12/29/16

 

8900.1 CHG 505

VOLUME 12  International Aviation

CHAPTER 2  FOREIGN air carrierS OPERATING TO THE U.S. AND FOREIGN OPERATORS OF U.S.‑REGISTERED AIRCRAFT ENGAGED IN COMMON CARRIAGE OUTSIDE THE UNITED STATES

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Section 9  Lease Agreements, Interchange Arrangements, and Charter Arrangements

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12-349    GENERAL. The leasing of large transport category aircraft between a U.S. and foreign air carrier or between two foreign air carriers is widely used. The Federal Aviation Administration (FAA) defines an aircraft lease as a contract by which one person grants the right of exclusive possession and use of a certain aircraft to another person for a specified period or a defined number of flights. The FAA recognizes two general types of leases: wet and dry. Whether a lease is a wet or dry lease is determined on a case‑by‑case basis, and the FAA will look at factors such as whether the companies are acting in concert. If there is any ambiguity or uncertainty as to the type of agreement or arrangement, then the responsible International Field Office (IFO) manager or Front Line Manager (FLM) will contact the International Field Office Management Branch (AFS‑54) for assistance. If AFS‑54 is unable to assist the IFO, then they will elevate the matter to the International Operations Branch (AFS‑52). In cases where the Flight Standards Service (AFS) has questions as to the type of agreement or arrangement the operator thinks or says that they have entered into and the type of agreement or arrangement that AFS thinks that the operator(s) has entered into (based on AFS review of the supporting documentation presented by the operator(s)), AFS will request legal counsel review. Additional definitions may be found in Volume 3, Chapter 13, Section 2.

12-350    DRY LEASE. The term “dry lease” means any arrangement whereby a lessor agrees to provide an entire aircraft without crew to an operator. The lessee operator of the aircraft must hold the necessary economic and operating authority for the aircraft, and it must exercise operational control over the aircraft. Accordingly, the lessee must provide the necessary flight and cabin crewmembers, ground personnel, dispatchers, and ground facilities to operate the leased aircraft.

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A.    Operations Specifications (OpSpecs). The dry leasing of U.S.‑ or foreign‑registered aircraft (without crewmembers) by foreign air carriers operating to the United States and foreign persons engaged in common carriage outside the United States is a common practice. Where the lessor of the aircraft is a U.S. or foreign air carrier, the FAA must remove the leased aircraft from the lessor carrier’s OpSpecs and list it on the lessee’s OpSpecs for the duration of the lease, except when the lease is in the form of an interchange arrangement.

B.    Regulatory Compliance.

1)    Each foreign air carrier operating to the United States must comply with Title 14 of the Code of Federal Regulations (14 CFR) part 129 and the applicable provisions of 14 CFR part 91.
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a)    In pertinent part, part 129,  129.13 (and  129.15 is similar in affect) states: “No foreign air carrier may operate any aircraft within the United States unless that aircraft carries a current registration certificate and displays the nationality and registration markings of the State of Registry and an airworthiness certificate issued or validated by the State of Registry.” Per the Office of the Chief Counsel (AGC), “validated” does not require the certificate to have been issued by the State of Registry. The FAA does not address what constitutes validation or what is sufficient to constitute validation, which leaves the matter open to interpretation.

NOTE:  European Union (EU) Regulation (EC) No. 216/2008 contains a mutual recognition provision. Article 11 states, in part: “Member States shall, without further technical requirements or evaluation, recognize certificates issued in accordance with this Regulation.”

b)    When there is ambiguity or uncertainty as to the validity of a flightcrew member license, IFOs should contact AFS‑54.
c)    Per International Civil Aviation Organization (ICAO) Doc. 8335, Manual of Procedures for Operations Inspection, Certification, and Continued Surveillance, dry lease of an aircraft registered in other States, in order to satisfy the requirement of Article 32(a) of the Convention on International Civil Aviation (Chicago Convention), validations would be subject to requirements established by the State of Registry.
2)    When operating a U.S.‑registered aircraft within or outside the United States in common carriage, each foreign air carrier and foreign person also must comply with:
a)    All applicable regulatory requirements in 14 CFR, including, but not limited to, the following:

    Parts 21 (airworthiness), 43 (maintenance), and 65 (airmen other than flightcrew members), as applicable.

    Parts 61 (in particular, 61.3 and 61.77) and 63 (in particular, 63.3, 63.23, and 63.42 (personnel licensing requirements for flightcrew members (pilot, flight engineer, and flight navigator))) (see Volume 5, Chapters 2 and 4).

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    Part 91 (in particular, 91.1, 91.701 through 91.703, and 91.706).

    Sections 129.5, 129.7, 129.9, 129.11, 129.14, 129.20, 129.24, and subparts B and C (U.S.‑registered aircraft operated solely outside the United States in common carriage by the foreign person or foreign air carrier. Refer to  129.1(b)).

b)    Title 49 of the Code of Federal Regulations (49 CFR) part 175 (rules for loading and carrying dangerous articles and magnetized materials in any civil aircraft in the United States and in civil aircraft of U.S. registry anywhere in air commerce).
c)    All applicable orders and regulations of other U.S. agencies and courts, and with all applicable laws of the United States.

C.    OpSpecs Applications and Amendments. Foreign air carriers should apply for OpSpecs or seek an amendment of their OpSpec authorizing the use of any dry‑leased U.S.‑registered aircraft in accordance with  129.5, 129.7, 129.9, and 129.11. The FAA will process such applications in accordance with Volume 3, Chapter 13, Section 1.

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12-351    INTERCHANGE ARRANGEMENT. The U.S. certificate holder who is party to an interchange arrangement is not required to file the agreement with the Aircraft Registration Branch Technical Section (AFS‑751) at P.O. Box 25724, Oklahoma City, OK 73125 per 14 CFR part 121,  121.153(a)(4), since it is not classified as a lease or charter agreement. An interchange arrangement permits two air carriers to connect two or more points on a route using the same aircraft but each operator’s own crewmembers. For example, Operator A (the primary operator) operates an aircraft from point X to point Y (the interchange point). At point Y, Operator B (the interchange operator) assumes operational control of the same aircraft to fly from point Y to point Z with Operator B’s own crew.

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A.    Definitions. The following definitions apply to interchange arrangements:

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1)    The Primary Operator. The primary operator under an interchange arrangement is the U.S. or foreign air carrier that would normally operate the aircraft if the interchange were not in effect. The primary operator always retains responsibility for the maintenance control of an aircraft that is the subject of an interchange arrangement.
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2)    The Interchange Operator. The interchange operator is the other U.S. or foreign air carrier party to the interchange arrangement.
3)    The Interchange Points. The interchange points are those airports where an aircraft may be transferred between the primary operator and the interchange operator. The transfer involves the replacement of the flightcrew of one operator with the flightcrew of the other operator.
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B.    Sample Scenarios. The following scenarios may arise when amending OpSpecs to document interchange arrangements involving foreign air carriers and operations to the United States:

NOTE:  List only the interchange points that are located in the United States or the last point of departure before coming to the United States, if it is an interchange point.

1)    If the primary operator under an interchange arrangement is either a U.S. operator or a foreign air carrier operating to the United States, the aircraft subject to the interchange will be identified in OpSpec A029 of the primary operator’s OpSpecs and included in the list of the primary operator’s aircraft in OpSpec A003 of its OpSpecs.
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2)    If the primary or interchange operator under an interchange arrangement does not provide service to the United States, then the interchange points must be located outside the United States. The FAA would not issue OpSpec A029 to the primary or interchange operator.
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3)    If the interchange operator provides service to the United States, the aircraft subject to the interchange will be identified in OpSpec A029 of the interchange operator’s OpSpecs.
4)    When U.S.‑registered aircraft are included under an interchange arrangement between two part 129 air carriers, those aircraft shall also be listed in OpSpec D085 of the primary operator’s OpSpecs.
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NOTE:  The parties to the interchange arrangement may transfer operational control of the aircraft only at an interchange point designated in the appropriate OpSpecs.

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C.    U.S. or Foreign Registry. Under an interchange arrangement, the aircraft may be of either U.S. or foreign registry. However, if the aircraft is foreign‑registered, in order to be operated by a U.S. certificate holder, it must specifically comply with the following:

1)    The aircraft carries an appropriate airworthiness certificate issued by the country of registration and meets the registration and identification requirements of that country.
2)    The aircraft is of a type design which is approved under a U.S. type certificate (TC) and complies with all of the requirements of this chapter (14 CFR Chapter 1) that would be applicable to that aircraft were it registered in the United States, including the requirements which must be met for issuance of a U.S. standard airworthiness certificate (including type design conformity, condition for safe operation, and the noise, fuel venting, and engine emission requirements of this chapter), except that a U.S. registration certificate and a U.S. standard airworthiness certificate will not be issued for the aircraft.
3)    The aircraft is operated by U.S.‑certificated airmen employed by the certificate holder.

NOTE:  If the aircraft is of U.S. registry, the foreign air carrier or foreign person must comply with the applicable 14 CFR requirements while it has operational control of the aircraft (see Volume 3, Chapter 13, Section 5).

12-352    WET LEASE. As defined in 14 CFR part 110,  110.2 and part 119,  119.53, a wet lease is any leasing arrangement whereby a person agrees to provide an entire aircraft and at least one crewmember. A wet lease is a commercial arrangement whereby an aircraft owner leases both the aircraft and at least one crewmember to another person for his or her exclusive use for a specified period or a defined number of flights. A wet lease does not include a code‑sharing arrangement.

NOTE:  When an air carrier provides less than an entire aircraft crew, the wet lease is occasionally referred to as a “damp lease.” Title 14 CFR authorizes only a wet lease or dry lease. Therefore, the term “damp lease” is used for commercial purposes only.

A.    Office of the Secretary of Transportation (OST) Characterization. When the OST characterizes a lease as a wet lease, the OST’s definition of the term applies to economic authority. The OST’s characterization of wet lease does not necessarily make the lessor responsible for operational control, which is one of the safety considerations for a wet lease authorized by the FAA. Therefore, the FAA’s definition of “wet lease” in 110.2 and in OpSpec A002 is different from the OST definition and applies solely to the safety authority falling under the FAA’s oversight.

B.    FAA Restriction. A U.S. air carrier may not wet lease an aircraft from any foreign air carrier or foreign person, as described in  119.53(b), 121.153(c), and part 135,  135.25(d). This restriction is based in part on the prohibition on cabotage under Title 49 of the United States Code (49 U.S.C.)  41703 and partially on safety oversight considerations under  44701.

NOTE:  The OST may authorize a U.S. air carrier to obtain an entire aircraft with crew under certain arrangements characterized as wet lease agreements by parties involved. The FAA and OST refer to these agreements as provision of aircraft with crew arrangements. More details may be found in paragraph 12‑354, Provision of Entire Aircraft with Crew.

C.    Operational Control. Depending on the laws of the State of the Operator, a foreign air carrier may be able to wet lease aircraft from a U.S. air carrier or from another foreign air carrier. Although the FAA permits U.S. air carriers to wet lease aircraft to foreign air carriers and foreign persons, those operators usually prefer to dry lease aircraft in order to have operational control of the leased aircraft.

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1)    The FAA’s policy requires each U.S. air carrier to retain operational control of each wet‑leased aircraft listed on its OpSpecs regardless of whether the aircraft is U.S.‑ or foreign‑registered. This policy applies to aircraft wet‑leased to any foreign air carrier and to any foreign person.
2)    To make a proper determination of operational control, it may be necessary to ask the lessor to submit any clarifying or supplemental information regarding the lease arrangement. Section 119.53 provides that the FAA will determine that a party has operational control of flights if that party exercises authority and responsibility for a specified number of operational functions. In cases where doubt or controversy exists, the Administrator will also consider additional factors, such as who is responsible for maintenance, servicing, and crewmember training.

D.    OpSpecs Amendments. Prior to engaging in a wet lease operation to or from the United States, a foreign air carrier must apply for, or seek an amendment of, its OpSpecs to list the aircraft in OpSpec A028. The FAA requires such an amendment whether the other party to the wet lease is a U.S. or foreign air carrier. In support of the amendment, the foreign air carrier must submit to the FAA a copy of the wet lease agreement or a written memorandum of the pertinent terms of the wet lease. The FAA will review the documents pertaining to the wet lease as follows:

1)    Identify the aircraft that are subject to the wet lease. If the lessor is a foreign air carrier, OpSpec A003 of the lessor’s OpSpecs must list the aircraft, and in addition, if the aircraft is U.S.‑registered, OpSpec D085 must also list the aircraft. If the lessor is a U.S. air carrier, OpSpec D085 must list the aircraft.
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2)    Determine if the lessor or grantor transfers legal or actual possession (i.e., custody) of the entire aircraft (see Volume 3, Chapter 18, Section 3, OpSpec A028). If not (see paragraph 12‑353, Charters), the arrangement is not covered by the  119.53 wet lease prohibition, and the arrangement may be a charter or should be referred to the OST (see paragraph 12‑354).
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3)    Determine which air carrier will exercise operational control over the wet lease operations. If the lessor is a U.S. air carrier, it must retain operational control of each wet‑leased aircraft. In that scenario, the nationality, registration, and serial number of each aircraft used under the terms of the wet lease agreement will be identified in OpSpec D080 or D087, as applicable, and OpSpec D085 of the certificate holder’s OpSpecs. While conducting operations under this authorization, the lessor may be authorized to use the call sign and flight number(s) of the lessee, provided that, for all flights the lessor certificate holder explains in the Remarks section of the applicable flight plan, that the lessor is conducting the flight under the call sign and flight number(s) of the lessee.
4)    Confirm that each party to the wet lease agreement holds the necessary operating and economic authority to conduct the wet lease. Each foreign air carrier must hold the appropriate economic authority from the OST to conduct wet lease operations to the United States.

E.    FAA/OST Differences. Because of differences in the way the FAA and the OST define and apply the term “wet lease,” the analysis of a wet lease transaction can be complicated. For example, the OST also includes wet lease transactions within the scope of what constitutes a charter (see paragraph 12‑354).

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F.    Additional Guidance. For additional guidance on the issuance of OpSpec A028, see Volume 12, Chapter 2, Section 3.

12-353    CHARTERS.

A.    Definition. A charter is an agreement whereby a person agrees to provide all, or part of, the lift capacity of an aircraft it operates to another person for a defined period of time or number of flights. In short, a charter is the provision of a flight service.

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NOTE:  Charters cannot be used for scheduled service. Under scheduled service, the agreement would need to be a wet or dry lease or an interchange.

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B.    Elements. In a charter arrangement, the following elements are usually present and distinguish a charter from a wet lease agreement.

1)    The provision of all or part of the aircraft’s lift capacity to another person.
2)    The person contracting for the lift capacity is not the operator of the aircraft.
3)    A specific aircraft is not identified.
4)    There is no transfer of exclusive possession and use of that aircraft to the other person. For example, the person providing the lift capacity either:

    Retains the right to substitute other aircraft for the aircraft identified in the agreement; or

    Retains the right to use the aircraft identified in the agreement for its own purposes when the aircraft is not needed by the operator receiving the lift capacity.

C.    Economic Authority.

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1)    A foreign air carrier conducting charter operations to or from the United States must hold the appropriate economic authority from the OST. Charter economic authority may be granted in the form of an exemption, foreign air carrier permit, or foreign aircraft permit/special authorization under 14 CFR part 375. Per the U.S. Department of Transportation (DOT), for licensing purposes, alternate airports are considered technical stops. Therefore, foreign air carriers who do not hold economic authority to serve the United States and want to file U.S. airports as alternate airports for weather reasons, may do so under the provisions of part 375,  375.30. The FAA does not issue OpSpecs to part 375 operators. However, part 129 operators conducting nonscheduled flights to or from any point in the United States must provide prior notification, in accordance with the reporting requirements of OpSpec A001.
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2)    Part 375 is an economic regulation that provides oversight for the admission to, and navigation in, the United States of foreign civil aircraft, other than those foreign civil aircraft operated under common carriage authority contained in a foreign air carrier permit or exemption. Some of the operations may be noncommercial in nature while others involve remuneration of some form. In addition to foreign‑registered civil aircraft, the part also applies to all foreign‑owned and/or controlled N‑registered aircraft wishing to operate to/from/within the United States. In most cases, operations licensed economically under part 375 would operate under part 91 of the FAA’s safety rules. An example of exceptions to that would be certain specialty air service operations that may be subject to 14 CFR part 133 or 137.

NOTE:  PIs may contact the International Programs and Policy Division (AFS‑50) headquarters (HQ) for questions that are not answered at the following internal AFS‑50 website: https://my.faa.gov/org/linebusiness/avs/offices/afs/divisions/hq_region/afs50.html.

12-354    PROVISION OF ENTIRE AIRCRAFT WITH CREW. Under an OST‑approved provision of aircraft with crew arrangement, a foreign air carrier may provide an entire aircraft with crew to a U.S.‑certificated air carrier without acting contrary to the FAA’s regulations that generally prohibit a foreign air carrier from wet leasing aircraft to a U.S.‑certificated air carrier. This agreement has features that are characteristic of a charter; however, the parties to the agreement may characterize it as a wet lease. If the lessor/grantor never transfers legal possession of the entire aircraft, the arrangement is not a prohibited  119.53 wet lease. Likewise, if the arrangement makes it clear that the lessor/grantor never transfers actual possession (custody) of the entire aircraft, the arrangement is not a  119.53 wet lease. In both cases, the arrangement might actually be a charter (i.e., a services agreement for provision of a flight service to a customer).

A.    Approval Process. Under regulatory guidance issued by the OST, the foreign operator providing the lift capacity for the U.S. air carrier will include in its application a copy of the agreement. The FAA will review the agreement against the essential elements in subparagraph 12‑354B and provide its recommendation to the OST. The OST will review the FAA’s recommendations and determine if the operation meets the requirements of 14 CFR part 212, is in the public’s interest, and whether to grant the authorization.

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NOTE:  The responsible Flight Standards District Office (FSDO) and IFO for the operator providing the entire aircraft with crew must maintain a copy of the agreement as specified in Volume 12, Chapter 5, Section 1, paragraph 12‑454.

B.    Essential Elements of the Provision. The essential elements of a provision of an entire aircraft with crew arrangement by a foreign air carrier to a U.S. air carrier are as follows:

1)    Operational control remains with the operator providing the lift capacity.

NOTE:  The operational control determination will be based on the terms of the agreement and all other relevant factors, such as authority over initiating, conducting, or terminating a flight.

2)    Legal and actual possession (custody) of the aircraft remains with the operator providing the lift capacity. Factors relevant to the determination of legal and actual possession include:

    The right to substitute other aircraft for the aircraft identified in the agreement; or

    The right to use the aircraft identified in the agreement for its own purposes when the aircraft is not needed by the operator receiving the lift capacity.

3)    The country that issued the Air Operator Certificate (AOC) of the operator providing the lift capacity will oversee the operations and would be continuously rated as Category 1 under the FAA’s International Aviation Safety Assessment (IASA) Program.
4)    The U.S. air carrier obtaining the lift capacity has assessed the level of safety of the service to be provided by the foreign air carrier involved and has found it to be satisfactory.
5)    Both parties to the agreement must apply to the OST for any necessary amendments to their economic permits.

NOTE:  The operator providing the lift capacity must provide all necessary flight and ground crew, crew training, ground handling, communications, dispatch of the aircraft, decision of the particular aircraft to be used in any given operation, and authority over the pilot in command (PIC) in all matters concerning flight operations, and be carried out in accordance with standards and practices as set out in its Flight Operations Manual (FOM).

NOTE:  Agreements between part 129 air carriers, or between a foreign person and a part 129 air carrier, to wet lease aircraft or provide an entire aircraft with crew must also be reviewed against the principles described in paragraphs 12‑353 and 12‑354 to determine whether the arrangement is a wet lease, typical charter, or provision of an entire aircraft with crew.

12-355    ARTICLE 83 BIS. Under international law, the State of Registry of an aircraft is responsible for overseeing the airworthiness of the aircraft, the licensing of its flightcrew members, and compliance by the operator of the aircraft with the applicable rules of the air.

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A.    Diminished Ability to Carry Out Oversight Responsibilities. When an operator certificated in one country operates an aircraft registered in another country, the ability of the State of Registry to carry out its oversight responsibilities may be diminished or less efficient. In such cases, the State of Registry and the State of the Operator may enter into an agreement under Article 83 bis of the Chicago Convention, transferring some or all of the oversight responsibilities of the State of Registry to the State of the Operator.

NOTE:  The term “bis” is a Latin term used throughout the convention to designate the articles created between existing sequentially numbered articles. For further information on the Chicago Convention, see Volume 12, Chapter 1.

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B.    Transfer of Oversight Responsibility. Among the visible effects of a transfer of oversight responsibilities under an Article 83 bis agreement are the following:

1)    If the State of Registry transfers its airworthiness oversight responsibilities under the Article 83 bis agreement, the State of the Operator will issue a certificate of airworthiness to the aircraft and oversee the continuing airworthiness of the aircraft in accordance with its laws and regulations.
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2)    If the State of Registry transfers its personnel licensing oversight responsibilities under an Article 83 bis agreement, the flightcrew members will hold Airman Certificates issued or validated by the State of the Operator under its laws and regulations. Each person acting as a flightcrew member must hold a certificate or license that shows the person’s ability to perform duties in connection with the operation of the aircraft.
3)    An aircraft that is subject to an Article 83 bis agreement will continue to be registered in the State of Registry and bear that State’s registration marks. The State of Registry will issue the registration certificates, which must be carried aboard the aircraft. A copy of the Article 83 bis agreement may also be carried aboard the aircraft.
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C.    Article 83 Bis Agreement. A State of Registry and State of the Operator are not required to enter into an Article 83 bis agreement as to a particular aircraft. However, once they execute such an agreement, it becomes effective as to third‑party States only when they register it with the ICAO and when ICAO makes it public, or when one of the parties to the agreement communicates the existence and scope of the agreement to those third‑party States (so that they know the transfer of obligations has taken place). When it exists, an Article 83 bis agreement is only required under  129.13 and 129.15. When it exists, the FAA wants to know which State has what oversight duty, and that the aircraft meets the rest of the regulatory criteria (registration and markings).

NOTE:  Under EU regulations, the competent authority for oversight of continuing airworthiness and review can be designated by the State of Registry and shared with the State of the Operator under EC No. 965/2012 and 1321/214, without need for an Article 83 bis agreement.

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D.    Certification Oversight of air carriers Transfer of Responsibilities. The State of the Operator cannot transfer the responsibilities for the certification and oversight of an air carrier to another State under an Article 83 bis agreement.

RESERVED. Paragraphs 12‑356 through 12‑370.