[Federal Register Volume 89, Number 82 (Friday, April 26, 2024)]
[Rules and Regulations]
[Pages 33068-33109]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08669]



[[Page 33067]]

Vol. 89

Friday,

No. 82

April 26, 2024

Part VI





Department of Transportation





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Federal Aviation Administration





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14 CFR Parts 5, 21, 91, et al.





Safety Management Systems; Final Rule

  Federal Register / Vol. 89, No. 82 / Friday, April 26, 2024 / Rules 
and Regulations  

[[Page 33068]]


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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Parts 5, 21, 91, and 119

[Docket No.: FAA-2021-0419; Amdt. Nos. 119-21, 21-108, 5-2, 91-374]
RIN 2120-AL60


Safety Management Systems

AGENCY: Federal Aviation Administration (FAA), Department of 
Transportation (DOT).

ACTION: Final rule.

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SUMMARY: The FAA is updating requirements for safety management systems 
and requiring certain certificate holders and commercial air tour 
operators to develop and implement a safety management system (SMS). 
This rule extends the requirement for an SMS to all certificate holders 
operating under the rules for commuter and on-demand operations, 
commercial air tour operators, production certificate holders that are 
holders or licensees of a type certificate for the same product, and 
holders of a type certificate that license out that type certificate 
for production. The FAA is publishing this rule in part to address a 
Congressional mandate as well as recommendations from the National 
Transportation Safety Board and two aviation rulemaking committees. 
Additionally, the rule more closely aligns the United States with Annex 
19 to the Convention on International Civil Aviation. This rule will 
improve aviation safety by requiring organizations to implement a 
proactive approach to managing safety.

DATES: Effective May 28, 2024.

ADDRESSES: For information on where to obtain copies of rulemaking 
documents and other information related to this final rule, see ``How 
to Obtain Additional Information'' in the SUPPLEMENTARY INFORMATION 
section of this document.

FOR FURTHER INFORMATION CONTACT: For technical questions concerning 
this action, contact Scott Van Buren, Office of Accident Investigation 
and Prevention, AVP-4, Federal Aviation Administration, 800 
Independence Avenue SW, Room 300 East, Washington, DC 20591, telephone 
(202) 494-8417; email [email protected].

SUPPLEMENTARY INFORMATION:

List of Abbreviations and Acronyms Frequently Used In This Document

AC--Advisory Circular
ACSAA--Aircraft Certification, Safety, and Accountability Act of 
2020
ANPRM--Advance notice of proposed rulemaking
ARC--Aviation Rulemaking Committee
ASAP--Aviation Safety Action Program
CAA--Civil Aviation Authority
CFR--Code of Federal Regulations
EASA--European Union Aviation Safety Agency
FAA--Federal Aviation Administration
FOIA--Freedom of Information Act
FRFA--Final Regulatory Flexibility Analysis
HTAWS--Helicopter Terrain Awareness and Warning System
ICAO--International Civil Aviation Organization
IRFA--Initial Regulatory Flexibility Analysis
LOA--Letter of Authorization
NAICS--North American Industry Classification System
NPRM--Notice of Proposed Rulemaking
NTSB--National Transportation Safety Board
OMB--Office of Management and Budget
OpSpec--Operations Specifications
PC--Production Certificate
PMA--Parts Manufacturer Approval
RFA--Regulatory Flexibility Act
RIA--Regulatory Impact Analysis
SBA--Small Business Administration
SMS--Safety Management System
STC--Supplemental Type Certificate
TC--Type Certificate
TSOA--Technical Standard Order Authorization
U.S.C.--United States Code
WBAT--Web-Based Analytical Technology

Table of Contents

I. Executive Summary
    A. Purpose of the Regulatory Action
    B. Changes Made in this Final Rule
    C. Summary of the Costs and Benefits
II. Authority for This Rulemaking
III. Background
    A. Statement of the Problem
    B. Safety Management System Overview
    C. Related Regulatory Actions
    D. NTSB Recommendations
    E. SMS ARCs
    F. Aircraft Certification, Safety, and Accountability Act
    G. International Movement Toward SMS
    H. Summary of the NPRM
    I. General Overview of Comments
IV. Discussion of Comments and the Final Rule
    A. Applicability to Part 135 and LOA Holders Under Sec.  91.147
    B. Applicability to Part 21 Foreign Entities
    C. Expansion of Proposed Applicability
    D. Compliance Timelines and Submission Requirements
    E. Use of the Term ``Person''
    F. System Description
    G. Notification of Hazards and Protection of Information
    H. Recordkeeping--Communications regarding Hazard Information 
Notifications
    I. ``Hazard'' Definition
    J. Scalability
    K. Code of Ethics
    L. FAA and Industry Readiness for SMS
    M. Aviation Organizations With an Existing SMS
    N. Employee Reporting
    O. Summary of Confidential Employee Reports
    P. Emergency Response Planning
    Q. Safety Risk Management
    R. Part 135 Pilot and Duty Rules ARC
    S. Consistency with ICAO
    T. Safety Policy
    U. Miscellaneous Amendments
    V. Benefits and Costs
    W. Severability
V. Regulatory Notices and Analyses
    A. Summary of the Regulatory Impact Analysis
    B. Regulatory Flexibility Act
    C. International Trade Impact Assessment
    D. Unfunded Mandates Assessment
    E. Paperwork Reduction Act
    F. International Compatibility
    G. Environmental Analysis
    H. Regulations Affecting Intrastate Aviation in Alaska
VI. Executive Order Determinations
    A. Executive Order 13132, Federalism
    B. Executive Order 13175, Consultation and Coordination With 
Indian Tribal Governments
    C. Executive Order 13211, Regulations That Significantly Affect 
Energy Supply, Distribution, or Use
    D. Executive Order 13609, Promoting International Regulatory 
Cooperation
VII. Additional Information
    A. Electronic Access and Filing
    B. Small Business Regulatory Enforcement Fairness Act

I. Executive Summary

A. Purpose of the Regulatory Action

    A safety management system (SMS) provides an organization-wide 
approach to identifying safety hazards, assessing and managing safety 
risk, and assuring the effectiveness of safety risk controls. An SMS 
provides a set of decision-making processes and procedures that can 
improve safety by assisting an organization in planning, organizing, 
directing, and controlling its aviation-related business activities. 
Currently, the SMS requirements of part 5 of title 14 of the Code of 
Federal Regulations (CFR) apply only to air carriers certificated under 
part 119 and conducting operations in accordance with part 121 (part 
121 operators). This final rule extends the applicability of the SMS 
requirements in part 5 to include additional entities to enhance 
safety, respond to a Congressional mandate, and more closely align the 
FAA's SMS requirements with International Civil Aviation Organization 
(ICAO) Annex 19.
    Historically, the approach to aviation safety was based on the 
reactive analysis of past accidents and the introduction of corrective 
actions to prevent the recurrence of those events. An SMS, in contrast, 
helps organizations proactively identify potential hazards in the 
operating environment, analyze the risks of those hazards, and mitigate 
those risks to prevent an accident or incident. In 2015, the FAA 
promulgated

[[Page 33069]]

14 CFR part 5, which required part 121 operators to develop and 
implement SMS and set out the basic requirements for those systems. The 
next step in improving aviation safety is to extend the SMS 
requirements in part 5 to additional organizations that play a critical 
role in the design, manufacturing, and operation of aircraft (i.e., 
part 119 certificate holders operating under part 135, Letter of 
Authorization (LOA) holders operating commercial air tours under Sec.  
91.147, and certain certificate holders under part 21). These aviation 
organizations are in the best position to prevent future incidents and 
accidents because they are closest to the hazards, and they know the 
most about their operations and products.
    An SMS provides a structured, repeatable, systematic approach to 
proactively identify hazards and manage safety risk. With 
implementation of an SMS, these aviation organizations will be better 
able to develop and implement mitigations that are appropriate to their 
environment and operational structure. SMS can be used to avoid or 
mitigate future aviation accidents. This final rule is based on the 
recommendations of two previous Aviation Rulemaking Committees 
(ARCs),\1\ the National Transportation Safety Board (NTSB),\2\ and the 
Joint Authorities Technical Review of the Boeing 737 MAX Flight Control 
System,\3\ and consideration of public comments received during the 
comment period.
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    \1\ The SMS ARCs are discussed in Section III.D.
    \2\ NTSB recommendations are discussed in Section III.C.
    \3\ Joint Authorities Technical Review (JATR), Boeing 737 MAX 
Flight Control System: Observations, Findings, and Recommendations, 
Washington, October 11, 2019.
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    Further, the Aircraft Certification, Safety, and Accountability Act 
of 2020 (Pub. L. 116-260, 134 Stat. 2309, hereafter referred to as 
ACSAA), enacted on December 27, 2020, mandated the application of SMS 
regulatory requirements to holders of both a Type Certificate (TC) and 
a Production Certificate (PC) issued under part 21.\4\ Congress further 
mandated that the FAA include certain requirements in its implementing 
regulations. The amendments to part 5 are in accordance with this 
legislation.
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    \4\ Section 102(a)(1) of ACSAA.
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    Lastly, requiring SMS for certain commercial operators and design 
and manufacturing organizations more closely aligns the FAA's SMS 
requirements with ICAO Annex 19; therefore, this final rule increases 
U.S. alignment with other civil aviation authorities (CAAs) that are 
also implementing SMS requirements in accordance with ICAO Standards 
and Recommended Practices.\5\
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    \5\ Several major civil aviation authorities have established or 
are in the process of establishing SMS requirements for air 
operators, air traffic management, airports, and maintenance 
organizations, including the European Union Aviation Safety Agency 
(EASA), Brazil, Canada, Japan, New Zealand, and Australia. Fewer 
countries have design and manufacturing organizations and, 
therefore, they have not established SMS requirements for those 
entities. However, New Zealand, Japan, and EASA have established SMS 
requirements for design and manufacturing organizations.
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    The FAA emphasizes that the requirements of this rule are limited 
to those activities that directly affect aviation safety. Therefore, to 
the extent the organizations covered by this rule also engage in 
activities that do not directly affect aviation safety (e.g., 
processing consumer payments, mitigating slip-and-fall accidents on 
company property, administering employee payroll), those activities 
need not be covered by an SMS required by this rule (but an 
organization is not prohibited from covering such activities by its 
SMS, if it chooses to do so).

B. Changes Made in This Final Rule

    After considering the information provided by commenters, the FAA 
is making several changes in this final rule from what was proposed in 
the notice of proposed rulemaking (NPRM).\6\ Table 1 below summarizes 
the changes. The changes are discussed in more detail in Section IV.
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    \6\ 88 FR 1932.

               Table 1--Summary of Regulatory Text Changes
------------------------------------------------------------------------
    Proposed 14 CFR section                        Summary of final rule
           affected                Description       changes from NPRM
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5.1(e) and 5.1(f).............  Applicability of   ``For the same
                                 part 5 to part     product'' (aircraft,
                                 21 certificate     aircraft engine, or
                                 holders.           propeller) is added
                                                    to Sec.   5.1(e) and
                                                    Sec.   5.1(f) to
                                                    clarify that part 5
                                                    does not apply to
                                                    either a
                                                    supplemental type
                                                    certificate (STC)
                                                    holder or a PC
                                                    holder for an STC,
                                                    or PC holders that
                                                    only produce parts
                                                    or articles.
5.1(g) and 5.15(a)............  Applicability of   Foreign holders of a
                                 part 5 to          validated TC issued
                                 foreign            under Sec.   21.29
                                 manufacturers.     are now excluded.
5.3...........................  Definition of      The proposed revision
                                 ``Hazard.''.       to the definition of
                                                    ``hazard'' is
                                                    partially adopted.
                                                    The terms
                                                    ``incidents'' and
                                                    ``objects'' are
                                                    incorporated as
                                                    proposed, but the
                                                    proposal to replace
                                                    the term
                                                    ``foreseeably'' with
                                                    ``potential to'' is
                                                    not adopted. The new
                                                    definition is:
                                                    ``Hazard means a
                                                    condition or an
                                                    object that could
                                                    foreseeably cause or
                                                    contribute to an
                                                    incident or aircraft
                                                    accident, as defined
                                                    in 49 CFR 830.2.''
5.5...........................  Scalability......  The proposal to
                                                    remove the
                                                    scalability language
                                                    in original Sec.
                                                    5.3 is not adopted.
                                                    The language is
                                                    retained and placed
                                                    in Sec.   5.5(a) to
                                                    provide a better
                                                    understanding
                                                    related to
                                                    scalability.
5.5(b), 5.95(c)...............  Organizational     The ``system
                                 system             description''
                                 description.       proposed in Sec.
                                                    5.5(b) is renamed to
                                                    ``organizational
                                                    system
                                                    description.'' The
                                                    requirement is moved
                                                    to Sec.   5.17 and
                                                    is now applicable
                                                    only to covered part
                                                    21 entities (Sec.
                                                    Sec.   5.11(a),
                                                    5.13(b)(1),
                                                    5.15(b)(1), and
                                                    5.15(c)(1)). The
                                                    proposed regulatory
                                                    language is revised
                                                    to make explicit
                                                    that only a summary
                                                    of information in
                                                    the organizational
                                                    system description
                                                    is required. Also,
                                                    the proposal to
                                                    require SMS
                                                    documentation of the
                                                    system description
                                                    in Sec.   5.95(c) is
                                                    not adopted.

[[Page 33070]]

 
5.7(a)........................  Part 121           The FAA proposed in
                                 submission         Sec.   5.7(a) that
                                 requirements.      existing part 121
                                                    operators would be
                                                    required to submit
                                                    to the FAA for
                                                    acceptance revisions
                                                    to their SMS
                                                    necessary to meet
                                                    the new requirements
                                                    in part 5. In the
                                                    final rule, existing
                                                    part 121 operators
                                                    with acceptable SMS
                                                    are required to make
                                                    revisions to their
                                                    SMS. However, in
                                                    alignment with the
                                                    requirements for new
                                                    part 121 applicants,
                                                    part 135 operators,
                                                    and LOA holders
                                                    under Sec.   91.147,
                                                    FAA acceptance of
                                                    the SMS and
                                                    revisions made by
                                                    existing part 121
                                                    operators will not
                                                    be required.
5.7(b), 5.9(a) and (b), and     Statement of       The FAA proposed that
 91.147(c)(8).                   Compliance.        existing part 135
                                                    operators and LOA
                                                    holders under Sec.
                                                    91.147 submit a
                                                    statement of
                                                    compliance. In the
                                                    final rule, the name
                                                    is changed from a
                                                    statement of
                                                    compliance to a
                                                    declaration of
                                                    compliance.
                                                   The requirement to
                                                    submit a statement
                                                    of compliance was
                                                    also proposed for
                                                    applicants for part
                                                    121 or 135
                                                    operations and LOAs
                                                    under Sec.   91.147.
                                                    This requirement is
                                                    not adopted in the
                                                    final rule.
5.9(a)(1) and (a)(2)..........  Part 135           The compliance
                                 operators and      timeline for
                                 Sec.   91.147      existing operators
                                 air tour           is extended from 24
                                 operators          months to 36 months.
                                 compliance
                                 timeline.
5.9...........................  Single-pilot       Part 135 operators
                                 operators.         and part 91
                                                    commercial air tour
                                                    operators are
                                                    required to have an
                                                    SMS, as proposed;
                                                    but some SMS
                                                    requirements have
                                                    been determined not
                                                    to be applicable to
                                                    certain single-pilot
                                                    operators. New Sec.
                                                     5.9(e) enumerates
                                                    the exceptions for
                                                    certain single-pilot
                                                    operators.
5.11; 5.13; 5.15..............  Requirements for   For existing part 21
                                 part 21            certificate holders,
                                 certificate        the deadline for
                                 holders.           submission of SMS
                                                    implementation plans
                                                    is changed from
                                                    December 27, 2024,
                                                    to no later than 6
                                                    months after the
                                                    final rule's
                                                    effective date. SMS
                                                    must be implemented
                                                    by these entities no
                                                    later than 36 months
                                                    after the effective
                                                    date. For PC
                                                    applicants or TC
                                                    holders entering
                                                    into a licensing
                                                    agreement, the
                                                    deadline to
                                                    implement SMS is
                                                    changed to no later
                                                    than 36 months after
                                                    submission of the
                                                    implementation plan.
                                                   Finally, the sequence
                                                    of the requirements
                                                    is changed to move
                                                    development of the
                                                    implementation plan
                                                    before development
                                                    of the SMS.
5.17..........................  Implementation     The implementation
                                 plan.              plan requirements in
                                                    proposed Sec.   5.17
                                                    are moved to Sec.
                                                    5.19 to more
                                                    logically follow the
                                                    ``organizational
                                                    system description''
                                                    requirements (now
                                                    Sec.   5.17).
                                                    Language is added to
                                                    require that the
                                                    implementation plan
                                                    be based on the
                                                    organizational
                                                    system description.
5.71..........................  Safety             In the NPRM, the FAA
                                 performance        proposed removing
                                 monitoring and     the word
                                 measurement.       ``operations'' from
                                                    Sec.   5.71(a) and
                                                    (b) to clarify the
                                                    requirement and
                                                    avoid confusion with
                                                    the term
                                                    ``operator.'' The
                                                    FAA does not adopt
                                                    that change in the
                                                    final rule.
5.94 and 5.97(d)..............  Notification of    The proposed Sec.
                                 hazards to         5.94(a) requirement
                                 interfacing        for notification of
                                 persons.           hazards is moved to
                                                    subpart C--Safety
                                                    Risk Management, in
                                                    new Sec.   5.57. The
                                                    term ``interfacing
                                                    persons'' is now
                                                    clarified to be
                                                    ``those who
                                                    contribute to the
                                                    safety'' of a
                                                    covered
                                                    organization's
                                                    ``aviation-related
                                                    products and
                                                    services.'' In
                                                    addition, a
                                                    requirement is
                                                    included in subpart
                                                    D--Safety Assurance
                                                    (new Sec.
                                                    5.71(a)(8)) to have
                                                    a process for
                                                    investigating hazard
                                                    notifications that
                                                    have been received.
                                                    Thus, the
                                                    requirement in
                                                    proposed Sec.
                                                    5.94(b) to develop
                                                    procedures for
                                                    reporting and
                                                    receiving hazard
                                                    information is
                                                    removed. Section
                                                    5.97(d) is updated
                                                    to replace the
                                                    reference to ``Sec.
                                                     5.94'' with ``Sec.
                                                     5.57.''
119.8.........................  Requirement to     Section 119.8 is
                                 meet part 5 for    changed to:
                                 part 121 and 135   ``Certificate
                                 operators.         holders authorized
                                                    to conduct
                                                    operations under
                                                    part 121 or 135 of
                                                    this chapter must
                                                    have a safety
                                                    management system
                                                    that meets the
                                                    requirements of part
                                                    5 of this chapter.''
                                                    This change corrects
                                                    an inadvertent error
                                                    in the NPRM.
------------------------------------------------------------------------

C. Summary of the Costs and Benefits

    As presented in the NPRM, the FAA estimated quantified annualized 
costs of $47.4 million using a 7 percent discount rate over a 5-year 
period of analysis. The costs represent resources to develop and 
implement an SMS. Mitigation costs to reduce or eliminate any hazards 
identified by an SMS, which are yet to be identified and thus unknown, 
are not quantified in the analysis. The FAA evaluated benefits 
qualitatively. The benefits are the value that would result from 
avoided fatalities, injuries, aircraft damage, and investigation costs. 
The analysis of costs and benefits reflects changes in the final rule 
from the NPRM. See Section V.A. for more information.

II. Authority for This Rulemaking

    The FAA's authority to issue rules on aviation safety is found in 
title 49 of the United States Code (U.S.C.). Subtitle I, section 106 
describes the authority of the FAA Administrator. Subtitle VII,

[[Page 33071]]

Aviation Programs, describes in more detail the scope of the Agency's 
authority. This rulemaking is promulgated under the authority described 
in 49 U.S.C. 106(f), which establishes the authority of the 
Administrator to promulgate regulations and rules.
    In 2010, Congress mandated that the FAA conduct rulemaking to 
require part 121 operators to implement an SMS in the Airline Safety 
and Federal Aviation Administration Extension Act of 2010 (Pub. L. 111-
216, 124 Stat. 2366).
    Subsequently, Congress enacted ACSAA, on December 27, 2020. Section 
102, titled ``Safety Management Systems,'' requires the FAA to initiate 
a rulemaking to require manufacturers that hold both a TC and a PC 
issued pursuant to 49 U.S.C. 44704 have an SMS consistent with the 
Standards and Recommended Practices established by ICAO and contained 
in Annex 19 to the Convention on International Civil Aviation (61 Stat. 
1180) for such systems, and ensure their SMSs are consistent with, and 
complementary to, existing SMSs. Section 102 of ACSAA requires the 
implementing regulations to include a confidential employee reporting 
system through which employees can report hazards, issues, concerns, 
occurrences, and incidents without concern for reprisal for reporting, 
and a code of ethics. The regulations in the final rule are in 
accordance with those requirements.
    Additionally, the FAA is using its discretion under the following 
authorities to proactively extend SMS requirements to part 119 
certificate holders authorized to operate under part 135, LOA holders 
operating under Sec.  91.147, and certain TC or PC holders not covered 
under section 102 of the ACSAA.
    This rulemaking is promulgated under 49 U.S.C. 44701(a)(5) (``The 
Administrator of the Federal Aviation Administration shall promote safe 
flight of civil aircraft in air commerce by prescribing regulations and 
minimum standards for other practices, methods, and procedure the 
Administrator finds necessary for safety in air commerce and national 
security''); 44701(a)(2)(A) (``The Administrator of the Federal 
Aviation Administration shall promote safe flight of civil aircraft in 
air commerce by prescribing regulations and minimum standards in the 
interest of safety for inspecting, servicing, and overhauling aircraft, 
aircraft engines, propellers, and appliances''); 44702(a) (``The 
Administrator of the Federal Aviation Administration may issue airman 
certificates, design organization certificates, type certificates, 
production certificates, airworthiness certificates, air carrier 
operating certificates, airport operating certificates, air agency 
certificates, and air navigation facility certificates''); and 
44704(a)(1) (``The Administrator of the Federal Aviation Administration 
shall issue a type certificate for an aircraft, aircraft engine, or 
propeller, or for an appliance specified under paragraph (2)(A) of this 
subsection when the Administrator finds that the aircraft, aircraft 
engine, propeller, or appliance is properly designed and manufactured, 
performs properly, and meets the regulations and minimum standards''). 
Additionally, this rulemaking is consistent with the requirements of 49 
U.S.C. 44701(d)(1)(A) (``When prescribing a regulation or standard 
under [49 U.S.C. chapter 447], the Administrator shall consider the 
duty of an air carrier to provide service with the highest possible 
degree of safety in the public interest'').
    Finally, 49 U.S.C. 44701(c) directs the Administrator to ``carry 
out this chapter in a way that best tends to reduce or eliminate the 
possibility or recurrence of accidents in air transportation.'' Among 
other things, this rulemaking requires certain entities whose 
activities affect safety in air transportation to develop and maintain 
an SMS to improve the safety of their operations. SMS enables persons 
to proactively identify and mitigate safety risk, thereby reducing the 
possibility or recurrence of accidents in air transportation consistent 
with the mandate in section 44701(c). For these reasons, the 
regulations identified in the final rule are within the scope of the 
FAA's authority and are consistent with Congress's mandate that the FAA 
exercise its authority proactively--not just reactively--to promote 
safe flight of civil aircraft and to reduce or eliminate hazards that 
could result in accidents in air transportation.

III. Background

A. Statement of the Problem

    As described in the NPRM, over the last few decades, accidents 
involving commercial aviation operators have decreased.\7\ Despite an 
overall reduction in accidents, the FAA determined that many of the 
accidents involving part 135 and Sec.  91.147 operators could have been 
effectively mitigated by the presence of an SMS. These accidents 
highlight the systemic improvement opportunities to safety, which are 
described in the Regulatory Impact Analysis (RIA) for this rulemaking. 
According to NTSB data, from 2015 to 2019, there were 215 accidents 
involving part 135 operators, with a total of 121 fatalities,\8\ as 
well as 33 accidents involving air tour operators operating under Sec.  
91.147, with a total of 16 fatalities.\9\ Of these accidents, the FAA 
identified 35 involving part 135 operators and four involving Sec.  
91.147 operators that resulted in fatalities and serious injuries that 
could have been mitigated had those operators implemented an SMS. 
Additional accidents not involving fatalities or serious injuries may 
also have been avoided. The FAA also identified several accidents 
across part 91, 121, and 135 operations involving design and production 
issues that resulted in fatalities and serious injuries that could have 
been mitigated or prevented if the design and manufacturing 
organizations involved had implemented an SMS. A full listing of each 
accident used to inform the analysis of this rulemaking is included in 
Appendix A to the RIA.
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    \7\ U.S. Air Carrier Safety Data, https://www.bts.gov/content/us-air-carrier-safety-data. Accessed March 22, 2022.
    \8\ National Transportation Safety Board. US Civil Aviation 
Accident Rates. 2022. Available at: https://www.ntsb.gov/safety/Pages/research.aspx.
    \9\ Data file of sightseeing accidents provided by the NTSB 
April 2020.
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    Given the rapid development, growth, and increasing complexities of 
the airspace, the FAA is extending SMS requirements to parties that 
play critical roles in the design, manufacturing, and operation of 
aircraft. ACSAA requires the FAA to include holders of both a TC and a 
PC among those organizations that should be required to implement an 
SMS. Applying SMS to commuter and on-demand air carriers, air tours, 
and the manufacturers responsible for design and production of products 
will continue to reduce incidents, accidents, and fatalities. This 
extended application will improve safety in aviation by requiring these 
organizations to proactively identify hazards, assess risk of those 
hazards, and develop and implement mitigations, as necessary. ICAO, 
other CAAs, industry advisory groups, and the NTSB all agree that the 
use of an SMS improves safety. An SMS has been implemented by each part 
121 operator, and many other aviation organizations have implemented an 
SMS within the context of the FAA's voluntary SMS programs.

B. Safety Management System Overview

    An SMS is a formal, top-down, organization-wide approach to 
managing safety risk and ensuring the effectiveness of safety risk 
controls. It includes systematic procedures, practices, and policies 
for the management of safety risk. An SMS is

[[Page 33072]]

a management system integrated into an organization's operations that 
enforces the concept that safety should be managed with as much 
emphasis, commitment, and focus as any other critical area of an 
organization.
    An SMS is a formalized approach to managing safety by developing an 
organization-wide safety policy, developing formal methods of 
identifying hazards, analyzing and mitigating risk, developing methods 
for ensuring continuous safety improvement, and creating organization-
wide safety promotion strategies. An SMS must include the following 
four components: Safety Policy, Safety Risk Management, Safety 
Assurance, and Safety Promotion. For additional information on these 
components and other elements of SMS see the ``Safety Management 
Systems for Domestic, Flag, and Supplemental Operations Certificate 
Holders'' final rule (80 FR 1309).
    The purpose of an SMS is to reduce incidents, accidents, and 
fatalities by aiding aviation organizations in identifying hazards and 
mitigating the risk of those hazards before they lead to an incident or 
accident. An SMS can work to reduce incidents, accidents, and 
fatalities in many different ways. For example, an SMS may:
     Increase safety of products or services by identifying and 
addressing problems before they result in an incident, accident, or 
fatality.
     Improve data-informed decision making to prioritize 
resource allocation.
     Enhance communication regarding safety by using common, 
consistent terminology within the organization and throughout the 
industry.
     Strengthen the organization's safety culture.
    SMS increases safety by requiring an organization with a part 5 SMS 
to ``connect the dots'' in a way that it may not do without an SMS. An 
SMS integrates discrete processes and procedures, such as 
organizational safety promotion, designation of safety roles and 
responsibilities, hazard identification, risk assessment and control, 
and performance assessment, into a comprehensive system to address 
aviation hazards. For example, consider an air carrier whose pilots 
suddenly start noticing that landings at a specific airport have 
recently become more difficult. Under SMS, those pilots are encouraged 
to communicate their individual observations to their management. Their 
management, upon noticing several reports have been received, would 
assess the situation and trigger their Safety Risk Management 
processes. These processes would then trigger a notification of the 
hazard to the airport. If the carrier does not have an SMS program, the 
carrier's pilots may not communicate their individual observations, the 
management may not have known of the hazard, and the systemic airport 
problem would not have been identified or addressed.
    As another example, consider the scenario of an aircraft production 
line where a tool is calibrated improperly. The aircraft assembly 
technician was unaware of the improperly calibrated tool and completed 
the assembly process. During operation, an air carrier's pilots 
identified minor and repeated flight control issues and reported these 
issues to their management. Under an SMS, the air carrier's management 
would report the hazard to the aircraft manufacturer. The aircraft 
manufacturer, upon receipt of the hazard report, would assess the 
situation and trigger its Safety Risk Management processes. This 
analysis would identify that the flight control problems were caused by 
an improperly calibrated tool. The manufacturer would then implement 
safety risk mitigations to correct the tool calibration process and 
increase tool inspection. In addition, the manufacturer would identify 
all delivered aircraft that may have been assembled with the improperly 
calibrated tool and issue maintenance instructions to all operators. 
Without SMS, the potential hazard may go unrecognized, unreported, and 
unmitigated, presenting a safety issue for each aircraft in service.
    Anecdotal evidence from FAA voluntary SMS program participants 
indicates that SMS improves the safety of aviation organizations.\10\ 
The FAA's Voluntary Program started as a pilot project in 2007 with a 
primary focus on part 121 operators, and it was based on the ICAO's SMS 
framework in Annex 19. In 2015, with the publication of part 5, the 
pilot project was transitioned to what is now called the FAA's SMS 
Voluntary Program, and it is based on part 5.\11\ As of October 31, 
2023, the SMS Voluntary Program had 72 participants, which included 45 
part 135 operators, two part 141 pilot schools, one part 142 training 
center, and 24 part 145 repair stations. As of October 31, 2023, there 
were 30 part 21 certificate holders participating in the associated 
voluntary program for design and production organizations, which 
includes 5 part 21 certificate holders with accepted SMSs. Recognizing 
this, the FAA has implemented SMS within many of its own organizations.
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    \10\ As described in the RIA, for example, one participant noted 
that the compressed executive awareness time of new safety related 
issues resulted in formal management actions occurring in less than 
90 days for low-risk issues and within hours for high-risk issues. 
Another participant noted that they have a seen a substantial drop 
in the major risk categories that they track.
    \11\ 80 FR 1308. The FAA published technical amendments on 
January 13, 2015 (80 FR 1584) and May 25, 2017 (82 FR 24009) to 
correct a date and a reference in the rule, respectively.
---------------------------------------------------------------------------

    Further, expansion of the SMS requirements increases U.S. alignment 
with other CAAs that are also implementing SMS requirements in 
accordance with ICAO Standards and Recommended Practices. With an SMS, 
a U.S. company may have an enhanced ability to operate internationally 
due to improved alignment with ICAO Standards and Recommended 
Practices.
    To date, SMS requirements have mainly focused on internal 
identification and mitigation of risk within an aviation organization. 
However, the FAA augmented these requirements in this rule to encourage 
a collaborative approach in which persons required to have an SMS share 
hazard information with each other and work together to identify and 
address hazards and safety issues. To enable collaboration, this rule 
requires persons to share hazard information with other aviation 
organizations to ensure that relevant information reaches the person in 
the best position to address the hazard. The expanded applicability and 
hazard information sharing among interfacing organizations will enable 
a network of aviation organizations working collaboratively to manage 
risk, thereby enhancing the safety benefits of SMS by assuring that 
hazards are communicated and mitigated effectively.
    Accordingly, expanding the implementation of SMS in the aviation 
industry, as well as requiring the notification of identified hazards 
to those best positioned to address them, will increase safety 
throughout the industry.

C. Related Regulatory Actions

1. Safety Management Systems for Domestic, Flag, and Supplemental 
Operations
    On July 23, 2009, the FAA published an advance notice of proposed 
rulemaking (ANPRM) to solicit public comments on whether certain 14 CFR 
parts 21, 119, 121, 125, 135, 141, 142, and 145 certificate holders, 
product manufacturers, applicants, and employers (product/service 
providers) should be required to develop an SMS.\12\ On August 1, 2010, 
Congress subsequently enacted the Airline Safety

[[Page 33073]]

and Federal Aviation Administration Extension Act of 2010 (Pub. L. 111-
216, 124 Stat. 2366), which directed the FAA to conduct rulemaking to 
``require all part 121 air carriers to implement a safety management 
system.'' \13\ To meet the rulemaking deadlines mandated by the Act, 
the FAA decided not to immediately address SMS for product/service 
providers other than part 121 air carriers.\14\ Accordingly, the FAA 
limited the SMS rulemaking project to part 121 air carriers, issued an 
NPRM on November 5, 2010,\15\ and subsequently withdrew the ANPRM.\16\
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    \12\ ANPRM, ``Safety Management Systems,'' 74 FR 36414. July 23, 
2009.
    \13\ See Sec. 215(a).
    \14\ See ``Safety Management System; Withdrawal,'' 76 FR 14592. 
March 17, 2011.
    \15\ 75 FR 68224.
    \16\ See id.
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    On January 8, 2015, the FAA published the ``Safety Management 
Systems for Domestic, Flag, and Supplemental Operations Certificate 
Holders'' final rule (SMS for part 121 final rule) requiring operators 
authorized to conduct operations under part 121 to develop and 
implement an SMS to improve the safety of their aviation related 
activities.\17\ The final rule added part 5 to title 14 of the CFR, 
creating the SMS requirements for part 121 certificate holders, modeled 
on the ICAO SMS framework in ICAO Annex 19 and consistent with the 2009 
ARC recommendations (as discussed in Section III.E.1.). The FAA crafted 
the requirements in part 5 to be applicable to aviation organizations 
of various sizes and complexities, as well as to be adaptable to fit 
the different types of organizations in the air transportation system 
and operations within an individual company. By 2018, all part 121 
operators had met the requirement to have an SMS acceptable to the FAA.
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    \17\ 80 FR 1308. The FAA published technical amendments on 
January 13, 2015 (80 FR 1584) and May 25, 2017 (82 FR 24009) to 
correct a date and a reference in the rule, respectively.
---------------------------------------------------------------------------

2. Safety Management Systems for Part 139 Airports
    On February 23, 2023, the FAA published a final rule \18\ updating 
14 CFR part 139 that requires certain airport certificate holders to 
develop, implement, maintain, and adhere to an airport SMS. 
Certificated airports that qualify under one or more of the following 
criteria are required to develop an SMS under this final rule: are 
classified as large, medium, or small hubs based on passenger data 
extracted from the FAA Air Carrier Activity Information System; have a 
3-year rolling average of 100,000 or more total annual operations, 
meaning the sum of all arrivals and departures; or serve any 
international operation other than general aviation. This rule expanded 
SMS requirements to certain certificated airports and furthered the 
FAA's aviation-wide approach to SMS implementation to address safety at 
an organizational level. This rule became effective on April 24, 2023.
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    \18\ 88 FR 11642.
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D. NTSB Recommendations

    The NTSB first recommended in 1997 that transportation 
organizations implement an SMS, and early recommendations were aimed at 
improving safety in the maritime industry. Since then, a number of NTSB 
investigations related to various modes of transportation, including 
aviation, have cited organizational factors contributing to accidents 
and resulted in recommendations that SMS be used as a way to prevent 
future accidents and improve safety. The NTSB issued 18 recommendations 
regarding SMS for aviation organizations over a 15-year period, 
spanning 2007 through 2021.\19\ These recommendations covered 
commercial operations under 14 CFR parts 121 and 135, revenue passenger 
carrying business operations under part 91, and certificate holders 
under part 21. Eight of the 18 NTSB recommendations were issued to the 
FAA.\20\
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    \19\ NTSB Safety recommendations: A-07-010 (2007), A-09-016 
(2009), A-09-089 (2009), A-09-098 (2009), A-09-106 (2009), A-12-062 
(2012), A-12-063 (2012), A-14-105 (2014), A-14-106 (2014), A-16-036 
(2016), A-19-028 (2020), A-19-036 (2019), A-19-038 (2019), A-20-025 
(2020), A-21-007 (2021), A-21-013 (2021), A-21-014 (2021), and A-21-
048 (2021).
    \20\ NTSB Safety recommendations: A-07-010 (2007), A-09-089 
(2009), A-09-016 (2009), A-16-036 (2016), A-19-028 (2020), A-21-013 
(2021), A-21-014 (2021), and A-21-048 (2021).
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    The NTSB publishes a Most Wanted List that ``highlights 
transportation safety improvements needed now to prevent accidents, 
reduce injuries, and save lives.'' \21\ The NTSB 2021-2023 Most Wanted 
List recommended that the FAA ``Require and Verify the Effectiveness of 
Safety Management Systems in all Revenue Passenger-Carrying Aviation 
Operations.'' \22\
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    \21\ 2021-2023 NTSB Most Wanted List of Transportation Safety 
Improvements, www.ntsb.gov/mwl.
    \22\ 2021-2023, NTSB Most Wanted List of Transportation Safety 
Improvements, Require and Verify the Effectiveness of Safety 
Management Systems in all Revenue Passenger-Carrying Aviation 
Operations, https://www.ntsb.gov/Advocacy/mwl/Pages/mwl-21-22/mwl-as-01.aspx.
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E. SMS ARCs

    Prior to publishing the 2015 SMS rule, the FAA chartered two ARCs 
to provide advice on implementing SMS in aviation regulations. The 
industry stakeholders on these ARCs included individual companies and 
associations representing operators, design and manufacturing 
organizations, repair stations, and training organizations. These ARCs 
expressed industry support for SMS and recommended that the FAA publish 
rules requiring the use of SMS.
    The FAA chartered the first ARC in 2009, after publishing an ANPRM 
seeking public input on requiring certain part 21, 119, 121, 125, 135, 
141, 142, and 145 certificate holders to develop an SMS.\23\ The ARC 
recommended the FAA issue regulations on SMS and that those regulations 
apply to certificate holders under 14 CFR parts 21, 119, 121, 125, 135, 
141, 142, and 145, as well as operators under 14 CFR part 91 subpart 
K.\24\ The ARC also recommended phased promulgation of SMS regulations 
and that the FAA prioritize new SMS regulations based on the potential 
safety benefit, as well as industry experience and regulatory oversight 
readiness. The rulemakings implementing SMS for part 121 operators and 
airports certificated under part 139 are addressed in more detail in 
Section III.C. of this preamble.
---------------------------------------------------------------------------

    \23\ 74 FR 36414, July 23, 2009.
    \24\ Safety Management System (SMS) Aviation Rulemaking 
Committee; Order 1110.152, Washington, DC. Available at: https://www.faa.gov/regulations_policies/rulemaking/committees/documents/media/SMSARC-2122009.pdf (as of March 15, 2022).
---------------------------------------------------------------------------

    The FAA chartered a second ARC in 2012 \25\ to evaluate 
improvements to the effectiveness and efficiency of existing 
``certification procedures for products and parts,'' and the benefits 
of incorporating SMS in the design and manufacturing environment. The 
FAA received the ARC's final report in October 2014.\26\ The ARC 
recommended establishing regulatory requirements for implementing SMS 
for design and production approval organizations that would be 
consistent with the part 5 requirements.
---------------------------------------------------------------------------

    \25\ 14 CFR 21/Safety Management Systems Aviation Rulemaking 
Committee Charter. Available at: https://www.faa.gov/regulations_policies/rulemaking/committees/documents/media/Part21ARC-10052012.pdf (visited March 15, 2022).
    \26\ Part 21/Safety Management Systems (SMS) Aviation Rulemaking 
Committee to the Federal Aviation Administration: Recommendations on 
Certification Procedures for Products and Parts. October 5, 2014.
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    For more information about both ARCs' recommendations and the FAA's 
responses, see Section IV.A of the NPRM preceding this final rule.

[[Page 33074]]

F. Aircraft Certification, Safety, and Accountability Act

    The Lion Air and Ethiopian Airlines accidents involving the Boeing 
737 MAX resulted in several investigations, not only of the accidents, 
but also of the FAA's oversight and certification processes. One such 
investigation, convened by the FAA in April of 2019, was the Boeing 737 
MAX Flight Control System Joint Authorities Technical Review. The Joint 
Authorities Technical Review included representatives from the National 
Aeronautics and Space Administration, the FAA, and several foreign 
CAAs. One of the Joint Authorities Technical Review recommendations was 
that the FAA encourage applicants to have a system safety function, 
such as an SMS, that is independent from their design organization.\27\
---------------------------------------------------------------------------

    \27\ Joint Authorities Technical Review (JATR), Boeing 737 MAX 
Flight Control System: Observations, Findings, and Recommendations. 
October 11, 2019.
---------------------------------------------------------------------------

    Subsequently, on December 27, 2020, Congress enacted ACSAA, which 
set forth a variety of reforms intended to address certain safety 
standards relating to the aircraft certification process. Section 102 
of ACSAA required the FAA to promulgate rules that require holders of 
both a TC and a PC issued under 14 CFR part 21 to implement an SMS. 
ACSAA also established a timeline for those certificate holders to 
adopt an SMS (i.e., no later than 4 years after the date of enactment, 
December 27, 2020), and it established certain requirements for the 
rulemaking, including a confidential employee reporting system through 
which employees can report hazards, issues, concerns, occurrences, and 
incidents without concern for reprisal for reporting, and a code of 
ethics.

G. International Movement Toward SMS

    ICAO Annex 19, Safety Management, establishes a framework for 
member States to develop and implement SMS requirements within their 
respective State's rules. Several member States, including the United 
States, started developing and implementing SMS requirements within 
their countries after Annex 19 First Edition was published in July 2013 
and became applicable in November 2013.\28\ Annex 19 currently requires 
States to establish requirements for SMS for international commercial 
air transportation, design and manufacturing, maintenance, air traffic 
services, training organizations, and certified aerodromes, as well as 
SMS criteria for international general aviation operators of large or 
turbojet airplanes.
---------------------------------------------------------------------------

    \28\ The Second Edition of Annex 19 was published in July 2016 
and became applicable in November 2019.
---------------------------------------------------------------------------

    Member States continue to make progress in developing, 
implementing, and maintaining requirements for SMS that are aligned 
with ICAO's SMS Standards and Recommended Practices, including 
certificating authorities in Canada, Brazil, the United Kingdom, Japan, 
Australia, and Europe (EASA). For example, in the EASA regulatory 
framework, SMS is mandatory for certificated operators of airplanes and 
helicopters authorized to conduct commercial air transportation. 
Additionally, EASA also adopted rules for EU-part 145 organizations, 
which became applicable on December 2, 2022, and for design and 
production organizations (EU part 21), which became applicable on March 
7, 2023.

H. Summary of the NPRM

    On January 11, 2023, the FAA published the NPRM for Safety 
Management Systems.\29\ The FAA proposed to update the SMS requirements 
in part 5 and extend the requirement to have an SMS to all certificate 
holders operating under the rules for commuter and on-demand operations 
(part 135), LOA holders operating commercial air tours under Sec.  
91.147, PC holders that are holders or licensees of a TC for the same 
product (part 21), and holders of a TC who license out that TC for 
production (part 21). The FAA proposed several amendments and new 
requirements to part 5 intended to increase the effectiveness of SMS. 
The FAA also proposed amendments to certain regulations in parts 21, 
91, and 119 to conform with, and enable the implementation of, the 
proposed requirements in part 5.\30\ The comment period was originally 
60 days and was scheduled to close on March 13, 2023. In response to 
commenters' requests for extensions, the comment period was extended by 
30 days and ultimately closed on April 11, 2023.\31\
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    \29\ 88 FR 1932.
    \30\ 88 FR 1933.
    \31\ 88 FR 5812.
---------------------------------------------------------------------------

I. General Overview of Comments

    The FAA received 186 comment submissions in response to the NPRM 
from a variety of commenters, including air carriers, aircraft 
designers and manufacturers, trade associations, emergency medical 
transport services, a non-profit safety organization, a university, and 
private citizens. The FAA received comments from the following: 
Aerospace Industries Association (AIA), Air Charter Safety Foundation, 
Air Line Pilots Association (ALPA), Air Medical Operators Association 
(AMOA), Airbus Commercial Aircraft (Airbus), Aircraft Electronics 
Association (AEA), Aeronautical Repair Station Association (ARSA), 
Aircraft Owners and Pilots Association (AOPA), Alaska Air Carriers 
Association (AACA), Ameristar, Association for Uncrewed Vehicle Systems 
International (AUVSI), Association of Air Medical Services, Cargo 
Airline Association, Commercial Drone Alliance, Commission on 
Accreditation of Medical Transport Systems (CAMTS), Delta Air Lines, 
Embraer S.A., European Union Aviation Safety Agency (EASA), 
Experimental Aircraft Association (EAA), GE Aerospace, General Aviation 
Manufacturers Association (GAMA), Gulfstream Aerospace Corporation 
(Gulfstream), Helicopter Association International (HAI), Lockheed 
Martin, Minnesota Business Aviation Association, Modification and 
Replacement Parts Association (MARPA), National Business Aviation 
Association (NBAA), National Transportation Safety Board (NTSB), 
NetJets Association of Shared Aircraft Pilots, Piper Aircraft, Pratt & 
Whitney, Regional Air Cargo Carriers Association (RACCA), Transport 
Canada Civil Aviation (TCCA), Rolls-Royce, Regional Airline Association 
(RAA), Small UAV Coalition, Transport Workers Union of America, 
Transportation Trades Department--AFL-CIO, WYVERN, Zipline, as well as 
multiple individuals and smaller operators.
    The FAA received comments on multiple aspects of the proposal. The 
comments and the FAA's responses are discussed in Section IV.

IV. Discussion of Comments and the Final Rule

A. Applicability to Part 135 and LOA Holders Under Sec.  91.147

    In the NPRM, the FAA proposed to apply part 5 to all operators 
under part 135 and air tour operators under Sec.  91.147. Specifically, 
proposed Sec.  5.1(b) stated that part 5 would apply to certificate 
holders or applicants authorized to conduct operations under part 135. 
Proposed Sec.  5.1(c) provided that part 5 would apply to applicants 
and LOA holders under Sec.  91.147.
1. Discussion of the Final Rule
    The FAA is applying part 5 to all part 135 operators and air tour 
operators with a LOA issued under Sec.  91.147, as well as to 
applicants for these operations. This amendment is designed

[[Page 33075]]

to further improve aviation safety for passenger-carrying and cargo 
operations conducted for compensation or hire. As detailed more 
thoroughly in the NPRM, the FAA identified a number of accidents 
involving part 135 operators and Sec.  91.147 LOA air tour operators 
that resulted in fatalities and serious injuries that could have been 
mitigated through SMS.
    After considering comments, the FAA adopts this applicability as 
proposed. However, for the reason discussed in the FAA Response 
section, the FAA decided not to require certain requirements within 
part 5 for those operators where a single pilot is the sole individual 
performing all necessary functions for the safe operation of the 
aircraft. Section 5.9 is revised from the NPRM to add paragraph (e), 
which identifies the requirements in part 5 that are not applicable to 
certain single-pilot organizations. These requirements generally focus 
on identification of designated management personnel, employee 
reporting, and communication across the aviation organization and are 
explained in more detail in section IV.A.3.
2. Summary of the Comments
    Several commenters indicated that requiring part 135 operators and 
Sec.  91.147 LOA holders to comply with the part 5 SMS requirements 
would impose a significant burden resulting in little safety benefit. 
Commenters, including the CAMTS, NATA, NBAA, and RACCA suggested part 5 
was designed for large air carriers, not for smaller operators, nor for 
the diversity of operations conducted under part 135. The commenters 
also argued part 5 is too prescriptive to accommodate the variation of 
size and scope of part 135 operations. For these reasons, commenters 
recommended that the FAA develop separate SMS requirements for part 135 
operators that are less complex than part 5 and are truly scalable for 
organizations with limited resources. As an alternative, NBAA 
recommended the FAA apply specific regulations to entities based on 
size or complexity, using criteria similar to the complexity criteria 
identified by the Safety Management International Collaboration Group.
    Commenters also expressed concern about the difficulty for small 
businesses to implement SMS. NBAA indicated that the FAA should 
consider EASA and TCCA SMS models, and the feedback both entities 
received, highlighting the difficulties that small organizations face 
when implementing SMS. NBAA further noted that its experience with 
other regulatory frameworks has illustrated the need for additional 
full-time personnel or external contractors to manage the system.
    NATA stated the FAA needs to recognize the challenges for small 
business and ensure that guidance and training address this issue. NATA 
noted that SMS solutions for small businesses must not be cost-
prohibitive or so burdensome as to drive businesses to close, further 
stating that the FAA has the responsibility to impose SMS regulations 
on small operators only if it can be done in a way that enhances safety 
and minimizes burdens. NATA also stated that there have been no pilot 
programs or specialized analysis conducted to support the concept of 
SMS for smaller operators.
    Some commenters asserted that air tour operations already have 
stringent requirements in place, and that imposing the part 5 
requirements would negatively harm these small businesses and cause 
inadvertent negative safety effects by diverting resources. Other 
commenters suggested that certain air tour operators should be excluded 
from the requirement, such as Sec.  91.147 LOA holders operating fewer 
than 100 flights per year or air tour operators with fewer than five 
employees.
    Several commenters recommended excluding single-pilot operators 
from the SMS requirements. These commenters argued the requirements are 
impractical, unnecessary, and overly burdensome, citing the 
confidential reporting system as an example. Commenters noted SMS may 
be beneficial for larger organizations because a team is involved, but 
it does not make sense for a single pilot operator because that 
individual is already conducting all the functions that would be 
required under part 5. According to one commenter, requiring single-
pilot operators to document their decisions, for example, is counter-
productive and may distract them from important duties.
    An individual commenter questioned the FAA's justification for 
requiring single-person operators to implement SMS. The commenter 
argued that the real-world accident descriptions in the NPRM did not 
provide evidence that an SMS would have prevented any of the accidents 
involving single-person operators. The commenter also noted the FAA did 
not present statistical evidence to justify making this regulatory 
change for single-person operators.
    Other commenters, however, supported the proposed rule, stating 
companies requiring payment for service should have an SMS. For 
instance, the NTSB stated that it supports the proposed expansion of 
SMS to include all part 135 operators and all operators conducting air 
tours under Sec.  91.147. The NTSB noted that if the proposed 
requirements were adopted, the rule could possibly satisfy the intent 
of Safety Recommendations A-16-36 and A-19-28. The NTSB also stated 
that the particular methods an operator uses to implement an SMS are 
not prescribed in the proposed rule; therefore, the current SMS 
framework provides sufficient flexibility to small operators under both 
part 135 and Sec.  91.147, and no alternatives exist that would achieve 
the same safety objectives as SMS.
3. FAA Response
    The FAA understands the concerns expressed by the commenters 
regarding the impact to small operators. Part 5 was designed to be 
scalable and flexible so aviation organizations could design and 
implement an SMS that fits their operations. Scalability was discussed 
at length in the preamble to the NPRM, discussed further in Section 
IV.J. of this preamble, and is addressed in Advisory Circular (AC) 120-
92 and AC 21-58.\32\ Appendix G in AC 120-92 includes implementation 
strategies and examples regarding how small operators could comply with 
part 5 requirements.
---------------------------------------------------------------------------

    \32\ Guidance, including ACs, to support this rule will be 
available at the FAA's Dynamic Regulatory System (https://drs.faa.gov) approximately 30 days after publication in the Federal 
Register.
---------------------------------------------------------------------------

    The public expects safe carriage from operators offering flight 
services for hire irrespective of whether an operator employs one pilot 
or many. Regardless of size, all companies have the responsibility to 
conduct safe operations. Accordingly, the FAA has determined SMS will 
be applicable to all part 135 operators as well as commercial air tours 
conducting their operations with a LOA under Sec.  91.147 because they 
are all engaged in the transportation of passengers or cargo for 
compensation or hire. This expanded applicability also meets, in part, 
the NTSB's recommendations for commercial aircraft operations to have 
an SMS.
    There is risk in aviation operations regardless of the size or 
complexity of the organization. A fundamental element of SMS is the 
identification of hazards and mitigating the risk of those hazards. 
Therefore, SMS is intended to be used to mitigate the risk in these 
operations, including the risk not currently addressed by existing 
regulations. Even though aviation organizations must ensure compliance 
with the relevant regulatory standards,

[[Page 33076]]

they should use their SMS to identify and address the underlying causes 
of regulatory or procedural noncompliance and invest resources and 
efforts to preclude their recurrence.\33\
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    \33\ An SMS does not excuse noncompliance with existing 
regulations.
---------------------------------------------------------------------------

    The FAA concludes that all commercial operators authorized under 
part 135 or Sec.  91.147 can benefit from implementing an SMS because 
it increases safety by supporting a proactive, predictive method of 
managing safety to identify and address problems before they result in 
an incident or accident. SMS is not a comprehensive solution but serves 
as an additional preventive measure in the evolution of aviation 
safety.
    In addition, the FAA recognizes that there is a spectrum of 
organizational sizes and complexities across the aviation industry. 
There are relatively low-cost implementation resources available to 
assist persons to meet part 5 requirements, including online platforms 
such as the Web-Based Analytical Technology (WBAT) platform. This 
platform is a federally funded software system that was originally 
created to support data collection and information technology for FAA 
voluntary safety programs. WBAT has since evolved, and it can now be 
used to assist organizations in meeting SMS requirements. The platform 
has modules to support all aspects of an SMS and it includes the 
following tools: SMS implementation manager, safety risk management, 
safety assurance, employee reporting, and data sharing. Basic access to 
the WBAT platform is free. Additional support is fee-based, and the 
platform has multiple tiers of service enabling organizations to decide 
which tier best fits their operations.
    In response to NBAA's suggestion that the FAA use criteria similar 
to the Safety Management International Collaboration Group for small 
organizations, the FAA decided not to adopt these criteria because part 
5 is already designed to be scalable based on the size and complexity 
of the aviation organization. Safety Management International 
Collaboration Group criteria are discussed further in AC 120-92 and may 
provide useful guidance for aviation organizations to use when 
implementing their SMS. However, the FAA is not codifying these 
specific criteria in this rule because the rule should allow for 
various ways to scale SMS implementation.
    The FAA agrees with commenters that certain part 5 requirements may 
be impractical or illogical for many single-pilot organizations. As a 
result, the FAA adds a new paragraph (e) to Sec.  5.9 to enumerate 
those SMS provisions that the FAA has determined shall not apply to 
certain single-pilot operations conducted under part 135 or an LOA 
issued under Sec.  91.147 (specifically, Sec. Sec.  5.21(a)(4), 
5.21(a)(5), 5.21(c), 5.23(a)(2), 5.23(a)(3), 5.23(b), 5.25(b)(3), 
5.25(c), 5.27(a), 5.27(b), 5.71(a)(7), 5.93, and 5.97(d)). These 
exceptions are limited to entities with a single pilot who is the sole 
individual performing all necessary functions in the conduct and 
execution related to, or in direct support of, the safe operation of 
the aircraft. All necessary functions would generally include: 
operational control, refueling, ground handling of the aircraft, flight 
planning, weight and balance calculations, performance of preventive 
maintenance, coordination of maintenance activities, pre-flight and 
post-flight activities, and financial decisions related to operating 
the aircraft safely, in addition to operating the aircraft. The FAA is 
removing requirements relating to employee reporting for these aviation 
organizations because the person reporting would be the same person 
receiving the reports. In addition, the requirements for communication 
within the aviation organization are also not necessary for these 
organizations; nor do they need to identify and designate various 
management personnel because the same person would be fulfilling those 
roles.
    The FAA provides additional guidance in AC 120-92 to help these 
single-pilot organizations navigate the exceptions. The FAA is also 
providing additional time for compliance, as discussed in Section IV.D. 
Commenters' concerns regarding the cost and the perceived lack of 
benefits are discussed further in Section IV.V.

B. Applicability to Part 21 Foreign Entities

    In the NPRM, the FAA proposed to apply the SMS requirements in part 
5 to any TC holder that allows another person to use the TC to 
manufacture the product under a PC. The proposal did not distinguish 
between TC holders where the United States is the State of Design \34\ 
and TC holders where a foreign country is the State of Design. Under 14 
CFR 21.29, the FAA may issue a U.S. TC to a foreign manufacturer for an 
import product by ``validating'' the original TC issued to the 
manufacturer by the relevant foreign CAA. For the holder of a validated 
TC issued by the FAA, the foreign country (or jurisdiction) remains the 
State of Design because that country has regulatory authority over the 
original TC and TC holder. As proposed in the NPRM, part 5 would be 
applicable to a foreign holder of a TC issued under Sec.  21.29 that 
licenses its TC to another person to manufacture the product in the 
United States. This applicability would therefore impose part 5 
requirements on a holder of a TC issued under Sec.  21.29, even though 
the United States is not the State of Design. The FAA did not intend 
for this provision to apply to these TC holders.
---------------------------------------------------------------------------

    \34\ As defined in Sec.  21.1(b)(8) of 14 CFR, the term ``State 
of Design'' means ``the country or jurisdiction having regulatory 
authority over the organization responsible for the design and 
continued airworthiness of a civil aeronautical product or 
article.''
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1. Discussion of the Final Rule
    The FAA intends for this rule to require SMS for TC and PC holders 
where the United States is the State of Design or State of 
Manufacture.\35\ In the final rule, the FAA makes changes to Sec.  
5.1(g) to address any ambiguity regarding to which entities the rule 
applies. Specifically, the FAA is revising Sec.  5.1(g) and Sec.  
5.15(a) to exclude foreign holders of a validated TC issued under Sec.  
21.29 that allow another person to use the TC to obtain a PC to 
manufacture the product in the United States.\36\
---------------------------------------------------------------------------

    \35\ As defined in Sec.  21.1(b)(9) of 14 CFR, the term ``State 
of Manufacture'' means ``the country or jurisdiction having 
regulatory authority over the organization responsible for the 
production and airworthiness of a civil aeronautical product or 
article.''
    \36\ Note that if the validated TC holder obtains a PC to 
manufacture the product itself, then it is subject to the rule.
---------------------------------------------------------------------------

2. Summary of the Comments
    Embraer S.A. commented that the requirement as proposed in Sec.  
5.1(g) did not distinguish between a U.S. TC holder and a foreign TC 
holder with a validated TC issued under Sec.  21.29. As a result, 
Embraer noted that one could interpret the provision to mean that the 
FAA would regulate a design organization for which the United States is 
not the State of Design. Embraer noted that this seems to be an 
unintended effect, based on information in the NPRM and the FAA's 
stated intention of seeking alignment with ICAO Annex 19, including 
section 4.1.5 of Chapter 4 of the Annex, which states ``the SMS of an 
organization responsible for the type design of aircraft, in accordance 
with Annex 8, shall be made acceptable to the State of Design.''
3. FAA Response
    The FAA agrees that it did not intend for this rule to apply to a 
design

[[Page 33077]]

organization for which the United States is not the State of Design. 
Rather, the FAA intended to require SMS for TC and PC holders where the 
United States is the State of Design or State of Manufacture. In the 
final rule, Sec.  5.1(g) is revised to exclude foreign holders of a TC 
issued under Sec.  21.29 that allow another person to use the TC to 
obtain a PC to manufacture the product in the United States. For 
purposes of this rule, the term ``production certificate'' in Sec.  
5.1(g) and in Sec.  5.15 continues to refer to a production certificate 
issued by the FAA under part 21 or a production certificate or 
equivalent authorization issued by a foreign aviation authority.

C. Expansion of Proposed Applicability

    The NPRM proposed to apply part 5 to part 135 operators, air tour 
operators operating under Sec.  91.147 LOAs, and certain certificate 
holders under part 21. Several commenters suggested expanding 
applicability beyond the proposal. In addition, the FAA specifically 
asked the public for input regarding a possible future rule to apply 
part 5 to part 145 repair stations, as well as input regarding whether 
part 5 should apply to all design and production approval holders 
(i.e., all holders of a TC, PC, technical standard order authorization 
(TSOA), supplemental type certificate (STC), or parts manufacturer 
approval (PMA)). The FAA also asked the public for input on whether 
part 5 applicability should be limited for certain subsets of the part 
145 or part 21 entities.
1. Discussion of the Final Rule
    The FAA has decided not to expand the applicability of this rule 
beyond the original proposal. The current applicability was chosen 
because the FAA believes this scope will capture segments of the 
aerospace system that have a large impact on safety without unduly 
delaying the effective date of the rule. Rather than expanding the 
scope of this rule, the FAA will continue to encourage voluntary 
implementation of SMS in segments of the aerospace system not covered 
by part 5.
2. Summary of the Comments
    Commenters suggested expanding the applicability of the proposal in 
various ways. Some commenters pointed out areas in the aerospace system 
where they thought risk existed and could benefit from SMS. Other 
commenters focused on covering entities that charged a fee for service 
or covering all entities that ICAO Annex 19 requires have an SMS.
    For the air transportation industry, the NTSB noted that FAA only 
proposed to apply the SMS requirements to air tour operations conducted 
under Sec.  91.147 rather than applying the requirements to all revenue 
passenger-carrying operations conducted under part 91 as the NTSB 
recommended. The NTSB stated the proposed rule does not go far enough 
to meet the intent of Safety Recommendations A-21-13 and -14, 
reiterated its position that SMS is necessary to improve the safety of 
all part 91 revenue passenger-carrying operations, and urged FAA to 
include all revenue passenger-carrying operations conducted under part 
91 in the final rule.
    NATA commented that including fractional ownership programs would 
be consistent with the reasons the FAA decided to regulate part 91 
subpart K operations.
    TCCA and EASA expressed their support for expanding SMS to other 
areas within part 21.
    For the aviation maintenance industry, the FAA asked in the NPRM 
whether it should consider a future rulemaking project to expand the 
applicability of part 5 to include repair stations certificated under 
part 145. Commenters that supported extending the application of part 5 
to repair stations, included the NTSB, EASA, Air Charter Safety 
Foundation, ALPA, Transportation Trades Department--AFL-CIO, Transport 
Workers Union of America, and Airbus Commercial Aircraft, as well as 
individuals and operators. The NTSB indicated that SMS should be 
applied to part 145 repair stations to address Safety Recommendation A-
21-48. EASA, Airbus Commercial Aircraft, GE Aerospace, and others cited 
the importance of harmonizing with ICAO and other CAAs as a reason to 
require part 145 repair stations to have an SMS.
    Other commenters, including AEA, ARSA, and Pratt & Whitney, did not 
support extending the application of part 5 to part 145 repair 
stations. AEA and ARSA stated that the addition of part 5 to existing 
safety standards for repair stations is redundant, expensive, and 
unnecessary. Pratt & Whitney recommended that part 145 repair stations 
remain in the voluntary program.
    A few commenters recommended applying SMS to part 145 repair 
stations to facilitate certificate acceptance by a foreign CAA.
    For the aviation design and manufacturing industry, the FAA sought 
comment in the NPRM as to whether part 5 should apply to all holders of 
a TC, PC, STC, TSOA, or PMA. The FAA also requested input on whether 
any exceptions should be made to these holders and for commenters to 
provide supporting information and data on the safety benefits or 
impact of the broadened applicability. Some commenters noted that 
limiting part 5 applicability (for design and manufacturing entities) 
to holders of a TC or a PC leaves gaps in safety and requested that SMS 
be extended to certain design and manufacturing entities that produce 
safety-critical components. The commenters, however, did not provide 
any data or information supporting the benefit of extending 
applicability to STC, TSOA, and PMA holders.
3. FAA Response
    Although the FAA agrees with many commenters that other areas of 
the aerospace system could benefit from SMS, the Agency is not 
expanding the applicability of this rule beyond the original proposal.
    With regard to expanding the rule to include STC, TSOA, and PMA 
holders under part 21, the FAA's decision not to expand this final rule 
simply maintains the existing level of safety in part 21 applicable to 
those entities. Before making changes, the FAA would first establish 
that a safety justification (the safety ``gap'' as characterized by one 
commenter) exists. At this time the FAA does not have sufficient 
information to support a safety justification for expanding this rule 
to STC, TSOA, and PMA holders. The FAA would also need to take these 
steps to expand the applicability of part 5 to additional part 91 
revenue passenger-carrying operations.
    With respect to part 145 repair stations, the FAA acknowledges the 
comments received on whether the Agency should consider future 
rulemaking to cover these organizations under part 5. The FAA 
recognizes the significant impact repair stations have on aviation 
safety; the recommendations of the NTSB for the FAA to require 
organizations that maintain aircraft to establish SMS; and the 
applicability of ICAO Annex 19 to maintenance organizations. The 
comments received from the NPRM offer a diverse set of viewpoints 
across the aviation sector, all of which must be taken into account 
should the FAA consider a future rulemaking to require part 145 repair 
stations to develop and maintain an SMS. The FAA continues to collect 
and evaluate data to determine whether the benefits would justify the 
costs and will continue to pursue and promote part 145 repair station 
involvement in the FAA's SMS Voluntary Program.

[[Page 33078]]

    In summary, applying SMS requirements to part 145 repair stations, 
additional part 21 design and production approval holders, and other 
entities as recommended in the comments requires careful and 
deliberative consideration by the FAA of many factors, including safety 
benefits, costs, and other priorities. The time needed to fully 
evaluate these considerations and to develop and apply the most 
appropriate SMS requirements for additional entities would inhibit the 
FAA's ability to finalize this rulemaking expeditiously. The FAA will 
continue to encourage voluntary implementation of SMS by aviation 
organizations not covered by part 5. The FAA acknowledges and 
appreciates the input provided by commenters in response to the 
questions posed on SMS applicability and may explore expansion of part 
5 applicability in future initiatives, which could include future NPRMs 
for which the FAA would solicit additional public input.

D. Compliance Timelines and Submission Requirements

    In the NPRM, the FAA proposed to require existing part 135 
operators and Sec.  91.147 air tour operators to develop and implement 
an SMS in accordance with part 5 and to submit a statement of 
compliance no later than 24 months after the effective date of a final 
rule. The FAA also proposed to require any new applicant for 
authorization to conduct operations under part 135 or for a LOA under 
Sec.  91.147 to submit a statement of compliance as part of the 
certification or LOA process. In the NPRM, existing part 121 operators 
were required to revise their SMS to meet the new proposed requirements 
in part 5 and submit those revisions for acceptance by the FAA no later 
than 12 months from the effective date of the rule. The FAA also 
proposed to require any new applicant for authorization to conduct 
operations under part 121 to submit a statement of compliance as part 
of the certification process.
    In addition, the FAA proposed that existing part 21 certificate 
holders be required to submit an implementation plan no later than 
December 27, 2024, and implement their SMS by December 27, 2025. For 
companies that apply for a PC, have a pending application for a PC, or 
have a TC and enter into a licensing agreement in accordance with Sec.  
21.55, the FAA proposed similar compliance timelines to maintain parity 
with the compliance timelines proposed for existing certificate 
holders. More specifically, the FAA proposed to require TC holders who 
enter into a licensing agreement to submit an implementation plan for 
FAA approval when providing a written licensing agreement to the FAA. 
The FAA also proposed to require PC applicants to submit an 
implementation plan for FAA approval during the certification process. 
In the proposal, PC applicants, as well as TC holders who enter into a 
licensing agreement, were required to implement their SMS no later than 
1 year after the FAA's approval of the implementation plan.
1. Discussion of the Final Rule
i. Existing Part 135 Operators and LOA Holders Under Sec.  91.147
    In the final rule, the FAA has increased the compliance timeframe 
from the proposed 24 months to 36 months for part 135 operators and LOA 
holders under Sec.  91.147 in response to comments received.
    In addition, the FAA is changing the title of the document to be 
submitted for existing part 135 certificate holders as well as existing 
LOA holders under Sec.  91.147 from ``statement of compliance'' to 
``declaration of compliance.'' Submitting a declaration of compliance 
to the FAA serves to document that the aviation organization has 
developed and implemented an SMS meeting the applicable requirements of 
part 5. The FAA will assess the aviation organization's compliance with 
SMS requirements during routine surveillance. Aviation organizations 
are required to make their SMS processes and procedures available in 
accordance with Sec. Sec.  5.9(d) and 5.95 to FAA personnel for review. 
Upon implementation of an SMS, if revisions to manuals are necessary, 
the aviation organization will submit those changes in accordance with 
applicable regulatory requirements.
ii. Existing Part 121 Operators
    After further consideration, the FAA decided to remove the proposed 
requirement for existing part 121 operators to submit the changes to 
their SMS to meet the new requirements in part 5 to the FAA for 
acceptance. Specifically, part 121 operators are required to revise 
their SMS to meet the new requirements proposed in Sec. Sec.  
5.21(a)(7) (Safety Policy Code of Ethics), 5.53(b)(5) (Safety Risk 
Management Interfaces), 5.57 (Hazard Notification), 5.71(a)(7) 
(Employee Confidential Reporting System), 5.71(a)(8) (Investigating 
Hazard Notifications), and 5.97(d) (SMS Records). The FAA will validate 
compliance with these new requirements using existing oversight methods 
and tools.
    Part 121 operators are still required to make available all 
necessary information and data that demonstrates that they have an SMS 
that meets the requirements in part 5, in accordance with Sec.  5.7(d). 
Therefore, the proposed requirement (Sec.  5.7(a)(2)) is unnecessary, 
and the FAA has removed it.
iii. Applicants for Part 121 or 135 Operations or for an LOA Under 
Sec.  91.147
    The FAA makes minor changes to the submission requirements for 
anyone who applies to operate under part 121 or 135 or for an LOA under 
Sec.  91.147 after the effective date of this rule. In the NPRM, the 
FAA proposed that these applicants submit a ``statement of compliance'' 
with their certificate or LOA application. After further consideration, 
the FAA concluded that it was not necessary to make this submission a 
regulatory requirement as a part of this rule. To be clear, the FAA 
will require part 121 and 135 and Sec.  91.147 LOA applicants to 
implement SMS. However, instead of requiring these applicants to submit 
a ``statement of compliance,'' the FAA will include its assessment of 
the applicant's SMS using the same processes and procedures it uses to 
assess the applicant's compliance with other FAA requirements. Removing 
the requirement is consistent with how the FAA evaluates compliance 
with other regulatory requirements and aligns with terminology used in 
traditional air carrier and air operator certification, thereby 
reducing the potential for confusion.
    Specifically, the general certification requirements in Sec.  
119.35 direct the air carrier or operator certificate applicant to 
submit an application with the necessary information and in a form and 
manner prescribed by the Administrator. The FAA provides guidance (AC 
120-49) describing how to prepare and submit application materials and 
document compliance with regulatory requirements. This guidance 
includes information on how to document compliance with regulations 
that the applicants must comply with, including part 5. Similarly, for 
applicants requesting issuance of an LOA under Sec.  91.147, the FAA 
will verify part 5 compliance during the application process. New Sec.  
91.147(b)(3) adds compliance with part 5 as a requirement for obtaining 
an LOA. This additional requirement, supported with requirements in 
Sec.  5.9(c) and (d), provides sufficient assurance

[[Page 33079]]

that Sec.  91.147 LOA applicants implement and maintain an SMS.
iv. Part 21 Certificate Holders
    In response to comments, the FAA revises the compliance deadlines 
for covered part 21 entities to be based upon the effective date of the 
final rule. Existing certificate holders will have 6 months from the 
final rule effective date to develop and submit an implementation plan 
to the FAA and 36 months from the effective date to implement their 
SMS. PC applicants are required to submit an implementation plan for 
FAA approval during the certification process, and to implement the SMS 
no later than 36 months after submission of their implementation plan. 
Holders of a TC entering into a licensing agreement in accordance with 
Sec.  21.55 are required to submit an implementation plan to the FAA 
when providing written licensing agreements, and to implement the SMS 
no later than 36 months after submission of their implementation plan.
2. Summary of the Comments and FAA Response
i. Part 135 Operators and LOA Holders Under Sec.  91.147
a. Summary of the Comments
    Industry associations, regulated entities, and several individuals 
submitted comments regarding implementation timeframes. Most of these 
commenters felt the 24-month timeframe was inconsistent with ICAO and 
other SMS implementation and maturity models, and that 24 months is 
insufficient to develop and implement SMS.
    Commenters, including HAI, NBAA, and Jet Linx Aviation, recommended 
extensions ranging from 36 months to 5 years for development and 
implementation of the SMS. Individual commenters cited the 36-month 
timeframes for existing part 121 SMS and SMS for airports, which 
permits up to 5 years in some circumstances.
    EAA, AMOA, NATA, AOPA, and LifeFlight of Maine recommended a phased 
(staged) approach to the timeline of SMS implementation instead of a 
rigid 24-month requirement. In particular, they cited no opportunity 
for operators to consult with the FAA before SMS acceptance and 
oversight, which could lead to noncompliance. These commenters noted 
the phased approach would also allow FAA inspectors to become familiar 
with SMS processes, procedures, and oversight. An individual commenter 
said that a more measured timeline would reduce the burden on business 
aviation operators.
b. FAA Response
    The FAA agrees with the commenters that extending the compliance 
timeframe would be beneficial and in the final rule extends the 
timeframe by 12 months for part 135 operators and LOA holders under 
Sec.  91.147, as well as provides pending applicants 36 months to meet 
part 5. This extension will allow more time for operators to obtain a 
comprehensive understanding of SMS. In addition, the 36-month timeline 
is more consistent with the timeframes provided to part 121 operators 
and airports, as well as the part 21 certificate holders covered by 
this rule (as discussed in Section IV.D.2.ii.).
    Although the FAA has chosen not to follow a phased approach as 
suggested by the commenters, the extended compliance timelines adopted 
in this final rule will help address their concerns over the lack of 
FAA consultation. The FAA and many industry stakeholders have gained 
significant experience with SMS principles in the years since part 5 
was originally published. The FAA, industry associations, and third-
party service providers have resources to help stakeholders with 
implementation, which are further discussed in Section IV.L.2. 
Stakeholders will continue to have the opportunity to contact the FAA 
for compliance assistance, as appropriate. The change from 24 months to 
36 months for compliance provides operators with the necessary time to 
implement SMS effectively.
ii. Part 21 Certificate Holders
a. Summary of the Comments
    Commenters, such as Pratt & Whitney, Piper Aircraft, Aviation 
Safety Solutions, Gulfstream, and GAMA/AIA noted that the timeframes 
proposed in the NPRM would provide insufficient time to implement an 
SMS and emphasized that the compliance deadlines should not be based on 
pre-established calendar dates. Commenters referenced timeframes 
recommended by the 2012 part 21 SMS ARC and the compliance deadlines 
established for part 121 operators under the part 5 rule issued in 
2015. Pratt & Whitney, Piper Aircraft, Aviation Safety Solutions, 
Gulfstream, and GAMA/AIA requested additional time for submitting an 
implementation plan and fully implementing SMS, ranging from 6-12 
months for submitting the implementation plan, and 24-48 months for 
fully implementing SMS.
    Airbus asked why the timeframes are different across different 
sections of the NPRM for part 21 entities.
    Individual commenters remarked on the requirement for PC applicants 
to submit an SMS implementation plan as a prerequisite to obtaining or 
amending a PC. Some commenters asked for the FAA to clarify that the 
submission of the implementation plan is the only part 5 prerequisite 
to obtaining or amending the PC and that companies are not expected to 
have the SMS fully implemented to obtain or amend a PC. GAMA/AIA 
requested an exception for TC holders that apply for a PC less than 1 
year after the final rule becomes effective, recommending that these 
applicants should be given 1 year after PC approval to submit their 
implementation plan.
    TCCA asked if 1 year to implement SMS is reasonable and indicated 
that the provision does not seem to consider the size and complexity of 
organizations, suggesting that large organizations may need more time 
to fully implement their SMS due to organizational structuring or re-
structuring. TCCA suggested that the FAA consider an implementation 
schedule based on the size of the organization, factoring in any 
existing voluntary programs. EASA noted that the proposed compliance 
timelines for part 21 are close to the compliance timeline for full 
implementation of SMS in the European regulatory framework (March 7, 
2025) and that extending timelines beyond those as proposed may delay 
FAA's SMS compliance with ICAO Annex 19 and may delay harmonization 
with other CAAs.
b. FAA Response
    The FAA acknowledges the need to provide design and manufacturing 
companies adequate time to plan and implement their SMSs. Further, the 
FAA recognizes the challenges posed by establishing compliance 
deadlines for existing holders based upon fixed calendar dates that may 
be impacted by delays in the publication of the final rule. Based on 
the feedback the FAA received, the FAA is extending the time for design 
and manufacturing companies to implement SMS. Under the final rule, 
existing part 21 certificate holders that come under this final rule 
will be afforded 6 months after the rule's effective date to develop 
and submit an implementation plan and 36 months after the rule's 
effective date to implement their SMS in accordance with the FAA-
approved implementation plan. This approach is consistent with the 
approach in the original part 5 for part 121 operators, as well as 
EASA's

[[Page 33080]]

SMS rule and the recommendations from the 2012 part 21 SMS ARC.
    New and pending applicants for a PC will be required to submit 
implementation plans as part of the production certification process 
(as was proposed in the NPRM). The FAA will not issue a PC until the 
Agency has received the required implementation plan. Submission of the 
implementation plan is the only prerequisite under part 5 before an 
applicant may be issued a PC. Once an implementation plan has been 
submitted to the FAA, applicants will have 36 months to implement their 
SMSs rather than the 12 months previously proposed.
    As a result of these changes, the timeframes for existing 
certificate holders and future and pending applicants will be 
consistent. Regarding GAMA/AIA's request to extend the requirement for 
TC holders that apply for a PC less than 1 year after the final rule 
becomes effective, the FAA does not agree that an extension is 
warranted because development of the implementation plan itself need 
not be complex. In addition, the FAA has provided information and 
materials in AC 21-58 to aid in the development of the plan.

E. Use of the Term ``Person''

    In the NPRM, the FAA proposed to amend various sections in part 5 
to change the term ``certificate holder'' to ``person.'' The FAA 
proposed this revision as a non-substantive conforming change. Prior to 
this rule, part 5 had only applied to part 121 certificate holders, and 
the reference to ``certificate holder'' in part 5 was appropriate. The 
FAA proposed to expand applicability beyond certificate holders to 
include Sec.  91.147 LOA holders. With that change, ``certificate 
holder'' would no longer be accurate and the FAA proposed replacing it 
with ``person.''
1. Discussion of the Final Rule
    This rule adopts the proposal to use the term ``person'' in place 
of ``certificate holder.''
2. Summary of the Comments
    Commenters, including Airbus, Alaska Seaplanes, Ameristar Air 
Cargo, Cargo Airline Association, Delta Air Lines, RAA, NBAA, U.S.C. 
Aviation Safety Management, U.S.C., and three individuals objected to 
or sought clarification regarding the change to use the term ``person'' 
instead of ``certificate holder.''
3. FAA Response
    The term ``person'' is defined in 14 CFR 1.1 as: ``an individual, 
firm, partnership, corporation, company, association, joint-stock 
association, or governmental entity. It includes a trustee, receiver, 
assignee, or similar representative of any of them.'' This definition 
includes certificate holders, service providers, or other types of 
individuals or business entities and is used throughout 14 CFR. As a 
result, the term ``person'' is not only appropriate, but also 
consistent with existing FAA use. Accordingly, the FAA replaces 
``certificate holder'' with the term ``person,'' as proposed.

F. System Description

    In the NPRM, the FAA proposed in Sec.  5.5 that any person that is 
required to have an SMS must develop a system description. The proposed 
description included, at minimum, the person's aviation-related 
processes, procedures, and activities; the function and purpose of the 
aviation products or services provided; the operating environment; and 
the personnel, equipment, and facilities; as well as identifies the 
interfacing persons that contribute to the aviation-related products 
and services provided.
1. Discussion of the Final Rule
    In the final rule, the FAA adopts a system description requirement 
with a number of notable changes from the NPRM. First, the requirement 
to develop a system description applies only to part 21 certificate 
holders. Second, the FAA removes the system description requirement 
from Sec.  5.5. Instead, the FAA is moving most of these requirements 
to Sec.  5.17. Section 5.17 now expressly states that only summary 
information must be included in the system description. The FAA is not 
adopting the proposed requirement for the system description to include 
information concerning the aviation organization's interfacing persons. 
Finally, the term ``system description'' is renamed to ``organizational 
system description'' to clearly denote that this requirement applies to 
the aviation organization and to avoid any confusion with the ``system 
analysis'' in Sec.  5.53.
    As a result of these changes, the requirements for developing and 
maintaining an organizational system description are now in the 
sections specific to the part 21 entities (Sec. Sec.  5.11(a), 
5.13(b)(1), 5.15(b)(1) and 5.15(c)(1)) and the documentation 
requirement in proposed Sec.  5.95(c) is removed.
2. Summary of the Comments
    Several commenters expressed concern that the proposed requirements 
in Sec.  5.5(b) to develop and maintain a system description creates an 
administrative burden without a corresponding safety benefit. 
Commenters, including Pratt & Whitney, GE Aerospace, and University of 
Southern California Aviation Safety and Security, said it would be a 
significant administrative burden to maintain a system description that 
lists all interfacing entities because the list is continuously 
changing given the fluidity of aviation operations. In addition, an 
individual indicated the requirement was unnecessary and Delta Air 
Lines requested clarification regarding the FAA's expectations.
    Baldwin Safety and Compliance noted that system descriptions are 
not required by most other CAAs and suggested the requirement be 
removed from the final rule to better align with the ICAO Annex 19 
Appendix 2 framework and other CAAs. TCCA suggested a system 
description may be better as a recommendation within guidance, rather 
than a required document, because it may be burdensome for small 
operators without enhancing their safety.
    Some commenters expressed concern about how the system description 
requirement would affect part 121 operators. Delta Air Lines said the 
system description could create significant administrative work. RAA 
and Cargo Airline Association acknowledged system descriptions may be 
helpful for new adopters of SMS, but strongly recommended the FAA 
remove the requirement for part 121 operators or limit it to new 
applicants.
3. FAA Response
    The FAA acknowledges the concerns by some commenters on the 
potential impacts to operators, large and small. Upon further 
evaluation, the FAA has determined that developing a system description 
should not be a requirement for operators (Sec.  91.147, part 135, and 
part 121) because the information required by the proposed provision is 
already documented by part 121 and 135 operators in their Operations 
Specifications and in the LOA application for Sec.  91.147 operators.
    Production organizations holding or applying for a production 
certificate have certain organizational description requirements in 
Sec.  21.135 (requiring the PC holder or applicant to provide a 
document describing how its organization will ensure regulatory 
compliance and describing assigned

[[Page 33081]]

responsibilities, delegated authorities, and organizational 
relationships for quality). However, there are no organizational 
requirements associated only with a type certificate. This difference 
may cause some aviation organizations to believe that SMS is applicable 
only to production activities and not to other activities such as 
design. As a result, the FAA retains the organizational system 
description requirement for part 21 organizations to ensure that SMS is 
applied to design, certification, production, and continued 
airworthiness activities.
    In response to commenters' concern that developing a system 
description would be overly burdensome and difficult to maintain, the 
FAA is requiring in the final rule that only a ``summary'' of these 
processes, procedures, and activities need to be included in the 
organizational system description. Therefore, a part 21 design and 
manufacturing organization should include a summary of the following 
processes in their organizational system description: design, 
certification, production, and continued operational safety; however, 
it does not have to list every process individually. AC 21-58 includes 
guidance regarding developing the organizational system description.
    The FAA acknowledges the concerns over the potential burden related 
to the proposed requirement in Sec.  5.5(b) for an aviation 
organization to include in its system description information on 
``interfacing persons that contribute to the safety of the aviation-
related products and services provided.'' The list of interfacing 
persons for a large company could number in the thousands, but most of 
those persons may never actually be involved with a safety hazard. As a 
result, in the final rule, the FAA is removing the requirement to 
include information about interfacing persons from the organizational 
system description. The design or production organization will engage 
with the proper interfacing persons during safety risk management 
through the requirement that the organization ``consider interfaces'' 
in Sec.  5.53(b)(5) and the ``hazard notification to interfacing 
persons'' requirement in the new Sec.  5.57 (discussed in the following 
section). This change will allow the covered aviation organization to 
identify the proper interfacing persons on an as-needed basis rather 
than developing and maintaining a listing of all interfacing persons 
that could theoretically be involved in safety risk management.

G. Notification of Hazards and Protection of Information

    In the NPRM, the FAA proposed to add a new section (Sec.  5.94) to 
require the person who identifies a hazard to notify the interfacing 
person in the best position to address that hazard or mitigate the 
risk, and also to develop and maintain procedures for reporting and 
receiving such hazard information.
1. Discussion of the Final Rule
    The FAA is retaining the intent of proposed Sec.  5.94 but is 
making regulatory text changes to better integrate sending and 
receiving hazard information with other functions in the SMS. To that 
end, the FAA has decided to remove proposed Sec.  5.94, instead placing 
these requirements in subparts C--Safety Risk Management and D--Safety 
Assurance. Specifically, the requirement to provide notification of 
hazards is added to Sec.  5.57, which is also amended to include 
language clarifying that ``interfacing persons'' are those who 
contribute to the safety of the aviation-related product or service.
    In addition, the FAA has added to Sec.  5.71(a)(8) a requirement to 
investigate hazards received from external sources to clarify that the 
aviation organization must investigate any hazard information received 
and process the investigation results through its safety assurance and 
safety risk management processes. Proposed Sec.  5.94(b) required a 
process to receive the hazard notification but did not require the 
aviation organization to do anything upon receipt of a hazard 
notification. While the proposed regulation implied that the aviation 
organization should investigate, it did not explicitly require such 
action. The final rule makes it clear that an aviation organization 
must investigate and address through its safety assurance and safety 
risk management processes all hazard notifications it receives. 
Finally, Sec.  5.97(d) is updated to replace the reference to ``Sec.  
5.94'' with ``Sec.  5.57'' to ensure aviation organizations retain 
records regarding the hazard communications.
2. Summary of the Comments
    Several commenters requested clarification regarding the proposed 
notification of hazards to interfacing persons requirement. Some 
commenters asked for clarification regarding who the ``interfacing 
person'' would be and the actions the interfacing person would be 
required to take.
    Pratt & Whitney recommended the FAA clarify ``interfacing persons'' 
be limited to those stakeholders outside the organization's quality 
management system having airworthiness decision-making responsibilities 
because this would result in a manageable list of stakeholders while 
realizing the hazard notification benefits. GE Aerospace noted a person 
who identifies a hazard may not have the requisite knowledge or 
information available to identify which persons are best able to 
address or mitigate the hazard. It recommended that the FAA either 
delete this requirement or revise it to require the person to notify 
the appropriate holders of FAA design, production, or maintenance 
approvals.
    Other commenters requested that the FAA clarify what hazards must 
be reported under the notification requirement. Airbus Commercial 
Aircraft suggested the requirement should only require relevant safety 
hazards to be shared with interfacing persons. RAA stated not all 
hazards rise to the level of risks, or at least may not rise to that 
level equally across all carriers as a standard deviation, and noted it 
is not convinced that this requirement will enhance aviation safety.
    Cargo Airline Association noted that this requirement raises many 
questions concerning the practicality and scope of the requirement. It 
also expressed concern that this requirement could have a chilling 
effect on voluntary reporting and ``just culture.''
    Collins Aerospace Division of Raytheon Technologies supported the 
sharing of hazard information with stakeholders; however, it also 
stated that additional formal documentation and recordkeeping could 
impede timely information transfer and could preclude reporting in 
certain situations.
    Other commenters expressed concern about protecting proprietary 
data related to sharing of hazard information. Some commenters raised 
concerns about whether or how the hazard information disclosures would 
be protected from public release. They noted that 49 U.S.C. 44735 
protects certain SMS information from disclosure under the Freedom of 
Information Act (FOIA) when submitted to the FAA voluntarily, but they 
wondered what protections would exist when disclosure to the FAA is 
mandated by this rule. Other commenters asked whether there is any way 
to protect proprietary information given that hazard information 
notification would require them to disclose information to private 
parties. Commenters indicated that unintended liabilities or other 
legal consequences could arise between private parties as a result. For 
example, once a person reports a hazard to a (non-FAA) third-party, 
nothing would prohibit that party

[[Page 33082]]

from releasing that information to the public or to other government 
regulators. While many commenters supported the concept of reporting 
hazards to interfacing persons, most objected to disclosing proprietary 
information to third parties without disclosure protections. For 
instance, GAMA asserted the notification requirement is vague and said 
the FAA provided no direction for how proprietary data will be handled, 
or how Export Administration Regulations would be handled in the case 
of interfaces with international organizations. This commenter noted 
some US-based companies contract with foreign Original Equipment 
Manufacturers to build proprietary components and have been granted an 
Export Control Classification Number license for rotor systems or 
transmissions, suggesting that sharing technical data with them may not 
be legal, and recommended the FAA consider international business 
communication mandates that may conflict with other U.S. Government 
restrictions.
3. FAA Response
    The FAA seeks to encourage a more collaborative approach in which 
persons required to have an SMS share hazard information with each 
other and work together to identify and address hazards and safety 
issues. Hazard information sharing would enable a network of aviation 
organizations working collaboratively to manage risk, thereby enhancing 
the safety benefits of SMS by assuring that hazards are communicated 
and mitigated effectively. Therefore, the FAA is retaining the intent 
of the requirements, but making regulatory text changes to better 
integrate the sending and receiving of hazard information with the 
other functions in the SMS. To that end, the FAA moved the requirement 
to provide notification of hazards to subpart C--Safety Risk Management 
(Sec.  5.57). The FAA moved the receipt of hazard notifications to 
subpart D--Safety Assurance (Sec.  5.71), requiring the aviation 
organization to investigate hazard notifications received from external 
sources.
    The FAA acknowledges the commenters' concerns regarding sharing 
information outside an aviation organization. Commenters requested 
clarification regarding whether the FAA could protect FOIA information 
disclosure. If an aviation organization reports hazard information to 
the FAA because the Agency is the interfacing person who could address 
the hazard, the information is not protected from FOIA disclosure. Once 
a report is required, FOIA disclosure protections in 49 U.S.C. 44735 no 
longer apply. However, the FAA would redact trade secret or 
confidential commercial or financial information before release. If an 
aviation organization discloses hazard information to a third party, 
the FAA cannot protect the information. The protection under 44735 only 
safeguards against public release by the FAA under the FOIA and does 
not extend to release by other governmental entities or private 
parties. One option for safeguarding information includes entering into 
non-disclosure agreements with the interfacing person. Aviation 
organizations may explore other ways to communicate information about 
hazards without disclosing proprietary or confidential elements.
    Sharing hazard information is an important part of improving safety 
from which all participants in the aviation eco-system can benefit. The 
FAA does not expect that sharing hazard information would require the 
sharing of proprietary or confidential information; it would only 
require the aviation organization to adequately describe the hazard. 
The FAA still expects that in instances where the hazard cannot be 
adequately described without the use of proprietary information, the 
aviation organization itself would likely be in the best position to 
address that hazard, and therefore, information sharing probably would 
not be necessary.
    Some commenters raised questions about what would happen if they 
made a report to a third-party interfacing person and then subsequently 
reported that same information to the FAA. Under this hypothetical, the 
third party is an interfacing person, but the FAA is not. This means 
that the report to the third party would be mandatory, but the 
subsequent report to the FAA would be voluntary. That voluntary report 
to the FAA would be excluded from release under the FOIA, except as 
allowed under section 44735 (i.e., de-identified information).
    In addition, the requirement limits reporting of information to 
``interfacing persons,'' which creates limits on which information the 
aviation organization must report. Section 5.57, which is newly adopted 
in the final rule, is limited to interfacing persons that, to the best 
of the notifying person's knowledge, could address the hazard or 
mitigate the risk. Section 5.57 clarifies further that interfacing 
persons are only those that contribute to the safety of the 
organization's aviation-related products and services. In practical 
terms, these limitations will effectively limit the hazard reporting 
requirement to organizations with which the aviation organization 
already has a relationship. This limit addresses some of the 
commenters' concerns regarding the scope and practicality of providing 
and receiving notification of hazard information to third parties. For 
example, interfacing persons for a part 135 operator or Sec.  91.147 
air tour operator could be any organization that the operator conducts 
business with, such as a fixed base operator, a repair station, 
airports where operations are conducted, or the aircraft manufacturer. 
An operator's customers, however--such as revenue passengers in a 
passenger-carrying operation--would not ordinarily be considered 
interfacing persons because passengers are not responsible for or 
expected to contribute to the safe operation of the aircraft (besides 
not interfering with the operation). The interfacing person for a 
design and manufacturing organization providing an aircraft, engine, or 
propeller would typically be suppliers of parts or engineering services 
for the aircraft, engine, or propeller. A competing manufacturer, on 
the other hand, would not be considered an interfacing person because a 
competitor to a TC and PC holder would not generally have any 
contribution to the design or production of the product provided by the 
TC and PC holder.
    As an example of hazard information sharing, consider a part 135 
air ambulance operator that identified a hazard with the helicopters it 
is operating. The investigation of one of its helicopters that was 
involved in a near controlled flight into terrain, identified that the 
volume of the audio warnings in the helicopter terrain awareness and 
warning system (HTAWS) fluctuated so the warnings were barely audible 
at times.
    In applying Sec.  5.57, the part 135 operator first determines, to 
the best of its knowledge, which interfacing person(s) could address 
the hazard or mitigate the risk. The air ambulance operator examines 
the HTAWS for wiring damage or wear and tear and, seeing none, 
determines that the issue is more likely the result of a design or 
production defect than a maintenance concern. Next, the part 135 
operator confirms that the helicopter manufacturer contributes to the 
safety of the air ambulance services. In a call with the manufacturer's 
representative, however, the operator learns that the HTAWS was not 
part of the original helicopter design, but rather, was installed a few 
years after production by the previous owner through an STC. The 
operator does some research to

[[Page 33083]]

ascertain the identity and contact information of the STC holder, the 
manufacturer of the particular HTAWS unit. Prior to sending the hazard 
notification to the HTAWS manufacturer, the air ambulance operator 
removes any proprietary or confidential information from the hazard 
report, including proprietary or confidential information involved with 
how the hazard was identified (e.g., as a result of internal 
investigation of a near accident), who identified the hazard (e.g., the 
names of the pilots and crew involved), or any risk mitigating actions 
the part 135 operator has implemented. Note that the air ambulance 
operator is not required by Sec.  5.57 to provide notification of the 
hazard to other helicopter operators that use the same HTAWS model in 
their helicopters because these other operators do not contribute to 
the safety of the services provided by the part 135 operator. This 
example illustrates how aviation organizations can meet the hazard 
information sharing per Sec.  5.57 without compromising confidential 
business or personal information, by: (1) identifying the interfacing 
person who could address the hazard or mitigate the risk; (2) 
confirming that the interfacing person contributes to the safety of the 
products or services provided by the aviation organization; and (3) 
removing any proprietary or confidential information other than the 
hazard details from the report prior to sending it to the interfacing 
person.
    The FAA emphasizes, however, that providing notification of hazard 
information to an interfacing person in accordance with Sec.  5.57 does 
not replace any other regulatory obligations to report or provide 
notification of safety issues, such as requirements under 14 CFR 
135.415 (service difficulty reporting), 49 CFR 830.5 (notification and 
reporting of aircraft accidents and incidents), or 14 CFR 21.3 
(reporting of failures, malfunctions, and defects).
    Finally, section 102(a)(2)(B) of the ACSAA mandates that the SMS 
regulations required to be issued under the statute include 
``provisions that would permit operational feedback from operators and 
pilots qualified on the manufacturers' equipment to ensure that the 
operational assumptions made during design and certification remain 
valid.'' The hazard information sharing requirements established in 
this rule create the structure for the type of feedback Congress 
intended for part 21 certificate holders.

H. Recordkeeping--Communications Regarding Hazard Information 
Notifications

    In the NPRM, the FAA proposed to amend Sec.  5.97(d) to require the 
retention of records of all communications that occur under the hazard 
reporting requirements of proposed Sec.  5.94, for a minimum of 24 
consecutive calendar months.
1. Discussion of the Final Rule
    The proposed requirement for notification of hazards to interfacing 
persons in Sec.  5.94 has been incorporated into the safety risk 
management and safety assurance within subparts C and D (Sec. Sec.  
5.57 and 5.71(a)(8)) (as discussed in Section IV.G.). The FAA is 
updating Sec.  5.97(d) in order to reference the new Sec.  5.57, but 
the amendment is otherwise adopted as proposed. Section 5.97(d) now 
requires covered aviation organizations to retain records of all 
communications involving the notification of hazards to interfacing 
persons, as required by Sec.  5.57, for a minimum of 24 consecutive 
months.
2. Summary of the Comments
    Commenters expressed concern regarding the requirements to maintain 
records of communications pertaining to notifying interfacing parties 
of hazards. Further, commenters requested additional information and 
clarification regarding what the FAA's expectations are for compliance, 
and urged flexibility, noting that recordkeeping could be burdensome 
for some organizations. NATA commented the FAA should allow operators 
to use third-party electronic systems that facilitate their 
participation in SMS. In addition, it indicated that the FAA should 
ensure that all businesses are able to use electronic systems for their 
SMS records without requiring them to obtain FAA approval (via 
Operations Specifications) for an electronic recordkeeping system.
    TCCA suggested that the 24-month minimum period for record 
retention could be too short. TCCA said disposing records after that 
period could lead to the loss of pertinent information on hazard 
reporting and prevent the ability to identify historical trends.
3. FAA Response
    The new documentation and recordkeeping requirement is necessary 
because of the requirement for all persons under part 5 to provide 
notification of hazards. Maintaining records of communications 
regarding notification of hazards provides objective evidence of 
compliance similar to the records that are maintained for internal 
safety communications conducted in accordance with Sec.  5.93. As with 
the other performance-based and scalable requirements, aviation 
organizations should determine how they meet these requirements in a 
way that fits their organization.
    Commenters indicated that the FAA should be flexible in allowing 
aviation organizations to determine how to maintain records. As stated 
in the NPRM, the operator chooses how it maintains the required SMS 
records, which can be electronically or in paper format. Regarding 
NATA's comment on allowing operators to use third-party electronic 
systems without requiring them to obtain FAA approval (via Operations 
Specifications or OpSpec) for an electronic recordkeeping system, the 
FAA has determined that the requirements of Sec.  5.97(d) do not 
present any unique challenges to justify deviation from standard 
practices currently applicable to part 135 operators. Authorizations to 
use electronic recordkeeping are issued to certain operators via OpSpec 
A025 when they elect to maintain required records electronically. If a 
certificate holder operating under part 135 seeks to develop and 
maintain its SMS records utilizing a electronic system (whether third-
party or internally developed), and does not already have OpSpec A025 
authorization, it should follow the standardized process for obtaining 
OpSpec A025 for electronic recordkeeping.\37\ In contrast, if an air 
tour operator with an LOA under Sec.  91.147 chooses to maintain its 
SMS records via an electronic system, the FAA has determined that, as 
of the publication date of this final rule, no specific authorization 
via an OpSpec will be needed. Due to the low volume of documentation 
LOA holders under Sec.  91.147 are required to maintain, creating a 
special authorization for these operators related to electronic 
recordkeeping is not warranted as it creates additional work for the 
operator and the FAA with no added value. For more information 
regarding the use of services provided by third parties, see Section 
IV.L.2.iv. For more information regarding scalability, see Section 
IV.J.
---------------------------------------------------------------------------

    \37\ The FAA notes that the procedures for obtaining operations 
specifications, including the necessity for many operators to obtain 
OpSpec authorization for electronic recordkeeping, are under 
continuous review and are subject to change in the future.
---------------------------------------------------------------------------

    TCCA commented that a 24-month retention period may be too short 
and could lead to the loss of pertinent information on hazard 
reporting. The 24-month retention period applies to the

[[Page 33084]]

records of communications. Any records of outputs of safety risk 
management processes must be retained for as long as the control 
remains relevant to the operation. As a result, information regarding 
identified hazards is not limited to the 24-month retention period 
related to communications.

I. ``Hazard'' Definition

    In the NPRM, the FAA proposed to revise the definition of 
``hazard'' to align it more closely with ICAO Annex 19. The definition 
in original part 5 (Sec.  5.5) reads as follows: ``Hazard means a 
condition that could foreseeably cause or contribute to an aircraft 
accident as defined in 49 CFR 830.2.'' In Annex 19, ICAO defines 
``hazard'' as ``a condition or an object with the potential to cause or 
contribute to an aircraft incident or accident.'' \38\ The FAA proposed 
to further align with the ICAO definition by adding after ``a 
condition'' the phrase ``or an object,'' replacing the phrase ``that 
could foreseeably'' with ``with the potential to,'' and inserting 
``incident'' before ``aircraft accident,'' such that the definition 
would read as follows: ``Hazard means a condition or an object with the 
potential to cause or contribute to an incident or aircraft accident, 
as defined in 49 CFR 830.2.''
---------------------------------------------------------------------------

    \38\ International Civil Aviation Organization, Annex 19 to the 
Convention on International Civil Aviation, Safety Management, 
Second Edition, pp. 1-2 (July 2016).
---------------------------------------------------------------------------

1. Discussion of the Final Rule
    To better align with the ICAO Annex 19 definition, the FAA is 
adopting the changes to the definition of ``hazard'' as proposed in the 
NPRM, with the exception of the proposed change from ``foreseeably'' to 
``potential to.'' The definition now reads as follows: ``Hazard means a 
condition or an object that could foreseeably cause or contribute to an 
incident or aircraft accident, as defined in 49 CFR 830.2.'' With these 
changes, particularly the inclusion of the term ``incident,'' the final 
rule clarifies that anything that affects or foreseeably could affect 
the safety of aviation operations is included in the definition of 
hazard, not just those conditions or objects that could result in 
serious injury, death, or substantial damage.
2. Summary of the Comments
    RACCA, AMOA, Ameristar Air Cargo, GE Aerospace, Small UAS 
Coalition, RAA, MARPA, and GAMA/AIA expressed opposition to elements of 
the proposed revision of the definition of ``hazard.'' Some commenters, 
like AMOA, were opposed to the replacement of the word ``foreseeably'' 
with ``with the potential to.''
    Delta Air Lines supported the FAA's proposed modification of the 
definition of ``hazard'' to include incidents as well as accidents. It 
said the FAA's proposed changes would boost safety by expanding the 
scope of potential hazards to address.
    MARPA, GE Aerospace, Pratt & Whitney, and an individual expressed 
concern that the expanded scope of hazards contemplated by the proposed 
inclusion of ``incidents'' might introduce additional safety risks as 
organizations spend more resources on concerns less likely to yield 
increased safety benefits. Pratt & Whitney urged the FAA to use a 
consistent definition of ``incident'' in other guidelines and 
requirements to help maintain a focus on issues that have a potential 
for an accident.
    MARPA said the NTSB's definition of ``incident'' in 49 CFR 830.2 is 
purposefully defined broadly because it is intended to give the NTSB 
flexibility in pursuing investigations into aircraft incidents, 
reflecting a very different context than that of the proposed SMS rule. 
MARPA said the FAA's proposed definition would encompass many incidents 
affecting the safety of operations that would be entirely beyond the 
control of a production approval holder; even though they might be 
considered foreseeable under an SMS, it would be unreasonable to expect 
production approval holders to anticipate and mitigate these incidents.
    Phoenix Air Group, LLC said the FAA's estimate of the cost and 
effort of SMS implementation fails to account for companies whose SMS 
applies across their entire organization, and whose definition of 
hazard, therefore, encompasses far more than potential causes of 
aircraft accidents. It advised the FAA to introduce a separate 
definition for the term ``accident'' to cover instances of injury to 
personnel or damage to aircraft, equipment, or facilities not 
associated with an intention for flight, as well as refine the 
definition of ``hazard'' to go beyond aircraft accidents or events 
associated with the operation of an aircraft. For example, the 
commenter said a puddle of oil on a hangar floor is clearly a hazard in 
its SMS, but it does not meet the definition of a hazard under the SMS 
rule or Annex 19.
3. FAA Response
    The FAA disagrees that the inclusion of the word ``incident'' in 
the definition expands the scope of ``hazard.'' As stated in the NPRM 
preamble, many of the same circumstances that result in an incident 
could just as easily result in an accident. The ``conditions'' and 
``objects'' that could ``foreseeably cause or contribute'' to an 
aircraft accident, such as a mid-air collision, have been found to be 
the same conditions and objects that cause or contribute to near mid-
air collisions (i.e., incidents).\39\ Under the previous definition, an 
aviation organization that applies the SMS requirements may have 
identified conditions in its systems that could foreseeably result in 
an aviation accident. Under the revised definition, the same aviation 
organization will, in general, identify that the same conditions are 
present that could foreseeably cause or contribute to either incidents 
or accidents. From the FAA's experience, it would be highly unlikely 
that the aviation organization would discover new conditions that can 
cause or contribute to an incident but not an accident. Therefore, the 
change would not create an additional burden or divert resources to 
efforts that would not yield safety benefits.
---------------------------------------------------------------------------

    \39\ See Tinsley, Catherine H., Robin L. Dillon, and Peter M. 
Madsen. How to Avoid Catastrophe. Harvard Business Review, https://hbr.org/2011/04/how-to-avoid-catastrophe (2011).
---------------------------------------------------------------------------

    The final rule changes to the definition, notably the addition of 
``incident,'' do not result in a substantial expansion in the scope of 
hazards that a covered person needs to address. First, aircraft 
incidents are already covered to a large extent under the original part 
5 SMS framework, even if the term ``incident'' was not expressly 
included in the ``hazard'' definition. The part 5 safety assurance 
processes require investigations of both incidents and accidents (Sec.  
5.71(a)(5)) and subsequent analysis (Sec.  5.71(b)) and assessments to 
identify new hazards (Sec.  5.73(a)(4) and (5)). The safety assurance 
processes and systems must also include a confidential employee 
reporting system in which employees can report incidents (in addition 
to hazards, issues, concerns, and occurrences) (Sec.  5.71(a)(7)). 
These changes are consistent with the original SMS rulemaking in 2015, 
which was designed to improve safety by addressing underlying 
organizational issues that may result in accidents or incidents.\40\
---------------------------------------------------------------------------

    \40\ 80 FR 1308.
---------------------------------------------------------------------------

    The FAA disagrees that the term incident is not defined. The term 
``incident'' is defined in 49 CFR 830.2 (as is ``aircraft accident''). 
As defined, ``incident'' means ``an occurrence other than an accident, 
associated with the operation of an aircraft, which affects or could 
affect the safety of operations.''

[[Page 33085]]

    The FAA is not adopting the recommendation to introduce separate 
definitions for the terms ``accident'' and ``hazard'' to cover non-
aviation-related concerns to avoid extending SMS requirements to 
subject areas such as workplace safety that extend beyond the intended 
scope of this rule. As noted in the NPRM, however, some aviation 
organizations might choose to extend their SMS to their non-aviation 
related activities, such as security and occupational safety and health 
issues. If an aviation organization elects to do so, the FAA will only 
conduct oversight of the SMS related to its aviation functions.
    The FAA acknowledges the concerns by commenters that the phrase 
``with the potential to'' could imply that the definition of hazard 
includes a boundless set of situations that could not be reasonably 
foreseen. The FAA agrees that ``with the potential to'' is too open-
ended. Thus, the FAA is not adopting the proposal to replace the term 
``foreseeably'' with ``potential to.'' The FAA recognizes that keeping 
the phrase ``that could foreseeably cause'' does not mirror the ICAO 
definition of hazard (which uses the phrase ``with the potential to''). 
The principal reason for proposing the changes to the definition of 
``hazard'' was to align with the internationally recognized definition 
of hazard established by ICAO in Annex 19. The FAA seeks to align with 
ICAO where feasible. Although the FAA aspires to align with ICAO, the 
Agency also recognizes there may be situations, such as this, in which 
full alignment may not be the best solution. In addition, using the 
term ``foreseeably'' is consistent with the Agency's definition of 
hazard in the recently published Airport SMS rule.\41\
---------------------------------------------------------------------------

    \41\ 88 FR 11642.
---------------------------------------------------------------------------

J. Scalability

    An SMS is designed to be scalable to the size and complexity of the 
aviation organization, and to not be unduly burdensome. When part 5 was 
originally promulgated in 2015, the FAA clarified that small air 
carriers would not be expected to have an SMS as complex as one for 
large carriers. Further, the FAA stated in the original Sec.  5.3 that 
the SMS must be ``appropriate to the size, scope, and complexity'' of 
the aviation organization.\42\ To emphasize the scalability of SMS to 
the new types of aviation organizations covered under the proposed 
rule, the NPRM for this rule included examples of how small aviation 
organizations, such as a single-pilot operator, could scale 
implementation of their SMS requirements to the size and complexity of 
their organization.\43\ Because the SMS requirements are performance-
based and scalable, the FAA proposed to remove as unnecessary the 
scalability language in former Sec.  5.3.
---------------------------------------------------------------------------

    \42\ 80 FR 1310.
    \43\ 88 FR 1952-53.
---------------------------------------------------------------------------

1. Discussion of the Final Rule
    In this final rule, the FAA has decided to retain the express 
requirement for the SMS to be appropriate to the size, scope, and 
complexity of the aviation organization, in order to provide a better 
understanding of scalability as a result of the comments received. This 
text is moved, along with the other general SMS requirements in former 
Sec.  5.3, to Sec.  5.5.
2. Summary of the Comments
    Commenters, including NBAA, EAA, and AOPA, expressed the need for 
scalable and flexible requirements. Commenters indicated part 5 is 
prescriptive and would be difficult for small operators to implement. 
Commenters also requested clarification regarding how an SMS can be 
scaled in application, and stated the FAA provided limited explanation 
or examples.
    Several commenters suggested the FAA provide more guidance to small 
organizations on how to comply with the proposed SMS requirements. The 
NTSB said it issued Safety Recommendation A-22-15 to address confusion 
about how SMS applies to smaller operators. The NTSB said the proposed 
rule's treatment of scalability does not appear to follow its 
recommendation's call for scalability guidance to include specific 
details, such as methods and techniques as well as examples addressing 
several operational sectors. The NTSB also said more explicit guidance 
on strategies and methods applicable to smaller operators would make it 
easier for a range of operators to comply with the proposed 
requirements, as well as help the FAA inspectors in evaluating 
compliance by smaller operators. It further suggested that the FAA 
compile an inventory of SMS strategies and methods used by operators of 
different sizes, noting that the Agency could take advantage of its 
experience working with the FAA's voluntary SMS program participants, 
as well as overseeing part 121 operators.
    Several commenters recommended that the final rule include an 
explicit statement establishing that the SMS is intended to be 
scalable. TCCA, Ameristar Air Cargo, Inc., GAMA, and AIA noted that 
scalability language in current 14 CFR 5.3(a) (``The SMS must be 
appropriate to the size, scope, and complexity of the certificate 
holder's operation. . ..'') was omitted from the proposed rule. These 
commenters urged the FAA to retain this language to ensure that the 
rule contains a clear statement of intent to incorporate scalability.
3. FAA Response
    The FAA agrees with the commenters that SMS implementation should 
be appropriately scaled to the aviation organization. Part 5 was 
designed to be scalable and flexible. Aviation organizations should 
scale their SMS implementation to fit their operations. This concept is 
addressed in detail in the NPRM preamble and guidance material. 
Appendix G in AC 120-92 includes implementation strategies and examples 
regarding how small operators could comply with part 5 requirements.
    The FAA, in an effort to address scalability, has designed part 5 
to allow for flexibility in solutions used to meet the requirements. 
The rule specifies a basic set of processes to form a framework for the 
SMS but does not specify particular methods for implementing these 
processes. Aviation organizations can use solutions that are 
appropriate for their size and complexity. For example, smaller or less 
complex aviation organizations may use standard word processing 
software, Excel spreadsheets, email, notebooks, and whiteboards rather 
than more complex software solutions to document the system, policies, 
processes, and procedures. Larger or more complex aviation 
organizations may need more involved solutions that might include 
databases and layered hierarchical analysis and decision-making.
    The following example illustrates how a small operator could scale 
implementation of SMS to fit its organization. The organization would 
document its safety policy; again, this could be done on paper or in a 
digital file. The example provided in the appendix in AC 120-92 could 
be used as a starting point, but there are also various examples 
available on the internet that could be used as a starting point.
    To meet safety risk management and safety assurance requirements, 
the operator could use a tool such as the Web-Based Analytical 
Technology (WBAT) platform which is FAA-supported software, to support 
employee reporting and SMS. The platform could also be used to meet 
recordkeeping and documentation requirements. However, simpler options 
such as digital files on a computer or

[[Page 33086]]

paper files could be used as well. For instance, AC 120-92 provides 
worksheets that the operator could use to meet most safety risk 
management requirements. To meet safety assurance requirements in a 
simpler way in a small operator, a person could observe how an 
operation is working and identify trends in real-time. If there are 
issues, the individual could take appropriate action and reevaluate the 
results. Any operational process could be observed and does not 
necessarily require formal audits or forms. Again, all of this could be 
documented on paper or in a digital file.
    To meet communication requirements a small operator might use 
existing email applications to share information within its 
organization and with interfacing organizations, as appropriate. To 
meet documentation and recordkeeping requirements, the organization 
could use paper or digital files just as they might do for other areas 
of their operations such as invoicing, service, and rental agreements, 
etc. The organization could document this using a medium of their 
choosing, including something as simple as a notebook.
    The following example illustrates how SMS might operate in a small, 
low complexity operator. This example company has two helicopters and 
four pilots, and it provides air tour services within a 25 nautical 
mile range of its home airport. The company has developed a safety 
policy under Sec.  5.21 that reminds everyone safety is the company's 
number one priority. It contains in bold letters at the bottom, ``If 
you see something unsafe, say something.'' This policy statement is one 
page, signed by the company owner, and posted inside the office for all 
to see.
    After a flight, one of the pilots reports to the air tour 
operator's home base that there is a new hazard in the flightpath of 
their desired tour route. The hazard is a power line across a canyon 
and there are no visibility markers on that line. The report of the 
hazard is the start of the safety risk management process under Sec.  
5.51(d). Under Sec.  5.53, the air tour operator researches the 
location and height of the power line relative to the flight path in 
the area. The operator calls the power company and learns that the line 
is \1/2\-inch thick and an expected date of installation for the 
markers is unknown due to manufacturing delays. This information is 
recorded in a notebook or digital file. Even the process for conducting 
this analysis under Sec.  5.53(c) can also be located in the notebook 
or in a digital file.
    Under Sec.  5.53, the air tour operator determines the unmarked 
power line is an operational hazard. Knowing that helicopters and 
unseen power lines are a high risk and realizing that the company's air 
tour route places them in the exact spot of the canyon where the 
unmarked power line exists, makes this particular risk assessment easy. 
The air tour company determines the severity of hitting that power line 
would be catastrophic and the likelihood of encountering that power 
line is high due to their route of flight. Using a risk matrix, the 
operator qualitatively determines that the risk of conducting tours 
with the presence of the unmarked power line is unacceptable and 
requires risk controls be implemented to reduce the risk to an 
acceptable level. All this information is placed into the notebook. The 
operator develops risk controls under Sec.  5.55(c), which, in this 
case, is a deviation to the planned air tour route. The evaluation of 
the risk acceptance under Sec.  5.55(d) is done by talking to other 
employees, brainstorming, or engaging with other operators. The records 
of meetings or conversations, as well as the risk controls themselves, 
are documented using a medium of their choosing, including something as 
simple as a notebook or digital file consistent with the recordkeeping 
requirements of Sec.  5.97.
    The operator's next step is to monitor the controls it put into 
place through its safety assurance program. The operator will check on 
the deviation to the route it put in place under Sec.  5.71(a)(1) 
through (a)(7). This can be done by tracking the flight path or 
auditing the new procedures and keeping those notes in the notebook. 
Under Sec.  5.93, the operator will promote safety by informing the 
pilots of the hazard and communicating the safety action taken, which 
was providing the air tour route with a deviation. Each pilot can be 
issued a safety alert via a memo that can be handed to them upon check 
in and perhaps sent via email before the flight starts.
    Just as existing part 5 requirements are performance-based and 
scalable, each revision proposed in the NPRM was also intended to be 
scalable. The FAA did not intend for the proposed removal of the 
scalability language to alter that stance. Based on the comments 
received, however, the FAA understands that the proposed removal caused 
confusion regarding its position on SMS scalability. Therefore, the FAA 
has decided to retain the scalability language, with minor adjustments 
to conform to general requirements language in Sec.  5.5(a).

K. Code of Ethics

    In the NPRM, the FAA proposed requiring a code of ethics be 
included in an aviation organization's safety policy. This proposal was 
in response to section 102(f) of ACSAA, which mandates: ``the 
regulations issued under subsection (a) shall require a safety 
management system to include establishment of a code of ethics 
applicable to all appropriate employees of a certificate holder, 
including officers (as determined by the FAA), which clarifies that 
safety is the organization's highest priority.'' While Sec. 102 of 
ACSAA is applicable only to certain part 21 certificate holders, the 
FAA proposed to apply the code of ethics requirement to all certificate 
and LOA holders that would be required to meet part 5 requirements.
1. Discussion of the Final Action
    The FAA is adopting the code of ethics requirement as proposed. The 
code of ethics must clarify that safety is the aviation organization's 
highest priority. Having a code of ethics, applicable to all employees 
of the aviation organization, influences the safety culture of that 
organization and is beneficial to overall safety. As a component of an 
aviation organization's safety policy (Sec.  5.21(a)(7)), the new 
requirement helps ensure that every officer, manager, and employee in 
the organization is aware that safety is a core value for that 
organization and that safety risk should be reduced to the extent that 
it is practicable to do so. If employees see their management engaged 
with safety as the highest priority, then that same safety attitude 
will likely prevail throughout the entire organization. Therefore, all 
persons required to have an SMS benefit from having a code of ethics 
that confirms safety is the aviation organization's highest priority.
2. Summary of the Comments
    Several commenters requested that the FAA either remove or modify 
the proposed requirement in Sec.  5.21(a)(7) to include in an 
organization's safety policy a code of ethics, applicable to all 
employees, clarifying that safety is the organization's highest 
priority. Piper Aircraft and NBAA stated that it would be more 
appropriate for the code of ethics to state that safety is a ``core 
value'' of the company.
    Commenters also indicated that safety cannot be a company's 
``highest priority'' and safety must be balanced with production or the 
provision of the service they provide. For instance, NBAA stated that 
organizations are not

[[Page 33087]]

in the business of manufacturing safety and that an organization's 
highest priority is to sustain the business through maximizing profit 
balanced against appropriate risk control.
    Commenters also expressed concern that the requirement may cause 
confusion or conflict with existing practices. For example, GAMA and 
AIA noted that the language could be misconstrued as creating a new 
standard of care or a new performance requirement and requested that 
the definition be revised to require the company to state their highest 
priority is compliance with applicable safety standards. Collins 
Aerospace Division stated that the language in the regulation may 
create a misunderstanding and lead to actions inconsistent with the 
FAA's current approach that allows continued temporary air operations 
with certain non-conformance or non-compliance. It recommended that the 
FAA reconsider the language to allow more flexibility to applicants to 
demonstrate in the code of ethics that safety is prioritized. Lockheed 
Martin Corporation also commented that the FAA should not mandate the 
use of specific words or phrases in this context.
    Additionally, commenters requested clarification regarding the 
FAA's expectations for the code of ethics. Gulfstream suggested that 
the FAA clarify whether the code of ethics must be explicitly 
identified as a ``Code of Ethics'' or if the requirement is satisfied 
as long as the prescribed statement is present in the safety policy. 
AACA also asked if compliance would involve adding language to an 
organization's safety policy that mandates all employees prioritize 
safety above all else, or if the FAA expects each organization to 
create a document titled ``Code of Ethics.'' Zipline suggested that the 
FAA clearly define the expectations of the new code of ethics 
requirement, or if no additional clarification is provided, remove it.
    AMOA's comment recognized the ACSAA mandate for the code of ethics 
was directed at design and manufacturing organizations and requested 
that different provisions be created for air transportation operators.
3. FAA Response
    The addition of the code of ethics to an aviation organization's 
safety policy ensures that every officer, manager, and employee in the 
aviation organization is aware that safety is a core value for that 
organization and that safety risk should be reduced to acceptable 
levels. The FAA recognizes there is inherent risk in aviation. An SMS 
includes processes for aviation organizations to identify hazards and 
to assess and mitigate the risk associated with those hazards. It is 
not possible to completely eliminate risk in aviation. However, it is 
essential for aviation organizations to consider safety and the 
reduction of risk, and they should use their SMS to reduce safety risk 
to acceptable levels. As stated earlier in this preamble, an aviation 
organization is in the best position to mitigate the risk of its 
products or services. When providing products and services, the 
aviation organization must consider safety and, if there is a conflict 
between safety and other considerations, safety must not be 
compromised.
    Section 5.21(a)(7) requires a code of ethics be included in a 
covered aviation organization's SMS safety policy. The FAA does not 
expressly require that the code of ethics be a separate document or be 
entitled ``Code of Ethics.'' Nonetheless, the FAA expects the aviation 
organization to make clear to its officers, managers, and employees, as 
well as to reviewing FAA personnel, that this component of the aviation 
organization's safety policy is a matter of ethics. The addition of 
this code of ethics does not create a new standard of care or new 
performance requirement for compliance with part 5. The safety hazard 
or risk may be identified, addressed, and mitigated using the existing 
processes and procedures for safety risk management, assurance, and 
promotion as required by part 5 (as amended by this rule). The addition 
of the code of ethics does, however, establish a new expectation for an 
aviation organization to prioritize safety over other concerns in the 
performance of its SMS processes and requirements.
    The FAA acknowledges that section 102(f) of ACSAA requires the FAA 
to apply the code of ethics requirement to only part 21 design and 
manufacturing certificate holders. The FAA does not agree with some 
commenters, however, that the regulatory requirement should be limited 
to design and manufacturing organizations. Nothing in the ACSAA, 
express or implied, suggests that the FAA cannot or should not extend 
the code of ethics to other entities. The FAA seeks consistency in the 
SMS requirements to the greatest extent possible and, therefore, is 
extending this requirement to all aviation organizations required to 
comply with part 5. In general, the changes to part 5 are added to 
assist in maximizing the potential of an SMS to increase safety across 
the aerospace system and, as a result, fall within the scope of the 
FAA's broad safety mandate.
    There is benefit to aviation organizations documenting their 
ethical commitment to safety. If this requirement were limited to only 
design and manufacturing organizations, the FAA would be concerned 
about implying some aviation organizations should make safety their 
highest priority, but others should not. In addition, ethical decision-
making in the management of safety should be foundational to any SMS.

L. FAA and Industry Readiness for SMS

    Several commenters asserted the FAA lacks the ability to adequately 
support and oversee the certificate and LOA holders required to develop 
and implement an SMS as proposed in the NPRM. In addition, several 
commenters recommended various ways to ensure adequate training is 
available to industry.
1. Summary of the Comments
    Several commenters expressed concern about the FAA's ability to 
accept and monitor new, mandatory SMS programs in a timely, effective 
manner. A commenter asserted that the FAA would need to significantly 
increase staffing to review and approve implementation plans, arguing 
that Flight Standards District Office staffing levels are critically 
low. Other commenters suggested that the FAA is not prepared to support 
part 135 and Sec.  91.147 companies, citing past experience with FAA 
staffing shortages, lack of effective training for inspectors and 
industry, unclear inspector guidance, and inconsistent inspector 
interpretation of guidance. Commenters, including NATA, NBAA, and AMOA, 
focused on inspector staffing levels, SMS expertise, and ability to 
oversee part 5. Commenters, including NBAA, and Alaska Air Carriers 
Association, also expressed concern about the consistency of guidance 
and the interpretation of guidance.
    Several commenters recommended various ways to ensure adequate 
training is available to industry. Commenters, including WYVERN, Air 
Charter Safety Foundation, and Priester Aviation/Mayo Aviation LLC, 
focused on the FAA working with industry to provide training. 
Commenters, including WYVERN and NBAA, proposed creation of FAA-
approved SMS consultant and designee programs, as well as the FAA pre-
approving SMS services provided by third-party vendors.
2. FAA Response
    The SMS training for FAA inspectors and engineers addresses 
validation of

[[Page 33088]]

operators' regulatory compliance through normal surveillance and 
oversight activities. The FAA continues to update and prepare its 
workforce to validate aviation organizations' implementation of SMS in 
support of this rule. The FAA also updated appropriate policy and 
guidance regarding oversight for part 5 compliance. To support an 
aviation organization's implementation of SMS, the FAA expects to 
conduct outreach with industry to facilitate understanding and 
implementation of SMS.
    Finally, as SMS requirements expand to other aviation 
organizations, the FAA anticipates more third-party providers will 
offer services to aid aviation organizations in developing and 
implementing their part 5 compliant SMSs. Aviation organizations may 
work with a third party to develop or implement an SMS that meets the 
regulatory requirements. A third-party SMS provider could include the 
provider developing the SMS and training the operator to use it. Other 
options could include not only development and training, but the third-
party could also operate some parts of the SMS on behalf of the 
aviation service provider.
    However, there are some aspects of an SMS that must be performed by 
the aviation organization. For instance, the accountable executive 
responsibilities and roles cannot be delegated to a contractor. An 
aviation organization may choose to use third-party providers and other 
industry resources to assist and support SMS integration and 
development, as appropriate, but that aviation organization remains 
fully responsible for regulatory compliance. The FAA does not endorse 
the use of any specific product or third-party provider, nor does it 
pre-approve any specific service to meet the regulatory requirements. 
For more information regarding the use of third-party service 
providers, please see AC 120-92.
    The NPRM did not propose the establishment of a designee or similar 
program for SMS. At this time, the FAA is not adopting such a program.

M. Aviation Organizations With an Existing SMS

    Numerous commenters requested more information regarding how the 
FAA would approach compliance for existing SMS processes, programs, or 
certifications.
1. Summary of the Comments
    NBAA and other commenters requested that the FAA accept third-party 
SMS as a means of compliance with part 5, while others requested credit 
for early adoption of an SMS. NBAA noted that some third-party SMS 
programs are compliant with ICAO Annex 19, and therefore, should be 
accepted by the FAA. Individual commenters raised questions about how 
part 5 relates to other SMS frameworks, and whether demonstration of 
compliance to ICAO Annex 19 could replace compliance with part 5 
requirements.
    Other commenters, including GAMA, TCCA, AACA, AMOA, CAMTS, PHI 
Health, Alaska Seaplanes, and Pratt & Whitney, indicated the need for 
clarification and assistance in bridging from voluntary SMS to 
mandatory SMS. They also expressed interest in how the FAA will 
consider existing voluntary SMS programs. Commenters expressed concerns 
with restarting the certification process and indicated the NPRM did 
not address FAA's voluntary SMS programs.
2. FAA Response
    The FAA asserts that aviation organizations having an SMS that is 
certified, approved, or accepted by another entity or through the FAA's 
voluntary SMS programs does not replace the mandate to meet all 
applicable part 5 requirements. Companies are nonetheless encouraged to 
leverage existing processes and procedures to help meet part 5 
requirements.
    The FAA encourages companies to conduct a gap analysis to identify 
the areas where their aviation organization complies with part 5 and 
where requirements are unmet. Additional information about conducting 
gap analyses is available in AC 21-58 and AC 120-92.
    Companies are encouraged to leverage existing SMS processes and 
procedures to help meet part 5 requirements and to utilize all 
available industry resources such as educational institutions, 
international organizations, as well as FAA guidance and support. 
However, the FAA will not be endorsing the use of any specific product 
or third-party provider to meet the regulatory requirements. 
Ultimately, the responsibility for ensuring compliance with part 5 
remains with the organization.

N. Employee Reporting

    Section 102(e) of ACSAA requires the FAA's SMS regulations to 
include a confidential employee reporting system through which 
employees can report, ``without concern for reprisal'', hazards, 
issues, concerns, occurrences, and incidents. Original part 5, under 
Sec.  5.71(a)(7) of subpart D--Safety Assurance, already required a 
confidential employee reporting system, applicable to all covered 
entities, but did not expressly provide that the system be without 
concern for reprisal. The FAA proposed to add the text ``without 
concern of reprisal for reporting'' to the Sec.  5.71(a)(7) 
confidential employee reporting system requirement, to respond to the 
mandate in section 102(e) of ACSAA.
1. Discussion of the Final Rule
    In the final rule, the FAA is maintaining the revision to the 
employee reporting system requirements in Sec.  5.71(a)(7). This 
requirement is applicable to all persons required to comply with part 
5, except as identified in Sec.  5.9(e).
2. Summary of the Comments
    Several commenters expressed concern or suggested changes to the 
proposed requirements in Sec.  5.71(a)(7) regarding developing and 
maintaining a confidential employee reporting system and that employees 
can report ``without concern of reprisal for reporting.''
    NATA commented that the concept of confidential reporting of 
hazards is critical but becomes unachievable as business size 
decreases. NATA stated that the FAA should ensure that guidance and 
training recognizes this issue, as well as educate operators on best 
practices when business size limits the confidential reporting of 
hazards.
    NBAA stated the proposed Sec.  5.71(a)(7) requirement to implement 
and maintain a confidential reporting system is a prescriptive 
requirement, noting that some organizations may wish to implement an 
anonymous reporting system over a confidential one to provide more 
comfort in reporting. In addition, NBAA questioned how either a 
confidential or anonymous reporting system would work in a one or two-
person organization.
    Cargo Airline Association expressed its support for the proposed 
change because it increases safety and leads to a just culture. Cargo 
Airline Association also noted this requirement is consistent with the 
intent of other voluntary reporting systems, including the Aviation 
Safety Action Program (ASAP), and that it would support additional 
information in the guidance materials to provide safeguards like those 
under ASAP.
    Multiple commenters expressed concern regarding not being able to 
act upon intentional malicious acts that are reported in the employee 
reporting system due the addition of the clause ``without concern of 
reprisal.''

[[Page 33089]]

3. FAA Response
    As described in the original part 5 preamble, the confidential 
reporting system in Sec.  5.71(a)(7) is a conduit for employees to 
raise aviation safety issues ``without fear of reprisal'' (see 80 FR 
1307, 1318). Although the FAA did not include that express language in 
the text of original Sec.  5.71(a)(7), the Agency's intent has always 
been that the confidential reporting system be non-punitive in nature. 
In this rulemaking, the phrase ``without concern of reprisal'' makes 
explicit what was already implicit, while also meeting the requirements 
of section 102(e) of the ACSAA.
    With respect to concerns that aviation organizations would not be 
able to act upon intentional malicious acts by employees, the FAA 
emphasizes that the addition of the phrase ``without concern of 
reprisal'' does not alter or supersede the requirement in existing 
Sec.  5.21(a)(5) for covered aviation organizations to establish policy 
that defines unacceptable behavior and conditions for disciplinary 
action. The FAA recognizes that there are instances where disciplinary 
action is warranted (e.g., the behavior indicates a willful disregard 
to comply with company procedures or regulations). Confidential 
reporting and disciplinary action requirements have historically co-
existed to address different concerns and behaviors. This allows the 
aviation organization to gather safety information from employees in a 
confidential manner while maintaining the freedom to address 
unacceptable behavior, ultimately supporting a just culture. Nothing in 
this final rule alters that.
    The FAA also notes that although the ACSAA mandate to add the text 
``without concern of reprisal for reporting'' to the confidential 
employee reporting system requirement is specific to part 21 
certificate holders, this requirement applies to all persons that must 
comply with part 5. Protecting employees from reprisal for reporting 
aviation hazards, issues, concerns, occurrences, or incidents is 
critical for safety regardless of the type of aviation organization.
    Further, some aviation organizations already have reporting systems 
in place, such as an ASAP. An ASAP would satisfy the confidential 
reporting program requirement for those aviation organizations that 
have a memorandum of understanding with the FAA for the specific 
employee groups. The FAA expects that these programs will continue to 
be used and be leveraged in the development and implementation of SMS. 
For employee groups that are not covered by an existing ASAP, the 
aviation organization must have an alternate means of compliance for 
confidential employee reporting.
    Regarding the comments about a confidential reporting system versus 
an anonymous reporting system, the requirement does not prohibit an 
aviation organization from accepting anonymous reports. An anonymous 
reporting system, if correctly implemented, would satisfy the Sec.  
5.71(a)(7) requirements for confidentiality and non-reprisal; however, 
anonymous reporting is not necessarily the better or preferred system 
for employee reporting. For instance, with anonymous reports, an 
aviation's ability to obtain additional information is more difficult 
as the original reporter would remain unknown. Accordingly, the FAA is 
not adopting recommendations from commenters for the FAA to require 
anonymous reporting rather than confidential reporting.
    Regarding the comments on the difficulty of maintaining 
confidentiality in a small aviation organization, the FAA acknowledges 
that maintaining confidentiality in a small organization may be more 
challenging. But these challenges do not outweigh the safety benefits 
of an employee reporting system for hazards and other aviation safety 
issues. Even if absolute confidentiality is not always possible due to 
the small numbers of employees in some aviation organizations, the FAA 
determined that organizations, regardless of size, can establish and 
communicate formal workplace policies for maintaining confidentiality 
and for non-reprisal of employee reports under Sec.  5.71(a)(7). 
Aviation organizations, especially small ones, should strive for a just 
culture and reporting culture to encourage employees to report hazards 
and openly share information.
    The FAA recognizes, though, that the confidential reporting system 
is unnecessary in aviation organizations where the pilot is the sole 
individual performing all necessary safety functions. Thus, employee 
reporting is not required for certain single-pilot operators, which is 
discussed further in Section IV.A.

O. Summary of Confidential Employee Reports

    In proposed Sec.  5.71(c), the FAA addressed the ACSAA section 
102(e) requirement that the FAA require TC and PC holders to submit to 
the FAA, at least twice a year, a summary of the employee reports 
received through the confidential reporting system. Summaries of 
confidential employee reports submitted by certificate holders with 
both a TC and a PC are protected from public disclosure by 49 U.S.C. 
44735(a)(2) if the summaries are requested under the Freedom of 
Information Act. The FAA did not propose to extend this requirement to 
all persons required to have an SMS because the information would not 
be protected under 49 U.S.C. 44735(a)(2) for persons that are not 
covered by the ACSAA requirement.
1. Discussion of the Final Rule
    In the final rule, the FAA is maintaining the requirement in Sec.  
5.71(c) as proposed and per ACSAA requirements. Specifically, holders 
of both a TC and a PC for the same product will be required to submit 
to the FAA a summary of confidential employee reports received every 6 
months.
2. Summary of the Comments
    Commenters focused on the chilling effect this requirement may have 
on existing reporting systems and expressed concerns that employees may 
be hesitant to raise issues if they believe they may be personally 
subjected to scrutiny by a regulator. MARPA maintained that these 
reports create a burden on the holder, drawing resources away from 
addressing the actual risks raised in these reports. MARPA also 
maintained that the requirement imposes a burden on the FAA without a 
directive to do more, stating it is unclear what, if anything, the FAA 
should do with these reports. U.S.C. Aviation Safety Management Systems 
Course 23-3, Piper Aircraft, Inc., Gulfstream, and a member of GAMA/AIA 
highlighted the disparity of this reporting requirement across those 
required to comply with part 5. They asserted that the requirement 
should apply equally for those required to comply with part 5 or should 
not apply at all.
3. FAA Response
    This final rule adopts the reporting requirement to part 21 
organizations holding both a TC and a PC for the same product because 
the FAA is statutorily required to promulgate the requirement. Section 
102(e) of the ACSAA does not give the FAA discretion with regard to 
whether this requirement should be imposed on TC/PC holders for the 
same product. The FAA understands the concerns surrounding 
confidentiality but reiterates that these semi-annual reports are 
specifically protected from disclosure under 49 U.S.C. 44735(a)(2). The 
reports submitted to the FAA should not contain any confidential or 
proprietary information.

[[Page 33090]]

    The FAA has determined that this requirement should be applicable 
only to part 21 organizations holding both a TC and a PC for the same 
product because 49 U.S.C. 44735(a)(2) protections apply only to those 
entities. Requiring all covered aviation organizations to compile and 
submit semi-annual summary reports would result in the inconsistent 
treatment among regulated entities, because only the part 21 reports 
would be protected from public disclosure. Therefore, the FAA is 
limiting this requirement to only those entities specifically covered 
by the ACSAA requirement.

P. Emergency Response Planning

    In the NPRM, the FAA proposed non-substantive edits to the 
requirements in Sec.  5.27, Coordination of emergency response 
planning. Specifically, the FAA added a comma that was missing in the 
introductory text, removed the semi-colon format, and replaced 
``certificate holder'' with ``person'' (or, in the case of paragraph 
(c), simply removed the term) in alignment with the change discussed in 
Section IV.E.
1. Discussion of the Final Rule
    The FAA adopts the edits as proposed. As explained in the FAA 
response to comments that follows and in AC 21-58, the Agency clarifies 
that emergency response plans would not ordinarily be necessary for 
part 21 certificate holders.
2. Summary of the Comments
    Several commenters expressed concern about the requirements to 
coordinate emergency response plans. NBAA asserted that the 
requirements are unclear, impractical, and burdensome for many part 135 
operations and expressed concern regarding the number of interfacing 
organizations with which a part 135 operator might need to coordinate. 
The part 21 commenters indicated that the requirements should not apply 
to design and manufacturing organizations.
3. FAA Response
    The FAA clarifies that the emergency response planning requirements 
of Sec.  5.27 are not, in general, needed by part 21 organizations. 
Section 5.27 provides that an emergency response plan is required 
``[w]here emergency response procedures are necessary.'' As explained 
further in AC 21-58, a part 21 certificate holder may be involved in 
the investigation of aircraft accidents or incidents but is likely not 
involved in the emergency response to the aircraft accident or 
incident. For this reason, the FAA has determined that emergency 
response planning is not ordinarily necessary for part 21 certificate 
holders.
    With respect to the concerns from NBAA, the FAA notes that many 
part 135 operators already have emergency response plans that may be 
used to fulfill this requirement. One of the primary intents of an 
emergency response plan is to provide procedures for management 
decision-making and actions in an emergency, and not necessarily to 
require the creation and coordination of specific emergency plans for 
every airport a part 135 on-demand operator might serve. The FAA 
provides further guidance in AC 120-92 with examples of how various 
types of operators, including part 135 on-demand operators, interface 
and coordinate with other aviation organizations. In response to 
comments related to emergency response plans being impractical and 
burdensome, the FAA has excepted requirements of Sec.  5.27(a) and (b) 
for certain single-pilot operations.

Q. Safety Risk Management

    In the NPRM, the FAA proposed a new requirement under Sec.  
5.53(b)(5) to consider the interfaces of the system when conducting a 
system analysis as part of the safety risk management process. 
Interfaces are a point where two or more operations, systems, subjects, 
or organizations connect and interact. Interfaces can be internal to an 
aviation organization, or they can be external (e.g., between 
organizations, between the system being analyzes and other systems, or 
between a human using the system and the system itself).
1. Discussion of the Final Rule
    The FAA adopts the requirement to consider interfaces of the system 
when conducting a system analysis as proposed in Sec.  5.53(b)(5). 
Hazards can exist with interfacing aviation organizations, processes, 
or systems in the way the two interfacing parts interact with each 
other. Understanding the interfaces while conducting a system analysis 
is important because the system analysis serves as the basis for 
identifying and analyzing hazards and their associated risk. As the 
aviation system becomes more complex, dynamic, and integrated, 
understanding these interfaces can assist in the identification of 
related hazards and improve safety overall.
2. Summary of the Comments
    Several commenters were concerned with whom and how the safety risk 
management processes will be accomplished. Other commenters were 
concerned that requiring organizations to consider external interfaces 
during safety risk management processes could be too burdensome and may 
not add value because they do not control the activities of external 
organizations. Baldwin Safety and Compliance asserted that the 
requirement in Sec.  5.53(a) requiring a system analysis when 
``applying safety risk management'' is prescriptive and limiting.
3. FAA Response
    Regarding the comments concerned with the burden and value of 
having to consider external interfaces during safety risk management 
processes, the FAA emphasizes, as it did in the NPRM, that an SMS that 
looks both inward and outward is more effective at identifying hazards, 
which is a core function of any operational SMS. Developing a good 
system analysis provides aviation organizations an opportunity to 
identify internal and external interfaces and will aid in the analysis 
process of the safety risk management by providing a whole system view. 
That said, the FAA does not expect external aviation organizations that 
do not have an input into the process or support the aviation activity 
to be included in the system analysis or safety risk management 
process. The system analysis is intended to limit the system only to 
those areas where the hazard was identified, and mitigations could be 
implemented. By reaching out to other aviation organizations that may 
be affected by the hazard, or have input to the system, substitute 
risks or residual risks to the system could be identified and more 
easily addressed.
    Furthermore, the FAA is not requiring aviation organizations, 
through Sec.  5.53(b)(5), to compel external interfaces to participate 
in risk analysis and system-related safety management, but rather, only 
to consider those interfaces when conducting system analysis. Aviation 
organizations are in the best position to determine whether those 
external interfaces should participate (and would be willing and able 
to participate) in an aviation organization's risk analysis activities.
    Because part 5 is a performance-based regulation, the aviation 
organization can determine how to meet the requirements, which allows 
the organization to scale and adapt the methods used for safety risk 
management. The aviation organization can design the process to fit the 
organization's size and complexity. For more information regarding 
scalability, see Section IV.J.

[[Page 33091]]

R. Part 135 Pilot and Duty Rules ARC

    In the NPRM, the FAA included the statement:
    The identification of hazards through SMS may include analyzing the 
potential risk associated with crewmember fatigue when compounded by 
variations in individual part 135 operations, such as scheduling 
variances, frequency of operations, distance, and number of pilots.\44\
---------------------------------------------------------------------------

    \44\ 88 FR 1940.

Footnote 44 was linked to this statement and said: See report from the 
Part 135 Pilot and Duty Rules Aviation Rulemaking Committee dated July 
2, 2021, a copy of which has been placed in the docket for this rule.
1. Summary of the Comments
    NBAA, NATA, and NJASAP expressed concern and asked questions 
regarding whether the FAA intends for the rule to address the ARC 
recommendations.
2. FAA Response
    While addressing hazards related to crew fatigue would be a part of 
a mature SMS, the FAA did not intend to imply that the ARC's 
recommendations would be covered by this rule. The FAA is evaluating 
the Part 135 Pilot and Duty Rules ARC's recommendations and weighing 
options to address them, which would need to be accomplished through a 
separate regulatory initiative.

S. Consistency With ICAO

    The FAA noted throughout the NPRM that the proposed rule would more 
closely align the United States SMS requirements with ICAO Annex 19.
1. Summary of the Comments
    Commenters expressed concerns about elements of the proposed rule 
that differ from ICAO Annex 19. Specifically, the Business Aviation 
Safety Consortium (BASC) noted that some elements of the proposed rule 
differ from the existing ICAO framework, which could lead to 
difficulties for flight departments that operate domestically and 
internationally where they must adhere to Annex 19. BASC asked whether 
these operators would need to operate two separate SMS programs or one 
hybrid program and cautioned that focusing on compliance with two 
separate frameworks could jeopardize safety when safety excellence 
already exists.
    University of Southern California Aviation Safety and Security said 
that requiring an SMS that departs radically from the ICAO standards 
could require international service providers to maintain two SMS 
programs, which would be an unacceptable burden and could diminish the 
effectiveness of SMS. The commenter indicated that the FAA cannot be 
exercising international leadership in aircraft safety if it departs 
substantially from ICAO Annex 19, and that the current part 5 
requirements should be standardized to reflect ICAO Annex 19 and 
Document 9589 more closely. Aviation Safety Solutions also said the 
FAA's reliance on a Quality Management System, rather than ICAO Annex 
19, for its SMS rule could create disadvantages for international 
operators. Minnesota Business Aviation Association recommended that 
requirements be identically worded to ICAO to facilitate the approval 
process for ICAO-compliant SMS operators in the United States.
    NBAA recommended returning to AC 120-92B because AC 120-92D is too 
prescriptive and inconsistent with ICAO Annex 19. It noted that several 
countries (Australia, Canada, Hong Kong, Saudi Arabia) applied Annex 
19, Appendix 2 to their respective regulatory frameworks, which helps 
avoid challenges for international operators. NBAA highlighted the 
accountable executive requirement as an example where the proposed rule 
is less flexible than under ICAO, and also cited the code of ethics, 
data sharing, and systems description requirements as ``outside the 
scope'' of Annex 19.
2. FAA Response
    ICAO Annex 19 directs member States to develop State safety 
programs for safety management and includes minimum requirements. 
Ultimately, each State is responsible to develop SMS regulations to 
implement this requirement. Part 5 fulfills this responsibility for the 
United States. An important distinction between Annex 19 and part 5 is 
that Annex 19 applies to the member States and part 5 applies to 
individual operators. As a result, each member State implements the 
Annex 19 SMS framework in accordance with its own processes and legal 
systems; accordingly, Member State regulations can vary to some extent. 
They meet Annex 19 requirements, however, if they include all of the 
elements in ICAO's framework. To be clear, Annex 19 does not apply 
directly to individual entities; its purpose is to direct member States 
to regulate those entities. Accordingly, the FAA developed part 5 to 
align with the SMS framework in ICAO Annex 19.
    Part 5 includes all the elements in ICAO's Annex 19 framework, 
which means that the United States and, by definition, U.S. entities 
compliant with part 5 are in compliance with Annex 19.
    Finally, the FAA issued AC 120-92D to be consistent with part 5. As 
a result, it is also consistent with Annex 19.

T. Safety Policy

    In addition to comments regarding proposed amendments to the safety 
policy, which are addressed in other sections of the preamble, several 
commenters expressed concern about various safety policy requirements 
in subpart B of part 5, which were not amended, including the required 
contents of the safety policy and the responsibilities of the 
accountable executive.
1. Summary of the Comments
    Pratt & Whitney said that the prescriptive list of requirements in 
Sec.  5.21 for the safety policy requires a lengthy legal document that 
would not bring about the desired behaviors. The commenter requested 
industry latitude to develop safety policies, possibly from multiple 
sources, that satisfy the proposed list of requirements.
    Small UAV Coalition questioned why Sec.  5.25(a) requires a single 
individual to satisfy all four functions of the accountable executive, 
noting that some companies have specialized executives (e.g., CFOs, 
Chief Human Resource Officers) that might better oversee a particular 
function. The coalition also said the requirement in Sec.  5.25(c) for 
the accountable executive to ``designate sufficient management 
personnel'' is vague and questioned whether small companies could 
comply with this requirement if they designated all responsibilities to 
one person.
    The U.S.C. Viterbi School of Engineering noted that the requirement 
for an accountable executive to review the safety policy is stated in 
both Sec.  5.21 and Sec.  5.25 and suggested it need only be stated in 
Sec.  5.25. The commenter also recommended specifying how often this 
review should be conducted and suggested that annual reviews be 
required.
2. FAA Response
    In response to the comments, the FAA notes that the only 
substantive addition to Sec.  5.21 is the code of ethics now required 
under new paragraph (a)(7) (discussed in Section IV.J. of this rule). 
The other requirements in Sec.  5.21, which were promulgated in the 
original part 5 rulemaking, are performance-based and are designed to 
provide the aviation organization with latitude in developing its 
safety policy. The FAA has included additional explanation in AC 120-92 
and AC 21-58 providing suggestions for

[[Page 33092]]

designating the accountable executive and management personnel, 
defining unacceptable behavior and conditions for disciplinary action, 
and the expectations for compliance in small entities.
    With respect to the concern regarding possible duplication of 
requirements, the FAA notes that, in some cases, similar language is 
necessary to tie one SMS component to another SMS component to achieve 
the desired closed-loop system. For example, although Sec. Sec.  5.21 
and 5.25(b) use similar language, Sec.  5.21 prescribes requirements on 
the aviation organization while Sec.  5.25(b) prescribes the 
responsibilities of the accountable executive.
    Neither Annex 19 nor part 5 specifies a set time interval, 
applicable to all covered entities, for reviewing the safety policy. 
Section 5.21(c) requires that the safety policy be documented and 
communicated throughout the aviation organization. This is where the 
aviation organization specifies the interval the safety policy is to be 
reviewed by the accountable executive, in a timeframe appropriate for 
its organization.

U. Miscellaneous Amendments

    After further consideration, the FAA decided to add ``for the same 
product'' to Sec.  5.1(e), Sec.  5.1(f), and Sec.  5.1(g) to clarify 
the applicability of part 5. The additional text clarifies that part 5 
does not apply to either an STC holder or a PC holder for an STC 
because these design and production approvals are for modifications to 
a product and not for complete products. Similarly, there are persons 
who may hold a TC and a PC to produce parts or articles only. The final 
rule does not apply because the PC is only for the production of a part 
or an article and not for the same product.
    In addition, in the NPRM the FAA proposed removing the word 
``operations'' from Sec.  5.71(a) to clarify the requirement and avoid 
confusion with the term ``operator.'' In retrospect, this change 
created additional confusion. As a result, the FAA is retaining the 
original part 5 language.
    Finally, the FAA proposed amending Sec.  119.8 to clarify that part 
119 certificate holders authorized to conduct part 121 or 135 
operations must have an SMS that meets part 5 requirements. On further 
review, the FAA determined that the amended language would have 
prohibited all operations while not in compliance with part 5, 
resulting in a new violation each time. This was not what the FAA 
intended. Accordingly, the FAA removed the language that would have 
provided for a per-operation violation. Section 119.8 now reads: 
Certificate holders authorized to conduct operations under part 121 or 
135 of this chapter must have a safety management system that meets the 
requirements of part 5 of this chapter. This change ensures the FAA's 
approach to Sec.  119.8 is consistent with past practices as well as 
other provisions in this rule.

V. Benefits and Costs

1. Comments in Support of Benefits
i. Summary of Comments
    NetJets Association of Shared Aircraft Pilots claimed that the 
safety benefits of SMS have been well established over the years. The 
NTSB stated that in the 15 years since its first aviation safety 
recommendation for SMS in 2007, its investigations have consistently 
shown the need for aviation safety providers to implement SMS to ensure 
its benefits to industry and the public are realized. Aviation Safety 
Solutions also indicated that it anticipates substantial safety 
benefits from part 5. The commenter claimed that International Standard 
for Business Aircraft Operations Stage 3 operators have not had a fatal 
accident in 20 years, the result of industry-wide safety culture 
enhancements, continual data analysis, and ensuring that safety is the 
operator's top priority. Another commenter noted that the level of 
benefits required to breakeven for certain part 21 design and 
production approval holders is not much of a challenge.
ii. FAA Response
    The FAA agrees with these comments and the potential benefits from 
SMS (the FAA does not have operator-specific information on 
International Standard for Business Aircraft Operations stage 3 to 
confirm the accident rate). SMS identifies hazards so mitigations can 
be implemented to reduce the potential of an accident occurring. By 
managing hazards in an operational environment, the potential for an 
accident is significantly reduced.
2. Comments Contesting Benefits
i. Summary of Comments
    Phoenix Air Group asserted that an SMS does not mitigate or reduce 
the number of accidents in any known definition or study of such 
programs. One commenter questioned if there are studies that show SMS 
would have any effect on accident rates or overall safety. One 
commenter stated that the NPRM shows no data proving that the present 
SMS has improved safety. Another commenter found the actual accident-
based case the FAA made for applying SMS mandates to single-person 
operations to be unsupported. Finally, one commenter expressed concern 
about the resources needed to implement an SMS and the lack of 
realistic practical benefits for certain small part 21 operations, for 
example, hot air balloon manufacturing.
ii. FAA Response
    The FAA acknowledges the lack of studies documenting reduced 
accident rates under SMS. As stated previously, SMS assists aviation 
organizations in identifying hazards that could result in an accident 
so the organization can implement mitigations to reduce accident 
probability.\45\ The FAA has determined that the requirements would be 
beneficial even applied to small entities, including small 
manufacturers, and implementation can also be scaled accordingly, as 
discussed in Section IV.J.
---------------------------------------------------------------------------

    \45\ In the data for recent years (2020-2021), the FAA 
identified an additional 9 part 135 accidents and 1 Sec.  91.147 
accident (resulting in 27 fatalities and 8 serious injuries) in 
which SMS could potentially have prevented the accident. These 
accidents include the 2020 helicopter crash in Calabasas, CA 
resulting in 9 fatalities (the NTSB determined that a contributing 
factor to the accident was the lack of use and oversight of the 
company's SMS). These accidents also include single-pilot operations 
(NTSB accident number CEN20CA119).
---------------------------------------------------------------------------

3. Comments on Costs
i. Summary of Comments
    Phoenix Air Group, Inc. stated that incompatibility between the 
rule and ICAO Annex 19 Standards and Recommended Practices would 
require the company to maintain two different safety programs, 
increasing costs by 75%. It stated that it has a third-party provided 
SMS that meets the ICAO Annex 19 requirements for all its operations 
under multiple CFR parts. The commenter stated that the current annual 
cost would be much higher than the RIA estimate, and the costs after 
the addition of part 5 would also be much higher. Regarding the cost of 
risk mitigations, Phoenix Air Group stated the company's mitigations 
have ranged from no cost actions to actions that added hundreds of 
thousands of dollars requiring the company to modify one or more 
aircraft, including the purchase of a supplemental type certificate, 
which added hundreds of thousands of dollars to the cost for each 
installation and removed each aircraft from operation for many weeks.
ii. FAA Response
    The FAA's estimates would not have accounted for the company's part 
91 operations (other than Sec.  91.147) or its repair station, or 
activity not affecting the safety of flight, which could explain the 
difference in costs. The commenter

[[Page 33093]]

also did not identify the gaps that would need to be addressed between 
the proposed rule and its current ICAO Annex 19 conforming SMS that 
would produce the projected additional costs. Although more specific in 
several areas, part 5 is harmonized with ICAO Annex 19, and the FAA 
disagrees that the rule would require separate SMS. The FAA 
acknowledges the potential range in mitigation costs, which will be 
specific to an aviation organization and the hazards identified.
iii. Summary of Comments
    LifeFlight of Maine/LifeFlight Aviation Services LLC stated that it 
is in the small operator proposed cost profile in the NPRM with between 
1-99 employees and 1-9 aircraft with costs estimates ranging from 
$7,500-$38,120 initial and $4,380-$39,420 annual recurring. It believed 
the cost estimates in the NPRM are significantly understated, citing a 
threefold increase in the NPRM proposed discounted costs from 
experience to date. It stated that, as a percentage of overall costs of 
operations, the NPRM proposed SMS mandate and timing are a 
significantly higher burden for smaller entities. Additionally, air 
medical operators are unable to pass through compliance costs via price 
increases as neither Medicare, Medicaid, nor commercial medical 
reimbursement recognize or allow costs associated with implementing and 
maintaining an SMS. The commenter stated that an effective SMS in a 
smaller program will look and feel quite different than the same in a 
large operation and spreading out implementation costs is essential for 
smaller operators.
iv. FAA Response
    The commenter did not provide additional detail for the FAA to 
evaluate the cited threefold difference in costs incurred. As described 
elsewhere in this preamble, the FAA maintains that SMS processes, and 
thus costs, are scalable to the size and complexity of the aviation 
organization. Aviation safety regulatory compliance costs represent 
costs of air medical service provision. If insurance reimbursement 
rates do not fully cover service provision costs, then such costs could 
negatively impact profit or service provision. However, as also 
explained elsewhere, the FAA has determined that the requirement for 
SMS in part 135 operations should apply to small and large operators 
alike. The FAA is providing an additional 12 months for compliance to 
assist in the spreading out of implementation costs for small 
operators.
v. Summary of Comments
    MARPA stated that the code of ethics provision affects a broad 
swath of individuals not reflected in the cost-benefit analysis, based 
on the requirement of the rule to ``be applicable'' to all employees. 
The Aviation Suppliers Association stated that many certificate holders 
who would be subject to the SMS regulations will flow down the 
requirements to aircraft parts suppliers and distributors through 
commercial obligations in contracts and other similar documents. The 
association found that flow-down appears to be an unintended 
consequence that exceeds the planned scope (and the cost-benefit 
analysis). It also suggested that a supplier to multiple certificate 
holders may be faced with adopting the disparate SMS requirements of 
several certificate holders, at a cost much greater than the cost of 
adopting its own SMS. The association also expressed concern that SMS 
requirements from other nations may not be consistent with the FAA's 
requirement, but nonetheless applied to suppliers from the United 
States. The commenter suggested that, for businesses that supply more 
than one certificate holder (directly or indirectly), having their own 
voluntary SMS program that is recognized by the FAA may be a more 
efficient model. MARPA and Aviation Suppliers Association also stated 
that the proposed requirement of Sec.  5.94 to notify interfacing 
persons of identified hazards creates flow-down risks to persons not 
intended to have SMS and could impose significant cost on those 
parties. They suggested that the FAA audit the extent to which the 
interfacing provisions result in flow down requirements, and if the 
actual reach of the regulations is beyond the stated scope, then 
consider preparing a revised cost-benefit analysis for the rule.
vi. FAA Response
    The FAA disagrees with these comments regarding costs. With respect 
to the code of ethics applying to all employees, the method the FAA 
used for extrapolating unit costs to design and manufacturing 
organizations entailed multiplying unit costs by the number of 
employees. Therefore, the costs estimates reflect the number of 
employees. With respect to hazard notification and the potential for 
flow down of SMS requirements, there are already flow down requirements 
from type and production certificate holders to suppliers to manage the 
quality of parts supplied (Sec.  21.137, Quality system). For example, 
type and production certificate holders already expect suppliers to fix 
defective parts. Regarding a voluntary SMS for suppliers, the FAA's 
voluntary SMS program is currently available to TSOA holders and PMA 
holders.
vii. Summary of Comments
    GAMA and AIA stated it is unclear if additional mandates 
(interfacing communications, confidential hazard reporting, addition of 
system description, and record keeping) are included in the FAA's cost 
estimates. They stated that costs for a summary of confidential reports 
could approach $100,000 a year, is not part of the cost analysis, and 
that there is no value added from this requirement. They requested 
clarification that the Executive Order 12866 requirement to only adopt 
a regulation upon reasoned determination that benefits justify the cost 
is met. They also requested clarification that the Unfunded Mandates 
Reform Act of 1995 requirement that agencies prepare a written 
assessment of costs, benefits, and other effects of proposed or final 
rules is met.
viii. FAA Response
    The FAA captures the costs of additions to part 5 in Tables 25 and 
27 of the RIA. In the final rule, the organizational system description 
applies only to part 21 certificate holders and is only a summary-level 
description. Also, for part 135 and Sec.  91.147, confidential hazard 
reporting is not applicable for certain single-pilot organizations. The 
FAA does not expect the summary of confidential employee reports for 
part 21 organizations to cost $100,000 per year. SMS requires analysis 
of safety performance data, including information obtained through 
confidential employee reporting systems. Therefore, these reports would 
already be consolidated, reviewed, and acted on as part of the 
company's SMS. The commenter's assertion of needing to cull out any 
military and international reports from a summary does not seem to 
explain this cost. As stated in the preamble to the proposed rule, the 
FAA maintains that benefits justify the cost, and that the costs do not 
meet the threshold in Unfunded Mandates Reform Act of 1995.
ix. Summary of Comments
    AMOA disputed the Agency's cost analysis that includes part 135 
operators with one employee-pilot. The commenter also found that the 
FAA assumes that third-party consultants or trade associations would 
provide ready tools for compliance by a small operator, yet the NPRM 
does not appear

[[Page 33094]]

to have examined the cost of third-party resources. The association 
urged the FAA to include a table specifically examining the costs of 
each SMS regulatory element for single-pilot operators to provide a 
better foundation for cost benefit analysis.
x. FAA Response
    Regarding the FAA's cost estimate for single-pilot/employee 
operations, see also the FAA's response to comments regarding 
Applicability to part 135 operators and LOA holders under Sec.  91.147 
(in Section IV.A.), as well as Scalability (in Section IV.J.). Aviation 
organizations can use solutions that are appropriate for their size and 
complexity. For example, smaller or less complex aviation organizations 
may use notebooks and whiteboards rather than more sophisticated 
software solutions. The costs of these solutions would scale as well. 
The FAA subject matter experts reviewed the estimates used for part 135 
operators, considering the experience of aviation organizations already 
implementing SMS and including higher cost areas such as Alaska, and 
found them reasonable.
    The FAA did solicit costs of third-party resources as part of 
developing the NPRM. However, these resources and costs depend on the 
particular offering and pricing structure. For the NPRM and final rule, 
the FAA instead relied on the information from the FAA's voluntary SMS 
program participants. For part 135 and Sec.  91.147, the FAA developed 
average costs based on number of aircraft for general categories of 
costs rather than element-by-element for single-pilot operators. As 
described in the RIA, the SMS ARC identified these sources of 
additional incremental initial and recurring costs that could be 
incurred as a result of an SMS rule, noting that these costs are highly 
dependent on the existing safety programs and systems within the 
aviation organization (see AC 120-92 for additional guidance). Table 26 
in the RIA provides the results (based on the limited industry outreach 
documented in Tables 21 and 23). Whether existing processes in place 
would meet the external interface identification and notification 
requirements would also be operator specific. In addition, in the final 
rule, certain requirements are not applicable to certain single-pilot 
operators.
xi. Summary of Comments
    Aviation Safety Solutions provided one-time and annual costs for 
emergency response plan manual, emergency response exercise, SMS 
manual, safety manager, SMS software, and training.
xii. FAA Response
    Aviation Safety Solutions did not provide the size of the aviation 
organization these costs are relevant to (other than commenting that 
for an organization size of close to 100, one individual running the 
SMS would be insufficient). The FAA also notes that these items and 
positions may not be incremental at all aviation organizations and 
incremental costs would depend on the extent of processes and 
procedures in place, as well as the scaled methods that the entity 
choses for compliance (e.g., small operators utilizing notebooks rather 
than SMS software). Therefore, the commenters' cost estimates may be 
relevant for some entities as one potential means of compliance with 
some requirements, rather than representative costs.
    The FAA summarizes and responds to comments regarding the Initial 
Regulatory Flexibility Analysis in Section V.B.

W. Severability

    As discussed earlier in this document, Congress authorized and 
required the FAA by statute to promote safety in aircraft manufacturing 
and operations. Consistent with that mandate, the FAA is requiring 
certain persons to implement an SMS that applies to their processes 
that have a direct effect on aviation safety. The purpose of this rule 
is to operate holistically in addressing a range of hazards in 
aviation. However, the FAA recognizes that certain provisions of this 
final rule will affect different organizations in different ways. 
Therefore, the FAA finds that the various provisions of this final rule 
are severable and able to operate functionally if severed from each 
other. In the event a court were to invalidate one or more of this 
final rule's provisions, the remaining provisions should stand, thus 
allowing the FAA to continue to fulfill its Congressionally authorized 
role of promoting safety in air commerce.

V. Regulatory Notices and Analyses

    Federal agencies consider impacts of regulatory actions under a 
variety of executive orders and other requirements. First, Executive 
Order 12866 and Executive Order 13563, as amended by Executive Order 
14094 (``Modernizing Regulatory Review''), direct 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 (Pub. L. 96-354) 
requires agencies to analyze the economic impact of regulatory changes 
on small entities. Third, the Trade Agreements Act (Pub. L. 96-39) 
prohibits agencies from setting standards that create unnecessary 
obstacles to the foreign commerce of the United States. Fourth, the 
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires agencies 
to prepare a written assessment of the costs, benefits, and other 
effects of proposed or final rules that include a Federal mandate that 
may result in the expenditure by State, local, and tribal governments, 
in the aggregate, or by the private sector, of $100 million or more 
(adjusted annually for inflation) in any one year. The current 
threshold after adjustment for inflation is $177 million using the most 
current (2022) Implicit Price Deflator for the Gross Domestic Product. 
The FAA has provided a detailed Regulatory Impact Analysis (RIA) in the 
docket for this rulemaking. This portion of the preamble summarizes the 
FAA's analysis of the economic impacts of this rule.

A. Summary of the Regulatory Impact Analysis

    The FAA estimated quantified annualized costs of $47.4 million 
using a 7 percent discount rate over a 5-year period of analysis. The 
costs represent the value of resources that regulated entities would 
need to develop and implement an SMS. Mitigation costs, which are yet 
to be identified and thus unknown, are not quantified. The benefits are 
the value that would result from avoided fatalities, serious injuries, 
aircraft damage, and investigation costs, which the FAA evaluated 
qualitatively.
1. Baseline for the Analysis
    The baseline for the analysis of incremental benefits and costs of 
the rule includes existing regulations and standards, existing 
practices, affected entities, and current risks of aircraft accidents 
and incidents. The FAA already requires part 121 operators to implement 
an SMS. The FAA also provides voluntary SMS programs for certificate 
holders under parts 21, 135, and 145. The FAA's voluntary SMS programs 
are based on the requirements in part 5. There are 5 aircraft design 
and manufacturing organizations and 40 part 135 operators in active 
conformance (full implementation of the certificate holder's SMS) under 
the voluntary

[[Page 33095]]

program.\46\ In addition, some part 121 operators have covered their 
part 135 operations and part 145 repair station services under their 
SMS. Finally, certain aircraft design and production approval holders 
(and certificated repair stations \47\) subject to requirements of EASA 
(applicable March 7, 2023) are required to develop and implement an SMS 
under that agency's SMS requirements.
---------------------------------------------------------------------------

    \46\ See FAA Order 8900, Volume 17, Chapter 3, Safety Management 
System Voluntary Program.
    \47\ The rule will not apply to repair stations.
---------------------------------------------------------------------------

    The FAA estimated that the rule would apply to approximately 65 
aircraft design and production approval holders. Also, there are 
approximately 1,848 part 135 operators that would be required to 
implement an SMS, which includes 203 entities that also hold an LOA to 
conduct commercial air tours under Sec.  91.147. Additionally, there 
are 715 LOA holders operating under Sec.  91.147 that are not 
associated with a part 135 certificate that would be required to 
implement an SMS under the rule.
    With respect to aircraft accidents, although risks associated with 
regularly scheduled commercial air carriers in the United States are 
low, there have been accidents involving fatalities and serious 
injuries. Under part 135, there has been an average of 43 accidents and 
24 fatalities annually from 2015 to 2019, mostly in on demand 
operations. There have also been recent fatal accidents involving air 
tours conducted under Sec.  91.147 (an average of 7 accidents and 3 
fatalities annually from 2015 to 2019).
2. Benefits
    The benefits of the rule include the value of the reductions in 
safety risks associated with requiring additional entities to implement 
SMS. The information available for estimating such benefits includes 
data on accident consequences, accident investigation reports 
identifying the probable causes, and information on the values 
associated with avoiding consequences. The FAA used aviation accident 
data from the NTSB for the years 2015 to 2019 and standard values for 
estimating avoided consequences including fatalities, serious injuries, 
property damage, and investigation costs.
    The FAA evaluated benefits by determining average annual aviation 
accident consequences, the share of those consequences that could be 
mitigated under the rule, and the probability of mitigation. The FAA 
determined the share of consequences that could potentially be 
mitigatable by the rule by looking at the causes of individual 
accidents. Requiring aircraft design and production approval holders to 
implement SMS has the potential to mitigate accidents in operations 
conducted under 14 CFR parts 121, 135, and 91. Requiring part 135 
operators and Sec.  91.147 LOA holders to implement SMS has the 
potential to mitigate accidents in operations conducted under part 135 
and Sec.  91.147. The probability of mitigation is uncertain.
    The FAA identified 11 accidents of which the risk could have been 
mitigated through SMS in aircraft design and production. The FAA also 
identified 35 accidents related to operations under part 135 and 4 
accidents related to Sec.  91.147 LOA holders of which the risk could 
have been mitigated through SMS. Because the FAA focused on accidents 
involving fatalities and injuries, not all accidents indicative of the 
potential for benefits from the rule may have been identified. 
Additionally, requiring SMS for certain part 21 certificate holders 
will have beneficial impacts beyond domestic operations (i.e., to 
citizens of foreign countries).
3. Costs
    To estimate compliance costs, the FAA developed average one-time 
SMS development and implementation costs and recurring SMS maintenance 
costs. Then, the FAA extrapolated these costs to entities that fall 
under the expanded applicability of part 5 who would not already be 
required to implement an SMS and are not already implementing an SMS 
voluntarily. To develop these estimates, the FAA conducted limited 
outreach to industry participants in the FAA's voluntary SMS program to 
obtain data on implementation costs. To properly scale costs for 
company size, the FAA calculated these costs per employee for 
certificate holders under part 21 and per aircraft for operators under 
part 135 and Sec.  91.147. The FAA then extrapolated the costs based on 
number of employees or number of aircraft. The FAA estimated only minor 
costs for entities that have already implemented an SMS voluntarily or 
under existing requirements for part 121.
    There are uncertainties in the analysis, including that costs are 
based on information from a small sampling. As a result, costs could be 
lower or higher than estimated. The outreach indicated a high level of 
variability depending on the individual circumstances of the entity 
(e.g., existing processes and capabilities). For this analysis, the FAA 
intends for the estimates to represent an average across entities.
4. Summary
    Table 2 provides a summary of annualized and 5-year present value 
costs using 3 percent and 7 percent discount rates.

                      Table 2--Summary of Costs \1\
                            [Millions $2022]
------------------------------------------------------------------------
                                                           Present value
                Category                    Annualized       (5 years)
------------------------------------------------------------------------
3% Discount Rate
    Part 21 \2\.........................            $4.9           $22.5
    Part 135............................            35.9           164.5
    Sec.   91.147.......................             7.2            33.2
    Part 121............................            0.05             0.2
                                         -------------------------------
        Total...........................            48.1           220.4
7% Discount Rate
    Part 21 \2\.........................             4.9            20.1
    Part 135............................            35.3           144.9
    Sec.   91.147.......................             7.1            29.2
    Part 121............................            0.05             0.2
                                         -------------------------------
        Total...........................            47.4           194.5
------------------------------------------------------------------------
\1\ Based on quantified impacts. Excludes costs of mitigation.
\2\ Includes FAA administrative costs.


[[Page 33096]]

5. Regulatory Alternatives
    The FAA considered two alternatives to the rule. Each alternative 
would change the applicability of the requirements for an SMS:
     Alternative 1: Extend applicability of part 5 to include 
most design and production approval holders under part 21, with some 
exceptions.
     Alternative 2: Exclude from the applicability of part 5 
the part 135 operators that use only one pilot-in-command in their 
operations and the Sec.  91.147 LOA holders that conduct fewer than 100 
flights per year.
    The FAA considered an alternative to the part 21 applicability 
(Alternative 1) based on recommendations from a part 21 SMS ARC. Under 
Alternative 1, the SMS requirements would apply beyond holders of both 
a type and production certificate for the same product and would 
include most design and production approvals holders. This alternative 
would exclude design and production approval holders of products, 
articles, or changes to existing type certificated products that are 
not typically used for carrying passengers or property for compensation 
or hire. Also, as part of this alternative, the FAA considered a 
process that would allow design and production approval holders to 
apply to be excluded from SMS requirements if their article or approved 
product alteration would have little or no effect on the continued safe 
flight or landing of the aircraft.
    Under Alternative 1, the FAA estimated that over 3,000 additional 
entities would be required to implement SMS and over 3,000 additional 
entities (not associated with the entities in the previous sentence) 
would likely apply to be excluded from the SMS requirements.
    Alternative 1 would increase benefits through SMS implementation by 
the approximately 3,000 entities who design or produce certain safety-
critical parts under any design or production approval. The alternative 
would also hold entities who design and produce safety-critical parts 
to the same SMS standard required of entities holding both a type 
certificate and a production certificate for the same product. This 
alternative would increase benefits by requiring SMS for all entities 
involved in the design or production of safety-critical aircraft parts 
compared to the final rule baseline that requires SMS for the 
approximately 60 type and production certificate holders that design or 
manufacture products (aircraft, aircraft engines, or propellers). The 
approximately 3,000 additional entities that would be required to 
implement SMS under this alternative include STC holders that modify 
product designs, TSOA holders that design and produce aircraft 
articles, and PMA holders that design and produce aircraft replacement 
and modification parts. The FAA expects requiring SMS for these 
additional entities would increase SMS benefits (reducing or eliminated 
accidents) through improved identification of safety hazards, enhanced 
management of safety risk, and better assurance of the effectiveness of 
safety risk controls across a larger ecosystem of aircraft design and 
production organizations. However, as of the date of this analysis, the 
FAA was not able to estimate these risks or benefits due to a lack of 
specific data.
    The FAA estimated that costs could be $37 million for Alternative 
1, using a number of assumptions because it does not have information 
for these entities on the size of their aviation design and production 
processes. The costs would include SMS development and implementation 
costs, costs to apply for an exception from the requirement to 
implement SMS, and FAA review and approval costs. Compared to the rule, 
the increase in costs is approximately $32 million (annualized using a 
7% discount rate).
    The FAA considered an alternative for part 135 and Sec.  91.147 
(Alternative 2) that would limit the number of small operators 
affected. Under Alternative 2, the FAA considered excluding from the 
applicability of part 5 the part 135 operators that use only one pilot-
in-command in their operations and the Sec.  91.147 LOA holders that 
conduct fewer than 100 flights per year. The FAA estimated that 1,300 
part 135 operators would be affected under Alternative 2 compared to 
1,848 under the rule. The FAA does not have data on the number of Sec.  
91.147 LOA holders that conduct less than 100 flights per year. As an 
estimate, the FAA used LOA holders with one aircraft listed on the LOA. 
The FAA estimated that 338 Sec.  91.147 LOA holders would be affected 
under Alternative 2 compared to 715 under the rule.
    The reduced applicability under Alternative 2 would lower both 
costs and benefits. For part 135, costs would be $3.0 million lower 
compared to the rule. For Sec.  91.147, costs would be $1.6 million 
lower compared to the rule. With respect to benefits, one of the 
potentially mitigatable accidents involved an operator that used only 
one pilot-in-command. These types of operators would not be required to 
implement an SMS.
    Table 3 provides a summary of the analysis of the alternatives. The 
uncertainty associated with the analysis of benefits and costs of the 
proposal also applies to the estimates of the alternatives. Section 
IV.C., Expansion of Proposed Applicability and Section IV.A., 
Applicability to Part 135 and LOA Holders under Sec.  91.147, of the 
preamble to the rule provides the Agency's rationale for selecting the 
option.

                                    Table 3--Summary of Alternatives Analysis
----------------------------------------------------------------------------------------------------------------
                                                               Change from proposed rule
               Scenario               --------------------------------------------------------------------------
                                          Affected entities             Benefits             Costs (millions)
----------------------------------------------------------------------------------------------------------------
Alternative 1: Extend applicability    SMS: +3,000 Exception:   Data not available to    +$32.0.
 to include additional design and       +3,000.                  quantify change in
 production approval holders under                               risk.
 part 21.
Alternative 2: Limit applicability     Part 135: -548 Sec.      Lower (would not         Part 135: -$3.0 Sec.
 for certain part 135 operators         91.147: -377.            mitigate risks           91.147: -$1.6.
 (exclude operators that use only one                            identified in 1 part
 pilot-in-command) and Sec.   91.147                             135 accident).
 LOA holders (exclude fewer than 100
 flights per year).
----------------------------------------------------------------------------------------------------------------

    See the RIA available in the docket for more details.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) of 1980, (5 U.S.C. 601-612), 
as amended by the Small Business Regulatory Enforcement Fairness Act of 
1996 (Pub. L. 104-121) and the Small Business Jobs Act of 2010 (Pub. L. 
111-240), requires Federal agencies to consider the effects

[[Page 33097]]

of the regulatory action on small business and other small entities and 
to minimize any significant economic impact. The term ``small 
entities'' comprises small businesses and not-for-profit organizations 
that are independently owned and operated and are not dominant in their 
fields, and governmental jurisdictions with populations of less than 
50,000.
    The FAA published an Initial Regulatory Flexibility Analysis (IRFA) 
in the proposed rule to aid the public in commenting on the potential 
impacts to small entities. The FAA considered the public comments in 
developing the final rule and this Final Regulatory Flexibility 
Analysis (FRFA). A FRFA must contain the following:
    (1) A statement of the need for, and objectives of, the rule;
    (2) A statement of the significant issues raised by the public 
comments in response to the IRFA, a statement of the assessment of the 
agency of such issues, and a statement of any changes made in the 
proposed rule as a result of such comments;
    (3) The response of the agency to any comments filed by the Chief 
Counsel for Advocacy of the Small Business Administration (SBA) in 
response to the proposed rule, and a detailed statement of any change 
made to the proposed rule in the final rule as a result of the 
comments;
    (4) A description of and an estimate of the number of small 
entities to which the rule will apply or an explanation of why no such 
estimate is available;
    (5) A description of the projected reporting, recordkeeping, and 
other compliance requirements of the proposed rule, including an 
estimate of the classes of small entities which will be subject to the 
requirement and the type of professional skills necessary for 
preparation of the report or record;
    (6) A description of the steps the agency has taken to minimize the 
significant economic impact on small entities consistent with the 
stated objectives of applicable statutes, including a statement of the 
factual, policy, and legal reasons for selecting the alternative 
adopted in the final rule and why each of the other significant 
alternatives to the rule considered by the agency which affect the 
impact on small entities was rejected.
1. Need for and Objectives of the Rule
    As described elsewhere in this preamble, the rule addresses a 
Congressional mandate as well as recommendations from the NTSB and 
various ARCs. Additionally, the rule would move the United States 
closer to harmonizing with ICAO Annex 19. The FAA intends for the rule 
to improve aviation safety by requiring organizations to implement a 
proactive approach to managing the safety performance of an 
organization. The successful use of SMS by part 121 operators suggests 
potential benefits of expanding SMS into other sectors of the aviation 
system.
    The objective of implementing an SMS is to proactively identify 
hazards, assess the risk of those hazards, and apply effective 
mitigations before an accident or incident occurs. The rule expands the 
use of SMS in the aviation industry by making the SMS requirements 
applicable to part 135 operators, Sec.  91.147 LOA holders, and certain 
part 21 design and production certificate holders. The rule also 
increases the opportunities for communication of identified hazards 
between part 119 certificate holders, Sec.  91.147 LOA holders, and 
manufacturers. The rule is therefore intended to increase the overall 
safety of the national airspace system. Additionally, the rule fulfills 
the statutory mandate in section 102 of ACSAA. Section II. of this 
preamble describes the FAA's authority to issue rules on aviation 
safety under title 49 U.S.C. and the Congressional mandate in section 
102 of ACSAA.
2. Significant Issues Raised in Public Comments
    Significant issues raised in the public comments relate to 
duplicative rules and the economic impact on small part 135 operations. 
MARPA stated that applying SMS to design and production holders creates 
duplicate or overlapping obligations for design and production holders. 
The association recommended that the FAA consider the duplications 
already identified in past ARC reports, as well as the facial 
duplication within the proposed rule, and amend the regulation to 
eliminate those already-identified as overlaps.
    The FAA does not agree that the requirements contained in part 5 
are duplicative of elements contained in part 21 as they serve 
different purposes. The provisions in part 21 are focused on the 
product; part 21 ensures a product's design is safe and compliant and 
it is produced in conformance with its approved type design. For 
example, when certifying an aircraft engine, an organization must 
conduct a safety analysis of the engine to demonstrate that the 
likelihood of engine failure effects is below specified levels. Part 5, 
on the other hand, is focused on identifying hazards and mitigating 
risks with the organization's systems that are used to design, certify, 
produce, and maintain continued airworthiness of the products they 
provide. For example, when revising a system for designing an engine 
(e.g., implementing a new design process), part 5 requires the 
organization to analyze, assess, and mitigate the risk of the system 
revision producing an engine safety issue.
    Within the proposed rule, the FAA determined the provisions are 
necessary for emphasis or to tie one SMS component to another SMS 
component to achieve the desired closed-loop system. In addition, many 
of the requirements map to the SMS Framework in ICAO Annex 19, Appendix 
2.
    NATA stated that SMS solutions for small businesses must not be 
cost-prohibitive or so burdensome that business closure becomes 
imminent. The association recommended a staggered compliance schedule 
of at least 5 years for small carriers to address this concern. NATA 
also raised issues related to feasibility of provisions not possible at 
many small businesses, such as confidential reporting of hazards, and 
stated that the FAA needs to ensure that guidance and training 
recognize this issue. It stated a need for communications retention 
procedures where communications are largely oral, and more articulation 
of precisely how the small operator will implement SMS. The FAA's 
assessment and response to these issues can be found in Sections IV.A., 
IV.D., IV.H., and IV.N. of this preamble.
    LifeFlight of Maine/LifeFlight Aviation Services LLC stated that as 
a percentage of overall costs of operations, the SMS mandate and timing 
are a significantly higher burden for smaller entities. Also, air 
medical operators have no methodology to pass these costs via price 
increases as neither Medicare/Medicaid nor commercial medical 
reimbursement recognize or allow these costs. It stated that an 
effective SMS in a smaller program will look and feel quite different 
than the same in a large operation and the spreading out of 
implementation costs is essential for smaller operators. An individual 
commenter found that the NPRM fails to meet the requirements of the 
RFA. The individual disputed single-person operations can increase 
fares to cover additional administrative responsibilities because they 
have neither the extra time for SMS management nor the market 
elasticity in which to raise prices. Another individual stated that it 
is unclear how small manufacturers of simple aircraft will absorb the 
initial and ongoing cost of implementation.

[[Page 33098]]

    The FAA evaluated these potential impacts and made two changes to 
the final rule: extending the compliance period for operators by 12 
months and excepting certain requirements of part 5 for certain single-
pilot operators. The FAA discusses these changes in Section IV.D. of 
this preamble. The FAA's rationale for maintaining the proposed 
applicability of the rule with respect to small and single-pilot 
operations is discussed in Sections IV.A. and IV.J. of this preamble.
3. Response to SBA Comments
    The SBA did not comment on the proposed rule.
4. Small Entities to Which the Rule Will Apply
    The FAA used the definition of small entities in the RFA for this 
analysis. The RFA defines small entities as small businesses, small 
governmental jurisdictions, or small organizations. In 5 U.S.C. 601(3), 
the RFA defines ``small business'' to have the same meaning as ``small 
business concern'' under section 3 of the Small Business Act. The Small 
Business Act authorizes the Small Business Administration (SBA) to 
define ``small business'' by issuing regulations.
    SBA has established size standards for various types of economic 
activities, or industries, under the North American Industry 
Classification System (NAICS). These size standards generally define 
small businesses based on the number of employees or annual receipts. 
Table 4 shows the SBA size standards for example industrial 
classification codes relevant for the proposed rule. Note that the SBA 
definition of a small business applies to the parent company and all 
affiliates as a single entity.

       Table 4--Small Business Size Standards: Air Transportation
------------------------------------------------------------------------
          NAICS code                  Description         Size standard
------------------------------------------------------------------------
336411........................  Aircraft Manufacturing  1,500 employees.
336412........................  Aircraft Engine and     1,500 employees.
                                 Engine Parts
                                 Manufacturing.
336413........................  Other Aircraft Part     1,250 employees.
                                 and Auxiliary
                                 Equipment
                                 Manufacturing.
481111........................  Scheduled Passenger     1,500 employees.
                                 Air Transportation.
481112........................  Scheduled Freight Air   1,500 employees.
                                 Transportation.
481211........................  Nonscheduled Chartered  1,500 employees.
                                 Passenger Air
                                 Transportation.
481212........................  Nonscheduled Chartered  1,500 employees.
                                 Freight Air
                                 Transportation.
481219........................  Other Nonscheduled Air  $16.5 million.
                                 Transportation.
487990........................  Scenic and Sightseeing  $8.0 million.
                                 Transportation, Other.
------------------------------------------------------------------------
NAICS = North American Industrial Classification System.

i. Part 21
    As described in the RIA, the FAA estimated that there may be 
approximately 65 design or production certificate holders under part 21 
that will need to implement SMS under this rule. Fifteen of these 
entities are already implementing SMS under the FAA's voluntary program 
or are large businesses (based on publicly available information 
regarding number of employees). Of the remaining 50 entities, 31 may 
meet the size standard for a small business in Aerospace Product and 
Parts Manufacturing (NAICS 33641).
ii. Part 135
    Approximately 1,848 part 119 certificate holders operating under 
part 135 will need to implement SMS under this final rule. Internal FAA 
data indicate that all but four of these certificate holders have fewer 
than 1,500 employees. Thus, to the extent that the industrial 
classification of the parent company of these entities is scheduled 
passenger or freight, or nonscheduled chartered passenger or freight 
air transportation (NAICS 481111, 481112, 481211, or 481212), most 
would be small businesses. Table 5 shows the distribution of 
certificate holders by total employment.

               Table 5--Distribution of Part 135 Employment
------------------------------------------------------------------------
                                        Number of          Percent of
        Number of employees            certificate        certificate
                                         holders          holders (%)
------------------------------------------------------------------------
1.................................                275                 15
2-9...............................                812                 44
10-19.............................                258                 14
20-49.............................                288                 16
50-99.............................                113                  6
100-499...........................                 79                  4
500-999...........................                 15                  1
1000+.............................                  6                  0
------------------------------------------------------------------------
Source: FAA data as of June 2023.

iii. Section 91.147
    Approximately 694 air tour operators will have to implement SMS 
under the final rule. To the extent that the industrial classification 
of the parent company of these entities is Scenic and Sightseeing 
Transportation, Other, the relevant size standard is $8.0 million. 
Internal FAA data does not include revenue or number of flights for 
these operations. However, 362 of these LOA holders have only one 
aircraft listed on the LOA. Many may meet the small business size 
standard.
5. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements
    Section IV.G. of this preamble discusses the reporting requirements 
of

[[Page 33099]]

the rule. Affected entities who identify a hazard in their operating 
environment must provide notice of the hazard to the interfacing person 
or persons who would best be able to address the hazard or mitigate the 
risk.
    Section IV.H. of this preamble describes the recordkeeping 
requirements of the proposed rule. Affected entities must maintain 
records of the outputs of safety risk management for as long as risk 
controls remain relevant to the operation. In addition, entities must 
retain outputs of safety assurance processes for a minimum of 5 years, 
SMS training records for as long as each individual is employed by the 
person, and communication records retained for a minimum of 24 months.
    Recordkeeping and reporting requirements, like the rest of part 5, 
are scalable to a wide variety of business models and sizes, as 
discussed in Section IV.J. of this preamble. As a result, entities 
could potentially accomplish the recordkeeping and reporting 
requirements through the use of existing personnel rather than require 
additional professional skills.
    Section III.B. of the preamble describes the primary requirements 
for an SMS, which include safety policy, safety risk management, safety 
assurance, and safety promotion, as well as documentation. As described 
in the RIA, the FAA estimated the cost of compliance with all the 
requirements based on number of employees for part 21 certificate 
holders and based on fleet size for part 135 operators and Sec.  91.147 
LOA holders. Table 6 and Table 7 provide the results for example size 
categories and expressed as a percentage of overall average receipts 
(using NAICS 336411 for part 21 and 336411 for part 135 as examples 
\48\). Not included in the costs are mitigation costs that are yet 
unknown. The RIA provides additional detail on the cost estimates.
---------------------------------------------------------------------------

    \48\ The ratios are similar using NACIS 336412 and 336413 for 
part 21 and 481112, 481113, 481211, 481212, and 481213 for part 135. 
For Sec.  91.147, the FAA does not have number of employees 
associated with the number of aircraft on the LOA. However, assuming 
LOA holders of 1 and 2 registered aircraft have less than 5 
employees, the ratios for one-time and annual costs as a percentage 
of inflation adjusted receipts in this smallest employment size 
category in NAICS 487990 would be 1.8% and 1.1%, respectively.

                      Table 6--Example SMS Compliance Costs By Number of Employees: Part 21
----------------------------------------------------------------------------------------------------------------
                                                                                  One-time cost/   Annual cost/
         Number of employees              One-time cost          Annual cost       receipts \1\    receipts \1\
----------------------------------------------------------------------------------------------------------------
1-99................................        $8,100-$28,140          $540-$10,940       0.2%-1.2%       0.1%-0.1%
100-499.............................      $28,420-$141,830       $11,050-$55,130       0.2%-1.2%       0.1%-0.5%
500-10,000..........................   $142,110-$2,842,190    $55,240-$1,104,870       0.03-0.1%     0.01%-0.04%
----------------------------------------------------------------------------------------------------------------
\1\ Source for receipts: 2017 County Business Patterns and Economic Census (https://www2.census.gov/programs-surveys/susb/tables/2017/us_state_naics_detailedsizes_2017.xlsx). Adjusted for inflation using the Consumer
  Price Index. Based on NAICS 336411.


                Table 7--Example SMS Compliance Costs By Number of Aircraft: Part 135 and 91.147
----------------------------------------------------------------------------------------------------------------
                                                                                  One-time cost/   Annual cost/
         Number of aircraft               One-time cost          Annual cost       receipts \1\    receipts \1\
----------------------------------------------------------------------------------------------------------------
1-9.................................        $8,100-$41,180        $4,730-$42,580       0.1%-0.7%       0.1%-0.4%
10-49...............................      $45,750-$224,180      $47,310-$231,820       0.1%-0.9%       0.1%-0.9%
50-99...............................     $228,750-$452,930     $236,550-$468,370       0.2%-0.9%       0.2%-0.9%
100-500.............................   $457,500-$2,287,510   $473,100-$2,365,510       0.2%-0.3%       0.2%-0.3%
----------------------------------------------------------------------------------------------------------------
\1\ Source for receipts: 2017 County Business Patterns and Economic Census (https://www2.census.gov/programs-surveys/susb/tables/2017/us_state_naics_detailedsizes_2017.xlsx). Adjusted for inflation using the Consumer
  Price Index. Based on NAICS 481111 and median number of employees per number of aircraft for part 135
  operators.

    Total annualized costs (using a 7 percent discount rate) for small 
businesses may be in the range of $0.3 million for part 21 and $35.3 
million for part 135. The FAA does not have data to identify Sec.  
91.147 LOA holders that may meet the size standard. However, total 
annualized costs for this sector are estimated at $7.1 million.
6. Significant Alternatives Considered
    The FAA has taken steps to minimize the significant economic impact 
on small entities. As described in Section IV.D., the FAA is providing 
part 135 operators and Sec.  91.147 LOA holders 3 years for submission 
of a declaration of compliance. Design and manufacturing companies will 
have 6 months to submit an implementation plan for FAA approval, and 3 
years to implement SMS. These timelines will enable small businesses to 
spread development costs over a 3-year period. Also, as described in 
Section IV.A., the FAA is excepting part 135 operators and Sec.  91.147 
LOA holders that use a single-pilot from certain part 5 provisions that 
will not be applicable in such small organizations. Finally, as 
described in Section IV.J., the FAA is providing additional information 
on how SMS is scalable to small entities.
    The FAA considered an alternative to the applicability for part 135 
and Sec.  91.147 that would have limited the number of small operators 
affected. The FAA considered excluding part 135 operators that use only 
one pilot-in-command in their operations and the Sec.  91.147 LOA 
holders that conduct less than 100 flights per year. However, the 
alternative does not meet the Agency's safety objective of having all 
commercial operations comply with part 5, which is also consistent with 
the recommendations of the NTSB.

C. International Trade Impact Assessment

    The Trade Agreements Act of 1979 (Pub. L. 96-39), as amended by the 
Uruguay Round Agreements Act (Pub. L. 103-465), prohibits Federal 
agencies from establishing standards or engaging in related activities 
that create unnecessary obstacles to the foreign commerce of the United 
States. Pursuant to these Acts, the establishment of standards is not 
considered an unnecessary obstacle to the foreign commerce of the 
United States, so long as the standard has a legitimate domestic 
objective, such as the protection of safety and does not operate in a 
manner that excludes imports that meet this objective. The statute also 
requires consideration of

[[Page 33100]]

international standards and, where appropriate, that they be the basis 
for U.S. standards. The FAA has assessed the potential effect of this 
rule and determined that it will improve aviation safety and does not 
exclude imports that meet this objective. As a result, the FAA does not 
consider this rule as creating an unnecessary obstacle to foreign 
commerce.

D. Unfunded Mandates Assessment

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) 
governs the issuance of Federal regulations that require unfunded 
mandates. An unfunded mandate is a regulation that requires a State, 
local, or tribal government or the private sector to incur direct costs 
without the Federal government having first provided the funds to pay 
those costs. The FAA determined that this final rule will not result in 
the expenditure of $177 million or more by State, local, or tribal 
governments, in the aggregate, or the private sector, in any one year. 
Therefore, the requirements of title II of the Unfunded Mandates Reform 
Act of 1995 do not apply.

E. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires 
that the FAA consider the impact of paperwork and other information 
collection burdens imposed on the public. According to the 1995 
amendments to the Paperwork Reduction Act (5 CFR 1320.8(b)(2)(vi)), an 
agency may not collect or sponsor the collection of information, nor 
may it impose an information collection requirement unless it displays 
a currently valid Office of Management and Budget (OMB) control number.
    This rule contains new information collection requirements and 
amendments to the existing information collection requirements 
previously approved under OMB Control Number 2120-0763. As required by 
the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), the FAA has 
submitted these information collection amendments to OMB for its 
review.
    Summary: This rule requires the following information collection 
activities (Table 8):

                                        Table 8--Information Collections
----------------------------------------------------------------------------------------------------------------
                  Information                       Section                        Description
----------------------------------------------------------------------------------------------------------------
Organizational system description.............         5.11(a)  Any person that holds a type certificate or a
                                                    5.13(b)(1)   production certificate issued under part 21 of
                                                    5.15(b)(1)   this chapter must develop and maintain an
                                                    5.15(c)(1)   organizational system description.
Compliance declarations.......................       5.9(a)(2)  Submit compliance information in a form and
                                                        5.9(b)   manner acceptable to the Administrator.
Implementation plan...........................         5.11(b)  Submit an implementation plan for FAA approval
                                                    5.13(b)(2)   in a form and manner acceptable to the
                                                    5.15(b)(2)   Administrator.
                                                    5.15(c)(2)
Safety policy.................................         5.21(a)  Any person required to have an SMS under this
                                                                 part must have a safety policy.
Summary of confidential employee reports......         5.71(c)  Any person that holds both a type certificate
                                                                 and a production certificate issued under part
                                                                 21 for the same product must submit a summary
                                                                 of the confidential employee reports to the
                                                                 Administrator every 6 months.
Notification of hazards to interfacing persons            5.57  If a person required to have an SMS under this
                                                                 part identifies a hazard in the operating
                                                                 environment, the person must provide notice of
                                                                 the hazard to the interfacing person or persons
                                                                 who, to the best of their knowledge, could
                                                                 address the hazard or mitigate the risk.
SMS documentation.............................            5.95  Any person required to have an SMS under this
                                                                 part must develop and maintain the following
                                                                 SMS documentation: (a) Safety policy, (b) SMS
                                                                 processes and procedures.
SMS records...................................            5.97  Any person required to have an SMS under this
                                                                 part must: (a) Maintain records of outputs of
                                                                 safety risk management processes for as long as
                                                                 the control remains relevant to the operation
                                                                 (b) Maintain records of outputs of safety
                                                                 assurance processes for a minimum of 5 years
                                                                 (c) Maintain records of all training provided
                                                                 under Sec.   5.91 for each individual for as
                                                                 long as the individual is employed (d) Retain
                                                                 records of all communications provided under
                                                                 Sec.   5.93 and Sec.   5.57 for a minimum of 24
                                                                 consecutive calendar months.
----------------------------------------------------------------------------------------------------------------

    Public Comments: The FAA received two comments on the information 
collection requirements. One individual stated that the requirement for 
SMS documentation by small businesses goes against the Paperwork 
Reduction Act. The individual stated that the FAA did not provide 
evidence of proven benefit to single person operators for SMS mandates 
and asserted that the FAA's justification of potential safety gains is 
a statutorily unacceptable justification for hardship. Wing Aviation 
LLC suggested that SMS has the capability to be used to reduce the 
burdensome regulations and paperwork necessary for routine unmanned 
aviation operations that have already proven themselves to be 
sustainably safe.
    The FAA has taken actions in the final rule in response to concerns 
regarding paperwork burden for small entities. In the final rule, the 
FAA is excepting certain single-pilot operations from SMS requirements 
that would not be applicable in organizations of this size. These 
exceptions will eliminate the reporting and recordkeeping burden 
associated with the reporting of safety hazards, disciplinary action, 
and communication under Sec.  5.21(a)(4) and (5), and the retention of 
safety communication records under Sec.  5.93 [Sec.  5.97(d)].
    Additionally, in the final rule, the requirement for an 
organizational system description is only applicable to design and 
manufacturing organizations under part 21.
    Use: The information collection will be used to provide a basis for 
the FAA's review during the development and implementing phases, used 
by the

[[Page 33101]]

certificate or LOA holder in its SMS processes and procedures, and used 
to demonstrate compliance with the part 5 requirements.
    Collection and analysis of safety data is an essential part of an 
SMS. Types of data to be collected, retention procedures, analysis 
processes, and organizational structures for review and evaluation will 
be documented in the SMS. These records will be used by a certificate 
holder or LOA holder in the operation of its SMS and to facilitate 
continuous improvement through evaluation and monitoring. While this 
rule does not require a certificate holder or LOA holder to submit 
these records to the FAA, it requires a certificate holder or LOA 
holder to make these records available upon request.
    Respondents (including number of): Table 9 provides the FAA's 
estimates of the number of respondents by affected entity category (by 
part 21 certificate holders, 121 operators, part 135 operators, and 
Sec.  91.147 LOA holders) that would be impacted by the paperwork 
requirements in this rule.

                     Table 9--Number of Respondents
------------------------------------------------------------------------
                                                             Number of
                Affected entity category                    respondents
------------------------------------------------------------------------
Organizational system description:
  Part 21...............................................              65
Compliance declarations:
  Part 135..............................................           1,848
  Sec.   91.147.........................................             715
                                                         ---------------
    Total...............................................           2,563
Implementation plan:
  Part 21...............................................              65
Safety policy:
  Part 21...............................................              65
  Part 135..............................................           1,848
  Sec.   91.147.........................................             715
                                                         ---------------
    Total...............................................           2,628
Summary of employee reports:
  Part 21...............................................              65
Notification of hazards:
  Part 21...............................................              65
  Part 135..............................................           1,848
  Sec.   91.147.........................................             715
  Part 121..............................................              66
                                                         ---------------
    Total...............................................           2,694
SMS documentation:
  Part 21...............................................              65
  Part 135..............................................           1,848
  Sec.   91.147.........................................             715
                                                         ---------------
    Total...............................................           2,628
SMS records:
  Part 21...............................................              65
  Part 135..............................................           1,848
  Sec.   91.147.........................................             715
                                                         ---------------
    Total...............................................           2,628
------------------------------------------------------------------------

    Frequency: The frequency of new information collection requirements 
and amendments to the existing information collection requirements is 
shown below in Table 10 with the annual burden estimate for each.
    Annual Burden Estimate: The FAA estimated the paperwork burden for 
up to 2,694 certificate and approval holders impacted by the rule as 
shown below in Table 10.

                                           Table 10--Paperwork Burden
----------------------------------------------------------------------------------------------------------------
                                     Number of     Frequency of    Total number    Burden hours        Costs
            Category                respondents    response \1\    of responses         \2\       (millions) \3\
----------------------------------------------------------------------------------------------------------------
Organizational system
 description:
    Part 21.....................              65               1              65             520           $0.05
Compliance declarations:
    Part 135....................           1,848               1           1,848           3,696            0.34
    Sec.   91.147...............             715               1             715           1,430            0.13
                                 -------------------------------------------------------------------------------
        Total...................           2,563              NA           2,563           5,126            0.47
Implementation plan:
    Part 21.....................              65               1              65           2,080            0.19
Safety policy:
    Part 21.....................              65               1              65             260            0.02
    Part 135....................           1,848               1           1,848           7,392            0.68
    Sec.   91.147...............             715               1             715           2,860            0.26
                                 -------------------------------------------------------------------------------
        Total...................           2,628              NA           2,628          10,512            0.97
Summary of employee reports:
    Part 21.....................              65               6             390           1,560            0.14
Notification of hazards:
    Part 21.....................              65               3             195           1,560            0.14
    Part 135....................           1,848               3           5,544          44,352            4.10
    Sec.   91.147...............             715               3           2,145          17,160            1.59
    Part 121....................              66               3             198           1,584            0.14
                                 -------------------------------------------------------------------------------
        Total...................           2,694              NA           8,082          64,656            5.98
SMS documentation:
    Part 21.....................              65               1              65           2,080            0.19
    Part 135....................           1,848               1           1,848          59,136            5.47
    Sec.   91.147...............             715               1             715          22,880            2.12
                                 -------------------------------------------------------------------------------
        Total...................           2,628              NA           2,628          84,096            7.78
SMS records:
    Part 21.....................              65               3             195           1,560            0.14
    Part 135....................           1,848               3           5,544          44,352            4.10
    Sec.   91.147...............             715               3           2,145          17,160            1.59
                                 -------------------------------------------------------------------------------
        Total...................           2,628              NA           7,884          63,072            5.84
----------------------------------------------------------------------------------------------------------------
NA = not applicable
\1\ Frequency over three-year period.
\2\ Calculated as number of respondents x hours per respondent.

[[Page 33102]]

 
\3\ Calculated as burden hours x average labor rate including benefits. The FAA used an average wage including
  benefits of $92.53, which is the mean average wage for aerospace engineers ($61.10) divided by the percent of
  total employer costs of employee compensation represented by wages (66%) to account for benefits (34%). Wages
  and benefits information available at: https://www.bls.gov/oes/current/oes172011.htm and https://www.bls.gov/news.release/ecec.t04.htm#ect_table4.f.1.

    Table 11 provides a summary of the implied annual responses and 
burden (total divided by three).

                                     Table 11--Summary of Annual Burden \1\
----------------------------------------------------------------------------------------------------------------
                            Category                                 Reporting     Recordkeeping    Disclosure
----------------------------------------------------------------------------------------------------------------
Organizational system description:
    # of respondents............................................              22               0               0
    # of responses per respondent...............................               1               0               0
    Time per response (hours)...................................               8               0               0
    Total # of responses........................................              22               0               0
    Total burden (hours)........................................             173               0               0
Compliance declarations:
    # of respondents............................................             854               0               0
    # of responses per respondent...............................               1               0               0
    Time per response (hours)...................................               2               0               0
    Total # of responses........................................             854               0               0
    Total burden (hours)........................................           1,709               0               0
Implementation plan:
    # of respondents............................................              65               0               0
    # of responses per respondent...............................               1               0               0
    Time per response (hours)...................................            10.7               0               0
    Total # of responses........................................              65               0               0
    Total burden (hours)........................................             693               0               0
Safety policy:
    # of respondents............................................               0             876               0
    # of responses per respondent...............................               0               1               0
    Time per response (hours)...................................               0               4               0
    Total # of responses........................................               0             876               0
    Total burden (hours)........................................               0           3,504               0
Summary of employee reports:
    # of respondents............................................              65               0               0
    # of responses per respondent...............................               2               0               0
    Time per response (hours)...................................               4               0               0
    Total # of responses........................................             130               0               0
    Total burden (hours)........................................             520               0               0
Notification of hazards:
    # of respondents............................................           2,694               0               0
    # of responses per respondent...............................               1               0               0
    Time per response (hours)...................................               8               0               0
    Total # of responses........................................           2,694               0               0
    Total burden (hours)........................................          21,552               0               0
SMS documentation:
    # of respondents............................................               0           2,628               0
    # of responses per respondent...............................               0               1               0
    Time per response (hours)...................................               0            10.7               0
    Total # of responses........................................               0           2,628               0
    Total burden (hours)........................................               0          28,032               0
SMS records:
    # of respondents............................................               0           2,628               0
    # of responses per respondent...............................               0               1               0
    Time per response (hours)...................................               0               8               0
    Total # of responses........................................               0           2,628               0
    Total burden (hours)........................................               0          21,024               0
----------------------------------------------------------------------------------------------------------------
\1\ Calculated as total burden from Table 10 divided by 3.

F. International Compatibility

    ICAO Annex 19 establishes an SMS Framework for managing aviation 
safety risk, as well as identifies the types of aviation organizations 
that should implement an SMS. This rule moves the United States closer 
to harmonization with ICAO Annex 19. The rule aligns with Annex 19 by 
requiring the following service providers to implement SMS: (1) 
commercial operators of airplanes or helicopters, and (2) certain 
organizations responsible for the design or manufacture of products. 
The FAA has already implemented SMS across the FAA's Air Traffic 
Organization.\49\ Additionally, the FAA published an update to part 139 
on February 23, 2023, to require SMS implementation for certain 
airports.\50\ Both of these recent rules bring the

[[Page 33103]]

United States closer to alignment with ICAO Annex 19 because Annex 19 
also includes air traffic service providers and airports.
---------------------------------------------------------------------------

    \49\ See FAA Order JO 1000.37 for implementation details.
    \50\ 88 FR 11642.
---------------------------------------------------------------------------

    When part 5 was originally constructed, it was based on the SMS 
framework in ICAO Annex 19. Part 5 currently also includes requirements 
for recordkeeping, which are not part of the ICAO's SMS framework. 
However, recordkeeping requirements facilitate FAA's oversight 
functions, and they assist the person implementing SMS in demonstrating 
compliance with the regulations. In addition, the rule requires the 
communication of information regarding safety hazards. While this 
requirement is not in the ICAO's SMS framework, the FAA believes that 
it is beneficial to the persons implementing SMS. In addition, it is 
consistent with ICAO's intent as ICAO notes in Annex 19 that other 
aviation organizations that interface with a product or service 
provider can make a significant contribution to the safety of its 
products or services.
1. Air Carriers and Operators
    The ICAO SMS requirements for commercial operators are contained in 
Annex 19, but Annex 6 defines the scope of the requirements. Part I of 
Annex 6 covers international commercial operations in airplanes. This 
part of Annex 6 makes no distinction in its requirements on the basis 
of an aviation organization's size. The Annex applies to all commercial 
air transportation operations in airplanes. In the United States, this 
includes operators certificated under part 119 and authorized to 
operate under part 121 or part 135. Part III of Annex 6 covers 
commercial air transportation operators of helicopters. In the United 
States, these operations are conducted under part 135. Annex 6, part I 
addresses international flight operations; in the United States, these 
international flights are operated under either part 121 or part 135. 
The FAA previously only required part 121 operators to implement and 
maintain an SMS, and this rule extends the requirement for an SMS to 
part 135 operators, further harmonizing the United States with ICAO's 
SMS requirements.
2. Aircraft Design and Manufacturing
    ICAO Annex 19 requires SMS for organizations responsible for the 
type design or manufacture of aircraft, engines, or propellers. This 
rule extends part 5 applicability to holders of both a TC and a PC for 
the same product, applicants for a PC where the applicant is the holder 
or licensee of the TC, and holders of a TC that allow other persons to 
use their TC to obtain a PC. This rule brings the United States into 
closer harmonization with the ICAO Annex 19 SMS requirement for certain 
organizations responsible for the design or manufacture of products.
3. Development and Implementation of SMS by Foreign Jurisdictions
    Many States have made significant progress in developing, 
implementing, and maintaining requirements for SMS, aligned with ICAO's 
SMS framework, including certificating authorities in Europe (EASA), 
Canada, Brazil, the United Kingdom, Japan, and Australia. Of those 
authorities, most have SMS requirements for international commercial 
operations, and some have SMS requirements for design and 
manufacturing. Most that do not have SMS requirements for design and 
manufacturing plan to adopt such requirements in the future. Some 
States also have SMS requirements for other operations in the aviation 
system: airports, maintenance organizations, training organizations, 
international general aviation operations, and for safety data 
collection, protection, and exchange.
    Harmonization of requirements, to the extent feasible, is important 
to reduce the regulatory burden on those holding certificates or 
authorizations from multiple States. The FAA continues to work with 
other States to harmonize SMS requirements. The rule aligns with 
sections of the ICAO SMS framework and furthers harmonization with 
other States requiring SMS. Consistency with international standards 
reduces the likelihood that U.S.-based aviation organizations providing 
products or services would need to duplicate efforts to meet SMS 
requirements of other States in which they do business. As a result, 
the rule likely reduces the regulatory burden on those holding 
certificates or authorizations across multiple States.
4. Other FAA Support for Harmonization and Standards Development
    The FAA is a founding member and active participant in the Safety 
Management International Collaboration Group, a group representing 18 
international regulatory authorities. The primary purpose of the Safety 
Management International Collaboration Group is to promote 
international harmonization of SMS regulations, guidance material, and 
oversight strategies. The FAA is also an active participant on the ICAO 
Safety Management Panel.
    The FAA also participated with the Aerospace Industries Association 
to develop an international industry standard for SMS: ``Implementing a 
Safety Management System in Design, Manufacturing and Maintenance 
Organizations.'' This standard is intended to enable the aviation 
industry to implement an SMS consistent with the ICAO Annex 19 ``Safety 
Management'' Second Edition, Appendix 2.

G. Environmental Analysis

    FAA Order 1050.1F identifies FAA actions that are categorically 
excluded from preparation of an environmental assessment or 
environmental impact statement under the National Environmental Policy 
Act in the absence of extraordinary circumstances. The FAA has 
determined this rulemaking action qualifies for the categorical 
exclusion identified in paragraph 5-6.6f for regulations and involves 
no extraordinary circumstances.

H. Regulations Affecting Intrastate Aviation in Alaska

    Section 1205 of the FAA Reauthorization Act of 1996 (110 Stat. 
3213) requires the Administrator, when modifying 14 CFR regulations in 
a manner affecting intrastate aviation in Alaska, to consider the 
extent to which Alaska is not served by transportation modes other than 
aviation, and to establish appropriate regulatory distinctions. Because 
this rule applies to: (1) any person authorized to conduct operations 
under part 135, (2) any person operating under an LOA issued under 
Sec.  91.147, and (3) certain holders of a TC or a PC, it could affect 
intrastate aviation in Alaska. The use of SMS may improve aviation 
safety in Alaska. The FAA analyzed NTSB part 135 accident data from 
2015 to 2019 and found that of all part 135 air carrier accidents 
studied, 43 percent of these accidents occurred in Alaska. Because 
implementation of SMS can be scaled to the size and complexity of an 
aviation organization, SMS requirements will not be overly burdensome 
for smaller part 135 operators (see discussion in Section IV.J.). The 
increase in safety benefits to intrastate operations in Alaska will 
positively impact air commerce in Alaska with the same requirements 
applicable to every organization under part 5.

VI. Executive Order Determinations

A. Executive Order 13132, Federalism

    The FAA has analyzed this final rule under the principles and 
criteria of

[[Page 33104]]

Executive Order 13132, Federalism. The FAA has determined that this 
action will not have a substantial direct effect on the States, or the 
relationship between the Federal Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government, and, therefore, will not have federalism implications.

B. Executive Order 13175, Consultation and Coordination With Indian 
Tribal Governments

    Consistent with Executive Order 13175, Consultation and 
Coordination with Indian Tribal Governments,\51\ and FAA Order 1210.20, 
American Indian and Alaska Native Tribal Consultation Policy and 
Procedures,\52\ the FAA ensures that Federally Recognized Tribes 
(Tribes) are given the opportunity to provide meaningful and timely 
input regarding proposed Federal actions that have the potential to 
have substantial direct effects on one or more Indian tribes, on the 
relationship between the Federal government and Indian tribes, or on 
the distribution of power and responsibilities between the Federal 
government and Indian tribes; or to affect uniquely or significantly 
their respective Tribes. At this point, the FAA has not identified any 
unique or significant effects, environmental or otherwise, on tribes 
resulting from this final rule.
---------------------------------------------------------------------------

    \51\ 65 FR 67249.
    \52\ FAA Order No. 1210.20 (Jan. 28, 2004), available at https://www.faa.gov/documentLibrary/media/1210.pdf.
---------------------------------------------------------------------------

C. Executive Order 13211, Regulations That Significantly Affect Energy 
Supply, Distribution, or Use

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

D. Executive Order 13609, Promoting International Regulatory 
Cooperation

    Executive Order 13609, Promoting International Regulatory 
Cooperation, promotes international regulatory cooperation to meet 
shared challenges involving health, safety, labor, security, 
environmental, and other issues and to reduce, eliminate, or prevent 
unnecessary differences in regulatory requirements. The FAA has 
analyzed this action under the policies and agency responsibilities of 
Executive Order 13609 and has determined that this action may improve 
regulatory cooperation by moving FAA requirements for SMS closer to 
ICAO Standards and Recommended Practices that other States are adopting 
or considering adopting.

VII. Additional Information

A. Electronic Access and Filing

    A copy of the NPRM, all comments received, this final rule, and all 
background material may be viewed online at https://www.regulations.gov 
using the docket number listed above. A copy of this final rule will be 
placed in the docket. Electronic retrieval help and guidelines are 
available on the website. It is available 24 hours each day, 365 days 
each year. An electronic copy of this document may also be downloaded 
from the Office of the Federal Register's website at https://www.federalregister.gov and the Government Publishing Office's website 
at https://www.govinfo.gov. A copy may also be found at the FAA's 
Regulations and Policies website at https://www.faa.gov/regulations_policies.
    Copies may also be obtained by sending a request to the Federal 
Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence 
Avenue SW, Washington, DC 20591, or by calling (202) 267-9677. 
Commenters must identify the docket or notice number of this 
rulemaking.
    All documents the FAA considered in developing this final rule, 
including economic analyses and technical reports, may be accessed in 
the electronic docket for this rulemaking.

B. Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act (SBREFA) of 
1996 requires the FAA to comply with small entity requests for 
information or advice about compliance with statutes and regulations 
within its jurisdiction. A small entity with questions regarding this 
document may contact its local FAA official, or the person listed under 
the FOR FURTHER INFORMATION CONTACT heading at the beginning of the 
preamble. To find out more about SBREFA on the internet, visit https://www.faa.gov/regulations_policies/rulemaking/sbre_act/.

List of Subjects

14 CFR Part 5

    Air carriers, Aircraft, Airmen, Aviation safety, Reporting and 
recordkeeping requirements, Safety, Transportation.

14 CFR Part 21

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

14 CFR Part 91

    Air carriers, Air taxis, Aircraft, Airmen, Aviation safety, Charter 
flights, Reporting and recordkeeping requirements.

14 CFR Part 119

    Administrative practice and procedure, Air carriers, Aircraft, 
Aviation safety, Charter flights, Reporting and recordkeeping 
requirements.

    For the reasons stated in the preamble, the Federal Aviation 
Administration amends chapter I of title 14, Code of Federal 
Regulations as follows:

PART 5--SAFETY MANAGEMENT SYSTEMS

0
1. The authority citation for part 5 is revised to read as follows:

    Authority:  49 U.S.C. 106(f), 106(g), 40101, 40113, 40119, 
41706, 44101, 44701-44702, 44705, 44709-44711, 44713, 44716-44717, 
44722, 46105; Sec. 102, Pub. L. 116-260, 134 Stat. 2309; Sec 215, 
Pub. L. 111-216, 124 Stat. 2366.


0
2. Revise subpart A to read as follows:
Subpart A--General
Sec
5.1 Applicability.
5.3 Definitions.
5.5 General requirements.
5.7 Requirements for domestic, flag, and supplemental operations.
5.9 Requirements for commuter and on-demand operations or passenger-
carrying flights for compensation or hire.
5.11 Requirements for production certificate holders that are 
holders or licensees of a type certificate for the same product.
5.13 Requirements for type certificate holders or licensees applying 
for a production certificate for the same product.
5.15 Requirements for type certificate holders that allow another 
person to use the type certificate to obtain a production 
certificate for the same product.
5.17 Organizational system description.
5.19 Implementation plan.

Subpart A--General


Sec.  5.1  Applicability.

    This part applies to all of the following:
    (a) Any person that holds or applies for a certificate issued under 
part 119 of this chapter authorizing the person to conduct operations 
under part 121 of this chapter.

[[Page 33105]]

    (b) Any person that holds or applies for a certificate issued under 
part 119 of this chapter authorizing the person to conduct operations 
under part 135 of this chapter.
    (c) Any person that holds or applies for a Letter of Authorization 
issued under Sec.  91.147 of this chapter.
    (d) Any person that holds both a type certificate and a production 
certificate issued under part 21 of this chapter for the same product.
    (e) Any person that holds a production certificate issued under 
part 21 of this chapter for a product for which the person is a 
licensee of the type certificate for the same product.
    (f) Any person that applies for a production certificate under part 
21 of this chapter for a product for which the person is the holder or 
licensee of the type certificate for the same product.
    (g) Any person that holds a type certificate issued under part 21 
of this chapter for a product, except for persons that hold only type 
certificates issued under Sec.  21.29 of this chapter, that allows 
another person to use the type certificate to manufacture the same 
product under a production certificate.


Sec.  5.3  Definitions.

    Hazard means a condition or an object that could foreseeably cause 
or contribute to an incident or aircraft accident, as defined in 49 CFR 
830.2.
    Risk means the composite of predicted severity and likelihood of 
the potential effect of a hazard.
    Risk control means a means to reduce or eliminate the effects of 
hazards.
    Safety assurance means processes within the SMS that function 
systematically to ensure the performance and effectiveness of safety 
risk controls and that the organization meets or exceeds its safety 
objectives through the collection, analysis, and assessment of 
information.
    Safety Management System (SMS) means the formal, top-down, 
organization-wide approach to managing safety risk and assuring the 
effectiveness of safety risk controls. It includes systematic 
procedures, practices, and policies for the management of safety risk.
    Safety objective means a measurable goal or desirable outcome 
related to safety.
    Safety performance means realized or actual safety accomplishment 
relative to the organization's safety objectives.
    Safety policy means the person's documented commitment to safety, 
which defines its safety objectives and the accountabilities and 
responsibilities of its employees in regards to safety.
    Safety promotion means a combination of training and communication 
of safety information to support the implementation and operation of an 
SMS in an organization.
    Safety Risk Management means a process within the SMS composed of 
describing the system, identifying the hazards, and analyzing, 
assessing, and controlling risk.


Sec.  5.5  General requirements.

    (a) SMS components. An SMS under this part must be appropriate to 
the size, scope, and complexity of the person's organization and 
include, at a minimum, all of the following components:
    (1) Safety policy that meets the requirements of subpart B of this 
part.
    (2) Safety risk management that meets the requirements of subpart C 
of this part.
    (3) Safety assurance that meets the requirements of subpart D of 
this part.
    (4) Safety promotion that meets the requirements of subpart E of 
this part.
    (b) Continuing requirements. Any person required to develop and 
implement an SMS under this part must maintain the SMS in accordance 
with this part.


Sec.  5.7   Requirements for domestic, flag, and supplemental 
operations.

    (a) Any person authorized to conduct operations under part 121 of 
this chapter that has an SMS acceptable to the FAA on or before May 28, 
2024, must revise its SMS to meet the requirements of this part no 
later than May 28, 2025.
    (b) Any person applying for authorization to conduct operations 
under part 121 of this chapter or with such application pending on or 
after May 28, 2024, must develop and implement an SMS that meets the 
requirements of this part.
    (c) Any person required to develop and implement an SMS under this 
section must maintain the SMS as long as the person is authorized to 
conduct operations under part 121 of this chapter.
    (d) Any person required to develop and implement an SMS under this 
section must make available to the Administrator, upon request, all 
necessary information and data that demonstrates that the person has an 
SMS that meets the requirements set forth in this part.


Sec.  5.9  Requirements for commuter and on-demand operations or 
passenger-carrying flights for compensation or hire.

    (a) Any person authorized to conduct operations under part 135 of 
this chapter or that holds a Letter of Authorization issued under Sec.  
91.147 of this chapter before May 28, 2024, must:
    (1) Develop and implement an SMS that meets the requirements of 
this part no later than May 28, 2027.
    (2) Submit to the FAA, a declaration of compliance with this part 
in a form and manner acceptable to the Administrator no later than May 
28, 2027.
    (b) Any person applying for authorization to conduct operations 
under part 135 of this chapter or a Letter of Authorization under Sec.  
91.147 of this chapter, or with such application pending on or after 
May 28, 2024, must develop and implement an SMS that meets the 
requirements of this part.
    (c) Any person required to develop and implement an SMS under this 
section must maintain the SMS as long as the person is authorized to 
conduct operations under either part 135 or Sec.  91.147 of this 
chapter.
    (d) Any person required to develop and implement an SMS under this 
section must make available to the Administrator, upon request, all 
necessary information and data that demonstrates that the person has an 
SMS that meets the requirements set forth in this part.
    (e) The following requirements do not apply to those organizations 
with a single pilot who is the sole individual performing all necessary 
functions in the conduct and execution related to, or in direct support 
of, the safe operation of the aircraft: Sec. Sec.  5.21(a)(4), 
5.21(a)(5), 5.21(c), 5.23(a)(2), 5.23(a)(3), 5.23(b), 5.25(b)(3), 
5.25(c), 5.27(a), 5.27(b), 5.71(a)(7), 5.93, and 5.97(d) of this part.


Sec.  5.11  Requirements for production certificate holders that are 
holders or licensees of a type certificate for the same product.

    Any person that holds a production certificate issued under part 21 
of this chapter for a product for which the person is the holder or 
licensee of the type certificate for the same product on or before May 
28, 2024, must:
    (a) Develop and maintain an organizational system description in 
accordance with Sec.  5.17 of this subpart.
    (b) Submit an implementation plan in accordance with Sec.  5.19 of 
this subpart for FAA approval in a form and manner acceptable to the 
Administrator no later than November 28, 2024.
    (c) Develop an SMS that meets the requirements of this part.
    (d) Implement the SMS in accordance with this part no later than 
May 28, 2027.
    (e) Make available to the Administrator, upon request, all 
necessary information and data that demonstrates that the person has an 
SMS that meets the requirements set forth in this part.

[[Page 33106]]

    (f) Maintain the SMS as long as the person is both a holder of a 
production certificate and a holder or licensee of a type certificate 
for the same product.


Sec.  5.13  Requirements for type certificate holders or licensees 
applying for a production certificate for the same product.

    (a) This section applies to any holder or licensee of a type 
certificate for a product who either:
    (1) Applies for a production certificate for that same product 
under part 21 of this chapter on or after May 28, 2024, or
    (2) Has an application for a production certificate for that same 
product under part 21 of this chapter pending on May 28, 2024.
    (b) Any person that meets paragraph (a) of this section must:
    (1) Develop and maintain an organizational system description in 
accordance with Sec.  5.17 of this subpart.
    (2) Submit an implementation plan in accordance with Sec.  5.19 of 
this subpart for FAA approval in a form and manner acceptable to the 
Administrator during the certification process.
    (3) Develop an SMS that meets the requirements of this part.
    (4) Implement the SMS in accordance with this part no later than 36 
months after submission of the implementation plan.
    (5) Make available to the Administrator, upon request, all 
necessary information and data that demonstrates that the person has an 
SMS that meets the requirements set forth in this part.
    (6) Maintain the SMS as long as the person is both a holder of a 
production certificate and a holder or licensee of a type certificate 
for the same product.


Sec.  5.15  Requirements for type certificate holders that allow 
another person to use the type certificate to obtain a production 
certificate for the same product.

    (a) This section applies to any person that holds a type 
certificate issued under part 21 of this chapter for a product, except 
for persons that hold only type certificates issued under Sec.  21.29 
of this chapter, that allows another person to use the type certificate 
to manufacture the same product under a production certificate.
    (b) Any person that meets paragraph (a) of this section and has a 
licensing agreement in accordance with Sec.  21.55 of this chapter on 
May 28, 2024, must:
    (1) Develop and maintain an organizational system description in 
accordance with Sec.  5.17 of this subpart.
    (2) Submit an implementation plan in accordance with Sec.  5.19 of 
this subpart for FAA approval in a form and manner acceptable to the 
Administrator no later than November 28, 2024.
    (3) Develop an SMS that meets the requirements of this part.
    (4) Implement the SMS in accordance with this part no later than 
May 28, 2027.
    (5) Make available to the Administrator, upon request, all 
necessary information and data that demonstrates that the person has an 
SMS that meets the requirements set forth in this part.
    (6) Maintain the SMS as long as the person continues to meet 
paragraph (a) of this section.
    (c) Any person that meets paragraph (a) of this section and enters 
into a licensing agreement in accordance with Sec.  21.55 of this 
chapter after May 28, 2024, must:
    (1) Develop and maintain an organizational system description in 
accordance with Sec.  5.17 of this subpart.
    (2) Submit an implementation plan in accordance with Sec.  5.19 of 
this subpart for FAA approval in a form and manner acceptable to the 
Administrator when providing written licensing agreements in accordance 
with Sec.  21.55 of this chapter.
    (3) Develop an SMS that meets the requirements of this part.
    (4) Implement the SMS in accordance with this part no later than 36 
months after submission of the person's implementation plan.
    (5) Make available to the Administrator, upon request, all 
necessary information and data that demonstrates that the person has an 
SMS that meets the requirements set forth in this part.
    (6) Maintain the SMS as long as the person continues to meet 
paragraph (a) of this section.


Sec.  5.17  Organizational system description.

    An organizational system description developed and maintained under 
this part must include a summary of the following information about the 
safety of the aviation products or services provided by the person:
    (a) The person's aviation-related processes, procedures, and 
activities.
    (b) The function and purpose of the aviation products or services.
    (c) The operating environment.
    (d) The personnel, equipment, and facilities necessary for 
operation.


Sec.  5.19  Implementation plan.

    (a) An implementation plan filed under this part must be based on 
the organizational system description as defined in Sec.  5.17 and 
describe the means of compliance (including, but not limited to, new or 
existing policies, processes, or procedures) used to meet the 
requirements of this part.
    (b) A person required to submit an implementation plan under this 
part must make available to the Administrator, upon request, all 
necessary information and data that demonstrates that the SMS has been 
or will be implemented in accordance with the implementation plan.

Subpart B--Safety Policy

0
3. Amend Sec.  5.21 by:
0
a. Revising paragraph (a) introductory text and paragraphs (a)(1) and 
(2);
0
b. Adding paragraph (a)(7); and
0
c. Revising paragraphs (c) and (d).
    The revisions and addition read as follows:


Sec.  5.21  Safety policy.

    (a) Any person required to have an SMS under this part must have a 
safety policy that includes at least the following:
    (1) The person's safety objectives.
    (2) The person's commitment to fulfill the safety objectives.
* * * * *
    (7) A code of ethics that is applicable to all employees, including 
management personnel and officers, which clarifies that safety is the 
organization's highest priority.
* * * * *
    (c) The safety policy must be documented and communicated 
throughout the person's organization.
    (d) The safety policy must be regularly reviewed by the accountable 
executive to ensure it remains relevant and appropriate to the person.

0
4. Amend Sec.  5.23 by revising paragraph (a) introductory text, 
paragraphs (a)(3) and (b) to read as follows:


Sec.  5.23  Safety accountability and authority.

    (a) Any person required to have an SMS under this part must define 
in its safety policy the accountability for safety of the following 
individuals:
* * * * *
    (3) Employees relative to the person's safety performance.
    (b) The person must identify the levels of management with the 
authority to make decisions regarding safety risk acceptance.

0
5. Revise Sec.  5.25 to read as follows:


Sec.  5.25  Designation and responsibilities of required safety 
management personnel.

    (a) Designation of the accountable executive. Any person required 
to have an SMS under this part must identify an accountable executive 
who, irrespective of other functions, satisfies the following:

[[Page 33107]]

    (1) Is the final authority over operations authorized to be 
conducted under the person's certificate(s) or Letter(s) of 
Authorization.
    (2) Controls the financial resources required for the operations to 
be conducted under the person's certificate(s) or Letter(s) of 
Authorization.
    (3) Controls the human resources required for the operations 
authorized to be conducted under the person's certificate(s) or 
Letter(s) of Authorization.
    (4) Retains ultimate responsibility for the safety performance of 
the operations conducted under the person's certificate(s) or Letter(s) 
of Authorization.
    (b) Responsibilities of the accountable executive. The accountable 
executive must accomplish the following:
    (1) Ensure that the SMS is properly implemented and is performing 
across all pertinent areas.
    (2) Develop and sign the safety policy.
    (3) Communicate the safety policy throughout the person's 
organization.
    (4) Regularly review the safety policy to ensure it remains 
relevant and appropriate to the person.
    (5) Regularly review the safety performance and direct actions 
necessary to address substandard safety performance in accordance with 
Sec.  5.75.
    (c) Designation of management personnel. The accountable executive 
must designate sufficient management personnel who, on behalf of the 
accountable executive, are responsible for the following:
    (1) Coordinate implementation, maintenance, and integration of the 
SMS throughout the person's organization.
    (2) Facilitate hazard identification and safety risk analysis.
    (3) Monitor the effectiveness of safety risk controls.
    (4) Ensure safety promotion throughout the person's organization as 
required in subpart E of this part.
    (5) Regularly report to the accountable executive on the 
performance of the SMS and on any need for improvement.

0
6. Revise Sec.  5.27 to read as follows:


Sec.  5.27  Coordination of emergency response planning.

    Where emergency response procedures are necessary, any person 
required to have an SMS under this part must develop, and the 
accountable executive must approve as part of the safety policy, an 
emergency response plan that addresses at least the following:
    (a) Delegation of emergency authority throughout the person's 
organization.
    (b) Assignment of employee responsibilities during the emergency.
    (c) Coordination of the emergency response plans with the emergency 
response plans of other organizations it must interface with during the 
provision of its services.

Subpart C--Safety Risk Management

0
7. Amend Sec.  5.51 by revising the introductory text to read as 
follows:


Sec.  5.51  Applicability.

    Any person required to have an SMS under this part must apply 
safety risk management to the following:
* * * * *

0
8. Amend Sec.  5.53 by:
0
a. Revising paragraph (a);
0
b. Adding paragraph (b)(5); and
0
c. Revising paragraph (c).
    The revisions and addition read as follows:


Sec.  5.53  System analysis and hazard identification.

    (a) When applying safety risk management, any person required to 
have an SMS under this part must analyze the systems identified in 
Sec.  5.51. Those system analyses must be used to identify hazards 
under paragraph (c) of this section and in developing and implementing 
risk controls related to the system under Sec.  5.55(c).
    (b) * * *
    (5) The interfaces of the system.
    (c) Any person required to have an SMS under this part must develop 
and maintain processes to identify hazards within the context of the 
system analysis.

0
9. Revise Sec.  5.55 to read as follows:


Sec.  5.55  Safety risk assessment and control.

    Any person required to have an SMS under this part must:
    (a) Develop and maintain processes to analyze safety risk 
associated with the hazards identified in Sec.  5.53(c).
    (b) Define a process for conducting risk assessment that allows for 
the determination of acceptable safety risk.
    (c) Develop and maintain processes to develop safety risk controls 
that are necessary as a result of the safety risk assessment process 
under paragraph (b) of this section.
    (d) Evaluate whether the risk will be acceptable with the proposed 
safety risk control applied before the safety risk control is 
implemented.

0
10. Add Sec.  5.57 to subpart C to read as follows:


Sec.  5.57  Notification of hazards to interfacing persons.

    If a person required to have an SMS under this part identifies a 
hazard in the operating environment, the person must provide notice of 
the hazard to any interfacing person that, to the best of the person's 
knowledge, could address the hazard or mitigate the risk. For the 
purpose of this section, interfacing persons are those that contribute 
to the safety of the certificate or Letter of Authorization holder's 
aviation-related products and services.

Subpart D--Safety Assurance

0
11. Revise and republish Sec.  5.71 to read as follows:


Sec.  5.71  Safety performance monitoring and measurement.

    (a) Any person required to have an SMS under this part must develop 
and maintain processes and systems to acquire data with respect to its 
operations, products, and services to monitor the safety performance of 
the organization. These processes and systems must include, at a 
minimum, the following:
    (1) Monitoring of operational processes.
    (2) Monitoring of the operational environment to detect changes.
    (3) Auditing of operational processes and systems.
    (4) Evaluations of the SMS and operational processes and systems.
    (5) Investigations of incidents and accidents.
    (6) Investigations of reports regarding potential non-compliance 
with regulatory standards or other safety risk controls established by 
the person through the safety risk management process established in 
subpart C of this part.
    (7) A confidential employee reporting system in which employees can 
report hazards, issues, concerns, occurrences, incidents, as well as 
propose solutions and safety improvements, without concern of reprisal 
for reporting.
    (8) Investigations of hazard notifications that have been received 
from external sources.
    (b) Any person required to have an SMS under this part must develop 
and maintain processes that analyze the data acquired through the 
processes and systems identified under paragraph (a) of this section 
and any other relevant data with respect to its operations, products, 
and services.
    (c) Any person that holds both a type certificate and a production 
certificate issued under part 21 of this chapter for the same product 
must submit a summary of the confidential employee reports received 
under paragraph (a)(7) of this section to the Administrator once every 
6 months.

[[Page 33108]]


0
12. Amend Sec.  5.73 by revising paragraph (a) introductory text, and 
paragraphs (a)(1) and (b) to read as follows:


Sec.  5.73  Safety performance assessment.

    (a) Any person required to have an SMS under this part must conduct 
assessments of its safety performance against its safety objectives, 
which include reviews by the accountable executive, to:
    (1) Ensure compliance with the safety risk controls established by 
the person.
* * * * *
    (b) Upon completion of the assessment, if ineffective controls or 
new hazards are identified under paragraphs (a)(2) through (5) of this 
section, the person must use the safety risk management process 
described in subpart C of this part.

0
13. Revise Sec.  5.75 to read as follows:


Sec.  5.75  Continuous improvement.

    Any person required to have an SMS under this part must establish 
and implement processes to correct safety performance deficiencies 
identified in the assessments conducted under Sec.  5.73.

Subpart E--Safety Promotion

0
14. Revise Sec.  5.91 to read as follows:


Sec.  5.91  Competencies and training.

    Any person required to have an SMS under this part must provide 
training to each individual identified in Sec.  5.23 of this part to 
ensure the individuals attain and maintain the competencies necessary 
to perform their duties relevant to the operation and performance of 
the SMS.

0
15. Amend Sec.  5.93 by revising the introductory text to read as 
follows:


Sec.  5.93  Safety communication.

    Any person required to have an SMS under this part must develop and 
maintain means for communicating safety information that, at a minimum:
* * * * *

Subpart F--SMS Documentation and Recordkeeping

0
16. Amend Sec.  5.95 by revising the introductory text to read as 
follows:


Sec.  5.95   SMS documentation.

    Any person required to have an SMS under this part must develop and 
maintain the following SMS documentation:
* * * * *

0
17. Revise Sec.  5.97 to read as follows:


Sec.  5.97  SMS records.

    Any person required to have an SMS under this part must:
    (a) Maintain records of outputs of safety risk management processes 
as described in subpart C of this part. Such records must be retained 
for as long as the control remains relevant to the operation.
    (b) Maintain records of outputs of safety assurance processes as 
described in subpart D of this part. Such records must be retained for 
a minimum of 5 years.
    (c) Maintain a record of all training provided under Sec.  5.91 for 
each individual. Such records must be retained for as long as the 
individual is employed by the person.
    (d) Retain records of all communications provided under Sec.  5.93 
or Sec.  5.57 for a minimum of 24 consecutive calendar months.

PART 21--CERTIFICATION PROCEDURES FOR PRODUCTS AND ARTICLES

0
18. The authority citation for part 21 is revised to read as follows:

    Authority: 42 U.S.C. 7572; 49 U.S.C. 106(f), 106(g), 40105, 
40113, 44701-44702, 44704, 44707, 44709, 44711, 44713, 44715, 45303; 
Sec. 102, Pub. L. 116-260, 134 Stat. 2309.


Sec.  21.55  Responsibilities of type certificate holders who license 
the type certificate.

0
19. Revise Sec.  21.55 to read as follows:
    < A type certificate holder who allows a person to use the type 
certificate to manufacture a new aircraft, aircraft engine, or 
propeller must meet the applicable requirements of part 5 of this 
chapter and provide that person with a written licensing agreement 
acceptable to the FAA.

0
20. Amend Sec.  21.135 by adding paragraph (c) to read as follows:


Sec.  21.135  Organization.

* * * * *
    (c) Each applicant for or holder of a production certificate, 
except those based only on a supplemental type certificate or on the 
rights to the benefits of a supplemental type certificate under a 
licensing agreement, must meet the applicable requirements of part 5 of 
this chapter.

0
21. Amend Sec.  21.147 by revising paragraph (b) to read as follows:


Sec.  21.147  Amendment of production certificates.

* * * * *
    (b) An applicant for an amendment to a production certificate to 
add a type certificate or model, or both, must comply with Sec. Sec.  
21.135(c), 21.137, 21.138, and 21.150.
* * * * *

PART 91--GENERAL OPERATING AND FLIGHT RULES

0
22. The authority citation for part 91 continues to read as follows:

    Authority:  49 U.S.C. 106(f), 106(g), 40101, 40103, 40105, 
40113, 40120, 44101, 44111, 44701, 44704, 44709, 44711, 44712, 
44715, 44716, 44717, 44722, 46306, 46315, 46316, 46504, 46506-46507, 
47122, 47508, 47528-47531, 47534, Pub. L. 114-190, 130 Stat. 615 (49 
U.S.C. 44703 note); articles 12 and 29 of the Convention on 
International Civil Aviation (61 Stat. 1180), (126 Stat. 11).


0
23. Revise Sec.  91.147 to read as follows:


Sec.  91.147  Passenger-carrying flights for compensation or hire.

    (a) Definitions. For the purposes of this section, Operator means 
any person conducting nonstop passenger-carrying flights in an 
airplane, powered-lift, or rotorcraft for compensation or hire in 
accordance with Sec. Sec.  119.1(e)(2), 135.1(a)(5), or 121.1(d) of 
this chapter that begin and end at the same airport and are conducted 
within a 25-statute mile radius of that airport.
    (b) General requirements. An Operator conducting passenger-carrying 
flights for compensation or hire must meet the following requirements 
unless all flights are conducted under Sec.  91.146. The Operator must:
    (1) Comply with the safety provisions of part 136, subpart A of 
this chapter.
    (2) Register and implement its drug and alcohol testing programs in 
accordance with part 120 of this chapter.
    (3) Comply with the applicable requirements of part 5 of this 
chapter.
    (4) Apply for and receive a Letter of Authorization from the 
responsible Flight Standards office.
    (c) Letter of Authorization. Each application for a Letter of 
Authorization must include the following information:
    (1) Name of Operator, agent, and any d/b/a (doing-business-as) 
under which that Operator does business.
    (2) Principal business address and mailing address.
    (3) Principal place of business (if different from business 
address).
    (4) Name of person responsible for management of the business.
    (5) Name of person responsible for aircraft maintenance.
    (6) Type of aircraft, registration number(s), and make/model/
series.
    (7) Antidrug and Alcohol Misuse Prevention Program registration.
    (d) Compliance. The Operator must comply with the provisions of the 
Letter of Authorization received.

[[Page 33109]]

PART 119--CERTIFICATION: AIR CARRIERS AND COMMERCIAL OPERATORS

0
24. The authority citation for part 119 continues to read as follows:

    Authority:  49 U.S.C. 106(f), 106(g), 40101, 40102, 40103, 
40113, 44105, 44106, 44111, 44701-44717, 44722, 44901, 44903, 44904, 
44906, 44912, 44914, 44936, 44938, 46103, 46105; sec. 215, Pub. L. 
111-216, 124 Stat. 2348.


0
25. Revise Sec.  119.8 to read as follows:


Sec.  119.8  Safety Management Systems.

    Certificate holders authorized to conduct operations under part 121 
or 135 of this chapter must have a safety management system that meets 
the requirements of part 5 of this chapter.

    Issued under authority provided by 49 U.S.C. 106(f), 44701(a), 
and 44703 in Washington, DC
Michael Gordon Whitaker,
Administrator.
[FR Doc. 2024-08669 Filed 4-22-24; 4:15 pm]
BILLING CODE 4910-13-P