https://crsreports.congress.gov
March 2, 2020
Transfer of Defense Articles: Direct Commercial Sales (DCS)
United States firms received licenses to export more than
$136 billion of defense articles and services in FY 2018
directly to eligible foreign entities, be they governments,
corporations, or individuals. Such transactions are
conducted as Direct Commercial Sales (DCS), for which
the U.S. government (USG) issues export licenses to U.S.
firms through a process that includes a review for
adherence to U.S. law and policy. DCS is distinct from
Foreign Military Sales (FMS), in which the U.S.
government procures U.S. defense articles as an
intermediary for foreign partners. (See CRS In Focus
IF11437, Transfer of Defense Articles: Foreign Military
Sales (FMS), by Nathan J. Lucas and Michael J. Vassalotti.
Congress authorized DCS licensing in the Arms Export
Control Act (AECA) of 1976 (22 U.S.C. §2751 et. seq.) and
provides active oversight of the program through annual
Department of State and Foreign Operations Appropriations
Acts and the National Defense Authorization Acts. It also
exercises oversight in the response to executive branch
notifications of foreign arms sales. Through these
mechanisms, Congress may limit or prohibit DCS to certain
countries, or encourage the use of DCS in other cases.
Administration policy is found in National Security
Presidential Memorandum 10 (NSPM-10) on “U.S.
Conventional Arms Transfer Policy,” published in 2018.
Federal regulations, 22 C.F.R. 120-130, contain the
International Traffic in Arms Regulations (ITAR) and the
U.S. Munitions List (USML), both of which regulate the
items restricted under the AECA.
Pursuant to the AECA, section 38, (22 U.S.C. §2778), all
persons (other than USG personnel performing official
duties) engaging in manufacturing, exporting, or importing
defense articles and services must register with the U.S.
Department of State under the ITAR. The law also requires
the President to review the USML and to notify the House
Foreign Affairs Committee, the Senate Foreign Relations
Committee, and the Senate Banking Committee if any items
no longer warrant export controls.
Figure 1. Direct Commercial Sales (DCS) Licensing Process In Comparison With Foreign Military Sales (FMS)
Source: GAO, “Conventional Arms Transfer Policy: Agency Processes for Reviewing Direct Commercial Sales and Foreign Military Align With
Policy Criteria,” GAO-19-673R, September 9, 2019. Annotated by CRS.
