Guide

Can Foreign Military Financing pay for a direct commercial contract?

Updated 11 September 2026

A partner's Foreign Military Financing allocation may fund a direct commercial contract only if the partner meets specific eligibility criteria; otherwise the financing is used through a Foreign Military Sales case.

Can Foreign Military Financing pay for a direct commercial contract?

SAMM C9.7.3 — Foreign Military Financing of Direct Commercial Contracts.

DCCs are contracts where the purchaser enters into a contract directly with a vendor, and the USG is not a party to the contract. A foreign partner’s FMF allocation from an approved year may be used to fund a DCC, but only if the partner meets specific eligibility criteria, and the conditions laid out in the annual Department of State appropriations language are fulfilled. Arms Export Control Act (AECA), Section 23(h) (22 U.S.C. 2763(h)) and the annual Department of State (State) appropriations legislation provide the authority to utilize FMF to fund DCCs for certain foreign partners. Initially, the annual State appropriation granted the authority to use FMF for DCCs to ten specific countries, as justified in the FY 1989 Congressional Presentation for Security Assistance: Israel, Egypt, Jordan, Morocco, Tunisia, the Republic of Turkiye, Portugal, Pakistan, Yemen, and Greece. The FY 2023 State Appropriation later expanded this authority, extending eligibility for FMF-funded DCCs to all NATO members and Major Non-NATO Allies. Military Groups (MILGPS)/SCOs should consult with the State’s Bureau of Political-Military Affairs, Office of Security Assistance (PM/SA), to confirm eligibility prior to engagement with the foreign partner on a DCC. The DSCA (IOPS/REX) DCC Manager, with State (PM/SA) concurrence, approves DCCs to be financed with FMF on a case-by-case basis. Approval requires a legally binding agreement between the partner and the U.S. Government and is subject to the standard Congressional Notification process for FMF, as outlined in the annual State appropriations bill. For further details on the DCC process, contractor eligibility, types of items, and certifications required, see "Foreign Military Financing of Direct Commercial Contracts" on the DSCA webpage.

Synced 11 September 2026 · View on samm.dsca.mil

Per SAMM C9.7.2.10.2, Foreign Military Financing (FMF) Program funds are used to finance FMS. The traditional FMS process is used to establish the government-to-government sales agreement; however, the FMS case LOA will specify the fund source as either a non-repayable grant or a repayable direct loan.

References

Drawn exclusively from publicly available authorities.

SAMM

SAMM C9.7.3 — Foreign Military Financing of Direct Commercial Contracts.

RoleDSCA Country Finance Director RoleIndustry Business Development GuideWho pays for FMS sales?

Can Foreign Military Financing pay for a direct commercial contract?

Can Foreign Military Financing pay for a direct commercial contract?

References

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