts.

PMA aircraft parts are typically exported under the jurisdiction of the Commerce Department’s Bureau of Industry and Security (BIS).  If you export aircraft parts, then the BIS regulations require a DCS.  These regulations have been changed to harmonize the DCS to the same language as the ITAR DCS.

Te DCS is placed on each export control document that accompanies an export shipment. The export control documents that are required to show this statement include the invoice, the bill of lading, the air waybill, and any 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.

This is sometimes known as the ‘non-diversion statement’ because the current version includes language stating that “diversion contrary to U.S. law is prohibited.” The purpose of the DCS was to alert parties outside the United States that the item is subject to the US export regulations.

The rules have always held that compliance with the comparable ITAR requirement was an acceptable means of compliance where the shipment included both ITAR and EAR-controlled articles. The comparable ITAR requirement requires slightly different language. Many people nonetheless found the different language in each regulation to be confusing.

The Commerce Department has changed their DCS language to harmonize it with the ITAR-required-language. This is meant to make compliance easier. Starting on the implementation date of the rule (November 15, 2016), exporters of articles subject to BIS jurisdiction (those with ECCNs) should use the following destination control statement on all exports:

“These items are controlled by the U.S. Government and authorized for export only to the country of ultimate destination for use by the ultimate consignee or end-user(s) herein identified. They may not be resold, transferred, or otherwise disposed of, to any other country or to any person other than the authorized ultimate consignee or end-user(s), either in their original form or after being incorporated into other items, without first obtaining approval from the U.S. government or as otherwise authorized by U.S. law and regulations”

In addition, the DCS should show the Export Commodity Classification Number (ECCN) for any 9×515 or ‘600 series’ (nx6nn) items being exported.

There are exceptions to this DCS requirement for EAR 99 exports and also for exports under license exceptions BAG (baggage) and GFT (gift parcels and humanitarian donations), but typically these do not apply to exports of PMA aircraft parts.

Become a Supplier to Embraer

For years MARPA has talked about opportunities that exist for PMA manufacturers willing to look for non-traditional customers.  One of the most under-appreciated possibilities, and one that MARPA President Jason Dickstein has emphasized, is to act as a supplier to OEMs.  OEMs are very often massive companies with a need for quality, reliable suppliers, and many MARPA members are ideally positioned to take advantage of OEM purchasing needs with high quality approved parts on the shelf and ready to ship.

The U.S. Department of Commerce is presenting a program on becoming a supplier to Embraer.  Because many PMA companies are already manufacturing parts for Embraer aircraft, this may be an excellent opportunity to broaden your customer base for your Embraer parts.

The program will begin with a presentation made by Embraer representatives on how to initiate a relationship with Embraer. This presentation will be made by webinar on October 28, 2016. Participation in this introductory webinar is a mandatory part of the program, so if this is something your company may even be remotely interested in, you should plan to register and participate.

Interested companies will then be asked to fill out an online questionnaire from which Embraer engineers will evaluate companies and select suppliers for a second round of webinar discussions with Embraer’s engineering department. Embraer may then invite select companies for a further in-depth interview.

There is no cost to participate in this program, and it presents an opportunity to potentially expand parts sales.  MARPA has often said that OEMs should be thought of as no different than air carriers from a customer perspective: they need parts, and we manufacture and sell great parts.  This could be an excellent opportunity for MARPA members to diversify their customer base.

If this opportunity sounds like something your company may be interested in, you can register for the mandatory introductory webinar at the following link: http://2016.export.gov/california/losangelesdowntown/events/embraer/eg_us_ca_102435.asp.

MARPA Returning to Japan

As part of its ongoing drive to increase the export of U.S.-made PMA parts and increase global knowledge and understanding of PMA, MARPA has in the past few years traveled to Japan to speak with potential customers, government contacts, and manufacturing partners.  MARPA is happy to announce that it will continue these efforts this year at the Japan International Aerospace Exhibition 2016, in Tokyo, Japan, October 12-15.

We have worked closely with long-time MARPA member and MARPA supporter Akira “Jay” Kato of JK Tech Consulting to make valuable contacts in Japan and discuss PMA at a very high level with Japanese customers and government officials. These efforts include both explaining and educating air carriers and their purchasing groups about PMA, as well as, importantly, promoting the use of PMA by discussing the safety, value, and reliability PMA provides.

2015-10-15 MARPA Staff and Tokyo Govt Rep and Jay Kato

From left to right: MARPA volunteer staff Judy Dickstein and Harvey Dickstein, MARPA VP of Government and Industry Affairs Ryan Aggergaard, Tokyo Metropolitan Government Supervisor for Aviation Industry Participation Support Project in Tokyo Chikako Nagase, and Tokyo Metropolitan Government Aviation Industry Participation Support Project Adviser (President, JK Tech Consulting, Inc.) Jay Kato at the MARPA booth at the 2015 Tokyo Aerospace Symposium.

These efforts are one prong of MARPA’s ongoing MDCP efforts supported by the U.S. International Trade Administration.

MARPA hopes to continue to make valuable contacts in the Japanese aviation community, and particularly to make additional inroads on behalf of the PMA industry with customers in Japan.

While MARPA always enthusiastically promotes the benefits of PMA where ever it goes, we would like to be able to provide a more targeted benefit to our members. We would therefore like to offer to our members the opportunity to display your marketing literature in the MARPA booth at the Japan International Aerospace Exhibition.  This will allow us to direct visitors at the MARPA booth to those members who can best serve their needs or might be an ideal partner for future business.

If you would like to have your literature displayed in the MARPA booth this October in Tokyo, please contact Senior MARPA Program Manager Katt Brigham at katt@washingtonaviation.com no later than September 30.

DRAFT Materials Advisory Circular – Extension of the Comment Period

Many of our members have been communicating with us about their concerns over the proposed Materials AC. We had previously asked the PMA community to send us their comments and concerns so we could assemble them into a single missive to deliver to the FAA.

We’ve heard from a number of you that the large volume of material and the highly technical nature of the proposed AC has made it slow going to put together your comments.  With this in mind, MARPA asked the FAA last week for a extension of time to file comments on this draft.

We received the answer today, granting that extension.

Dear Mr. Ryan Aggergaard,

This e-mail is in response to your request to grant a 90 day extension to comment on the FAA public draft Advisory Circular 33.15-3, titled “Parts Manufacturer Approval (PMA) Metallic Part Material Compliance Using Comparative Test and Analysis Method for Turbine Engines or Auxiliary Power Units”.

The FAA will consider comments after the comment period has closed if it is possible to do so without incurring expense or delay.

We have determined there will be no incurring expense or delay, and will grant the MARPA members and the MARPA Technical Committee an extension from July 20, 2016, to October 18, 2016.

Please feel free to contact us if you have any questions or concerns.

Sincerely,

Judith Watson

Please do not wait until October to review this AC and develop your comments.  The earlier you can provide your comments and concerns to the FAA (and to MARPA), the better able we will be to address them in a positive and productive way with the FAA.

Challenges Apparent in Reconciling Performance Based Regulations and Emerging Technologies

MARPA had the opportunity this week to attend the 2016 FAA-EASA International Aviation Safety Conference that was held in Washington, DC. The conference provides an opportunity for the regulatory agencies and industry to get together to discuss emerging issues in aviation safety and strengthen the cooperation between both the regulators themselves as well as the regulators and industry.

One notable panel discussed performance-based regulations (PBR) and their development, implementation and oversight as a part of the ongoing safety management adoption. The goal of PBR is essentially to retain the high level requirements and clearly establish what those high-level regulations are trying to achieve, while clearing out more detailed prescriptive regulations. Those detailed regulations would then be replaced by industry consensus standards.

In theory, this should clear the way for innovation by focusing more on ensuring a satisfactory outcome (that complies with the regulations) is the result, rather than focusing on prescriptive compliance-based rules. (How this exactly squares with a safety management system focused on systems and processes rather than the outcome per se is a conversation for another day.)  Performance-based regulations can free the hands of regulated parties and avoid the trap of innovation stagnation in which companies are forced to design or produce in only limited ways in order to comply with the regulations.

Although moving to a PBR approach may be a laudable goal, the next panel demonstrated how challenging it may be for regulators to break free of deeply ingrained compliance-based approaches to oversight.  Relevant to PMA manufacturers, the “fast-moving technologies” panel spent a significant amount of time discussing certification of projects using additive manufacturing techniques.

In theory, a PBR approach would be ideal for approving parts manufactured using emerging technology like additive manufacturing (AM).  If a part can be produced using AM techniques (like 3D printing) that meets all the design requirements (dimensions, material composition, durability, etc) of a part that is traditionally machined, an outcome-focused approach like PBR claims to be should have no problem approving that part. Conversely, if a 3D printed part cannot be made to conform to the approved design, our quality assurance systems reject the part and we go back to the drawing board.

However, it became clear during that panel that we can expect to see more of the same compliance based review of processes in seeking to obtain approval of parts manufactured using emerging technologies like AM.  Of course to borrow from Captain Renault I was shocked, SHOCKED to find that the OEM panelist expressed skepticism that “sub-tier” suppliers or those in the aftermarket were capable of producing approved parts using these methods. But of greater concern was his statement that the regulators might also question that ability.

Part of this concern on the part of the regulators arises from the fact that the regulators themselves do not fully understand technologies like AM yet. The FAA is currently working with industry to determine what controls will need to be in place and what the oversight requirements will be with respect to AM. It will therefore be very important for any PMA manufacturer seeking to use new techniques to manufacture parts to engage the FAA early in the process and demonstrate to the FAA its competence with the technique. This may involve educating the FAA in some cases (and refuting the implications of some larger OEMs that only they know the “special sauce” of new technology).

This much was supported by FAA AIR-1 Dorenda Baker, when she explained that the key to getting approval when relying on new technology is ensuring an understanding on both sides. The FAA needs to be brought into the process very early on. When the FAA is brought in at the last minute, problems and confusion can arise, because what might seem clear to the applicant, who has been working with the technology for months or even years, can seem confusing to the regulator seeing it in action for the first time.  Ms. Baker explained that we don’t want questions being asked for the first time, or engineers trying to understand new processes, at the time of certification. We, as applicants relying on new manufacturing techniques, need to engage the FAA early and often.

Of course this is somewhat inconsistent with a performance-based approach. As we mentioned above, if the goal of PBR is to ensure an outcome that satisfies high-level regulations, it should be less important how we get to the result than that we obtain a satisfactory result. A need on behalf of the regulator to understand fully the processes by which we obtain the result is more consistent with systems oversight (their stated goal) but doesn’t square perfectly with a PBR approach.

Nonetheless, it thus becomes clear that the PMA industry will have to fight this battle of fast moving technology on two fronts: First, we will have to (again) battle against an OEM-driven (mis)perception that only OEMs are capable of understanding and safely applying emerging technologies like additive manufacturing. Second, we will have to work very closely with the regulators to continuously demonstrate our competence and expertise in applying these technologies, and in effectively implementing systems that consistently produce the desired outcome.

There is a lot happening right now; from fundamental shifts in the role regulators play to the way we design and manufacture parts. By frequently engaging with the regulators we are able demonstrate our competence and abilities (simultaneously refuting any implications by competitors to the contrary) and keep the regulators closely engaged so that the certification process moves smoothly and we are able to nimbly adapt to changes as they happen.

MARPA will continue to keep you updated as old regulations change and new regulations emerge.

EASA is Moving

By Monday, the European Aviation Safety Agency (EASA) will have a new location. The new location is closer to the main Koln train station (same side of the river). As of June 6, 2016 EASA will be operating from their new Headquarters located at:

Konrad-Adenauer-Ufer 3
D-50668 Cologne, Germany

The post-office box as well as all telephone numbers remain the same:

Postfach 10 12 53
D-50452 Cologne, Germany

Tel: +49 221 8999 000
Email: info@easa.europa.eu

Compliance with the New Part 21 Rules

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:

  • Change in the compliance statement;
  • Change in supplier management; and
  • Capability for PMA holders to issue 8130-3 tags  (without using designees).

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.

PMA in China

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.

CHINA

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

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.