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FAA on Voluntary Surrender: A Bad Rule to Pursue Bad Actors

On July 13, the FAA denied the industry’s rulemaking petition to reinstate a repair station’s right to voluntarily surrender its certificate.

In its new repair station rule, which became effective in November 2014, the FAA took the unprecedented step of subjecting surrendered certificates to “acceptance for cancellation” (see, § 145.55). A coalition of ten aviation industry members, led by ARSA, called for the removal of the requirement, since it is unique among aviation certificates, runs counter to the interest of aviation safety and increases regulatory administrative burden without any agency explanation as to how its discretion will be utilized.

In the petition, the industry noted the FAA’s ability to investigate individuals is unaffected by the surrender of the entity’s certificate. Therefore, denying a repair station’s right to voluntarily surrender its certificate bears no rational connection to the aim of ensuring safety through the investigation and banishment of “bad actors.”

The agency’s response ignored facts and simply re-stated the new rule’s preamble: investigators must prevent the surrender of a certificate so that enforcement action can possibly be taken. The FAA rejected the logic that its updates to § 145.51 allow the agency to refuse new applications if individuals involved materially contributed to circumstances where a repair station certificate was “revoked, or [was] in the process of bring revoked.”

Though § 145.51 empowers the FAA to protect aviation safety by denying the issuance of new certificates to “bad actors,” the agency continues to insist on its ability to deny the right of surrender to existing repair stations.

Additionally, the response completely ignored the coalition’s concern that disparate treatment – denying rights to repair station certificate holders but granting them to the rest of the aviation community – creates uncertainty for the entire industry.

On behalf of its members and the larger aviation world, ARSA cannot accept an incomplete and uncooperative response in this matter. Stay tuned as the association continues to pursue guaranteed rights for all certificate holders.

Previously from ARSA

ARSA to FAA: “Or New” Unacceptable



February 2, 2015

On Jan. 29, ARSA asked the FAA to clarify when the new owner of a repair station can apply for an amended versus a new certificate.

The change to the repair station rule, which became effective Nov.10, 2014, revised Title 14 Code of Federal Regulations (CFR) section 145.57(b). That section states the new owner of repair station assets “…must apply for an amended or new certificate in accordance with § 145.51.” (Emphasis added).

The addition of the words “or new” was not even mentioned in the notice of proposed rulemaking, but the FAA reasoning is that “[t]he revision clarifies that a new owner will need to apply for a new certificate only if the new owner chooses to operate as a repair station.”

The change was totally unnecessary, and creates confusion rather than clarity. While ARSA appreciates that a repair station certificate cannot be transferred, amending one takes fewer resources for both industry and agency. Considering the current waiting time for a new certificate can be up to two-years, any uncertainty regarding the application is unacceptable.

Along with its letter, ARSA submitted suggested changes to guidance material. The association asked the agency make clear an application for a new certificate is only required where the new owner opts for a new certificate number. And even then, the processing interval should depend upon the changes the new owner makes to the location, housing, facilities, equipment and personnel.

To see more about the “or new” issue, visit arsa.org/or-new.

Industry to FAA: Repair Stations Know When to Fold ‘Em

January 12, 2015

On Jan. 9, a coalition of aviation trade associations petitioned the FAA to restore the right to voluntarily surrender a repair station certificate.

In its new repair station rule, which became effective in November 2014, the FAA took the unprecedented step of subjecting surrendered certificates to “acceptance for cancellation.” The coalition called for the removal of this requirement, which is unique among aviation certificates, runs counter to the interest of aviation safety and increases regulatory administrative burden without any agency explanation as to how the new discretion will be utilized.

“It is critical for any aviation business to be able to voluntarily surrender its certificate,” said Laura Vlieg, ARSA’s regulatory affairs manager . “The FAA has set a dangerous precedent by treating maintenance providers differently from any other certificate holder. The aviation community quickly realized the implications and has asked the agency to put repair stations back on equal footing.”

The group points out that the FAA’s ability to investigate individuals is unaffected by the surrender of the entity’s certificate. Therefore, denying a repair station’s right to voluntarily surrender its certificate bears no rational connection to the aim of ensuring safety through the investigation and banishment of “bad actors.”

“We do not support individuals that use any certificate irresponsibly or in a manner that jeopardizes safety,” said Sarah MacLeod, ARSA’s executive director. “We do however have to deal in the real world; business demands make it too problematic for surrendered certificates to depend on the administrative whims of the FAA.”

In addition to ARSA, the group included the Aerospace Industries Association, the Aircraft Electronics Association, the Aviation Suppliers Association, the General Aviation Manufacturers Association, Helicopter Association International, the Modification and Replacement Parts Association, the National Air Carrier Association, the National Air Transportation Association and the Regional Airline Association.

Updated RSQM Released

December 11, 2014

Now that the new repair station rule is effective, repair stations must ensure operations manuals are also revised as appropriate. ARSA has updated its Model Repair Station Quality Manual in order to reflect the changes to part 145 as follows:

  • Added falsification of records policy as provided for in § 12
  • Added the requirement that the FAA accept the repair station’s certificate surrender pursuant to § 55
  • Renumbered and updated cross-reference table to ensure new provisions are addressed

Specific changes are provided in tracked excerpts of the manual here.

For more information, or to obtain the latest version of the model manual, click here.

Know the New Part 145

November 10, 2014

The new repair station rule is effective on November 10, 2014.

While the Federal Register published the FAA’s request that reinserted “serious” into the service difficulty reports section in 14 CFR part 145, the new rule requires more attention from the association and its members.

Bad Actors
The focus of the new sections to part 145 is on getting rid of “bad actors” – individuals whose actions resulted in (or materially contributed to) the revocation of a repair station certificate.

Subsequently, section 145.12 closes a loophole by making fraudulently or intentionally submitting false entries or omissions in applications, records or reports a basis for suspension or revocation of “any certificate, approval or authorization the FAA issued to the person who made the entry or caused the omission.”

Additionally, under 145.51 the FAA can deny a repair station certificate if:

  • The applicant held or holds a repair station certificate that was or is being revoked.
  • The applicant intends to fill a management position with an individual who materially contributed to the revocation of a repair station certificate.
  • An individual who materially contributed to the revocation of a repair station certificate will have control over or substantial ownership interest in the applicant.

While innocuous and worthy in its objective to remove “bad actors” from the owning or operating a repair station, the rule mixes “applicants” (businesses entities) with the “individuals” it wishes to curtail from the industry. The association will work to ensure proper delineation between the business and the individual. The separation will help to ensure the appropriate action can be taken when a “bad actor” is actually involved in the decisions of the applicant for and holder of a repair station certificate.

Certificate Surrender
Section 145.55 will require the FAA to affirmatively accept a repair station certificate surrender for cancellation. Given the financial burden associated with maintaining a certificate, and the uncertainty of how the agency will use its discretion in accepting or rejecting a “surrender,” the association will work to eliminate or at least reduce this burdensome requirement.

“…Or New”
The words “or new” were added to section 145.57(b) regarding the sale of repair station assets. The FAA provided no clarity as to when a repair station owner must apply for a new as opposed to an amended certificate. A new certificate can take up to two years, while an amendment takes fewer resources from both the agency and industry. Accordingly, ARSA will work with the agency to clarify when a “new” certificate will be required.

Review every word in the “new” regulations as well as the “old”; when you have questions call ARSA first.

'Serious' Victory for FAA and Repair Stations

November 7, 2014

WASHINGTON – Thanks to a coalition of aviation trade associations and the responsiveness of the Federal Aviation Administration (FAA), the Code of Federal Regulations (CFR) will retain seven important letters. The word “serious” has been reinserted into the paragraph of 14 CFR part 145 requiring repair stations to report failures, malfunctions or defects in articles received for work to the agency within 96 hours.

The group included the Aeronautical Repair Station Association (ARSA), the Aerospace Industries Association, the Aircraft Electronics Association, Airlines for America, the Cargo Airline Association, the General Aviation Manufacturers Association, the National Air Carrier Association and the National Air Transportation Association. It petitioned the FAA on Sept. 22 to reinsert the word in the new repair station rule before the Nov. 10 effective date. Over 40 industry members submitted supportive comments highlighting that a plain reading of the service difficulty reporting requirement without the seven-letter word would mean submitting information on everything that comes through the door; repair stations only receive articles that need work because of failures, malfunctions or defects.

On Nov. 7, the Federal Register posted the FAA’s direction to reinsert “serious” in 145.221(a), saving incalculable cost for both itself and also the private businesses it regulates. The rule, as it was written in August, would have imposed onerous burdens on maintenance providers and their customers as well as agency inspectors but generated no additional revenue for industry members and – most importantly – no improvements to safety for the flying public.

“Our system worked,” said Sarah MacLeod, ARSA’s executive director, about the months-long process of getting the agency to correct its misstep. “The new rule has almost 7,500 words, and we found the most serious error – the seven absent letters that were going to cause our members a world of trouble. With the regulatory record on our side, the industry got the agency’s attention. Together, we made things right.”

In the days leading up to the correction, ARSA provided its members with strategies and resources for dealing with the new rule in the event that “serious” was not re-inserted in time. “It’s our responsibility,” MacLeod said. “Even as we are fixing an issue, we make sure members are ready for its potential impact on their businesses. In this case, that extra work turned out to be unnecessary.”

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For more information on ARSA’s effort to re-insert “serious,” visit arsa.org/serious.

Legal Brief: 'Seriously' be Ready for New Rule Implementation

October 28, 2014

By Ryan Poteet and Laura Vlieg

On August 12, 2014 the Federal Aviation Administration (FAA) issued a final rule amending Title 14 Code of Federal Regulations (14 CFR) part 145. It becomes effective November 10, 2014.

As reported in ARSA publications, the final rule contains a critical seven-letter omission; it removes the word “serious” from the service difficulty reporting requirements in § 145.221. That change was made without notice or opportunity for public comment, based upon the agency’s mistaken justification that the word had been “removed through notice and comment rulemaking…[and] inadvertently inserted by a separate final rule.” (Emphasis added.)

In reality, after the word “serious” was removed from the reporting requirement in 2001, it was deliberately and correctly reinserted as a direct consequence of public comments. In the 2003 rulemaking, the “FAA agree[d] with the repair station industry concerning the word ‘serious’” and stated that “[i]t was not the agency’s intent to require repair stations to report ‘any’ failure, malfunction, or defect.” Therefore, the agency was “reinserting the word ‘serious’ before the word ‘failure’ in § 145.221(a).”

The new rule’s omission prompted ARSA, industry allies, and ARSA members to request that the FAA reinsert the word “serious” into § 145.221 before the November 10 effective date. While we are confident that the agency will correct its misstep, our diligence requires us to inform members of their options if the problem is not addressed before the rule is implemented.

From a business standpoint, there are two options: attempt to comply with the new requirement, or simply comply with the current rule until the agency issues the correction and/or guidance to its employees on the matter.

With respect to the first option, as ARSA members have pointed out in comments submitted to the September 22 petition for rulemaking, compliance compels submitting reports on all failures, malfunctions, and defects. A plain reading of that requirement means reporting information on not only every unit received, but also every piece part within that article. If it is even possible to comply, it would mean hiring new employees just to keep up with this onerous new reporting obligation.

The other option is to comply with the current version of the section by reporting only “serious” failures, malfunctions and defects until the agency addresses the matter. If, during this unlikely hiatus, an FAA representative threatens or takes enforcement action, consider fighting the improperly implemented reporting requirement using these steps:

1. Discuss the matter with ARSA so that the proper strategy can be outlined and information can be reported to decision-makers in the agency’s hierarchy.
2. Wait for a letter of investigation (LOI).
3. If a LOI is received, respond within ten days using this template.
4. If the agency doesn’t withdraw the action and issues a notice of proposed civil penalty (NPCP); request a copy of the enforcement investigatory report (EIR) and an informal conference with the FAA lawyer using this template.
5. After receiving the EIR, if the agency has not corrected the rule, hire a lawyer to present your case through an informal conference with the FAA’s legal office. The LOI template response provides the information needed to defend an enforcement action that is based upon an improper rulemaking.
6. If the matter has not been resolved, your lawyer should request a hearing before an administrative law judge (ALJ).

The administrative hearing process is similar to other court proceedings. The FAA will file a complaint and the repair station will be required to respond by filing a motion or an answer. ARSA’s LOI template response provides the support for its belief that an ALJ would terminate the proceedings because the FAA will be unable to establish the repair station committed a violation of a valid regulation.

Simply put, the Administrative Procedure Act (APA) (5 U.S.C. §§ 551 et seq.) prescribes certain procedural requirements that agencies must follow in order to give their rules the force of law. Unlike general policy statements or interpretive rules, regulations that impose binding obligations on the public (i.e., “substantive” and “legislative” rules) must be properly noticed and submitted to the public for comment.

Due to the agency’s fundamental APA error, repair stations have the ability to prevail in any potential enforcement action under the new rule by using the administrative legal process. If this course of action is required, the association’s LOI response template will be invaluable in establishing the proper record for review.

That said, the association is confident that the agency will correct its unfortunate misstep in removing a vital seven-letter word before the implementation date.

Stay tuned.

This material is provided as a service to association members for educational and informational purposes only. It does not constitute legal or professional advice, and is not privileged or confidential.

For more information on ARSA’s effort to re-insert “serious,” visit arsa.org/serious.

Take 'Serious' Action - Support Petition for Rulemaking

Oct. 6, 2014

The petition submitted to the FAA by ARSA and a coalition of trade groups asking the agency to put the word “serious” back in the service difficult reporting requirement (14 CFR § 145.221)is open for comment—now repair stations can add serious weight to that request.

Click here to submit a comment in support of the petition. Be sure to:

(1)  Illustrate the costs and challenges your company will face if the correction is not made.

(2)  Include the fact that “serious” was deliberately included in the current rule due to industry comments after the agency attempted to remove it in a previous rulemaking. Specifically from “Service Difficulty Reporting,” 68 FR 75380 (2003) the agency stated:

“FAA agrees with the repair station industry concerning the word ‘serious’. It was not the agency’s intent to require repair stations to report ‘any’ failure, malfunction, or defect. […] Again, it was not FAA’s intent to require repair stations to report all failures, malfunctions, and defects. Repair stations are required to report only serious failures, malfunctions, and defects. Therefore, FAA is reinserting the word “serious” before the word “failure” in § 145.211(a).  (Emphasis added.)

The association’s regulatory team has done the legwork for you. Click here to download a customized comment template.

For more information on ARSA’s effort to re-insert “serious,” visit arsa.org/serious.

'Serious' Petition to FAA

Sept. 23, 2014

On Sept. 22, a coalition of aviation trade associations asked the Federal Aviation Administration (FAA) to fix a seven-letter mistake in the Code of Federal Regulations (CFR) that would create serious headaches for the aviation maintenance industry.

The group, which includes the Aeronautical Repair Station Association (ARSA), the Aerospace Industries Association, the Aircraft Electronics Association, Airlines for America, the Cargo Airline Association, the General Aviation Manufacturers Association and the National Air Carrier Association, petitioned the FAA to correct the new repair station ruleissued on Aug. 12. The amendment to 14 CFR part 145 will become effective Nov. 10, but includes the improper removal of the word “serious” from a paragraph requiring repair stations to report a failure, malfunction or defect of an article to the agency within 96 hours.

Complying with the section was already difficult. By removing the word “serious,” aviation repair stations are effectively required to report everything that comes through the door – if an article did not have a failure, malfunction or defect, it would not need work – an expectation that is unrealistic and inefficient. The change would impose incalculable cost on both the agency and industry and was made without warning; it was not considered in the notice of proposed rulemaking (NPRM) to which industry members submitted comments in 2012.

The FAA incorrectly claims that “serious” was removed to rectify the word’s “inadvertent” insertion during a previous rulemaking. In fact, the term was deliberately and correctly reinserted as a direct consequence of public comments in 2003, when the agency agreed with industry and acknowledged “it was not FAA’s intent to require [aviation] repair stations to report all failures, malfunctions, and defects.”

“This is why we scrutinize the rules,” said Sarah MacLeod, ARSA’s executive director. “One misplaced or misused word can cause a whole lot of trouble for repair stations, their customers and – in the end – the flying public. It takes work to dissect, apply and chronicle regulations published by the government, but it is one of ARSA’s jobs for the repair station community. The effort paid off and now the agency has the opportunity to quickly make things right.”

In the petition, the coalition urges the FAA to honor its previous rulemaking activity by replacing “serious.” Since it is in the public interest to implement a correction that was fully vetted during a prior comment period, the agency can use its authority under the Administrative Procedures Act (APA) to implement a direct final rule without delays required for public notice and comment.

For more information on ARSA’s effort to re-insert “serious,” visit arsa.org/serious.

The New Part 145

August 19, 2014

The Federal Aviation Administration (FAA) has issued a final rule amending 14 Code of Federal Regulations part 145. The rule’s effective date is November 10, 2014.

To facilitate ARSA’s analysis of the part 145 amendments, and provide an educational tool for our members, changes to the current rule are provided in red-lined format at http://arsa.org/wp-content/uploads/2014/08/ARSA-Part145TrackedChanges-20140818.pdf.

Look for in-depth analysis in the August issue of the hotline.

FAA Issues Repair Station Rule

August 12, 2014

The Federal Aviation Administration (FAA) has issued a final rule amending 14 Code of Federal Regulations part 145. The rule’s effective date is Nov. 10, 2014.

The agency changed the rule considerably since the original notice of proposed rulemaking (NPRM), to which ARSA submitted comments in 2012.

The final rule attempts to remove “bad actors” from managing a repair station by changing the application process, tracking persons who were previously connected to certificates that were revoked and providing those persons with due process. It also eliminates the voluntary surrender of repair station certificates; if an investigation is open, a repair station cannot surrender its certificate without the agency’s permission.

The rule’s revised language also adds the words “or new” to section 145.57 regarding transfer of a repair station’s assets. This addition might seem innocuous, but it could cause operational problems. There is no explanation as to when a new owner of the assets would have to apply for an amended versus a new certificate. The length of the latter process is problematic and could create unnecessary delays in commerce.

ARSA is carefully reviewing its comments to the proposed rulemaking vis-à-vis the final rule and will provide an in-depth analysis in coming articles.

To see all the ways ARSA is working as the voice of the aviation maintenance industry, visit the ARSA Works page.



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