Proposed FAA Rule Regarding U.S. Registered Civil Aircraft Registration

March 4, 2010

In February of 2008, the Federal Aviation Administration (the "FAA") issued the attached Notice of Proposed Rulemaking. The proposed rule aims to increase the accuracy of the records within the FAA Civil Aircraft Registry, however it will also impose additional obligations on the holders of Certificates of Aircraft Registration.

The proposed rule establishes an expiration date for, and mandates periodic renewal of, the Certificate of Aircraft Registration for every U.S. registered civil aircraft. Accordingly, once the proposed rule takes effect all aircraft currently registered in the United States must be re-registered during a specific three-month period falling within the next three years. This re-registration process will even apply to aircraft registered prior to passage of the proposed rule. This is a significant change since Certificates of Aircraft Registration currently have no expiration date nor is there any requirement for renewal of such Certificates.

The proposed rule adds Section 47.40 to the Federal Aviation Regulations found in Part 14 of the Code of Federal Regulations. This proposed Section states that Certificates of Aircraft Registration will expire three years after the last day of the month in which they are issued.  As a result, and to comply with the proposed rule, current Certificate holders must first re-register their aircraft and then subsequently renew the registration of their aircraft every three years.

The proposed rule outlines the future dates within which currently registered aircraft must be re-registered based upon the month the Certificate of Aircraft Registration was originally issued. Once such renewals are completed,each Certificate of Aircraft Registration will be valid for three years and will clearly display an expiration date.

To initiate the renewal process, the FAA will send the registered owner, at the address listed in its Aircraft Registration Application, an Aircraft Registration Renewal form 120 days prior to the expiration date on the Certificate of Aircraft Registration. To render the renewal timely, the registered owner must (1) file the Renewal form and (2) pay a $5.00 fee to the FAA Civil Aircraft Registry (3) at least 90 days prior to the expiration date on the Certificate of Aircraft Registration.The stated purpose behind the 90-day requirement is to "facilitate timely issuance and delivery of the new certificate before expiration." If there are nosubstantive changes (e.g., name,address) to the registration, the Renewal form may be filed, and the requisite fee paid, through the FAA’s website.

Failure to timely re-register or renew an aircraft’s registration will result in cancellation of such aircraft's Certificate of Aircraft Registration and will invalidate the registration of the aircraft. As a result, the aircraft will no longer be legally operable, the N-number will be cancelled and the perfection of legal interests may be jeopardized. Further, the aircraft may be grounded, seized, or impounded and fines may be imposed. Moreover, even if the holder of a Certificate of Aircraft Registration initiated the renewal process before expiration, but did not receive a new Certificate of Aircraft Registration prior to the expiration date, the aircraft registration will be cancelled. Accordingly, the proposed rule requires diligent supervision and oversight with respect to the expiration date of one's Certificate of Aircraft Registration.

The FAA's proposed rule presents challenges for commercial operators of aircraft, corporate flight departments, fractional program operators and financiers of aircraft. Substantive time and resources will be required to effectively manage one's fleet of aircraft to comply with the proposed renewal procedures. Even more onerous is the burden placed on finance companies attempting to monitor their borrower's compliance with the proposed regulations. The operation of an invalidly registered aircraft, or an aircraft whose Certificate has been cancelled, has serious consequences for the owners and financiers of said aircraft.

Following notice of the proposed rule, the FAA solicited Comments from interested parties. Despite a multitude of Comments submitted from the aviation industry objecting to the proposed rule, the FAA submitted the final proposed rule, in its original form, to the Department of Transportation (DOT) where it has remained since January 15, 2010. Following review by the DOT, it must be cleared by the Office of Management and Budget (OMB). Even though the rule was scheduled to go to the OMB on February 19, 2010, for its approval or rejection by May 19, 2010, it appears that the proposed rule remains with the DOT. According to FAA officials, the proposed rule remains on course to be approved by the OMB.Once approved by the OMB, the proposed rule will become a published regulation, and therefore deemed a final rule, with the effective date set forth therein. Despite the delay in moving to the OMB, the proposed rule’s anticipated publication date is June 2, 2010. Therefore, at earliest, the rule would take effect on June 2, 2010. As such, the first cancellation date for Certificates of Aircraft Registration would be September 2, 2010.

For further informationregarding: (i) what the proposed changes will mean to you and/or your company; (ii) the aircraft currently registered to you and/or your company; or (iii) assistance in maintaining a database with respect to the renewal dates for those aircraft registered in your company's name or in which you presently have a security interest, please contact one of our aviation department attorneys.

Copyright 2010 Crowe & Dunlevy

Notice of Proposed Rulemaking