While purchasing an aircraft is already an extensive transaction, importing one from outside the United States adds another layer of difficulty. The importation process and paperwork are two major aspects of a domestic deal that can become even more complicated when dealing with foreign transactions.
In the United States, the Federal Aviation Administration (FAA) is the only place to verify aircraft records. Assuming an aircraft has always been in the United States, most reputable title companies can perform a quick title search to identify any claims impacting the title. However, in countries like Canada, there is no central source for determining an aircraft’s chain of ownership. Aircraft registration in Canada is done at the regional level, so it is necessary to conduct multiple provincial and territorial queries to ascertain whether there are any outstanding claims on Canadian-owned aircraft.
Each country has its own distinct aircraft registration process, and unfamiliarity with these procedures can significantly delay transactions and increase paperwork. The International Registry (IR) was created to address this issue, but it falls short in providing certainty of a clear chain of title, even for the aircraft it covers.
Another potential challenge in the aircraft purchase process is the pre-purchase inspection. A case was recently reported where a buyer imported a plane without setting up a thorough Purchase and Sale Agreement (P&S), and a dispute arose during the annual inspection performed by the buyer’s A&P. The buyer’s mechanic found several issues with the aircraft, but the seller believed that the aircraft was airworthy when it departed their country, leading to a disagreement over which country’s definition of airworthiness should take precedence. As a result, the deal and the aircraft were both in pieces, and the lender refused to release funds until someone confirmed the aircraft’s airworthiness. This situation emphasizes the importance of a thorough P&S agreement and understanding of the different country’s definitions of airworthiness.
In the United States, the FAA’s designated airworthiness representative (DAR) controls the transaction, overseeing the de-registration and registration process. Similarly, other countries have their equivalent representatives, offering various options on how to proceed. However, whichever course is chosen, it involves scheduling an appointment with the DAR and completing paperwork.
Other details to be resolved include determining the country where the plane will be de-registered, how it will be flown into the United States, how it will clear U.S. Customs, and how the aircraft will be re-registered. Therefore, it is recommended to hammer out a solid purchase and sales agreement before embarking on the journey. Clearly outlining all the details can help ensure expectations are realistic, specify when money will become non-refundable, and when the funds will be released to the seller.
Disputes can happen, so it is essential to clarify the dispute resolution process up front, the logistics of deregistering and re-registering the aircraft, and the time period for the designated airworthiness representative to inspect and deem the aircraft airworthy by U.S. standards. Another crucial piece of advice is to get title insurance, which is cost-effective and can defend you if something goes wrong.
Options for Financing Your Aircraft Outside the US
Air travel has become a critical aspect of both modern business and leisure. If you’re considering purchasing an aircraft outside of the US, aircraft financing can be a daunting task. Many individuals and businesses require financial assistance when purchasing aircraft for personal or business travel, especially when buying outside of their home country. Financing an aircraft outside of the US requires proper research and preparation to ensure a smooth and successful process. Let’s take a look at how to finance your aircraft outside the US, including your options, researching and comparing financing options, seeking guidance from aviation attorneys and financial advisors, and tips for successfully financing your aircraft.
The first step in aircraft financing outside the US is to understand the options available to you. In most cases, you can obtain financing from local lenders or international banks. Local lenders may offer competitive rates and may be more familiar with the regulations and laws of the country in which you are buying the aircraft. International banks may offer more flexibility in financing terms, including longer loan periods and lower interest rates.
Another option is to use private financing. Private financing is a viable option, especially for individuals or companies with a proven track record in the aviation industry. Private financing can be customized to meet specific needs and can offer more flexibility in terms of payment schedules.
Researching and Comparing Financing Options
After identifying the financing options available to you, the next step is to research and compare the terms and conditions of the lenders. It’s essential to understand the different financing options, including interest rates, repayment periods, and collateral requirements.
When comparing lenders, consider the following factors:
- Reputation: Research the reputation of the lender to ensure they are reputable and trustworthy.
- Interest rates: Compare the interest rates offered by different lenders and understand how they calculate the interest rate.
- Collateral requirements: Understand the collateral requirements and whether they are reasonable based on the value of the aircraft.
- Repayment periods: Consider the repayment periods and ensure they are feasible based on your financial situation.
- Loan-to-value ratio: Understand the loan-to-value ratio, which is the ratio of the loan amount to the value of the aircraft. Ensure that the ratio is reasonable and in line with industry standards.
Flying an aircraft is a dream for many, but financing one may prove to be more difficult. If you are considering purchasing an aircraft outside the US, there are several important factors to consider before proceeding. These include seeking guidance from aviation attorneys and financial advisors, understanding the financing process, and knowing the tips for successfully financing your aircraft outside the US.
Seeking Guidance from Aviation Attorneys and Financial Advisors
Before you start looking for an aircraft to purchase outside the US, it is important to seek guidance from aviation attorneys and financial advisors who have experience in international asset-based finance transactions. Aviation attorneys can help you navigate the legal complexities of purchasing and owning an aircraft outside the US. They can also provide guidance on how to structure your transaction to minimize risk and ensure compliance with international regulations.
Financial advisors, on the other hand, can help you assess the financial risks associated with purchasing an aircraft outside the US. They can help you understand the financing options available, including loans and leases, and advise you on the best course of action based on your financial situation.
Tips for Successfully Financing Your Aircraft Outside the US
Once you have sought guidance from aviation attorneys and financial advisors, you can begin to explore your financing options. Here are some tips to help you successfully finance your aircraft outside the US:
- Choose a reputable lender: It is important to choose a lender with experience in international aircraft financing. Look for a lender that has a proven track record of successful transactions and understands the regulatory requirements of the country where the aircraft is located.
- Understand the regulatory requirements: Each country has its own regulations regarding aircraft financing. It is important to understand these regulations and ensure that you comply with them to avoid any legal issues down the line.
- Consider leasing: Leasing an aircraft can be a viable option for those who cannot afford to purchase an aircraft outright. Leasing also provides flexibility in terms of aircraft type, duration, and financing options.
Conclusion
When it comes to financing an aircraft outside the US, there are several factors that you need to consider. Whether you’re buying a new aircraft or leasing one, it’s important to have a solid financing plan in place.
First and foremost, you’ll need to research and understand the different regulations and laws that apply to aircraft financing in the country where you plan to operate the aircraft. You’ll also need to find a reliable financing institution that is willing to work with you on financing your aircraft.
Additionally, you may want to consider exploring asset-based finance options with international lenders or manufacturers, as they may have specific programs that cater to customers outside the US.
In conclusion, financing an aircraft outside the US can be a complex process, but with the right research and planning, it’s possible to secure the financing you need to get your aircraft off the ground.
