Guide
What is termination liability in Foreign Military Sales?
is the potential cost the U.S. Government would be liable for if a case that includes procurement contracts were terminated before completion. The reserve collected against it is not a constant amount and is adjusted as contracts are awarded, work progresses and deliveries are made.
What is termination liability?
is the potential cost that the would be liable for if a particular case is terminated prior to completion. It applies to any case that has procurement contracts. TL reserve is the amount collected from an international partner and held in escrow in anticipation of any liability that would accrue to the should an international partner terminate a particular case or program prior to the normal completion of the contract. The reserve is not a constant amount and must be adjusted regularly as contracts are awarded, work progresses, payments are received, and deliveries are made. When a applies, the will be developed without TL.
A may be used instead of TL to guarantee termination payments. programs are not eligible to participate. The international partner may request participation in the program. The international partner’s request(s) must be sent to in writing and signed by an official authorized to accept the documents on behalf of the international partner. The purchaser must specify the bank(s) it wishes to use. The international partner is responsible for paying all fees associated with the to the . No fees can be capitalized or included in the dollar amount specified in the documents. The international partner must sign the agreement specifying the terms and conditions in order for the associated to be implemented. The international partner must notify in writing if it wishes to terminate the agreement with the bank(s).
References
SAMM
- SAMM GLOSSARY/termination-liability-tl — Termination Liability (TL)
- SAMM GLOSSARY/termination-liability-worksheet-tlw — Termination Liability Worksheet (TLW)
- SAMM C9.9.1.5.4.1.1 — Standby Letter of Credit.
- SAMM C9.9.1.5.1 — Initial Deposit.
- SAMM C9.9.1.5.3 — Termination Liability.
Related
Termination Liability (TL) (Foreign Military Sales)
The potential cost for which the U.S. Government would be liable if a particular Foreign Military Sales case that includes procurement contracts is terminated prior to completion.
SAMM Glossary, as of 12 September 2026
Foreign Military Sales (FMS)
A process, authorized by the Arms Export Control Act, through which eligible foreign governments and international organizations may purchase defense articles, services, and training from the United States Government.
SAMM Glossary, as of 12 September 2026
Security Assistance (SA)
A group of programs authorized by federal statutes by which the United States provides defense articles, military training, and other defense-related services by grant, lease, loan, credit, or cash sales in furtherance of national policies and objectives, and those that are funded and authorized through the Department of State to be administered by Department of Defense/Defense Security Cooperation Agency, which are considered part of security cooperation.
SAMM Glossary, as of 12 September 2026
FMS — Foreign Military Sale
SAMM Acronyms, as of 12 September 2026
Standby Letter of Credit (SBLC) (Credit Assured Payment Schedules (CAPS) Term of Sale)
A legal document that serves as the eligible bank's guarantee to pay DSCA if the Foreign Military Sales (FMS) partner fails to make complete and timely quarterly payments on an FMS Letter of Offer and Acceptance (LOA), in accordance with the DD 645. It is a formal independent undertaking issued by a bank to DSCA, as the "beneficiary," which specifies the responsibilities of the bank and the FMS partner and establishes the ability for DSCA to draw upon the value of the SBLC when the FMS partner does not make a complete and timely payment.
SAMM Glossary, as of 12 September 2026
Payment Schedule
List of dollar amounts and when they are due from the foreign customer. The payment schedule is included in the Letter of Offer and Acceptance (LOA) presented to the customer. After acceptance of the LOA, the payment schedule generally serves as the basis for billing to the customer. Changes in the estimated costs of an Foreign Military Sales case may require changes in the accompanying payment schedule.
SAMM Glossary, as of 12 September 2026
SBLC — Standby Letter of Credit
SAMM Acronyms, as of 12 September 2026
DSCA — Defense Security Cooperation Agency
SAMM Acronyms, as of 12 September 2026
Glossary entry →Defense Security Cooperation Agency (DSCA) →
Issuing Bank (Bank Letter of Credit (BLOC) Memorandum of Understanding (MOU))
The financial institution that issues the Letter of Credit.
SAMM Glossary, as of 12 September 2026