Non-Citizen Trusts

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FAA Extends Comment Period on Non-Citizen Trust Proposal

July 13, 2012

The Federal Aviation Administration (FAA) has granted additional time for respondents to weigh in on the use of non-citizen trusts (NCTs) to support foreign ownership of N-numbered aircraft. The comment period has been extended to Aug. 17, following the latest meeting between industry representatives and agency officials about the issue.

Registering an aircraft through a non-citizen trust allows the owner to register the aircraft on the United States aircraft registry, under an N-number, even if they are not a U.S. citizen or legal resident.

NCTs have been used for years to temporarily register new "green" aircraft in the U.S. at the time of sale, or while they are being finished and outfitted. NCTs are also a valuable tool for finance and leasing companies to register aircraft in the United States, so an aircraft may be inspected and maintained under FAA regulations even if it is operated in a foreign country.

The FAA counters that use of an NCT jeopardizes its oversight of an N-registered aircraft and could enable that aircraft to be operated by parties not directly under the FAA's authority. A May 2010 moratorium on the use of NCTs was relaxed following an immediate outcry from aviation groups, including NBAA, but the issue has not gone away.

"The agency has clearly stated its goal is to change the current process, but it hasn't stated what's wrong with the current methods used to identify operators of trust-owned aircraft," said Kent Jackson, founder and managing partner in the law firm of Jackson & Wade.

"The FAA brands the use of non-citizen trusts to register an aircraft with an N-number a 'flag of convenience,' by making U.S. registry available to those who don't fit the requirements,” Jackson added. “Anyone familiar with the process of registering an aircraft here can tell you that simply isn't the case."

The FAA issued its latest policy proposal in February 2012. Industry representatives asked the FAA to extend the comment period on that proposal following a June 2012 meeting between the two sides.

"NBAA is a part of a broad coalition of interested associations, financial institutions, aircraft manufacturers, aircraft owners and others that are affected by the FAA’s policies on non-citizen trusts," said Mike Nichols, NBAA vice president, operations, education & economics. "We appreciate that the FAA is actively listening to the industry’s concerns and making adjustments, and we are committed to securing a reasonable, workable solution on this matter."

NBAA Members are encouraged to review the proposal and submit their comments on the matter to the FAA at [email protected].