Foreign Military Sales
Sentfore Insights
This note explains the difference between a Foreign Military Sale and a Direct Commercial Sale, who holds the contract in each, which part of the United States government is involved, and what the official position is on choosing between them.
The contracting relationship in each route, the licensing requirement that applies to a commercial sale, the stated neutrality of the United States government, and the category of items that may only move government to government.
Advice on which route suits a particular requirement, and any assessment of a specific transaction.
A partner government buying United States defense equipment has two lawful routes. Under Foreign Military Sales, it buys from the United States government. Under a Direct Commercial Sale, it buys from a company.
The manual defines a Direct Commercial Sale as "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 Foreign Military Sales procedures" (SAMM glossary, Direct Commercial Sale).
The consequence is set out in the standard notice an implementing agency sends a purchaser when a commercial route is preferred. It reads: "If a commercial transaction is undertaken, the USG shall not be a party to the contract; therefore, all aspects of contract performance must be between your government and the company" (SAMM C4.3.6.3).
Under Foreign Military Sales the position is the reverse. An implemented case "is a government-to-government agreement between the purchaser government or international organization and the United States" (SAMM C5.6.13), and the underlying procurement is placed by a United States contracting officer.
A commercial sale is an export, and it needs a licence. Section 38 of the Arms Export Control Act authorises the President to control the export and import of defense articles and defense services (22 U.S.C. 2778). That authority is implemented through the International Traffic in Arms Regulations.
The regulation records the delegation: "The Secretary of State delegates the authority to administer the regulations in this subchapter to the Deputy Assistant Secretary of State for Defense Trade Controls, Bureau of Political-Military Affairs" (22 CFR 120.1(a)).
The operative requirement is short. Any person intending to export or temporarily import a defense article "must obtain the approval of the Directorate of Defense Trade Controls prior to the export or temporary import, unless the export or temporary import qualifies for an exemption" (22 CFR 123.1). The same section requires the applicant to be registered with the Directorate first.
A Foreign Military Sale is authorised differently, as a government to government transfer under the Act, rather than by a licence issued to a company.
Two features of that regime matter to a partner government weighing the routes. The licence is issued to the exporter, not to the buyer, so the obligation to hold and comply with it sits with the company. And the company must already be registered with the Directorate before it may apply, which 22 CFR 123.1 requires "prior to submitting an application". A commercial route therefore depends on the standing of the supplier as much as on the merits of the transaction.
The United States government does not, as a matter of policy, push partners toward one route. The manual states that "the USG is generally neutral as to whether a partner purchases U.S.-origin defense articles or services commercially or through Government-to-Government (G2G) channels (e.g. FMS)". It then states the exception: "by exception the USG may determine that select defense articles, services, or technology be transferred on a G2G basis in order to protect its most sensitive and sophisticated technologies" (SAMM C4.3.4).
Neutrality has a practical edge. The manual also records that the department "does not provide price quotes for comparison of FMS to DCS" (SAMM C2.1.8.6). A partner weighing the two routes will not be handed a side by side comparison by the government.
Some items are not available commercially. The manual maintains a Government-to-Government Only list and states three grounds for putting something on it. They are technological sensitivity and sophistication, where "the most sensitive and sophisticated technology requires the highest degree of protection"; an agreement, arrangement or legal requirement; and supply that comes from the United States government (SAMM C4.3.5).
Inclusion on that list is a restriction on the commercial route, not a prohibition on industry involvement. The manual states that items on the list remain "eligible for transfer under any USG-directed export authority". It notes that in some cases those exports are "conducted by U.S. industry under an export license authorization". Inclusion on the list "should not be understood to prohibit approval of an export license in furtherance of a USG authorized G2G program" (SAMM C4.3.5.2).
There is also a route in the other direction. A company that would rather pursue a particular sale commercially may ask DSCA to issue a Direct Commercial Sale preference for that sale, and the manual records that such preferences "are valid for one year" (SAMM C4.3.6).
The difference a programme manager notices is which rulebook applies.
An FMS procurement runs on the ordinary United States defence acquisition rules. The Defense Federal Acquisition Regulation Supplement instructs contracting officers to "Conduct FMS acquisitions under the same acquisition and contract management procedures used for other defense acquisitions" (DFARS 225.7301(b)). The manual says the same from the other side: "Federal Acquisition Regulation (FAR) provisions applicable to the DoD also apply to FMS procurements" (SAMM C6.3.1).
The manual gives the reason partners often cite for choosing the route. Applying those rules "affords the foreign purchaser the same benefits and protection that apply to DoD procurement and is one of the principal reasons why foreign governments and international organizations prefer to procure through FMS channels" (SAMM C6.3.1).
A commercial sale carries none of that machinery, and carries instead the freedom to negotiate directly with the supplier. Neither is better in the abstract. They allocate control, administration and risk differently, and the allocation is the choice.
| DCS | Direct Commercial Sale. Defined at SAMM glossary. |
|---|---|
| DDTC | Directorate of Defense Trade Controls, the State Department body that licenses commercial exports of defense articles. 22 CFR 120.1. |
| ITAR | International Traffic in Arms Regulations, 22 CFR parts 120 to 130. |
| G2G Only | The list of items the manual restricts to government to government transfer. SAMM C4.3.5. |
| DFARS | Defense Federal Acquisition Regulation Supplement. Subpart 225.73 covers acquisitions for Foreign Military Sales. |
This note describes public United States government programmes for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.
Whichever route a programme takes, the equipment and the people operating it still have to be moved, housed, protected and supported in country. Sentfore's current services cover protective security, armored transport and secure movement, secure facilities and life support, technology and sensor integration, and contingency and expeditionary operations. Sentfore's principals have worked on overseas defense and security programmes in the regions where these requirements arise. Enquiries can be sent through the contact page.
Sentfore, LLC is a United States company based in McLean, Virginia. It provides protective security, armored transport and secure movement, secure facilities and life support, technology and sensor integration, contingency and expeditionary operations, and ISR advisory services for government, defense and commercial organisations operating in complex environments. Contact the team.