After multiple inquiries from owners and operators about the recent changes in United States’ policies regarding Non-Citizen Trusts, we decided to address this issue in the following Memorandum. We have had many requests for our views on (1) whether an aircraft registered in San Marino may, consistent with U.S. Federal Aviation Administration’s (“FAA”) operating rules, be principally based in the United States and (2) if so, whether a time limit exists with respect to how long the aircraft may remain principally based in the United States. In our judgment, given certain circumstances, the answer to (1) is yes and the answer to (2) is no. We explain below.
We assume that the aircraft at issue is directly owned by an SPV entity (e.g. Bermuda, BVI, etc.), registered in San Marino, and dry leased to a U.S. operator. We also assume that the aircraft is used in civil operations.
Based on the above assumptions, we believe the dry lease arrangement could be authorized pursuant to Part 375 of the regulations of the U.S. Department of Transportation (“DOT”), and more specifically 14 C.F.R. § 375.36. The aircraft would operate in the United States under the applicable provisions of Part 91 of FAA’s Federal Aviation Regulations (“FARs”), 14 C.F.R. Pt. 91, and applicable San Marino Civil Aviation Regulations.
Section 375.36, entitled “Lease of foreign civil aircraft without crew” provides: “Foreign civil aircrafts that are leased without crew to an air carrier or citizen or permanent resident of the United States, and used by the lessee in otherwise authorized air transportation or commercial air operations, may be operated into, out of, and within the United States in accordance with any applicable regulations prescribed by the Federal Aviation Administration.” As you can see, this section contemplates that the foreign-registered aircraft will be leased to a U.S. entity (and thus presumably based in the United States). Section 375.36 does not impose any limit on the amount of time the dry lease arrangement may remain in effect.
From the FAA’s standpoint, such an aircraft would have to be operated in the U.S. pursuant to FAA’s “General operating and flight rules” in Part 91 of the FARs (except those Part 91 rules that apply only to U.S.-registered aircraft), as well as applicable San Marino requirements (CAR-OPS 2). The FARs do not impose time limits on such operations.
If the aircraft is operated under commercial air operations or otherwise used for compensation or hire, additional DOT and FAA regulations and requirements might apply. Of course, each individual case requires careful consideration on behalf of your legal advisor to determine whether the above regulations and/or other regulations are applicable.
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