Domestic Content Requirements & Exceptions iii. Financing Security ii. Customer – the Customer refers to the Foreign Government purchaser of the U.S. defense products. The Vendor must obtain export approval from the U.S. State Department. U.S. Government (USG) is not involved in the transaction, and does not act on behalf of the Customer or Vendor should complications arise. 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. For qualified FMS customers, the U.S. Congress provides funding through foreign military financing (FMF). Challenges. Competition in the form of subsidized, or state-owned, foreign defense companies receiving sole-sourced contracts in place of competitive contract bidding. 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. Major defense equipment is defined in DODD 2140.2, Recoupment of Nonrecurring Costs on Sales of … It has been reproduced in the best form available to the Pentagon. The Customer assumes management responsibility. FMF funds purchases are made through the Foreign Military Sales (FMS) program, which manages government-to-government sales. 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. LMDefense, LLC is a registered broker for defense articles and services. 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 These methods help to increase standardization and interoperability between the U.S. and its Allies. VA Arlington, VA | 703-200-2409 Or, learn more about LMDefense and our consulting services. 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. 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). 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. 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. Authorized under Sec. NDIA Affiliates are subsidiary organizations that focus on specific areas and missions related to it's community of interest. Check out my overview of the benefits of FMS vs. the benefits of DCS. Our services are designed to demystify the international sales process, identify opportunities, connect with potential customers, and navigate the logistics of international sales. 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. Vendor – the Vendor refers to the U.S. defense company seeking to sell their product overseas. 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. Join a local chapter and get plugged in to NDIA. The United States Government benefits directly and indirectly from transfers of military technologies or systems to foreign governments or end users. This chart explains the main differences between Foreign Military Sales (FMS) and Direct Commercial Sales (DCS). 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. Regulatory Coverage vs. 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. The FMS program’s overriding purpose is to build relationships with foreign countries by contracting on their behalf with industry providers. 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. 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. The NDIA Business Institute exists to build a more capable, qualified, and DCS should be distinguished from the Foreign Military Sales program, which manages government-to-government sales. 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. Like the FMS program, DCS advances interoperability between the U.S military and its allies. 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. However, they must carry more risk and administrative burdens. 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. We are also authorized to provide EDA under the FAA and to approve third-party transfer requests under both the … © 2020 National Defense Industrial Association. All rights reserved. Foreign customers view the FMS process as more transparent, reliable, and secure. Foreign Military Sales Versus Direct Commercial Sales [Metin Gultekin] on Amazon.com. From there, you might want to see the rest of my posts on FMS. Check out our Services or Contact Us to learn more. The US DOD will negotiate with the Customer on behalf of the Vendor. Arlington, 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. The NDIA Chapters are the foundation of the Association. Each affiliate has its own membership, structure, and dues. 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. Direct Commercial Sales Reviews. Munitions List (USML), pursuant to the International Traffic in Arms Regulations (ITAR). Defense technology transfers equip our international friends and allies with capabilities needed to address regional and global security concerns. The USG is not involved in the sale (although the vendor is required to comply with U.S. regulations regarding military exports). 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. Unlike DCS, with FMS the foreign government has a contract with a US contractor the Foreign Military Sales program (FMS), through which the U.S. government procures defense articles as an intermediary for foreign partners. 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. 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! 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. 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. U.S. Defense companies have two main avenues for selling on the international market: Direct Commercial Sales (DCS) and Foreign Military Sales (FMS). Qualifying for an export license through DCS is based on how a product or service is categorized. Any required notifications to Congress are jointly sponsored by the US DOD and the State Department. doing business with the Department of Defense. 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 . DCS is the mode that foreign government deals with U.S. military suppliers directly, with the permission of the U.S. government. 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 … Basically, DCS is any sale not through the FMS/FMF system. efficient Defense Industrial Base to support our national security through –The … 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. 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. Place of Manufacture ii. The NDIA Policy team monitors, advocates for, and educates government stakeholders on, policy matters of importance to the defense industrial base. Both are viable options for U.S. defense companies seeking to do business overseas. The initial deposit required is usually somewhat lower than commercial contract down payments. 3. The size and skill of the Customer contracting staff may be a limiting factor during procurement. The Vendor is responsible for submitting a completed DSP-83. 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. Follow the links to learn more about activities, missions, and contacts. The FMS program is funded by administrative charges to foreign purchasers and is operated at no cost to taxpayers. This chart explains the main differences between Foreign Military Sales (FMS) and Direct Commercial Sales (DCS). U.S. financial assistance, through the Foreign Military Financing Program (FMF) may be available to the Customer. Disclosure e. Contracts i. *FREE* shipping on qualifying offers. Guidelines and Ground Rules b. 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. 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). US DOD procures the defense articles under the same contractual provisions used for all DOD procurement. DCS arms sale involves sub-system like jet engine and other technology. Both methods have existed for decades, but a novice to international sales has a steep learning curve regarding the complexities of each. Policy staff regularly meets with key policy stakeholders, and manages Congressional interaction with NDIA Chapters and Divisions. 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). In the U.S. foreign arms sale, there are two modes, “Foreign Military Sale (FMS)” and “Direct Commercial Sale (DCS)”. An essential course for manufacturers, exporters and their executives, and legal and financial advisors....Learn More Now 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. 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. 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. The Customer pays an additional 3.5% of the total price to cover the contracting and administrative services provided by US DOD. 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. 22201 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 . U.S. Defense companies have two main avenues for selling on the international market: Direct Commercial Sales (DCS) and Foreign Military Sales (FMS). DCS is regarded as a more flexible process, as the purchaser consults directly with industry about specific products and services it needs. What differentiates Direct Commercial Sales (DCS)? Eligible Countries c. Eligible Contractors d. Eligible Items i. Unlike FMS, direct commercial sales are negotiated directly between the foreign … 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). Over the past three years, the Policy team has led NDIA’s Acquisition Reform Initiative. Munitions List abroad. If FMF funds are available, they must be processed through FMS (except for the ten countries granted an exception). 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. 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. LMDefense provides consulting and brokering services to help U.S. defense companies do business overseas. Customer negotiates directly with the Vendor. U.S. DOD – U.S. DOD refers to any U.S. military office. These organizations are driving the future of defense through education, access, and collaboration. Direct commercial contracts generally require a relatively large down payment, payable at the time of contract signature. While certain terms of agreements may change and deliveries (if any) take years to complete, … 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. This facilitates payment by the Customer. Both are viable options for U.S. defense companies seeking to do business overseas. There are various DOD offices involved in the FMS process. This is a government-to-government transfer, so the export process is managed the US DOD. 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. These methods help to increase standardization and interoperability between the U.S. and its Allies. Foreign Military Financing of Direct Commercial Sales a. 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. Growth in Foreign Military Sales — Fluke or Long-Term Trend? Why purchase through the FMS program? The US DOD assumes contracting risk and is responsible for ensuring that the Vendor meets cost, schedule, and performance requirements. 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. This may create difficulties for the Customer. 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 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. No involvement by the Vendor is required. (Basically, both DCS and FMS require the same type of notification). The Foreign Military Sales (FMS) program manages government-to-government purchases of weapons and other defense articles, defense services, and military training. Our consulting services can help you determine whether FMS or DCS is right for your company! The Vendor negotiates with the Customer. A military buying weapons through the FMS program does not deal directly with the company that makes them. 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. In these cases, the Pentagon does not support these types of mission requirements in their stockpiles, or in their annual budget. 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. Foreign Military Sales. 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. 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. Foreign Military Sales (FMS): Government-to-government sales facilitated and regulated by the United States government. The US DOD guarantees payment by the Customer. It is not spiral-bound 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. 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. Check out our, Foreign Military Sales Sole Source Requirements Updated, Foreign Military Sales Admin Fee Decreases to 3.5%; Small Case Fee Eliminated. 2778 of U.S. Code, DCS is distinguished from the Foreign Military Sales (FMS) program, which manages government-to-government sales or transfers. A robust defense industrial-government network consisting of Divisions, Industrial Committees, and ad-hoc Working Groups. Through the Foreign Military Sales process, the U.S. government serves as a go-between for foreign partners and American industry. 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. These activities represent overhead management costs to the Customer. 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. While FMS cases must have departmental approval, they are exempt from the export licensing process. 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. In 2016 alone, aerospace and defense exports reduced the overall deficit by $80-90 billion dollars. Use on contracts for foreign military sales shall be on a rent-free basis. Broadly, combat resource acquisition comes in two colors, FMS and DCS. Direct Commercial. Foreign governments buy billions of dollars of defense equipment and services through the U.S. Defense Department's foreign military sales program. DCS means that the U.S. defense company (the vendor) works directly with the foreign government customer to negotiate, finalize, and deliver a sale. Foreign Military vs. If the Customer wishes to use FMF funding, DCS is not an option. 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. 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. Accesion For PTIS … This is a NAVAL POSTGRADUATE SCHOOL MONTEREY CA report procured by the Pentagon and made available for public release. also read. Contracting on their behalf with industry about specific products and services it needs of.. 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