PRINCIPLES AND ORGANIZATION OF A FAR-47 TRUST FOR A US-REGISTERED AIRCRAFT 

OPERATED BY A NON-RESIDENT

 

                                                                                            

We are in a position to create and manage a legal entity covered by Paragraph 47 of the Federal Aviation Regulations, the object of which is to allow a non-resident individual or entity to legally own and operate a N-registered aircraft, based or not in the United States, with full approval by the Federal Aviation Administration.

                                                                                            

1/ The advantages of a USA registration:

                                                                                            

a/ Minimized maintenance costs: for a privately used aircraft (not on a FAR 135 Public Transportation Certificate), the FAA imposes a maintenance schedule limited to an Annual Inspection, identical in scope to a 100-hour Inspection, and to the compliance with the applicable Airworthiness Directives, but not with the Manufacturers’ Service Bulletins, Service Letters or Service Instructions, contrary to other Regulatory Authorities (GSAC, LBA, CAA, OFAC, Veritas, etc…). Time Between Overhauls (TBOs) on engines, propellers, accessories, etc…, are recommended, not mandatory, and they are left up to the appreciation of the aircraft owner/operator and its maintenance facility.           

                                                                                               

Flight Training for a fee is not considered Public Transportation, but any flight-school aircraft has to undergo 100-hour Inspections in addition to the Annual Inspections.

                                                                                            

The IFR certification is automatic as long as the necessary instrumentation is installed; IFR renewal does not entail removal and bench-testing of the instruments; a simple test of the pitot/static system and of the transponder/encoder have to be effected on the airplane every 24 months.

                                                                                            

b/ A far larger leeway is afforded to the aircraft owner in terms of supplementary equipment installation: a vast number of FAA-approved Supplemental Type Certificates (STCs) have not received an equivalent approval abroad, because the market is too limited in each foreign country for the manufacturers or the importers to go through the hoops of certification. As a result, a number of radios, accessories, airframe or engine modifications and improvements are not authorized on a European-registered aircraft. Some aircraft types themselves are not certificated in those countries (or they have not received a noise certification, which makes them ineligible for domestic registration), whereas they are perfectly operable anywhere under N registry.

                                                                                            

c/ Ease of resale on the world market: the N registration is universally accepted; another may be a handicap, particularly when the European market is depressed. Moving an aircraft from one registry to another involves time, administrative complexity and substantial costs.

                                                                                            

d/ Operating a US-registered aircraft can be done with US pilot certificate and ratings, generally obtained more easily than their European counterparts (particularly the Instrument Rating).

                                                                                            

2/ The constraints of the US registration for an airplane based outside the United States:

                                                                                            

a/ Pilot Certificate: In any European country, one may operate a US-registered aircraft with either a US pilot certificate OR a pilot certificate issued by that country. If a pilot only has a national license, he/she may only fly as Pilot-in-Command over this national airspace. To fly across the border, the pilot will either need a US certificate (the one of the aircraft country of registry) OR the one of the country being overflown. This means that a French license holder, for example, must stay within the French borders, or that he/she must obtain a US "courtesy" certificate from the FAA based on his/her national certificate. This can be done in a US FSDO (Flight Standards District Office) in the United States or in the Frankfurt Office of the FAA. Such a courtesy license is obtained fairly easily for VFR privileges (with a 30 to 60 day pre-advisement notification to the FAA so it can verify the credentials of the applicant with his/her national issuing Authority, this as an aftermath of the September 11, 2001 events). The validation of a foreign Instrument Rating is only obtained after the applicant passes a Multi-choice questionnaire centered on US regulations (40 questions, with a 70% pass rate). Preparing for this small exam can be done by purchasing widely available tapes, videos, DVDs or CD-ROMs.

                                                                                            

b/ Instruction: In order to give instruction to a European resident in a US-registered airplane within a European country, the Instructor must hold a valid European Instructor Certificate. A FAA-certificated instructor (CFI) does not have any authority to solo a student pilot outside the United States. It is not certain that soloing a student on a US-registered aircraft in France, regardless of the nationality of the Instructor’s Certificate, is legal (this is presently being debated and contested).

                                                                                            

c/ Public Transportation: in order to operate a US-registered airplane for hire (charter), one must obtain an AIR TAXI CERTIFICATE from the FAA. In practice, this is extremely difficult if the operator’s fleet is based outside the United States (a FAA Inspector must come to approve the operator’s practices, manuals, methods, training and hardware; the maintenance technicians must be FAA certified, etc…). The only practical solution to invoice flight hours beyond sharing direct operating costs (limited to a pro-rata share of fuel and oil) would be for all the users to be shareholders of the US corporation holding title to the airplane (Trustee) so they can pay the hours flown as a contribution to the operating needs of the company. This option generates complex US and international (VAT) Tax Law issues that are only justified for fairly costly aircraft (over $1,000,000). A small number of users (3 or 4) can be co-Trustors and share the costs equitably.

                                                                                            

d/ Insurance: US Underwriters are generally not allowed or willing to cover aircraft based outside the United States, regardless of their country of registry. It is too bad, because insurance rates are often more favorable in the US than in Europe. However, competition is heating up in newly deregulated Europe, as British, Italian, German and Swiss Underwriters are now eagerly competing with national insurers (in France, the Benelux countries, etc…).

                                                                                            

e/ Value Added Tax: US registration is not by itself a means to avoid paying V.A.T. on the importation or operation of an aircraft in Europe. The location of the aircraft is the basis for VAT taxation: in general, if an aircraft is based in Europe for 183 days a year, it is subject to importation and to VAT. In some countries (UK, Denmark, Luxembourg, etc..) and under specific rules, VAT can then be reclaimed. A specialized tax and aviation lawyer should be retained and will offer solutions depending on the weight of the aircraft, its principal country of operation and its type of operation.

                                                                                            

f/ US registration Inspection: in the case of an aircraft already located in Europe and registered in a European country, in order to change its registration to N, it will have to undergo an Annual Inspection by an FAA-certificated Airframe and Powerplant Maintenance Technician with Inspection Authorization (A&P/IA), followed by a Conformity Inspection by an FAA Designated Airworthiness Representative. In practice, a FAA-145 repair station, or a European facility used to working with a FAA Inspector, can take care of this formality which would only impose a modest extra cost if it was made to coincide with an Annual Inspection. The aircraft owner requests that the Civil Aviation Authority of the country of registry de-register the aircraft and notify the FAA by fax/telex. The FAA then assigns an N registration. The aircraft will be grounded for 2 to 3 weeks awaiting the hard copy of the new registration (or a "Fly-Wire") as a US-registered aircraft cannot be legally flown outside the United States under a provisional registration.

                                                                                            

3/ The logistics of the USA registration:

                                                                                            

A sizable number of companies or individuals who are either ill-informed or not protective of their clients interests, create simple shell corporations in the United States, of which the foreign customer is a shareholder, and pretend to have thus gone around the prohibition against foreign ownership of a US-registered aircraft. This is illegal and can bear dire consequences for the investor (including the loss of the aircraft). There are legal means of complying with the regulations; they are well known to specialists and to the FAA and have been successfully used for many years. They are based on the concept of the TRUST as described in section 47 of the Federal Aviation regulations. We have offered and implemented such a package for many European and Caribbean clients for well over 10 years and currently have dozens of such Trusts under management. Our package includes the following:

                                                                                            

a/ The creation of a Delaware corporation (Delaware is generally used due to the flexibility its laws offer regarding taxes and corporate rules).

                                                                                            

b/ The research and registration of a name for the above corporation (the client proposes a preferential name and one or two alternates in case the prime choice is unavailable).

                                                                                            

c/ Domiciliation of the company for reception and forwarding of legal notices by a specialized company in Delaware.

                                                                                            

d/ Creation of a Trustor-Trustee Agreement specifying the rights and obligations of the Trustor (the real owner of the aircraft, i.e. the client or an affiliated entity) and the Trustee, holder of the title to the aircraft (the ad hoc Delaware corporation of which EUROPEAN AMERICAN AVIATION CORP. is the stockholder and of which Marc Mosier is the President). To summarize its contents: the foreign Trustor has all the privileges of ownership and can decide to exercise them at any time (right to sell the aircraft, in particular), in exchange for which he holds the Trustee harmless for all the operational and judicial consequences of ownership. The stockholder is prevented through this Agreement from disposing of the aircraft, mortgaging it or otherwise encumbering its title. The Trustor may, at all times, have the aircraft sold and/or remove the Trustee under the applicable provisions of the Agreement.

                                                                                            

e/ Submission of the Agreement to, and approval by, the FAA Legal Counsel’s office; submission of the aircraft Registration documentation to the FAA Registry.

                                                                                            

f/ Procurement of the aircraft Registration and forwarding of Trust & ownership documentation to the Trustor.

                                                                                            

g/ Procurement and payment of the 10-year FCC Radio Station License, mandatory for foreign operations of an aircraft.

                                                                                            

The cost of this package will include the initial 12-month domiciliation fees. Beyond that period, the current cost of keeping the Trust current on its obligations (minimum statutory corporate tax in Delaware, legal domiciliation, forwarding of legal notices and applicable Airworthiness Directives) is currently $1,450 per year. Please contact us for up-to-date pricing information on the full package.

One must remark in passing that some Trust management companies offer a package which is potentially a little less involved and cheaper, because they do not create an individual corporation for the purpose of housing your individual aircraft. Instead, they place it in a corporation common to many unrelated Trusts and aircraft. Our attorneys are adamantly opposed to such cost-cutting measures due to the obvious resulting risk of asset co-mingling: if an unrelated aircraft in that "bulk" corporation was the object of an accident, a law suit, confiscation, etc..., all transactions, and even perhaps operations, of your aircraft could be frozen until potentially long and costly judicial recourses in a third country were successfully conducted by you (at your own cost).

                                                                                            

HOW TO PROCEED:

                                                                                            

1/ Communicate to us the full name(s), birth date(s) and place(s), nationality(ies) and address(es) of the Trustor(s). Our attorneys generally recommend including a spouse as Joint Tenant with Rights of Survivorship (JTWROS). We also need a domiciliation address for the Trustor, as well as a phone and a fax number. The Trustor may be a corporate entity, in which case we need not only its full name, address, phone and fax numbers, but also the name of the officer signing on its behalf and his/her title (President, General Manager, Managing Director).

                                                                                            

2/ Communicate to us 2 or 3 names for the Delaware Trustee. Examples: Nxxx Corp. (the tail number of the aircraft), ABC Aviation Inc., XYZ Aircraft Corp., XXX Air Inc....

                                                                                            

3/ Wire the agreed upon package price (quote upon request depending on the complexity of the legal set-up).

                                                                                            

We hold at your disposal the endorsements of numerous international clients who have been using our services for years.

 

IMPORTANT ADDENDUM: In October 2010, EASA has attempted to prohibit EU residents from using an FAA certificate to operate an N-registered aircraft within the EU. Thanks to the lobbying efforts of the stakeholders, this measure has been temporarily defeated. In order to insure that this threat to the spirit and the rules of  ICAO remains at bay, we encourage you to join in the lobbying effort by going to the following website:

www.november.aero.

 

                                                                                           

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HUNTERS LAKE – 349 HADEN ROAD Telephone: (1-434) 589-2274
P. O. Box 1050 Fax: (1-434) 589-6798
TROY, VA 22974 USA Email: MarcMosier@EAAC.us

 

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