[House Report 108-526]
[From the U.S. Government Publishing Office]



108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     108-526

======================================================================



 
              CAPE TOWN TREATY IMPLEMENTATION ACT OF 2004

                                _______
                                

  June 8, 2004.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

     Mr. Young of Alaska, from the Committee on Transportation and 
                Infrastructure, submitted the following

                              R E P O R T

                        [To accompany H.R. 4226]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Transportation and Infrastructure, to whom 
was referred the bill (H.R. 4226) to amend title 49, United 
States Code, to make certain conforming changes to provisions 
governing the registration of aircraft and the recordation of 
instruments in order to implement the Convention on 
International Interests in Mobile Equipment and the Protocol to 
the Convention on International Interests in Mobile Equipment 
on Matters Specific to Aircraft Equipment, known as the ``Cape 
Town Treaty'', having considered the same, report favorably 
thereon with an amendment and recommend that the bill as 
amended do pass.
  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as ``Cape Town Treaty Implementation Act of 
2004''.

SEC. 2. FINDINGS AND PURPOSE.

  (a) Findings.--Congress finds the following:
          (1) The Cape Town Treaty (as defined in section 44113 of 
        title 49, United States Code) extends modern commercial laws 
        for the sale, finance, and lease of aircraft and aircraft 
        engines to the international arena in a manner consistent with 
        United States law and practice.
          (2) The Cape Town Treaty provides for internationally 
        established and recognized financing and leasing rights that 
        will provide greater security and commercial predictability in 
        connection with the financing and leasing of highly mobile 
        assets, such as aircraft and aircraft engines.
          (3) The legal and financing framework of the Cape Town Treaty 
        will provide substantial economic benefits to the aviation and 
        aerospace sectors, including the promotion of exports, and will 
        facilitate the acquisition of newer, safer aircraft around the 
        world.
          (4) Only technical changes to United States law and 
        regulations are required since the asset-based financing and 
        leasing concepts embodied in the Cape Town Treaty are already 
        reflected in the United States in the Uniform Commercial Code.
          (5) The new electronic registry system established under the 
        Cape Town Treaty will work in tandem with current aircraft 
        document recordation systems of the Federal Aviation 
        Administration, which have served United States industry well.
          (6) The United States Government was a leader in the 
        development of the Cape Town Treaty.
  (b) Purpose.--Accordingly, the purpose of this Act is to provide for 
the implementation of the Cape Town Treaty in the United States by 
making certain technical amendments to the provisions of chapter 441 of 
title 49, United States Code, directing the Federal Aviation 
Administration to complete the necessary rulemaking processes as 
expeditiously as possible, and clarifying the applicability of the 
Treaty during the rulemaking process.

SEC. 3. RECORDATION OF SECURITY INSTRUMENTS.

  (a) Establishment of System.--Section 44107(a) of title 49, United 
States Code, is amended--
          (1) in paragraph (2)(A) by striking ``750'' and inserting 
        ``550''; and
          (2) in paragraph (3) by striking ``clause (1) or (2) of this 
        subsection'' and inserting ``paragraph (1) or (2)''.
  (b) International Registry.--Section 44107 of such title is amended 
by adding at the end the following:
  ``(e) International Registry.--
          ``(1) Designation of united states entry point.--As permitted 
        under the Cape Town Treaty, the Federal Aviation Administration 
        Civil Aviation Registry is designated as the United States 
        Entry Point to the International Registry relating to--
                  ``(A) civil aircraft of the United States;
                  ``(B) an aircraft for which a United States 
                identification number has been assigned but only with 
                regard to a notice filed under paragraph (2); and
                  ``(C) aircraft engines.
          ``(2) System for filing notice of prospective interests.--
                  ``(A) Establishment.--The Administrator shall 
                establish a system for filing notices of prospective 
                assignments and prospective international interests in, 
                and prospective sales of, aircraft or aircraft engines 
                described in paragraph (1) under the Cape Town Treaty.
                  ``(B) Maintenance of validity.--A filing of a notice 
                of prospective assignment, interest, or sale under this 
                paragraph and the registration with the International 
                Registry relating to such assignment, interest, or sale 
                shall not be valid after the 60th day following the 
                date of the filing unless documents eligible for 
                recording under subsection (a) relating to such notice 
                are filed for recordation on or before such 60th day.
          ``(3) Authorization for registration of aircraft.--A 
        registration with the International Registry relating to an 
        aircraft described in paragraph (1) (other than subparagraph 
        (C)) is valid only if (A) the person seeking the registration 
        first files documents eligible for recording under subsection 
        (a) and relating to the registration with the United States 
        Entry Point, and (B) the United States Entry Point authorizes 
        the registration.''.

SEC. 4. REGULATIONS.

  (a) In General.--The Administrator of the Federal Aviation 
Administration shall issue regulations necessary to carry out this Act, 
including any amendments made by this Act.
  (b) Contents of Regulations.--Regulations to be issued under this Act 
shall specify, at a minimum, the requirements for--
          (1) the registration of aircraft previously registered in a 
        country in which the Cape Town Treaty is in effect; and
          (2) the cancellation of registration of a civil aircraft of 
        the United States based on a request made in accordance with 
        the Cape Town Treaty.
  (c) Expedited Rulemaking Process.--
          (1) Final rule.--The Administrator shall issue regulations 
        under this section by publishing a final rule by December 31, 
        2004.
          (2) Effective date.--The final rule shall not be effective 
        before the date the Cape Town Treaty enters into force with 
        respect to the United States.
          (3) Economic analysis.--The Administrator shall not be 
        required to prepare an economic analysis of the cost and 
        benefits of the final rule.
  (d) Applicability of Treaty.--Notwithstanding parts 47.37(a)(3)(ii) 
and 47.47(a)(2) of title 14, of the Code of Federal Regulations, 
Articles IX(5) and XIII of the Cape Town Treaty shall apply to the 
matters described in subsection (b) until the earlier of the effective 
date of the final rule under this section or December 31, 2004.

SEC. 5. LIMITATION ON VALIDITY OF CONVEYANCES, LEASES, AND SECURITY 
                    INSTRUMENTS.

  Section 44108(c)(2) of title 49, United States Code, is amended by 
striking the period at the end and inserting ``or the Cape Town Treaty, 
as applicable.''.

SEC. 6. DEFINITIONS.

  (a) In General.--Chapter 441 of title 49, United States Code, is 
amended by adding at the end the following:

``Sec. 44113. Definitions

  ``In this chapter, the following definitions apply:
          ``(1) Cape town treaty.--The term `Cape Town Treaty' means 
        the Convention on International Interests in Mobile Equipment, 
        as modified by the Protocol to the Convention on International 
        Interests in Mobile Equipment on Matters Specific to Aircraft 
        Equipment, signed at Rome on May 9, 2003.
          ``(2) United states entry point.--The term `United States 
        Entry Point' means the Federal Aviation Administration Civil 
        Aviation Registry.
          ``(3) International registry.--The term `International 
        Registry' means the registry established under the Cape Town 
        Treaty.''.
  (b) Conforming Amendment.--The analysis for such chapter is amended 
by adding at the end the following:

``44113. Definitions.''.

SEC. 7. EFFECTIVE DATE AND PRESERVATION OF PRIOR RIGHTS.

  This Act, including any amendments made by this Act, shall take 
effect on the date the Cape Town Treaty (as defined in section 44113 of 
title 49, United States Code) enters into force with respect to the 
United States and shall not apply to any registration or recordation 
that was made before such effective date under chapter 441 of such 
title or any legal rights relating to such registration or recordation.

                       Purpose of the Legislation

    H.R. 4226 amends title 49, United States Code, to make 
certain conforming changes to provisions governing the 
registration of aircraft and the recordation of instruments to 
implement the Convention on International Interests in Mobile 
Equipment and the Protocol to the Convention on International 
Interests in Mobile Equipment on Matters Specific to Aircraft 
Equipment, known as the ``Cape Town Treaty.''

                  Background and Need for Legislation

    The Cape Town Convention on International Interests in 
Mobile Equipment, and the related Protocol on Aircraft 
Equipment, known as the ``Cape Town Treaty,'' will extend 
modern commercial finance laws, already in place in the United 
States, to international transactions involving high value 
mobile equipment. The Cape Town Convention contains the basic 
terms and provisions that underlie the regime and the Aircraft 
Protocol makes the Treaty operational as to aircraft, aircraft 
engines and helicopters above a certain size. The Treaty 
represents a significant advance in international aviation 
financing and is vital to U.S. aviation and aerospace interests 
given the challenges faced by the industry today. Key federal 
agencies concerned with civil aviation and U.S. exports, 
including the FAA, Export-Import Bank of the United States 
(EXIM Bank), and the Departments of Transportation, Commerce 
and State were fully involved in development of the Convention 
and Aircraft Protocol.
    The financing provisions on secured interests and leasing 
under the Treaty do not require any implementing legislation in 
the U.S. because they are fully consistent with U.S. law under 
the Uniform Commercial Code. However, certain technical 
amendments to the Federal Aviation Administration's (FAA) Civil 
Aviation Registry functions are required to fully integrate the 
FAA's Registry system with the new, computerized International 
Registry that will be established under the Treaty. Those 
technical amendments are set forth in H.R. 4226, the ``Cape 
Town Treaty Implementation Act of 2004.''

Treaty status

    The Cape Town Convention and Aircraft Protocol were 
negotiated under the auspices of the International Institute 
for the Unification of Private Law (UNIDROIT), an 
intergovernmental organization focused on harmonizing the 
commercial law of nations, and the International Civil Aviation 
Organization (ICAO), the United Nations body responsible for 
international aviation. It was concluded in November 2001 at a 
Diplomatic Conference at Cape Town, South Africa, and has been 
signed by 29 states, including the United States. The President 
transmitted the Cape Town Convention and Aircraft Protocol to 
the Senate on November 5, 2003. Later that month, Secretary of 
Transportation Norman Y. Mineta transmitted proposed technical 
amendments to the FAA's authority to fully implement the 
Treaty. The Senate Foreign Relations Committee held a hearing 
on the Treaty on April 1, 2004.

Benefits of the FAA Civil Aviation Registry, the designated U.S. Entry 
        Point, and the International Registry

    The Cape Town Treaty will establish a new international 
legal framework, modeled on the modern finance law as practiced 
in the U.S., to give greater security to those who finance the 
purchase of highly mobile aircraft, aircraft engines and 
helicopters of a certain size. To implement this world-wide 
system for countries ratifying the Treaty, an International 
Registry will be established where notices of rights in 
aircraft, helicopters and engines will be recorded. That will 
be done for the limited purpose of establishing the priority of 
competing financial interests, and has no oversight, safety or 
other regulatory implications. Under the amendments made by 
H.R. 4226, the FAA's Civil Aviation Registry (``FAA Registry'') 
system will be preserved and fully integrated with the new 
International Registry.
    Once in force, the Cape Town Treaty will provide 
significant economic benefits both in the U.S and abroad. For 
countries that manufacture aircraft, such as the U.S., there 
will likely be increased exports as the number of orders for 
aircraft and aircraft equipment increase. U.S. companies that 
make aircraft parts and provide related services also will 
benefit and positive employment implications all around are 
expected. In addition, the creditor protections provided for by 
the Treaty will benefit U.S. financing companies. There will be 
a significant reduction in the risk financing companies incur 
when financing aircraft in countries whose laws do not 
meaningfully protect creditors in the event of a default or 
insolvency. This risk reduction will, in turn, bring benefits 
to many countries, particularly developing countries, whose 
carriers have had to pay high interest rates or who have not 
been able to access the commercial credit markets at all 
because of their credit risk. For example, the EXIM Bank has 
already offered financing advantages to airlines located in 
countries that ratify the Treaty. Currently, four countries 
have ratified the Convention and Protocol: Ethiopia, Pakistan, 
Nigeria and Panama. Increased credit, assisting in the 
acquisition of modern aircraft, will also contribute to 
international aviation safety.
    An important difference between the FAA's Registry and the 
new International Registry is that parties having recordable 
interests in U.S. aircraft and related equipment file their 
complete documents relating to the interest with the FAA 
Registry, while they will only file short, summary notices of 
such interests with the new International Registry. To ensure 
overall effectiveness of aircraft finance and to maintain the 
benefits of the FAA's ``full documentary'' Registry, H.R. 4226 
designates the FAA Registry, to be the U.S. ``Entry Point'' to 
the International Registry. It also provides that parties must 
continue to file all recordable documents with the FAA to 
receive the authorization to file with the International 
Registry and for that registration to be valid.

Amendments to U.S. law to implement the Cape Town Treaty

    H.R. 4226 makes minor conforming changes to chapter 441 of 
title 49, United States Code, which governs the recordation of 
security interests with the FAA Registry, currently operated 
out of the FAA's Mike Monroney Aeronautical Center in Oklahoma 
City. It designates the FAA Registry as the U.S. Entry Point to 
the International Registry and implements other key features of 
the Cape Town Treaty.
    First, it provides for the filing of prospective interests 
in aircraft, helicopters or engines. This is a modern financing 
approach where the priority of the secured interest dates from 
the date of the filing of the notice of prospective interest. 
The FAA is directed to establish a system for filing such 
notices and authorizing the parties to file with the 
International Registry. The filing of the prospective notice 
and its registration with the International Registry is not 
valid unless the parties subsequently file with the FAA, within 
60 days, their recordable documents relating to the interest. 
This is essential to maintaining the current FAA system and 
providing for legal certainty and clarity.
    Second, the bill makes conforming amendments to current law 
to recognize the application of the Cape Town Treaty. One 
amendment allows the recordation of slightly less powerful 
engines with the FAA registry and the new International 
Registry. Another change directs the FAA to immediately 
prescribe regulations for the registration and deregistration 
of aircraft in accordance with the terms of the Treaty relating 
to the consent of affected parties. This only relates to 
financing interests, and has no effect on FAA safety and 
security rules and practices.

FAA rulemaking

    The Committee also requires an expedited rulemaking 
procedure and directs the agency to complete the rulemaking by 
December 31, 2004. The rulemaking requires the updating of only 
two sections of FAA's current regulations (sections 47.37 and 
47.47 of 14 C.F.R.). To expedite the rulemaking process, the 
Committee believes that the FAA should be able to proceed to a 
final rule without first seeking public comment on these 
straightforward changes to the FAA regulations. The bill also 
waives the requirement to prepare an economic analysis of the 
cost and benefits of the rule. To provide legal certainty and 
clarity during the time period of the rulemaking process, the 
bill expressly provides that the provisions of the Cape Town 
Treaty apply to those matters covered by the rulemaking until 
the final rule is effective or December 31, 2004, whichever is 
earlier.
    H.R. 4226 provides that the Act and the amendments made by 
this Act are effective upon the Cape Town Treaty's coming into 
force in the U.S. and do not apply to any prior registration or 
recordation. The Committee wants to make certain and clear that 
all existing rights are subject to prior rules and are 
unaffected by the Act. The Committee expects that the FAA will 
manage its rulemaking process so as to make its updated 
regulations effective when the Cape Town Treaty comes into 
force in the U.S. and the International Registry has been 
established. The FAA should facilitate the U.S. ratification of 
the Treaty at the earliest possible date. U.S. ratification is 
critical to ratification by a number of other countries, 
including those with large markets for U.S. exports.

Summary of the Legislation

                        SECTION 1.--SHORT TITLE

    This Act may be cited as the ``Cape Town Implementation Act 
of 2004''.

                    SECTION 2.--FINDINGS AND PURPOSE

    This section sets forth congressional findings describing 
the significance and benefits of the Cape Town Treaty and 
noting that the Treaty's commercial financing and leasing 
concepts are fully consistent with existing U.S. law. It also 
notes that only technical changes to U.S. law and regulations 
are needed and recognizes the United States' leadership role in 
the development of the Treaty. This section also sets forth 
that the purpose of the Act is to provide for implementation of 
the Treaty by making certain technical amendments to title 49, 
United States Code. It directs the FAA to complete rulemaking 
as fast as possible.

            SECTION 3.--RECORDATION OF SECURITY INSTRUMENTS

    This section makes conforming changes to 49 U.S.C. 44107, 
the provision that governs the recordation of security 
interests with the FAA Registry. The first amendment would 
lower the power rating of aircraft engines eligible for 
recordation from 750 rated takeoff horsepower to 550. This 
allows for interests in slightly less powerful engines to be 
recorded with the FAA registry, a change called for by the Cape 
Town Treaty. That change was included in the Treaty so that 
security interests in engines that power all medium size 
business aircraft to large commercial aircraft would be 
eligible for the benefits of the Treaty including the new 
International Registry.
    This section designates the FAA's Civil Aviation Registry 
as the U.S. ``Entry Point'' for authorizing filings related to 
U.S. registered civil aircraft, helicopters or aircraft engines 
with the new International Registry. This reflects an expressly 
authorized declaration under the Treaty by the U.S., which was 
done to ensure the seamless interaction of the new 
International Registry and the FAA Registry, as well as to 
maintain full documentation of all transactions at the FAA 
Registry. Use of that FAA authorization procedure is also 
available for aircraft engines, so as to permit efficient 
transaction closings.
    This section also directs the FAA to establish a system for 
filing notices of prospective interests in aircraft, 
helicopters or aircraft engines with the FAA and, in turn, 
authorizing such filings with the new International Registry. 
This concept of prospective interests reflects the modern 
financing practice in the U.S. under the Uniform Commercial 
Code. It gives notice of an intended secured interest, where 
both parties to the transaction agree. The date the notice is 
registered establishes the interest's priority. This 
advancement is one of the key improvements brought about under 
the Cape Town Treaty. To provide for this type of filing, while 
at the same time ensuring that the full documentary system of 
the FAA Registry is maintained, this section provides that the 
filing of a notice of prospective interest and its registration 
on the International Registry will only be valid if the secured 
parties subsequently file the recordable documents related to 
the notice within 60 days. However, this 60-day rule does not 
apply in the limited cases where a document-type or category is 
not eligible for recordation at the FAA Registry, as for 
example, with regard to a sale of an aircraft engine. In such a 
case, this section does not invalidate a registration at the 
International Registry based on such notice of prospective 
interest.
    Finally, this section provides that, with regard to U.S. 
civil aircraft, or aircraft that have received a U.S. 
identification number (but have not yet become U.S. aircraft), 
that authorization from the FAA Entry Point must be obtained 
for a filing with the International Registry, and all related, 
eligible documents must first be recorded with the FAA 
Registry, for any registration with the International Registry 
to be valid relating to such aircraft. However, for aircraft 
engines the FAA authorization is optional (since engines do not 
have any country's nationality). This is consistent with the 
Treaty and is intended to provide clarity and certainty to the 
registration process.

                        SECTION 4.--REGULATIONS

    This section directs the FAA to prescribe regulations 
necessary to implement the Cape Town Treaty with regard to two 
specific processes. First, FAA must proscribe regulations for 
the registration of aircraft in the U.S. that were previously 
registered in a foreign country where the Cape Town Treaty is 
in force. Secondly, the FAA must proscribe regulations for the 
de-registration of U.S. civil aircraft based on a request made 
in accordance with the terms of the Treaty. These terms deal 
only with financial interests and have no effect on safety, 
security or other legal requirements. This rulemaking serves 
the limited function of implementing key remedies available 
under the Treaty to those holding financial interests in 
aircraft.
    This section also requires an expedited rulemaking process. 
Given the noncontroversial nature of the matters to be dealt 
with in rulemaking, the expected, clear content of the 
regulations based on express provisions in the Treaty, and the 
fact that the development of the Cape Town Treaty had broad 
participation of private parties as well as government 
agencies, this section directs the FAA to publish a final rule 
by no later than December 31, 2004. It also notes that the 
final rule shall not be effective before the Treaty comes into 
force in the U.S. In the further interest of avoiding 
unnecessary delay and given the widespread acknowledgement of 
and support for the Treaty's potential economic benefits, the 
preparation of any economic analysis for the rulemaking is not 
required.
    Finally, this section states that the Cape Town Treaty 
shall apply to the registration and deregistration of aircraft 
until the FAA final rule is effective, or until the deadline 
for a final rule, December 31, 2004, whichever is earlier. 
Sections 47.37 and 47.47 of 14 C.F.R., cited in this section, 
are inconsistent with the mandates of the Cape Town Treaty in 
that they provide that before an aircraft can be registered as 
a U.S. civil aircraft (or deregistered as a U.S. civil 
aircraft), all holders of recorded security interests must be 
satisfied or give their consent before the registration (or 
deregistration) can be approved. The current regulations carry 
out the terms of the old Geneva Convention. The Cape Town 
Convention updates and changes these requirements. 
Specifically, once the Treaty is in effect, and where, under 
the Treaty, a specific authorization has been granted, only the 
senior interest will have to be satisfied or consent to the 
registration or deregistration of an aircraft. This change 
reflects more modern methods of financing and is acceptable 
because any other financial interests will still be protected 
through filings with the new International Registry.

  SECTION 5.--LIMITATION ON THE VALIDITY OF CONVEYANCES, LEASES, AND 
                          SECURITY INSTRUMENTS

    This section makes a conforming change to 49 U.S.C. 44108 
to recognize that the application of the Cape Town Treaty. 
Specifically, it clarifies that the terms of section 
44108(c)(1), which provides that the validity of a transaction 
is governed by the law of the place of delivery, does not take 
precedence over the Cape Town Treaty. The change is required 
since the Treaty lays down substantive requirements with regard 
to the validity of a transaction. A similar approach was 
previously followed for the Geneva Convention.

                        SECTION 6.--DEFINITIONS

    This section provides definitions of terms used in the Act.

      SECTION 7.--EFFECTIVE DATE AND PRESERVATION OF PRIOR RIGHTS

    This section provides that the Act and the amendments made 
by this Act are effective upon the Cape Town Treaty coming into 
force in the U.S. and do not apply to any prior registration or 
recordation under chapter 441 or any legal rights relating 
thereto. All existing rights are subject to prior rules and 
thus unaffected by the Act.

            Legislative History and Committee Consideration

    H.R. 4226 was introduced by Chairman Young, Ranking Member 
James Oberstar, Aviation Subcommittee Chairman John Mica and 
Aviation Subcommittee Ranking Member Peter DeFazio on April 28, 
2004. It was referred to the Committee on Transportation and 
Infrastructure. The Aviation Subcommittee held a hearing on the 
Treaty and H.R. 4226 on April 29, 2004 and then, on the same 
date, in a mark up session, the Subcommittee ordered that H.R. 
4226 be favorably reported, without amendment, to the full 
committee. A full committee mark-up was held on May 12, 2004, 
where, after adopting a manager's amendment offered by Aviation 
Subcommittee Chairman Mica, (which made clarifying changes to 
the bill), H.R. 4226 was ordered reported, as amended, to the 
House by voice vote.

                             Rollcall Votes

    Clause 3(b) of rule XIII of the House of Representatives 
requires each committee report to include the total number of 
votes cast for and against on each roll call vote on a motion 
to report and on any amendment offered to the measure or 
matter, and the names of those members voting for and against. 
There were no roll call votes during consideration of the bill.

                      Committee Oversight Findings

    With respect to the requirements of clause 3(c)(1) of rule 
XIII of the Rules of the House of Representatives, the 
Committee's oversight findings and recommendations are 
reflected in this report.

                          Cost of Legislation

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives does not apply where a cost estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974 has been timely submitted prior to the filing of the 
report and is included in the report. Such a cost estimate is 
included in this report.

                    Compliance with House Rule XIII

    1. With respect to the requirement of clause 3(c)(2) of 
rule XIII of the Rules of the House of Representatives, and 
308(a) of the Congressional Budget Act of 1974, the Committee 
references the report of the Congressional Budget Office 
included below.
    2. With respect to the requirement of clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, the 
performance goals and objective of this legislation are to 
improve transportation safety.
    3. With respect to the requirement of clause 3(c)(3) of 
rule XIII of the Rules of the House of Representatives and 
section 402 of the Congressional Budget Act of 1974, the 
Committee has received the following cost estimate for H.R. 
4226 from the Director of the Congressional Budget Office.

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 26, 2004.
Hon. Don Young,
Chairman, Committee on Transportation and Infrastructure,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4226, the Cape 
Town Treaty Implementation Act of 2004.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Megan 
Carroll.
            Sincerely,
                                         Elizabeth Robinson
                               (For Douglas Holtz-Eakin, Director).
    Enclosure.

H.R. 4226--Cape Town Treaty Implementation Act of 2004

    The Cape Town Treaty, which CBO expects to come into force 
during fiscal year 2005, will extend asset-based financing 
laws, already applied in the United States, to international 
transactions involving the sale, financing, or leasing of 
aircraft and aircraft engines. Under that treaty, an 
international organization will establish a registry to record 
security interests in aircraft and aircraft engines.
    The Federal Aviation Administration (FAA) currently 
operates a similar registry for domestic aircraft and aircraft 
engines. To implement the Cape Town Treaty in the United 
States, H.R. 4226 would expand the FAA's authority to operate 
that registry and authorize the agency to provide access to the 
new international registry. The bill also would direct the FAA 
to issue regulations to implement these changes.
    According to the FAA, H.R. 4226 would require no major 
changes to the agency's existing registry or recording 
processes, and any increases in administrative costs would be 
less than $500,000 a year. Hence, CBO estimates that 
implementing H.R. 4226 would not significantly affect the 
federal budget. The bill would not affect direct spending or 
revenues.
    Section 4 of the Unfunded Mandates Reform Act excludes from 
the application of that act any legislative provisions that are 
necessary for the ratification or implementation of 
international treaty obligations. CBO has determined that 
because H.R. 4226 would implement the Cape Town Treaty, it 
falls within that exclusion. CBO has thus not reviewed the bill 
for the presence of mandates.
    The CBO staff contact for this estimate is Megan Carroll. 
This estimate was approved by Peter H. Fontaine, Deputy 
Assistant Director for Budget Analysis.

                   Constitutional Authority Statement

    Pursuant to clause (3)(d)(1) of rule XIII of the Rules of 
the House of Representatives, committee reports on a bill or 
joint resolution of a public character shall include a 
statement citing the specific powers granted to the Congress in 
the Constitution to enact the measure. The Committee on 
Transportation and Infrastructure finds that Congress has the 
authority to enact this measure pursuant to its powers granted 
under article I, section 8 of the Constitution.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act. (Public Law 104-4).

                        Preemption Clarification

    Section 423 of the Congressional Budget Act of 1974 
requires the report of any Committee on a bill or joint 
resolution to include a statement on the extent to which the 
bill or joint resolution is intended to preempt state, local or 
tribal law. The Committee states that H.R. 4226 does not 
preempt any state, local, or tribal law.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act are created by this 
legislation.

                Applicability to the Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act. (Public Law 
104-1).

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

TITLE 49, UNITED STATES CODE

           *       *       *       *       *       *       *


SUBTITLE VII--AVIATION PROGRAMS

           *       *       *       *       *       *       *


PART A--AIR COMMERCE AND SAFETY

           *       *       *       *       *       *       *


                          SUBPART III--SAFETY

         CHAPTER 441--REGISTRATION AND RECORDATION OF AIRCRAFT

Sec.
44101.  Operation of aircraft.
     * * * * * * *
44113.  Definitions.
          * * * * * * *

Sec. 44107. Recordation of conveyances, leases, and security 
                    instruments

  (a) Establishment of System.--The Administrator of the 
Federal Aviation Administration shall establish a system for 
recording--
          (1) * * *
          (2) leases and instruments executed for security 
        purposes, including conditional sales contracts, 
        assignments, and amendments, that affect an interest 
        in--
                  (A) a specifically identified aircraft engine 
                having at least [750] 550 rated takeoff 
                horsepower or its equivalent;
          * * * * * * *
          (3) releases, cancellations, discharges, and 
        satisfactions related to a conveyance, lease, or 
        instrument recorded under [clause (1) or (2) of this 
        subsection] paragraph (1) or (2).
          * * * * * * *
  (e) International Registry.--
          (1) Designation of united states entry point.--As 
        permitted under the Cape Town Treaty, the Federal 
        Aviation Administration Civil Aviation Registry is 
        designated as the United States Entry Point to the 
        International Registry relating to--
                  (A) civil aircraft of the United States;
                  (B) an aircraft for which a United States 
                identification number has been assigned but 
                only with regard to a notice filed under 
                paragraph (2); and
                  (C) aircraft engines.
          (2) System for filing notice of prospective 
        interests.--
                  (A) Establishment.--The Administrator shall 
                establish a system for filing notices of 
                prospective assignments and prospective 
                international interests in, and prospective 
                sales of, aircraft or aircraft engines 
                described in paragraph (1) under the Cape Town 
                Treaty.
                  (B) Maintenance of validity.--A filing of a 
                notice of prospective assignment, interest, or 
                sale under this paragraph and the registration 
                with the International Registry relating to 
                such assignment, interest, or sale shall not be 
                valid after the 60th day following the date of 
                the filing unless documents eligible for 
                recording under subsection (a) relating to such 
                notice are filed for recordation on or before 
                such 60th day.
          (3) Authorization for registration of aircraft.--A 
        registration with the International Registry relating 
        to an aircraft described in paragraph (1) (other than 
        subparagraph (C)) is valid only if (A) the person 
        seeking the registration first files documents eligible 
        for recording under subsection (a) and relating to the 
        registration with the United States Entry Point, and 
        (B) the United States Entry Point authorizes the 
        registration.

Sec. 44108. Validity of conveyances, leases, and security instruments

  (a) * * *

           *       *       *       *       *       *       *

  (c) Applicable Laws.--(1) * * *
  (2) This subsection does not take precedence over the 
Convention on the International Recognition of Rights in 
Aircraft (4 U.S.T. 1830)[.] or the Cape Town Treaty, as 
applicable.

           *       *       *       *       *       *       *


Sec. 44113. Definitions

  In this chapter, the following definitions apply:
          (1) Cape town treaty.--The term ``Cape Town Treaty'' 
        means the Convention on International Interests in 
        Mobile Equipment, as modified by the Protocol to the 
        Convention on International Interests in Mobile 
        Equipment on Matters Specific to Aircraft Equipment, 
        signed at Rome on May 9, 2003.
          (2) United states entry point.--The term ``United 
        States Entry Point'' means the Federal Aviation 
        Administration Civil Aviation Registry.
          (3) International registry.--The term ``International 
        Registry'' means the registry established under the 
        Cape Town Treaty.

           *       *       *       *       *       *       *


                                  
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