Transfer of Defense Articles: Foreign Military Sales (FMS)

Transfer of Defense Articles: Foreign Military Sales (FMS)

February 21, 2020
Transfer of Defense Articles: Foreign Military Sales (FMS)
The United States sells more than $55 billion worth of
Department of State and Foreign Operations Appropriations
defense articles and services annually to foreign
Acts and the National Defense Authorization Acts. Such
governments to advance U.S. security and economic
oversight is also seen in the congressional response to
interests. Such purchases are managed primarily through
executive branch notifications of foreign arms sales.
the Foreign Military Sales program (FMS), through which
Through these mechanisms, Congress may limit or prohibit
the U.S. government procures defense articles as an
FMS to certain countries, or encourage the use of FMS in
intermediary for foreign partners. This adds value for
other cases.
customers by ensuring that they have the same contract
benefits and protections that apply to the U.S. military’s
The sale of defense articles to Taiwan is not formally
subject to the AECA. Rather, FMS-like transfers to Taiwan
acquisition of its own defense articles and services. In turn,
are authorized pursuant to the Taiwan Relations Act of
the U.S. benefits from a government-to-government
1979, P.L. 96-8, 22 U.S.C. §3301 et seq.
relationship in the sale intended to comply with U.S.
foreign and security policy, as well as to help ensure
The Department of Defense (DOD) uses the FMS
militarily interoperable weapons systems among allies and
infrastructure for defense articles procured and transferred
partners.
to foreign partners through the Foreign Military Financing
(FMF) program. It also uses the infrastructure under other
Congress authorized the FMS program in the Arms Export
Title 10 authorities (e.g., 10 U.S.C §333), though these are
Control Act (AECA) of 1976 (22 U.S.C. §2751 et seq.) and
not considered FMS cases.
provides active oversight of the program through annual
Figure 1. Foreign Military Sales (FMS) Process

Source: Defense Security Cooperation Agency (DSCA), annotated by CRS.
Notes: LOR: Letter of Request. LOA: Letter of Offer and Acceptance. NSPM: CFM: Country Financial Management Division, DSCA.
FMS Process (Figure 1)
to serve U.S. foreign policy interests. The State
Pursuant to Title 22, United States Code, all security
Department’s Bureau of Political-Military Affairs (PM)
assistance programs are subject to the continuous
administers FMS, and DOD is the implementing agency,
supervision and general direction of the Secretary of State,
through the Defense Security Cooperation Agency (DSCA).
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Transfer of Defense Articles: Foreign Military Sales (FMS)
DSCA manages and coordinates FMS cases, submitting the
U.S. government and purchaser advanced planning for
proposed sale to the PM Bureau for review and consultation
transportation of materiel is critical for case development
with Congress in order to receive approval to make a formal
and execution. DOD policy states that the purchaser is
agreement with the eligible foreign purchaser.
responsible for transportation and delivery of its purchased
Letters of Request (LOR) Start the Process
materiel. Purchasers can use DOD distribution capabilities
on a reimbursable basis at DOD reimbursable rates via the
U.S. officials often consult with foreign partners
Defense Transportation System (DTS). Alternatively, it
considering purchases or otherwise seeking U.S. defense
could employ an agent, known as a Foreign Military Sales
articles or services. To initiate transfer consideration, a
freight forwarder, to manage transportation and delivery
partner must submit an official request to DOD, known as a
from the point of origin (typically continental United
letter of request (LOR). The letter may take nearly any
States) to the purchaser’s desired destination. Ultimately,
form, from a handwritten request to a formal letter, but it
the purchaser is responsible for obtaining overseas customs
must be in writing. The potential purchaser submits the
clearances and for all actions and costs associated with
LOR to a U.S. security cooperation organization (SCO),
customs clearances for deliveries of FMS materiel,
normally an Office of Defense Cooperation in the country
including any intermediate stops or transfer points. In most
or directly to DSCA or an implementing agency (IA),
FMS cases, firms ship defense articles to the foreign partner
usually a military department or DOD agency. This can
via a third-party freight forwarding company. The security
occur in-country or through the country’s military and
cooperation organization, part of the U.S. Embassy Country
diplomatic personnel stationed in the United States. Unless
Team, may receive the item and hand it over to the
an item requiring greater government security measures has
purchaser, or the purchaser may receive it directly.
been designated as “FMS Only,” DOD is generally neutral
as to whether a country purchases U.S. defense articles or
Generally, title to FMS materiel is transferred to the
services commercially or through the FMS program.
purchaser upon release from its point of origin, normally a
DOD supply activity. However, USG security responsibility
When the SCO receives a LOR, it transmits the request to
does not cease until the recipient’s designated government
the relevant agencies for consideration and export licensing.
representative assumes control of the consignment. U.S.
U.S. government (USG) preliminary responses to LORs
officials then implement end-use monitoring of U.S.
include price and availability (P&A) data, and respond to
purchasers’ requests.
defense articles as required by U.S. law and specified in
The executive branch conducts its
LOA terms.
internal reviews, and, if considering approval of certain
transfers, the State Department begins consultations with
Congressional Notification Requirements
congressional committees of jurisdiction. If during
for FMS
executive branch review the IA or the State Department
recommends (for a number of potential reasons) that the
The AECA, Section 36(b) (22 U.S.C. §2776(b)), specifies that
purchaser’s request be disapproved, the IA or State notifies
the executive branch must report to Congress
DSCA, which formally notifies the customer.

30 calendar days before issuing a Letter of Offer and
Letters of Offer and Acceptance (LOA) Set Terms
Acceptance (LOA) for major defense equipment valued
at $14 mil ion or more, defense articles or services
After executive branch policy reviews and any required
valued at $50 mil ion or more, or design and
congressional notifications are complete, the USG responds
construction services valued at $200 mil ion or more;
with a Letter of Offer and Acceptance (LOA). The LOA is
and
the legal instrument used by the USG to sell defense
articles, defense services including training, and design and

15 calendar days before issuing an LOA for NATO
construction services to an eligible purchaser. The LOA
member states, NATO, Japan, Australia, South Korea,
itemizes the defense articles and services offered and when
Israel, or New Zealand for sale, enhancement, or
implemented by DSCA becomes an official tender by the
upgrading of major defense equipment valued at $25
USG. Signed LOAs and their subsequent Amendments and
mil ion or more, defense articles or services at $100
Modifications are also referred to as “FMS cases.” The time
mil ion or more, or design and construction services of
required to prepare LOAs varies with the complexity of the
$300 mil ion or more.
sale.
Congress reviews formal notifications pursuant to
Case Executions Deliver the Articles
procedures in the AECA and has the authority to block a
sale. See CRS Report RL31675, Arms Sales: Congressional
Case execution is the longest phase of the FMS case life
Review Process, by Paul K. Kerr.
cycle. It includes acquisition, logistics, transportation,
maintenance, training, financial management, oversight,

coordination, documentation, case amendment or
modification, case reconciliation, and case reporting. Case
Nathan J. Lucas, Section Research Manager
managers, normally assigned to the IAs, track FMS delivery
Michael J. Vassalotti, Section Research Manager
status in coordination with SCOs. All case transactions,
financial and logistical, must be recorded as part of the
IF11437
official case file. Cost statements and accounting must be
supported by source documents.

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Transfer of Defense Articles: Foreign Military Sales (FMS)

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