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Foreign Military Sales

A U.S. Air Force C-130H Hercules assigned to the 746th Expeditionary Airlift Squadron at Al Udeid Air Base, Qatar, prepare to taxi down the runway to depart for a combat airdrop mission over an undisclosed location in support of Combined Joint Task Force-Inherent Resolve's Operation Roundup, June 11, 2018. The C-130H squadron is deployed from the 908th Airlift Wing, Maxwell Air Force Base, Ala. Known as the "workhorse of the Air Force," the plane can carry 42,000 pounds of cargo. (U.S. Air Force photo by Staff Sergeant Rion Ehrman)

Foreign Military Sales (FMS) are growing quickly as the U.S.-industry preferred method for selling products and services abroad. For companies in a solid position as US DoD providers but new to exporting, FMS offers huge logistical benefits;

  • U.S. DoD serves as a go-between in an international FMS transaction.
  • The final customer is a foreign military, but the U.S. defense company deals primarily with the U.S. DoD.
  • The DoD handles all the logistics associated with the international sale, including permits, transportation, and payments.
  • Allows for a broader customer base, reduces inherent risks in direct commercial international sales, better facilitates planning, and reduces the administrative burden of doing business internationally.

Top Benefits of Foreign Military Sales

    • Dramatically reduces the risks of working internationally. The DoD will even make sure you get paid! Your company signs a contract with the DOD, not with the foreign customer, so you’re guaranteed to get paid under USG rules.

    • The foreign government is on the hook to the DoD, so it’s more likely they’ll keep their end of the deal. In contrast, if you sell directly to the foreign customer and they break your contract, you’d likely need to seek recourse in international courts. The risks of non-payment or broken contracts in DCS deals is dramatically higher.

    • Creates opportunities to build on your USG sales. The basis of FMS is the USG is procuring your goods on behalf of a foreign government.
    • Gives you access to a broader market. The FMS system makes every allied nation a potential customer by including the U.S. companies’ goods in the standardized catalogue for international sale.

    • Facilitates planning. FMS orders have generous lead times from concept to implementation, allowing plenty of time for planning and production.

    • Reduces administrative burden. All international logistics, including export licenses and transportation, are managed by the U.S. DoD.

Direct Commercial Sales (DCS) offer a number of benefits to exporters, including more flexibility, direct communication with the customer, and less bureaucracy. It’s especially attractive for well-established defense companies with strong international networks. AQI is an international distributor for U.S. defense companies managing the entire DCS process from business development to sales & licensing to logistics and post-sales support. We have the expertise to bring solutions to both customers and manufacturers for the DCS space.

What differentiates Direct Commercial Sales (DCS)?
  • DCS means that the U.S. defense company (the vendor) works directly with the foreign government customer to negotiate, finalize, and deliver a sale. The USG is not involved in the sale (although the vendor is required to comply with U.S. regulations regarding military exports.) Basically, DCS is any sale not through the FMS/FMF system.
Top Benefits of Direct Commercial Sales
  • Flexibility. With DCS, the vendor might have more flexibility to cater to the customer’s needs. Working directly with the customer, the vendor can assemble a package that best fits the customer’s needs and budget.
  • Direct Communication. In FMS, the US DoD is the intermediary between the vendor and the customer. Communication filters back and forth through the USG, creating opportunities for miscommunication. DCS bypasses this problem since the vendor works directly with the customer.
  • Fewer Procurement Regulations. Since the USG is not involved in a DCS sale, the deal isn’t subject to USG procurement rules and competitive bidding. However, the sale will probably be subject to the foreign government’s procurement rules, so there might have to be a competitive tender to comply with local regulations.
  • Less Bureaucratic / Faster. Some companies find FMS to be a confusing, lengthy process. Skipping some of the bureaucratic steps involved in FMS might allow the vendor to more quickly negotiate, finalize an agreement, and deliver their product...presumably leading to happier customers, too!