[Federal Register Volume 71, Number 59 (Tuesday, March 28, 2006)]
[Rules and Regulations]
[Pages 15325-15329]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-2930]


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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Part 375

[Docket No. OST-2003-15511]
RIN 2105-AD39


Certain Business Aviation Activities Using U.S.-Registered 
Foreign Civil Aircraft

AGENCY: Office of the Secretary (OST), Department of Transportation 
(DOT).

ACTION: Final Rule.

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SUMMARY: In response to a petition by the National Business Aircraft 
Association (NBAA), this final rule amends the requirements governing 
the licensing and operation in the United States of ``foreign civil 
aircraft'' which are not engaged in common carriage. The rule provides 
that certain types of operations by business aircraft operators using 
U.S.-registered foreign civil aircraft (such as carriage of a company's 
own officials and guests, or aircraft time-sharing, interchange or 
joint ownership arrangements between companies) do not constitute 
operations ``for remuneration or hire'' and, therefore, do not require 
a DOT permit. This document also dismisses, without prejudice, the 
request of NBAA that the regulation be amended so that reimbursement by 
political candidates carried on foreign civil aircraft is not 
considered ``remuneration or hire'' under the rule.

DATES: This final rule becomes effective April 27, 2006

FOR FURTHER INFORMATION CONTACT: David Modesitt, Chief, Europe 
Division, Office of International Aviation (X-40), U.S. Department of 
Transportation, 400 7th Street, SW., Washington, DC 20590; (202) 366-
2384.

SUPPLEMENTARY INFORMATION:

Background

Notice of Proposed Rulemaking

    On February 7, 2005, OST published a notice of proposed rulemaking 
(NPRM) (70 FR 6382) that proposed to amend Part 375 to further 
delineate whether, and under what circumstances, companies operating 
U.S.-registered foreign civil aircraft are engaged in commercial air 
operations for remuneration or hire to, from, and within the United 
States and need specific authorization for each flight. Part 375 
currently defines ``foreign civil aircraft'' as ``(a) an aircraft of 
foreign registry that is not part of the armed forces of a foreign 
nation, or (b) a U.S.-

[[Page 15326]]

registered aircraft owned, controlled or operated by persons who are 
not citizens or permanent residents of the United States.'' Section 49 
U.S.C. 40102(a)(15) of Title 49 of the U.S. Code defines ``citizen of 
the United States'' as, among other things, ``a corporation or 
association organized under the laws of the United States or a State, 
the District of Columbia, or a territory or possession of the United 
States, of which the president and at least two-thirds of the board of 
directors and other managing officers are citizens of the United 
States, which is under the actual control of citizens of the United 
States, and in which at least 75 percent of the voting interest is 
owned or controlled by persons that are citizens of the United 
States.''
    ``Commercial air operations'' are defined in Part 375 as operations 
by foreign civil aircraft engaged in flights for the purpose of crop 
dusting, pest control, pipeline patrol, mapping, surveying, banner 
towing, skywriting, or similar agricultural and industrial operations 
performed in the United States, and any operations for remuneration or 
hire to, from or within the United States [emphasis added] including 
air carriage involving the discharging or taking on of passengers or 
cargo at one or more points in the United States, including carriage of 
cargo for the operator's own account if the cargo is to be resold or 
otherwise used in the furtherance of a business other than the business 
of providing carriage by aircraft, but excluding operations pursuant to 
foreign air carrier permits issued under 49 U.S.C. 41301, exemptions, 
and all other operations in air transportation.
    Thus, if a company that does not meet the definition of a citizen 
of the United States (for example, if its president is not a U.S. 
citizen) owns, directly or through a parent or subsidiary, a U.S.-
registered corporate aircraft, that aircraft is considered to be a 
``foreign civil aircraft'' under Part 375. In addition, if any funds 
are transferred to the company operating the foreign civil aircraft to 
cover the costs of the operation even by another company within the 
same corporate family as the operator, that transfer of funds, as 
``remuneration'' under Part 375, would require a specific authorization 
for each such flight.
    As explained in the NPRM, the Department addressed this issue in 
limited past situations, specifically as it pertains to demonstration 
flights performed on a chargeback basis related to the sale of aircraft 
or flight training indoctrination (see 14 CFR 375.31 and 375.34), and 
chargeback operations conducted by a parent for its wholly-owned 
subsidiary under circumstances where the management and/or board of 
directors and management of the corporation were not entirely composed 
of U.S. citizens (see Letter dated March 20, 2003, from then Assistant 
Secretary for Aviation and International Affairs Read Van de Water to 
Pete West, Senior Vice President, NBAA, in Docket OST-2003-15511). In 
these instances the Department indicated that such operations involving 
the transfer of funds, within the confines of the facts of those 
circumstances, did not constitute operations for remuneration or hire, 
and, therefore, a foreign aircraft permit would not be required under 
Part 375 of the Department's regulations.
    In the NPRM, it was our tentative view that NBAA had made a 
persuasive case for the changes to Part 375 that it seeks, and we 
proposed to amend our regulations to effect those changes.
    Under Part 375, U.S.-registered foreign civil aircraft may not 
perform these types of operations without prior Department approval for 
each individual flight. The kinds of intra-corporate, interchange, 
joint ownership, and time-sharing operations involving transfer of 
funds to reimburse costs that are the subject of this proceeding have 
become a more and more necessary part of global commerce involving U.S. 
business. The limitation on cost reimbursement for these operations, 
requiring individual permits, are problematic for companies operating 
U.S.-registered foreign civil aircraft, since these flights are often 
time-sensitive and involve a now common practice of cost reimbursement 
within a corporate organization. When there is a well-defined class of 
operations with a clear purpose in cost-only transfer of funds, there 
is not a significant potential for those operations to be considered 
common carriage operations for hire in the United States. It is in the 
public interest to accept cost reimbursement in these circumstances, 
without prejudice to any other interpretation of ``remuneration or 
hire,'' as has been done for demonstration flights and flight 
indoctrination, as not being within the purview of Part 375 as ``for 
remuneration or hire.''
    As the U.S. economy has become increasingly global and businesses 
more multinational in character and structure, more and more companies 
operating U.S. registered business aircraft do not meet the statutory 
requirements of ``citizen of the United States'' for commercial air 
operations. These companies, because of their corporate structures, are 
thus hindered in conducting the range of business aviation activities 
that they otherwise could provide if their operations were not 
considered ``commercial air operations'' under Part 375. This 
situation, in our view, unnecessarily hampers the companies' 
flexibility in structuring their corporate organizations and 
relationships and limits global business operations to the detriment of 
U.S. interests. A company that might own a U.S.-registered business 
aircraft should be able to operate that corporate aircraft in the 
United States for certain business purposes and be reimbursed for costs 
by a subsidiary without specific flight approval by the Office of 
Secretary under Part 375.
    We previously explained in the NPRM our belief, in the context of 
the limited business-related activities presented by NBAA, that public 
interest considerations warrant treating all companies operating U.S. 
registered aircraft the same way. Specifically, we believe that where a 
company operating a U.S.-registered foreign civil aircraft engages in 
the kinds of business air service transactions as defined below, 
reimbursement for certain expenses should not be considered 
remuneration or hire within the context of Part 375. The cost 
reimbursement under these conditions does not present a situation of 
operating an aircraft ``for hire,'' thereby allowing the potential for 
common carrier operations. The operations would now no longer require 
prior approval in the form of a foreign aircraft permit under Part 375. 
In this instance our decision to so amend our rule treats U.S.-
registered foreign civil aircraft consistently throughout Department 
regulations.\1\
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    \1\ We note that the FAA in 14 CFR Part 91 authorizes similar 
reimbursements as non-commercial. We wish to make clear, however, as 
we did in the NPRM, that nothing in our proposed change to Part 375 
would in any way serve to alter any orders, regulations, or 
requirements, or interpretations thereof, of the Federal Aviation 
Administration.
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    The NPRM proposed to implement these changes by adding a new 
section to Subpart D of Part 375. The new section, ``Certain business 
aviation activities using U.S.-registered foreign civil aircraft,'' 
would authorize those types of operations that NBAA requested be 
covered. We also proposed a minor technical amendment to the existing 
language in the statutory authority citation in Sec.  375.1 to reflect 
the recodification of Title 49 of the U.S. Code, changing the current 
reference of ``section 402 of the Federal Aviation Act of 1958, as 
amended'' to ``49 U.S.C. 41301.''

[[Page 15327]]

Discussion of Comments

    On April 8, 2005, Carnival Corporation (Carnival Cruise Lines) 
submitted comments in response to the NPRM. Carnival indicated its 
support for the contemplated rule change, and proposed four technical 
changes to the proposed rule change to create greater clarity and meet 
the intent of the proposed rule change. First, Carnival proposes that 
the first sentence of proposed section 375.37, under the definition of 
``company'' should be changed to also include a definition of 
``person'' to read: * * * (``person'') is defined as an individual, 
firm, partnership, corporation, company, association, joint-stock 
association, or government entity.'' Second, Carnival proposes that the 
second sentence of proposed section 375.37 should be revised to read 
``* * * when the carriage is, in the case of intracorporate operations, 
within the scope of, and, in all cases, incidental to the business of 
the company * * * '' [Carnival proposed change in bold]. Third, 
Carnival proposes that, in subsection (a) of proposed section 375.37, 
the word ``company'' should be deleted immediately preceding the 
semicolon at the end of the sentence; and that in subsection (d) of 
proposed section 375.37 the words ``another company'' should be deleted 
immediately preceding the semicolon and replace them with the words ``a 
person to the extent such time-sharing is authorized under 14 CFR 
91.501 or any successor regulation.''
    NBAA filed comments in response to the NPRM as well on April 8, 
2005. NBAA supports the NPRM and proposed three technical changes to 
the proposed rule change to create greater clarity and meet the intent 
of the proposed rule change. In section 375.37(a), NBAA proposed 
replacing the words ``Intracorporate operations'' with ``Intracompany 
operations,'' adding the words ``or a subsidiary of its parent'' after 
the first use of the word ``parent,'' deleting the word ``corporate'' 
from the subsection, and changing the end of that subsection to read as 
follows ``* * * provided that the operator of the U.S.-registered 
foreign civil aircraft must hold majority ownership in, or have a 
common parent with, the company for which it provides operations.'' In 
section 375.37(b), it proposed replacing the word ``company'' with the 
word ``person'' in the two places where the word ``company'' appears; 
and, in section 375.37(d), replacing the word ``company'' with the word 
``person'' in the first clause.
    NBAA filed an additional comment on the text of the proposed rule 
change, suggesting an amendment of the NPRM to include newly proposed 
language to grant to foreign operators of business aircraft, under 14 
CFR Part 375, the privileges given to U.S. operators under FAA FAR Part 
91.321 relating to the carriage of elected officials. NBAA notes that 
this issue may not be properly within the scope of the instant 
rulemaking, and that it might be better for the Department to consider 
the request as an independent rulemaking, particularly if it would 
delay a final decision in this case.
    A comment was filed by B. Sachau, expressing concern over the 
security implications of foreign aircraft being operated within the 
United States, stating that all foreign aircraft should be required to 
obtain permits to conduct such operations, and stating that management 
in companies operating aircraft in the United States should be U.S. 
citizens.

Discussion of Final Rule

    This final rule adopts the amendments proposed in the NPRM with 
certain changes to reflect the suggestions proposed by interested 
parties in this proceeding, where those suggestions add to the clarity 
of the revised rule.
    We are accepting NBAA's proposed changes in section 375.37(a) for 
clarity, as there is no change in the substance or intent of subsection 
(a). For clarity, we have amended the opening sentence in section 
375.37 to define ``company'' as a ``person,'' which is defined in the 
statute, thereby eliminating the need for NBAA's changes in sections 
375.37(b) and (d).
    With respect to NBAA's request that we either amend this rulemaking 
proceeding, or consider another rulemaking to include as in 14 CFR Part 
91 new provisions concerning business aircraft travel by political 
campaign travelers, we have decided that the issue of political 
campaign travel is too far removed from the issue being addressed here 
and that, in any event, consideration of campaign travel would unduly 
delay a final rule in this proceeding. We will therefore dismiss, 
without prejudice, this request by NBAA. Should NBAA wish to pursue 
this matter, it is free to file its request in a new and separate 
docket for our consideration.
    Further, we do not believe that the changes proposed by Carnival 
add to the clarity of the rule or are otherwise warranted. Carnival 
seeks to expand the reach of the final rule in ways that go beyond 
business-aviation activities and would allow, in some cases, non-
business-aviation entities to benefit from the revised rule's 
provisions. We are not persuaded that such changes are justified. The 
intent of NBAA's request, and of this proceeding, is to facilitate 
certain business aviation activities conducted with foreign civil 
aircraft, and we do not believe that the final rule should encompass 
operations or activities that are not clearly business-related. To 
consider such a change to scope of NBAA's request, and our NPRM, would, 
as with the political campaign travel issue discussed above, 
unnecessarily delay the issuance of this amended rule. To the extent 
that some past ad hoc Department grants of authority have, in 
Carnival's view, been more expansive, we remain prepared to look at 
these kinds of situations in the future on a case-by-case basis, under 
the existing prior approval provisions of Part 375.
    With respect to the comment from B. Sachau, the authority of 
foreign civil aircraft to operate in the United States for certain 
purposes is authorized by statute, as is the authority of U.S.-
registered aircraft to be owned by non-U.S. citizens (see 49 U.S.C. 
41703 and 44102). These foreign civil aircraft are subject to 
regulation by the Federal Aviation Administration and by the 
Transportation Security Administration, Department of Homeland 
Security. Part 375 requires that commercial air operations by these 
aircraft be subject to the grant of economic authority in the form of a 
permit. The rule adopted in this rulemaking does not in any way affect 
FAA or TSA authority or regulation.

International Compatibility

    In keeping with U.S. obligations under the Convention on 
International Civil Aviation, it is the Department's policy to comply 
with International Civil Aviation Organization (ICAO) Standards and 
Recommended Practices to the maximum extent practicable. The Department 
has determined that there are no ICAO Standards and Recommended 
Practices that correspond to these amendments.

Executive Order 12866 and DOT Regulatory Policies and Provisions

    This rule is not a significant regulation under Executive Order 
12866 or DOT Regulatory Policies and Provisions, and was not reviewed 
by the Office of Management and Budget.
    The economic impact of the implementation of the rule will be 
minimal. The rule will save certain companies the legal expenses and 
data-preparation expenses of submitting and

[[Page 15328]]

processing requests for DOT authority to conduct specified types of 
intracorporate flight operations. In turn, the Department will save 
expense by not having to process additional foreign air carrier permit 
applications. The rule will eliminate an unnecessary and burdensome 
requirement to obtain approval of the covered operations.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601, et seq., as amended 
by the Small Business Regulatory Enforcement Fairness Act (SBREFA)) of 
1996, requires an agency to review regulations to assess their impact 
on small businesses. The Department certifies that this rule will not 
have a significant economic impact on a substantial number of small 
entities. The rule would almost exclusively affect only large 
corporations. In addition, we anticipate the rule would have little, if 
any, economic impact.

Trade Impact Analysis

    The Trade Agreement Act of 1979 prohibits Federal agencies from 
establishing standards or engaging in related activities that create 
unnecessary obstacles to the foreign commerce of the United States. 
Legitimate domestic objectives, such as safety, are not considered 
unnecessary obstacles. The statute also requires consideration of 
international standards and, where appropriate, that they be the basis 
for U.S. standards. The Department has assessed the potential effect of 
this rulemaking and had determined that, as a result of reduced 
potential paperwork for certain companies, it will have only a positive 
effect on trade-sensitive activity.

Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501-3520, 
Federal agencies must obtain approval from the Office of Management and 
Budget (OMB) for each collection of information they conduct, sponsor, 
or require through regulations. Part 375 contains information 
collection requirements. However, information collected under Part 375 
will not be affected by this change to the rule.
    OST Form 4509 is a required Application for Foreign Aircraft Permit 
or Special Authorization under Part 375 filed with the Department prior 
to entities conducting certain operations in the United States with 
foreign civil aircraft. The Department grants or denies the 
authorization to the entity on a case-by-case basis. Entities file this 
form as often as necessary whenever they wish to conduct operations for 
which prior Department approval is required under the Part. This two 
page form does not require a significant amount of time to complete 
(the Department estimates one-half hour per application), and is not 
burdensome to complete. Other than general aviation knowledge and 
experience inherent with each applicant, no specialized training or 
education is required to complete the form. For calendar years 2005 and 
2004, the Department received an average of 23 requests using the form.
    As required by the Paperwork Reduction Act, the Department will 
submit this previously approved collection requirement to the Office of 
Information and Regulatory Affairs of the OMB for review, and 
reinstatement, without change.
    OMB Control Number: 2106-0002.
    Title: 14 CFR Part 375--Navigation of Foreign Civil Aircraft Within 
the United States.
    Burden hours: 13 hours annually. (Average of 26 collections per 
year in recent years, and an estimated .5 hours to complete each Form 
4509.)
    Affected public: Operators of foreign civil aircraft within the 
United States.
    Cost: There are no costs to the respondents as a result of this 
collection.
    Description of Paperwork: OST Form 4509 ensures that the Department 
has sufficient information to judge the merits of applications for 
authority to operate foreign civil aircraft within the United States 
under Part 375. This form standardizes information requests, to the 
benefit of both the Department and applicants.

Unfunded Mandates Reform Act

    This rule will not impose an unfunded mandate for the purposes of 
the Unfunded Mandates Reform Act of 1995.

Executive Order 13132, Federalism

    The Department has analyzed this rulemaking action in accordance 
with the principles and criteria set forth in Executive Order 13132 and 
we have determined that it does not have sufficient federalism 
implications to warrant consultation with State and local officials. 
The Department anticipates that any action taken will not preempt a 
State law or State regulation or affect the States' ability to 
discharge traditional State government functions.

List of Subjects in 14 CFR Part 375

    Administrative practice and procedure, Aircraft, Foreign relations, 
Reporting and recordkeeping requirements.


0
For the reasons set forth in the preamble, the Department of 
Transportation proposes to amend 14 CFR part 375 as follows:

PART 375--NAVIGATION OF FOREIGN CIVIL AIRCRAFT WITHIN THE UNITED 
STATES

0
1.The authority citation for 14 CFR part 375 is revised to read as 
follows:

    Authority: 49 U.S.C. 40102, 40103, and 41703.


0
2. In Sec. 375.1, the definition of ``Commercial air operations'' is 
revised to read as follows:


Sec.  375.1  Definitions.

* * * * *
    Commercial air operations shall mean operations by foreign civil 
aircraft engaged in flights for the purpose of crop dusting, pest 
control, pipeline patrol, mapping, surveying, banner towing, 
skywriting, or similar agricultural and industrial operations performed 
in the United States, and any operations for remuneration or hire to, 
from or within the United States including air carriage involving the 
discharging or taking on of passengers or cargo at one or more points 
in the United States, including carriage of cargo for the operator's 
own account if the cargo is to be resold or otherwise used in the 
furtherance of a business other than the business of providing carriage 
by aircraft, but excluding operations pursuant to foreign air carrier 
permits issued under 49 U.S.C. 41301, exemptions, and all other 
operations in air transportation.
* * * * *

0
3. A new Sec.  375.37 is added to read as follows:


Sec.  375.37  Certain business aviation activities using U.S.-
registered foreign civil aircraft.

    For purposes of this section, ``company'' is defined as a person 
that operates civil aircraft in furtherance of a business other than 
air transportation. U.S.-registered foreign civil aircraft that are not 
otherwise engaged in commercial air operations, or foreign air 
transportation, and which are operated by a company in the furtherance 
of a business other than transportation by air, when the carriage is 
within the scope of, and incidental to, the business of the company 
(other than transportation by air), may be operated to, from, and 
within the United States as follows:
    (a) Intra-company operations. A company operating a U.S.-registered 
foreign civil aircraft may conduct operations for a subsidiary or 
parent or

[[Page 15329]]

a subsidiary of its parent on a fully-allocated cost reimbursable 
basis; provided, that the operator of the U.S.-registered foreign civil 
aircraft must hold majority ownership in, be majority owned by, or have 
a common parent with, the company for which it provides operations;
    (b) Interchange operations. A company may lease a U.S.-registered 
foreign civil aircraft to another company in exchange for equal time 
when needed on the other company's U.S. registered aircraft, where no 
charge, assessment, or fee is made, except that a charge may be made 
not to exceed the difference between the cost of owning, operating, and 
maintaining the two aircraft;
    (c) Joint ownership operations. A company that jointly owns a U.S.-
registered foreign civil aircraft and furnishes the flight crew for 
that aircraft may collect from the other joint owners of that aircraft 
a share of the actual costs involved in the operation of the aircraft; 
and
    (d) Time-sharing operations. A company may lease a U.S.-registered 
foreign civil aircraft, with crew, to another company; provided, that 
the operator may collect no charge for the operation of the aircraft 
except reimbursement for:

    (1) Fuel, oil, lubricants, and other additives.
    (2) Travel expenses of the crew, including food, lodging, and 
ground transportation.
    (3) Hanger and tie-down costs away from the aircraft's base of 
operations.
    (4) Insurance obtained for the specific flight.
    (5) Landing fees, airport taxes, and similar assessments.
    (6) Customs, foreign permit, and similar fees directly related to 
the flight.
    (7) In flight food and beverages.
    (8) Passenger ground transportation.
    (9) Flight planning and weather contract services.
    (10) An additional charge equal to 100 percent of the expenses for 
fuel, oil, lubricants, and other additives.

    Issued under authority delegated in 49 CFR 1.56a in Washington, 
DC, on this 21st day of March, 2006.
Michael W. Reynolds,
Acting Assistant Secretary for Aviation and International Affairs.
[FR Doc. 06-2930 Filed 3-27-06; 8:45 am]
BILLING CODE 4910-62-P