#  **It's The Law**

##  Office of the Assistant General Counsel for Finance and Litigation

**Federal Assistance Law Division**

Vol. 14 February 13, 2002

### "Fly America -- More Than Just A Name

**by Mike Cannon**

#### INTRODUCTION

Recipients of Federal financial assistance funds are required to abide
by the provisions of the Fly America Act \-- but what does that mean? Is
it just a bureaucratic restriction placed on Federal financial
assistance recipients, or are there good reasons for compliance? How
does one comply? Where does one go with questions on the Fly America
Act? This article will explore these and other issues and is meant to be
a synopsis of the restrictions flowing from the Act.

In a nutshell, the Fly America Act requires that foreign air travel
funded with Federal dollars be performed on U.S. flag air carriers,
unless one has a good reason not to.[^1] This applies to ALL foreign
travel funded by Federal dollars which mans that these restrictions also
apply to Federal Government employees on official travel, not just
Federal financial assistance recipients and Federal contractors. As a
matter of fact, the regulations implementing the restrictions of the Fly
America Act found at 41 CFR Parts 301-10.131 through 301-10.143 are part
of the Federal Travel Regulations promulgated by the General Services
Administration (GSA).

#### BACKGROUND

The "Fly America Act" originally referred to provisions enacted by
section 5 of the International Air Transportation Fair Competitive
Practices Act of 1974 (Pub L. 93-623, January 3, 1975), 49 U.S.C. App.
1517, as amended by section 21 of the International Air Transportation
Competition Act of 1979 (Pub. L. 96-192, February 15, 1980), 94 Stat.
43.

In 1974 the Committee on Interstate and Foreign Commerce was referred a
Bill to amend the Federal Aviation Act of 1958 to deal with
discriminatory and unfair competitive practices in international air
transportation. This Bill, enacted as Public Law 93-623, the
International Air Transportation Fair Competitive Practices Act of 1974,
dealt with problems that U.S. carriers operating in foreign air
transportation encountered in their competition with foreign carriers.
More specifically for our purposes, the Bill encouraged travel to and
from the U.S. on U.S. carriers and required that transportation of
Government-financed passengers and property be on U.S. carriers.[^2] The
Committee noted that discriminatory and unfair competitive practices
were prevalent in many of the countries where U.S. carriers operated.
Practices included the uneven application of national taxes, delays and
considerable paperwork requirements imposed on U.S. carriers in currency
conversions, preferences for the local carrier in accessibility to
airport facilities and services, and denial to U.S. carriers of domestic
connecting space within a foreign country.[^3] Subsection (a) of section
5 of the Act provided that when foreign transportation of persons or
property is paid for or furnished by the U.S. Government, Agencies were
to take steps to assure that the air transportation was furnished by
U.S. air carriers. Additionally, expenditures from appropriated funds
for foreign air travel that did not meet such standards were to be
disallowed by the Comptroller General unless satisfactory proof of
necessity was shown.

The International Air Transportation Competition Act of 1979 amended the
1974 Act in two ways. First, it allowed the use of foreign carriers if
U.S. flagged air carrier services were not "reasonably available"
between two foreign points. This was an effort to avoid undue delays.
Secondly, it authorized the U.S. Government to negotiate the right to
carry U.S. Government-financed passenger traffic with foreign
governments in return for liberal bilateral agreements that benefited
the public and U.S. air carriers.[^4] The Act was repealed by P.L.
103-272, which promulgated 49 U.S.C. §40118, which is present day
version of the Fly America Act as amended.

#### FINAL RULES

Subsection 127(d) of the General Accounting Office Act of 1996 (P.L.
104-316) amended 49 U.S.C. §40118 to require that the Administrator of
GSA issue regulations under which agencies may permit payment for
transportation on a foreign air carrier when such transportation is
determined necessary. Prior to this amendment, regulations were
promulgated by the Comptroller General and were found at 41 CFR 301-3.6.
On April 7, 1998, GSA published a proposed rule,[^5] with request for
comments, that amended the Federal Travel Regulation pertaining to the
use of U.S. flag air carriers under the Fly America Act. The proposed
rule allowed for a 30-day comment period during which GSA received
comments from Federal agencies, U.S. air carriers, an air carrier
association and non-Government entities. GSA published the final rule on
November 13, 1998,[^6] which was codified in the Code of Federal
Regulations at 41 CFR Parts 301-10.131 to 301-10.143, which also removed
the former regulations found at 41 CFR 301-3.6.

The final rules were written in plain language style in an effort to
make the regulations easier to understand and use \-- a question and
answer format. The new regulations brought about a few changes. The new
regulations reduced the connecting time for use of a U.S. flag air
carrier service at an overseas interchange point from six hours down to
four; required that airline tickets issued under a code share agreement
identify the U.S. flag air carrier's designator code and flight number;
removed references to "gateway airport in the United States" and
"gateway air port abroad" for determining when a U.S. flag air carrier
is available or reasonably available;[^7] and implemented a new method
for calculation of a grantee's or recipient's liability for unauthorized
transportation on a foreign air carrier. The regulations are easy to
read and are the first place you should go if you have a question about
compliance with the Fly America Act.

WHEN DO THE RESTRICTIONS OF THE FLY AMERICA ACT APPLY?

The restrictions of the Fly America Act apply wherever travel is
financed by U.S. Government funds. Essentially, if your travel is paid
for by the U.S. Government, you have to use a U.S. flag air carrier.

U.S. flag air carrier means that the carrier providing the service holds
a certificate under 49 U.S.C. §41102, and the services are authorized by
such a certificate, or by exemption or regulation. Additionally, U.S.
flag air carrier service is also defined as service provided under a
**code share agreement** with a foreign air carrier. A **code share
agreement** is common industry practice. It is a marketing arrangement
where one airline puts its code on the flight of another airline in
order to coordinate services and advertise and sell the other airline's
services as its own, i.e., the code-share flights are marketed by U.S.
carriers as their own flights. Some or all of the transportation is
provided by another carrier which carries its partner's designator code.
Regulations promulgated by the Department of Transportation require
airlines involved in code sharing to inform prospective passengers as
soon as possible during calls to reservation offices when the flight
involves a code share and to identify the carrier actually providing the
service. The airlines must do this, even if the customer has not asked
to book the flight. Therefore, when you book a flight with an airlines,
they are required to tell you if a code share agreement exists that will
affect your travel. If you are not sure, ask the airlines
representative.

Additionally, when using a code share, the ticket, or documentation for
an electronic ticket, identifies the U.S. flag air carrier's designator
code and flight number. The designator code and flight number are the
essential features because this shows how the money flows.

SOME GENERAL EXCEPTIONS TO THE FLY AMERICA ACT

To every rule, there are some exceptions, and the Fly America Act is no
different. As a matter of fact, there are many exceptions to the Act.
Some of the exceptions are listed below.

**A matter of necessity.** It is determined that use of a foreign air
carrier is a matter of necessity. How does one make that determination?
41 CFR 301-10.138 gives some guidance. Using a foreign air-carrier is
deemed a necessity when service by a U.S. air-carrier is available, but
cannot provide the air transportation needed or use of the U.S.
air-carrier will not accomplish the agency's mission. Some circumstances
dictating a necessity are when an agency determines that use of a
foreign air-carrier is necessary for medical reasons, or if use is
required to avoid an unreasonable risk to a traveler's safety (requires
written approval by an agency on a case-by-case basis), or when a
traveler can't purchase a ticket in his/her authorized class of service
on a U.S. air-carrier, but can purchase one in his/her authorized class
on a foreign air-carrier.

**Travel under a bilateral agreement**. Transportation is provided under
a bilateral or multilateral air transportation agreement between the
U.S. and another country. The Secretary of Transportation has to have
determined that the agreement meets the require-ment of the Fly America
Act.

**Employees of Certain Agencies.** Another exception applies to officers
and employees of the Department of State, U.S. Information Agency, U.S.
International Development Corporation Agency, or the Arms Control Agency
whose travel is paid for by funds appropriated to one of those agencies
and the travel is between two places outside the U.S.

**No U.S. Air-Carrier Service on that Particular Leg.** If there is no
U.S. air-carrier that provides service on a certain leg of your flight,
then you may use a foreign air carrier. But only to or from the nearest
exchange point on a usually traveled route to connect with a U.S.
air-carrier.

**Involuntary Re-routing.** You can use a foreign air-carrier if a U.S.
air carrier involuntarily re-routes your travel and puts you on a
foreign air carrier.

**Saving a Substantial Amount of Time.** You can use a foreign air
carrier if service on the foreign air carrier would be three hours or
less, AND use of a U.S. air-carrier would at least double your en route
travel time.

**Costs of Transportation Reimbursed by a Third Party.** You may use a
foreign air-carrier when the costs of your transportation are reimbursed
in full by a third party, such as a foreign government or international
agency.

SOME SPECIFIC EXCEPTIONS TO THE FLY AMERICA ACT

In addition to the general exceptions above, there are some specific
exceptions to be aware of, and they

depend on whether your origin and destination are outside of the U.S.,
or whether your travel is between another country and the U.S.

**Travel between the U.S. and another country.** Below are some
exceptions to keep in mind that only apply when your travel is between
the U.S. and another country.

\(1\) If a U.S. flag air carrier offers nonstop or direct service (no
aircraft change) from your origin to your destination, you have to use a
U.S. air carrier, UNLESS, use of the U.S. air carrier would extend your
travel time, including a delay at your origin, by 24 hours or more.

\(2\) If a U.S. flag air carrier does not offer nonstop or direct
service (no aircraft change) between your origin and your destination,
you MUST use a U.S. air carrier on every portion of your route where the
U.S. carrier provides service, unless, when compared to using a foreign
air carrier, use of the U.S. carrier would (a) increase the number of
aircraft changes you make outside the U.S. by 2 or more; (b) use of the
U.S. air carrier would extend your travel time by at least 6 hours or
more, or (c) the use of a U.S. air carrier would require a connecting
time of 4 hours or more at an overseas interchange point.

**Travel solely outside the U.S.** Below are some exceptions to the Fly
America Act requirements that apply when you travel solely outside the
U.S., and a U.S. flag air carrier provides service between your origin
and destination. Basically, you have to use the U.S. air carrier unless,
when compared to using a foreign air carrier, use of the U.S. air
carrier would: (1) increase the number of aircraft changes you have to
make en route by 2 or more; (2) extend your travel time by 6 hours or
more; or (3) require a connecting time of 4 hours or more at an overseas
interchange point.

DOCUMENTATION REQUIRED WHEN USING A FOREIGN AIR CARRIER

When using a foreign air carrier, a grantee will need to provide a
certification as to why a foreign air carrier must be used. According to
section 301-10.142, the certification must include (a) the traveler's
name; (b) the dates of travel; (c) the origin and destination of travel;
(d) a detailed itinerary of the travel, including the name of the air
carrier and flight number for each leg of the trip; and (e) a statement
explaining why the travel performed by the grantee met one of the
exceptions to the requirements of the Fly America Act. The certification
should go to the Grants Officer when requesting approval to use a
foreign flag air carrier, and a copy of the certification should be kept
in the grant file.

LIABILITY FOR IMPROPERLY USNG A FOREIGN AIR CARRIER

Under the old regulations, when a traveler failed to use available U.S.
flag air carrier service, the amount disallowed was based on the loss of
revenues suffered by the U.S. flag air carrier as determined under a
formula. This is no longer the case. Under the current regulations, a
traveler will not be reimbursed for any transportation cost for which
the traveler improperly used a foreign air carrier service.

#### HOW DO YOU COMPLY?

The best way to maintain compliance with the restrictions of the Fly
America Act is to familiarize yourself with the regulations. The
regulations are in an easy question and answer format, and should
address most issues. Additionally, our office has prepared a checklist
to assist in determining whether the travel in question may qualify for
a waiver of the restrictions of the Act. A copy of the checklist is
included at the end of this article. Also, ask if code shares exist when
you are booking your flights out of the country and you are booked on a
non-U.S. flagged air carrier. Further, be sure to provide the
certification information required by the regulations when using a
non-U.S. flag air carrier. Finally, if you have a question, seek
guidance from our office. We can be reached on (202) 482-8035.

**FLY AMERICA ACT WAIVER CHECKLIST**

(To assist in determining qualification for a waiver of the restrictions
of the Fly America Act under 41 CFR Part 301-10, check the applicable
statement(s) below. **Use this checklist after January 1, 1999)**

\_\_\_\_ Foreign air travel on a non-U.S. air carrier is financed by
U.S. Government, or will be claimed as costs under an award. *(If you do
not check this block, the restrictions of the Fly America Act do not
apply. Check at least one of the statements below to qualify for a
waiver of the restrictions of the Fly America Act.)*

\_\_\_\_ Use of foreign air carrier is a matter of necessity because of:
*(Must check one below)*

\_\_\_\_U.S. flag air carrier cannot provide the air transportation
needed*, e.g.*

\_\_\_\_Use of foreign air carrier is necessary for medical reasons.

\_\_\_\_Use of foreign air carrier is required to avoid unreasonable
risk to

> traveler's safety. *(see 41 CFR 301-10.138(b)(2) for supporting
> evidence needed.*

\_\_\_\_Seat on U.S. air carrier in authorized class of service is
unavailable,

> seat on foreign air carrier in authorized class of service is
> available.

\_\_\_\_Other. (Provide detailed explanation.)

\_\_\_\_Use of U.S. flag air carrier will not accomplish the
Department's mission.

> (Provide detailed justification)

\_\_\_\_ Bilateral or multilateral air transportation agreement. U.S. is
a party and Dept. of Transportation determines agreement meets
requirements of Fly America Act.

\_\_\_\_ No U.S. flag air carrier provides service on a particular leg
of your route *(can only use foreign air carrier to or from the nearest
interchange point to connect with a U.S. carrier).*

\_\_\_\_ A U.S. flag air carrier involuntarily reroutes traveler on a
foreign air carrier.

\_\_\_\_ Service on a foreign air carrier is three hours or less, and
use of U.S. flag air carrier doubles en route travel time.

\_\_\_\_ Air travel is between the U.S. and another country and use of a
U.S. carrier on a nonstop flight extends travel time by 24 hours more.

\_\_\_\_ Any other air travel. *(you must check at least one of the
following statements to qualify for a waiver of the Fly America
restrictions in this section)*

> \_\_\_\_ Use of a U.S. carrier increases the number of aircraft
> changes outside the U.S. by 2 or more.
>
> \_\_\_\_ Use of a U.S. carrier extends travel time by 6 hours or more.
>
> \_\_\_\_ Use of a U.S. carrier requires a connecting time of 4 hours
> or more at an overseas interchange point.

Remember, you **must use a U.S. flag air carrier on every portion of the
route where is provides service** unless you qualify for a waiver.

[^1]: The acceptable reasons for not using a U.S. flagged air carrier
    are listed in the regulations implementing the Fly America Act and
    will be explained in detail below.

[^2]: Legislative History of P.L. 93-623, as found in H. Rep. No.
    93-1475, 1974 U.S.C.C.A.N. 7461, 7462.

[^3]: H. Rep. No. 93-1475, 1974 U.S.C.C.A.N. 7461, 7463.

[^4]: Legislative History of P.L. 96-192, as found in H.Rep.No. 96-329,
    1979 U.S.C.C.A.N. 54, 65.

[^5]: 63 FR 16936

[^6]: 63 FR 63417

[^7]: Under the old regulations, a "gateway airport in the United
    States" was the last airport in the U.S. from which the traveler's
    flight departed or the first airport in the U.S. at which the
    traveler's flight arrived; and a "gateway airport abroad" was the
    airport abroad from which the traveler last embarked en route to the
    U.S. or at which the traveler first debarked incident to travel from
    the U.S. The terms were used in determining whether a U.S. Flag air
    carrier was available or reasonably available, and were a source of
    some confusion in the past.