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The Defense Security Cooperation Agency (DSCA), a part of the US Department of Defense, has codified a new policy that augments the range of financing options available for the US Foreign Military Sales (FMS) program. As announced in August 2023, the DSCA’s “Bank Letter of Credit” policy now permits US allies and partner nations to use a letter of credit for their FMS cases.
As explained in an Agency news release, the DSCA policy provides that an LC may be used: To replace national funds held in the FMS Trust Fund to make routine payments; To supplement national funds on one or more Letters of Offer and Acceptance; or To secure payment schedules under the Credit Assured Payment Schedules (CAPS) term of sale.
DSCA is in the process of compiling a list of eligible banks interested in participating in its Bank LOC policy. Requirements contained in the Agency’s Security Assistance Management Manual (Chapter 9).