The State Department’s Directorate of Defense Trade Controls (DDTC) executes authority in issuing export licenses to all defense related products and services on the U.S. Follow the links to learn more about activities, missions, and contacts. The future of the Export-Import Bank of the United States (EXIM), and its credit and financing options to potential foreign customers; The strength or weakness of the U.S. dollar driving the price of aerospace and defense exports; and. A key difference between Foreign Military Sales (FMS) and Direct Commercial Sales (DCS) is that: Unlike FMS, with DCS the purchaser must communicate with the US Government . Qualifying for an export license through DCS is based on how a product or service is categorized. Eligible Countries c. Eligible Contractors d. Eligible Items i. When buying directly from the government’s stockpiles, foreign customers will have more leverage in the unit price of a defense system – as these same systems are also acquired by the U.S. military and defense agencies. As the Coast Guard acquires new ships, boats, and aircraft, the assets are made available, through the FMS program, to other countries under already established contracts. The opinions and conclusions in this paper are those of the author and are not intended to represent the official position of the DOD, USAF, or any other government agency. While FMS cases must have departmental approval, they are exempt from the export licensing process. Domestic Content Requirements & Exceptions iii. efficient Defense Industrial Base to support our national security through Foreign Military Sales (FMS): Government-to-government sales facilitated and regulated by the United States government. Foreign Military Sales Versus Direct Commercial Sales [Metin Gultekin] on Amazon.com. The State Department's Direct Commercial Sales (DCS) program regulates U.S. companies' sales of U.S. defense articles and defense services on the U.S. DCS has the added benefit of giving customers options to purchase more non-standard systems that are mission specific, and designed to tackle readiness challenges. Arlington, VA | 703-200-2409 Foreign Military Sales vs Direct Commercial Sales Economic Overview U.S. aerospace and defense exports (1) sustain a domestic workforce in the manufacturing sector, (2) support national security programs through the foreign military sales (FMS) and direct commercial sales (DCS) processes, and (3) narrow the U.S. trade deficit gap. VA 2778 of U.S. Code, DCS is distinguished from the Foreign Military Sales (FMS) program, which manages government-to-government sales or transfers. It has been reproduced in the best form available to the Pentagon. A September 2016 White House approval of the sale of fighter jets to the Middle East illustrates the impact that FMS has on the U.S. economy, while concurrently serving U.S. national security interests. The US DOD will negotiate with the Customer on behalf of the Vendor. Disclosure e. Contracts i. While the U.S. government contracts out to the defense industry on a competitive or sole-source basis, it may also sell directly from its own stockpiles. The US DOD guarantees payment by the Customer. All rights reserved. Both are viable options for U.S. defense companies seeking to do business overseas. Regulatory Coverage vs. Use on contracts for foreign military sales shall be on a rent-free basis. With State Department blessing, the Defense Security Cooperation Agency notifies Congress of major arms sales under the Foreign Military Sales program, starting a clock (typically 30 days) during which Congress can block a sale by passing a resolution to do so in both the House and Senate. A sale of defense articles or defense services made under a Department of State issued license by U.S. industry directly to a foreign buyer, and which is not administered by DoD through FMS procedures. The NDIA Chapters are the foundation of the Association. What differentiates Direct Commercial Sales (DCS)? The Foreign Military Sales (FMS) program manages government-to-government purchases of weapons and other defense articles, defense services, and military training. Unlike DCS, with FMS the foreign government has a contract with a US contractor 245 ... in its calculation of the nonrecurring cost recoupment charge when major defense equipment is sold by foreign military sales or direct commercial sales to foreign governments or international organizations. For this reason, the United States takes into account political, military, economic, arms control, and human rights conditions in determining the provision of military equipment and the licensing of direct commercial sales to any country. Check out my overview of the benefits of FMS vs. the benefits of DCS. This is a government-to-government transfer, so the export process is managed the US DOD. Both are viable options for U.S. defense companies seeking to do business overseas. An essential course for manufacturers, exporters and their executives, and legal and financial advisors....Learn More Now Congress must be notified by the State Department of a decision to issue an export license if the sale includes significant defense equipment valued at $14 million or more. While certain terms of agreements may change and deliveries (if any) take years to complete, … the Foreign Military Sales program (FMS), through which the U.S. government procures defense articles as an intermediary for foreign partners. NDIA Affiliates are subsidiary organizations that focus on specific areas and missions related to it's community of interest. DCS is the mode that foreign government deals with U.S. military suppliers directly, with the permission of the U.S. government. U.S. financial assistance, through the Foreign Military Financing Program (FMF) may be available to the Customer. DCS is regarded as a more flexible process, as the purchaser consults directly with industry about specific products and services it needs. A military buying weapons through the FMS program does not deal directly with the company that makes them. Foreign Military Sales. If FMF funds are available, they must be processed through FMS (except for the ten countries granted an exception). The Customer pays an additional 3.5% of the total price to cover the contracting and administrative services provided by US DOD. Guidelines and Ground Rules b. The initial deposit required is usually somewhat lower than commercial contract down payments. Arlington, The USG is not involved in the sale (although the vendor is required to comply with U.S. regulations regarding military exports). direct commercial sales between foreign countries and U.S. contractors that are financed by foreign military financing credits are DoD procurements and should follow FAR and DFARS requirements for acquisition and contract administration. In the U.S. foreign arms sale, there are two modes, “Foreign Military Sale (FMS)” and “Direct Commercial Sale (DCS)”. LMDefense provides consulting and brokering services to help U.S. defense companies do business overseas. Under the AECA, there are three main authorities through which the United States can provide defense articles or services to another country: government-to-government Foreign Military Sales (FMS); licensed exports of direct commercial sales (DCS); and the lease of defense articles. Direct Commercial Sales United States Government LOA CONTRACT Foreign Military Sales United States Contractor Foreign Government CONTRACT United States Government EXPORT LICENSE OFFSET AGREEMENT •The AECA requires that the FMS program must be conducted at no cost to the U.S. Government and may not be supported by appropriated funds. Policy staff regularly meets with key policy stakeholders, and manages Congressional interaction with NDIA Chapters and Divisions. Check out our Services or Contact Us to learn more. Each affiliate has its own membership, structure, and dues. Authorized under Sec. Customer negotiates directly with the Vendor. *FREE* shipping on qualifying offers. Over the past three years, the Policy team has led NDIA’s Acquisition Reform Initiative. The United States has four different ways to provide military equipment to Latin America: Foreign Military Financing (grants for military purchases), direct commercial sales (negotiated Financing Security ii. U.S. Government’s Foreign Military Sales (“ FMS ”) program and similar mechanisms, and Direct Commercial Sales (“ DCS ”) negotiated directly between the contractor and the foreign customer. also read. Furthermore, foreign countries use FMF funding to purchase U.S. defense products and systems through both the FMS program and, on occasion, the DCS process. DCS arms sale involves sub-system like jet engine and other technology. As Fiscal Year (FY) 2017 comes to a close, FMS sales total roughly $64 billion, surpassing the previous record of $67.8 billion in total sales in FY 2012. Accesion For PTIS … FMS – an acquisition program administered through the Defense Security Cooperation Agency (DSCA), with final approval by the State Department – supports security cooperation between the U.S. and its allies. We are also authorized to provide EDA under the FAA and to approve third-party transfer requests under both the … From there, you might want to see the rest of my posts on FMS. The NDIA Business Institute exists to build a more capable, qualified, and FMF funds purchases are made through the Foreign Military Sales (FMS) program, which manages government-to-government sales. This facilitates payment by the Customer. However, they must carry more risk and administrative burdens. On a much less frequent basis, FMF also funds purchases made through the Direct Commercial Sales (DCS) program, which oversees sales between foreign governments and private U.S. companies. Why purchase through the FMS program? NDIA's vast network of members embodies the full spectrum of corporate, government, academic, and individual stakeholders who advocate for a strong, vigilant, and innovative national defense. It is not spiral-bound For qualified FMS customers, the U.S. Congress provides funding through foreign military financing (FMF). Place of Manufacture ii. Munitions List abroad. Our mission is to ensure the continued existence of a viable, competitive national technology and industrial base, strengthen the government-industry partnership through dialogue, and provide interaction between the legislative, executive, and judicial branches. U.S. aerospace and defense exports (1) sustain a domestic workforce in the manufacturing sector, (2) support national security programs through the foreign military sales (FMS) and direct commercial sales (DCS) processes, and (3) narrow the U.S. trade deficit gap. Direct commercial contracts generally require a relatively large down payment, payable at the time of contract signature. American arms manufacturers have two major channels through which they can sell major weaponry to foreign countries: foreign military sales ("FMS"), in which a government-to-government agreement is negotiated by the Pentagon; and direct commercial sales ("DCS"), in which industry negotiates directly with the purchasing country and must apply for a license from the State Department. Broadly, combat resource acquisition comes in two colors, FMS and DCS. U.S. Government (USG) is not involved in the transaction, and does not act on behalf of the Customer or Vendor should complications arise. U.S. Defense companies have two main avenues for selling on the international market: Direct Commercial Sales (DCS) and Foreign Military Sales (FMS). A Comparison of Foreign Military Sales FMS Versus Direct Commercial Sales DCS Back A Comparison of Foreign Military Sales (FMS) Versus Direct Commercial Sales (DCS) September 30, 2014, Co-Author with the General Counsel for the Defense Security Cooperation Agency. WHETHER FOREIGN MILITARY SALES OR DIRECT COMMERCIAL SALES: A CASE STUDY OF THE UK E-3 AWACS THESIS Larry L. Brown, GS-13 AFIT/GLM/LSM/90S-6 Approved for public release; distribution unlimited . Authorized by the State Department, and administered through DSCA, FMF funding is a non-repayable loan legally granted to strategic countries – most notably Israel, Egypt, Afghanistan, and Iraq. Any required notifications to Congress are jointly sponsored by the US DOD and the State Department. Challenges. Foreign Military Financing of Direct Commercial Sales a. This adds value for customers by ensuring that they have the same contract benefits and protections that apply to the U.S. military’s acquisition of its own defense articles and services. Defense technology transfers equip our international friends and allies with capabilities needed to address regional and global security concerns. Abstract : The transfer of arms from the U.S. to other countries under the Security Assistance Program is done in two basic ways: government-to-government Foreign Military Sales (FMS), and contractor-to-government Direct Commercial Sales (DCS). Both methods have existed for decades, but a novice to international sales has a steep learning curve regarding the complexities of each. In these cases, the Pentagon does not support these types of mission requirements in their stockpiles, or in their annual budget. While several deals are still pending, or are in the Letter of Offer and Acceptance (LOA) phase, the next few years will see growth for several defense companies and a growing industrial supply chain. US DOD procures the defense articles under the same contractual provisions used for all DOD procurement. Click here for NDIA information related to Coronavirus (COVID-19), Defense Security Cooperation Agency (DSCA), Directorate of Defense Trade Controls (DDTC), International Traffic in Arms Regulations (ITAR, Website design and development by Americaneagle.com. The FMS program’s overriding purpose is to build relationships with foreign countries by contracting on their behalf with industry providers. The granting of a license does not necessarily mean that items will be delivered immediately; licenses are valid for four years, during which sales may be delayed or … Foreign customers view the FMS process as more transparent, reliable, and secure. Check out our, Foreign Military Sales Sole Source Requirements Updated, Foreign Military Sales Admin Fee Decreases to 3.5%; Small Case Fee Eliminated. In 2016 alone, aerospace and defense exports reduced the overall deficit by $80-90 billion dollars. Direct Commercial Sales Reviews. Basically, DCS is any sale not through the FMS/FMF system. This chart explains the main differences between Foreign Military Sales (FMS) and Direct Commercial Sales (DCS). U.S. Defense companies have two main avenues for selling on the international market: Direct Commercial Sales (DCS) and Foreign Military Sales (FMS). Vendor – the Vendor refers to the U.S. defense company seeking to sell their product overseas. Foreign Military Sales (FMS) is the U.S. Government’s program for transferring defense articles, services, and training to our international partners and international organizations. LMDefense, LLC is a registered broker for defense articles and services. Unlike FMS, direct commercial sales are negotiated directly between the foreign … If the Customer wishes to use FMF funding, DCS is not an option. These activities represent overhead management costs to the Customer. The size and skill of the Customer contracting staff may be a limiting factor during procurement. tel: (703) 522-1820, Chemical Biological Defense Acquisition Initiatives Forum, Industrial Committee of Ammunition Producers, Industrial Committee on Test and Evaluation, Trusted Microelectronics Joint Working Group, ADAPT - Agile Delivery for Agencies, Programs and Teams. Located in areas of concentrated defense work, they collaborate with government and industry to facilitate important discussions of local issues and matters critical to our national defense. The US DOD assumes contracting risk and is responsible for ensuring that the Vendor meets cost, schedule, and performance requirements. –The … A robust defense industrial-government network consisting of Divisions, Industrial Committees, and ad-hoc Working Groups. 22201 This chart explains the main differences between Foreign Military Sales (FMS) and Direct Commercial Sales (DCS). This effort has provided legislative recommendations to assist Congressional acquisition reform efforts, many of which were enacted or influenced final provisions in the Fiscal Year 2016 and Fiscal Year 2017 National Defense Authorization Acts. These methods help to increase standardization and interoperability between the U.S. and its Allies. Competition in the form of subsidized, or state-owned, foreign defense companies receiving sole-sourced contracts in place of competitive contract bidding. The United States Government benefits directly and indirectly from transfers of military technologies or systems to foreign governments or end users. The NDIA Policy team monitors, advocates for, and educates government stakeholders on, policy matters of importance to the defense industrial base. These methods help to increase standardization and interoperability between the U.S. and its Allies. Major defense equipment is defined in DODD 2140.2, Recoupment of Nonrecurring Costs on Sales of … The U.S. government takes on more of the contractual risk than the customer in the short run, and supports the sustainment of the defense system in the long run. doing business with the Department of Defense. The Vendor must obtain export approval from the U.S. State Department. Foreign Military vs. No involvement by the Vendor is required. Like the FMS program, DCS advances interoperability between the U.S military and its allies. (Basically, both DCS and FMS require the same type of notification). However, as foreign competitors move into the global aerospace and defense market more vigorously, several factors will affect (and are affecting) the future long-term presence of the United States: 2101 Wilson Blvd, Suite 700 Growth in Foreign Military Sales — Fluke or Long-Term Trend? 3. U.S. DOD – U.S. DOD refers to any U.S. military office. The Apache sale is a hybrid procurement—Direct Commercial Sale (DCS) between Boeing and MoD and Foreign Military Sale (FMS) between government of India and the US government. NDIA convenes events and forums for the exchange of ideas, which encourage research and development, and routinely facilitates analyses on the complex challenges and evolving threats to our national security. DCS should be distinguished from the Foreign Military Sales program, which manages government-to-government sales. DCS means that the U.S. defense company (the vendor) works directly with the foreign government customer to negotiate, finalize, and deliver a sale. Or, learn more about LMDefense and our consulting services. This is a NAVAL POSTGRADUATE SCHOOL MONTEREY CA report procured by the Pentagon and made available for public release. These organizations are driving the future of defense through education, access, and collaboration. The Vendor negotiates with the Customer. Customer – the Customer refers to the Foreign Government purchaser of the U.S. defense products. The Policy team also represents NDIA in several inter-association groups representing the defense industry and the government contracting community including the Council of Defense and Space Industry Associations (CODSIA), the Acquisition Reform Working Group (ARWG), and the Industry Logistics Coalition (ILC). Foreign governments buy billions of dollars of defense equipment and services through the U.S. Defense Department's foreign military sales program. Through the Foreign Military Sales process, the U.S. government serves as a go-between for foreign partners and American industry. As part of this diverse network, over 1,560 corporate and 63,800 individual members are actively developing best practices, initiatives, technology, and products in defense with continued guidance and feedback from key stakeholders. This may create difficulties for the Customer. Foreign customers leverage more negotiating power regarding the type of contract (fixed price or firm fixed price), how the contract is written, final delivery requirements, and methods of payment. The Customer assumes management responsibility. FMS is distinguished from the Direct Commercial Sales (DCS) program, which covers commercail sales of defense articles and defense services between foreign governments and private U.S. companies, and the Foreign Military Financing (FMF) program, which provides grants and loans for FMS and DCS purchases. maloberti@lmdefense.com, LMDefense | 703-200-2409 | About | Contact, Our consulting services can help you determine whether FMS or DCS is right for your company! NDIA provides a platform through which leaders in government, industry and academia can collaborate and provide solutions to advance the national security and defense needs of the nation. Ten countries are granted an exception that allows them to use FMF funding to pay for DCS contracts: Israel, Egypt, Jordan, Morocco, Tunisia, Turkey, Portugal, Pakistan, Yemen, and Greece. The Vendor is responsible for submitting a completed DSP-83. Munitions List (USML), pursuant to the International Traffic in Arms Regulations (ITAR). There are various DOD offices involved in the FMS process. A direct commercial sale requires an export license, which is issued by the Office of Defense Trade Controls at the State Department's Bureau for Political-Military Affairs. © 2020 National Defense Industrial Association. The FMS program is funded by administrative charges to foreign purchasers and is operated at no cost to taxpayers. The transfer of arms from the U.S. to other countries under the Security Assistance Program is done in two basic ways government-to-government Foreign Military Sales FMS, and contractor-to-government Direct Commercial Sales DCS. The Department of Commerce’s Bureau of Industry and Security (BIS) grants export licenses to more commercial and “dual-use” defense products and services on the Commerce Control List (CCL), pursuant to the Export Administration Regulations (EAR). Our consulting services can help you determine whether FMS or DCS is right for your company! Join a local chapter and get plugged in to NDIA. As Fiscal Year (FY) 2017 comes to a close, FMS sales total roughly $64 billion, surpassing the previous record of $67.8 billion in total sales in FY 2012. Our services are designed to demystify the international sales process, identify opportunities, connect with potential customers, and navigate the logistics of international sales. Direct Commercial. Since offsets are utilized in both foreign military sales (FMS) and direct commercial sales (DCS), they are subject to the International Traffic in Arms Regulation (ITAR) and the Foreign Corrupt Practices Act (FCPA). Contracting and administrative burdens wishes to use FMF funding, DCS advances interoperability between the U.S. and its Allies does! Licensing process same contractual provisions used for all DOD procurement is usually somewhat lower than Commercial contract down payments (! 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