[Federal Register: October 16, 2009 (Volume 74, Number 199)]
[Rules and Regulations]
[Page 53367-53395]
[DOCID:fr16oc09-19]

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Part III

Department of Transportation

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Federal Aviation Administration

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14 CFR Parts 1, 21, 43, et al.

Production and Airworthiness Approvals, Part Marking, and Miscellaneous
Amendments; Final Rule

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Parts 1, 21, 43, and 45

[Docket No. FAA-2006-25877; Amendment Nos. 1-64, 21-92, 43-43, and 45-
26]
RIN 2120-AJ44

Production and Airworthiness Approvals, Part Marking, and
Miscellaneous Amendments

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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SUMMARY: The FAA is amending its certification procedures and
identification requirements for aeronautical products and articles. The
amendments will update and standardize those requirements for
production approval holders (PAHs), revise export airworthiness
approval requirements to facilitate global manufacturing, move all part
marking requirements from part 21 to part 45, and amend the
identification requirements for products and articles. The intent of
these changes is to continue to promote safety by ensuring that
aircraft, and products and articles designed specifically for use in
aircraft, wherever manufactured, meet appropriate minimum standards for
design and construction. As a result of this action, the FAA's
regulations now better reflect the current global aircraft and aircraft
products and articles manufacturing environment.

DATES: This rule is effective April 14, 2010.

FOR FURTHER INFORMATION CONTACT: For technical questions concerning
this rule, contact Barbara Capron and/or Robert Cook, Production
Certification Branch, AIR-220, Federal Aviation Administration, 800
Independence Avenue, SW., Washington, DC 20591; telephone (202) 385-
6360 or<PHONE_NUMBER>; e-mail<EMAIL_ADDRESS>or
<EMAIL_ADDRESS>For legal questions concerning this rule, contact
Angela Washington, AGC-210, Office of the Chief Counsel, Federal
Aviation Administration, 800 Independence Avenue, SW., Washington, DC
20591; telephone<PHONE_NUMBER>; e-mail<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Authority for this Rulemaking

    Under the laws of the United States, the Department of
Transportation has the responsibility to develop transportation
policies and programs that contribute to providing fast, safe,
efficient, and convenient transportation (49 United States Code,
Subtitle 1, Sec.  101). The Federal Aviation Administration (FAA or
``we/us/our'') is an agency of the Department. The FAA has general
authority to issue rules regarding aviation safety, including minimum
standards for articles and for the design, material, construction,
quality of work, and performance of aircraft, aircraft engines, and
propellers (49 U.S.C. 106(g) and 44701). We may also prescribe
regulations in the interest of safety for registering and identifying
an aircraft engine, propeller, or article (49 U.S.C. 44104).
    The FAA is amending its regulations governing the certification
procedures for products and articles and its requirements for
identification and registration marking. These changes will improve the
quality standards applicable to manufacturers, which help ensure that
products and articles are produced as designed and are safe to operate.
We are also relocating and standardizing our requirements for marking
articles intended for use in aviation. These changes will make it
easier to determine whether the correct articles are installed, which
will contribute to a greater degree of safety. For these reasons, this
rule will be a reasonable and necessary exercise of our rulemaking
authority and obligations.

Table of Contents

I. Background
II. Discussion of the Final Rule
    A. Summary of Amendments
    B. Miscellaneous Requirements
    C. Compliance Dates
III. Regulatory Notices and Analyses
IV. Amendments

I. Background

    Over the last several decades, the aircraft manufacturing industry
has evolved significantly. Years ago, most transport category aircraft
were manufactured in the United States. A typical business model
consisted of a production certificate (PC) holder with a relatively
small number of suppliers. Today, the number of aircraft manufacturing
suppliers has increased dramatically. Conversely, through the years,
the aircraft industry has seen a steady decline in the number of U.S.-
based transport category aircraft manufacturers. Those manufacturers,
who once predominantly oversaw the production of replacement articles
for their aircraft, now witness the ever increasing production of
replacement and modification articles by independent parts
manufacturers. Suppliers, including parts manufacturers, were located
mainly in the United States decades ago; now, they are located all over
the world. Suppliers are manufacturing greater percentages of aircraft
products and articles. As a result, aircraft are now manufactured in an
increasingly global environment.
    The FAA did not envision such an expansion in aircraft
manufacturing when the certification rules were first promulgated in
1964. The industry has been the subject of burgeoning
internationalization in the last several decades. Evidence of this fact
is that now, more than ever before, the United States has more
bilateral agreements with foreign civil airworthiness authorities
addressing the production, import, and export of aircraft. The old
certification rules are too restrictive to accommodate today's
manufacturing paradigm. Removing some of those restrictions will
greatly improve our regulatory efficiency. This final rule is the FAA's
response to the changing dynamics of the aircraft manufacturing
industry, and this final rule contains requirements that reflect the
current global environment.
    The evolution of the manufacturing industry prompted the FAA to
publish in the Federal Register a notice of proposed rulemaking (NPRM)
on ``Production and Airworthiness Approvals, Parts Marking, and
Miscellaneous Proposals'' (71 FR 58914, October 5, 2006). In that
notice, we proposed comprehensive changes to certification procedures
and identification requirements for aeronautical products and articles.
In general, we proposed to: (1) Standardize quality system requirements
for all Production Approval Holders (PAH); (2) require PAHs, including
those producing under Type Certificate, to mark all articles, including
sub-assemblies and components; (3) require PAHs to issue airworthiness
approvals for aircraft engines, propellers, and other aviation
articles; (4) require PAHs to create a certifying staff to issue those
approvals; and (5) revise export airworthiness approval requirements to
facilitate global manufacturing. The NPRM contains the background and
rationale for this final rule, and except where we have made revisions
to the proposal in this document, you should refer to the NPRM for that
information.
    Commenters to the NPRM represented aircraft and parts
manufacturers; repair stations; the U.S. Small Business Administration,
Office of Advocacy (SBA's Office of Advocacy); industry groups; and
other civil aviation authorities and individuals. While there was much
support for the general intent

of the proposed rule changes, the largest percentage of the commenters
opposed the following four specific proposals:

1. Identification Requirements for Parts, Appliances, and Technical
Standard Order Articles

    The NPRM proposed to require manufacturers to mark each component
of an aircraft engine or propeller, each part and component thereof,
and each appliance and component thereof. Until now, the FAA has only
required marking of the part; not the individual components of the
part. Over forty commenters rejected the proposal, stating that the
requirement to mark each component would be cost prohibitive. Also, the
proposal would necessitate a change in all associated drawings and
design data to reflect the marking requirement.

2. Mandatory Issuance of Airworthiness Approvals for Each Aircraft
Engine, Propeller, and Article

    The NPRM contained a proposal that would have required PAHs to
issue an airworthiness approval for each aircraft engine, propeller, or
article produced under the production approval that conforms to its
approved design and is in a condition for safe operation. Currently,
and under the old rules, an airworthiness approval is mandatory for
products and articles only when those products and articles are being
exported. The FAA has never required that airworthiness approvals be
issued domestically. Commenters stated that because a
disproportionately larger number of aircraft engines, propellers, and
articles are shipped domestically than are exported, mandatory issuance
of airworthiness approvals would impose a substantial cost burden on
manufacturers.

3. Creation of Certifying Staff To Issue Airworthiness Approvals

    We proposed in the NPRM to require PAHs to develop procedures for
establishing and maintaining certifying staff that would be responsible
for issuing airworthiness approvals for aircraft engines, propellers,
and articles, including the issuance of export airworthiness approvals.
Presently, only the FAA or its designees issue airworthiness approvals.
Commenters opposed this requirement, arguing that it would necessitate
additional staff training and implementation of new procedures for
manufacturers, thus unnecessarily escalating the cost of manufacturing.

4. Standardized Quality System Requirements

    In the NPRM, we proposed to standardize quality system requirements
for PAHs so that all PAHs comply with the same set of quality system
requirements, regardless of the product or article produced. We
received over 65 comments (including those from the SBA's Office of
Advocacy; industry groups representing manufacturers, airlines, and
pilots; and aircraft, aircraft engine, and aircraft parts
manufacturers). An overriding concern of the commenters was that the
quality system requirements, if adopted, would be burdensome to
implement, particularly for small businesses. Commenters asserted that
the requirements would impose substantial additional costs on industry
with no measurable increase in safety.
    In addition to the commenters noted above, there were commenters on
other proposals in the NPRM. We received over 100 comment letters (with
over 500 comments) in response to the NPRM. After evaluating all
comments received, we proceeded with this rulemaking action.

II. Discussion of Final Rule

A. Summary of Amendments

1. Identification Requirements
    In response to the concerns and issues raised, the FAA has
reconsidered some of its proposals and made several substantive changes
to the proposed regulatory text. Our most significant change pertains
to the proposal to require marking of all component parts and
appliances. Fifty-two commenters (including SBA's Office of Advocacy;
industry groups representing manufacturers, airlines, and pilots; and
aircraft, aircraft engine, and aircraft parts manufacturers) asserted
the proposed requirement to mark detail parts would be cost prohibitive
and would provide no verifiable safety benefit. Commenters pointed out
some products or articles consist of hundreds or sometimes thousands of
detail parts, arguing that the costs associated with changing the
drawings and design data could cost small businesses over one billion
dollars to implement.
    When we performed our initial regulatory flexibility assessment
(IRFA) for the NPRM, we did not recognize the extent to which design
data would have to be changed in order to accommodate the proposed
marking of detail parts. Given that each product or article consists of
hundreds or thousands of sub-tiered drawings, all of which would have
to be changed, we agree with the commenters that we put forth a cost-
prohibitive proposal. Accordingly, the final rule does not contain this
requirement.
    As a result of the many comments in opposition to our marking
proposal, we revised the proposed rule to provide for methods of
identification more flexible than marking. PAHs must mark the product
or article that they have been granted a certificate or approval for in
accordance with part 45. However, the sub-assemblies and component
parts of that product or article do not have to be marked or identified
unless they leave the PAH's facility as a separate article (e.g.,
replacement or modification part). Sub-assemblies, component parts, or
replacement articles that leave the PAH's facility as FAA-approved must
include the manufacturer's part number and name, trademark, symbol, or
other FAA-approved PAH identification (e.g., the production approval
number, cage code, or Federal supply code for manufacturers (FSCM)). A
manufacturer or person producing under subparts F, G, K, or O may
choose any method to meet this requirement. Methods include, but are
not limited to, marking the article, attaching a tag to the article,
placing the article in a container, or providing a document with the
article with the information previously mentioned. This identification
requirement codifies current industry practice and is less stringent
than the proposed requirement.
    This identification requirement is not driven by a history of
aviation accidents where inadequate marking or identification was
necessarily found to be a primary cause; rather, it is part of a
systemic approach to safety. Accident investigations and safety
management system analyses show that accidents are rarely caused by one
event. Accidents are the result of a chain of events. If any of the
events had not occurred, an accident may have been prevented. This
requirement assists in the traceability of articles and helps reduce
the installation of incorrect articles, thereby preventing accidents.
    Because identification of articles is simply a byproduct of the
marking proposal, the FAA has determined that it is within the scope of
this rulemaking. The economic effects of this requirement have been
evaluated and determined to be cost-neutral (i.e., having no economic
impact).
    In the NPRM, we proposed to revise Sec.  45.15 to specify
particular marking requirements for parts manufacturer approval (PMA)
and technical standard order (TSO) articles. In doing so, we removed
the former requirements for producers of PMA articles to mark those

articles with the designation ``FAA-PMA'' and information stating the
installation eligibility of the article. As proposed, the rule would
have required PMA holders to mark articles with the PMA holder's name,
trademark, symbol, or other FAA-approved identification.
    Several commenters (including Airline Transport Association (ATA),
Aerospace Industries Association (AIA), General Electric Company (GE),
the Boeing Company, and Snecma) questioned the proposal. They stated
the current requirement to mark PMA articles with the letters ``FAA-
PMA'' increases traceability and allows installers and maintenance
providers to easily identify the article being installed. The European
Aviation Safety Agency (EASA) stated it had recently introduced a
requirement for the marking of parts not produced under the control of
a TC or supplementary type certificate (STC). The marking clearly
distinguishes those parts from parts produced by a TC or STC holder.
EASA suggested the FAA and EASA coordinate their efforts in developing
a coherent, consistent, and comprehensive part marking policy.
    The FAA does not espouse an opinion regarding the premise that
marking PMA articles as ``FAA-PMA'' increases traceability. However,
having a marking requirement consistent with the requirement of other
aviation authorities is advantageous and enhances harmonization
efforts. Furthermore, as we reviewed the proposal, we realized the
removal of ``FAA-PMA'' would result in additional costs to the PMA
holder. Much like the proposal to mark detail parts, the removal of
``FAA-PMA'' would require a manufacturer to revise all of its design
drawings, making it a cost-prohibitive change. Accordingly, this final
rule retains the current ``FAA-PMA'' marking requirements.
    Unless otherwise specified in the applicable TSO, Sec.  45.15 now
requires manufacturers of TSO articles to permanently and legibly mark
the article with the TSO number and letter of designation, all markings
specifically required by the applicable TSO, and the serial number or
the date of manufacture of the article, or both. Likewise, each person
who manufactures a part or component for which a replacement time,
inspection interval, or related procedure is specified in the
Airworthiness Limitations section of a manufacturer's maintenance
manual or Instructions for Continued Airworthiness must permanently and
legibly mark that part or component with a serial number (or
equivalent).
    An individual commenter expressed concern that requiring a
manufacturer to permanently mark an article may result in masking the
age of a product. The commenter argued that a manufacturer could modify
an existing appliance and issue it a new serial number and date of
manufacture. The commenter recommended the proposal be revised to
prohibit such activity. We understand the commenter's concern; however,
the original serial number and date of manufacture must be maintained
throughout the TSO article's life-cycle. We think the regulation is
sufficiently clear that markings must be permanent. Additional markings
must not obscure, remove, or obliterate the original markings.
    GE and Pratt & Whitney stated that the phrase ``or equivalent,''
when used to refer to an alternative to marking a part or component
with a serial number, is confusing and should not be in the final rule.
We disagree. Use of the phrase ``or equivalent'' offers flexibility in
compliance with the marking requirement and provides an assessable
standard for FAA enforcement of the requirement. Therefore, we retained
the phrase in the final rule.
    Section 45.11 now provides relief to aircraft owners and operators
for data plate location requirements for gliders and certain types of
aircraft. This rule allows the data plate to be secured in an
accessible location near the aircraft entrance. The former rule
required the data plate be secured to the aircraft fuselage exterior,
such that it was legible to a person on the ground. However, the old
requirements were impractical. Over the last several years, the FAA has
issued numerous exemptions from Sec.  45.11 for relief from the
requirements for data plate location. This rule relieves the burden on
the public and the FAA in regards to processing these types of
exemptions in the future.
    AIA and GE stated that the proposed requirement to mark engine
modules was unclear. They questioned whether the module marking should
reflect the engine's information or the module's information. Also, GE
stated that an additional identification plate should be added to a
module when an STC has been incorporated. We have determined that the
requirement to mark engine modules is unnecessary. The rule language
has been changed to remove this requirement. We do not agree that
additional marking is required when an STC is incorporated. While an
STC is used for the approval of a major change in the type design, it
does not approve the production of parts used in the modification. The
data plate placed on a TC product is based on the manufacturer of the
product, rather than the TC design approval holder (DAH). Requiring
additional markings for STC incorporation would confuse the STC holder
with the actual manufacturer of the STC modification part. It also
would not provide any safety benefit. STC incorporation is marked in
aircraft logbooks and flight manuals and has been shown effective.
    A repair station expressed concern about changes to articles driven
by service bulletins. Articles for which service bulletins have been
issued often require a new or revised marking. Since many of these
articles are in service, the maintenance provider, not the producer,
makes the required changes. Therefore, the commenter requested that the
FAA create a regulatory provision permitting maintenance providers to
act as the manufacturer's agent for the purpose of remarking the
article.
    Changes to articles pursuant to service bulletins are governed by
the provisions of part 43. Those changes, including the marking of the
articles, are considered maintenance activity and are more
appropriately accomplished pursuant to the maintenance provisions of
part 43.
    If the FAA finds a part or component is too small or otherwise
impractical to mark with any of the information required by this part,
the manufacturer is required to attach that information to the part or
component, or its container. Aircraft Owners and Pilots Association
(AOPA) commented that an enormous workload is imposed on the FAA
because it must determine whether an article is too small or is
otherwise impractical to mark. AOPA recommended that the manufacturer
be allowed to make that determination.
    The FAA is ultimately responsible for determining compliance with
regulatory requirements, and we must ensure consistency in application
of the standard. Therefore, we will not abdicate our responsibility for
determining whether articles are too small or otherwise impractical to
mark.
    Marking requirements for all PAHs are now consolidated in part 45.
These requirements apply to all PAHs, as well as to persons who produce
the products or articles for export to the United States under the
provisions of an agreement between the United States and another
country or jurisdiction. The required markings constitute a
representation that the product or article conforms to its approved
design. Only the person authorized to produce the product or article
may make this representation. However, this rule does not preclude an
approved supplier to a PAH from applying markings in accordance with
requirements imposed by the PAH;

neither does it preclude applying in-process markings throughout the
manufacturing process.
    AIA, ATA, GE, and Pratt & Whitney stated the FAA should permit
marking by owner operators, certificated repair stations, or
appropriately certificated mechanics performing maintenance under part
43. However, part 43 already allows owner/operators, certificated
repair stations, and certificated mechanics performing maintenance to
mark articles, and addressing it in this rulemaking would be
duplicative and unnecessary.
    A parts manufacturer and an individual questioned whether using
barcodes would be an acceptable means of complying with the rule,
particularly in the case of small articles. Barcode identification may
be used in conjunction with, but not in lieu of, the marking
requirements. Provisions for marking small or delicate articles are
specified in Sec.  45.15(d).
2. Mandatory Issuance of Airworthiness Approvals and Certifying Staff
    Forty-six commenters (including SBA's Office of Advocacy, industry
groups, aircraft manufacturers, engine manufacturers, parts
manufacturers, and individuals) stated that FAA's proposal to require
the issuance of airworthiness approvals for each aircraft engine,
propeller, or article would be cost prohibitive. Commenters stated that
because a disproportionately larger number of aircraft engines,
propellers, and articles are shipped domestically than are exported,
mandatory issuance of airworthiness approvals would impose a
substantial cost burden on manufacturers.
    We have further reviewed the potential impact of the proposal and
have determined that the costs would disproportionately affect small
manufacturers. Many small manufacturers do not ship their products or
articles outside the United States, nor do they currently issue
airworthiness approvals. In addition, airworthiness approvals are often
separated from the product or article when it is received by the end
user, nullifying the safety aspect of increased traceability. Because
we have determined that the mandatory issuance of airworthiness
approvals will not increase safety, and there is a high cost associated
with its implementation, that proposal is not included in this final
rule.
    We also have determined that mandating PAHs to establish and
maintain a certifying staff to issue airworthiness approvals would
necessitate costly staff training, and implementation of new procedures
would be too burdensome for manufacturers. Because we have not included
the proposed requirement for mandatory issuance of airworthiness
approvals for each aircraft engine, propeller, and article, the
requirement for a PAH to establish and maintain a certifying staff to
issue the approvals is therefore not included in this rule.
3. Quality System Requirements
    This final rule prescribes a PAH's requirements for controlling the
quality of the product or article it manufactures. The FAA has imposed
in this final rule certain additional PAH quality system requirements
designed to achieve overall improvement of the PAH's quality system.
The quality system consists of fourteen specific quality system
requirements. As described below, it is important to note that those
fourteen quality system requirements are scalable, depending on the
size and complexity of the PAH and of the product or article produced.
Some of these requirements were already mandatory prior to this
rulemaking and have been retained. The remaining requirements also have
already been incorporated by industry for years and used voluntarily as
``best practices.''
    Prior to this rulemaking, holders of different production approvals
complied with, and were audited to, differing sets of requirements. For
instance, if a manufacturer produced a PMA part and a TSO article, the
manufacturer was subject to different quality and marking standards for
each part it produced. Today's requirements are now applicable to PC
and PMA holders and TSO authorizations alike. This final rule relieves
PAHs from having to maintain, and the FAA from having to oversee,
multiple PAH systems and procedures. Hence, this final rule will
increase regulatory efficiency.
    We received over 65 comments (including those from the SBA's Office
of Advocacy; industry groups representing manufacturers, airlines, and
pilots; and aircraft, aircraft engine, and parts manufacturers). A
general consensus of the commenters was that the proposed quality
system requirements would be too restrictive, burdensome, and costly,
especially on small businesses.
    SBA's Office of Advocacy believed the FAA's approach was more
appropriate for large companies, rather than for smaller companies.
That commenter suggested the FAA consider exempting small businesses
from the quality system requirements or adopt a tiered approach based
on the size and volume of the business. In addition, SBA's Office of
Advocacy suggested that if the FAA does not intend to require an
International Organization for Standardization (ISO)- or SAE-equivalent
regime, then it should delete the references to those standards in the
preamble. In the NPRM, we likened our quality system requirements to
those international quality standards and suggested that there is a
global trend toward implementing them. SBA's Office of Advocacy argued
the FAA should not impose ISO- or AS-based requirements of advocacy,
maintaining that such a requirement would be duplicative because many
PAHs have already achieved ISO or AS certification.
    The FAA derived its quality system requirements from a number of
sources, including previous requirements in subparts G and K, as well
as industry best practices, ISO standards, and other aviation
authorities' requirements (e.g., Joint Aviation Authorities (JAA),
European Aviation Safety Agency (EASA), and Transport Canada). These
requirements do not introduce significantly different standards for
PAHs, small businesses included. Because many PAHs currently employ
these standards as best practices, the FAA has determined that
compliance will not be costly. We have determined that the quality
system requirements, as proposed, are appropriate for all
manufacturers.
    In response to the SBA's Office of Advocacy's comment suggesting
the FAA adopt a tiered approach for small businesses, the FAA maintains
that even small businesses have many of these practices in place, just
on a smaller scale than larger aircraft manufacturers. We are simply
codifying those practices. Our requirements are consistent for all
manufacturers, but they will be scalable and commensurate to the size
of the company and the complexity of the product or article produced.
For example, we would expect a large aircraft manufacturer to have a
well-developed, complex quality system. In contrast, a small parts
manufacturer producing a non-complex article could have a less complex
quality system.
    However, that system could still comply with FAA quality system
regulations and reflect the needs of the PAH without imposing an undue
burden. The FAA will provide additional information on the Internet
site http://www.faa.gov on how a PAH may construct a scalable quality
system, to include examples.
    In addition to industry best practices, these amended quality
system requirements are now consistent with

requirements of other aviation authorities. As a result, these quality
system requirements will encourage greater international acceptance of
products and articles and facilitate the import and export of those
products and articles.
    This rule also requires that a manufacturer's quality system
include procedures for controlling the use of design data and
subsequent changes to ensure that only current, correct, and approved
data are used. Earlier, we had proposed that the system include
procedures for controlling design data, rather than the use of the
data. However, GE correctly commented that the TC holder, not the PAH,
controls the design data. Accordingly, we revised the rule language to
accommodate that fact. We now require PAHs to have access to design
data necessary to determine conformity and airworthiness for each
product and article produced under the PC. In the case of a PAH who
obtained approval by test and computation, the PAH controls the data.
However, a PAH who obtained approval by licensing agreement might only
have access to the data through the type design holder.
    This rule now requires manufacturers to establish procedures to
control conformity of each supplier-furnished product or article to its
approved design before release for installation. The PAH must establish
a quality system that ensures the products or articles produced are
conforming and in a condition for safe operation. In that regard, we
have identified Supplier Control as one of the processes for which the
PAH must establish procedures. The PAH is responsible for determining
the type and scope of controls and the frequency of oversight necessary
to ensure the conformity of the products or services provided by its
supply chain, along with its compliance to contract requirements.
    We further require that the quality system include procedures for
inspections and tests to ensure that a product or article conforms to
its approved design. This revision clarifies that the purpose of
inspections and tests is to verify that each product and article
conforms to its approved design and is in a condition for safe
operation. In addition, the inspection and test procedures must include
a flight test of each aircraft produced, unless that aircraft will be
exported as an unassembled aircraft, and a functional test of each
aircraft engine and each propeller must be performed. Embraer
questioned the benefit of performing a functional test on a fixed pitch
propeller because it has no control system. For that reason, Embraer
proposed we create an exception to exclude fixed pitch propellers from
functional testing; however, we disagree. Inspections and tests,
including functional tests, must be performed on fixed pitch
propellers. These tests are used to validate whether performance
characteristics and the structural integrity meet the design
requirements.
    The quality system must include procedures to ensure that all
inspection, measuring, and test equipment used to determine conformity
of products and articles is calibrated and controlled. Each calibration
standard must be traceable to a standard acceptable to the FAA. Boeing
suggested we require calibration of inspection, measuring, and test
equipment only when calibration is specified by the type design.
However, calibration of inspection, measuring, and test equipment is a
function of the quality system; it is not addressed in the type design.
Proper calibration of all equipment helps ensure the integrity of the
manufacturing process.
    This rule now requires that a quality system include procedures to
ensure that discarded articles are rendered unusable. This revision
helps ensure that discarded articles are not erroneously placed into
service on aircraft. AIA, GE, and Boeing proposed that the FAA allow
PAHs to identify articles as ``scrap,'' rather than the PAH rendering
discarded articles as ``unusable''. The commenters further recommended
that we define the term ``scrap'' in the rule.
    The term ``scrap'' is an acceptable industry term that may be used
at the PAH's discretion, but many times, PAH's may use ``scrapped''
items in a new capacity. The term ``scrap'' does not clearly convey
that the item may not be reused in a type-certificated product. For the
purposes of this rule, we have decided that the term ``unusable''
clearly reflects our intent to ensure that an article that has been
discarded cannot be used.
    In addition, this rule requires that the quality system include
procedures to prevent damage or deterioration of products and articles
during handling, storage, preservation, packaging, and delivery. AIA,
GE, and Pratt & Whitney argued that the PAH cannot ensure the condition
of articles after they have left the PAH's facility, and they
recommended that we remove the term ``delivery'' from the proposed rule
language. We agree and have revised the regulatory text accordingly.
    Pratt & Whitney also recommended revising the rule language to
reflect that the quality system include procedures ``intended'' to
prevent damage and deterioration of products and articles, as opposed
to procedures that will prevent damage and deterioration. However, the
FAA is responsible for imposing a standard that is measurable. We have
determined that the standard imposed will better prevent damage or
deterioration. Thus, we have retained the rule language as proposed.
    The FAA now requires the quality system to include procedures for
identifying, storing, protecting, retrieving, and retaining quality
records. Quality system records include inspection and test records,
material review board records, and work orders. Both production
approval applicants and PAHs must retain these records for at least
five years for the products and articles manufactured under the
approval and at least ten years for those articles that are identified
as critical components under Sec.  45.15(c) of this chapter.
    GE recommended we increase the record retention time to 40 years.
An individual commenter stated that the former record retention
requirements were adequate. However, the new record retention
requirements are the result of a recommendation from the Aviation
Rulemaking Advisory Committee (ARAC). The ARAC stated that it is
possible for a product or article to remain in production in excess of
two years before it is released from production. Furthermore, that
product or article would spend some length of time in service before
any airworthiness directives (ADs) were possibly issued against it.
Therefore, by the time a nonconformance or unairworthy condition is
identified, the 2-year record retention period could have passed,
making it difficult to identify a root cause for the condition. We have
determined that a 5-year record retention for products and articles and
a 10-year record retention for critical parts are necessary to
facilitate the tracking of nonconformances. However, a PAH may maintain
records longer if it chooses.
    Boeing suggested that we require record retention periods for
products and articles only. We disagree. Records are objective evidence
that a PAH has complied with all applicable regulatory requirements.
Records are part of the quality system and are used to validate
conformity to type design. Therefore, we have determined that these
records are necessary, and the retention period is appropriate.
    We now require that the quality system include procedures for
planning, conducting, and documenting internal audits to ensure
compliance with the approved quality. A parts manufacturer

suggested the meaning of the term ``internal'' is relative to a PAH's
quality system; therefore, audits of suppliers would fall within the
scope of internal audits because a supplier is under the PAH's quality
system. The commenter requested a clarification of the definition of
``internal audits'' as it pertains to suppliers.
    The concept of what constitutes ``internal'' for the purposes of an
audit is relative to the PAH's quality system. We think the regulation
is sufficiently clear. Suppliers are controlled through the PAH's
quality system, and procedures for suppliers' audits are dictated in
Sec.  21.137(c), Supplier control. Conversely, Sec.  21.137(l) denotes
procedures for the conduct of internal audits of the effectiveness of
the PAH's Supplier Control System.
4. Replacement and Modification Articles
    Former Sec. Sec.  21.303(a) and (b) addressed production
requirements for replacement and modification parts to ensure that only
articles that conform to their approved design and are in condition for
safe operation are installed in type-certificated aircraft. With
certain exceptions, the former rule prohibited the production of such
parts for sale for installation on a type-certificated product, unless
those parts were produced pursuant to a PMA. Exempted from this
requirement were parts produced under a TC or PC, parts produced by an
owner or operator for maintaining or altering his own product, parts
produced under an FAA TSO, and standard parts. This final rule
consolidates those former requirements in newly established Sec.
21.9(a), with some revisions. Under today's rule, the FAA will now
prohibit the production of a replacement or modification article if the
producer knows, or should know, that the part is reasonably likely to
be installed on a type-certificated product unless the article part is:
     Produced under a TC;
     Produced under an FAA production approval;
     A standard part;
     A commercial part, as defined in Sec.  21.1;
     Produced by an owner or operator for maintaining or
altering that owner or operator's product; or
     Fabricated by an appropriately rated certificate holder
with a quality system and consumed in the repair or alteration of a
product in accordance with part 43.
    The provisions of Sec.  21.9 apply to the producer of any part that
may be used as a replacement or modification article, not just parts
that were produced specifically as replacement or modification
articles. In determining whether a violation has occurred, one factor
the FAA will consider is whether the article was represented as
suitable for installation on a type-certificated product. Producers of
replacement or modification articles who represent those articles as
suitable for installation on a type-certificated product may be in
violation of Sec.  21.9 unless the articles were produced under one of
the above exceptions.
    Representation may include, but is not limited to, a producer
advertising its parts in aviation magazines; representing the part with
statements such as ``aviation quality'' or ``as previously installed
on''; issuing aviation parts catalogs; or marketing at aviation trade
shows and conferences. Owners, operators, producers, and maintenance
providers rely on these representations to determine the airworthiness
of an aircraft, or the acceptability of products and articles for a
given application. Therefore, these representations must be truthful.
Assessing representation of a part is just one means of determining
whether a violation of Sec.  21.9(a) has occurred. Absent any such
representation, the FAA may still find a violation has occurred if
evidence can be established that the producer knows or should know that
the part is reasonably likely to be installed on a type-certificated
product.
    Finally, newly established Sec.  21.9(c) would allow a person to
represent an article as suitable for installation on a type-
certificated aircraft if the article was declared surplus by the U.S.
Armed Forces and was intended for use on that model of U.S. Armed
Forces aircraft.
    We received thirty-seven comments on this section. SBA's Office of
Advocacy requested additional clarification on how the provisions of
this section of the rule would apply. In addition, two individuals
stated the rule language ``if a person knows, or should know, that the
part is reasonably likely to be installed on a type-certificated
product'' is very subjective, and it will be difficult to properly and
consistently enforce. It believed distributors, owner/operators, and
manufacturers could be subject to legal action due to misunderstandings
of the rule. The expected misunderstandings would arise from the
likelihood of this final rule affecting parts manufacturers not subject
to FAA regulation before its issuance. However, we believe the new rule
is clearly stated, objective, and enforceable. As we apply the
standard, we will examine all relevant facts and circumstances to
determine whether a person knew or should have known that a part he
produced was reasonably likely to be installed on a type-certificated
product.
    Numerous commenters (including Aircraft Electronics Association
(AEA), Aviation Suppliers Association (ASA), and repair stations)
stated our proposed rule no longer contained language prohibiting the
production of parts ``for sale for installation on a type-certificated
product.'' In addition, the SBA's Office of Advocacy asked the FAA to
clarify and confirm that the existing ability of a repair shop to
produce a part during maintenance activities remains in place. Since
the NPRM proposed to remove that language, several repair stations
asked us to clarify whether they will still be able to produce articles
that will be consumed in the course of a repair without violating Sec.
21.9(a).
    It is not our intent to preclude that activity. To address that
concern and clarify our intent, we established an exception in Sec.
21.9(a)(6). This exception, which was not proposed in the NPRM, allows
for the production of articles without benefit of a production approval
when articles are fabricated by an appropriately rated certificate
holder with a quality system and consumed in the repair or alteration
of a product or article in accordance with part 43. Maintenance
providers who do not have a quality system may continue to fabricate
owner-produced articles for installation on type-certificated aircraft
using the guidelines set forth in Policy Memorandum, Definition of
``Owner Produced Part,'' Section 21.303(b)(2), August 5, 1993.
    SBA's Office of Advocacy asked the FAA to clarify how the rule
would impact the distribution of parts and existing inventories based
on small business concerns that the proposed rules will forbid anyone
from selling civil aircraft parts unless they are the manufacturer of
the part, essentially forcing current parts distributors out of
business. This phrase was used in former Sec.  21.303(a). We disagree.
Section 21.9 governs the production, not the sale, of articles and does
not prohibit distributors from selling articles.
    SBA's Office of Advocacy was also concerned that the regulation
does not contain express provisions concerning inventories of existing
articles. That commenter recommended we clarify that any new production
requirements on articles or products apply only to articles
manufactured after a certain date and that the requirements do not
render current articles or products in inventory unusable. Like the
Office of Advocacy, ASA believed the rule would

prohibit the sale of existing inventories, and thus, they would lose
value. The commenters' concerns are unfounded. The requirements of this
rule apply to products or articles as they are manufactured. The
provisions of this rule do not apply to existing inventories.
    Lastly, an individual commenter stated modification articles should
be exempted from a PMA if those articles could be installed: (1) As a
minor alteration with a simple logbook entry without approved data, or
(2) under a field approval with data approved by a Flight Standards
District Office (FSDO) airworthiness inspector or Designated
Engineering Representative (DER). We disagree. Both exceptions would
serve to weaken our regulatory intent to ensure that only articles for
which a suitability determination has been made are installed in type-
certificated aircraft. An article is not approved unless the article
is: Produced under a TC; produced under an FAA production approval; a
standard part; a commercial part, administered in a manner acceptable
to the FAA; or produced by an owner or operator for maintaining or
altering that owner or operator's product.
5. Definition of ``Commercial Parts''
    In the NPRM, we proposed to establish a definition of commercial
parts and create a replacement parts classification that would
facilitate the use of parts during maintenance. This rulemaking
established that classification and allows for the production of
commercial parts, as defined by this rulemaking, as replacement or
modification articles without benefit of a production approval. Over
ten commenters (including SBA's Office of Advocacy, the Regional
Airline Association (RAA), ASA, and Snecma) stated the proposed
definition of ``commercial parts'' was confusing. SBA's Office of
Advocacy asked the FAA to further explain how the new provisions would
impact current practices and the industry's ability to use parts that
commonly have been referred to as commercial prior to this rulemaking.
The commenters were concerned that only those parts designated by the
DAH and approved by the FAA as commercial would be considered as such.
They concluded the proposal would unduly restrict the use of commercial
parts on in-service aircraft, which is common industry practice today.
    In response to these comments, we modified the definition of
``commercial parts,'' as it was proposed in the NPRM, to better clarify
the meaning of the term. A commercial part means an article that is
listed on an FAA-approved Commercial Parts List included in the DAH's
Instructions for Continued Airworthiness (ICAs). By creating a
``commercial parts'' classification, the FAA has constructed a new
mechanism by which commercial parts may be approved for use on type-
certificated products as replacement or modification articles. The FAA
has not removed any of the processes used prior to this rule change for
approving articles for installation on type-certificated products as
replacement or modification articles. Those processes include
purchasing the article from the PAH or manufacturer producing under a
TC approved to produce the article; produced and installed under the
provisions of an STC; or produced and installed in accordance with the
provisions of part 43.
    For the purposes of this rulemaking, in order for a part to be
considered commercial, the DAH must submit to the FAA a list of parts
it has designated as commercial pursuant to the provisions of Sec.
21.50(c). A part is designated as commercial when the DAH: (1) Provides
data to the FAA showing that the failure of the commercial part, as
installed in the product, would not degrade the level of safety of the
product; (2) shows the part is produced only under the commercial part
manufacturer's specification and marked with only the commercial part
manufacturer's markings, and (3) provides any other data the FAA
requires to approve the Commercial Parts List.
    As discussed in the NPRM preamble, the data requirement concerning
the failure of the part is necessary to ensure that commercial parts,
which are not subject to the rigorous quality control requirements for
PAHs, cannot jeopardize flight safety if they fail. The part marking
requirement is necessary to ensure that other similar parts, whose
safety has not been demonstrated, cannot be substituted for the part
identified as commercial. Because this is a new regulatory
classification of parts, we cannot anticipate all the issues that may
arise as applicants submit proposals. We therefore need the third
``catch-all'' provision to obtain information necessary to verify our
intent in creating this new classification is fulfilled and to ensure
there is no adverse effect on safety. The DAH must include the
Commercial Parts List in the Instructions for Continued Airworthiness.
The FAA approves the commercial parts list, and the parts on it are
then eligible for use on a type certificated product as replacement or
modification articles.
    SBA's Office of Advocacy was equally concerned that as a result of
this new commercial parts classification, non-PAH commercial parts
manufacturers would be held liable for a violation of Sec.  21.9
regarding production of parts if a part they manufacture is used on a
type-certificated aircraft without being declared a commercial part. It
stated the FAA should be aware that a strict reading of the proposed
rule seems to suggest that once a manufacturer knows or has reason to
know that a repair or maintenance facility is installing its product on
an aircraft, that manufacturer would have a legal obligation to obtain
the approval of either the design holder or the FAA (through a PMA or
TSO) for that part. This would extend the reach of the FAA's rule to a
vast universe of manufacturers, none of whom are included in the FAA's
economic analysis.
    SBA's Office of Advocacy is correct in its understanding of the
proposed rule, in that if non-PAH producers know or should know that
their articles are reasonably likely to be installed on a type-
certificated product, they cannot produce those articles unless they
meet one of the four exemptions noted in Sec.  21.9. Non-PAH parts
producers that know their parts are being installed on type-
certificated products may apply for a production approval for the
production of those parts, or the DAH of the product or article on
which those commercial parts will be installed may designate them as
commercial. Our intent is to create an enforceable standard that helps
ensure that parts that are used on type-certificated products are
produced under an approved quality system or otherwise approved for use
on that product.
    Several repair stations were unclear on whether repair or
maintenance facilities would still be able to utilize the maintenance
provisions in Sec.  43.13 to install commercial parts on aircraft.
Commercial parts as defined in this rulemaking do not require a
production approval, and repair stations may continue to utilize the
provisions of Sec.  43.13 to install parts. Those parts that are
generally recognized by industry as commercial, but have not been
designated on a Commercial Parts List, must be approved for
installation in accordance with part 43.
    Two individuals stated that the use of commercial parts should be
approved only in applications where their function or failure would not
degrade safety. The FAA agrees with that statement, and as we do with
other parts

approved as part of the type design, we will also evaluate commercial
parts during the type design approval process to determine their affect
on the safety of the product. In order for a DAH to designate a part as
commercial, the DAH must show that failure of the commercial part would
not degrade the safety of the product.
    Snecma and an individual commenter recommended that advisory
material would be helpful in determining when or how commercial parts
can be used as part of a type design, including guidance on what a DAH
must do to obtain approval of its commercial parts. A repair station
also commented that we should provide advisory material on when and how
commercial parts may be used by operators and maintenance personnel.
The FAA will issue advisory material providing guidance on the above
concerns and on substitution of commercial parts during maintenance.
    Lastly, an individual commenter noted that the marking requirements
for commercial parts are not consistent with the marking requirements
in part 45. We agree. However, the marking requirements in part 45
pertain only to those articles manufactured under an approved type
design or in accordance with the provisions of a bilateral agreement
between the United States and another country or jurisdiction for the
acceptance of products and articles. Accordingly, the part 45 marking
requirements are not applicable.
6. Location of or Change to Manufacturing Facilities
    The FAA is requiring all PAHs to obtain FAA approval before making
any changes in location or physical changes to its manufacturing
facilities. Additionally, PAHs must immediately notify us of any
changes that may affect the inspection, conformity, or airworthiness of
its products or articles. This requirement applies to all PAHs and
persons producing under a TC only.
    One commenter noted that Sec.  21.122(a) appears to allow for
production under a TC outside the United States. The commenter is
correct. We considered amending subpart F to prohibit manufacturing
under a TC in a foreign country. However, we decided to allow
manufacturing under a TC in a foreign country, as long as it causes
``no undue burden'' for the FAA.
7. Issuance of Export Airworthiness Approvals for Aircraft Engines,
Propellers, and Articles
    Section 21.331 permits a person to obtain, from the FAA, an export
airworthiness approval for a new or used aircraft engine, propeller, or
article manufactured under this part if it conforms to its approved
design and is in a condition for safe operation. Also, used aircraft,
engines, and propellers are no longer required to be newly overhauled.
Finally, prior to issuance of an export airworthiness approval for an
aircraft engine, propeller, or article, the special requirements of
importing countries or jurisdictions must be met.
    AIA, GE, and Pratt & Whitney suggested the FAA amend the rule to
reflect that some products require disassembly for shipping purposes
after the product has been certificated that it is ``in a condition for
safe operation.'' Airworthiness is determined at the time the product
is submitted to the FAA in an assembled state. We allow for disassembly
of a product for the purpose of shipping to the end-user, but the
importing authority will require an airworthiness determination after
reassembly and prior to installation on the aircraft.
    AIA, Boeing, and GE also suggested we revise the rule language to
allow a PAH to obtain letters of acceptance directly from the importing
country when required for nonconforming products ready for export. A
fundamental principle of our bilateral agreements is that letters of
acceptance are transmitted between authorities, and we are not planning
to institute a change to that policy. Because bilateral agreements
supersede our regulatory requirements, the FAA will continue to receive
and process letters of acceptance from importing authorities.
    AIA, Boeing, and GE further stated it would be beneficial for us to
define the term ``used'' as it appears in Sec.  21.331. They also
suggested that we revise Sec.  21.331 to allow the issuance of export
airworthiness approvals for used products that do not meet an approved
type design, as service time and wear prevent conformity to new article
dimensions. We agree that there should be a consistent application of
the term ``used'' as it relates to aircraft products; however, a
regulatory definition would not be appropriate at this time because the
term has different meanings in its application in a certification
context versus a maintenance context. As to the comment regarding
nonconforming products, Sec.  21.331 already allows for the issuance of
an export airworthiness approval for used products that do not meet an
approved type design.
    An individual commenter thought it unnecessary to obtain letters of
acceptance from an importing country when shipping nonconforming
products or articles. We disagree. An importing authority has complete
discretion on whether it will accept nonconforming products or
articles, and this issue is addressed between authorities in bilateral
agreements and is not dictated via domestic regulations. Another
individual commenter suggested that an importing country, rather than
the FAA, should authorize deviations from the regulatory requirements
of subpart L for products exported. Importing countries have no
regulatory jurisdiction in the United States, and therefore, they have
no authority to grant a deviation from our requirements. We maintain
sole authority to grant deviations from our regulations.
    An individual commenter suggested that the rule accommodate the
movement of articles whose airworthiness status is unknown. Again, we
disagree. The rule is intended to accommodate only the export of
products and articles determined to be airworthy. The issuance of an
airworthiness approval for products and articles whose status is
unknown would be contrary to the fundamental airworthiness principles
and obligations of our bilateral airworthiness agreements with other
countries and/or jurisdictions.
    Section 21.335(a) requires exporters to forward to the importing
country or jurisdiction all documents specified by that country or
jurisdiction. Paragraph (b) requires the exporter to preserve and
package products and articles as necessary to protect them against
corrosion and damage during transit or storage and to state the
duration of effectiveness of such preservation and packaging. AIA, GE,
aircraft parts manufacturers, and individuals assert that because it is
difficult, or sometimes impossible, to predict how long an article may
need to be preserved, it may be equally difficult to comply with the
packaging and preservation requirements.
    This rule requires that products and articles be properly preserved
and packaged as necessary at the time of export. Exporters must state
the duration of effectiveness, but they are not required, as the
commenters suggest, to exercise control over the end use or storage of
the parts exported. If a product or article does not require any
preservation or protective packaging in order to prevent damage, this
rule does not apply.
    AIA and GE were concerned that U.S. exporters may be required to
obtain an export airworthiness approval as part of the documents
specified for export. They believed that import and export requirements
should be the same. The commenters are correct. Based on the content of
our agreement with a country, additional documentation,

including an export airworthiness approval from the importing country
or jurisdiction, may be required.
    AIA mentioned that Sec.  21.335(a), or the preamble, should clearly
state the documentation requirements for export, as there is often a
variation in requirements. The FAA has numerous bilateral agreements
with countries addressing the type, format, and content of
documentation required for imported and exported products and articles.
It would be impractical to delineate all those requirements in our
regulations, as they are subject to change by the importing country.
The FAA does request the importing authorities to periodically update
and review its special import requirements, and we maintain that
information in AC 21-2, Appendix 2, which is available on our Web site.
8. Definition of ``Standard Parts''
    We proposed in the NPRM to expand the definition of ``standard
parts'' that appeared in former Sec.  21.303(b)(4). The proposed
definition of ``standard parts'' included a part that conforms to a
specification established by a foreign government agency or a consensus
standards organization. However, due to conflicts between our proposed
definition with other authorities' definitions of ``standard parts,''
the FAA has decided against revising the definition of ``standard
parts'' at this time. Instead, we are maintaining the original use of
the term, which now appears in Sec.  21.9(a)(3).
9. Definitions
    FAA has expanded the part 1 definition of ``approved,'' as it
relates to the approval of products and articles, to include approvals
issued under the provisions of a bilateral agreement between the United
States and a foreign country or jurisdiction. This amendment clarifies
that data approved by a foreign civil aviation authority under a
bilateral agreement does not require further FAA approval. Furthermore,
the term ``jurisdiction,'' as it appears in the definition, applies to
entities that are not countries (e.g., the European Union (EU)).
    Section 21.1(a)(1) prescribes procedural requirements for issuing
and changing design approvals, production approvals, airworthiness
certificates, and airworthiness approvals. Paragraphs (b)(1) through
(b)(8) define the terms airworthiness approval, article, commercial
part, design approval, product, production approval, State of Design,
and State of Manufacture.
    We received forty-eight comments on this section. National Civil
Aviation Agency--Brazil (ANAC) asked that we define the term
``airworthiness certificates.'' An airworthiness certificate is a form
issued by the FAA or its designee to document whether a product meets
its type design and is in a condition for safe operation. The usage of
this form in this manner has been commonly accepted, and we have
determined that the term ``airworthiness certificate'' is widely
understood and requires no further definition.
    ANAC stated that the term ``jurisdiction,'' as it appeared in the
proposed definition of ``State of Design,'' should be defined because
an airworthiness jurisdiction is sometimes different than the company's
legal location jurisdiction. We have revised the definition of ``State
of Design'' to clarify that it means an entity that has regulatory
authority over an organization responsible for the design and continued
airworthiness of a civil aeronautical product or article. The concept
of ``airworthiness jurisdiction'' is addressed by the reference to
regulatory authority.
    ANAC further stated that we should better clarify the term ``State
of Manufacture'' because a product or article could have more than one
State of Manufacture. Accordingly, we have revised the definition of
``State of Manufacture'' to clarify that it means the country or
jurisdiction with regulatory authority over the organization
responsible for the production and airworthiness of a civil
aeronautical product or article.
    An individual commenter mentioned the definition of ``airworthiness
approval'' should include a reference to FAA Forms 8130-3 and 8130-4.
The commenter also stated that an FAA Form 8130-3 should be required
for standard and commercial parts when sold to an owner/operator for
installation. We disagree with both comments. The FAA reserves
discretion to change or use different FAA forms for various functions.
Therefore, we rarely use form numbers in the regulations. The required
form and manner of regulatory compliance is usually stated in policy
and guidance material. Also, as stated, an airworthiness approval is
used to document the airworthiness status of products and articles.
Because standard and commercial parts are not produced pursuant to an
approved type design, it would be inappropriate to issue an
airworthiness certificate for those parts. While the FAA does not issue
airworthiness approvals for these parts, they have been subjected to
evaluation by both the type design holder and the FAA to ensure their
suitability of use in the design.
    Boeing and two individual commenters stated that the term
``article'' should be used throughout Title 14. We have determined that
the part 21 definition of ``article'' may be inappropriate for use in
applications of the term in other parts of the regulations. Universal
application of the definition could likely result in unintended
consequences. However, the definition of ``article'' is appropriate for
use in this part.
    GE and two individual commenters contended that the definition of
``article'' should not include ``processes'' because generally, there
are no processes that can be considered stand-alone articles. Prior to
this rulemaking, we have traditionally defined ``article'' to include
processes, particularly in reference to TSO parts. We are retaining
that usage in this rule. We have determined that this definition is
appropriate because there are, in fact, instances when a stand-alone
process, such as software, is considered an article. When making a
determination of whether a process is an article, the FAA must consider
whether that process is a deliverable, stand-alone end item.
    AIA, Boeing, and GE stated that we should define the term
``supplier''. In general, the term ``supplier'' is understood to mean
any person or organization contracted to furnish products, articles, or
related services at any tier. However, the term ``supplier'' is well-
understood, and there is no need to define the term in this rulemaking
action.
    We have removed from subpart L the definitions of Class I, Class
II, and Class III products and the definition of ``newly overhauled''.
We now use the terms product and article consistently throughout part
21. In addition, we no longer require a definition of ``newly
overhauled'' since all occurrences of the term and any associated
requirements related to it have been removed from the regulations.

B. Miscellaneous Requirements

    The following discussion addresses miscellaneous amendments made to
part 21, many of which are primarily procedural or administrative in
nature and do not constitute major departures from the pre-existing
part 21 rules. In addition, we have made administrative changes to the
regulatory text to use terms consistently and for plain language
purposes.
1. Application for Parts Manufacturer Approval
    Section 21.303 requires an article to conform to its ``approved
design,'' rather than conforming to ``drawings in the

design,'' as was required by its predecessor rule. We have replaced the
term ``fabrication processes,'' appearing in the former rule, with
``manufacturing processes'' to reflect that PMA holders will no longer
have a fabrication inspection system. PMA holders must now comply with
the same quality system requirements as all other PAHs, consistent with
the size of the PAH and the complexity of the product or article
produced. PMA applicants must also provide a statement certifying that
the applicant has complied with the airworthiness requirements of this
subchapter.
    We received eleven comments on this section. AIA and GE recommended
that we clarify in the rule the meaning of ``approved design''. The
commenters noted that design data, such as process specifications, are
more than likely referenced on a drawing and may, along with the
drawing, comprise the complete type design data package. Specifications
and design documents may include material properties, inspection
criteria, non-destructive inspection criteria, design practices, design
parameters, or documents that include operational limits.
    We do not agree that a detailed definition of ``approved design''
is appropriate in this regulation. In our experience, it is widely
understood among applicants and approval holders that an ``approved
design'' means a complete design data package containing substantiating
data (e.g., processes, material specification, design parameters, and
limitations). Our intent is to clarify that the approved design may
consist of more than referenced drawings.
2. Production under Type Certificate (TC)
    This rule revises the introductory text of Sec.  21.123 to clarify
that a TC holder is authorized to manufacture articles, not just
products, for its type-certificated products. Paragraph (b) requires
the TC holder to make each product and article available to the FAA for
inspection. Paragraph (c) requires each manufacturer of a product, or
article thereof, under a TC to maintain completed inspection and test
records for specified periods of time. This rule also increases the
record retention requirements for all PAHs and for persons producing
under a TC from 2 years to at least 5 years. For critical components
identified under Sec.  45.15(c) of this chapter, the record retention
requirement is at least 10 years. Paragraph (d) requires each
manufacturer of a product, or article thereof, manufactured under a TC
to allow the FAA to make any inspection or test (including any
inspection or test at a supplier facility) necessary to determine
compliance with this subchapter.
    Industry groups, aircraft, aircraft engine, and parts manufacturers
expressed four main concerns. AIA, GE, and Pratt & Whitney were
concerned with the applicability of this section to existing TC or PC
holders. The commenters suggested that subpart F should only apply to
first-time applicants. If a person holds a current TC and PC for
various product models, then that person is producing articles for any
new models under an existing quality system. Commenters assert that the
TC or PC holder should not be required to obtain a PC six months after
the issuance of the new model TC, as required by Sec.  21.123, because
the person already has a PC. We partially agree. If the PC holder
chooses to manufacture a more complex product, the FAA must review the
quality system to determine whether it is adequate to produce products
or articles that conform to the type design and is in a condition for
safe operation.
    A part manufacturer asked whether a TSO article that is
incorporated into a TC is considered to have been manufactured in
accordance with the type design for the TC. While the TSO article is
part of the type design, it has its own approval process. A TSO article
is produced using minimum performance specifications; those
specifications constitute the design for the TSO article. That design
data is submitted to the FAA for approval with the manufacturer's
quality manual. A joint design/production approval is then granted
under subpart O.
3. Falsification of Applications, Reports, or Records
    Section 21.2 prohibits persons from making misleading statements on
applications for certificates or approvals or in any record or report
that is kept, made, or used to show compliance with any requirement of
this part. For the purposes of this rule, a misleading statement
requires a material representation or omission that is likely to
mislead a person when that person is acting with reasonable diligence
under the circumstances. The scope of Sec.  21.2 is now expanded to
prohibit fraudulent, intentionally false, or misleading statements on
any record that is kept, made, or used to show compliance with any
requirement of part 21. Also, a violation of this rule may be used as
the basis for denying an approval issued under part 21, in addition to
suspending or revoking an approval.
    We received eight comments on this proposed rule. AIA, Boeing, GE,
Pratt & Whitney, Embraer, and an individual commenter were concerned
that some persons might unknowingly make misleading statements and be
subject to an FAA violation. They stated that we should recognize, and
the rule should reflect, that honest mistakes happen and that those
mistakes should be given due consideration.
    The FAA recognizes that honest mistakes happen, and to that end, we
will collect and evaluate any available evidence regarding incorrect
representations and examine the overall impression created by that
representation. We must reserve the right to take action, as
appropriate, to address material inaccuracies in the related
application or records, whether or not the inaccuracies are
intentional.
    Experimental Aircraft Association (EAA) requested that we revise
the preamble language to reflect that phrases such as ``direct
replacement'' and ``ready to use in your aircraft'' are acceptable, as
they have been used for years in both certificated and experimental
aircraft industries. However, the FAA will not endorse the use of the
phrases ``direct replacement'' and ``ready to use in your aircraft'' to
suggest that an article is approved for installation on a type-
certificated aircraft unless the statements are supported by objective
evidence of such an approval.
    An individual commenter stated that we should clarify that Sec.
21.2 applies to noncertificated persons, commercial parts producers,
standard parts producers, and surplus suppliers. Part 21 governs the
certification of products or articles, and persons seeking such
certification would be subject to its provisions.
4. Design Changes
    Section 21.319 governs the classification and approval of PMA
design changes. Prior to this rulemaking, part 21 did not formally
address PMA design changes. Changes were accomplished using the design
change process used for TCs.
    Seven commenters, representing industry groups, aircraft
manufacturers, and engine manufacturers, expressed two main concerns.
The first concern was with the proposed definition of ``minor change''.
In general, AIA, Boeing, and GE believe that limiting the applicability
of design changes to an isolated view of ``parts-only'' could impact
safety. For example, under Sec.  21.319(a)(1), a change to the design
of an article may be classified as minor; however, if the change was
evaluated

with consideration of the complete aircraft or engine, the
classification of the change might not be minor.
    We disagree with the commenters and have determined that safety
will not be adversely affected by classifying changes to PMA parts as
``minor''. The classification of a change to a PMA article as minor
under Sec.  21.319 does not waive the installer of the requirements of
compliance to part 21, subpart D for the TC holder. This is due to the
installation of the changed PMA article, or the requirements of Sec.
21.113 for any person altering a type product with a major change in
type design. For example, if the installation of the changed PMA
article causes a major change to the type product, Sec.  21.113
requires an STC for installation approval.
    To clarify that the PMA change classification is only to apply at
the article level, we modified the definition of minor change. Section
21.319(a)(1) has been changed to read, ``A `minor change' to the design
of an article produced under a PMA is one that has no appreciable
effect on the approval basis.''
    Boeing recommended that we review the EASA regulation and
associated guidance and provide a discussion in the rule language to
differentiate how design changes are approved under differing methods
of obtaining a PMA. The issue of design change classifications
encompasses individuals other than just PMA holders who obtained their
approvals with licensing agreement data. TC holders can license their
design data to any third person, including to PAHs who have no
intention of seeking a PMA. The PMA holder can only evaluate the change
to its own design approval for its own article. If the PMA holder is
making a design change that affects the product on which the article is
installed, it requires an STC for the product.
    Furthermore, a comparison of our proposed regulation regarding
design changes with EASA regulations and guidance is beyond the scope
of this rulemaking.
5. Changes in Quality System
    Section 21.150 specifies requirements regarding changes in the
quality system. Previously, we required the PC holder to notify the FAA
of any change that might affect the inspection, conformity, or
airworthiness of the product. This rule amends that requirement to now
apply to ``articles,'' as well as products. Accordingly, we have
incorporated this requirement in subparts K and O, which are applicable
to PMA holders and TSO authorizations, respectively. Again, this rule
standardizes requirements for all PAHs.
6. Transferability of a Type Certificate
    Today's rule requires a TC holder to notify the FAA before the
transfer, execution, or termination of a licensing agreement. Such
notification allows us time to coordinate with our affected offices and
to inform the prospective licensees of their responsibilities. We also
now require a grantor to notify the FAA of TC transfer when the State
of Design is changing before the transfer occurs. Transferring a TC
when the State of Design is changing requires FAA coordination with the
aviation authority of the prospective State of Design to identify
requirements in support of the transfer and to reduce the FAA's burden
in managing the certificate.
    Embraer suggested the FAA place limits on how much advance notice
is required before transferring a certificate. We have determined that
it is more efficient to coordinate the transfer of a TC before the
transfer, rather than after it has occurred. Depending on the scope of
the transferred TC (complex aircraft or engine, etc.), the length of
transfer time may vary. Therefore, predetermined time limits could
restrict the process.
    ANAC suggested we require an agreement between States for licensing
agreements in which the licensee or the licensor is in another country.
ANAC believes such an agreement would make the oversight process more
efficient. We agree. However, bilateral agreements between authorities
already address licensing agreements between States, and we need not
make this a regulatory requirement. We exercise oversight
responsibilities for licensors in the United States. We have no
oversight responsibility over licensees located in other States.
    An individual commenter stated that the rule language regarding the
anticipated date of the agreement in Sec.  21.47(d) requires further
explanation. That commenter also questioned whether the licensing
agreement should be sent to the Manufacturing Inspection District
Office (MIDO), rather than the Aircraft Certification Office (ACO), as
any manufacturing activity based on the licensing agreement must be
approved by the MIDO. The ``anticipated date of the transfer'' is a
projection and may be speculative at times on the part of the licensor.
Furthermore, Sec.  21.47(d) applies to TC holders. A production
approval applicant must work with both the ACO and its cognizant MIDO.
7. Special Flight Permits
    Section 21.197(c)(1) allows the issuance of special flight permits
by part 119 certificate holders that have an approved program for
continuing flight authorization. It also allows the issuance of special
flight permits by management specification holders authorized to
conduct operations under part 91 for aircraft they operate and maintain
under a continuous maintenance program prescribed by Sec.  91.1411.
    The flight permits include conditions and limitations for flight
and may be issued for aircraft that do not meet applicable
airworthiness standards. Formerly, the FAA allowed the issuance of
special flight permits only by operators that maintain their aircraft
under a continuous airworthiness maintenance program (CAMP). This rule
provides relief to operators who do not have a CAMP but periodically
require the issuance of special flight permits. The operator must have
the necessary quality system and infrastructure to support this
authorization.
8. TC Applicant--Compliance with Applicable Requirements
    We established Sec.  21.20(a) to require an applicant for a TC,
including an amended TC or STC, to show compliance with all applicable
requirements and to provide the FAA the means by which such compliance
has been shown. It also requires an applicant for a TC, including an
amended TC or STC, to provide a statement certifying that the applicant
has complied with the applicable requirements.
    We received four comments on this section. Embraer, a repair
station, and two individual commenters stated that it would be
difficult for an applicant to determine if all of the requirements had
been met prior to applying for a TC. Therefore, further guidance might
be required. The type certification process requires the applicant and
the ACO to work closely together through the entire certification
process. The ACO will advise applicants of the requirements prior to
receipt of the certifying statement. This rule is intended to expedite
the type certification approval process by ensuring that an applicant's
submission package is complete prior to the FAA making the compliance
determination.
9. Issuance of Standard Airworthiness Certificates
    We revised Sec.  21.183(c) to allow a person to obtain a standard
airworthiness certificate for an aircraft

that is imported to the U.S. via an export certificate of
airworthiness, provided the aircraft is type certificated under Sec.
21.21 or Sec.  21.29, manufactured under the authority of another State
of Manufacture, and there is no undue burden on the FAA. The State of
Manufacture must certify (in accordance with the provisions of an
agreement with the United States for import and export of that
aircraft), and the FAA would have to determine that the aircraft
conforms to its type design and is in a condition for safe operation.
    An individual commenter stated that Sec.  21.183(c) should be
revised to apply the standards to new aircraft only. However, it would
be inappropriate to apply the rule for new aircraft only because there
are instances when used aircraft may be eligible for a standard
airworthiness certificate, such as when a used aircraft is imported
into the United States. If an airworthiness determination can also be
made for these aircraft, we have determined that used aircraft should
be eligible for a standard airworthiness certificate.
    That commenter also asserted the 100-hour inspection requirements
of Sec.  21.183(d)(2) should not be relaxed. The commenter believed the
only exception should be when: (1) An aircraft is imported from a
country with which the United States has a bilateral agreement that
addresses maintenance, and (2) the aircraft is currently certificated
and operating under an acceptable inspection/maintenance program.
Section 21.183(d)(2) does not relax the 100-hour inspection
requirement. Section 21.183(d)(2) merely provides an alternative means
of determining whether a product is acceptable.
    The commenter further asserted that the U.S. should only accept a
used aircraft from a country or jurisdiction that is not the State of
Manufacture when we have a bilateral agreement for maintenance with
that country or jurisdiction. Finally, the commenter stated that the
U.S. should not accept an aircraft for an airworthiness certification
in a category that requires a TC, unless the State of Manufacture for
that aircraft provides a certification of its status at manufacture.
    The intent of Sec.  21.183(d)(2) is to provide the ability to
accept equivalent inspection standards and the corresponding
airworthiness determinations from those countries and jurisdictions
with which the U.S. has a bilateral agreement. This rule incorporates
current policy, is consistent with bilateral practices, and may reduce
the cost of importing a used aircraft when duplicate inspection
requirements are eliminated.
10. Approval of Major Changes in Type Design
    The FAA now requires an applicant for approval of a major change in
type design to show that the changed product complies with the
applicable requirements. The applicant must provide the FAA the means
by which such compliance has been shown and a statement certifying that
the applicant has complied with the applicable requirements.
11. Quality Manual
    Section 21.138 requires each PC applicant to provide a quality
manual describing its quality system to the FAA for approval. This
requirement also applies to PMA and TSO approval holders. The quality
manual must address the quality system requirements of the subpart
under which the applicant seeks production approval. The quality manual
should also address changes to the quality system, revisions to the
manual, and a means of tracking revisions to the manual. These changes
must be acceptable to the FAA. In addition, this rule requires that the
quality manual be in the English language and retrievable in a form
acceptable to us so that regardless of the media used, the quality
manual is easily available to the PAH and FAA personnel.
12. Production Limitation Record
    Section 21.142 clarifies that the PC holder, not a PC applicant, is
authorized to manufacture the products listed on the production
limitation record (PLR). A PLR is issued once an applicant obtains a
PC, allowing the PC holder to manufacture the products listed on the
PLR.
13. Persons Authorized to Perform Maintenance, Preventive Maintenance,
Rebuilding, and Alterations
    The FAA has amended Sec.  43.3(j)(3) by removing all references to
an aircraft production inspection system (APIS). This change is
consistent with the amendments to part 21, subpart F. This change also
allows a manufacturer to perform any inspection required by parts 91 or
125 on aircraft it manufactured under a TC only or currently
manufactures under a PC.
    Transport Canada stated that Sec.  43.3(j) should be revised to
eliminate the special maintenance privileges afforded to manufacturers
so that all persons or organizations are subject to the same
requirements.
    We recognize that this section needs clarification to address the
performance of maintenance and oversight of those manufacturers who
exercise the privileges of Sec.  43.3(j). FAA is currently working to
address this and other maintenance/manufacturing issues.
14. Statement of Conformity
    The proposed rule requires a TC applicant to provide a statement of
conformity for each aircraft engine or propeller presented for TC. This
rule also removes the flight and operational check requirements that
were previously in Sec.  21.130. Those requirements were redundant with
the requirements in Sec. Sec.  21.127(a), 21.128, and 21.129. We have
removed from the regulations prescriptive details related to particular
FAA forms, form content, and form. This information is more
appropriately located in policy documents that are more easily amended
to reflect future changes in procedures.
    Previously, Sec.  21.130(c) exempted TC holders from providing a
statement of conformity for products manufactured for the Armed Forces
if they had accepted the product. We have removed that exception. Now,
TC holders must issue an FAA Form 8130-2, Conformity Certificate--
Military Aircraft, for products manufactured for the Armed Forces. This
amendment facilitates a future applicant's ability to obtain a special
airworthiness certificate under Sec.  21.183(d) for surplus military
aircraft.
    A parts manufacturer questioned the additional benefit associated
with obtaining an FAA Form 8130-2, in addition to Form 8130-3, that
would have been required under our original proposal. Because we are no
longer mandating the issuance of an airworthiness approval, the
commenter's concern about issuance of a Form 8130-3 approval is no
longer at issue. However, a Form 8130-2 is still required for military
aircraft used in civil applications. The FAA (or the DAR) relies on the
statement of conformity issued by the manufacturer as objective
evidence that the product or article for which the TC was issued
conforms to its approved type design and is in a condition for safe
operation.
15. Privileges
    We have revised Sec.  21.119(c) to clarify that the STC holder may
obtain a PC for the change in the type design approved by the STC if
the STC holder meets the requirements of subpart G, pertaining to the
issuance of PCs.

16. Issuance of Airworthiness Certificates for Restricted Category
Aircraft
    We have revised Sec.  21.185(c) to allow, under certain conditions,
the issuance of a special airworthiness certificate for restricted
category aircraft that are imported into the U.S. with an export
certificate of airworthiness. That aircraft must be type certificated
under Sec. Sec.  21.25 or 21.29 and be manufactured under the authority
of another State of Manufacture. The State of Manufacture must certify
that the aircraft conforms to its type design and is in condition for
safe operation at the time of export. Again, the FAA must find that the
aircraft conforms to its type design and is in condition for safe
operation.
17. Acceptance of Articles
    We have revised Sec.  21.502 by replacing the word ``approval''
with ``acceptance'' to clarify that subpart N governs only the import
or acceptance of articles into the U.S.; not the original design or
production approvals of articles. This revision also requires that an
article (including an article produced under a letter of TSO design
approval) be marked in accordance with part 45 of this chapter to meet
the requirements for FAA acceptance.

C. Compliance Dates

    This rule is effective 180 days after publication in the Federal
Register. The compliance date for part 1; part 21, subparts H, I, L,
and N; and part 45, subpart B, Sec. Sec.  45.11 and 45.13 is 180 days
after publication in the Federal Register. The rule changes in these
subparts are either cost relieving or have no economic impact on
industry. The changes do not affect, and are not affected by, other
changes to the rule. Therefore, the compliance date is the same as the
effective date. All other portions of the final rule either promulgate
new requirements or are tied to other requirements that have an
extended compliance date. These rule provisions have a compliance date
of 18 months after the rule's publication in the Federal Register.
    Prior to the effective compliance dates of this final rule,
compliance with any portion of this rule that conflicts with an
existing rule is not allowed. However, it is possible to comply with
the former part 21 requirements and the requirements of this rule
concurrently.

III. Regulatory Notices and Analyses

Paperwork Reduction Act

    This rule contains new information collection requirements. As
required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)),
the FAA submitted the information requirements associated with this
rule to the Office of Management and Budget (OMB) for review and
approval. An agency may not collect or sponsor the collection of
information, nor impose an information collection requirement, unless
it displays a currently valid OMB control number.
    As required by the Act, we submitted a copy of the new information
requirements to OMB for its review when we published the NPRM.
Additionally, in the NPRM, we solicited comments from the public on the
proposed new information collection requirements. Affected parties,
however, do not have to comply with the information collection
requirements of this rule until OMB approves the FAA's request for this
information collection requirement. The FAA will publish a separate
document notifying you of the OMB Control Number and the compliance
date(s) for the information collection requirements of this rule.
    The NPRM (71 FR 58914, October 5, 2006) summarized the FAA's
analysis of the economic impacts of this rule. The FAA expected private
entities would incur reporting and recordkeeping costs when applying
for and operating under this rule and solicited comments on minimizing
the cost and burden of the collection.
    Based on comments to the docket that costs were prohibitive and
benefits small, the FAA withdrew proposals that required airworthiness
approvals for all (domestic and overseas) shipments of aircraft
engines, propellers, and articles; certifying staff to issue the
approvals; and marking requirements for all aircraft products and
articles. These changes removed $327.1 million or 99.2 percent of the
original undiscounted (gross) cost, and $187.6 million or 99.1 percent
of the original present value total cost.
    We also removed the provision in Sec.  21.331 to allow PAHs to
issue their own export airworthiness approvals. The issuance of an
export airworthiness approval by the manufacturer would violate the
terms of our bilateral agreements with other countries and
jurisdictions. A fundamental premise of all bilaterals is that exported
parts must be accompanied by an airworthiness approval issued by the
relevant authority or its authorized designee. We estimated
undiscounted cost savings of $95.5 million over 10 years, and present
value cost savings of $54.8 million from this rule change in the NPRM.
The net cost relief from changes to the NPRM to the rule amount to
$231.6 million in undiscounted costs and $132.8 million in present
value costs.
    The average total annual cost burden and average total annual hour
burden discussed in the NPRM do not take into consideration that
section 3, Quality System manual and section 4, Organization, have
costs that are front-loaded at a ratio of 80 percent in the first two
years. Adjustments have been made to account for that front-loading.
Estimates of the Hour Burden of the Collection Information
    The requirements for hour burden of the information collection
associated with this rule fall into the following categories:
     Reporting of Failures, Malfunctions, and Defects;
     Commercial Parts;
     PC Quality System (internal audits);
     PC Quality System (in-service feedback);
     PMA Application (statement of compliance);
     PMA Quality System;
     PMA Quality Manual;
     TSO Organization.
    The total annual hour burden for this rule is estimated to be
approximately 2,589 hours.
Benefits of this Rulemaking
     The rule becomes effective in 2009. However, the FAA does
not propose to make this information collection effective until
approximately 12 months after the rule's effective date.
     The costs savings a private entity will attain under this
rule will exceed the costs imposed by this rule.

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 the corresponding ICAO Standards and Recommended Practices and
has enhanced two ICAO definitions in these regulations.

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

    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 (Pub. L. 96-354) requires
agencies to analyze the economic impact of regulatory changes on small

entities. Third, the Trade Agreements Act (Pub. L. 96-39) prohibits
agencies from setting standards that create unnecessary obstacles to
the foreign commerce of the United States. In developing U.S.
standards, this Trade Act requires agencies to consider international
standards and, where appropriate, that they be the basis of U.S.
standards. 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 with base year of
1995).
    In conducting these analyses, the FAA has determined this final
rule has benefits that justify its costs, and it is a ``significant
regulatory action'' as defined in section 3(f) of Executive Order 12866
because it raises novel policy issues contemplated under that executive
order. Accordingly, OMB has reviewed this rule. The rule is also
``significant'' as defined in DOT's Regulatory Policies and Procedures.
The final rule, if adopted, will not have a significant economic impact
on a substantial number of small entities, will not create unnecessary
obstacles to international trade and will not impose an unfunded
mandate on state, local, or tribal governments, or on the private
sector. These analyses, available in the final regulatory evaluation
supporting this rule, are summarized below.

Regulatory Evaluation Summary

    For more information, we suggest readers go to the full regulatory
evaluation. A copy is in the docket for this rulemaking.
    This portion of the preamble summarizes the FAA's analysis of the
economic impact of this rule. It also includes summaries of the final
regulatory flexibility analysis, international trade impact assessment,
and the unfunded mandate assessment. For more information, we suggest
readers go to the full regulatory evaluation, a copy of which we have
placed in the docket for this rulemaking.
Total Benefits and Costs of this Rule
    We find the modest costs of this rule to be overwhelmed by very
large cost savings and some safety benefits. We estimate the
undiscounted 10-year costs of this rule to be about $2.1 million, the
undiscounted 10-year cost savings to be about $126 million, and the
undiscounted 10-year safety benefits to be about $10.1 million. We
estimate the present value (2009 dollars) costs of this rule to be
about $1.7 million, the present value cost savings to be about $88.4
million, and the present value safety benefits to be about $7.1
million. Consequently, we estimate this rule to be highly cost-
beneficial with undiscounted 10-year net benefits of about $134 million
and present value net benefits of about $93.8 million.
Persons Potentially Affected by this Rule
    This rule primarily directly affects all type certificate (TC) and
production approval holders (PAHs), including holders of PCs, TSOs, and
PMAs. Regional air cargo carriers and exporters of used aircraft and
used engines, propellers, and other articles (primarily distributors
and individuals) are also directly affected by this rule.
Assumptions and Sources of Information
     As the rule mandates procedural changes with small front-
loaded costs, we use a 10-year period of analysis, 2009 through 2018.
     This rule will become a final rule in 2009. The FAA
intends to make cost-neutral or cost-relieving subparts and sections of
this rule that are stand-alone changes effective 180 days after
publication in the Federal Register. For purposes of our cost-benefit
analysis, we assume safety benefits and benefits of cost-relieving
changes will begin in 2009. The remaining portions of the rule (with
positive costs) will be effective 12 months after the rule's effective
date. We assume one-time costs will occur in 2010 and continuing costs
will begin in 2010.
     The discount rate is 7 percent (Office of Management &
Budget, Circular A-94, ``Guidelines and Discount Rates for Benefit-Cost
Analysis of Federal Programs'', October 29, 1992, p. 8).
     We obtained the number of PAHs by PAH type from the FAA's
Certificate Management Information System (CMIS) database.
     PAHs are defined as ``small'' or ``large'' using U.S.
Small Business Administration (SBA) size standards. (See table of Small
Business Size Standards Matched to North American Industry
Classification System Codes, July 21, 2006.)
     We estimated the number of small (and large) PAHs using a
45 percent sample of all PAH data from the FAA's Small Airplane and
Rotorcraft Directorates.
     The fully burdened wage rate for engineers and quality
system professionals is $80 an hour.
     The fully burdened wage rate for pilots in the regional
air cargo industry is $55 an our (RACCA).
     We obtained data on aircraft and aircraft engine exports
from the Trade Policy Information System (TPIS) database (International
Trade Administration, Department of Commerce).
     Importing countries accept large transport category
airplanes based on a bridge inspection document (Industry expert from
the Aeronautical Repair Station Association (ARSA)).
     Exporters of used aircraft and used engines compete away
90 percent of the cost savings to overseas buyers.
     Forty percent of U.S. engine exports are used engines
(based on the percentage of used aircraft exports shown by TPIS
database).
     Aircraft engine overhauls occur every five years (FAA
expert from the Office of Aviation Safety, Flight Standards Service
(AFS)).
     Eighty percent of importing countries accept used large
jet engines without a complete overhaul (ARSA industry expert).
     We obtained information on aircraft accidents caused by
inadequate quality control from the National Transportation Safety
Board (NTSB) accident reports and the FAA's Aviation Safety Information
Analysis and Sharing (ASIAS) database for air claims.
     The value of a statistical fatality averted is $3 million
(Economic Values for FAA Investment and Regulator Decisions, a Guide,
p. 2-2, Aviation Specialist Group, Inc., for Office of Aviation Policy
and Plans, FAA, Washington, DC, December 31, 2004).\1\
---------------------------------------------------------------------------

    \1\ The current value of the equivalent life saved is $5.8
million, and under that value, benefits would be even higher.
---------------------------------------------------------------------------

     The legal and medical costs for fatalities and injuries
are obtained from Economic Values for FAA Investment and Regulator
Decisions, pp. 2-2 to 2-4.
     This rule will prevent 50 percent of future accidents
caused by inadequate quality control.
     Data on costs of compliance with this rule were obtained
from FAA data and industry representatives.
Changes From the NPRM to the Final Rule
    Based on comments to the docket that costs were prohibitive and
benefits small, the FAA has withdrawn major proposals requiring
airworthiness approvals for all (domestic and overseas) shipments of
aircraft engines, propellers, and articles; certifying staff to issue
these approvals; and marking

requirements for all aircraft products and articles. These changes
remove $327.1 million or 99.2 percent of the original undiscounted
(gross) cost, and $187.6 million or 99.1 percent of the original
present value total cost.
    We have also, however, removed the provision in Sec.  21.331 that
would have allowed PAHs to issue their own export airworthiness
approvals. The issuance of an export airworthiness approval by the
manufacturer would violate the terms of our bilateral agreements with
other countries and jurisdictions. A fundamental premise of all
bilaterals is that exported parts must be accompanied by an
airworthiness approval issued by the relevant authority or its
authorized designee. In the NPRM, we estimated undiscounted cost
savings of $95.5 million and present value cost savings of $54.8
million from this rule change. Consequently, the net cost relief from
changes to the NPRM amount to $231.6 million in undiscounted costs and
$132.8 million in present value costs.
Benefits of this Rulemaking
    The benefits of the rule include estimated cost savings from three
rule changes that relieve regulatory burden and estimated safety
benefits. As the table shows, we estimate the undiscounted 10-year cost
savings from these rule changes to be about $126.0 million and the
present value cost savings to be about $88.4 million. Safety benefits
from this rule will arise to the extent that it prevents accidents
caused by inadequate quality control. As the table shows, we estimate
the undiscounted 10-year safety benefits of this to be about $10.1
million and the present value (2009 dollars) safety benefits to be
about $7.1 million. As the table shows, summing the cost savings and
the safety benefits yields undiscounted total 10-year benefits of about
$95.5 million and total present value (2009$) benefits of about $95.5
million.

                               Table 1--Summary Table of Benefits by Rule Section
----------------------------------------------------------------------------------------------------------------
                                                                          Present value cost   Undiscounted cost
              Section No.                      Section description         savings/benefits    savings/benefits
----------------------------------------------------------------------------------------------------------------
Sec.   21.197..........................  Special flight permits.........          $4,596,668          $6,661,500
Sec.   21.329(c) deleted...............  Annual type inspection no                 6,719,695           9,567,330
                                          longer required for used A/C
                                          to receive export
                                          airworthiness certificate.
Sec.   21.331 (Sec.   21.329(e)          New overhaul no longer required          77,122,043         109,804,440
 deleted).                                for used engine to receive
                                          export airworthiness approval.
                                                                         ---------------------------------------
                                         Total Cost Savings.............          88,438,406         126,033,270
                                        ------------------------------------------------------------------------
                                         Safety Benefits................           7,067,034          10,061,867
                                        ------------------------------------------------------------------------
                                         Total Benefits of the Rule.....          95,505,440         136,095,137
                                        ------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------

Costs of This Rulemaking
    The Final Regulatory Evaluation for this rule examines the impact
of an FAA final rule that will make extensive changes to its part 21
certification procedures and identification requirements for
aeronautical products and articles. These changes will:
     Standardize several requirements for PAHs, including
requirements for a quality system and quality manual to reflect
industry best practices;
     Revise export airworthiness approval requirements to
facilitate global manufacturing and trade;
     Move all part marking requirements from part 21,
Certification Procedures for Products and Parts, to part 45,
Identification and Registration Marking; and
     Add a new classification of parts called ``commercial
parts.''
    The intent of these changes is to promote safety by ensuring that,
whether manufactured locally or abroad, aircraft products and articles
meet applicable standards. These changes will update the regulations to
reflect the current global environment for the manufacture and trade of
aircraft products and articles and, more generally, to improve
regulatory efficiency.
    Most of these changes standardize, clarify, or simplify rule
language, while other rule changes are already industry practice.
Consequently, they impose no new costs and possibly have qualitative
positive benefits by increasing the efficiency of the regulatory
process. Of the dozens of rule changes, only eight have net positive
costs, not including probable qualitative benefits. Our estimates are
shown in the table. As the table shows, we estimate undiscounted 10-
year costs to be about $2.1 million and present value (2009 dollars)
costs to be about $1.7 million.

                                 Table 2--Summary Table of Costs by Rule Section
----------------------------------------------------------------------------------------------------------------
                                                                             Present value
              Section No.                      Section description               costs        Undiscounted costs
----------------------------------------------------------------------------------------------------------------
Sec.   21.3(f).........................  Reporting of failures,                       $4,614              $6,942
                                          malfunctions, and defects.
Sec.   21.9(a)(4)......................  Commercial parts...............             499,890             790,596
Sec.   21.137(l).......................  PC Quality system (internal                  11,813              12,640
                                          audits).
Sec.   21.137(m).......................  PC Quality system (in-service                39,626              42,400
                                          feedback).
Sec.   21.303(a)(5)....................  PMA Application (statement of               276,262             295,600
                                          compliance).
Sec.   21.307..........................  PMA Quality system.............             415,551             444,640
Sec.   21.308..........................  PMA Quality manual.............             424,374             454,080
Sec.   21.605..........................  TSO Organization...............              22,430              24,000
                                                                         ---------------------------------------
    Total Costs.........................................................           1,694,560           2,070,898
----------------------------------------------------------------------------------------------------------------

Regulatory Flexibility Determination

    The Regulatory Flexibility Act of 1980 (Pub. L. 96-354) (RFA)
establishes ``as a principle of regulatory issuance that agencies shall
endeavor, consistent with the objectives of the rule and of applicable
statutes, to fit regulatory and informational requirements to the scale
of the businesses, organizations, and governmental jurisdictions
subject to regulation. To achieve this principle, agencies are required
to solicit and consider flexible regulatory proposals and to explain
the rationale for their actions to assure that such proposals are given
serious consideration.'' The RFA 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 rule will
have a significant economic impact on a substantial number of small
entities. If the agency determines that it will, the agency must
prepare a regulatory flexibility analysis as described in the RFA.
However, if an agency determines that a rule is not expected to have a
significant economic impact on a substantial number of small entities,
section 605(b) of the RFA provides that the head of the agency may so
certify and a regulatory flexibility analysis is not required. The
certification must include a statement providing the factual basis for
this determination, and the reasoning should be clear.
    The Initial Regulatory Flexibility Analysis of this rule, published
in the Federal Register (72 FR 6968, February 14, 2007), found a
significant economic impact on a substantial number of small entities.
We received numerous comments to the docket that the costs of the rule
were prohibitive, and particularly so for small firms. The greatest
concern was with our requirements for (1) airworthiness approvals for
all (domestic and overseas) shipments of aircraft engines, propellers,
and articles and (2) marking requirements for all aircraft products and
articles. In response to these comments, the FAA has withdrawn these
major proposals. These changes remove $187.6 million, or 99.1 percent
of the original present value (gross) cost. As a consequence, for all
firms in our sample of small firms affected by the rule, the annualized
cost of the rule relative to estimated average annual revenues is less
than 0.1 percent.
    Several comments to the docket argued that we have greatly
underestimated the cost for PMA holders--especially small holders--to
comply with the requirement for a quality system (Sec.  21.307) and
quality manual (Sec.  21.308), particularly the internal audit
provision. According to these comments, additional staff will be
required at a cost, in the case of a one-person shop, of up to $60,000
a year. Our reference to ISO standards and other preamble language may
have misled these commenters. We intend that the requirements be
scalable relative to firm size and product complexity. The complexity
of the quality system and the size of the quality manual depend on the
size of the PAH and the complexity of the product or articles
manufactured. A small PMA producing a simple article requires only a
simple quality system--Some of the quality system requirements might
even be ``not applicable.'' In the case of a one-person shop producing
a simple article, the internal audit provision might be not applicable
or, if deemed applicable, might be satisfied with an audit every four
years. The corresponding quality manual might consist of only three or
four pages.
    Therefore, as the FAA Administrator, I certify that this rule will
not have a significant economic impact on a substantial number of small
entities.

International Trade Impact Assessment

    The Trade Agreements Act of 1979 (Pub. L. 96-39), as amended by the
Uruguay Round Agreements Act (Pub. L. 103-465), prohibits Federal
agencies from establishing standards or engaging in related activities
that create unnecessary obstacles to the foreign commerce of the United
States. Pursuant to these Acts, the establishment of standards is not
considered an unnecessary obstacle to the foreign commerce of the
United States, so long as the standard has a legitimate domestic
objective, such the protection of safety, and does not operate in a
manner that excludes imports that meet this objective. The statute also
requires consideration of international standards and, where
appropriate, that they be the basis for U.S. standards. The FAA has
assessed the potential effect of this proposed rule and determined that
it would have only a domestic impact and therefore would not create
unnecessary obstacles to the foreign commerce of the United States. We
have assessed the potential effect of this rule and determined it
complies with the Trade Agreements Act, as it will promote
international trade by:
     Revising export airworthiness certificate and approval
requirements to no longer require used aircraft to undergo an annual
type inspections and to no longer require used engines and propellers
to be newly overhauled; and
     Changing language in order to harmonize with bilateral
agreements and European Union (EU) regulations.

Unfunded Mandates Assessment

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4) requires each Federal agency to prepare a written statement
assessing the effects of any Federal mandate in a proposed or final
agency rule that may result in an expenditure of $100 million or more
(adjusted annually for inflation with the base year 1995) in any one
year by State, local, and tribal governments, in the aggregate, or by
the private sector; such a mandate is deemed to be a ``significant
regulatory action.'' The FAA currently uses an inflation-adjusted value
of $136.1 million. This rule does not contain such a mandate. The
requirements of Title II do not apply.

Executive Order 13132, Federalism

    The FAA has analyzed this rule under the principles and criteria of
Executive Order 13132, Federalism. We determined that this action will
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,
and, therefore, does not have federalism implications.

Regulations Affecting Intrastate Aviation in Alaska

    Section 1205 of the FAA Reauthorization Act of 1996 (110 Stat.
3213) requires the FAA, when modifying its regulations in a manner
affecting intrastate aviation in Alaska, to consider the extent to
which Alaska is not served by transportation modes other than aviation,
and to establish appropriate regulatory distinctions. In the NPRM, we
requested comments on whether the proposed rule should apply
differently to intrastate operations in Alaska. We did not receive any
comments, and we have determined, based on the administrative record of
this rulemaking, that there is no need to make any regulatory
distinctions applicable to intrastate aviation in Alaska.

Environmental Analysis

    FAA Order 1050.1E identifies FAA actions that are categorically
excluded from preparation of an environmental assessment or
environmental impact statement under the National Environmental Policy
Act in the absence of extraordinary circumstances. The FAA has
determined this

rulemaking action qualifies for the categorical exclusion identified in
paragraph 308(b) and involves no extraordinary circumstances.

Regulations that Significantly Affect Energy Supply, Distribution, or
Use

    The FAA has analyzed this NPRM under Executive Order 13211, Actions
Concerning Regulations that Significantly Affect Energy Supply,
Distribution, or Use (May 18, 2001). We have determined that it is not
a ``significant energy action'' under the executive order because while
it is a ``significant regulatory action,'' it is not likely to have a
significant adverse effect on the supply, distribution, or use of
energy.

Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act (SBREFA) of
1996 requires FAA to comply with small entity requests for information
or advice about compliance with statutes and regulations within its
jurisdiction. If you are a small entity and you have a question
regarding this document, you may contact your local FAA official, or
the person listed under the FOR FURTHER INFORMATION CONTACT heading at
the beginning of the preamble. You can find out more about SBREFA on
the Internet at http://www.faa.gov/regulations_policies/rulemaking/
sbre_act/.

Availability of Rulemaking Documents

    You can get an electronic copy of rulemaking documents using the
Internet by--
    1. Searching the Federal eRulemaking Portal (http://
www.regulations.gov);
    2. Visiting the FAA's Regulations and Policies Web page at http://
www.faa.gov/regulations_policies/; or
    3. Accessing the Government Printing Office's Web page at http://
www.gpoaccess.gov/fr/index.html.
    You can also get a copy by sending a request to the Federal
Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence
Avenue, SW., Washington, DC 20591, or by calling<PHONE_NUMBER>. Make
sure to identify the amendment number or docket number of this
rulemaking.
    You may access all documents the FAA considered in developing this
final rule, including economic analyses and technical reports, from the
Internet through the Federal eRulemaking Portal referenced in paragraph
(1).

List of Subjects

14 CFR Part 1

    Air transportation.

14 CFR Part 21

    Aircraft, Aviation safety, Exports, Imports, Reporting and
recordkeeping requirements.

14 CFR Part 43

    Aircraft, Aviation safety, Reporting and recordkeeping
requirements.

14 CFR Part 45

    Aircraft, Exports, Signs and symbols.

The Amendment

0
In consideration of the foregoing, the Federal Aviation Administration
amends Chapter I of Title 14, Code of Federal Regulations parts 1, 21,
43, and 45 as follows:

PART 1--DEFINITIONS AND ABBREVIATIONS

0
1. The authority citation for part 1 continues to read as follows:

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

0
2. Amend Sec.  1.1 by revising the definition of ``Approved'' to read
as follows:

Sec.  1.1  General definitions.

* * * * *
    Approved, unless used with reference to another person, means
approved by the FAA or any person to whom the FAA has delegated its
authority in the matter concerned, or approved under the provisions of
a bilateral agreement between the United States and a foreign country
or jurisdiction.
* * * * *

0
3. Amend Sec.  1.2 by adding the abbreviations PMA and TSO in
alphabetical order to read as follows:

Sec.  1.2  Abbreviations and symbols.

* * * * *
    PMA means parts manufacturer approval.
* * * * *
    TSO means technical standard order.
* * * * *

PART 21--CERTIFICATION PROCEDURES FOR PRODUCTS, ARTICLES, AND PARTS

0
4. 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, 44704, 44707, 44709, 44711, 44713, 44715, 45303.

PART 21 [AMENDED]

0
5. Amend part 21 by:
0
a. Removing the word ``Administrator'' and adding in its place the word
``FAA'' wherever it appears;
0
b. Removing the word ``shall'' and adding in its place the word
``must'' wherever it appears; and
0
c. Removing the phrase ``type certificate only'' and adding in its
place the phrase ``type certificate'' wherever it appears.

0
6. Revise Sec.  21.1 to read as follows:

Sec.  21.1  Applicability and definitions.

    (a) This part prescribes--
    (1) Procedural requirements for issuing and changing--
    (i) Design approvals;
    (ii) Production approvals;
    (iii) Airworthiness certificates; and
    (iv) Airworthiness approvals;
    (2) Rules governing applicants for, and holders of, any approval or
certificate specified in paragraph (a)(1) of this section; and
    (3) Procedural requirements for the approval of articles.
    (b) For the purposes of this part--
    (1) Airworthiness approval means a document issued by the FAA for
an aircraft, aircraft engine, propeller, or article which certifies
that the aircraft, aircraft engine, propeller, or article conforms to
its approved design and is in a condition for safe operation;
    (2) Article means a material, part, component, process, or
appliance;
    (3) Commercial part means an article that is listed on an FAA-
approved Commercial Parts List included in a design approval holder's
Instructions for Continued Airworthiness required by Sec.  21.50;
    (4) Design approval means a type certificate (including amended and
supplemental type certificates) or the approved design under a PMA, TSO
authorization, letter of TSO design approval, or other approved design;
    (5) Product means an aircraft, aircraft engine, or propeller;
    (6) Production approval means a document issued by the FAA to a
person that allows the production of a product or article in accordance
with its approved design and approved quality system, and can take the
form of a production certificate, a PMA, or a TSO authorization;
    (7) State of Design means the country or jurisdiction having
regulatory authority over the organization responsible for the design
and continued airworthiness of a civil aeronautical product or article;
    (8) State of Manufacture means the country or jurisdiction having
regulatory authority over the organization responsible for the
production and airworthiness of a civil aeronautical product or
article.

0
7. Amend Sec.  21.2 by revising paragraphs (a) introductory text,
(a)(1), (a)(2), and (b) to read as follows:

Sec.  21.2  Falsification of applications, reports, or records.

    (a) A person may not make or cause to be made--
    (1) Any fraudulent, intentionally false, or misleading statement on
any application for a certificate or approval under this part;
    (2) Any fraudulent, intentionally false, or misleading statement in
any record or report that is kept, made, or used to show compliance
with any requirement of this part;
* * * * *
    (b) The commission by any person of an act prohibited under
paragraph (a) of this section is a basis for--
    (1) Denying issuance of any certificate or approval under this
part; and
    (2) Suspending or revoking any certificate or approval issued under
this part and held by that person.

0
8. Amend Sec.  21.3 by revising paragraphs (a), (b), (d)(1), (d)(2),
(e)(3), and (f) to read as follows:

Sec.  21.3  Reporting of failures, malfunctions, and defects.

    (a) The holder of a type certificate (including amended or
supplemental type certificates), a PMA, or a TSO authorization, or the
licensee of a type certificate must report any failure, malfunction, or
defect in any product or article manufactured by it that it determines
has resulted in any of the occurrences listed in paragraph (c) of this
section.
    (b) The holder of a type certificate (including amended or
supplemental type certificates), a PMA, or a TSO authorization, or the
licensee of a type certificate must report any defect in any product or
article manufactured by it that has left its quality system and that it
determines could result in any of the occurrences listed in paragraph
(c) of this section.
* * * * *
    (d) * * *
    (1) Failures, malfunctions, or defects that the holder of a type
certificate (including amended or supplemental type certificates), PMA,
TSO authorization, or the licensee of a type certificate determines--
    (i) Were caused by improper maintenance or use;