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The Bilateral Aviation Safety Agreement between The U.S. and Mexico

16 Nov 2012

Interview between Humberto Gayou of Lexcorp Abogados and The Offshore Group on the subject of the Bilateral Aviation Safety Agreement between U.S. and Mexico

The Offshore Group: Humberto Gayou, an attorney in Mexico specializing in fostering and guiding multinational corporations and who has gained a reputation through the years as an expert on the subject of foreign direct investment, especially in the Mexican aerospace industry has agreed to answer some questions related to the Bilateral Aviation Safety Agreement, or BASA, for us today.

HG: Thank you for speaking with me about an issue that is important and related to the industry that we will discuss, which is the Mexican Aerospace industry. Aerospace activity in Mexico is changing. We are presently mapping and modifying its development in a way that will affect it today, as well as in the years to come. I am positive with respect to this. In a nutshell the aerospace industry is going to be an engine of economic growth in a way that the automotive industry has already been for a number of decades and continues to be.

The Offshore Group: To begin, can you tell us a bit about yourself, and about the law firm that you manage in Mexico. We would like to know more about LexCorp’s overall practice, and as to what you are dedicating your expertise to at present.

HG: With pleasure.  Very well, I have been representing multinational companies since the year 1982. I began my practice in Mexico as an attorney. Then, for the last 30 years, which include 20 (years) since I founded the LexCorp group of law firms in Mexico, I have focused on servicing all sources of foreign direct investment in Mexico, in all areas of economic endeavor. Recently our firm has been working with emphasis on the Mexican aerospace industry. A lot of FDI has been flowing into Mexico in the area of aerospace manufacturing in the last several years.

The Offshore Group: So Lexcorp works with all types of foreign direct investment and investors, but today the bulk of its activity is in the aerospace industry in Mexico?

HG: Yes, well it is with such approach that we at LexCorp get involved in all areas of the law, with the specialization just mentioned, and every day comply with the Foreign Corrupt Practices Act, the Sabarnes Oxley Act and other regulations that apply to our clients. Doing business in Mexico is not what it used to be in the early years of my practice. Today it is a much more dynamic proposition. Today Mexico operates at global standards.

What we have done, at least in the last 20 years, in the area of the Mexican aerospace industry is related, on the one hand, to the establishment of business related manufacturing services for the aeronautical products. By aeronautical products I am referring to airplanes, motors and/or propellers, but this also includes the aeronautical parts. Today we see more and more the establishment of a good and solid aerospace manufacturing base in Mexico. It has been developing for years and we expect that this will continue to be the case.

The Offshore Group: Humberto, what in particular is enabling Mexico to develop its aerospace industry, and how will this impact the the U.S. market?

HG: This is where I would like to focus our discussion. It is important to consider, at first, if the laws that are in place are friendly with respect to the development of the aerospace industry in Mexico. We must determine if they meet new demands and needs that exist in today's markets? If not, the Mexican aerospace industry might be left behind trying play catch up with global requirements? The Bilateral Aviation Safety Agreement, or BASA, has been put in place as a tool to enable Mexico to continue to develop its aerospace capabilities.

The Offshore Group: Humberto can you explain to us what are the features of the BASA, and what effect its existence will have on Mexico aerospace?

HG: Sure, the BASA Agreement is THE AGREEMENT BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE UNITED MEXICAN STATES FOR THE PROMOTION OF AVIATION SAFETY

This Bilateral International Treaty was executed by the Federal Transportation Authorities of the United States of America and Mexico in Montreal, on September 18th, 2007, and binds the Government of the two countries (let’s call them the “Parties”, it is easier for us Attorney to use such terms).

Also important to note is who the Implementing Authorities of the BASA Agreement are: In the U.S. it is the Federal Aviation Administration (FAA) of the Department of Transportation, while in Mexico it is the Mexican General Directorate of Civil Aeronautics (DGAC) of the Ministry of Communications and Transport.

In a simple manner the BASA Agreement is the most relevant aviation safety agreement for the U.S., the country that is the major foreign player in manufacturing and service activities in the Mexican aerospace industry.

For the purposes of clarification: the BASA Agreement is entered by the U.S. with other countries as well, but it is significant that Mexico now has such an agreement with the U.S. Its is a major legal driver and framework definer for the interaction between the United States and Mexico in the aerospace industry from the present going forward.

The Offshore Group: What does the BASA mean for the U.S. and Mexico in concrete terms?

HG: The U.S. and Mexico have agreed to in principle:

1.- the facilitation and acceptance by each Party to the BASA of the other Party's: (a) airworthiness approvals and environmental testing and approval of civil aeronautical products, and (b) qualification evaluations of flight simulators.

2.- the facilitation and acceptance by the Parties to the agreement of the approvals and monitoring of maintenance facilities and alteration or modification of aerospace facilities, maintenance personnel, flight crew members, aviation training establishments, and flight operations of the other Party, and

3.- cooperation in sustaining an equivalent level of safety and environmental objectives with respect to aviation safety.

The Offshore Group: Can you please tell us about the term “airworthiness approval”, and why is such an important component of the BASA?

HG: Under the BASA, “airworthiness approval" means a finding that the design or change to a design of a civil aeronautical product meets the standards agreed to between the parties to the agreement. It also signifies that a civil aeronautical product conforms to a design that has been found to meet those standards, and as such it is in a condition for safe operation. As a matter of fact, pursuant to the BASA, the FAA and the DGAC shall conduct technical assessments and work cooperatively to develop an understanding of each other's standards and systems in the following areas:

1.- Airworthiness approvals of civil aeronautical products;

2.- Environmental approval and environmental testing;

3.- Approval and monitoring of maintenance facilities and maintenance personnel;

4.- Approval and monitoring of flight operations and flight crew members;

5.- Evaluation and qualification of flight simulators, and

6.-Approval and monitoring of aviation training establishments.

The BASA Agreement between the U.S. and Mexico for the aerospace industry is all about improving timing and approval mechanisms for the benefit of all players. It is about promoting and increasing the efficiencies of the global actors in producing finished products to for world markets, and, finally, it is about improving mutual recognition amongst the most suited authorities in each of these magnet countries (the U.S.A. and Mexico) in these matters as in others, which will certainly improve the development of the respective economies in both countries.

The Offshore Group: You have stated in talks that you have given that the purpose of this international aerospace agreement between the U.S. and Mexico is to define the civil aeronautical products, parts and appliances eligible for import into the U.S.A. and Mexico, and to define the interface requirements and activities between authorities for the import and continued support of those civil aeronautical products, parts, and appliances. Are there procedures that have been put into place for executing the provisions of the BASA agreement?

HG: Yes, of course, there implementation procedures that address the performance of design, production, airworthiness, and related certification functions. These have their base in a high degree of mutual confidence in the FAA’s and DGAC’s technical competence and regulatory capabilities to perform these tasks. Let me stress that the FAA and DGAC, as importing civil aviation authorities, shall give the same validity to the certification made by the other, as the exporting civil aviation authority, as if the certification had been made by the FAA or DGAC in accordance with its own applicable laws, regulations, and requirements.

Here, the fundamental principle is to maximize the use of the exporting civil aviation authority’s aircraft certification system to ensure that the airworthiness standards of the importing civil aviation authority are satisfied. As we would expect this is a real time and cost saver for all parties involved in the process.

The Offshore Group: Could you explain to us what the Applicable National Requirements, Procedures, and Guidance Material under the BASA Agreement are of importance?

HG: That is not a problem at all, now a days, I carry this information with me at all times. Give just a second, OK, with the possibility of overdoing this chat but I shall keep brief, we as Attorneys shall consider:

In the U.S.A. - The FAA’s standards for aircraft airworthiness and environmental certification are contained in the Code of Federal Regulations (CFR), Title 14, Parts 21, 23, 25, 26, 27, 29, 31, 33, 34, 35, and 36. The FAA also uses Certification Specifications (CS)-22 and (CS)-VLA for some special class aircraft. Guidance material, policy, and procedures are contained in FAA Advisory Circulars, Orders, Notices, and Policy Memoranda.

In Mexico - DGAC standards for aircraft airworthiness and environmental certification are contained in the CP AV-01/02 Standards for Aeronautical Design Accepted by the Aeronautical Authority (January 24, 2012), Mexican Airworthiness Standard CP AV-05/05, Standards for the Certification of Aeronautical Products Accepted by the Aeronautical Authority (July 25, 2008). For Mexico, the Procedures are contained in Normas Oficiales Mexicanas (NOM’s), internal procedures, and guidance material. Also, at the Applicable National Requirements, Procedures, and Guidance Material CO AV-29-11 R1 -Standards for Aeronautical Manufacturing of Products and Parts Approval Accepted by the Aeronautical Authority (dated June 27, 2012) – This is Mexico’s most recently enacted Standards.

When we talk about the standards for Mexico, you should note that these are mandatory, and that they will apply to all companies that manufacture aerospace parts in Mexico. These establishment of these standards was executed in response to the significant increase in the number of firms manufacturing aeronautical products (airplanes, motors and/or propellers) in Mexico during the course of the last ten years.

The Offshore Group: On a personal business level, can you comment on the kind of challenges your firm has experienced in Mexico,or may experience in the future?

Humberto Gayou: The greatest challenge has been and will continue to be, for some time, reaching out to those companies not yet benefiting from the BASA Agreement. Many aerospace manufacturing in Mexico companies could benefit from an awareness of it. We feel that LexCorp is well-placed nation-wide to address the needs of the aerospace industry in Mexico. We feel that we can educate and serve aerospace manufacturers with respect to the BASA.

The Offshore Group: What say in general about the conditions for manufacturing aerospace parts in Mexico?

HG: All entities established in Mexico with the purpose of manufacturing aeronautical products or parts must comply with all requirements contained in the aforementioned standards in order to obtain a “Manufacture Approval” from the Aeronautic Authority to proceed with any manufacturing/production process.

The Offshore Group: I believe that you have already addressed this matter, but can you reiterate, who is the authority in Mexico who evaluates and implements the BASA Agreement?

HG: Of course, the DGAC is the authority that evaluates, qualifies and applies sanctions, by due process, in cases of non-compliance to these standards, or related laws, regulations and Mexican aerospace manufacturing standards that apply.

The Offshore Group: What would be the main challenge in Mexico for the aviation authorities in implementing the BASA Agreement?

HG: The DGAC,as the regulatory entity in Mexico implementing the BASA, faces, faces the challenges related to adapting to today’s needs and new environments in the specialized markets as they evolve. Effective implementation can only be successfully addressed in a collaboration with other Nations as has occurred historically with the U.S.A. The BASA between the U.S. and Mexico is a tangible example of this.

Furthermore, I consider that the DGAC, as the governing uthority in Mexico, must deal with the enforceability and harmony of provisions, rules and understandings reached at the Chicago Convention, the Convention on International Civil Aviation of the International Aviation Organization, and other International Treaties to which Mexico is a signatory, this includes Mexican Civil Aviation and other National Laws and Rules and its technical and official standards.

The Offshore Group: What effect is expected to occur as a result of the signing of the BASA between the two neighboring countries? It has been five years since the execution and signing of the BASA agreement occurred between the U.S. and Mexico. Can you please give us an assesssment on what the effect of its existence during this time has been?

HG: Thus far, it has been a major reason why aerospace manufacturing is growing and will continue to grow in Mexico.

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