On April 9, 2025, President Trump published Executive Order (EO) 14268 titled “Reforming Foreign Defense Sales to Improve Speed and Accountability.” See 90 Fed. Reg. 15631 (Apr. 15, 2025). The EO requires inter-agency reforms to increase the efficiency and flexibility of the Foreign Military Sales (FMS) program, eliminates bureaucratic hurdles, and expands the list of eligible defense items and foreign partner recipients of arms transfers. While the entire scope of changes to come remains to be seen, the EO demonstrates a commitment to increasing both the quantity and efficiency of these sales.
Background—Established under the Arms Export Control Act of 1976, FMS and the closely related Direct Commercial Sales (DCS) programs are the primary frameworks for supplying foreign countries with U.S.-origin weapons and other major defense systems. Under the FMS program, the U.S. Government purchases defense articles and services from U.S. contractors on behalf of foreign partners using the Department of Defense acquisition system. Foreign partners may purchase the “total package” of a defense system through FMS, including not only the hardware or software but also related training, spare parts, and other support needed to sustain a system. DCS eliminates the U.S. Government as the middleman and permits a foreign government to contract directly with U.S. contractors, subject to interagency approval given export license requirements.
The FMS and DCS programs are co-managed by the Office of Political–Military Affairs at the Department of State, and the Defense Security Cooperation Agency (DSCA) within DOD. When reviewing proposed FMS and DCS sales, these agencies must consider political, economic, military, nonproliferation, technological security, end-use, and other factors to determine whether to approve the sale. Sales crossing certain dollar thresholds must be reported to Congress for review. After receiving such a notification, Congress has a limited window in which it may enact a joint resolution prohibiting the proposed sale: 15 days if the customer is within a group of specified allies, and 30 days for other customer countries. 22 USCA § 2776(c).
FMS and DCS are a booming business, with the highest ever annual total number of sales and assistance provided to allies and partners under these programs in fiscal year 2024. See http://state.gov/fiscal-year2024-u-s-arms-transfers-and-defense-trade/. With many countries building up their defense capabilities in response to the rapidly changing global security landscape, many view simplification of FMS procedures as a promising way to enable the U.S. defense industrial base to meet expanding global demand.
The EO's Purpose and Policy Goals—This EO announces a goal of expanding the FMS program, affirming that a “rapid and transparent foreign defense sales system” helps maintain “a robust network of capable partners and allies,” enhancing response to security threats, while at the same time ensuring that future transfers do no harm to U.S. stockpiles and force readiness. To achieve these objectives, the EO seeks to remove barriers to FMS transactions by streamlining approval processes, increasing accountability within the federal bureaucracy, and reducing regulatory requirements for the sale of many defense articles and services. More specifically, the EO outlines the following overarching policies:
- Improve accountability and transparency to make FMS and DCS purchases and deliveries more predictable and reliable for foreign partners;
- Consolidate redundant decision points for FMS and DCS purchase approvals;
- Reduce burdensome regulations surrounding foreign military purchases;
- Increase Government-industry collaboration to achieve cost and schedule efficiencies; and
- “Advance United States competitiveness abroad, revitalize the defense industrial base, and lower unit costs for the United States and [] allies and partners by integrating exportability features in the design phase, improving financing options for partners, and increasing contract flexibility overall.” EO § 2(a)–(e).
Immediate Actions—The EO utilizes a “phased implementation” approach to effectuate its policy goals and requires the secretaries of state and defense to immediately undertake three actions.
First, the secretaries must implement National Security Presidential Memorandum 10—the U.S. Conventional Arms Transfer Policy (CAT) published by the first Trump Administration on April 19, 2018. National Security Presidential Memorandum Regarding U.S. Conventional Arms Transfer Policy, White House (Apr. 19, 2018), https:// trumpwhitehouse.archives.gov/presidentialactions/national-security-presidentialmemorandum-regarding-u-s-conventional-armstransfer-policy/.
Although CATs are neither legally binding nor enforceable, they provide whole-of-Government guidance on whether and when to authorize the transfer of U.S. arms to a foreign user. For example, President Biden's CAT strengthened restrictions on arms transfers by lowering the standard from “actual knowledge” that the arms would be used to commit atrocities to it being “more likely than not” that the items would be used in such a way. See John Ramming Chappell & Ari Tolany, Unpacking Biden's Conventional Arms Transfer Policy, Lawfare (Mar. 1, 2023), https://www.lawfaremedia.org/ article/unpacking-bidens-conventional-armstransfer-policy. President Trump's renewed CAT returns the standard to “actual knowledge,” a high standard to meet. President Trump's CAT additionally places more emphasis than President Biden's CAT on the importance of economic considerations when weighing approval for FMS and DCS sales, promising to “streamline procedures, clarify regulations, increase contracting predictability and flexibility, and maximize the ability of the United States industry to grow and support allies and partners.”
Second, the secretaries must reevaluate restrictions imposed by the Missile Technology Control Regime (MTCR) on the sale of certain Category 1 items and “consider supplying certain partners with specific Category 1 items.” The MTCR is a nonbinding agreement among 35 member countries to limit the proliferation of missiles and missile technology. Category 1 items are the most sensitive and include ballistic missiles and cruise missiles with longer ranges and higher payloads. Category 1 of the MTCR includes: “complete rocket systems (including ballistic missiles, space launch vehicle and sounding rockets) and unmanned air vehicle systems (including cruise missile systems, target and reconnaissance drones) with capabilities exceeding a 300km/500kg range/payload threshold; production facilities for such systems; and major sub-systems including rocket stages, re-entry vehicles, rocket engines, guidance systems and warhead mechanisms.” https://www.mtcr.info/en/ mtcr-guidelines.
The MTCR instructs member nations to employ a strong presumption of denial when considering approving a Category 1 item transfer, (MTCR FAQ, https://www.state.gov/bureau-of-internationalsecurity-and-nonproliferation/releases/2025/01/ missile-technology-control-regime-mtcr-frequentlyasked-questions), so the EO signals a relaxing of barriers to selling these items. This is not necessarily a change—in the last days of the Biden Administration, a National Security Memorandum announced a similar approach, after that Administration approved transfers of Tomahawk cruise missiles to Australia and Japan despite the MTCR's “strong presumption” of denial. See Fact Sheet: Biden-Harris Administration Introduces New Guidance for Missile Technology Exports to Advance Nonproliferation Goals and Bolster Allied Defense Capabilities, White House (Jan. 7, 2025), available at https://bidenwhitehouse.archives.gov/ briefing-room/statements-releases/2025/01/07/ fact-sheet-biden-harris-administration-introducesnew-guidance-for-missile-technology-exports-toadvance-nonproliferation-goals-and-bolster-allieddefense-capabilities/.
Third, the secretaries must submit a joint letter to Congress proposing an update to statutory congressional notification thresholds for proposed sales under FMS and DCS. At present, proposed sales to North Atlantic Treaty Organization member countries and “NATO plus” countries (including South Korea, Australia, Japan, Israel, and New Zealand) require congressional notification at the following thresholds:
- For “major defense equipment” (MDE) valued at $25 million or more (“Major defense equipment” means “any item of significant military equipment on the U.S. Munitions List having a nonrecurring research and development cost of more than $50,000,000 or a total production cost of more than $200,000,000.” 22 CFR § 120.37. “Significant military equipment” means “articles for which special export controls are warranted because of their capacity for substantial military utility or capability.” Id. § 120.36.);
- For any defense articles or services valued at $100 million or more; and
- For design and construction services valued at $300 million or more.
For all other countries, the thresholds are $14 million for MDE, $50 million for defense articles or services, and $200 million for design and construction services. These notification dollar thresholds have not been adjusted since fiscal year 2003 despite marked inflation since that time. U.S. House of Representatives Foreign Affairs Committee, Foreign Military Sales Tiger Task Force: Report, p. 8 (Feb. 7, 2024), https://foreignaffairs.house.gov/wpcontent/uploads/2024/02/2.7.24-FMS-TIGERTask-Force-Report.pdf (HFAC Report).
Because the congressional notification requirement effectively imposes a 15-day or 30-day waiting period before any FMS or DCS case can be executed, increasing the threshold for transactions subject to this waiting period would expedite the process for lower-dollar transactions. The EO also requires the secretary of state to review congressional approval procedures to ensure the timely adjudication of proposed FMS and DCS sales.
Actions Within 60 Days (By June 8, 2025)—No later than June 8, 2025, the secretaries of state and defense must work together to develop lists of “priority partners” for arms transfers and “priority end-items” for potential transfer to such priority partners. Such lists are to be updated on an annual basis. While the EO does not specify the purpose of these lists, fast-tracked approvals of items and countries on such a list would greatly streamline the FMS process for pre-vetted transactions.
Additionally, the secretaries must review the list of so-called “FMS-only items” and the U.S. Munitions List to “focus protections solely on our most sensitive and sophisticated technologies,” suggesting that items currently on these lists may be removed to allow for greater sales flexibility and expediency. (FMS-only items are defined as particularly sensitive capabilities and systems designated through a State Department and DOD interagency process. See Security Assistance Management Manual [SAMM], Chapter C4.3.5, Defense Security Cooperation Agency, https://samm.dsca.mil/ chapter/chapter-4. The U.S. Munitions List is a catalog of defense-related articles, services, and technologies subject to strict export controls under the International Traffic in Arms Regulations located at 22 CFR pt. 121.)
Actions Within 90 Days (By July 8, 2025)—By July 8, 2025, the secretaries must submit a plan to the president to:
- Improve transparency of U.S. defense sales to foreign partners by developing metrics for bureaucratic accountability,
- Secure exportability as a requirement in the early stages of the acquisition process, and
- Consolidate interagency approvals of proposed sales.
While the first and third bullets are selfexplanatory, the second is a potentially notable policy development for the defense industry. The EO defines “exportability” as “the process to identify, develop, and integrate technology protection features into U.S. defense systems early in the acquisition process to protect critical technologies, capabilities, and program information and thus enable export to partners.” This recognizes the benefit of designing weapon systems and defense articles so that they may be exported through the inclusion of “technology protection features.” In the past, DOD has at times compromised on exportability as an initial design requirement, often to resolve budget concerns, with the result of longer wait times for foreign partners wanting to purchase the technology, which then has to be modified before it can be safely exported. See HFAC Report, supra p. 12. This portion of the EO signals that exportability will have renewed importance in future design acquisitions.
Actions Within 120 Days (By Aug. 7, 2025)—By Aug. 7, 2025, the secretaries (plus the secretary of commerce) must jointly submit a plan to the National Security Advisor to develop an electronic system to track all pending FMS efforts and DCS export license requests throughout their respective case life cycles. Such a central system would presumably combine the separate systems currently maintained by DSCA and each DOD service branch department. See SAMM Chapter C6.1.
Takeaways and Conclusion—The EO announces the Administration's intent to address the regulatory hurdles and bureaucratic delays associated with FMS and DCS cases in the hope that a flexible and streamlined process will enable foreign partners to more easily purchase U.S. defense items (where such sales serve U.S. national security interests). This is welcome news to many in the defense industry. With global conflicts giving rise to greater demands for defense articles and services, the U.S. Government has pushed foreign partners to continue or expand their arms procurement from the U.S. See Gram Slattery, John Irish & Daphne Psaledakis, US officials Object to European Push to Buy Weapons Locally, Reuters (Apr. 2, 2025), https://www.reuters.com/world/us-officials-objecteuropean-push-buy-weapons-locally-2025-04-02/. As FMS and DCS inherently preference U.S. defense contractors, relaxation of restrictions and expansion of items and countries eligible for FMS and DCS position the U.S. defense industrial base to meet this demand.
Just as notable is what the EO does not purport to change. Foreign military sales are subject to a web of rules, regulations, and guidance, including DSCA's SAMM and the Foreign Military Financing (FMF) regulations, which the EO does not at least on its face announce any intent to modify. As before, expanded FMS and DCS opportunities will favor those who understand how the system works and can leverage those rules in their favor.
While potentially wide-reaching, many of the proposed reforms have long been in the pipeline. For example, the mandate to make the FMS review process more efficient, to prioritize priority countries and “priority capabilities,” and expand both U.S. Government acquisition support and defense industrial base capabilities mirror a set of recommendations from a DOD FMS Tiger Team in 2023. See Department of Defense Unveils Comprehensive Recommendations to Strengthen Foreign Military Sales, Dep't of Def. (June 13, 2023), https:// www.defense.gov/News/Releases/Release/Article/ 3425963/department-of-defense-unveilscomprehensive-recommendations-to-strengthenforei/. Many of the measures identified by the EO even more directly track a 2024 bipartisan U.S. House of Representatives Foreign Affairs Committee report that highlighted outdated congressional notification thresholds, de-prioritization of the exportability of defense systems during the design phase, communication challenges with purchasing nation partners, and insufficient flexibility to supply commonly ordered items more quickly as promising areas for FMS reform. HFAC Report, supra.
Given the overlap between this report and the EO, industry may look for specifics in this report where the EO does not specify precise actions. For example, regarding congressional notification, although the EO itself does not prescribe dollar figures, the HFAC Report recommended thresholds be adjusted for inflation in the following amounts: $42 million, $166 million, and $500 million for NATO plus countries and $23 million, $83 million, and $332 million for all other countries. Similarly, recommendations offered in the report that are not addressed in this EO and may be taken up at a later date include:
- Institutionalizing Presidential Drawdown Authority (which authorizes the president to circumvent lengthy FMS and DCS processes to provide defense equipment and support on an expedited basis from U.S. stockpiles to respond to an unforeseen emergency),
- Bolstering the Special Defense Acquisition Fund at the Department of State to stock the most commonly ordered defense articles, and
- Providing customer countries with combatant command-led briefings on regional security threats to ensure partners are purchasing the most relevant and useful items and can support U.S. policy objectives.
Two intriguing phrases from the EO that have not yet seen much public analysis are the mandate to “achieve cost and schedule efficiencies” and “improv[e] financing options for partners.” In pursuit of these goals, future FMS transactions could follow different structures than have been typical to date. Could multiple countries' FMS purchases be combined into a larger order to lower unit prices? Could future or repeat orders be anticipated and contracted for in advance to obtain the same goal? On the financing front, could guaranteed FMF funds be securitized or otherwise creatively leveraged to attain greater purchasing power?
The next few months could see these and other changes in the rules governing foreign military transfers. Interested parties should closely watch this space for developments and the opportunities inherent in times of significant change.
Originally Published by Thomson Reuters
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