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ASA Member Bulletin - Nov 2018 - Brexit is Coming!

Brexit – the withdrawal of the United Kingdom from the European Union – will occur at 11 pm on Friday, March 29, 2019 (known as the withdrawal date). In the past few weeks, we’ve met with representatives from the UK CAA, EASA and the FAA.  We’ve had a chance to talk about post-Brexit expectations. It is clear that there are still a lot of unknowns.

One of the most significant unknowns revolves around the uncertainty in the future of UK-EU relations. The UK CAA feels that there are generally two possible options.

The Two Options for Brexit

Option one is a Brexit that is reflected by an agreement between the United Kingdom and the EU. The EU and the UK negotiators have a draft of such an agreement, but early statements suggest that it may face some difficulty being ratified by the UK Parliament.

If there is a broad agreement between the two parties before the withdrawal date, then there is a reasonable chance that EU will permit UK CAA to participate in EASA. EASA already has several non-EU participants that participate in EASA – like Norway and Switzerland – and the EU could permit the United Kingdom to join EASA as a non-EU member state. In such a case, UK could continue to issue certificates recognized by EASA and certificate holders could continue to issue the EASA Form 1. This option could make things simple, but as each day passes without a ratified high-level UK-EU agreement, the likelihood of this happening diminishes.

In addition, UK CAA has suggested that EASA may be unable to negotiate with UK CAA at any level under after the withdrawal date (because UK remains a part of the EU until then); so even if the plan is for UK CAA to participate in EASA, there may be a gap between the withdrawal date and UK CAA’s subsequent participation in EASA.

Option two arises if there is no deal between the United Kingdom and the European Union. In such a case, UK CAA believes that EASA will not be permitted to negotiate with UK CAA on a formal basis. UK CAA would have to rebuild its own independent regulatory framework; it is already hiring additional qualified staff to be prepared to do this.

Under option two, and even under some versions of option one, there may be no aviation safety agreement between UK and EU. If there is no agreement, then the European Commission published a Notice to Stakeholders detailing the consequences of the UK’s withdrawal from the European Union’s aviation safety rules. The Notice to Stakeholders paints a bleak picture of the near future between the UK CAA and EASA.

European Union Treatment of Parts Produced or Maintain in the UK

The European Notice to Stakeholders explains that when the UK leaves the European Union (EU), then from an EU perspective, this action will (1) invalidate all certificates issued by the UK CAA, and (2) invalidate all certificates issued by the UK CAA certificate holders. Certificates will be invalid as of the withdrawal date, which is currently set for 11pm (UK time) on March 29, 2019.

The Notice explains that “[t]he products, parts and appliances concerned will no longer be considered as certified in accordance with Article 5 of the Basic Regulation.” Article 5 of the Basic Regulation provides the legal foundation for the issue of an EASA Form 1 for a part or appliance.

This means that UK production approvals will become invalid, as far as the EU is concerned. But this does not just apply to parts made after March 29. It also applies to parts made before the withdrawal date.

Under European regulations, acceptable parts are required to bear appropriate documentation (such as EASA Form 1). EASA Forms 1 issued before the withdrawal date under UK CAA authority become invalid as of the withdrawal date. This means that parts in your inventory today – parts that are perfectly acceptable for installation on European-registered aircraft, today – will no longer be acceptable, after withdrawal, under EASA documentation rules because the UK CAA certificates will become invalid after the withdrawal.

After March 29, one may not install a part that is documented solely under a UK CAA EASA Form 1 into an EU-registered aircraft.  It would appear likely that this also would apply to aircraft registered in non-EU nations (like Norway) that have agreed to follow EASA regulations. This would include:

  • New parts with UK CAA EASA Form 1
  • Maintained parts released to service on a UK CAA EASA Form 1

In a practical sense, if you have an EASA Form 1 for a new part, and it was issued in the UK, then the EU will no longer recognize it as a valid document after Brexit. This means that parts in your inventory that bear EASA Form 1 may have to be segregated and identified as “UK” and “EU,” in order to ensure that if they are still in inventory after Brexit, then they can be directed to customers who are legally able to use those parts.

How does a distributor tell if its EASA Form 1 certificates are affected? Check block 1 of the form. This is the block with the name of the regulatory authority. If it says “UK CAA” in block one, then the EU will no longer recognize it as a valid tag after the withdrawal date (unless there is an agreement that changes the circumstances). As an example, here is a link to a form issued under the legal authority granted by France’s DGAC; and here is a link to an overhaul tag issued under the legal authority granted by the UK CAA.

Some people might wonder about dual-certificated parts from the UK. About 200 repair station in the UK have FAA Part 145 certifications, and they historically have been released to service, following maintenance, on a UK CAA EASA Form 1 that also indicates compliance with FAA Part 145 regulations. The EU has a bilateral agreement with the United States … does this permit acceptance of the work because it was performed under US FAA standards (too)? The answer is “no.” The EU only accepts maintenance from the United States’ system when it also approved under the EASA 145 standards.  Because UK’s EASA 145 certificates (and all other certificates issued by the repair stations) will become invalid upon withdrawal, a dual US-UK approval will not be acceptable for introduction into the EASA system.

Possible UK Solutions

EASA has a solution. But it may be a costly and unwieldy solution.

EASA has proposed to issue EASA certificates to businesses in the UK as “third-country.” In fact, it started accepting applications on October 2. “Third country” treatment means that the UK certificate holders get treated like any-old foreigners. They need to pay as if they were foreign applicants. They need to pay for all of the EASA-time spent in approval and oversight.

By way of comparison, the EU has a working arrangement agreement with Uzbekistan. It is currently scheduled to have no agreement with the UK. So the Uzbekistan CAA is scheduled to have a closer relationship with EASA than the UK CAA will have.  This doesn’t mean that the years of trust between EASA and UK CAA disappear.  In the interim between now and March 29 (while UK CAA is still a member of EASA), EASA will be relying on UK CAA to support audits of UK aviation businesses that apply for EASA certificates as third country applicants.

EASA issues a number of foreign certificates, but the two most important for aircraft parts distribution are likely to be production organization approvals and maintenance organization approvals.  Both are potentially available to UK businesses. An EASA third-country production organization approval would permit a UK manufacturer to produce parts and issue an acceptable EASA Form 1 even after the withdrawal date.  An EASA maintenance organization approval would permit a UK repair station to maintain articles and issue an acceptable EASA Form 1 even after the withdrawal date.

The timing of third-country certificates appears to be uncertain. It would make the most sense for EASA to issue the certificate on or before March 29 in order to allow seamless operations in support of aviation safety.  The earlier that   EASA is able to issue the certificate before March 29. the better for industry planning (including safety contingency planning).  But it is also possible that the European Union will not permit EASA to issue third-country certificates to businesses in the UK until after the withdrawal date (a lergal justification advanced for this delay is that UK is not a third country until the withdrawal date).

When a distributor looks at an EASA Form 1 certificate issued by a UK-based entity, if block 1 of the form says “EASA” then this is an indication that the relevant certificate was issued by EASA and not by the UK CAA.  If it says “EASA” in block one of the Form 1, then the EU should recognize it as a valid (“third country”) tag after the withdrawal date.

What happens to parts that were maintained or produced in the UK before withdrawal date, by a company that obtains a replacement EASA third country certification? This would appear to establish a continuity of EASA approval; but the actual legal treatment of the certification is currently unknown.  It is equally possible that EASA could invalidate EVERYTHING with UK CAA in block one (for ease of determination) or it could decide to accept parts from UK certificate holders who subsequently obtain comparable EASA foreign approvals (causing potential complication in cases where there was a hiatus between the withdrawal date and the date on which the EASA foreign approval was issued).

US Acceptance of UK Maintenance and Production

The United States and the United Kingdom have pledged to work things out. It is likely that there will be some difficulties at first (there always are), but both authorities seem optimistic about their desire to find a way to support safety and keep aviation flying. They are actively negotiating a new bilateral agreement, with the understanding that they will be ready to use it if the UK CAA is unable to rely on EASA as their agent (and if the EU permits UK CAA to participate in EASA, then some of the following details will likely change).

An important element of the US-UK negotiations is the plan concerning UK-based repair stations. As previously mentioned, there are about 200 repair stations in the UK that bear FAA credentials as well.  The plan appears to be

  1. Identify the repair stations whose FAA credentials will expire in the first six months after the withdrawal date;
  2. Renew the FAA credentials of those soon-expiring repair stations early, before the withdrawal date, so they can be renewed before March 29 under the EASA provisions;
  3. This early renewal of expiring repair station certificates in the UK allows the FAA to have a cushion of time to work-out the operating procedures with UK CAA without any emergencies forcing rash decisions;
  4. After the withdrawal date, FAA repair stations in the UK will be permitted to issue dual release 8130-3 tags under FAA and UK CAA authority.

Yes, you read that last bit correctly.  Repair stations in the UK would be permitted to issue 8130-3 tags as approval for return to service documents. This unusual move is permitted, because FAA removed the geographic limitations on 8130-3 tags about a decade ago. The UK repair stations in question hold FAA Part 145 certificates and are permitted to approve for return to service in accordance with 14 C.F.R. 43.9.  UK CAA is in favor of this solution because the 8130-3 tag is well-recognized internationally.

Other than these details, it is likely that much of the UK-US bilateral will resemble the US-EASA bilateral in order to minimize the differences and mitigate the change management issues associated with Brexit.

Conclusion

It is possible that the EU and the UK will enter into an agreement that permits UK CAA to remain a part of EASA. It is also possible that Brexit could be reversed. But, absent some other agreement, the EU will no longer accept UK-based EASA Form 1 for new parts, even if the Form was issued while the UK was still part of the EU, after the withdrawal date.

Distributors need to be prepared by:

  1. Assessing their inventory for susceptibility to Brexit issues based on UK CAA production and/or maintenance, and potentially segregating inventory in a way that eases identification;
    • Segregation could be physical or virtual, e.g. inventory could be managed through software;
    • Remember that we might not know who is willing to accept EASA Form 1 from the UK CAA until very close to the withdrawal date;
  2. Communicating with customers to understand their post-Brexit expectations;
  3. Establishing procedures for proper handling of UK CAA-tagged articles to ensure that they do not go to customers who cannot accept such articles;
  4. Training their personnel on how Brexit impacts the business and the customers;
  5. Communicating with UK-based partners to assess how they plan to deal with the changes.  For example, will your UK-based repair stations apply for EASA 145 under the third-country provisions?  Will your UK-based manufacturers apply for EASA POA under the third-country provisions?

Bear in mind that we’ve dealt here only with the airworthiness acceptance issues in this article. Commercial relationships will be further complicated by myriad other issues, ranging from import tariffs to continued operations of aircraft.

This is a developing issue. ASA will be taking steps to keep members informed, and ASA hopes to host discussions about the impact of Brexit in the near future.

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