Monthly Archives: April 2015

BOEING AND EX-IM BANK FIND SUPPORT IN FEDERAL COURT AS CONGRESSIONAL REAUTHORIZATION LOOMS

With its controversial reauthorization scheduled to be brought before Congress this June, the Export-Import Bank of the United States recently found support for its loan programs to foreign airlines in federal district court in Washington, D.C.

On March 30, 2015, the U.S. District Court for the District of Columbia rejected a lawsuit by Delta Air Lines and others challenging Export-Import Bank loan guarantees for the purchase of Boeing aircraft.  According to Delta, those loan guarantees were harmful in that they effectively subsidized foreign airlines to the detriment of U.S. carriers.

This most recent legal challenge is particularly timely as the Bank’s reauthorization, due June 30, 2015, is being hotly debated in Washington.  Opponents accuse the Bank of “crony capitalism” – supporting Boeing to the detriment of domestic airlines.  As they observe, the Bank issued $6.1 billion in loan guarantees to Boeing in 2014 alone.  Critics also observe that only 11% of the Bank’s loans and guarantees were necessary because the risks were too great for private financial institutions.  Finally, some claim that the Bank’s apparent financial independence is an accounting mirage, and that it actually is operating at a significant deficit.

Supporters of the Export-Import Bank, on the other hand, note the many benefits conferred on the public and U.S. businesses by the Bank, at no cost to American taxpayers.   While a sizeable portion of the Bank’s activities do support Boeing, some argue that this is merely a counterbalance to subsidies enjoyed by foreign aircraft manufacturers.  Many small U.S. businesses also enjoy support from the Bank, with roughly 90% of its authorizations and $5.1 billion in funds going to those small businesses in 2014.  Not only has the bank been self-sustaining since 2008, funding itself entirely from customer receipts, but it has generated close to $7 billion in excess revenues for the U.S. Treasury since 1992.

If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com, 202-659-6622) or Drew Derco (dderco@eckertseamans.com, 202-659-6665).

DOT ISSUES NEW FULL FARE ADVERTISING PENALTY

On March 13, 2015, Fareportal, Inc., d/b/a as CheapOair, was fined $185,000 by DOT for offering erroneous and misleading information in connection with fare advertisements on its website. An investigation by the Department’s Office of Aviation Enforcement and Proceedings determined that the fare matrix on Fareportal’s website displayed that the same carrier operated the outbound and return flights when in fact a different carrier operated one of the flights. Also, the fare matrix displayed the flights as non-stop, when they actually had multiple stops.

If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com, 202-659-6622) or Drew Derco (dderco@eckertseamans.com, 202-659-6665).

FAA REVOKES AIR CARRIER CERTIFICATE OF GLOBALJET

The FAA recently revoked GlobalJet NA, LLC’s certificate for allegedly conducting unauthorized operations. In taking this action, the FAA alleged GolbalJet operated a Cessna 550 jet on at least 47 flights without proper authorization. In response to an FAA request for information, the company allegedly provided falsified logs showing the flights were not for compensation and also failed to produce any invoices related to the service. GlobalJet also did not have a qualified chief pilot during the time period in question and used crew members who were not qualified for for-compensation or for-hire operations on over 140 revenue flights.

If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com, 202-659-6622) or Drew Derco (dderco@eckertseamans.com, 202-659-6665).

FAA PROPOSES ADDITIONAL PENALTIES FOR DRUG AND ALCOHOL VIOLATIONS

  • $74,553 against Gardner Aviation Specialist for failing to conduct pre-employment drug tests and obtaining verified negative results before hiring personnel to perform safety-sensitive functions. One of the company’s new hires tested positive during a pre-employment drug test and was allowed to work on two aircraft without being evaluated by a substance abuse specialist and completing the required paperwork before returning to work. Additionally, the company failed to request information from twelve employees regarding previous positive drug or alcohol tests or refusals to be tested. The company also failed to provide written drug and alcohol educational materials to all of its employees and did not train the person who was required to make determinations about reasonable suspicion drug testing.

 

  • $105,500 against Servisair LLC for failing to administer drug and alcohol tests to the minimum required percentage of employees in 2013.  During that year Servisair did not add five employees to its random drug testing pool after they had completed their ground coordinator training. Additionally, Servisair also failed to distribute educational material regarding drug use following a move to a new terminal.

If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com, 202-659-6622) or Drew Derco (dderco@eckertseamans.com, 202-659-6665).

FAA PROPOSES HAZMAT PENALTIES AGAINST FIVE MORE COMPANIES

The FAA, which has been extremely aggressive in enforcing the Hazardous Materials Regulations (HMR) over the past six months, recently proposed five additional civil penalties ranging from $63,000 to $82,500 against companies for alleged violations of the HMR. In each case, the FAA alleged that certain shipments were not accompanied by shipping papers to indicate the hazardous nature of their contents and were improperly marked, labeled or packed. The FAA further alleged that the affected companies failed to provide emergency response information and ensure their employees had received required training in packaging and shipping hazardous materials.

  • $63,000 against Chemique, Inc., for offering for shipment six, 8-ounce containers of liquid rust remover and restoration cleaner aboard a FedEx aircraft. Both substances are corrosive poisons.
  • $66,000 against Crow Works, LLC, for offering a shipment containing petroleum miner spirits, rubbing alcohol, flammable aerosols and paint for shipment aboard a FedEx aircraft.
  • $67,070 against Bridgewater International, Inc., for offering a shipment containing polyester resin, acetone, organic peroxide and constriction adhesives for shipment aboard a FedEx aircraft.
  • $82,500 against China Express International Express, for a shipping one Lithium-ion battery pack on United Airlines.
  • $96,000 against The Home Depot, Inc. for a shipment containing 58 two-quart containers of flammable charcoal lighter fluid and four lighter packs, each containing three flammable lighters.

If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com, 202-659-6622) or Drew Derco (dderco@eckertseamans.com, 202-659-6665).

FAA ISSUES FINAL RULE ON AIR CARRIER MAINTENANCE REQUIREMENTS

The FAA on March 4, 2015 issued a final rule that amends select portions of 14 C.F.R. Parts 121 and 135. The impacted sections are 121.368, 121.369, 135.426, and 135.427. The rulemaking was needed because the FAA Modernization and Reform Act of 2012 (the Act) addressed contract maintenance work performed on aircraft operated by part 121 certificate holders but did not address similar work performed on aircraft operated by Part 135 certificate holders.

According to the FAA, the changes are necessary to remedy performance deficiencies by contract maintenance providers and because contract maintenance accounts for approximately 70 percent of all maintenance performed on aircraft operated under Parts 121 and 135.

In addition to including those requirements already mandated under the Act, the FAA’s final rule requires that affected air carriers and operators:

  • Develop policies, procedures, methods, and instructions for performing contract maintenance that are acceptable to the FAA, and to include them in their maintenance manuals; and
  • Provide a list to the FAA of all persons with whom they contract their maintenance and a description of the type of maintenance the contractor would perform.

A full copy of the final rule is available at: https://federalregister.gov/a/2015-04179

If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com, 202-659-6622) or Drew Derco (dderco@eckertseamans.com, 202-659-6665).

U.S. ISSUES PENALTIES UNDER IRAN SANCTIONS

The United States government recently issued its first penalties under the new Iranian sanctions regime, which was put in place to prevent foreign investment in Iran’s oil and gas sector and to persuade Iran to limit its nuclear program.

To date the U.S. has targeted Naftiran Intertrade Co., which is a Swiss subsidiary of Iran’s national oil company. The government’s actions will prevent Naftiran Intertrade Co. from receiving loans in excess of $10 million from any U.S. bank. Through these sanctions U.S. officials also hope to discourage foreign companies from doing business with the Naftiran Intertrade Co. for fear they may also be penalized.

The Obama administration granted waivers to four European energy companies (Total of France, Statoil of Norway, Eni of Italy, and Anglo-Dutch Shell) which are in the process of withdrawing from the Iranian market.

If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com, 202-659-6622) or Drew Derco (dderco@eckertseamans.com, 202-659-6665).

OFAC UPDATES SDN AND BLOCKED PERSONS LIST

This month, the Department of Treasury’s Office of Foreign Asset Controls (OFAC) made significant changes to its list of Specially Designated Nationals and Blocked Persons (SDN List). The changes included new designations under the Kingpin Act and removals of certain Cuban interests. OFAC, in its efforts to enforce the U.S. sanctions regime, regularly publishes a list of individuals and companies that are owned or controlled by targeted countries, as well as individuals, groups, and entities (e.g., terrorists and drug trafficking organizations). The assets of entities included on the SDN List are blocked, and U.S. persons are generally prohibited from dealing with them.

OFAC’s recent additions to the SDN List were made under the Kingpin Act, which became law on December 3, 1999. According to OFAC, the Act’s “purpose is to deny significant foreign narcotics traffickers, their related businesses, and their operatives access to the U.S. financial system and to prohibit all trade and transactions between the traffickers and U.S. companies and individuals.” Entities removed from the list were de-listed in response to the U.S. Government’s easing of certain sanctions against Cuba including, notably, some travel restrictions.

The latest version of the SDN list is available at: http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx

If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com, 202-659-6622) or Drew Derco (dderco@eckertseamans.com, 202-659-6665).

GOODYEAR PAYS $16M TO SETTLE FCPA CHARGES

Goodyear Tire & Rubber Co. has agreed to pay approximately $16 million to settle charges by the U.S. Securities and Exchange Commission (SEC) that two of Goodyear’s subsidiaries paid bribes in violation of the Foreign Corrupt Practices Act (FCPA) to facilitate tire sales in Africa.

According to the SEC’s investigation, Kenyan Goodyear subsidiary Treadsetters Tyres Ltd. and Angolan Goodyear subsidiary Trentyre Angola Ltd. paid bribes on a routine basis to government officials in their respective countries to obtain tire sales.

The settlement represents the profits Goodyear made as a result of the alleged bribes and does not include a monetary penalty due to the fact that Goodyear self-reported its actions and fully cooperated with the SEC investigators. Under the settlement, Goodyear must also report its FCPA remediation efforts to the SEC for the next three years.

If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com, 202-659-6622) or Drew Derco (dderco@eckertseamans.com, 202-659-6665).

DOT FINAL RULE ON THE CARRIAGE OF MUSICAL INSTRUMENTS

As we reported earlier this year, on January 5, 2015 DOT issued a final rule regarding the carriage of musical instruments as carry-on or checked baggage on commercial passenger flights. The rule applies to all U.S. certificated and commuter air carriers, air taxis, and U.S. indirect carriers such as public charter operators that operate scheduled and charter flights to, from or within the United States.

The rule, which became effective on March 6, 2015 applies to the carriage of small instruments as carry-on baggage, the carriage of large instruments as carry-on baggage, and the carriage of large instruments as checked baggage.

Below is a link to the most frequently asked questions concerning enforcement of the Musical Instruments rule.

http://www.dot.gov/sites/dot.gov/files/docs/DOT_Musical_Instruments_FAQ_2_0.pdf

If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com, 202-659-6622) or Drew Derco (dderco@eckertseamans.com, 202-659-6665).