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. Or, learn more about LMDefense and our consulting services. 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. Basically, DCS is any sale not through the FMS/FMF system. Vendor – the Vendor refers to the U.S. defense company seeking to sell their product overseas. Foreign Military Sales. 2778 of U.S. Code, DCS is distinguished from the Foreign Military Sales (FMS) program, which manages government-to-government sales or transfers. DCS should be distinguished from the Foreign Military Sales program, which manages government-to-government sales. Accesion For PTIS … 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). The US DOD guarantees payment by the Customer. The USG is not involved in the sale (although the vendor is required to comply with U.S. regulations regarding military exports). The Customer pays an additional 3.5% of the total price to cover the contracting and administrative services provided by US DOD. The US DOD assumes contracting risk and is responsible for ensuring that the Vendor meets cost, schedule, and performance requirements. This facilitates payment by the Customer. 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. However, they must carry more risk and administrative burdens. 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). U.S. financial assistance, through the Foreign Military Financing Program (FMF) may be available to the Customer. Both are viable options for U.S. defense companies seeking to do business overseas. Qualifying for an export license through DCS is based on how a product or service is categorized. 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. 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. Authorized under Sec. Major defense equipment is defined in DODD 2140.2, Recoupment of Nonrecurring Costs on Sales of … 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! 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. the Foreign Military Sales program (FMS), through which the U.S. government procures defense articles as an intermediary for foreign partners. Our services are designed to demystify the international sales process, identify opportunities, connect with potential customers, and navigate the logistics of international sales. Foreign customers view the FMS process as more transparent, reliable, and secure. Foreign Military Financing of Direct Commercial Sales a. 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. No involvement by the Vendor is required. 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. In these cases, the Pentagon does not support these types of mission requirements in their stockpiles, or in their annual budget. This is a government-to-government transfer, so the export process is managed the US DOD. 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. 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 Foreign governments buy billions of dollars of defense equipment and services through the U.S. Defense Department's foreign military sales program. Foreign Military Sales Versus Direct Commercial Sales [Metin Gultekin] on Amazon.com. 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 . 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. Regulatory Coverage vs. This may create difficulties for the Customer. The Vendor is responsible for submitting a completed DSP-83. 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. 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. 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). FMF funds purchases are made through the Foreign Military Sales (FMS) program, which manages government-to-government sales. 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. Domestic Content Requirements & Exceptions iii. In 2016 alone, aerospace and defense exports reduced the overall deficit by $80-90 billion dollars. Challenges. 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. Over the past three years, the Policy team has led NDIA’s Acquisition Reform Initiative. The NDIA Business Institute exists to build a more capable, qualified, and Each affiliate has its own membership, structure, and dues. 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. 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. DCS arms sale involves sub-system like jet engine and other technology. 22201 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. Arlington, All rights reserved. Customer – the Customer refers to the Foreign Government purchaser of the U.S. defense products. DCS is the mode that foreign government deals with U.S. military suppliers directly, with the permission of the U.S. government. 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. doing business with the Department of Defense. Munitions List (USML), pursuant to the International Traffic in Arms Regulations (ITAR). These methods help to increase standardization and interoperability between the U.S. and its Allies. This is a NAVAL POSTGRADUATE SCHOOL MONTEREY CA report procured by the Pentagon and made available for public release. 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. Check out our Services or Contact Us to learn more. Financing Security ii. 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. Like the FMS program, DCS advances interoperability between the U.S military and its allies. Disclosure e. Contracts i. © 2020 National Defense Industrial Association. Place of Manufacture ii. Check out our, Foreign Military Sales Sole Source Requirements Updated, Foreign Military Sales Admin Fee Decreases to 3.5%; Small Case Fee Eliminated. A robust defense industrial-government network consisting of Divisions, Industrial Committees, and ad-hoc Working Groups. Policy staff regularly meets with key policy stakeholders, and manages Congressional interaction with NDIA Chapters and Divisions. While certain terms of agreements may change and deliveries (if any) take years to complete, … VA U.S. DOD – U.S. DOD refers to any U.S. military office. Foreign Military Sales (FMS): Government-to-government sales facilitated and regulated by the United States government. Use on contracts for foreign military sales shall be on a rent-free basis. If FMF funds are available, they must be processed through FMS (except for the ten countries granted an exception). Unlike FMS, direct commercial sales are negotiated directly between the foreign … While FMS cases must have departmental approval, they are exempt from the export licensing process. The size and skill of the Customer contracting staff may be a limiting factor during procurement. The foundation of the Vendor pursuant to the Customer refers to any U.S. Military directly. 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