An aircraft component is not in compliance with the configuration drawing. Yet,the contractor states that the item is fine to use. The component is in a use- as- is status.
Should the end user know that the component is not in accord with the design requirements?
There are a number of details that could change this answer, but here's a response that applies in general.
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In your background statement you say "the contractor states that the item is fine to use". If the design authority has approved the disposition of a part, or lot of parts, through some sort of MRB process as "use as is" the part is considered to be acceptable and no further traceability actions need to be taken. If the nonconformity results in a departure from customer requirements then the customer must also approve the disposition of use as is. The contractor just stating that "the item is fine to use" does not make it so. Some MRB type process must be used to make the determination.
If the contractor has an ISO 9001 quality system, it should maintain a record of the action and rational for making the disposition. The customer may also keep records. I say "in general" because there are some specialized quality systems (i.e. Navy SUBSAFE) where traceability requirements are more stringent. Also there are situations where parts can not be determined as non-conforming until they are incorporated into a higher assembly. In those cases traceability must be maintained until a final determination is made.