[Federal Register Volume 62, Number 135 (Tuesday, July 15, 1997)]
[Proposed Rules]
[Pages 38008-38013]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-18520]



[[Page 38007]]

_______________________________________________________________________

Part IV





Department of Transportation





Federal Aviation Administration



_______________________________________________________________________



14 CFR Part 187



Fees for Providing Production Certification-Related Services Outside 
the United States; Proposed Rule



Proposed Advisory Circular 187-XX, Aircraft Certification Service Fees 
for Providing Production Certification-Related Services Outside the 
United States; Notice

  Federal Register /  Vol. 62, No. 135 / Tuesday, July 15, 1997 / 
Proposed Rules  

[[Page 38008]]



DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 187

[Docket No. 28967; Notice No. 97-11]
RIN 2120-AG14


Fees for Providing Production Certification-Related Services 
Outside the United States

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

-----------------------------------------------------------------------

SUMMARY: This document proposes to establish fees by voluntary 
agreement for production certification-related services pertaining to 
aeronautical products manufactured or assembled outside the United 
States (U.S.). In addition, the NPRM outlines the methodology for 
determining the fees, describes how and when the FAA would provide 
these services, and describes the method for payment of fees. This 
proposed action, if adopted, would allow the FAA to recover certain 
costs in providing requested production certification-related services 
abroad and help to ensure that such services are provided in a 
responsive and timely manner.

DATES: Comments must be received on or before August 14, 1997.

ADDRESSES: Comments on this proposal may be delivered or mailed, in 
triplicate, to: Federal Aviation Administration, Office of the Chief 
Counsel, Attention: Rules Docket (AGC-200), Docket No. 28967, Room 
915G, 800 Independence Avenue, SW., Washington, DC 20591. Comments 
submitted must be marked: ``Docket No. 28967.'' Comments may also be 
sent electronically to the following Internet address 9-nprm-
[email protected]. Comments may be examined in Room 915G on weekdays, 
except Federal holidays, between 8:30 a.m. and 5:00 p.m.

FOR FURTHER INFORMATION CONTACT:
Ramona L. Johnson, Aircraft Certification Service, AIR-200, Federal 
Aviation Administration, 800 Independence Avenue, SW., Washington, DC 
20591, telephone: (202) 267-8361.

SUPPLEMENTARY INFORMATION:

Comments Invited

    Interested persons are invited to participate in the making of the 
proposed rule by submitting such written data, views, or arguments as 
they may desire. Comments relating to the environmental, energy, 
federalism, or economic impact that might result from adopting the 
proposal in this notice are also invited. Substantive comments should 
be accompanied by cost estimates. Comments must reference the 
regulatory docket or notice number and be submitted in triplicate to 
the Rules Docket address identified above.
    All comments received, as well as a report summarizing each 
substantive public contact with FAA personnel on this rulemaking, will 
be filed in the docket. The docket is available for public inspection 
before and after the comment closing date.
    All comments received on or before the closing date will be 
considered by the Administrator before proceeding with this proposed 
rulemaking. Late-filed comments will be considered to the extent 
practicable. The proposals contained in this notice may be changed as a 
result of the comments received.
    Commenters wishing the FAA to acknowledge receipt of their comments 
submitted in response to this notice must include with those comments a 
pre-addressed, stamped postcard on which the following statement is 
made: ``Comments to Docket No. 28967.'' The postcard will be date 
stamped and mailed to the commenter.

Availability of NPRMs 

    This document may be downloaded from the FAA regulations section of 
the FedWorld electronic bulletin board (telephone: 703-321-3339), the 
Federal Register's electronic bulletin board (telephone: 202-512-1661).
    Internet users may access the FAA's web page at http://www.faa.gov 
or the Federal Register web page at http://www.access.gpo.gov/su__docs 
to download recently published rulemaking documents.
    Any person may obtain a copy of this NPRM by submitting a request 
to the Federal Aviation Administration, Office of Rulemaking, ARM-1, 
800 Independence Avenue, SW., Washington, DC 20591, or by calling (202) 
267-9680. Communications must reference the notice number or docket 
number of this NPRM.
    Persons interested in being placed on the mailing list for future 
NPRMs should request a copy of Advisory Circular (AC) No. 11-2A, Notice 
of Proposed Rulemaking Distribution System, which describes the 
application procedure. This document can be obtained from the FAA 
Office of Rulemaking.

Background

    Under Title 49 U.S.C. Section 44701, the FAA is responsible for the 
regulation and promotion of safety of flight. Title 49 U.S.C. Section 
44704(b) authorizes the FAA Administrator to issue production 
certificates. Section 44704(b) provides, in part, that:

    The Administrator shall issue a production certificate 
authorizing the production of a duplicate of any aircraft, aircraft 
engine, propeller, or appliance for which a type certificate has 
been issued when the Administrator finds the duplicate will conform 
to the certificate. On receiving an application, the Administrator 
shall inspect, and may require testing * * *.

    The production certification-related services that the FAA provides 
to fulfill its statutory responsibilities may be generally described as 
follows:
    1. Processing applications for the following: production under a 
type certificate only, production under an approved production 
inspection system, production under a production certificate or 
extension of a production certificate, production under a technical 
standard order authorization, and production under a parts manufacturer 
approval. The processing of applications includes a review of data, 
response to the applicant, and evaluation of the applicant's further 
responses as necessary.
    2. Certificate management of the manufacturing facility quality 
assurance system.
    3. Witnessing tests and performing conformity inspections of 
articles. 
    4. Managing designees.
    5. Investigating incidents, accidents, allegations and other 
unusual circumstances.
    These FAA services are provided to Production Approval Holders 
(PAH). A person who holds a parts manufacturer approval (PMA), a 
Technical Standard Order (TSO) authorization, or a production 
certificate (PC), or who holds a type certificate (TC) and produces 
under that TC, is referred to as a PAH. The regulatory services 
provided to a PAH include: initial PAH qualification, ongoing PAH and 
supplier surveillance, designee management, conformity inspections; as 
well as initial PAH qualification and ongoing surveillance for 
production certificate extensions outside the U.S. The specialists who 
perform these functions on behalf of the FAA are Aviation Safety 
Inspectors, Aviation Safety Engineers, and Flight Test Pilots.
    Currently, the FAA performs production certification-related 
services both domestically and internationally. It does not issue 
production approvals

[[Page 38009]]

outside of the U.S. However, in some international situations, the FAA 
allows PAH use of suppliers outside the U.S. if parts or sub-assemblies 
can be 100% inspected by the PAH upon their receipt in the U.S. or if 
parts or subassemblies are produced under a PAM's supplier control 
system that has been accepted by the FAA. Under certain circumstances, 
production outside the U.S. of complex parts, subassemblies, or 
products is approved by the FAA on a case-by-case basis.
    PAHs who choose to perform manufacturing outside the U.S. receive 
significant and special benefits as a result of FAA's international 
production oversight. By using manufacturing facilities located outside 
the U.S., a PAH may benefit through lower labor costs, may increase its 
market share, or may reap other benefits. Further, since it is FAA's 
responsibility to prescribe and enforce standards in the interest of 
safety for the design, materials, workmanship, construction, and 
performance of civil aeronautical products, the FAA's oversight of 
manufacturing facilities located outside the U.S. helps assure public 
confidence in the products and parts manufactured there.

The Need for Rulemaking

    Globalization of the aircraft manufacturing industry increases the 
challenges to the FAA in carrying out its statutory mandate to ensure 
that safety and airworthiness standards for civil aircraft are being 
met during manufacture.
    To be more competitive, production approval holders are requesting 
approval from the FAA to expand their activities, to use more 
facilities around the world, and to manufacture more complex 
subassemblies, including complete aircraft.
    Limited resources make it difficult for the FAA to support these 
initiatives as international ventures by U.S. aircraft manufacturers 
become more diverse and complex. Congress recognized the impact of 
FAA's resource limitations in the Federal Aviation Administration 
Authorization Act of 1994, P.L. 103-305 (108 State. 1569). As stated in 
Conference Report No. 103-677 on H.R. 2739:

    Safety regulatory efforts to keep pace with the trend of 
globalization can be hampered by resource constraints * * * the 
Aircraft Certification Service should be able to offset expenditures 
made in support of aircraft or airline safety regulatory programs of 
both U.S. and foreign owned companies outside the United States. 

    Therefore, in passing PL 103-305, Congress permitted the FAA to 
recover its costs ``to provide safety regulatory services abroad in a 
more responsive and timely manner.''
    In addition, under Title V of the Independent Offices of 
Appropriations Act of 1952 (IOAA), 31 U.S.C. 9701, the FAA is 
authorized to establish a fair and equitable system for recovering the 
cost for any service, such as the issuance of a certificate, that 
provides a special benefit to an individual beyond those that accrue to 
the general public. Title 31 U.S.C. 9701(a) provides, in part, as 
follows:

    It is the sense of the Congress that each service or thing of 
value provided by an agency (except a mixed-ownership Government 
corporation) to a person (except a person on official business of 
the United States Government) is to be self-sustaining to the extent 
possible.

    Title 31 U.S.C. 9701(b) further provides:

    The head of each Federal agency (except a mixed-ownership 
Government corporation) may prescribe regulations establishing the 
charge for a service or thing of value provided by the agency. 
Regulations prescribed by the heads of executive agencies shall be 
as uniform as practicable. Each charge shall be--
    (1) Fair; and
    (2) Based on--
    (A) The costs to the Government;
    (B) The value of the service or thing to the recipient;
    (C) Public policy or interest served; and
    (D) Other relevant facts.

The Proposed Rule

    If adopted, the proposed rule allows PAHs to enter into a voluntary 
agreement with the FAA for the provision of production certification-
related services outside the U.S. on mutually agreed terms and 
conditions. This would include PAHs who elect to use organizations or 
facilities outside the U.S. to manufacture, assemble, or test, 
aeronautical products, after the effective date of a final rule. Since 
not all members of the domestic aerospace industry choose to use 
organizations or facilities outside the U.S., FAA oversight of these 
activities outside of the U.S. is above and beyond the oversight 
services regularly provided to PAHs.
    An agreement for services between the PAHs and FAA for production 
certification-related services for products manufactured, assembled, or 
tested outside the U.S. would allow the FAA to provide services upon 
request in a more responsive and timely manner. By charging for its 
services outside the U.S., the FAA would be able to support more 
complex manufacturing activities and provide acceptance of parts, sub-
assemblies, and products that would otherwise need to be disassembled 
when received in the U.S. Under this proposal, when production 
certification-related services are requested and provided outside the 
U.S., no duplication of FAA work or reinspection of parts is 
anticipated, except as otherwise required of domestic manufactured 
parts during the PAH receiving inspection process.

Guidelines for Cost Recovery

    The FAA has developed this proposed rule consistent with the IOAA 
and with the Office of Management and Budget's (OMB) Circular A-25, 
entitled ``User Charges.''
    FAA fees may be assessed to persons who are recipients of special 
benefits conferred by FAA's production certification-related services 
outside the U.S. These special benefits would include services: (1) 
Rendered at the request of an applicant; (2) for the issuance of a 
required production approval; and (3) to assist an applicant or 
certificate holder in complying with its regulatory obligations.
    The FAA has determined that all services associated with the 
issuance, amendment, or inspection of a production certificate or 
approval as detailed in this NPRM would be subject to cost recovery. 
All direct and indirect costs incurred by the FAA in providing special 
benefits outside of the U.S. would be recovered. Each fee would not 
exceed the FAA's cost in providing the service to the recipient. 
Calculation of agency costs would be performed as accurately as is 
reasonable and practical, and would be based on the specific expenses 
identified to the smallest practical unit.
    To determine the smallest practical unit for the various FAA 
services covered, a letter of application would be made by the PAH to 
the FAA requesting FAA production certification-related services 
outside the U.S. The proposed application procedure would apply to any 
PAH; i.e., holders or applicants for production under a type 
certificate only, under an approved production inspection system, under 
a production certificate or extension of a production certificate, 
under a technical standard order authorization, or under a parts 
manufacturer approval. Based on the details provided in the 
application, the FAA would determine the cost and terms of providing 
the requested services to the PAH outside the U.S. and detail those 
costs to the applicant. The applicant would then request the provision 
of those services from FAA.

[[Page 38010]]

Methodolgy for Fee Determination and Collection

Fee Determination

    The FAA proposes to recover the full cost associated with providing 
production certification-related services outside of the U.S. Costs to 
be recovered include personnel compensation and benefits (PC&B), travel 
and transportation costs, and other agency costs.
    PC&B: For the purpose of these computations, average PC&B rates for 
participating Aircraft Certification Service employees would be charged 
per activity. PC&B charges would reflect the actual hours spent 
participating in the activity as well as preparatory time, travel time, 
and the time spent on follow-up activities.
    Travel and transportation costs: These charges would include all 
costs pertaining to domestic, local, and international transport of 
persons and equipment. These costs may include fares, vehicle rental 
fees, mileage payment, and any expenses related to transportation such 
as baggage transfer, insurance for equipment during transport, and 
communications. FAA personnel would adhere to all U.S. Government 
travel regulations.
    Fees would be charged for lodging, meals, and incidental expenses 
in accordance with U.S. Government per diem rates, rules, and 
regulations. Incidental expenses include fees, tips, and other 
authorized expenses.
    Other agency costs: Also included in these computations would be 
other direct costs; for example, all printing and reproduction 
services, supplies and materials purchased for the activity, conference 
room rental, and other activity-related expenses. An additional 
percentage charge, as established by the FAA in accordance with OMB 
Circular A-25, would be added to the total cost of this activity to 
compensate for agency overhead.
    The Aircraft Certification Service of the FAA maintains a data 
system to which employees submit periodic records identifying the 
number of work hours used to provide service to customers. Travel 
vouchers are also submitted and audited. This data would be maintained 
for each applicant and project. The Aircraft Certification Service 
tracks work hour records quarterly to determine the costs associated 
with providing its services. This information would be used in 
assessing and adjusting fees. In this manner, the FAA would be able to 
assure applicants that they are paying only for expenses incurred in 
connection with services provided to that specific applicant.

Fee Collection

    All charges would be estimated and agreed upon between the FAA and 
the applicant before the FAA provides services outside the U.S.
    Under the proposal, payment would be made to the FAA in advance for 
all production certification-related activities scheduled during the 
upcoming 12-month period unless a shorter period is mutually agreeable 
between the PAH and the FAA. The amounts set forth in the cost estimate 
would be adjusted to recover the FAA's full costs. If cost are expected 
to exceed the estimate by more than 10 percent, notification would be 
made to the applicant as soon as possible. No services would be 
provided until the FAA receives the full estimated payment for the 
entire upcoming year. As activities are completed the full costs of the 
activities would be charged against the advance account. Any remaining 
funds would either be returned or applied to future activities as 
requested by the applicant.
    Payment for services rendered by the FAA would be in the form of a 
check, money order, draft, or wire transfer, and would be payable in 
U.S. currency to the FAA and drawn on a U.S. bank. Bank processing fees 
would also be added to the fees charged to the applicants, where such 
processing fees are charged to the U.S. Government.
    In any case where an applicant has failed to pay the agreed fee for 
FAA services, the FAA may suspend or deny any application for service 
and may suspend or revoke any production-related approval granted.
    In accordance with the agreement that would be signed by the FAA 
and the applicant (Appendix C(d)(3)), this arrangement may be 
terminated at any time by either party by providing 60 days written 
notice to the other party. Any such termination would allow the FAA and 
additional 120 days to close out its activities.
    If this proposal is adopted, the FAA will issue an Advisory 
Circular further detailing the requirements of the application. A 
notice of availability will be published concurrently with this NPRM.

Section-by-Section Discussion of the Proposals

    This NPRM contains proposals to amend sections of 14 CFR part 187.

Section 187.15  Payment of Fees

    The FAA proposes to amend Sec. 187.15 to reference all fees under 
part 187. In addition, charges would be made for banking services if 
they are necessary to expedite the deposit of funds to the U.S. 
Government.

Section 187.17  Failure by Applicant To Pay Prescribed Fees

    The FAA proposes to add a new Sec. 187.17 that would detail FAA 
actions in the event the applicant fails to pay the fee agreed to for 
FAA services. The proposed actions range from not processing the 
application to suspending or revoking any approval granted outside the 
U.S.

Appendix C to Part 187--Fees for Providing Production 
Certification-Related Services Outside the United States

    The FAA proposes to add a new Appendix C to part 187 that would 
contain the following:
    1. The methodology for the calculation of fees for production 
certification-related services outside the U.S. that are performed by 
the FAA.
    2. The applicability to certain manufacturers.
    3. Definitions of terms associated with these fees: ``manufacturing 
facility,'' ``production certification-related services,'' ``supplier 
facility,'' and ``U.S. production approval holder.''
    4. The process for obtaining FAA production certification-related 
services outside the U.S.
    5. The manner in which the FAA would review fees to ensure that the 
fees will not exceed the full cost of providing the service.

International Compatibility

    The FAA has reviewed corresponding International Civil Aviation 
Organization international standards and recommended practices and 
Joint Aviation Authorities requirements and has identified no 
comparable requirements applicable to this proposed rule.

Paperwork Reduction Act

    In this NPRM, proposed part 187, Appendix C contains information 
collection requirements (basically application requirements). As 
required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d), the 
FAA has submitted a copy of these proposed sections to the Office of 
Management and Budget (OMB) for its review.
    The information to be collected is needed to allow the FAA to 
understand the scope of production activities outside the U.S. that are 
envisioned by an applicant.
    The total annual reporting and recordkeeping burden on all the PAHs

[[Page 38011]]

is estimated to be 1,800 to 2,000 hours and is broken down as follows:
    Preparation of the letter of application identifying the company, 
the proposed location of manufacturing, a general description of the 
product to be manufactured and the manufacturing activities to be 
performed, estimated start and end dates, as well as unique 
requirements (estimated at 2 to 20 hours for each application).
    It is estimated that this proposal would affect 90 to 100 
production approval holders annually.
    Organizations and individuals desiring to submit comments on the 
information collection requirements should direct them to the Office of 
Information and Regulatory Affairs, OMB, Room 1235, New Executive 
Office Building, Washington, DC 20503; Attention: Desk Officer for 
Federal Aviation Administration. These comments should reflect whether 
the proposed collection is necessary; whether the agency's estimate of 
the burden is accurate; how the quality, utility, and clarity of the 
information to be collected can be enhanced; and how the burden of the 
collection can be minimized. A copy of the comments also should be 
submitted to the FAA Rules Docket.
    OMB is required to make a decision concerning the collection of 
information contained in this NPRM between 30 and 60 days after 
publication in the Federal Register. Thererfore, a comment to OMB is 
best assured of having its full effect if OMB receives it within 30 
days of publication. This does not affect the deadline for the public 
to comment on the NPRM.

Regulatory Evaluation Summary

    Proposed 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 the 
costs. Second, the Regulatory Flexibility Act of 1980 requires agencies 
to analyze the economic effect of regulatory changes on small entities. 
Third, the Office of Management and Budget directs agencies to assess 
the effect of regulatory changes on international trade. In conducting 
these analyses, the FAA has determined that this proposed rule: (1) 
Would generate benefits that justify its costs and is a non-significant 
regulatory action as defined in the Executive Order; (2) is non-
significant as defined in the Department of Transportation's Regulatory 
Policies and Procedures; (3) would not have a significant impact on a 
substantial number of small entities; and (4) would not constitute a 
barrier to international trade. These analyses, available in the 
docket, are summarized below.
    This proposed rule would not impose any additional costs on any 
members of society other than those requesting FAA production 
certification-related services for manufacturing facilities and 
suppliers located outside the United States. The proposed rule would 
allow the FAA to recover its full costs for providing certification-
related services requested by the users.
    The FAA proposes to charge a fee to recover its costs for 
production certification-related services provided to all PAHs: (1) Who 
elect to use manufacturing facilities outside the U.S. and are not 
currently receiving FAA services; or (2) who elect to expand their 
current manufacturing facilities outside the U.S. or expand their 
current manufacturing work outside the U.S.
    As stated, actual fees to be charged as a result of this rulemaking 
will be those fees necessary for the FAA to recover its full costs. 
Since the FAA is not able at this time to state precisely what those 
fees will be, it is, for the purpose of this proposal, assuming a wide 
range from $80.00 to $200.00 per hour. The FAA estimates that if it 
would charge an hourly rate of $80, the first year fees would total 
about $2.876 million and if it would charge an hourly rate of $200, the 
first year fees would total about $5.468 million. Due to an anticipated 
increase in the number of requests for FAA production certification-
related services outside the U.S., these annual fees would increase to 
between $4.211 million (based on $80 an hour fee) and $8.006 million 
(based on a $200 an hour fee) in the fifth year, after which they would 
remain stable.
    The primary potential benefit would be that the proposed rule may 
make it easier for PAHs to use organizations, facilities, and suppliers 
outside the U.S. to: (1) Take advantage of lower manufacturing costs; 
and (2) fulfill certain aircraft purchasing agreements that require a 
PAH to produce a percentage of the aircraft within the purchasing 
country.

Regulatory Flexibility Determination

    The Regulatory Flexibility Act of 1980 (RFA) was enacted by 
Congress to ensure that small entities are not unnecessarily and 
disproportionately burdened by Federal regulations. The RFA requires a 
Regulatory Flexibility Analysis if a proposed rule is expected to have 
a significant (positive or negative) economic impact on a substantial 
number of small entities.
    The proposed rule would primarily affect PAHs and their facilities 
and suppliers located outside the U.S. Although some small U.S. 
companies may be indirectly affected, the FAA has determined that the 
proposed rule would not have a significant impact on a substantial 
number of small entities.

International Trade Impact

    The globalization of aircraft manufacturing has increased 
competition among manufacturers. In order for PAHs to remain 
competitive, they need to have the flexibility to compete on an equal 
footing with their competitors located around the world. Further, many 
overseas purchasers of PAH products (particularly aircraft) now require 
that some percentage of the product be produced in their own country.
    The proposal would provide PAHs with more timely FAA service in 
approving products manufactured outside the U.S. Consequently, it 
should have a favorable competitive impact on PAHs. However, charging a 
fee for the FAA's production certification-related services outside the 
U.S. may raise slightly the costs of using a facility outside the U.S. 
The FAA does not anticipate that the fee would be a significant 
deterrent to a PAH's decision regarding whether or not to use a 
facility or supplier outside the U.S.
    Nevertheless, the proposal would reduce the PAHs' costs to use 
facilities and suppliers outside the U.S. because the increased 
coordination between the FAA and PAHs would result in reducing the 
costs currently associated with FAA delays in performing the necessary 
production certification-related services at a facility or supplier 
located outside the U.S.
    The effect of the anticipated cost reduction could be twofold. 
First, any increased purchases of products made at facilities outside 
the U.S. may result in a corresponding reduction in the purchases of 
those products made in U.S. facilities, if there were to be no 
subsequent overall increase in the number of aircraft and aircraft 
engines manufactured. Second, using a less expensive facility and 
supplier located outside the U.S. could produce a less expensive U.S. 
aircraft, potentially resulting in new orders or an increase in 
existing orders. The net effect could be an overall increase in the 
amount of aircraft products manufactured within the U.S.
    Therefore, although the proposed rule may adversely affect some 
domestic product manufacturers, it could also positively affect other 
domestic product manufacturers. The FAA anticipates

[[Page 38012]]

that the overall effect would be to encourage international trade and 
to provide a mechanism that may assist U.S. civil aviation industry.

Federalism Implications

    The proposed regulations herein would not have substantial direct 
effects 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. Therefore, in 
accordance with Executive Order 12612, it is determined that this 
proposal would not have sufficient federalism implications to warrant 
the preparation of a Federalism Assessment.

Unfunded Mandates Reform Act

    This proposed rule does not contain any Federal intergovernmental 
or private sector mandate because all fees are entered into by 
voluntary agreement. Therefore, the requirements of Title II of the 
Unfunded Mandates Reform Act of 1995 do not apply.

Conclusion

    For the reasons discussed above, and based on the findings in the 
Regulatory Flexibility Determination and the International Trade Impact 
Analysis, the FAA has determined that this proposal would be 
nonsignificant under Executive Order 12866, Regulatory Planning and 
Review, issued October 4 1993. In addition, the FAA certifies that this 
proposal, if adopted, would not have a significant economic impact, 
positive or negative, on a substantial number of small entities under 
the criteria of the Regulatory Flexibility Act. This proposal is 
considered nonsignificant under DOT Regulatory Policies and Procedures 
(44 FR 11034, February 26, 1979) and Order DOT 2100.5, Policies and 
Procedures for Simplification, Analysis, and Review of Regulations, of 
May 22, 1980. Further, the requirements of Title II of the Unfunded 
Mandates Reform Act of 1995 would not apply to this proposal. An 
initial regulatory evaluation of the proposal, including a Regulatory 
Flexibility Determination and International Trade Impact Analysis, has 
been placed in the docket. A copy may be obtained by contacting the 
person identified under FOR FURTHER INFORMATION CONTACT.

List of Subjects in 14 CFR Part 187

    Administrative practice and procedures, Air transportation.

The Proposed Amendment

    In consideration of the foregoing, the Federal Aviation 
Administration proposes to amend part 187 of Title 14, Code of Federal 
Regulations (14 CFR part 187) as follows:

PART 187--FEES

    1. The authority citation for part 187 continues to read as 
follows:

    Authority: 31 U.S.C. 9701; 49 U.S.C. 106(g), 106(m), 40104-
40105, 40109, 40113-40114, 44702.

    2. Section 187.15 (a) and (b) are revised to read as follows:


Sec. 187.15  Payment of fees.

    (a) The fees of this part are payable to the Federal Aviation 
Administration by check, money order, wire transfer, or draft, payable 
in U.S. currency and drawn on a U.S. bank prior to the provision of any 
service under this part.
    (b) Applicants for the FAA services provided under this part shall 
pay any bank processing charges on fees collected under this part, when 
such charges are assessed on U.S. Government.
* * * * *
    3. Section 187.17 is added to read as follows:


Sec. 187.17  Failure by applicant to pay prescribed fees.

    If an applicant fails to pay fees agreed to under Appendix C of 
this part, the FAA may suspend or deny any application for service and 
may suspend or revoke any production certification-related approval 
granted.

    4. Appendix C is added to read as follows:

Appendix C to Part 187--Fees for Production Certification-Related 
Services Performed Outside the United States

    (a) Purpose. This appendix describes the methodology for the 
calculation of fees for production certification-related services 
outside the U.S. that are performed by the FAA.
    (b) Applicability. This appendix applies to production approval 
holders who elect to use manufacturing facilities or supplier 
facilities located outside the U.S. to manufacture or assemble 
aeronautical products after [effective date of the final rule].
    (c) Definitions. For the purpose of this appendix, the following 
definitions apply:
    Manufacturing facility means a place where production of a complete 
aircraft, aircraft engine, propeller, component, or appliance is 
performed.
    Production certification-related service means a service associated 
with initial production approval holder qualification; ongoing 
production approval holder and supplier surveillance; designee 
management; initial production approval holder qualification and 
ongoing surveillance for production certificate extensions outside the 
U.S.; conformity inspections; and witnessing of tests.
    Supplier facility means a place where production of a part, 
component, or subassembly is performed for a production approval 
holder.
    U.S. production approval holder means a person who holds an FAA 
approval for production under type certificate only, an FAA approval 
for production under an approved production inspection system, a 
production certificate, a technical standard order authorization, or a 
parts manufacturer approval.
    (d) Procedural requirements. (1) Applicants must apply for FAA 
services provided outside the U.S. by a letter of application to the 
FAA detailing the particular services required from the FAA.
    (2) The FAA will notify the applicant in writing of the estimated 
cost and schedule to provide the services.
    (3) The applicant will review the estimated costs and schedule of 
services. If the applicant agrees with the estimated costs and schedule 
of services, the applicant will propose to the FAA that the services be 
provided. If the FAA agrees, a written agreement will be executed 
between the applicant and the FAA.
    (4) The applicant must provide advance payment for each 12-month 
period of requested FAA service unless a shorter period is agreed to 
between the production approval holder and FAA.
    (e) Fee determination. (1) Fees for FAA production certification-
related services will consist of: personnel compensation and benefit 
(PC&B) for each participating FAA employee, actual travel and 
transportation expenses incurred in providing the service, other agency 
costs and an overhead percentage.
    (2) Fees will be determined on a case-by-case basis according to 
the following general formula:

W1H1+W2H2 etc., +T+O

where:

W1H1=hourly PC&B rate for employee 1, times 
estimated hours
W2H2=hourly PC&B rate for employee 2, etc., times 
estimated hours
T=estimated travel and transportation expenses
O=other agency costs related to each activity including overhead.

    (3) In no event will the applicant be charged more than the full 
FAA costs of providing production certification-related services.

[[Page 38013]]

    (4) If the full FAA costs vary from the estimated fees by more than 
10 percent, written notice by the FAA will be given to the applicant as 
soon as possible.
    (5) If FAA costs exceed the prepaid fees, the applicant will be 
required to pay the difference prior to receiving further services. If 
the prepaid fees exceed the FAA costs, the applicant may elect to apply 
the balance to future agreements or receive a refund.
    (f) Fees will be reviewed by the FAA each year, at the beginning of 
the fiscal year, and adjusted either upward or downward in order to 
reflect the current costs of performing production certification-
related services outside the U.S.
    (1) Notice of any change to the elements of the fee formula will be 
published in the Federal Register.
    (2) Notice of any change to the methodology and other changes for 
the fees will be published in the Federal Register.

    Issued in Washington, DC, on July 9, 1997.
Thomas E. McSweeny,
Director, Aircraft Certification Service.
[FR Doc. 97-18520 Filed 7-14-97; 8:45 am]
BILLING CODE 4910-13-M