Importing Jets: Should you Leverage Offshore Registries?

Could an offshore aircraft registry help with the import and operation of a business jet? Cooling & Herbers’ Jessica Pownell discusses the upsides and the downsides to help provide a measured answer…

Jessica Pownell  |  08th July 2020
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Jessica Pownell
Jessica Pownell

Jessica L. Pownell is an attorney with Cooling & Herbers, P.C., representing and advising aircraft owners...

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Mid-size business jet on airport ramp with painted taxi lines

Although many aircraft owners still register their aircraft on the FAA Registry (or other large and long-standing registries), in recent years, an increasing number of aircraft owners have utilized – or have at least considered utilizing – smaller aircraft registries around the world.

Though the FAA Registry (for instance) is a well-developed and well-regulated registry that allows for registration by both US citizen owners and non-US citizen owners through either the non-citizen trust or the ‘based and primarily used in the US’ options, for various reasons, an aircraft owner may elect to place an aircraft on a smaller foreign registry.

In particular, the speed and efficiency offered by these smaller registries can help accelerate a transaction as well as implementation of the new owner’s aircraft operations.

Key Benefits of Foreign Aircraft Registries

Many smaller aircraft registries offer a lot of the same opportunities as the larger ones. These include:

  • A lien registry
  • An option to choose the aircraft’s specific registration number, and
  • In some cases, options for reimbursements between certain affiliated companies, or to obtain a charter certificate (provided such operations comply with the laws of the countries within which the aircraft is operated) while also offering additional benefits.

As noted, smaller registries often operate quickly and efficiently and offer personalized and direct service. Many of these registries can process registrations and airworthiness inspections in as little as 1-2 days, which can be a major benefit to a new aircraft owner who is looking to close an acquisition and begin operating quickly.

A number of the smaller registries are run like private companies with a focus on customer service and up-to-date technology. As many of the aircraft on these registries are owned and based around the world, registry personnel typically are multilingual and are often available during flexible hours. Some registries have office locations outside of the registry country to serve registrants located in different areas.

Some registries have online portals where registrants can manage their aircraft records, approvals, and other documents, and many also value the privacy of their registrants’ information and preserve such privacy whenever possible; some have well-developed legal systems with laws that specifically protect the confidentiality of registrant information.

Smaller registries can also offer cost savings – for instance the Bermuda Registry recently announced an approximately 40% reduction in its Certificate of Airworthiness fees for corporate and General Aviation aircraft.

Perhaps more importantly, however, some smaller registries accept Supplemental Type Certifications (STCs) from both the FAA and the European Aviation Safety Agency (EASA), which can tremendously reduce the costs associated with transferring an aircraft to the new registry.

As an example, aircraft modifications may have been made to some previously FAA-registered aircraft that required STCs. While these STCs were acceptable to the FAA, they may not be acceptable to other agencies (i.e. EASA).

Any STCs not acceptable to an applicable new registry could be expensive to remove or reengineer. In fact, it’s sometimes the case that transfer to another registry is difficult, prohibitively expensive, or would take an inordinate amount of time to accomplish if there is an unacceptable STC.

This burden is lifted if a registry will accept the applicable FAA or EASA STCs.

Private Jet side-on view with sunset reflections on paint

Common Registry Options & Typical Requirements

Aircraft owners considering a smaller registry have a number of registry options from which to choose, including Aruba, Bermuda, the Cayman Islands, Guernsey, Isle of Man and San Marino.

The aircraft registration process for these registries is fairly similar to the FAA aircraft registration process (though, as noted, it may have some additional benefits).

Generally speaking, an aircraft must meet the applicable registry’s technical requirements for registration, and must receive a Certificate of Airworthiness from the registry. 

Similar to the FAA Registry, smaller registries will typically require that the aircraft be inspected by an authorized individual to confirm that it meets that registry’s requirements for issuance of a Certificate of Airworthiness.

The aircraft’s owner and operator must also meet the registry’s requirements, as applicable, which may include a due diligence financial and legal assessment. Eligible registrants typically include entities formed in the applicable country and which have their registered office or principal place of business in the country. 

Many times, the applicable aircraft owner or operator can meet this requirement by forming a company in the applicable country of registration and then either leasing or transferring ownership of the aircraft to that company.

Considerations when Operating a Foreign-Registered Aircraft in the US

Despite the benefits of registering an aircraft on a foreign registry there are a few downsides to consider, too. For example, a private aircraft placed on a registry other than the FAA – even if owned, controlled, or operated by a US citizen - is a ‘foreign civil aircraft’ under FAA regulations and cannot be operated for remuneration or hire to, from, or within the United States.

Moreover, the exceptions provided under 14 C.F.R. § 375.37 that allow for certain cost reimbursements for US-registered foreign civil aircraft do not apply (as the applicable ‘foreign civil aircraft’ is foreign-registered, not US-registered).

And an aircraft’s presence in certain US states – particularly if the aircraft is based in a US state – may trigger sales or use tax in such states. The aircraft may also still need to be registered in the US state in which it is based despite its foreign registration.

In Summary

For some owners and operators who have considered and understood the potential downsides, there are a number of benefits to registering an aircraft on a small, foreign aircraft registry. Indeed, the speed and efficiency provided by such registries may help accelerate a transaction and help a new aircraft owner or operator to quickly begin operations

More information from www.coolinglaw.com

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