Document ID: FAA-2003-15062-0033
Agency: faa
Document Type: Rule
Title: U.S. DOT/FAA - Final Rule - Regulatory Evaluation, Final Regulatory Flexibility Determination, International Trade Impact Assessment, and Unfunded Mandates Assessment
Posted Date: 2005-09-21T04:00Z

U.S. Department of

Transportation

FEDERAL AVIATION

ADMINISTRATION

REGULATORY EVALUATION, FINAL REGULATORY FLEXIBILITY DETERMINATION,
INTERNATIONAL TRADE IMPACT ASSESSMENT, AND UNFUNDED MANDATES ASSESSMENT

FALSE AND MISLEADING STATEMENTS REGARDING AIRCRAFT PARTS

Final Rule

Office of Aviation Policy and Plans

Operations Regulatory Analysis Branch, APO-310

Reviewed by Thomas C. Smith

March 2004

TABLE OF CONTENTS

	SECTION	PAGE NO.

	EXECUTIVE SUMMARY CHECKLIST	i

I.	INTRODUCTION & BACKGROUND	1

II.	FINAL RULE	3

III.	BENEFITS AND COSTS	4

	

	A. Assumptions	4

	

	B. Benefits	5

	

	C. Costs	5

	

	D. Conclusion	6

IV.	FINAL REGULATORY FLEXIBILITY DETERMINATION	6

V.	INTERNATIONAL TRADE IMPACT ASSESSMENT	7

VI.	UNFUNDED MANDATES ASSESSMENT	8



EXECUTIVE SUMMARY CHECKLIST

This final rule will establish rules related to false and misleading
statements regarding type-certificated aircraft, products, parts and
materials that may be used on type-certificated aircraft.  The primary
intent of this final rule is to prevent entities from misrepresenting
items as suitable for use on type certificated aircraft when these items
may not be suitable.

Total Costs and Benefits of this Rulemaking

The estimated quantifiable net cost of this rulemaking is $1.1 million
($0.8 million, discounted) over the next ten years.  The benefits of
this rulemaking are unquantifiable and cannot be estimated.

 

Who is Potentially Affected by this Rulemaking

This rulemaking affects anyone engaged in aviation-related activities,
such as manufacturers, repair stations and mechanics, air carriers or
other aircraft operators, including part distributors and part brokers.

Our Cost Assumptions and Sources of Information

Discount rate – 7%

Period of analysis – 2004 – 2013

Monetary values expressed in 2003 dollars

Loaded wage rate of an FG-13 Step 5 - $47.64

Alternatives We Considered

No alternatives were considered in this rulemaking analysis.

Benefits of this Rulemaking

Lack of relevant data prevents the FAA from quantifying the benefit
analysis.  These unquantifiable benefits of the rule are enhanced safety
to the aviation community and flying public by ensuring that aircraft
owners, aircraft operators and persons who maintain aircraft have
factual information on which to determine whether a part may be used in
a given civil aircraft.

Costs of this Rulemaking

The FAA will incur costs of $1.1 million ($0.8 million, discounted), and
the entities affected by this rulemaking will not incur any costs.

Changes from the NPRM to the Final Rule

The FAA did not receive any comments that either questioned our
analysis, or provided suggestions to consider altering our initial
analysis.  The only changes made in the analysis was that the loaded
wage rate of a FG-13, step 5 employee was increased from $40.16 to
$47.64.

Final Regulatory Flexibility Determination

Pursuant to the Regulatory Flexibility Act, 5 U.S.C. 605(b), the Federal
Aviation Administration has determined that this final rule will not
have a significant economic impact on a substantial number of small
entities, due to the no cost impact on those entities affected by this
rulemaking.

International Trade Impact Assessment

This rule affects entities that advertise and operate within the United
States, and due to the rule’s lack of compliance costs, this rule will
not have an impact on international trade.

Unfunded Mandates Assessment

This rulemaking does not impose any unfunded mandates on any State,
local, or tribal governments.

I.	INTRODUCTION AND BACKGROUND

The final rule will provide assurance that aircraft owners and
operators, as well as those who maintain aircraft, have truthful
information on which to determine whether any products, parts,
appliances and materials can be used safely on type certificated
products.  The FAA is concerned that the quality and condition of some
products, parts, appliances, and materials described in various records
has lead individuals to install these items under the impression that
they were suitable for a particular use when they were not.

 

Section 43.13 of the Federal Aviation Regulations requires any person
performing maintenance, preventive maintenance, or alterations to use
materials of such quality that the aircraft, airframe, aircraft engine,
propeller or appliance after the maintenance is at least equal quality
to its original condition or properly altered condition.  Persons are
required to use replacement products, parts, appliances and materials
that will allow them to return the aircraft to service in an airworthy
condition.

Considering that a product, part, appliance, or material’s
airworthiness cannot always be determined by visually inspecting it, an
installer must rely on information provided by the part distributor to
determine its airworthiness.  Most products, parts, appliances, and
materials in the aviation system are of the quality and condition
described in their accompanying records.  Unfortunately, false or
misleading statements in advertisements and other records have caused
some installers to install a product, part, appliance, or material on an
aircraft believing it was suitable for a particular use, when it was not
suitable.  

For aircraft, the airworthiness certificate and the maintenance records
for the airframe and power plant are necessary documents.  For
airframes, engines, propellers, appliances, other parts, and materials,
a number of recorded items must be reviewed.  For instance, the part
number is important, and it is critical to know whether the part was
produced by an FAA production approval holder (PAH).  For example, if a
part has a specific useful life, or shelf life, then it is essential to
know time in service or time since manufacture.  For a used part, it is
important to know what maintenance has been performed on the part, who
performed the maintenance, and whether an appropriately certificated
person has approved the part for return to service.  This information is
needed to determine whether the part could be properly used in a given
application, and whether additional service is required on the part
before it is installed.

There are numerous methods used to verify who handled the part, how the
part was handled, and whether the part has been repaired according to
the procedures specified in the manufacturer’s maintenance manual.  On
receipt of the part, the installer must make sure that the part is
indeed appropriate for the intended use.  Many parts are marked with
some of the required information.  However, markings do not contain
information regarding the parts time in service, overhaul, or repair
history.  Additional information may be on FAA Form 8130-3
(Airworthiness Approval Tag), for example.  In addition, information may
come from a shipping paper, invoice, maintenance log, or other document
indicating the manufacturer, part number, time in service, or other
information.

Additionally, people who manufacture aircraft, airframes, aircraft
engines, appliances, and other aircraft parts must use materials and
parts that would allow them to produce a product that meets the approved
design standard.  They obtain materials and parts from several sources. 
Producers have procedures in place to assure that they are using quality
parts, but they too must rely on representations made by others
regarding the parts and materials.

The FAA opened and investigated 3,023 cases of suspected unapproved
parts from 1994 through 2003.  The number of cases opened during this
ten-year period range from a low of 220 in 2002, to a high of 411 in
1994, as detailed in the table below.

Year	Cases

1994	411

1995	317

1996	294

1997	329

1998	321

1999	349

2000	262

2001	274

2002	220

2003	246

Total	3023

Source: DOT, FAA, AVR-20

One case was an advertisement for a high-tech metal treatment.  The
advertisement stated that it has been “FAA Accepted Since 1979.”  It
was unclear from reading this advertisement what FAA accepted means. 
However, one could be led to believe that the above metal treatment had
been FAA approved when it had not.

II.	Final Rule

Considering that the additional rules would not fit well within any
existing CFR part, the FAA will create a new part 3.  Part 3 will
contain rules that apply broadly and address the applicability (§ 3.1)
and false and misleading statements regarding aircraft parts (§ 3.5).

Section 3.1 (a) applies to persons engaged in aviation-related
activities, such as manufacturers, repair stations and mechanics, air
carriers or other aircraft operators, as set forth in this part, who
makes a record about a type certificated product, and a product, part,
appliance and material that may be used on a type certificated product. 
This rule will also apply to part distributors and part brokers, who are
not directly regulated by the FAA.

Section 3.1 (b) defines the terms, product and record, used in part 3 of
this final rule.  Product is defined as an aircraft, aircraft engine, or
aircraft propeller.  Record is defined as any writing, drawing, map,
recording, tape, film, photograph or other document, which preserves
information in any format (i.e., audio, visual, electronic).

Section 3.5(a) sets forth the restriction against making fraudulent or
intentionally false statements in an original record, or reproduced
record, with respect to the acceptability and installation of any
product, part, appliance or material on a type-certificated product.

Section 3.5(b) sets forth the prohibition of making misleading
statements in a record about the airworthiness of a product, or that a
product, part, appliance or material may be installed on a
type-certificated product.

Section 3.5(c) allows the Administrator to inspect the product, part,
appliance or material, and to inspect and copy records relating to the
source and acceptability of the product, part, appliance or material.

III.	BENEFITS AND COSTS

A. Assumptions

All monetary values are expressed in 2003 dollars

Costs are discounted at 7% as mandated by the Office of Management and
Budget

Costs are projected for the next ten years

This rule will be effective in 2004

B.	Benefits

The benefits of this rule are enhanced safety to the aviation community
and flying public by ensuring that aircraft owners, aircraft operators
and persons who maintain aircraft have factual information on which to
determine whether a product, part, appliance, or material may be used in
a given civil aircraft.  Reducing the likelihood that an unapproved
product, part, appliance, or material is installed would reduce the
potential for an accident or an incident due to a mechanical or
structural failure caused by the installation of any of the above
unapproved items.  It is difficult to establish that an unapproved part
was installed on an aircraft because of a false or misleading statement,
and that part caused an accident.  Although the FAA has not been able to
delineate this clear chain of events, the FAA has documented cases of
fatal aircraft accidents where unapproved items have been installed on
the subject aircraft.  The FAA believes that these unapproved items may
have been installed due to false or misleading statements.  Unapproved
items that have been installed include faulty fuel filters and fuel
lines, substandard bushings on electric fuel booster pumps, a
counterfeit propeller pitch control cam, and counterfeit landing-gear
components.  This final rule will reduce the number of these
occurrences.

Enhanced safety will be achieved because this rulemaking will (1) fill
in gaps in the legal and regulatory structure, to extend the prohibition
on fraudulent or intentionally false statements beyond those now covered
by Title 14, Code of Federal Regulations (14 CFR) part 21 and part 43;
(2) provide a civil remedy for some fraudulent and intentionally false
statements; and (3) provide for investigation of representations made
regarding the quality of aircraft parts.

C.	Costs

For most dealers and most transactions, there will not be any additional
costs associated as a result of this final rule because most dealers are
marketing legitimately approved parts and can present appropriate
records verifying their claims.  However, as documented by the cases
under review by the FAA, some entities have made false and misleading
statements regarding aircraft products, parts, appliances, and material,
and these entities would be affected by this final rule.  They will have
to revise their advertisements, paperwork, etc.  However, these affected
entities should make the necessary changes as they routinely update
their paperwork and/or the products they sell.  These changes are
considered part of the ordinary cost of doing business, and therefore,
the FAA expects that these parties would incur few additional costs as a
result of its implementation.

The number of cases reported to the FAA on suspected unapproved parts is
likely to increase as a result of this rulemaking.  The FAA estimates
that there could be as many as 30 additional cases annually,
approximately a ten percent increase, divided equally among cases
involve aircraft certification, and flight standard.  On average, the
FAA spends about 80 hours on each case involving suspected unapproved
parts.  This 80 hours includes follow-up and coordination.  The majority
of the individuals working on the cases are FG-13’s and are assumed to
be Step 5 and, in this analysis.  Therefore, the added annual cost to
the agency for these cases would be approximately $114,710 per year, or
$805,657, discounted over the next ten years.

D.	Conclusion

Based upon the low compliance cost coupled with the potential safety
benefits, the FAA concludes that the final rule is cost-beneficial.

IV.	FINAL REGULATORY FLEXIBILITY DETERMINATION

The Regulatory Flexibility Act of 1980 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 principal, 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 is 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.

This final rule will establish rules related to false and misleading
statements regarding products, parts and materials that may be used on
type-certificated aircraft.  For the entities affected by this final
rule, the FAA expects the annualized compliance costs to be minimal. 
Therefore, these small entities should incur only minimal additional
costs as a result of the final rule.  Accordingly, pursuant to the
Regulatory Flexibility Act, 5 U.S.C. 605(b), the Federal Aviation
Administration certifies that this final rule will not have a
significant economic impact on a substantial number of small entities.

V.	INTERNATIONAL TRADE IMPACT ASSESSMENT

The Trade Agreement Act of 1979 prohibits Federal agencies from engaging
in any standards or related activities that create unnecessary obstacles
to the foreign commerce of the United States. Legitimate domestic
objectives, such as safety, are not considered unnecessary obstacles. 
The statute also requires consideration of international standards and
where appropriate, that they be the basis for U.S. standards.  

The final rule will not affect trade opportunities for U.S. firms doing
business overseas or for foreign firms doing business in the United
States.

VI.	UNFUNDED MANDATES ASSESSMENT

Title II of the Unfunded Mandates Reform Act of 1995 (the Act), enacted
as Public Law 0104-4 on March 22, 1995, 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 the expenditure of $100 million or more (when adjusted
annually for inflation) in any one year by State, local, and tribal
governments in the aggregate, or by the private sector.  Section 204(a)
of the Act, 2 U.S.C. 1534(a), requires the Federal agency to develop an
effective process to permit timely input by elected officers (or their
designees) of State, local, and tribal governments on a proposed
“significant intergovernmental mandate.”  A “significant
intergovernmental mandate” under the Act is any provision in a Federal
agency regulation that will impose an enforceable duty upon State,
local, and tribal governments in the aggregate of $100 million (adjusted
annually for inflation) in any one year.  Section 203 of the Act, 2
U.S.C. 1533, which supplements section 204(a), provides that, before
establishing any regulatory requirements that might significantly or
uniquely affect small governments, the agency shall have developed a
plan, which, among other things, must provide for notice to potentially
affected small governments, if any, and for a meaningful and timely
opportunity for these small governments to provide input in the
development of regulatory proposals.

This final rule does not contain any Federal intergovernmental or
private sector mandates.  Therefore, the requirements of Title II of the
Unfunded Mandates Reform Act of 1995 do not apply.

 $114,710 = 80 hours x 30 additional cases x $47.80/hour.  The loaded
wage rate for a FG-13, step 5 is calculated by dividing their annual
salary of $75,059 by 2,080 work hours to establish their hourly wage
rate of $36.09.  This wage rate is then multiplied by the load factor of
32.45% and added to their nominal wage rate to equal $47.80.

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