[Federal Register Volume 65, Number 110 (Wednesday, June 7, 2000)]
[Rules and Regulations]
[Pages 36244-36266]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-14052]



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Part III





Department of Transportation





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Federal Aviation Administration



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14 CFR Part 11 et al.



Type Certification Procedures for Changed Products; Final Rule

Federal Register / Vol. 65, No. 110 / Wednesday, June 7, 2000 / Rules 
and Regulations

[[Page 36244]]


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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Parts 11, 21, and 25

[Docket No. 28903; Amdt. No. 11-45, 21-77, 25-99]
RIN 2120-AF68


Type Certification Procedures for Changed Products

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule; request for comments.

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SUMMARY: This document amends the procedural regulations for the 
certification of changes to type certificated products. These 
amendments affect changes accomplished through either an amended type 
certificate or a supplemental type certificate. The amendments are 
needed to address the trend toward fewer products that are of 
completely new design and more products with multiple changes to 
previously approved designs. This final rule action will enhance safety 
by applying the latest airworthiness standards, to the greatest extent 
practicable, for the certification of significant design changes of 
aircraft, aircraft engines, and propellers.

DATES: Effective June 7, 2000. Mandatory compliance dates are December 
10, 2001 for transport category airplanes and restricted category 
airplanes that have been certified using transport category standards, 
and December 9, 2002 for all other category aircraft and engines and 
propellers. Comments on the information collection requirements and the 
Regulatory Evaluation section, which includes the regulatory 
flexibility analysis, must be submitted on or before August 7, 2000.

ADDRESSES: Comments for this final rule should be mailed or delivered, 
in triplicate, to the Federal Aviation Administration, Office of the 
Chief Counsel, Attn: Rules Docket (AGC-200), Docket No. 28903, Room 
915G, 800 Independence Avenue, SW, Washington, DC 20591. Comments 
submitted must include the regulatory docket or amendment number. 
Comments may also be sent electronically to the following Internet 
address: <a href="/cdn-cgi/l/email-protection#d4edf99a848699f99799808794b2b5b5fab3bba2"><span class="__cf_email__" data-cfemail="01382c4f51534c2c424c5552416760602f666e77">[email protected]</span></a>. Comments may be filed or examined in Room 
915G on weekdays, except Federal holidays, between 8:30 a.m. and 5:00 
p.m.

FOR FURTHER INFORMATION CONTACT: Randall Petersen, Certification 
Procedures Branch (AIR-110), Aircraft Certification Service, Federal 
Aviation Administration, 800 Independence Avenue, SW, Washington, DC 
20591, telephone (202) 267-9583.

SUPPLEMENTARY INFORMATION:

Compliance Dates

    This final rule requires that major changes to transport category 
airplanes and restricted category airplanes that have been certified 
using transport category standards, be evaluated under the new rules 
beginning 18 months from today's date of publication in the Federal 
Register. Major changes to all other category aircraft and engines and 
propellers are required to be evaluated under the new rules beginning 
30 months from today's date of publication in the Federal Register.

Comments Invited

    In the NPRM, the FAA certified that the proposed rule would not 
have a significant economic impact on a substantial number of small 
entities. The FAA has revisited the question of the potential impact on 
small entities and has determined that an analysis under the Regulatory 
Flexibility Act of 1980, as amended, is required. This analysis and a 
complete analysis of potential costs and benefits are set out in the 
Regulatory Evaluation Summary portion of this preamble. As stated in 
this final rule document, the FAA determined that there could be a 
significant impact on a substantial number of small entities. 
Additionally, the cost analysis of the regulatory evaluation has 
undergone a substantial revision, and comments on the entire regulatory 
evaluation are requested.
    Since this rule is being adopted without prior notice and prior 
public comment on the increased information collection requirements 
listed in the Paperwork Reduction Act section of this document, 
interested persons are also invited to submit such written data, views, 
or arguments, as they may desire, relating to the information 
collection requirements.
    Pending the evaluation of the public comments, the FAA has decided 
to proceed with due diligence. This rule differs from the NPRM and has 
been revised to address the concerns of the majority of small entities 
likely to be affected by the rule. The FAA will consider and respond to 
comments on the Regulatory Flexibility Analysis and the information 
collection requirements that are subject to review by the Office of 
Management and Budget (OMB) under the Paperwork Reduction Act of 1995 
before the compliance dates published in this document.
    The FAA will consider all comments received, and will publish in 
the Federal Register a summary of the disposition of those comments 
and, if appropriate, changes to the rule that may result from 
consideration of those comments.
    Comments must include the regulatory docket or amendment number and 
must be submitted in triplicate to the address above. All comments 
received, as well as a report summarizing each substantive public 
contact with FAA personnel on this rulemaking, will be filed in the 
public docket and will be considered by the FAA. The docket is 
available for public inspection before and after the comment closing 
date.
    Commenters who want the FAA to acknowledge receipt of their 
comments submitted in response to this final rule must include a 
preaddressed, stamped postcard with those comments on which the 
following statement is made: ``Comments to Docket No. 28903.'' The 
postcard will be date-stamped by the FAA and mailed to the commenter.

Availability of Final Rule

    An electronic copy of this final rule may be downloaded, by using a 
modem and suitable communications software, from: the FAA regulations 
section of the FedWorld electronic bulletin board service (telephone: 
(703) 321-3339), or the Government Printing Office's (GPO) electronic 
bulletin board service (telephone: (202) 512-1661).
    Internet users may reach the FAA's web page at http://www.faa.gov/avr/arm/nprm/nprm.htm, or the GPO's web page at http://www.access.gpo.gov/nara, for access to recently published rulemaking 
documents.
    Any person may obtain a copy of this final rule by submitting a 
request to: FAA, Office of Rulemaking, Attention: ARM-1, 800 
Independence Avenue, SW, Washington, DC 20591; or by telephoning (202) 
267-9680. Individuals requesting a copy of this final rule should 
identify their request with the amendment number or docket number.
    Persons interested in being placed on the mailing list for future 
rulemaking documents should request from the above office a copy of 
Advisory Circular No. 11-2A, Notice of Proposed Rulemaking Distribution 
System, that describes the application procedure.

Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act (SBREFA) of 
1996, requires the FAA to comply with

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small entity requests for information or advice about compliance with 
statutes and regulations within its jurisdiction. Therefore, any small 
entity that has a question regarding this document may contact their 
local FAA official. Internet users can find additional information on 
SBREFA on the FAA's web page at http://www.faa.gov/avr/arm/sbrefa.htm 
and may send electronic inquiries to the following Internet address: <a href="/cdn-cgi/l/email-protection#cff6e28e988ee29c8d9d8a898e8fa9aeaee1a8a0b9"><span class="__cf_email__" data-cfemail="4a73670b1d0b671908180f0c0b0a2c2b2b642d253c">[email protected]</span></a>.

Background

Statement of the Problem

    Under the regulations in effect prior to the early 1940's, an 
applicant for a changed product, such as an alternate engine 
installation, was required to apply for a new type certificate and 
comply with the standards current at the time of application. This did 
not present an unreasonable burden on the applicant then because the 
airworthiness standards did not change appreciably over short periods 
of time. That is, the standards current at the time of an application 
for a change were essentially the same as those with which the original 
product had to comply. Since the early 1940's, however, rapid changes 
in technology have resulted in significant changes in the airworthiness 
standards over relatively short periods of time. Therefore, an 
applicant for an extensive change to a type certificated product, which 
required a new type certificate, could be faced with complying with 
safety standards that varied considerably from the standards for the 
original product. To relieve this situation, the FAA's predecessor 
agency required an application for a new type certificate only if the 
change was quite extensive.
    In recent years, a trend has developed towards fewer products that 
involve substantial design changes that would require a new type 
certificate. In many cases, over a period of time, a series of changes 
could permissively be made to a product by amending its original type 
certificate such that the resultant model is substantially different 
from the original model. Although each changed product in such a series 
of changes may differ little from its immediate predecessor, the 
changes could collectively result in a product with considerable 
differences from the original product. As a result, many changed 
aeronautical products have not been required to demonstrate compliance 
with all the recent airworthiness standards. This rule is intended to 
clarify under what conditions more recent airworthiness amendments need 
to be applied to changed products.
    In order to achieve this goal, the FAA published a proposed rule 
(Notice No. 97-7; 62 FR 24288, May 2, 1997) to amend the procedural 
regulations for the certification of changes to type certificated 
products whether the change is accomplished through an amended type 
certificate or through a supplemental type certificate. The FAA's 
purpose in including supplemental type certificates (STC) was to ensure 
that all significant changes to a type certificated product would 
follow the same procedure. A related purpose was to avoid creating a 
loophole that would allow a type certificate (TC) applicant to choose 
the STC process thereby avoid complying with later amendments.

History of Type Certification

    Title 49 U.S.C. 44701 authorizes the FAA Administrator to promote 
safety of flight of civil aircraft in air commerce by prescribing 
minimum standards governing the design and construction of aircraft, 
aircraft engines, and propellers as may be required in the interest of 
safety, and such minimum standards governing appliances as may be 
required in the interest of safety.
    Under 49 U.S.C. 44704, the FAA may issue type certificates, 
including supplemental type certificates, for aircraft, aircraft 
engines, propellers, and certain appliances.
    The general certification procedures for products (aircraft, 
aircraft engines, and propellers) and parts are set forth in 14 CFR 
part 21 (part 21). As described in Secs. 21.13 and 21.15, any 
interested person may apply for a type certificate by submitting an 
application accompanied by the required documentation to the FAA. 
Sections 21.16 through 21.21, 21.101, and 21.115 specify certain 
regulations and designate the applicable airworthiness standards for 
type certification of both new and changed products. The term ``changed 
product'' is used throughout part 21 and throughout this preamble to 
include changes that are made through an amended type certificate, as 
well as those made under a supplemental type certificate. A person who 
is not the type certificate holder has only the STC option while the 
type certificate holder has the option of applying either for an 
amended type certificate or for an STC.
    Section 21.17 designates the applicable regulations for the 
issuance of type certificates. In order to be issued a type 
certificate, the applicant must show that the product complies with the 
airworthiness standards contained in one of the following 14 CFR parts, 
as applicable: Part 23 for normal, utility, acrobatic, and commuter 
category airplanes; part 25 for transport category airplanes; part 27 
for normal category rotorcraft; part 29 for transport category 
rotorcraft; part 31 for manned free balloons; part 33 for aircraft 
engines; part 35 for propellers; and part 21 (Sec. 21.17(b) and (f)) 
for special classes of aircraft and primary category aircraft, 
respectively.
    The airworthiness standards in these parts of the regulations may 
be amended as needed to reflect continually changing technology, 
correct design deficiencies, and provide for safety enhancements. An 
applicant for a type certificate is required under current Sec. 21.17, 
with certain exceptions, to show that the product meets the applicable 
airworthiness standards that are in effect on the date of the 
application. The exceptions include instances in which the 
Administrator specifies otherwise, or in which the applicant either 
elects or is required under specific circumstances to comply with later 
effective amendments. In addition, the Administrator may prescribe 
special conditions.
    Under Sec. 21.16, special conditions may be prescribed if the 
Administrator finds that the existing airworthiness standards do not 
contain adequate or appropriate safety standards because of novel or 
unusual design features of the product to be type certificated relative 
to the design features considered in the applicable airworthiness 
standards. Also, under Sec. 21.21(b)(1), if any applicable 
airworthiness standards are not complied with, an applicant may 
nevertheless be entitled to a type certificate if the Administrator 
finds that those standards not complied with are compensated for by 
factors that provide an equivalent level of safety. Such determinations 
are commonly referred to as ``equivalent safety findings'' and are made 
with respect to the level of safety intended by the applicable 
standard. In addition, under Sec. 21.21(b)(2), an applicant may be 
denied a type certificate if the Administrator finds an unsafe feature 
or characteristic of the aircraft for the category in which type 
certification is requested, even though the aircraft may comply fully 
with the applicable airworthiness standards.
    Taken together Secs. 21.16, 21.17, and 21.21 designate the 
applicable airworthiness regulations for type certification and 
accommodate those circumstances when the airworthiness standards do not 
adequately cover the design features of a product. These sections 
recognize and balance the following four important considerations:

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    (1) The FAA is obligated, under 49 U.S.C. 44701, to keep the 
airworthiness standards required in the interest of safety, (i.e., 
parts 23, 25, 27, 29, 31, 33 and 35) as current as practicable.
    (2) The type certificate applicant needs to know, early in a 
certification program, what the applicable airworthiness standards will 
be in order to finalize the detailed design of its product and to 
enable the applicant to make reasonable performance guarantees to its 
potential customers.
    (3) In the interest of safety, rapid technological advances 
presently being made by the civil aircraft industry necessitate that 
the FAA be able to issue special conditions to address novel or unusual 
design features that it has not yet had an opportunity to address in 
the airworthiness standards through the general rulemaking process, or 
to address novel or unusual design features that were not considered by 
the appropriate airworthiness standards applicable to changes to type 
certificates.
    (4) It is also important to allow flexibility in design. Wherever 
possible, the airworthiness standards of 14 CFR Chapter 1, subchapter 
C, are intentionally written as performance standards, and the 
procedural regulations permit design changes over the operational life 
of a product.

History of Type Certification of Changes

    Part 21 designates the applicable airworthiness standards for 
changed products. Section 21.19 describes the circumstances in which an 
applicant for type certification of a changed product must apply for a 
new type certificate. As previously discussed, before the early 1940's, 
an applicant for a changed product, such as an airplane with an 
alternative engine installation, was required to apply for a new type 
certificate. For the reasons already described, by the early 1940's, an 
application for a new type certificate was required only if the change 
was quite extensive.
    Under Sec. 21.101, the original type certificate may be amended to 
include changes to the product when the applicant demonstrates that it 
complies with the same airworthiness standards as the original product 
plus appropriate special conditions, and the change does not warrant 
making a new application for a type certificate under Sec. 21.19. 
Because Sec. 21.101(a) and (b) are incorporated by reference in 
Sec. 21.115, these procedures are equally applicable to persons 
applying for supplemental type certificates.
    Section 21.101(a) requires that an applicant for a change to a type 
certificate must comply with either the regulations incorporated by 
reference in the type certificate or the applicable regulations in 
effect on the date of application, plus any other amendments the 
Administrator finds to be directly related. The ``regulations 
incorporated by reference'' are the regulations that were the 
certification basis for the original issuance of the type certificate 
or any later regulations that were the certification basis for any 
changes to the original type certificate.
    If an applicant chooses to show compliance with the regulations in 
effect on the date of the application for the change, the applicant 
must also comply with any other amendments that are directly related. 
In some instances, a regulation may have been amended to become less 
stringent, while a related regulation has become more stringent. In 
this situation, an applicant must also comply with the related more 
stringent regulation. Current Sec. 21.101(a) does not otherwise require 
compliance with later amendments and does not grant the Administrator 
the authority to require compliance with later regulations as a method 
to increase the level of safety of a product.
    An applicant for a change to a type certificated product is 
responsible for showing that the product, as altered, not just the 
change itself, complies with the existing certification basis, because 
areas that have not been changed may be affected by the change. 
However, the applicant need not resubstantiate those areas of the 
product where the original substantiation has not been invalidated by 
the change.
    Current Sec. 21.101(b) pertains to changes for which the 
regulations incorporated by reference do not provide adequate 
standards. Such changes generally involve features that were not 
envisaged at the time the regulations incorporated by reference were 
adopted and are, therefore, novel or unusual with respect to those 
regulations. For these changes, the applicant must comply with 
regulations in effect on the date of application for the change as 
found necessary to provide a level of safety equal to that established 
by the regulations incorporated by reference. In this case, the 
applicant is not able to select any amendment of the regulation it 
chooses between those incorporated by reference and those in existence 
on the date of the application. When regulations in effect on the date 
of application for the change fail to provide adequate standards, the 
applicant must comply with special conditions to provide a level of 
safety equal to that established by the regulations incorporated by 
reference.

Trends in Type Certification of Changes

    In recent years, a trend has developed toward fewer products that 
are of completely new designs, which would require new type 
certificates. Over a period of time, a series of changes to an original 
product may have been made so that the current model is considerably 
different from the original model. Although each changed product in 
such a series of changes may differ little from its immediate 
predecessor, the changes could result collectively in a product with 
substantial differences from the original product.
    Another trend in manufacturing is to keep products in production 
over several decades. Some currently manufactured airplanes have, for 
example, evolved from airplane models originally type-certificated 25 
years ago. This does not imply that those airplanes are ``unsafe,'' 
because they do, in practice, have features that address the intent of 
most of the current airworthiness standards. However, current 
procedural regulations (part 21) do not require that changed products 
demonstrate compliance with all the current airworthiness standards.
    The basic premise behind the FAA's current policies for the 
procedures and airworthiness standards for type certification is that 
the highest possible degree of safety in the public interest should be 
achieved by products being certificated at any given time. In dealing 
with this premise, the FAA has had to continually weigh the desire for 
the highest level of safety with the cost to the manufacturers, 
operators, and traveling public for achieving the highest possible 
degree of safety in the public interest. This balance between safety 
and cost has been exacerbated by the introduction of highly 
sophisticated products whose development and manufacture have become 
enormously expensive. As already stated, this is one reason 
manufacturers choose to produce more and more changed products that, by 
the FAA regulations, are not required to have new type certificates.
    The FAA maintains that the issue should not be whether a product is 
produced under a new type certificate or a changed one. The issue is 
whether or not the level of safety of the product, embodied in the 
airworthiness standards it complies with, is as high as practicable. In 
addition, to require areas unaffected by the change to comply with the 
later standards could not only be unreasonably costly but could reduce 
the level of safety of the product due to unforeseen developmental 
problems. The manufacturers are constantly issuing service information 
that

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describes approved alterations that users may make to improve the level 
of safety of the product.
    When establishing the highest practicable level of safety for a 
changed product, the FAA has determined that it is appropriate to 
assess the service history of a product, as well as the later 
airworthiness standards. It makes little sense to mandate changes to 
well understood designs, whose service experience has been acceptable, 
merely to comply with new standards. The clear exception to this 
premise is if the new standards were issued to address a deficiency in 
the design in question, or if the service experience is not applicable 
to the new standards. This consideration of airworthiness standards and 
service experience should form the basis for developing the 
certification basis for a change in a product.
    While it can be argued that, for consistency, new airworthiness 
standards should apply across-the-board to the entire aircraft fleet, 
application of new standards would not be practical in every case. 
Although newly designed aircraft are required to meet all applicable 
current airworthiness standards, in many cases a product being changed, 
for which only an amended type certificate is needed, is required to 
meet only the standards referenced in the original type certificate or 
in an amended type certificate. Thus, there may be a considerable 
difference between the standards required for a new product and for a 
product undergoing change. A product undergoing change that met the 
applicable standards at the time of original or amended type 
certification is not currently required to meet more current 
airworthiness standards, except in those instances where retroactive 
regulations have been issued or the applicant elects to comply with 
later amendments.
    In recent rulemakings, the FAA has carefully considered whether 
corresponding retroactive action is warranted whenever a change to the 
airworthiness standards for type certification was proposed. In those 
cases where it has been determined that an across-the-board safety 
benefit commensurate with the cost could be achieved, the rulemaking 
has also included a proposal to change the relevant operating 
regulations to require newly manufactured airplanes or airplanes in 
service, or both, to comply with the new standards, regardless of 
whether such compliance would be required as a condition of type 
certification. For instance, some of the regulations implemented in 
recent revisions to part 25 for newly designed airplanes were required 
for the existing fleet and were implemented in the operating 
regulations, such as part 121.

Recent FAA Actions

    In addition to the safety considerations previously described, 
there has also been a growing international concern that some changed 
products are given an unfair competitive advantage over those that are 
of new design and must comply with later standards.
    Because of these concerns, beginning in 1989 the FAA participated 
in an ad hoc committee sponsored by the Aerospace Industries 
Association of America, known as the International Certification 
Procedures Task Force (ICPTF). In addition to the FAA, this task force 
included representatives of the European Joint Aviation Authorities, 
Transport Canada Civil Aviation Authority (TCCAA), Aerospace Industries 
Association of America, Air Transport Association of America, General 
Aviation Manufacturers Association, International Air Transport 
Association, The European Association of Aerospace Industries (AECMA), 
Aerospace Industries Association of Canada, Air Line Pilots 
Association, and Association of European Airlines.
    The ICPTF was organized to develop the philosophy and the necessary 
regulatory text and advisory material that would provide for the 
implementation of later regulatory amendments applicable to 
aeronautical products undergoing change, products in production, and 
products in service. The specific tasks of the ICPTF were: (1) develop 
the type certification philosophy for changes to aeronautical products, 
including revisions to the regulations and associated advisory 
material; (2) develop the necessary guidance information on the use of 
``service experience'' in the type certification process; and (3) 
develop a method to evaluate the safety impact and cost effectiveness 
of revisions to the airworthiness standards.
    In order to develop future proposed safety standards by using a 
system-type analysis, the FAA chartered a committee of safety experts, 
known as the Aviation Rulemaking Advisory Committee (ARAC), on February 
5, 1991. This committee established the International Certification 
Procedures Working Group, which consisted of the original ad hoc 
committee formerly known as the ICPTF. The task assigned to this 
working group was to present to ARAC various proposals pursuant to its 
area of expertise. ARAC then had the option to submit these 
recommendations to the FAA, and the FAA would decide whether or not to 
issue a proposal based on the ARAC recommendations.
    The working group presented to ARAC a recommended NPRM and 
associated advisory material concerning the type certification 
procedures for changes to aeronautical products, changed products, and 
products already in service. ARAC, in turn, submitted these documents, 
dated October 14, 1994, as recommendations to the FAA.
    The rulemaking proposed by the FAA in Notice No. 97-7 reflects the 
ARAC recommendations in the type certification procedures for changed 
products with mostly minor changes in the preamble to the proposed 
rule. The Joint Aviation Authorities (JAA) have published similar 
proposed changes. That document was circulated for public comment on 
June 10, 1996, in NPA 21-7.
    At the same time the FAA issued Notice No. 97-7, the FAA announced 
the availability of a proposed companion advisory circular (AC) for 
public comment. While the FAA's proposed AC was based on a draft 
submitted by the ARAC, the FAA's version was significantly reorganized 
and rewritten except for the proposed appendices which were identical 
to those recommended by the ARAC. Also, the FAA stated in Notice No. 
97-7 that while the ARAC recommended that the safety benefit resource 
evaluation guide included in the proposed AC (Appendix 2) be considered 
an acceptable means of showing compliance with the exceptions of 
proposed Sec. 21.101(b), the FAA included this guide for information 
purposes only. The FAA stated, ``The safety benefit resource guide does 
describe some of the kinds of issues that the applicant would address, 
and the FAA would consider, in determining the certification basis in 
accordance with the proposed rule.''
    After the comment period on Notice No. 97-7 closed, the FAA tasked 
the ARAC to review the public comments and to recommend to the FAA a 
disposition of the comments and a draft final rule document. This final 
rule reflects most of the work of the ARAC under this task. This work 
was accomplished largely through a series of ARAC working group 
meetings held between August of 1997 and July of 1998. Because of an 
FAA imposed deadline date of September 1, 1998, the working group 
members submitted their comments to the ARAC based on a draft final 
rule dated August 4, 1998. The August 4, 1998, draft was based on the 
working group's previous recommended disposition of comments and on 
discussions and agreements reached at

[[Page 36248]]

the final working group meeting held on July 7-8, 1998. The ARAC, at 
FAA's request, forwarded a report that included this draft and the 
comments to the FAA at the August 24, 1998, issues meeting. At the time 
of the report, consensus had not been reached on the draft final rule. 
Because many of the comments received from working group members and 
from the full ARAC members before and at the August 24 meeting 
duplicated comments that were made on the NPRM, the FAA has not 
attempted to deal separately and repetitively in this preamble with 
these post-comment period ARAC comments.

FAA Rulemaking on Changed Products

    This rulemaking amends the type certification procedures for 
changes to type certificated products to bring the certification basis 
for significantly changed products (whether the change is by amended 
type certificate, supplemental type certificate, or amended 
supplemental type certificate) closer to the current regulations. The 
intent is to ensure that when an essentially new product is developed 
through a series of changes, the final product achieves a level of 
safety similar to that of a comparable new product.
    By this rulemaking, the FAA requires all proposed changes for all 
type-certificated products to comply with the latest amendments of the 
airworthiness standards, unless one of the stated exceptions applies. 
The long term result of this rule change will be that a changed product 
will have a certification basis that provides a similar level of safety 
to that provided by the certification basis of a new type certificate 
for the same product, except as provided in the rule.
    As discussed more fully later in this preamble, the final rule 
contains an approach that was not discussed in the NPRM. This approach 
should help minimize the procedural burden for applicants for amended 
type certificates and STC's for aircraft (other than a rotorcraft) with 
a maximum weight of 6,000 pounds or less and for non-turbine rotorcraft 
with a maximum weight of 3,000 pounds or less.
    As stated, the FAA will issue an advisory circular based on this 
rulemaking. This advisory circular will provide guidance on determining 
the certification basis for changed aeronautical products, including 
identifying the conditions under which it will be necessary to apply 
for a new type certificate. For the reasons discussed below, this final 
advisory circular will follow the draft AC originally proposed by the 
ARAC, with changes as necessary to conform to the final rule language 
and to international harmonization.

Discussion of Comments Received on the NPRM

    The FAA received over 90 comments on the NPRM. Commenters included 
aircraft manufacturers and operators, organizations representing these 
groups, foreign entities, and individuals.
    More than half of the comments focus on the issue of applicability 
of the proposed rule changes to supplemental type certificates (STC's) 
and type certification amendments for small part 23 airplanes, 
particularly older airplanes. Virtually all of these commenters state 
that the proposed rule and advisory circular were designed for 
transport category aircraft by persons involved in manufacturing or 
using transport category aircraft. These commenters urge that non-
transport category aircraft not be included in the final rule. Several 
request an extension of, or reopening of, the comment period, stating 
that the in-service modifier community was not involved in the 
development of the NPRM and asserting that much of this community was 
not even aware of the NPRM until after the comment period closed. (For 
further detail, see discussion of comments under the heading 
``Applicability to General Aviation Aircraft and to Supplemental Type 
Certificates.'')
    Many of the commenters request that the preamble and advisory 
circular be rewritten to reflect more closely the recommendations by 
the Aviation Rulemaking Advisory Committee (ARAC). Many of these 
commenters state that one of the main purposes of this NPRM was to 
achieve harmonization with the Joint Aviation Authorities (JAA) and 
that to the extent the FAA departed from the ARAC recommendation, 
harmonization was lost because the JAA Notice of Proposed Amendment 
(NPA) was very closely aligned with the ARAC recommended document. (For 
further detail, see discussion of comments under ``ARAC Recommendation 
and Harmonization'' and ``Rewrite of AC from ARAC Draft.'') Comments 
that suggest specific substantive changes to the proposed rule language 
are summarized and addressed under the section-by-section portion of 
this preamble.
    Many commenters made specific comments on the proposed advisory 
circular. These comments are not discussed in this document but are 
being considered by the FAA.
    In view of the harmonization goal of this rulemaking and the 
intended close relationship between the FAA's Notice No. 97-7 and the 
JAA's NPA 21-7, the FAA included the comments received by the JAA in 
the FAA public docket and the ARAC reviewed the relevant comments on 
NPA 21-7. Except for the issue of applicability to aircraft modifiers, 
the comments on NPA 21-7 were mostly from the same entities that 
commented on this rulemaking and these comments did not differ 
significantly from the comments on FAA's Notice No. 97-7. Therefore, 
this document does not separately address the comments received on NPA 
21-7.

General and Miscellaneous Comments

    Comments: One commenter, in reference to the preamble section 
``Recent FAA Actions,'' says that the FAA's mandate, under 49 U.S.C. 
Sec. 44701, is to promote safety and safety regulations. This commenter 
says that the FAA has no mandate or legal basis for ``making 
regulations designed to manipulate competitive forces or marketplace 
decisions.''
    Fairchild Aircraft Inc. (Dornier) also states its concern that the 
real problem being addressed by the FAA is not a safety problem, but 
rather the potential for an unfair trade advantage.
    Hiller Aircraft expresses opposition to the proposal and states 
that current Secs. 21.16, 21.19, and 39.1 already provide the FAA with 
``the regulatory flexibility to prescribe applicable rules for any 
newly proposed design, any design being considered for change and any 
design found to be unsafe through field experience.'' Hiller says that 
the proposal would be administratively burdensome on the FAA and 
manufacturers, while not providing the FAA with any additional 
regulatory power. Fairchild also concludes that the proposed rule would 
only create more bureaucratic paperwork, and increase the cost of the 
certificated product without compensating increases in safety.
    FAA Response: While international concern over potential unfair 
competitive advantages that could result if different standards are 
applied to similar changed products, was cited as one of the triggering 
events for this rulemaking, that concern was not the basis for 
justifying the changes proposed in Notice No. 97-7. As the NPRM 
preamble described at some length, and as summarized in the Background 
section of this preamble, the FAA's justification for the proposed 
change was a safety justification, namely, to ensure that significantly 
changed products comply with later requirements that apply to new 
products to the maximum extent practicable.

[[Page 36249]]

    With respect to the possible increased administrative burden on the 
FAA, this rule will, to some extent, decrease the FAA's administrative 
burden. Under the present rule, the FAA must demonstrate that the 
regulations incorporated by reference in the type certificate are not 
adequate to achieve the established level of safety when an applicant 
applies for a change to a type certificate. Under the proposed and 
final rule language, except for certain specified smaller aircraft, the 
initial burden will be on the applicant to show that it should not be 
required to comply with the regulations in effect on the date of the 
application because it meets one of the stated exceptions. As stated in 
the NPRM, compliance with the regulations in effect on the date of 
application where required by this rule will enhance the level of 
safety for the changed product. The burdens on the applicants are 
unavoidable if the objectives of the rule are to be achieved. Advisory 
Circular 21.101-XX that will be issued prior to the mandatory 
compliance dates of this rule will contain guidance intended to reduce 
the administrative burden on both the applicant and the FAA.

Retroactive and Retrofit Requirements

    Comments: The European Association of Aerospace Industries (AECMA) 
states that the ``key point in ensuring steps forward in safety is to 
clearly define the applicability of the new standards at the time of 
the rule elaboration.'' Applicability to changed, newly manufactured or 
in-service aircraft may be mandated through appropriate amendments to 
CFR Secs. 23.2, 25.2, 27.2 and 29.2 (special retroactive requirements), 
or to the operational regulations (for instance part 121, subpart J).
    AECMA also states that the methodology used to assess possible 
retroactive applicability of new standards should follow the principles 
of AC 21.101-XX, Appendix 2, with the necessary adjustments for each 
category of product. In addition, the harmonization process should be 
extended to the retroactive requirements. While promoting the 
implementation of the real safety improvements, this approach would 
allow the manufacturers to clearly anticipate the requirements 
applicable to their products, instead of entering into case by case 
non-public discussions with possible unequal treatment.
    FAA Response: Whenever the FAA adopts a new design requirement, it 
determines whether to apply that requirement to previously type 
certificated, but changed products, through a retroactive design 
requirement, or to previously manufactured aircraft through an 
operating rule. However, that determination is not the same as the 
determination that must be made when the FAA receives an application 
for a changed product. The determination of which amendments should be 
applied depends on the safety benefits to be realized from the proposed 
change, and the design, operational, and other cost burdens. Therefore, 
the FAA does not agree that the generalized normal retroactive and 
retrofit determinations are sufficient for dealing with specific 
changed products.

Consistency of Application within FAA

    Comments: Raytheon suggests that in conjunction with the 
implementation of this rule the FAA should consider an Aircraft 
Certification Office (ACO) oversight program that would include (1) 
annual review of ACO's and new changes to type certificated products; 
(2) quarterly report submittal from ACO's stating amendment level of 
rules mandated for incremental changes; and (3) feedback from the FAA 
Directorate if it sees a consistent pattern from one ACO where the 
later rule amendments are not being imposed. Raytheon's recommendations 
are intended to ensure more equitable compliance requirements to avoid 
giving some region or manufacturer an economic advantage. Raytheon also 
recommends that the FAA implement an appeal process for an applicant 
who strongly disagrees with an ACO decision.
    FAA Response: One of the tasks assigned to the ARAC was to assist 
the FAA in developing follow-up training for both government and 
industry to facilitate implementation of this final rule. It is the 
FAA's intent that all FAA employees called on to implement this final 
rule will receive appropriate training and implementation documents, 
such as internal orders and handbooks. The FAA will also implement 
other appropriate follow-up actions to ensure that the rule is being 
implemented uniformly throughout the FAA.
    The ability of an applicant to appeal an ACO certification decision 
would not be changed by this rule. If not sooner resolved by the FAA 
appeals process (through the accountable Directorate), such a decision 
would be, ultimately, adjudicated as part of a certificate denial. A 
certificate denial is a ``final order of the Administrator,'' 
appealable to a U.S. Court of Appeals pursuant to 49 U.S.C. Sec. 46110.

Potential for Adverse Safety Effect

    Comments: One commenter predicts that the likely effect of enacting 
the proposed rule will be that no changes to existing aircraft designs 
will be incorporated due to the increased cost of certification. As a 
result, no safety improvements would occur.
    Representatives of the in-service modifier community make the same 
point with respect to safety improvements that would require an STC. 
(See discussion under ``Applicability to General Aviation Aircraft and 
to Supplemental Type Certificates'').
    FAA Response: The FAA does not agree that this rule will be a 
disincentive. The FAA recognizes the impact on airlines and independent 
modification companies of the requirement to have the data in order to 
determine significance. However, the FAA needs, in the interest of 
safety, to ensure that all significant changes move to the latest 
certification basis for affected areas when the change would contribute 
materially to the level basis of safety of the changed product and 
would be practical.

ARAC Recommendation and Harmonization

    Comments: The most common issue discussed by the commenters (who 
were not focused on the in-service modifier/STC issue) related to the 
differences between the FAA NPRM and accompanying draft AC and the ARAC 
documents, and the resulting lack of harmonization with the JAA NPA 
which the commenters state is closer to the ARAC recommendation.
    The United Kingdom's Civil Aviation Authority (CAA) states that in 
the NPRM the FAA policy appears to be moving towards accepting 
previously certificated products with a greater level of change before 
requiring certification as a new product. CAA comments support the need 
to positively limit the extent to which manufacturers should be allowed 
to change products without being required to certificate a product to 
the latest airworthiness standards. CAA suggests that the harmonization 
of FAA and JAA requirements remains incomplete until it is clearly 
understood by both FAA and JAA the extent to which the criteria for a 
changed product is to be applied in a particular instance.
    The General Aviation Manufacturers Association (GAMA) submitted the 
complete ARAC recommendation dated October 14, 1994, with its comment 
and requests that the FAA reconsider the original ARAC recommendation 
in developing the final rule. Other

[[Page 36250]]

commenters that state their concern that the FAA's NPRM and draft 
advisory circular were significantly different from the original ARAC 
recommendation (and therefore different from JAA's NPA 21-7) are the 
European Association of Aerospace Industries (AECMA), Pratt and Whitney 
Canada, Bombardier, and the Aerospace Industries Association.
    FAA Response: A number of the commenters suggest rewording of the 
NPRM preamble to make it consistent with the document submitted by the 
ARAC to the FAA. The FAA has considered the substance of these comments 
and where appropriate, they are addressed in this final rule preamble. 
In general, the differences between Notice No. 97-7 and the document 
submitted to the FAA by the ARAC involved additional preamble language 
included by the FAA to clarify the intent of the proposed changes. With 
one exception the proposed rule language in Notice No. 97-7 was 
identical to the rule language recommended by the ARAC. The draft AC, 
which is a non-binding tool to aid compliance, is discussed later in 
this preamble.

Applicability to General Aviation Aircraft and to Supplemental Type 
Certificates

    Comments: Over half of the comments received focus exclusively on 
the question of the applicability of the proposed changes to aircraft 
that are not certificated under part 25 (i.e., to non-transport 
category aircraft, frequently referred to by commenters as ``general 
aviation aircraft'') and the applicability to supplemental type 
certificates in general. Most of these commenters state that part 23 
aircraft should be entirely excluded from this rulemaking. The specific 
substantive statements are summarized below.
    The thrust of the comments from the general aviation and in-service 
modifier communities received in the public docket fell into one or 
more of the following categories:
    1. The in-service modifier community was not aware until late in 
the comment period that the ARAC recommendation and the resulting FAA 
Notice No. 97-7 would affect it at all. Several request an extension of 
the comment period.
    2. The basis for Notice No. 97-7 was developed and recommended by 
an ARAC working group composed entirely of representatives of 
manufacturers of transport category aircraft and their counterparts in 
the represented civil aviation authorities. The in-service modifier 
community believed that the ICPTF/ARAC working group was focused on a 
problem involving the manufacture of transport category aircraft, not 
the alteration of general aviation aircraft. The in-service modifier 
community argues that the older the aircraft, the more the burden would 
increase on STC applicants and the less relevant would be the problems 
and examples used to justify the rule change.
    3. Notice No. 97-7 gave no indication that it would affect 
applicants for supplemental type certificates and none of the stated 
justification warranted changing the rules for STC's.
    4. Nowhere in Notice No. 97-7 is there any statement to indicate a 
problem with STC's. The entire discussion of the problem, the 
regulatory history, and recent FAA actions used aircraft manufacturing 
examples and mostly examples involving transport category airplanes.
    5. Little or no consideration was given to the potential impact of 
the proposed rule and associated advisory material on general aviation 
aircraft production or on the STC process. For example, the finding 
under the Regulatory Flexibility Act that the proposed amendments would 
not have a significant economic impact on a substantial number of small 
entities ignores the potential impact on persons seeking STC's for 
general aviation aircraft.
    6. Substantively, and therefore of most significance, the proposed 
change would shift the burden from the FAA to the applicant to prove 
whether a proposed change should comply with type design amendments 
that have occurred after the original type certificate was issued. The 
in-service modifier comments and representatives state that this change 
in burden from a ``bottom up'' approach to a ``top down'' approach 
would add significant costs to numerous small businesses which apply 
for the majority of current STC's. The in-service modifiers also 
dispute the relevance of FAA Order 8110.4 that established a top-down 
approach as a matter of policy in 1990. The in-service modifiers state 
that this order cannot be used to justify the rule changes proposed in 
Notice No. 97-7 because it was not enforceable since the rule was not 
changed and further because the FAA has not previously sought to apply 
this policy to STC's. For these reasons, this community was not even 
aware of its existence.
    Specific written comments on the STC issue can be summarized as 
follows:
    GAMA, EAA, NATA, and AOPA state that the proposal would be 
burdensome for older general aviation airplanes that would have to 
undergo significant and costly changes each time the in-service product 
is upgraded under STC procedures. GAMA adds that the re-entry into 
production of airplanes with older type certificates would be prevented 
because ``product changes dictated by the FAA would be so extensive 
that changed products would not be cost effective due to the expense of 
such changes.'' EAA states that the change ``will block safety 
improvements in general aviation aircraft by creating such a difficult 
barrier to approving Supplemental Type Certificates (STC's) that few 
improvements will be attempted on older aircraft designs.'' These 
commenters believe that the rule could have exactly the opposite of the 
intended effect by discouraging general aviation aircraft owners from 
improving their aircraft.
    GAMA and AOPA state that, if present type certificate holders were 
prevented from resuming production due to economic reasons, the result 
would be a lack of spare parts and technical assistance needed by 
current airplane owners for the continued airworthiness of their 
airplanes.
    GAMA says that the proposal would, in effect, ``render the type 
certificates for older out-of-production airplanes valueless due to the 
extensiveness of mandated FAA product changes. . . .'' AOPA states that 
the ``proposed changes would have a tremendous negative impact on the 
fledgling revitalization of the general aviation industry in this 
country by rendering nearly all existing out of production type 
certificates virtually valueless.''
    NATA states that the NPRM fails to specifically limit the 
application of the rule and expresses concern that the rule 
requirements could be applied to unintended areas such as maintenance.
    FAA Response: The ARAC recommended an exception from the most 
burdensome impact of this rulemaking for a significant segment of 
aircraft that are mostly used in general aviation operations. The FAA 
has adopted, in this final rule, a process that will apply to changes 
to these aircraft. Therefore, as is more fully discussed and explained 
in the section by section discussion of Sec. 21.101, changes to 
aircraft (other than rotorcraft) with a maximum weight of 6,000 pounds 
or less and non-turbine powered rotorcraft with a maximum weight of 
3,000 pounds or less, will be evaluated starting with the latest 
certification basis for changes to a type certificate (whether through 
an amendment or an STC). This exception should address the concerns of 
most of the in-service modifiers listed above. Reduction of the 
potential costs from this change are discussed in the

[[Page 36251]]

Regulatory Evaluation Summary portion of this preamble.
    While it is unfortunate that the in-service modifier community may 
not have recognized the potential impact on it of this rulemaking, the 
in-service modifier community had full opportunity to participate in 
the ARAC process from the date that the FAA tasked the ARAC. The fact 
that in-service modifier interests may not have been fully represented 
in the ARAC working group is not because in-service modifiers were 
excluded but because they elected not to participate until after the 
NPRM was issued.
    The working group distributed its draft NPRM and AC to all ARAC 
members on August 30, 1994, for review and consideration. The ARAC met 
on October 13 and unanimously passed the proposals as written, with no 
substantive comments or changes. Among the organizations present at the 
October 13 meeting were several in-service modifier community 
representatives, such as, Aviation Repair Station Association (ARSA), 
National Air Transportation Association (NATA), Experimental Aircraft 
Association (EAA), General Aviation Manufacturers Association (GAMA), 
and the Airline Suppliers Association (ASA).
    Furthermore, while the FAA decided not to extend or reopen the 
comment period, as previously noted, representatives of the ARAC 
working group and the FAA met with representatives of in-service 
modifiers on several occasions during the ARAC working group meetings 
to dispose of the comments to the NPRM. Additionally, representatives 
from the General Aviation community met with the Associate and the 
Deputy Associate Administrators for Regulation and Certification to 
express their concern with the conduct of the working group meetings. 
Their concerns were addressed and a record of these meetings are 
reflected in the docket.
    The STC issue and potential applicability to non-transport category 
airplanes were addressed in Notice No. 97-7. Section 21.1(a) of part 21 
prescribes procedural requirements ``for the issue of type certificates 
and changes to those certificates; the issue of production 
certificates; the issue of airworthiness certificates; and the issue of 
export airworthiness approvals.'' (Emphasis added.) Supplemental type 
certificates are not mentioned in Sec. 21.1 or throughout part 21 
because the word ``changes'' is clearly used to cover all possible 
changes to a type certificated product whether made by the type 
certificate holder, the aircraft owner, or a third party. Section 21.19 
states that certain changes will require a new type certificate. 
Subpart D of part 21 prescribes ``procedural requirements for the 
approval of changes to type certificates.'' Subpart E covers 
supplemental type certificates, which Sec. 21.113 states must be 
applied for by any person ``who alters a product by introducing a major 
change in type design, not great enough to require a new application 
for a type certificate under Sec. 21.19 . . . except that the holder of 
a type certificate for the product may apply for amendment of the 
original type certificate.'' Section 21.115, which Notice No. 97-7 
proposed to amend, states that an applicant for an STC must ``show that 
the altered product meets applicable airworthiness requirements'' of 
Sec. 21.101, that is, the same requirements that would apply to the 
holder of the type certificate. Thus, persons familiar with part 21, as 
are the representatives of the major in-service modifiers that 
commented on Notice No. 97-7, know that each proposed rule that affects 
``changes'' under part 21 has potential broad application.
    Notice No. 97-7 contained numerous statements that made it clear 
that the proposed amendments to existing regulations would affect 
persons other than transport category type certificate holders. For 
example:
    1. Section 21.115, which applies to all applicants for an STC, is 
referenced early in the ``History of Type Certification'' section of 
the preamble.
    2. In the ``History of Type Certification of Changes'' section of 
the preamble the following sentence appears:

    Because Sec. 21.101(a) and (b) are incorporated by reference in 
Sec. 21.115 these procedures are equally applicable to persons 
applying for supplemental type certificates.

    3. In the ``Recent FAA Actions'' portion of the preamble the 
following sentences appear:

    The ICPTF was organized to develop the philosophy and the 
necessary regulatory text and advisory material that would provide 
for the implementation of later regulatory amendments applicable to 
aeronautical products undergoing change, products in production, and 
products in service. (Emphasis added.)
    The working group presented to ARAC an NPRM and associated 
advisory material concerning the type certification procedures for 
changes to aeronautical products, changed products, and products 
already in service. (Emphasis added.)

    4. In the section by section discussion of Sec. 21.115 the 
following sentence appeared:

    There should not be a difference in the certification basis for 
a change to a type-certificated product between these two methods of 
approval, amended type certificate, or supplemental type 
certificate.

    5. In the Regulatory Evaluation Summary the following sentence 
appears:

    The formalization of this policy by regulation would expedite 
decisions about the certification basis of proposed changed products 
and, therefore, would provide manufacturers and modifiers with 
earlier and more dependable information on which to base their 
product development decisions.

    In view of the opportunity provided by the ARAC process before and 
after issuance of Notice No. 97-7 and the number of references to STC's 
and modifiers throughout the NPRM preamble, the in-service modifier 
community had adequate notice of the potential impact of Notice No. 97-
7 and adequate opportunity to participate. In the Regulatory Evaluation 
Summary portion of this preamble the FAA has revisited the question of 
the potential impact on small entities and has determined that an 
analysis under The Regulatory Flexibility Act of 1980, as amended, is 
required. This analysis and a complete analysis of potential costs and 
benefits are set out in the Regulatory Evaluation Summary portion of 
this preamble.

Transport Category Aircraft STC's

    Comments: ATA says that the proposal's requirement for an applicant 
to prove that a proposed change to be accomplished under an STC does 
not invoke a new safety standard will consume time and resources 
without improving airworthiness. ATA says that the current STC process 
is effective in ensuring that changes to an aircraft design are 
airworthy and recommends that the FAA exclude STC's from the proposed 
rule.
    FAA Response: As discussed in the preamble to the NPRM Notice No. 
97-7, the FAA has determined that an application for a design change 
through the STC process should be certificated to the same level of 
safety as an application for the same change through an amended type 
certificate. The FAA's intent is to establish an airworthiness 
certification basis that is not dependent on whether the applicant is 
applying for an amended or a supplemental type certificate.

Section-by-Section Discussion

Section 11.11

    Current Sec. 11.11 lists special conditions required as prescribed 
under Sec. 21.101(b)(2) as an FAA record that is

[[Page 36252]]

maintained in current docket form in the Office of the Chief Counsel. 
To remain consistent with the changes to Sec. 21.101, described later, 
the NPRM proposed to amend Sec. 11.11 to refer to Sec. 21.101(c) (now 
Sec. 21.101(d)) instead of Sec. 21.101(b)(2). The NPRM also proposed 
revisions to make the section read easier.
    There were no substantive comments on this section and it is 
adopted as proposed with the cross-reference change described above.

Section 21.19

    Current Sec. 21.19(a) states that any person who proposes to change 
a product must make a new application for a type certificate if the 
Administrator finds that the proposed change in design, configuration, 
power, power limitations (engines), speed limitations (engines), or 
weight is so extensive that a substantially complete investigation of 
compliance with the applicable regulations is required. In addition, 
current paragraphs (b), (c), and (d) list other specific types of 
changes that mandate a new application for a type certificate. Notice 
No. 97-7 proposed to include only the general language of current 
paragraph (a) into the new Sec. 21.19, while the previously listed 
specific changes would be subject to case-specific evaluations to 
determine whether they are substantial.
    Current Sec. 21.19(b) describes specific changes for which the 
applicant must apply for a new aircraft type certificate. These include 
(1) changes in the number of engines or rotors; and (2) changes to 
engines or rotors using different principles of propulsion, or to 
rotors using different principles of operation. Historically, these 
types of changes have fallen into one of two categories--those that 
were not extensive enough to require a new application for a type 
certificate, as evidenced by the large number of exemptions that have 
been granted over the past quarter century, or those that were so 
extensive that a new application was required because a complete 
investigation of compliance was required. Accordingly, as was discussed 
in the NPRM preamble, the provisions of current Sec. 21.19(b) are not 
needed and were not included in the proposal.
    Recently, the FAA considered a petition for exemption from 14 CFR 
Sec. 21.19(b)(2), to replace turbopropeller engines with turbofan 
engines on a transport category airplane. The petitioner argued that 
the certification basis for the changed airplane should be developed 
using the approach proposed in the NPRM. In responding to the petition, 
the FAA pointed out that while the NPRM proposed to eliminate the 
specific reference to a change to engines using different principles of 
propulsion, that kind of change normally would be considered so 
extensive that a substantially complete investigation of compliance 
would be required. Thus, it should be noted that new Sec. 21.19 does 
not necessarily change how one would evaluate ``extensive'' in each 
case. Instead, new Sec. 21.19 eliminates the legal presumption that 
certain changes are automatically ``extensive.''
    Current Sec. 21.19(c) describes another specific change in which 
the applicant must apply for a new aircraft engine type certificate. 
This change is in the principle of operation. In addition, current 
Sec. 21.19(d) describes specific changes in which the applicant must 
apply for a new propeller type certificate. The NPRM proposed to delete 
these types of changes from Sec. 21.19. Under proposed Sec. 21.101, 
with certain exceptions, these types of changes and all areas, systems, 
components, equipment, and appliances affected by the changes would 
have to comply with the regulations in effect on the date of 
application for the change to the type certificate.
    Comments: CAA recommends that this section (Sec. 21.19) be cross-
referenced in Sec. 21.101(a).
    One commenter recommends that wing modifications be added to the 
list of design changes listed in the preamble. This would be written 
as: ``New wing (external geometry, structure, and performance.)''
    FAA Response: The CAA comment is discussed under Sec. 21.101(a). 
The list of design changes typically regarded as substantial that were 
referenced in the NPRM preamble have not been included in this 
document. However, they will be addressed in the forthcoming Advisory 
Circular. Section 21.19 is adopted as proposed.

Section 21.101(a)

    Current Sec. 21.101(a) states that if a person applies for a change 
in a type certificate, the product must comply with either the 
regulations referenced in the type certificate or the applicable 
regulations in effect on the date of the application for the change, if 
elected by the applicant, plus any other amendments the Administrator 
finds to be directly related.
    In Notice No. 97-7, the FAA proposed to amend Sec. 21.101(a) to 
require an applicant for a change to a type certificate to comply with 
the applicable regulations in effect on the date of the application for 
the change and with parts 34 and 36, unless the applicant falls within 
one of the exceptions that would allow compliance with an earlier 
amendment. The primary purpose of this proposed change was to ensure 
that products being changed in a significant manner meet the latest 
airworthiness standards wherever practicable.
    Under this approach, the starting basis is the applicable 
regulations in effect on the date of the application for the change. 
The burden is on the applicant to prove that compliance with earlier 
regulations would provide an acceptable safety level. Under the current 
regulation, the starting basis is the regulations incorporated by 
reference in the type certificate. In this case, the burden is on the 
FAA to find that later amendments are directly related to the proposed 
change, or that there are other reasons (e.g., the regulations 
incorporated in the type certificate do not provide adequate standards 
with respect to the proposed change) for requiring compliance with 
later amendments.
    The FAA points out that current part 21 and amendments resulting 
from this rulemaking, only address ``major'' type design changes under 
Sec. 21.93. ``Minor'' design changes are ``approved'' under Sec. 21.95, 
and are not considered to be the changes to a type certificate that are 
covered under Sec. 21.101.
    Comments: The comments that address the substantive issue of the 
safety justification for, and potential cost of, changing from an 
original or previously amended certification basis approach to a 
current amendments approach were addressed earlier in the General and 
Miscellaneous Comments section of this preamble.
    The CAA says that Sec. 21.101(a) should be amended to cross 
reference Sec. 21.19 to clarify that this section applies only when a 
new type certificate is not required under Sec. 21.19. The CAA 
suggested rewording the paragraph to read as follows:

    Where the Administrator finds that an application for a new type 
certificate is not required under Sec. 21.19 and except as provided 
in paragraph (b). . . .

    Raytheon recommends that proposed paragraph (a)(1) of Sec. 21.101 
be rewritten so that the word ``and'' after the term ``changed 
product'' is deleted.
    FAA Response: The FAA does not agree with the CAA's suggested 
rewording as Sec. 21.19 stands on its own and there is no need for a 
cross-reference to it in Sec. 21.101. As rewritten, the ``and'' in 
Sec. 21.101(a)(1) is not included. The general phrase, ``airworthiness 
requirements applicable to the category of product'' has been 
substituted for the references to parts 23, 25, 27, 29, 31, 33, and 35. 
As

[[Page 36253]]

adopted, Sec. 21.101(a), with minor revisions for clarification, 
replaces proposed Sec. 21.101(a)(1) and (2) without substantive 
changes.

Section 21.101(b)

    Proposed Sec. 21.101(b) provided exceptions to the regulation in 
proposed paragraph (a), that, when met, would allow the applicant to 
comply with earlier amendments to the regulations. When choosing the 
amendment level of a regulation, all regulations associated with any 
relevant paragraphs in that amendment level would have to be included. 
The amendment level chosen may not predate either the latest 
certification basis or anything required by the retroactive sections, 
that is, Secs. 23.2, 25.2, 27.2, or 29.2.
    The intent of the proposed change was to apply the applicable 
regulations in effect on the date of the application to those areas, 
systems, components, equipment, and appliances significantly affected 
by the change, unless the Administrator finds that compliance with a 
regulation would not, (1) contribute materially to the level of safety 
of the changed product, or (2) would be impractical. For those areas, 
systems, components, equipment, and appliances not significantly 
affected by the change, or otherwise excepted, continued compliance 
with the regulations incorporated by reference in the type certificate 
would be considered acceptable.
    Proposed paragraph (b)(1) stated that the applicant would be 
allowed to demonstrate compliance with earlier regulations, but not 
earlier than the regulations incorporated in the latest certification 
basis, if the effect of the proposed change is not significant, taking 
into account earlier design changes and previous updating of the type 
certification basis.
    Proposed paragraph (b)(2) stated that the applicant may show 
compliance with earlier regulations for those areas, systems, 
components, equipment, and appliances that are not affected by the 
change.
    Proposed paragraph (b)(3) stated that, if compliance with a 
regulation in effect on the date of the application for the change 
would not contribute materially to the level of safety of the product 
to be changed, or would be impractical, the applicant may demonstrate 
compliance with an earlier amendment of a regulation provided that the 
amended regulation does not precede either the corresponding regulation 
in Secs. 23.2, 25.2, 27.2, or 29.2 of this chapter, or the 
corresponding regulation incorporated by reference in the type 
certificate.
    A proposed advisory circular contained a safety benefit resource 
evaluation guide, which was recommended by the ARAC to be an acceptable 
means of compliance with the ``impractical'' exception of proposed 
Sec. 21.101(b)(3), but which was included by the FAA for purposes of 
information only.
    For the reasons discussed in more detail below, proposed 
Sec. 21.101(b) is adopted with minor clarification changes, but without 
substantive changes.
    Comments: Erickson Air-Crane Co. recommended a change in the 
wording of the rule to make it clearer that ``You don't comply with the 
amendment alone, but rather the entire regulation at a given amendment 
level.''
    FAA Response: The FAA does not agree that an applicant would always 
have to comply with an entire amendment level. The proposal was to 
require compliance only with the relevant portions of a particular 
amendment level.
    Comments: CAA states that the objective of the certification policy 
for changed products should be to ensure, as far as is practicable, 
that a changed product will achieve the same level of safety as a new 
product introduced concurrently. CAA states that the proposal, Notice 
No. 97-7, will not achieve this objective for the following reasons:

    (a) The proposed Sec. 21.101(b)(2) allows areas not affected by 
the change being considered to continue to use superseded 
airworthiness requirements, some of which may have been amended with 
the objective of improving the general level of safety. The fact 
that a product is a changed product, rather than a new product, 
should not be the reason for allowing it to continue to use outdated 
safety standards indefinitely. Even for areas not affected by the 
changes there needs to be a point beyond which a changed product is 
required to comply with the latest standards where amendments have 
been made as part of an initiative to improve general safety levels 
in such areas.
    (b) The proposed Sec. 21.101(b)(3) allows the continued use of 
superseded airworthiness requirements where compliance ``would not 
contribute materially to the safety of the changed product.'' 
Although NPRM 97-7 acknowledges the need to assess the accumulative 
effect of a number of small changes on the level of safety, the text 
of Paragraph (b)(3) is written in terms of the effect of a single 
change . . . there is a need to establish the datum as the original 
design standard of the product originally certificated.

    CAA believes that Sec. 21.101(b) is difficult to understand and 
should be re-drafted and cross-referenced to paragraphs (b)(1), (b)(2), 
and (b)(3).
    CAA comments, as it did on the JAA proposal that the phrase ``For 
each area, system, component, equipment, or appliance'' should be 
replaced with ``For each feature of the product.'' CAA acknowledges 
that this change, if adopted, would require extensive interpretive 
material to clarify what the word ``feature'' means.
    FAA Response: There is very little language difference, and no 
substantive difference, between the FAA's proposed rule language and 
the language in JAA's NPA 21-7. Nonetheless, for reasons discussed 
below, Sec. 21.101(b) has been rewritten for clarification. The ARAC 
working group had numerous discussions as to the meaning of 
``nonsignificant'' in the proposed rule. The working group focused 
particularly on the draft Advisory Circular (AC) circulated for public 
comment at the same time as Notice No. 97-7 because the draft AC 
contained language explaining ``nonsignificant.'' The ARAC recommended 
that some of the proposed AC language be included in the final rule to 
make it clear, in determining whether a change would be nonsignificant, 
that an applicant would go back to the latest certification basis and 
not the original certification basis. The draft AC provided that the 
following are nonsignificant:
    ``Changes that do not modify the general characteristics of the 
product in that: (1) The general configuration and principles of 
construction are retained; and (2) The assumptions used for 
certification of the basic product remain valid and the results can be 
extrapolated to cover the changed product.''
    In view of the ARAC discussions, the FAA has decided that it would 
be helpful to use the affirmative term ``significant'' rather than the 
negative term, ``nonsignificant'' and to more fully explain in the rule 
itself the term ``significant.'' As adopted Sec. 21.101(b)(1) reads as 
follows:

    (b) If paragraphs (b)(1), (2), or (3) of this section apply, an 
applicant may show that the changed product complies with an earlier 
amendment of a regulation required by paragraph (a) of this section, 
and of any other regulation the Administrator finds is directly 
related. However, the earlier amended regulation may not precede 
either the corresponding regulation incorporated by reference in the 
type certificate, or any regulation in Secs. 23.2, 25.2, 27.2, or 
29.2 of this chapter that is related to the change. The applicant 
may show compliance with an earlier amendment of a regulation for 
any of the following:
    (1) A change that the Administrator finds not to be significant. 
In determining whether a specific change is significant, the 
Administrator considers the change in context with all previous 
relevant design

[[Page 36254]]

changes and all related revisions to the applicable regulations 
incorporated in the type certificate for the product. Changes that 
meet one of the following criteria are automatically considered 
significant:
    (i) The general configuration and the principles of construction 
are not retained; and
    (ii) The assumptions used for certification of the product to be 
changed do not remain valid.

    This language should help both the applicant and the FAA reviewer 
to determine whether the effect of a change is significant, when 
considered in context with all previous changes to the design and all 
related changes to the latest ``certification basis.'' Again, the 
overall intent of this rulemaking is to ensure that products developed 
through a series of changes, achieve a level of safety similar to that 
of a comparable new product. The final rule language makes it clear 
that, in determining whether a change is significant, the FAA will 
consider the latest amendments to the airworthiness standards adopted 
after the most recent type certification basis.
    This is particularly important because a subsequent amendment of a 
regulation can indicate an important change in the emphasis in an area 
of the regulations. For example, if the regulations have been amended 
in an affected area, then the assumptions used for certification of the 
product may no longer be valid. The FAA considers these changes in the 
rule language to be clarifying since they are consistent with the 
intent of Notice 97-7 and with the explanations given in the 
accompanying draft Advisory Circular.
    Comments: One commenter states that the FAA should reconsider its 
proposal to delete the existing Sec. 21.101(b)(1) that allows the FAA 
to apply later regulations without regard to the exceptions in proposed 
Sec. 21.101(b)(1), (2), and (3). This commenter provides an example of 
a transport category airplane with an early certification basis built 
with independent round dial instruments. The commenter notes that a 
number of rules were added that applied to replacing independent round 
dial instruments with a multifunction display or an electronic flight 
instrument system. The commenter suggests that the proposed rule would 
preclude compliance with the added rules for that kind of design 
change.
    This commenter suggests that proposed Sec. 21.101(b)(3) is not an 
improvement over the issue paper process, where that applicant would 
have an opportunity to apply for an exemption from the rule, which the 
applicant did not agree with, through a public notice process.
    This commenter also expressed concerns regarding the use of the 
service history of an already changed product when analyzing the 
``impractical'' exception to application of the latest regulations to a 
change of that product. Specifically, the commenter is concerned that, 
when a later rule addresses hazards or failures in very small 
probabilities and a product change is certificated using that later 
amendment, the older version of that product may have not yet reached 
the total exposure to the hazard or failure addressed by the later 
rule. In this case, the service history of the older version of the 
product would ``bask in the glow'' of the uneventful service history of 
the newer version that complies with the later amendment, making it 
appear that compliance with the latest amendments would be unwarranted.
    Additionally, this commenter states that the preamble discussion of 
``impractical'' mentions both a cost analysis and a benefit-resource 
evaluation and states that the applicant will only be able to provide a 
cost analysis and that there would not be enough data to make a 
comparison.
    This commenter does not believe the use of a cost/benefit analysis 
to be practical as a tool to determine if a later rule should be 
applied under the proposed Sec. 21.101. The commenter states that if 
such an approach is used then the FAA should at least eliminate the 
proposed AC Appendix 2 as it appears biased and without justification.
    The ARAC working group had numerous discussions on the limited 
applicability of the data in Appendix 2 of the draft AC because this 
data was drawn from, and therefore only applicable to, transport 
category airplanes. The ARAC recommended that data be developed for 
other airplanes and for rotorcraft. The ARAC also recommended delayed 
compliance dates to allow time for development of this data.
    FAA Response: The FAA construes the first comment to mean that the 
exceptions in proposed Sec. 21.101(b)(1), (2), and (3) are too broad, 
so as to overly limit FAA discretion to impose later requirements. With 
respect to the example, the FAA notes that such a design change would 
be significant, and that it would be difficult, if not impossible, for 
the applicant to demonstrate that one of the exceptions applies. 
Therefore, compliance with the later regulations would most likely be 
required. The FAA has found that the public interest is satisfied by 
limiting the situations of required compliance with the latest 
airworthiness standards to each significant change, each area affected 
by the change, and each instance where compliance would contribute 
materially to the level of safety of the product and would be 
practical. In addition, special conditions may be required in 
accordance with the existing regulations. Nothing more is necessary for 
the safety enhancement of changed products.
    Regarding the second comment, proposed Sec. 21.101(b)(3) was not 
intended to replace the issue paper process, but to change the 
standards of certification, allowing an applicant to use earlier 
regulations if compliance with the latest regulation has been 
determined to be impractical or would not contribute to the level of 
safety. An individual's right to request an exemption from any rule has 
not been eliminated. As a result of the issue paper process, the 
applicant may still decide to petition for an exemption. This final 
rule does not change the applicant's ability to apply for that 
exemption.
    The commenter's concerns with respect to service history are 
unwarranted. First, as was noted in the preamble to the NPRM, the 
service history that would be considered in deciding whether to invoke 
an exception to compliance with a later amendment would be the 
applicable service experience. In the case cited by the commenter, the 
relevant, service experience applicable to a change to the later 
version of the product would be the service experience of that later 
version, which complies with the later amendment. The relevant, service 
experience applicable to a change to the older version of the product 
would be the service experience of that older version, which doesn't 
comply with the later amendment. Second, as explained in this preamble 
and the preamble to the NPRM, the starting point of the analysis in 
determining whether the latest amendments should be applied to an 
already changed product is the changed product's latest certification 
basis.
    In response to the last comment, the preamble to Notice No. 97-7 
referenced a safety benefit resource evaluation guide as part of the 
draft advisory circular. The guide was developed by the Aviation 
Rulemaking Advisory Committee, and was included in the draft circular 
for information purposes only. In consideration of comments received 
and after further discussion with the ARAC, the FAA has determined 
that, in theory, a safety benefit resource evaluation guide could be 
used by the applicant to demonstrate that compliance with the later 
amendment would be impractical. An

[[Page 36255]]

applicant who elects to make a showing using this guide would be 
required to submit data on potential benefits and costs that would 
justify compliance with an amendment level in effect before the date of 
the application for a change. As mentioned earlier, the burden of the 
initial showing of costs and benefits rests with the applicant. The FAA 
will consider the analysis along with other factors in its assessment 
and determination of the appropriate amendment level. A safety benefit 
resource evaluation guide, therefore, will likely be retained in the 
final advisory circular as a tool to assist the applicant in developing 
arguments as to the appropriate certification basis.
    The safety benefit resource evaluation guide recommended by the 
ARAC could not be endorsed as a sole means of determining the amendment 
level because the process cannot be proven through any rational 
financial analysis determination. In addition, the guide includes 
factors that are not relevant in determining applicable regulations. 
For example, the guide suggested a change to a single production item 
could be certificated differently than the same change to multiple 
production items. In determining whether a regulation should apply, the 
FAA considers the level of safety, not the quantity of production items 
as the basis.
    Comments: AECMA states that few of the changes proposed during the 
life of a product are really significant and that therefore, it is an 
administrative burden to require elaboration and documentation of a 
justification for application of one of the exceptions in 
Sec. 21.101(b) for each change. This commenter emphasized an 
established procedure described in the Action Notice A8110.23, 
``requiring application of the latest requirements only for changed 
parts of the product and affected area warranted equivalent results 
with less bureaucratic burden.''
    FAA Response: FAA's Action Notice 8110.23, which was replaced by 
Order 8110.4, was an interim action intended to move applicants in the 
direction of the regulations in effect on the date of the application 
for a change. Neither document has, nor were they intended to have, the 
regulatory impact of the rule language proposed in Notice No. 97-7. 
These documents were, however, directed at all derivative aircraft, 
engines, and propellers where a change is significant, but not so 
extensive as to require a new type certificate. The action notice and 
subsequent order applied to all changed products whether the approval 
method was an amended type certificate or an STC.
    Comments: Raytheon states that the intent of the word 
``impractical'' in proposed Sec. 21.101(b)(3) ``should be defined as 
not providing added value (perceived or actual) to the operator, 
manufacturer, or traveling public, or not achieving the desired effect, 
as in non-meritorious or ineffectual.'' Raytheon suggests, ``Perhaps 
impractical could be defined as `without value enhancement,' to stress 
that any change required as a result of a new regulation which doesn't 
result in a value enhancement may, with analytical substantiation, be 
exempted from compliance.''
    FAA Response: There is little, if any, difference between the FAA's 
explanation of compliance that would not contribute materially to the 
level of safety and Raytheon's understanding of compliance that would 
be ``impractical.'' The question of whether compliance with a later 
regulation would be impractical arises only after it has been 
determined that compliance with the later regulation would ``contribute 
materially to the level of safety of the changed product. . . .'' The 
cost burden introduced by impracticality is considered in relation to 
the potential safety benefit. In order to show impracticality the 
applicant considers whether the cost to incorporate the change, plus 
the cost of the subsequent operation of the changed product, would not 
be commensurate with the potential increase in safety.
    Comments: One commenter states that if an applicant is granted an 
exception under proposed Sec. 21.101(b)(2) (unaffected areas) it should 
be subject to mandatory periodic FAA reviews of safety related issues 
for airplanes that continue in production under the same type 
certificate. This commenter states that for airplanes that have 
continued in production for many years and at substantial quantities, 
the claim of excessive economic burden may be invalid and that a 
reasonable time period for periodic reviews would be ten years, 
starting from the date the exception was first granted. The commenter 
recommends that mandated changes should be incorporated in newly 
produced airplanes within three years after the review. Furthermore, 
the FAA should consider expected size of the future market when 
considering granting an exception for production airplanes.
    On the topic of ``impractical'' this commenter believes the concept 
is acceptable, although balancing safety with economics is not 
something readily acceptable to the public at large. The commenter 
states ``cost-effective/not cost-effective'' should be used instead of 
``practical/impractical'' since the latter terms are too broad and not 
descriptive of the concept.
    FAA Response: Since the basis for an exception under proposed 
Sec. 21.101(b)(2) is a finding that the area, system, component, etc. 
is not affected by the change, the FAA does not agree that there is a 
need for a periodic review of the ground for the exception, nor does 
the FAA agree that economic burden is a factor in this determination. 
With respect to whether compliance with the later regulation would be 
impractical, the FAA cannot agree that the terms ``cost effective/not 
cost effective'' would be more descriptive. While costs and benefits 
stated in dollar terms are essential ingredients, a safety benefit 
resource analysis involves more than costs.
    The benefit-resource analysis is a composite evaluation of four 
elements that are key to determining the contribution to safety made by 
meeting a particular rule. The four critical elements are:
    (1) The frequency of occurrence of the hazard the rule is intended 
to mitigate.
    (2) The potential severity of the hazard.
    (3) How well the configuration being certificated will mitigate the 
hazard by meeting the rule.
    (4) What resources are required if the design must meet the rule. 
While cost is one element of this evaluation, all four elements must be 
considered in evaluating the application of a rule. Furthermore, 
because application of the rule will set appropriate standards for the 
product design and the design change, the concern of the comment 
regarding length of production where no design change is proposed is 
beyond the scope of this rulemaking.

Section 21.101(c) (New)

    Section 21.101(c) in this final rule contains the previously 
mentioned exceptions for aircraft (other than rotorcraft) of 6,000 
pounds or less maximum weight, as defined in Sec. 23.25(a), and non-
turbine rotorcraft of 3,000 pounds or less maximum weight, as defined 
in Sec. 27.25(a). Inclusion of these exceptions will address some of 
the concerns expressed by the aircraft modifiers who commented on 
Notice No. 97-7.
    The primary impact of the exception language in Sec. 21.101(c) will 
be that the starting point for determining the applicable regulations 
for a changed product will continue to be, as in current Sec. 21.101, 
the regulations incorporated by reference in the type certificate, 
rather than the regulations in effect on the date of application for 
the change. To ensure that later regulations

[[Page 36256]]

are applied when appropriate, Sec. 21.101(c) contains language that 
allows the administrator ``to designate an amendment to the regulation 
incorporated by reference that applies to the change and any regulation 
that the Administrator finds is directly related, unless the 
Administrator also finds that compliance with that amendment or 
regulation would not contribute materially to the level of safety of 
the changed product or would be impractical.''
    Thus, as adopted, for the excepted aircraft the starting point for 
determining the applicable regulations will be the latest certification 
basis rather than those regulations in effect on the date of 
application for the change. In this case, the FAA would make the 
finding that applying later amendments is necessary. The later 
amendments would not be applied, however, if the Administrator also 
finds that one of the exceptions applies. This part of the rule, like 
other regulations, leaves the burden on the applicant to demonstrate 
that compliance with those later amendments would not contribute 
materially to the level of safety, or would be impractical. For 
example, the burden is on an applicant for a pilot certificate to 
provide the evidence on which the Administrator finds that he or she is 
qualified to hold a certificate.
    Historically FAA and its predecessor agencies have treated light 
airplanes and small non-turbine rotorcraft differently from other 
classes of aircraft. Aircraft of 6,000 pounds or less maximum weight 
and non-turbine rotorcraft of 3,000 pounds or less maximum weight are 
usually of less complex design than the larger aircraft. In addition 
design changes to these aircraft usually are of less complexity. 
Furthermore, the certification requirements for these aircraft are many 
times less complex than those for larger aircraft. Examples of this are 
simplified design load criteria and performance requirements.
    The exception in Sec. 21.101(c) is premised on the assumption that 
the lesser complexity of design, design changes, and requirements will 
allow the FAA Aircraft Certification Office (ACO) to more easily 
identify the current airworthiness standards appropriate for the areas 
of the product affected by the proposed change. Nonetheless, 
Sec. 21.101(c) also allows the applicant to submit data on which the 
ACO could decide to allow one or more of the exceptions to requiring 
the latest airworthiness standards.
    Most importantly, although the process for determining the 
appropriate level of safety for these aircraft and rotorcraft will be 
different from the more complex large aircraft, the final result should 
be the same. The level of safety for both types will be enhanced 
because the most appropriate airworthiness standards will be used.

Section 21.101(d)

    Section 21.101(d) (proposed Sec. 21.101(c)) retains the provisions 
of current Sec. 21.101(b)(2) concerning special conditions. This 
paragraph addresses novel or unusual design features where the 
Administrator finds that the regulations incorporated by reference in 
the type certificate do not provide adequate standards. For a product 
that has a novel or unusual design feature, the applicant must comply 
with the regulations in effect on the date of the application for the 
change and any necessary special conditions ``to provide a level of 
safety equal to that established by the regulations incorporated by 
reference in the type certificate for the product.'' For consistency 
with the other proposed changes to Sec. 21.101, this proposed paragraph 
stated that an applicant for a change must comply with any special 
conditions, and amendments to those special conditions, if any, that 
provide a level of safety equal to that established by the regulations 
in effect on the date of the application for the change.
    The provisions of current Sec. 21.101(c), concerning the 
replacement of reciprocating engines with turbopropeller engines, have 
been removed because a change of this nature would usually be 
considered a significant change, and compliance with the regulations in 
effect on the date of application of the change would, therefore, be 
required.
    Comments: CAA recommends that the words ``established by the 
regulations'' be replaced with the words ``intended by the 
regulations.''
    FAA Response: The phrase ``intended by the regulations'' is not 
appropriate rule language. Except for the change from paragraph (c) to 
paragraph (d) this section is adopted as proposed.

Section 21.101(e)

    Section 21.101(e) (proposed Sec. 21.101(d)) sets a limit of five 
years on an application for a change to a type certificate for a 
transport category aircraft, and sets a limit of three years on an 
application for a change to a type certificate for all other products. 
The durations for these amended or supplemental type certificate 
applications are the same as those for applications for the 
corresponding type certificates. If an application for a design change 
expires, an applicant may file a new application or apply for an 
extension of the original application as provided in Sec. 21.17(c) and 
(d).
    This section is adopted as proposed, except that paragraph (e)(2) 
has been clarified. New paragraph (e)(2) allows the applicant to select 
a new date. The new application date may not precede the date the 
change is approved by more than the time period established under 
paragraph (e). For example, a person applies for a change to a 
transport category airplane in 2000. In 2003, the applicant decides 
that the project cannot be completed by 2005 (the time period required 
by paragraph (e)). The applicant, however, decides that the project can 
be completed by 2007. Under paragraph (e)(2), the applicant may elect 
2002 (2007 minus 5 years equals 2002) as the new certification basis 
date.

Section 21.101(f)

    Section 21.101(f) (proposed Secs. 21.101(e)(1) and (2)) requires 
the certification basis for a change to a product certificated under 
predecessor regulations be established in the same manner as that for a 
change to a certification basis for a product certificated under parts 
23, 25, 27, 29, 31, 33, or 35.
    Changes to products type certificated under Secs. 21.21 and 21.29 
and changes to aircraft type certificated under Secs. 21.24, 21.25, 
21.27, as well as special classes of aircraft (where regulations from 
the airworthiness standards listed in Chapter 1 are a part of the 
certification basis) would be required to comply with the requirements 
of Sec. 21.101(a).
    Comments: Pratt & Whitney Canada states that neither the proposed 
Canadian regulation nor the related JAA NPA 21-7 contain requirements 
similar to this proposal and recommends that the FAA consider tasking 
ARAC to address this issue in the interest of harmonization, if a 
safety concern exists.
    Bombardier and Transport Canada believe extending the applicability 
of this requirement to restricted category aircraft (Sec. 21.25) would 
be contrary to the ARAC recommendation. Bombardier advises that the 
ARAC proposal excluded this category of aircraft because ``compliance 
with the `applicable' regulations (whether earlier or latest) was not 
required for the original model when justified with the regulating 
Authority.''
    The Aerospace Industries Association (AIA) asserts that 
Sec. 21.101(f) (proposed Sec. 21.101(e)) contains the same requirements 
as Sec. 21.101(a). AIA believes these sections ``make no exception for 
products originally certificated to regulations that existed

[[Page 36257]]

prior to the codification of the applicable part(s) of 14 CFR nor for 
products certificated as restricted, surplus military, or other unique 
types.'' AIA recommends this proposal be eliminated.
    Transport Canada recommends the paragraph be revised in a manner 
similar to proposed Sec. 21.101(a)(1), which specifically states ``each 
regulation that is applicable to the changed product.''
    FAA Response: The intent of proposed paragraph (e)(1) was to ensure 
that the predecessor regulations (former CAR's, etc.) would continue to 
be the starting basis for aircraft that were originally type 
certificated under earlier regulations. The recodification of the 
regulations did not remove airworthiness requirements under which 
products were type certificated. Therefore, the FAA agrees, in part, 
with AIA in that proposed paragraph (e)(1) is redundant. Proposed 
paragraph (e)(1) has not been adopted.
    However, Sec. 21.101(f)(proposed Sec. 21.101(e)(2)) is still needed 
to address aircraft type certificated under Secs. 21.24, 21.25, 21.27, 
and special classes of aircraft covered by Sec. 21.17(b). The 
airworthiness requirements applicable to the category of aircraft in 
effect on the date of the application for the change must include any 
airworthiness requirements that the Administrator finds to be 
appropriate for the type certification of the aircraft in accordance 
with those sections.
    The FAA has determined that some restricted category aircraft 
should comply with the requirements of this rulemaking action and the 
reference to Sec. 21.25 has been retained. Although Transport Canada 
has somewhat comparable ``restricted category'' provisions in their 
regulations, the JAA have no comparable provisions in their 
regulations. However, the FAA does certificate some restricted category 
aircraft using airworthiness standards and has determined that this 
requirement is needed to ensure that the aircraft certificated using 
regulations from parts 23, 25, 27, and 29 are included in the rule. The 
requirements of proposed Sec. 21.101(e)(2) have been revised and 
retained as Sec. 21.101(f) in the final rule. Due to the revision of 
Sec. 21.101(f), the language to which Transport Canada referred is no 
longer in the paragraph.

Section 21.115

    A type certificate holder may obtain approval for a change by 
amending the original type certificate under Sec. 21.101, or by 
obtaining a supplemental type certificate under Sec. 21.115. Other 
modifiers must obtain supplemental type certificates under Sec. 21.115. 
Because the provisions of Sec. 21.115 incorporate by reference the 
provisions of current Sec. 21.101(a) and (b), the provisions to amend 
the type certificate are essentially the same as the provisions for 
supplemental type certificates. To align the provisions of proposed 
changes to Sec. 21.101 and appropriate references to those changes in 
proposed Sec. 21.115, the paragraph designators (a) and (b) have been 
removed.
    By deleting the paragraph designators the FAA, in effect, proposed 
to require applicants for a supplemental type certificate to show that 
the modified product complies with the applicable regulations in effect 
on the date of the application for the STC is met.
    Comments: Virtually all of the commenters who commented on proposed 
Sec. 21.115 (including the oral comments from the in-service modifiers 
represented at the ARAC working group meetings) opposed this proposal 
and the substantive change proposed in Sec. 21.101(a) that requires 
that STC applicants make a finding of compliance with later applicable 
regulations. These commenters recommend no changes to the current 
requirements for an STC.
    FAA Response: As mentioned earlier under the discussions in 
Sec. 21.101(b), the FAA has provided an exception, in Sec. 21.101(c), 
for aircraft of 6,000 pounds or less maximum weight and non-turbine 
rotorcraft of 3,000 pounds or less maximum weight. The primary impact 
of this exception will be that the starting point for determining the 
applicable regulations for a changed product will continue to be the 
regulations incorporated by reference in the type certificate. The 
administrator may designate an amendment to the regulation incorporated 
by reference that applies to the change and any regulation that the 
Administrator finds is directly related, unless the Administrator also 
finds that compliance with that amendment or regulation would not 
contribute materially to the level of safety of the changed product or 
would be impractical.
    The exception applies to both amended and supplemental type 
certificates. This is because there is no legal difference between the 
number of products that can be modified using an amended type 
certificate versus using supplemental type certificates.

Section 25.2

    Current Sec. 25.2(c) incorporates by reference the provisions of 
current Secs. 21.101(a) and (b) concerning special retroactive 
requirements applicable to airplanes for which the regulations 
referenced in the type certificate predate subsequent amendments. 
Section 25.2(c) has been revised consistent with the changes to 
Sec. 21.101(a).
    Comments: Raytheon believes that Secs. 23.2, 27.2, and 29.2 should 
be amended to use the same language as Sec. 25.2.
    FAA Response: Current Secs. 23.2, 27.2, and 29.2 do not contain 
references to Sec. 21.101 no change is needed in these sections.

Paperwork Reduction Act

    This rule contains information collections that are subject to 
review by OMB under the Paperwork Reduction Act of 1995 (44 U.S.C. 
section 3507(d)). As previously stated, comments on the information 
were not invited at the proposed rule stage and therefore are being 
invited in this final rule document. The Department of Transportation 
has submitted the information requirements associated with this rule to 
the Office of Management and Budget (OMB) for its review. The title, 
description, and number of respondents, frequency of the collection, 
and estimate of the annual total reporting and recordkeeping burden are 
shown below.
    Title: Type Certification Procedures for Changed Products.
    Summary: This rule will constitute a reporting burden for 
applicants seeking an amended Type Certificate or a Supplemental Type 
Certificate for changes to aeronautical products. This rule requires 
applicants, with some exceptions, to comply with the latest regulations 
in effect on the date of the application for the design changes of 
aircraft, aircraft engines, and propellers. Compliance with the latest 
regulations will not be required:
    (1) if the change is not significant,
    (2) for those areas or components not affected by the change,
    (3) if such compliance would not contribute materially to the level 
of safety, or
    (4) if such compliance would be impractical.
    The applicant for most product changes now will incur an additional 
incremental administrative cost to document an analysis based on the 
latest certification basis and identify to the FAA those regulations 
they will or will not be complying with, based on the above four 
criteria. This analysis is part of the applicant's compliance review 
document.
    Applicants for product changes to non-turbine rotorcraft of 3,000 
pounds or less maximum weight, or other aircraft of 6,000 pounds or 
less would

[[Page 36258]]

not necessarily be required to perform this analysis. For such 
applications, the FAA would make an initial finding to require 
compliance with appropriate regulations. In that case, the applicant 
may decide to demonstrate compliance with those regulations, or may 
perform the analysis to demonstrate that compliance is not warranted.
    Use of: Because the rule shifts most of the responsibility from the 
FAA to the applicant to evaluate and demonstrate the applicable 
certification basis for product changes, the applicant must produce 
additional documentation when submitting an application to the FAA. The 
FAA will review all documentation provided with the amended TC or STC 
application and determine the certification basis for the changed 
product.
    Respondents: Any individual or business entity desiring to submit 
an application for a change to a TC or an STC; i.e., a current TC or 
STC holder, a manufacturer, or a modifier of aeronautical products.
    Frequency: Approximately 2,860 applications are received by the FAA 
annually. Of these, an average of 1,649 applications per year result in 
certificates being issued. The difference of 1,211 applications per 
year represents an estimate of the applications that are initiated but 
are never completed; e.g., withdrawn, canceled, or inactive. The sum of 
the 1,649 annual applications completed for certification, and 75 
percent of the 1,211 applications not completed, equals the 
administrative equivalent of 2,557 applications per year.
    Annual Burden Estimate: The full regulatory evaluation forecasts 
costs over a 20-year period, beginning in the year 2000, and assumes a 
3 percent annual increase in applications. For all applicants, the 
first year administrative costs of the rule are projected to equal 
$1,975,530 (1998 present value $1,725,504) divided by an overhead rate 
of $105 an hour, which equals 18,815 total annual hours.
    Using the 1500-employee size standard, small firms are projected to 
incur 56.6 percent of those costs, equaling $1,118,679 with a 1998 
present value of $977,098. The small business proportion of expected 
administrative costs (56.6 percent) is lower than the proportion of 
applications expected from small business (62.1 percent) because a 
significantly higher proportion of the administrative exceptions under 
the rule are projected for small business applicants. This 
disproportionate exception rate also causes the average increased 
administrative cost per small business application ($664) to be smaller 
than the average for all applicants ($728.)
    For the 20-year study period, incremental small business 
administrative costs under the rule are projected to total $30,059,321 
with a 1998 present value of $13,938,179.
    The agency solicits public comment on the information collection 
requirements to:
    (1) evaluate whether the collection of information is necessary for 
the proper performance of the functions of the agency, including 
whether the information will have practical utility;
    (2) evaluate the accuracy of the agency's estimate of the burden of 
the collection of information, including the validity of the 
methodology and assumptions used;
    (3) enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) minimize the burden of the collection of information on those 
who are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology, (e.g.. permitting electronic 
submission responses).
    Individuals and organizations may submit comments on this 
information collection requirements by August 7, 2000, and should 
direct them to the address listed in the ADDRESSES section of this 
document.
    Persons are not required to respond to a collection of information 
unless it displays a currently valid OMB control number. The burden 
associated with this rule has been submitted to OMB for review. The FAA 
will publish a notice in the Federal Register notifying the public of 
the approval number.
    Information collection requirements to other sections of part 21 
have previously been approved by the Office of Management and Budget 
(OMB) under the provisions of the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)), and have been assigned OMB Control Number 2120-0018.

International Compatibility

    In keeping with U.S. obligations under the Convention on 
International Civil Aviation, it is FAA policy to comply with 
International Civil Aviation Organization (ICAO) Standards and 
Recommended Practices to the maximum extent practicable.
    The FAA has reviewed corresponding ICAO Standards and Recommended 
Practices and Joint Aviation Airworthiness Authorities regulations, 
where they exist, and has identified and discussed similarities and 
differences in these proposed amendments and foreign regulations.
    The final rule results, primarily, from a recommendation harmonized 
with the aviation authorities of Canada and Europe. Transport Canada 
and the Joint Aviation Authorities have proposed similar corresponding 
changes to regulations governing type certification procedures for 
changed products.

Economic Evaluation, Regulatory Flexibility Determination, 
International Trade Impact Assessment, and Unfunded Mandates 
Assessment

    Proposed changes to Federal regulations must undergo several 
economic analyses. First, Executive Order 12866 directs that each 
Federal agency shall propose or adopt a regulation only upon a reasoned 
determination that the benefits of the intended regulation justify its 
costs. Second, the Regulatory Flexibility Act of 1980, as amended, 
requires agencies to analyze the economic impact of regulatory changes 
on small entities. Third, the Trade Agreements Act (19 U.S.C. 
Secs. 2531-2533) prohibits agencies from setting standards that create 
unnecessary obstacles to the foreign commerce of the U.S. And fourth, 
the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires 
agencies to prepare a written assessment of the costs, benefits and 
other effects of proposed or final rules that include a Federal mandate 
likely to result in the expenditure by State, local, or tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more annually (adjusted for inflation).
    In conducting these analyses, the FAA has determined that this 
rule: (1) would generate benefits that justify its costs; and is ``a 
significant regulatory action'' under Executive Order 12866 and under 
the regulatory policies and procedures of the Department of 
Transportation (44 FR 11034, February 26, 1979), (2) would have a 
significant economic impact on a substantial number of small entities; 
(3) would not constitute a barrier to international trade; and (4) does 
not contain a significant intergovernmental or private sector mandate. 
These analyses, available in the docket, are summarized below.

Response to Economic Comments

    Comment: The Air Transport Association (ATA) and a private aircraft 
owner both raise due process concerns based on the failure of the FAA 
to quantify the costs and benefits of the proposal in the Notice of 
Proposed Rulemaking (NPRM). While the NPRM stated that the FAA was not 
able to quantify the costs and benefits of this

[[Page 36259]]

proposal, the NPRM also stated that the benefits would exceed the 
costs. In previous rulemakings the FAA was able to justify part 25 
amendments applicable to new type designs, but failed to satisfy 
reasonable cost-benefit criteria essential to making them applicable to 
derivatives, new production units, or the existing fleet. Based on 
this, ATA doubts that the benefits of the proposal exceed the costs, 
and, in general, holds that government should not adopt regulations for 
which the costs and benefits have not been quantified.
    FAA Response: The FAA's assessment that the proposed rule would be 
cost-beneficial was, and is, based on the provision of the rule that, 
in the final instance, compliance with later regulations will not be 
required if such compliance ``. . .would not contribute materially to 
the level of safety of the changed product or would be impractical.'' 
In the discussion of this provision, the NPRM further explained that 
``compliance with a later amendment would be considered 'impractical' 
when the applicant can establish that the cost of the design change and 
related changes necessary to demonstrate compliance with the amendment 
would not be commensurate with the resultant safety benefit.''
    Executive Order 12866, which is the basis for federal regulatory 
evaluation, explicitly recognizes that costs and benefits may not 
always be quantifiable. The Order states that, ``costs and benefits 
shall be understood to include both quantifiable measures (to the 
fullest extent that these can be usefully estimated) and qualitative 
measures of costs and benefits that are difficult to quantify, but 
nevertheless essential to consider.''

Discussion of Costs and Benefits

    The costs imposed by the final rule will be incurred by future 
applicants for amended and supplemental type certificates for 
aeronautical products. Two categories of costs may be imposed: (1) 
administrative costs, and (2) the costs of compliance with later 
regulations.
    The final rule will require applicants to comply with the 
regulations in effect on the date of the application for the change, as 
compared to the latest certification basis of the product to be 
changed, unless one of several conditions is met. Compliance with the 
later set of regulations will not be required:
    (1) if the change is not significant,
    (2) for those areas or components not affected by the change,
    (3) if such compliance would not contribute materially to the level 
of safety of the changed product, or
    (4) if such compliance would be impractical; i.e., would result in 
costs that would not be commensurate with the safety benefit that would 
be derived.
    Applicants for changes to most products would incur the incremental 
administrative cost of evaluating and demonstrating to the FAA the 
applicability of these four conditions to their product changes. The 
final rule, unlike the proposed rule, would make an exception to this 
administrative responsibility for applicants for changes to either: (1) 
non-turbine rotorcraft of 3,000 pounds or less maximum weight, or (2) 
other aircraft of 6,000 pounds or less. For such applications, the FAA 
would maintain the administrative responsibility of demonstrating that 
the certification basis for a changed product should incorporate the 
latest airworthiness standards.

Survey Methodology

    The evaluation of this rule was based on a sample of records from 
the FAA's Aircraft Certification Office Subsystem (ACOS) database. The 
ACOS system is used to track FAA certification projects at the 
individual certification office level. All pertinent (amended and 
supplemental) certification actions, where the date of application was 
1994 or later, were selected and combined into a single database. That 
filter resulted in a set of 13,448 project records, from which, a 
random sample of 250 project records were selected for detailed review 
and analysis. These sample project records were then used to forecast 
the expected distribution of characteristics for future amended and 
supplemental certification actions under the final rule.
    The 250 sample project records were evaluated by a team of field-
experienced FAA certification employees. Based on the data provided for 
each project in the sample, the review team assessed the following five 
areas for each sample record:
    1. Categorized the number of employees in the firm submitting each 
application. This information was used to evaluate the potential 
effects of the rule on small entities.
    2. Assessed the weight and type of the affected aeronautical 
product in order to estimate the proportion of applications that would 
fall within the final rule's specified exceptions for certain small 
aircraft.
    3. Estimated the existing administrative effort for each 
application under current procedures.
    4. Estimated the incremental administrative work that would be 
caused by the final rule. The review team also estimated the additional 
administrative work for those applications that would actually be 
excepted by the rule's small-aircraft provision. These estimates were 
needed to measure the amount of relief that would be afforded by this 
exception.
    5. Estimated the proportional split between the certification 
projects that would and would not be required to meet later 
regulations. For those projects that would not be required to meet 
later requirements, the responses were used to measure the distribution 
of conditions that would lead to that determination. Conversely, for 
those projects that would be required to meet later regulations, these 
responses were used to categorize the relative cost impact of meeting 
those regulations.
    For 227 of the 250 sample project applications, the ACOS data 
system contained sufficient information for the FAA review team to 
estimate answers for the five-part evaluations described above. 
Insufficient data were available to assess the remaining 23 project 
records, which were removed and were not considered further.

Costs

    The following procedure was used to estimate the administrative 
costs of the rule. First, the sample data were tabulated to determine 
the proportional distributions of results for each item area in the 
sample. This distribution for the sample project applications was then 
expanded to represent the characteristics that would be expected for 
all affected applications in a year. The ACOS data show that an average 
of 2,860 applications for amended or supplemental type certificates are 
received into the system each year. Of these, an average of 1,649 
applications per year result in certificates being issued. The 
difference of 1,211 applications per year represents an estimate of the 
applications that are initiated but are never completed; e.g., 
withdrawn, canceled, or inactive.
    The regulatory evaluation assumes that the additional 
administrative efforts caused by the final rule would apply to all 
projects that are completed, and that 75 percent of that additional 
administrative effort would actually take place for the ``never 
completed'' projects. The sum of the 1,649 annual applications 
completed for certification, and 75 percent of the 1,211 applications 
not completed, equals the administrative equivalent of 2,557 
applications per year. The projected numbers of applications, by 
category,

[[Page 36260]]

were then computed by multiplying the percentage distributions of the 
sample data by this administrative equivalent of 2,557 applications per 
year.
    Next, the annual increased hours of administrative work that will 
be caused by the rule was computed by multiplying the matrix of 2,557 
applications by the respective average increases in administrative 
hours per application, as determined from the review team evaluations 
of Item 4. This methodology projects that the rule will impose a total 
additional 17,218 applicant hours of administrative work per year. By 
comparison, the rule's exception provision for small aircraft 
applications is projected to preclude an additional 3,985 hours of 
applicant administration from being imposed.
    The increased annual administrative costs of the rule were then 
computed by multiplying the incremental administrative hours, from 
above, by a unit cost factor of $105 per hour. This factor is intended 
to be a representative, fully burdened labor rate for the highest skill 
level necessary to make and support the determinations called for under 
the rule. These calculations project a base annual administrative 
burden of approximately $1.8 million.
    The administrative costs of the rule were then projected over a 20-
year study period. For computational simplicity, all administrative 
costs were assumed to begin in the year 2000, even though the effective 
date of the rule will vary by product type. The computations assumed an 
annual 3 percent increase in certification applications, and 
accordingly, a 3 percent annual increase in attributable costs. The 
initial year 2000 cost was computed from the $1.8 million base annual 
administrative burden described above and inflated at 3 percent 
annually from 1997 to the year 2000. These calculations predict that 
the 20-year administrative costs of the rule will total $53.1 million, 
with a 1998 present value of $24.6 million. Parallel calculations were 
made for the costs that will be excepted under the rule's provision for 
certain small aircraft. This exception will preclude an estimated $12.3 
million in applicant administrative costs over the study period, with a 
1998 present value of $5.7 million.
    In addition to the administrative costs detailed above, additional 
costs will be imposed by the rule's conditional requirements for 
compliance with later certification regulations. It is important to 
note that the final rule's exception for small aircraft only applies to 
the administrative burden of proof under the rule. Accordingly, 
applications that are excepted from the rule's incremental 
administrative costs may still incur the incremental costs of complying 
with later, and likely more stringent, regulations.
    A second important difference between the calculations for 
administrative costs versus compliance costs concerns the base number 
of affected applications. The previous computations of administrative 
costs included a proportion (75 percent) of those applications that 
were never finalized, and where no amended or supplemental type 
certificate was issued. By comparison, any additional compliance 
requirements resulting from this rule would only apply in situations 
where an amended or supplemental type certificate is actually issued. 
As such, the compliance cost calculations are based on the average 
1,649 amended and supplemental certificates issued each year, as 
reported from the ACOS data. Using this base number, the annual numbers 
of certifications that would be subject to the rule over the 20-year 
study period were forecast, based on a 3 percent growth rate.
    The expected annual numbers of certification projects that would 
have to meet later regulations were estimated from the sample results. 
Item 5 from the team evaluation areas assessed the simulated effect of 
the rule on the certification basis of each sample project. The 
percentage distribution of that assessment follows.

------------------------------------------------------------------------
                                                              Percent of
                                                               samples
------------------------------------------------------------------------
Rule would not invoke later regulations:
    Change would be not significant........................         49.3
    Change would not contribute materially to safety or              9.7
     would be impractical..................................
Rule would invoke later regulations:
    Compliance costs would increase less than 10%..........         36.1
    Compliance costs would increase 10%-25%................          3.5
    Compliance costs would increase over 25%...............          1.3
                                                            ------------
        Total..............................................        100.0
------------------------------------------------------------------------

    This regulatory evaluation uses the three compliance impact level 
percentages to project the annual numbers of applications where later 
regulations would be invoked and additional compliance costs could 
result. Separate estimates were made for each of the three ranges of 
compliance impact. This procedure projected that, in the first year, 
cost increases of less than 10 percent would result from applying later 
regulations to 651 certification projects. Similarly, 64 projects were 
projected to incur cost increases of 11 to 25 percent, and 24 projects 
would have cost increases of over 25 percent. Annual impact estimates 
were projected over the entire study period through the year 2019, 
again assuming a 3 percent growth.
    It would be informative to have more detailed compliance impact 
estimates than the broad categorizations of relative percentages that 
were possible using the sample review methodology employed in this 
evaluation. However, the scope of projects that will be affected by 
this rule is wide, and reliable measures of the sample project 
production levels were not available for this evaluation. Therefore, in 
an effort to provide useful information, without portraying a higher 
degree of confidence than is supportable, estimates were made of the 
future annual compliance cost impacts of the rule per assumed $100,000 
unit of project size. This assumed average project size is a direct 
factor to the resulting projected compliance costs, and alternate 
assumptions are readily calculable.
    While this analysis uses a compliance cost of $100,000 for a single 
project, the FAA believes there is a wide range of compliance costs. 
For example:
    1. A $100 thousand dollar project. An emergency medical service 
system for a helicopter over 3,000 pounds. This modification includes a 
litter/restraint system, medical equipment (oxygen, ventilator, air 
pump, defibrillator, etc.), and an auxiliary electrical system.
    2. A $20 to $50 thousand dollar project. An improved stainless 
steel exhaust system for a twin-engine general aviation aircraft.
    3. A $15 thousand dollar project. The purchase and installation of 
an avionics instrument system. For a simple sensitivity test, the 
compliance cost estimate is directly related to changes in the assumed 
$100,000 compliance cost per project. If, for example, the project cost 
for small business is better represented by $20,000, then the 
compliance cost estimates should be reduced by 80 percent.
    The unit-project-size cost estimates were computed as the product 
of: (1) the relevant number of annually affected projects described 
above, (2) an assumed median value for the percentage impact ranges at 
each of the three impact levels, and (3) the assumed $100,000 unit 
project size. For example, the year 2000 cost estimate for projects in 
the less-than-10-percent cost impact category was computed as the 
product of:

[[Page 36261]]

    (1) the projected 651 affected projects from Table 7,
    (2) an assumed mid-range cost impact of 5 percent, and
    (3) the assumed unit project level of $100,000.
    This subcalculation produces a cost impact estimate of $3,255,000 
for projects in the ``less-than-10-percent'' cost impact category in 
the year 2000, as shown in Table 8. When applied to all 3 cost impact 
categories, and summed, this methodology produces an annual compliance 
cost impact of $4.8 million in the year 2000. Total twenty-year 
compliance costs, at the $100,000 unit project level, are projected to 
equal $128.0 million, with a 1998 present value of $59.4 million.
    In summary, the 20-year administrative costs of the rule are 
projected to total $53.1 million, with a 1998 present value of $24.6 
million. Parallel compliance costs, assuming a $100,000 unit project 
level, equal $128.0 million, with a 1998 present value of $59.4 
million. An additional $12.3 million ($5.7 million, 1998 present value) 
in applicant administration costs will be averted by the small-aircraft 
exception provision in the rule.

Benefits

    The directly attributable benefit of this final rule is the 
augmented safety that will result in those cases where future changed 
products will be required to comply with later, more stringent 
airworthiness standards than those that would be required in the 
absence of this rule. These benefits cannot be accurately predicted and 
quantified, but the rule includes provisions to assure that any actions 
taken pursuant to it will be cost-beneficial.
    The benefits of amendments to the airworthiness standards are 
evaluated at the time of those amendments. Some amendments are based on 
the FAA's evaluation of accidents or incidents; other amendments are 
based on the FAA's evaluation of probable or likely safety problems 
that may not be attributable to a specific accident. The changed 
products rule is FAA's proactive approach to addressing safety issues 
before they arise. The FAA does not have to wait for an accident to 
justify a rule.
    As noted previously, the rule will require compliance with all 
later regulations where such compliance will contribute materially to 
the level of safety. The rule will not require compliance with later 
regulations: (1) if the change in the aeronautical product is not 
significant, (2) for those areas or components of the product not 
affected by the change, (3) if such compliance would not contribute 
materially to the level of safety of the changed product, (4) or in the 
final analysis, if such compliance would be impractical. Compliance 
with later regulations will be considered impractical if the applicant 
can show that such compliance would result in costs that are not 
consistent with the possible safety benefits. Since each action taken 
under the rule will be cost-beneficial, the FAA has determined that the 
benefits of the rule will justify its costs.

Smaller Aircraft Exception Provision

    The exception in Sec. 21.101 for non-turbine rotorcraft under 3000 
pounds and for other aircraft under 6000 pounds places the burden on 
the FAA to make an initial determination whether or not to require the 
applicant to demonstrate compliance with a later airworthiness 
standard. The certification basis for the change could be approved in 
several ways:
    (a) If the FAA determines that no later regulation is to be 
applied, the applicant would demonstrate compliance with the existing 
certification basis, and there would be no administrative or compliance 
costs associated with application of this changed products rule.
    (b) If the FAA determines that a later regulation is to be applied, 
the applicant can accept that determination, and, while there would be 
compliance costs associated with accepting the FAA determination, there 
would be no administrative costs.
    (c) If the FAA determines that a later regulation is to be applied, 
the applicant could submit a technical analysis to demonstrate that, 
for example, compliance with the later regulation would be impractical 
or would not contribute materially to the level of safety of the 
product. In that case--
    (1) If the FAA agrees with the applicant's technical analysis, the 
applicant would demonstrate compliance with the existing certification 
basis, and, while there would be no compliance costs, there would be 
administrative costs.
    (2) If the FAA does not agree with the applicant's technical 
analysis, the applicant would demonstrate compliance with the later 
regulation, and there would be resultant administrative and compliance 
costs.
    Thus, in practice, the total costs to applicants for changes to the 
smaller aircraft could be a combination of ``no costs'' (scenario 
``(a)'' above), compliance costs only (scenario ``(b)'' above), 
administrative costs only (scenario ``(c)(1)'' above), and compliance 
and administrative costs (scenario ``(c)(2)'' above). The calculations 
in this regulatory analysis are based on the assumption that, if the 
FAA determines that a later regulation should apply, the applicant will 
demonstrate compliance with the later regulation, and will not attempt 
to demonstrate that one of the exceptions in Sec. 21.101 applies, e.g., 
that compliance with the later regulation would be impractical or would 
not contribute materially to the level of safety.
    However, one needs to consider the following. The applicant will 
make their own educated determination as to the applicability of the 
later regulation, and will decide to accept compliance with that 
regulation only when they are relatively certain that the 
administrative costs of demonstrating that one of the Sec. 21.101 
exceptions applies and will exceed the costs of demonstrating 
compliance with the later regulation. Thus, this regulatory analysis 
somewhat over-estimates total compliance costs in that it assumes that 
applicants will always forego their opportunities to convince the FAA 
that compliance with the later regulation would be impractical or would 
not contribute materially to the level of safety. By the same token, 
that assumption results, somewhat, in an under-estimation of the total 
administrative costs. Only when an applicant has decided that 
compliance costs are likely to actually exceed administrative costs, 
will the applicant choose to expend the resources to make the 
``impracticality,'' ``contribution to safety,'' or other arguments. 
Furthermore, an applicant is more likely to choose to make those 
arguments when there is a persuasive technical foundation for them. 
Therefore, this regulatory analysis over-estimates compliance costs by 
including those costs that would tend to be avoided by the more 
efficient expenditure of administrative resources. And, by the same 
token, the administrative costs that are ``unaccounted for'' due to the 
above under-estimation are more likely to be spent in realistic efforts 
to avoid even higher compliance costs. The net effect is that this 
regulatory evaluation over-estimates total costs.

Regulatory Flexibility Analysis

    The Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612) 
establishes, ``as a principle of regulatory issuance that agencies 
shall endeavor, consistent with the objective of the rule and of 
applicable statutes, to fit regulatory and informational requirements 
to the scale of the business, organizations, and governmental 
jurisdictions subject to regulation.'' To achieve that principle,

[[Page 36262]]

the Act requires agencies to solicit and consider flexible regulatory 
proposals and to explain the rationale for their actions. The Act 
covers a wide range of small entities, including small businesses, not-
for-profit organizations, and small governmental jurisdictions.
    Agencies must perform a review to determine whether a proposed or 
final rule will have a significant economic impact on a substantial 
number of small entities. If the determination finds that it will, the 
agency must prepare a regulatory flexibility analysis (RFA) as 
described in the Act.
    However, if an agency determines that a proposed or final rule is 
not expected to have a significant economic impact on a substantial 
number of small entities, section 605(b) of the 1980 act provides that 
the head of the agency may so certify, and an RFA is not required. The 
certification must include a statement providing the factual basis for 
this determination, and the reasoning should be clear.
    Recently, the Office of Advocacy of the Small Business 
Administration (SBA) published new guidance for Federal agencies 
responding to the requirements of the Small Business Regulatory 
Enforcement Act of 1996. Following the SBA guidance, the FAA conducted 
the required review of this rule and determined that, based on the cost 
assumptions described above, it will have a significant impact on a 
substantial number of small entities. Accordingly, a full regulatory 
flexibility analysis was conducted and is summarized as follows.

1. A Description of The Reasons Why Action By The Agency Is Being 
Considered

    In recent years, a trend has developed toward fewer products that 
are of completely new designs, which would require new type 
certificates. Over a period of time, a series of changes to an original 
product may have been made so that the current model is considerably 
different from the original model. Although each changed product in 
such a series of changes may differ little from its immediate 
predecessor, the collective changes can result in a product with 
substantial differences from the original product.
    Another trend in manufacturing is to keep products in production 
over several decades. Some currently manufactured airplanes have 
evolved from airplane models originally type-certificated 25 years ago. 
This does not imply that those airplanes are unsafe, because they do, 
in practice, have features that address the intent of most of the 
current airworthiness standards. However, current procedural 
regulations (part 21) do not require that changed products demonstrate 
compliance with all current airworthiness standards.
    The FAA maintains that the issue should not be whether a product is 
produced under a new type certificate or an amended one, or changed 
under a supplemental type certificate. Nor should the certification 
basis of a changed product turn on the fact that the product is to be 
modified or initially operated by a small (as opposed to a large) 
entity. The issue is whether or not the level of safety of the product, 
embodied in the airworthiness standards it complies with, is as high as 
practical.

2. A Succinct Statement of The Objectives Of, and Legal Basis For, The 
Proposed Rule

    The objective of this rule is to enhance safety by applying the 
latest airworthiness standards, to the greatest extent practical, for 
the certification of significant design changes to aircraft, aircraft 
engines, and propellers.
    The legal basis for the rule derives from Title 49, U.S.C. 44701 
which authorizes the FAA Administrator to promote safety of flight of 
civil aircraft in air commerce by prescribing, in part, minimum 
standards governing the design and construction of aircraft, aircraft 
engines, and propellers, as may be required in the interest of safety. 
Under 49 U.S.C. Sec. 44704, the FAA may issue type certificates, 
including supplemental type certificates, for aircraft, aircraft 
engines, and propellers.

3. A Description of The Projected Reporting, Recordkeeping and Other 
Compliance Requirements of The Proposed Rule, Including an Estimate of 
The Classes or Types of Small Entities That Will Be Subject to The 
Requirement and The Type of Professional Skills Necessary For 
Preparation of The Report or Record

    As detailed previously in the regulatory evaluation, the 
requirements imposed by this rule will affect future applicants for 
amended and supplemental type certificates for changed aeronautical 
products. The rule will impose both administrative requirements (with 
certain exceptions) and compliance requirements. It will require 
applicants to comply with the regulations in effect on the date of the 
application for the change, as compared to the latest certification 
basis of the product to be changed, unless one of several conditions is 
met. Compliance with the later set of regulations will not be required: 
(1) if the change is not significant, (2) for those areas or components 
not affected by the change, (3) if such compliance would not contribute 
materially to the level of safety of the changed product, or (4) if 
such compliance would be impractical; i.e., would result in costs that 
would not be commensurate with the safety benefit that would be 
derived.
    Applicants for changes to most products would need to evaluate and 
demonstrate to the FAA the applicability of these four conditions to 
their product changes, if compliance to regulations other than the most 
current is to be required. The skill level necessary to make these 
determinations will vary widely with the scale and engineering 
complexity of the individual product change involved. In general, these 
skills would include a working knowledge of the pertinent aviation 
regulations, the ability to evaluate and approve technical data, and a 
combination of training and responsible experience in the field or 
fields of engineering pertinent to the product change. In assessing the 
administrative costs of this rule, the regulatory evaluation assumes a 
fully burdened labor rate of $105 per hour for the highest skill level 
necessary to make and support the determinations called for under the 
rule.

4. An Identification, to The Extent Practicable, of All Relevant 
Federal Rules That May Duplicate, Overlap, or Conflict With The Rule

    The FAA is unaware of any federal rules that would duplicate, 
overlap, or conflict with the final rule.

5. A Description and An Estimate of The Number of Small Entities To 
Which The Rule Will Apply

    This rule will apply to future applicants for amended and 
supplemental type certificates for changed aeronautical products. FAA 
regulations are typically directed toward some closely identified 
industry or occupation; such as domestic air carriers or private 
pilots. By comparison, the applicants under this rule are not uniquely 
defined, and may be found in a wide variety of industries. In assessing 
this rule, the FAA identified 63 industry groups in 19 different four-
digit standard industrial classifications (SIC) that would reasonably 
include applicants for certifications to changed aeronautical products. 
These industries are listed as Table 9 of the appendix to the full 
regulatory evaluation.
    The Small Business Administration (SBA) provides descriptive 
national data for the year 1995 on U.S. firms, aggregated at the four-
digit SIC level.

[[Page 36263]]

These data include the numbers of firms, numbers of establishments, 
employment, annual payroll, and estimated receipts by employment size 
of firm. Information for the 19 industry classifications identified 
under this rule were combined to produce the following distributions.

------------------------------------------------------------------------
                                                                Annual
                                                               receipts
               Number of  employees                 Percent      per
                                                   of firms    employee
                                                              ($1,000's)
------------------------------------------------------------------------
1--99............................................      83.2        148.0
100--499.........................................       8.0        163.9
500 or more......................................       8.8        207.6
                                                  ----------------------
    Total........................................     100.0   Avg: 200.1
------------------------------------------------------------------------

    The SBA also provides small business size standards for each 
industry. The 19 industry groups that could include firms affected 
under this rule fall into four separate SBA standards for small 
business definition: 500, 750, 1000, or 1500 employees. As part of the 
evaluation for this rule, the FAA analyzed the employment size of firms 
for a random sample of 227 supplemental and amended type certification 
projects. The size distribution of these samples is presented below.

------------------------------------------------------------------------
                                                    Percent   Cumulative
               Number of  employees                   of      percent of
                                                    samples    samples
------------------------------------------------------------------------
1--100...........................................      44.1         44.1
101--500.........................................      12.3         56.4
501--750.........................................       2.6         59.0
751--1000........................................       1.8         60.8
1001--1500.......................................       1.3         62.1
1501 or more.....................................      37.9        100.0
                                                  ----------------------
    Total........................................    100.00  ...........
------------------------------------------------------------------------

    As presented in the table, depending on which size standard is 
applied, between 56.4 percent to 62.1 percent of the changed-product 
applications that would be affected by this rule will be submitted by 
small businesses. To simplify discussion, the remainder of this 
analysis is based on the 62.1 percent proportion and uses the under 
1500-employee size standard. As estimated in the full regulatory 
evaluation, the FAA expects the administrative equivalent of 2,557 
applications will be submitted each year, and 1,588 of those would be 
from small firms.
    The final rule, unlike the original rule, includes an 
administrative exception for applications related to certain small 
aircraft. Based on the sample of projects that were analyzed for this 
rule, 16.7 percent of all applications would fall under this exception, 
and 97.4 percent of the excepted applications would be submitted by 
small firms. An estimated 417 of the total annual 1,588 small-business 
applications would qualify for this exception, and the remaining 1,171 
would not.
    In addition to the administrative requirements for applications 
that are submitted, the rule will also invoke certain regulatory 
compliance requirements for the proportion of applications that are 
completed and certificated. Some 1,649 of the total applications are 
completed annually as amended or supplemental type certificates and 
would be subject to the rule's compliance provisions. Of these, an 
estimated 1,024 will be from small firms.

Regulatory Flexibility Cost Analysis

    The full regulatory evaluation forecasted costs over a 20-year 
period, beginning in the year 2000, and assumed a three-percent annual 
increase in applications. For all applicants, the first year 
administrative costs of the rule are projected to equal $1,975,530 
(1998 present value $1,725,504). Using the 1500-employee size standard, 
small firms are projected to incur 56.6 percent of those costs, 
equaling $1,118,679 with a 1998 present value of $977,098. The small 
business proportion of expected administrative costs (56.6 percent) is 
lower than the proportion of applications expected from small business 
(62.1 percent) because a significantly higher proportion of the 
administrative exceptions under the rule are projected for small 
business applicants. This disproportionate exception rate also causes 
the average increased administrative cost per small business 
application ($664) \1\ to be smaller than the average for all 
applicants ($728.) For the 20-year study period, incremental small 
business administrative costs under the rule are projected to total 
$30,059,321 with a 1998 present value of $13,938,179.
---------------------------------------------------------------------------

    \1\ Note that these are average costs per application, not per 
affected application. Based on the sample, 36 percent of all small 
business applications would meet the ``small aircraft'' exception 
under the rule and incur no incremental administrative costs.
---------------------------------------------------------------------------

    The regulatory evaluation also details the incremental costs 
expected under the rule for compliance with later regulations. Based on 
the evaluation of sample applications, 48 percent of the future 
certifications from small business firms would be required to meet some 
measure of additional later regulations. This proportion is higher than 
the parallel figure of 41 per cent for applications from all firms.\2\ 
In turn, this higher incidence rate also produces higher small business 
costs per certification action if it is assumed that the scale and 
complexity of small business and large business certification projects 
are the same. In the absence of reliable project size estimates, the 
regulatory evaluation has employed a uniform $100,000 project size as a 
unit factor to facilitate decision-making. However, the FAA does not 
believe that the projects submitted by small and large businesses are 
typically equal in scale and complexity.
---------------------------------------------------------------------------

    \2\ Note that the ``small aircraft'' exception under the rule 
will not alter compliance decisions nor alleviate their costs.
---------------------------------------------------------------------------

    While this analysis uses a compliance cost of $100,000 for a single 
project, the FAA believes there is a wide range of compliance costs. 
For example:
    1. A $100 thousand dollar project. An emergency medical service 
system for a helicopter over 3,000 pounds. This modification includes a 
litter/restraint system, medical equipment (oxygen, ventilator, air 
pump, defibrillator, etc.), and an auxiliary electrical system.
    2. A $20 to $50 thousand dollar project. An improved stainless 
steel exhaust system for a twin-engine general aviation aircraft.
    3. A $15 thousand dollar project. The purchase and installation of 
an avionics instrument system. For a simple sensitivity test, the 
compliance cost estimate is directly related to changes in the assumed 
$100,000 compliance cost per project. If, for example, the project cost 
for small business is better represented by $20,000, then the 
compliance cost estimates should be reduced by 80 percent.
    With the above sensitivity test in mind and using the $100,000 
project size cost, small business applications are expected to incur a 
year 2000 compliance cost of $3,582,317 (with a 1998 present value of 
$3,128,934).\3\ This represents an average increase of $3,198 per 
project, assuming a unit $100,000 base project size.\4\ Over the 
twenty-year study period, small business compliance costs under this 
scenario are projected to total $96,006,280 (with a 1998 present value 
of $44,532,108).
---------------------------------------------------------------------------

    \3\ For computational simplicity, the regulatory evaluation 
overstates initial annual compliance costs by assuming that all such 
costs would occur in the year that the project is approved. In 
reality, they would occur over several years.
    \4\ Aircraft operators or modifiers typically do not amortize 
the incremental cost of $3,200 for a modification totaling $100,000 
or more.
---------------------------------------------------------------------------

Affordability Analysis

    If the assumed $100,000 unit of project size is also assumed to be 
the average size for a small-business project,

[[Page 36264]]

the increased administrative cost per project ($664) can be added to 
the increased compliance cost per project ($3,198) to provide an 
expected average increase of $3,862 per project. The relative effect of 
these costs per small firm is a function of: (1) the size (receipts) of 
that firm, and (2) the number of project applications that a firm 
submits/completes per year.\5\ The following table presents the average 
impact of the rule as a percentage of a firm's annual receipts, for 
various assumptions on firm size and annual number of projects. For 
example, a firm with 5 projects per year would incur additional costs 
of 5 times $3,862; or $19,310 for the year. If that firm employs 10 
people, with each employee producing an average $148,000 of receipts 
per year (from the ``annual receipts per employee'' factors reported 
above in paragraph 5) the firm's total receipts would equal $1.48 
million. For this example combination of employees and projects, the 
$19,310 one-year impact of the rule would equal 1.30 percent of the 
$1.48 million estimated annual receipts of the firm. As a matter of 
context, it should be noted that FAA analysis of the ACOS data shows 
that 52 percent of applications were submitted by firms that only 
submitted one application in that year.
---------------------------------------------------------------------------

    \5\ FAA analysis of the ACOS data shows that 52% of applications 
were submitted by firms that only submitted one application in that 
year.

        Average Impact of Rule as a Percentage of Annual Receipts
------------------------------------------------------------------------
                                                        Annual No. of
                                                          projects
                     Employees                     ---------------------
                                                       1        5     10
------------------------------------------------------------------------
10................................................    0.26%    1.30%  2.
                                                                      61
                                                                      %
100...............................................    0.02%    0.12%  0.
                                                                      24
                                                                      %
1000..............................................    0.00%    0.01%  0.
                                                                      02
                                                                      %
------------------------------------------------------------------------

Disproportionality Analysis

    As discussed in the cost and affordability analyses above, a higher 
proportion of total certification applications is received from small 
businesses (62.1 percent) than from large businesses (37.9 percent). 
This is not surprising given the relative proportions of numbers of 
small and large businesses. By comparison, the small business 
proportion of expected administrative costs (56.6 percent) will be 
lower than the proportion of applications expected from small 
businesses (62.1 percent) because a significantly higher proportion of 
the administrative exceptions under the rule are projected for small 
business applicants. By comparison, the sample survey assessment 
predicts that small business applicants will disproportionately incur 
the additional costs of complying with later regulations as a result of 
the rule. The sample survey predicts that the rule will require 48 
percent of small business applications, as compared to 29 percent of 
large business applications, to comply with later regulations.

Competitiveness Analysis

    As discussed above, it appears that there will be proportionally 
higher compliance costs imposed by the rule on small than on large 
businesses. This information is not sufficient, however, to determine 
the impact of the competitiveness of small business vis-a-vis large 
entities. There is a wide divergence in the characteristics and 
ultimate consumer of products. There is a fundamental difference among 
large, fixed-wing commercial aviation, general aviation, and 
rotorcraft. Also, the products that are produced by the companies that 
are subject to the rule are not homogeneous. The wide range of products 
that would be certificated under this rule includes major aircraft 
components such as wings, diversely unique avionics, and small 
subassemblies such as seat fasteners. Also, many of the larger 
companies in this field are assemblers of products that often are 
produced by small companies. As such, the large companies may be 
customers rather than competitors to the affected small companies.

Business Closure Analysis

    The FAA believes that the average impact of the rule gauged by the 
cost of the rule per year relative to an affected firm's average annual 
receipts is likely to be low. In cases where the potential costs would 
be prohibitive, firms may decide not to proceed with the intended 
change. This would prevent cash flow problems, losses, and business 
closure in the short run. However, a series of decisions not to certify 
new products could affect long run business viability. Based on the 
sample of 250 applications analyzed by the FAA, the agency believes 
that the vast majority of applications would not impose high enough 
compliance costs to threaten business closure of small business.

Description of Alternatives

    Three primary alternatives were considered in crafting this rule. 
The first would be to take no new rulemaking action and to retain the 
changed-product certification process as it now exists. The FAA opposes 
this alternative because it would not address the problem whereby a 
series of cumulative changes can result in a model that is 
substantially different from the original model, yet that product is 
not required to demonstrate compliance with all the recent 
airworthiness standards.
    The second evident alternative would be to retain the existing 
certification process for changes to small aircraft, since the bulk of 
these applications are submitted by small firms. Again, the FAA opposes 
this alternative since it would leave the existing problem for a 
segment of the industry and would create an unacceptable inequity 
across aircraft model sizes.
    As an alternative to full exclusion from the rule, the FAA has 
included a small-aircraft exception for the administrative 
responsibilities of the final rule, but not for its compliance 
provisions. This exception was specifically added to address small 
business concerns that arose from the proposed rule. The exception will 
apply to applicants for changes to either: (1) non-turbine rotorcraft 
of 3,000 pounds or less maximum weight, or (2) other aircraft of 6,000 
pounds or less. For changes to such products, the FAA (i.e., the 
Aircraft Certification Office (ACO) processing the application) may 
make an initial determination that one or more later airworthiness 
standards should be part of the certification basis of the changed 
product. If the ACO makes that determination, the applicant may submit 
technical analyses to convince the ACO that compliance with the later 
regulation(s) would be impractical or would not contribute materially 
to the level of safety of the product. However, as discussed previously 
in this summary, the regulatory analysis makes the conservative 
assumption that the applicant will forgo the administrative costs of 
those technical analyses and incur the compliance costs (estimated to 
be twice that of administrative costs) attributable to the later 
regulation(s).
    Based on the sample survey, 16.7 percent of all project 
applications would qualify for this exception, and 97.4 percent of the 
excepted applications would come from small firms (fewer than 1500 
employees). In point of fact, 81.6 percent of the exceptions would go 
to firms with less than 100 employees.
    The value of applicant costs that will be averted by the small-
aircraft exception is detailed in the full regulatory evaluation. The 
expected value of all exceptions in the first year of the rule (year 
2000) is calculated at $457,224. Over the 20-year study period, the 
value of exceptions totals to $12.3 million with a 1998 present value 
of $5.7 million. Again, over 97 percent of this relief will go to small 
businesses.

[[Page 36265]]

The small-aircraft exception provision is predicted to reduce the 
rule's administrative burden on small businesses by 27.6 percent from 
the level that would exist without it. The total small business cost 
burden (administrative and compliance costs) will be 6 percent lower as 
a result of this exception.
    Other alternatives were considered, but were determined not to be 
practicable. These included (1) requiring applicants for changes to 
comply with the latest regulations, with no exceptions; and (2) 
requiring a complete recertification at certain intervals (10 years).

Compliance Assistance

    The FAA will issue an advisory circular based on this rulemaking. 
The circular will provide examples and guidance for determining the 
certification basis of changed aeronautical products. Small businesses 
and other applicants may follow this guidance in developing their own 
arguments as to the appropriate certification basis of their changed 
products. The circular will be available from the FAA's aircraft 
certification offices and through the FAA website.
    The agency intends to use a variety of additional mechanisms to 
inform applicants and industry trade associations of the rule change 
and to explain the new procedures. The FAA will serve copies of this 
final rule document, with the Regulatory Evaluation Summary, on trade 
associations that represent most of the small entities affected by this 
rule. The FAA also will utilize its directorate newsletters to inform 
industry. The agency will present information on the new rule at 
industry and FAA designee meetings. In addition, a training video and 
instructional materials are being developed that will introduce the new 
rule and explain the respective roles of applicants and FAA personnel. 
These products will also be available to small businesses through the 
aircraft certification offices.

International Trade Impact Assessment

    The provisions of this rule promote international trade for U.S. 
firms doing business in foreign countries and foreign firms doing 
business in the United States. The final rule results, primarily, from 
a recommendation harmonized with the aviation authorities of Canada and 
Europe. Transport Canada and the Joint Aviation Authorities have 
proposed similar corresponding changes to regulations governing type 
certification procedures for changed products.
    The Trade Agreements Act (19 U.S.C. 2531-2533) prohibits agencies 
from setting standards that create unnecessary obstacles to the foreign 
commerce of the U.S. This final rule imposes additional safety 
requirements for aviation products that are registered in the U.S. 
Thus, this final rule does not create any unnecessary obstacles to the 
foreign commerce of the U.S.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (the Act), 
codified as 2 U.S.C. 1501-1571, requires each Federal agency, to the 
extent permitted by law, to prepare a written assessment of the effects 
of any Federal mandate in a proposed or final agency rule that may 
result in expenditures by State, local, and tribal governments, in the 
aggregate, or by the private sector of $100 million or more (adjusted 
annually for inflation) in any one year.
    This rule does not meet the thresholds of the Act. Therefore, the 
requirements of Title II of the Act do not apply.

Executive Order 13132, Federalism

    The FAA has analyzed this proposed rule under the principles and 
criteria of Executive Order 13132, Federalism. We determined that this 
action would not have a substantial direct effect on the States, on the 
relationship between the national Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. Therefore, we determined that this notice does not have 
federalism implications.

Environmental Analysis

    FAA Order 1050.1D defines FAA actions that may be categorically 
excluded from preparation of a National Environmental Policy Act (NEPA) 
environmental assessment or environmental impact statement. In 
accordance with FAA Order 1050.1D, appendix 4, paragraph 4(j), this 
rulemaking action qualifies for a categorical exclusion.

Energy Impact

    The energy impact of the rule has been assessed in accordance with 
the Energy Policy and Conservation Act (EPCA) Pub. L. 94-163, as 
amended (42 U.S.C. 6362). It has been determined that it is not a major 
regulatory action under the provisions of the EPCA.

List of Subjects

14 CFR Part 11

    Administrative practices and procedures reporting

14 CFR Part 21

    Aircraft, Aviation safety, Safety, Type certification

14 CFR Part 25

    Aircraft, Aviation safety, Safety, Type certification

Adoption of Amendments

    Accordingly, the FAA amends parts 11, 21, and 25, Chapter 1 of 
Title 14, Code of Federal Regulations, as follows:

PART 11--GENERAL RULEMAKING PROCEDURES

    1. The authority citation for part 11 continues to read as follows:

    Authority: 49 U.S.C. 106(g), 40101, 40103, 40105, 40109, 40113, 
44110, 44502, 44701-44702, 44711, 46102.

    2. Section 11.11 is amended by removing the first sentence and 
adding two sentences, in its place, to read as follows:


Sec. 11.11  Docket.

    Official FAA records relating to rulemaking actions are maintained 
in current docket form in the Office of the Chief Counsel. These 
records include: Proposals, notices of proposed rulemaking, written 
material received in response to notices, petitions for rulemaking and 
exemptions, written material received in response to summaries of 
petitions for rulemaking and exemptions, petitions for rehearing or 
reconsideration, petitions for modification or revocation, notices 
denying petitions for rulemaking, notices granting or denying 
exemptions, summaries required to be published under Sec. 11.27, 
special conditions required as prescribed under Secs. 21.16 or 
21.101(d) of this chapter, written material received in response to 
published special conditions, reports of proceedings conducted under 
Sec. 11.47, notices denying proposals, and final rules or orders. * * *

PART 21--CERTIFICATION PROCEDURES FOR PRODUCTS AND PARTS

    3. The authority citation for part 21 continues to read as follows:

    Authority: 42 U.S.C. 7572; 49 U.S.C. 106(g), 40105, 40113, 
44701-44702, 44707, 44709, 44711, 44713, 44715, 45303.

    4. Section 21.19 is revised to read as follows:


Sec. 21.19  Changes requiring a new type certificate.

    Each person who proposes to change a product must apply for a new 
type certificate if the Administrator finds that

[[Page 36266]]

the proposed change in design, power, thrust, or weight is so extensive 
that a substantially complete investigation of compliance with the 
applicable regulations is required.

    5. Section 21.101 is revised to read as follows:


Sec. 21.101  Designation of applicable regulations.

    (a) An applicant for a change to a type certificate must show that 
the changed product complies with the airworthiness requirements 
applicable to the category of the product in effect on the date of the 
application for the change and with parts 34 and 36 of this chapter. 
Exceptions are detailed in paragraphs (b) and (c) of this section.
    (b) If paragraphs (b)(1), (2), or (3) of this section apply, an 
applicant may show that the changed product complies with an earlier 
amendment of a regulation required by paragraph (a) of this section, 
and of any other regulation the Administrator finds is directly 
related. However, the earlier amended regulation may not precede either 
the corresponding regulation incorporated by reference in the type 
certificate, or any regulation in Secs. 23.2, 25.2, 27.2, or 29.2 of 
this chapter that is related to the change. The applicant may show 
compliance with an earlier amendment of a regulation for any of the 
following:
    (1) A change that the Administrator finds not to be significant. In 
determining whether a specific change is significant, the Administrator 
considers the change in context with all previous relevant design 
changes and all related revisions to the applicable regulations 
incorporated in the type certificate for the product. Changes that meet 
one of the following criteria are automatically considered significant:
    (i) The general configuration or the principles of construction are 
not retained.
    (ii) The assumptions used for certification of the product to be 
changed do not remain valid.
    (2) Each area, system, component, equipment, or appliance that the 
Administrator finds is not affected by the change.
    (3) Each area, system, component, equipment, or appliance that is 
affected by the change, for which the Administrator finds that 
compliance with a regulation described in paragraph (a) of this section 
would not contribute materially to the level of safety of the changed 
product or would be impractical.
    (c) An applicant for a change to an aircraft (other than a 
rotorcraft) of 6,000 pounds or less maximum weight, or to a non-turbine 
rotorcraft of 3,000 pounds or less maximum weight may show that the 
changed product complies with the regulations incorporated by reference 
in the type certificate. However, if the Administrator finds that the 
change is significant in an area, the Administrator may designate 
compliance with an amendment to the regulation incorporated by 
reference in the type certificate that applies to the change and any 
regulation that the Administrator finds is directly related, unless the 
Administrator also finds that compliance with that amendment or 
regulation would not contribute materially to the level of safety of 
the changed product or would be impractical.
    (d) If the Administrator finds that the regulations in effect on 
the date of the application for the change do not provide adequate 
standards with respect to the proposed change because of a novel or 
unusual design feature, the applicant must also comply with special 
conditions, and amendments to those special conditions, prescribed 
under the provisions of Sec. 21.16, to provide a level of safety equal 
to that established by the regulations in effect on the date of the 
application for the change.
    (e) An application for a change to a type certificate for a 
transport category aircraft is effective for 5 years, and an 
application for a change to any other type certificate is effective for 
3 years. If the change has not been approved, or if it is clear that it 
will not be approved under the time limit established under this 
paragraph, the applicant may do either of the following:
    (1) File a new application for a change to the type certificate and 
comply with all the provisions of paragraph (a) of this section 
applicable to an original application for a change.
    (2) File for an extension of the original application and comply 
with the provisions of paragraph (a) of this section. The applicant 
must then select a new application date. The new application date may 
not precede the date the change is approved by more than the time 
period established under this paragraph (e).
    (f) For aircraft certificated under Secs. 21.17(b), 21.24, 21.25, 
and 21.27 the airworthiness requirements applicable to the category of 
the product in effect on the date of the application for the change 
include each airworthiness requirement that the Administrator finds to 
be appropriate for the type certification of the aircraft in accordance 
with those sections.

    6. Section 21.115 is amended by revising paragraph (a) to read as 
follows:


Sec. 21.115  Applicable requirements.

    (a) Each applicant for a supplemental type certificate must show 
that the altered product meets applicable requirements specified in 
Sec. 21.101 and, in the case of an acoustical change described in 
Sec. 21.93(b), show compliance with the applicable noise requirements 
of part 36 of this chapter and, in the case of an emissions change 
described in Sec. 21.93(c), show compliance with the applicable fuel 
venting and exhaust emissions requirements of part 34 of this chapter.
* * * * *

PART 25--AIRWORTHINESS STANDARDS: TRANSPORT CATEGORY AIRPLANES

    7. The authority citation for part 25 continues to read as follows:

    Authority: 49 U.S.C. 106(g), 40113, 44701-44702, 44704.

    8. Section 25.2 is amended by revising paragraph (c) to read as 
follows:


Sec. 25.2  Special retroactive requirements.

* * * * *
    (c) Compliance with subsequent revisions to the sections specified 
in paragraph (a) or (b) of this section may be elected or may be 
required in accordance with Sec. 21.101(a) of this chapter.

    Issued in Washington, DC, on May 31, 2000.
Jane F. Garvey,
Administrator.
[FR Doc. 00-14052 Filed 6-2-00; 10:13 am]
BILLING CODE 4910-13-P


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