On April 9, 2025, President Trump issued an Executive Order (EO) titled “Reforming Foreign Defense Sales to Improve Speed and Accountability.” This EO aims to reform the foreign defense sales (FDS) system, which encompasses U.S. sales of defense products and services to foreign governments through both Foreign Military Sales (FMS) and Direct Commercial Sales (DCS) by:

The EO will follow a phased implementation. The EO immediately directs the Secretary of State (SecState) and the Secretary of Defense (SecDef) to:

Additional key deadlines in the EO include:

Potential Impact on Defense Contractors

Once implemented, these actions will simplify the landscape for contractors to sell defense products and services to foreign governments. These changes should lead to increased opportunities for defense contractors as the approval process is expected to be substantially streamlined and the regulatory barriers reduced. Despite some U.S. allied countries seeking to develop in-country defense manufacturing capabilities, the streamlining of the FDS regulations may lead to increased sales opportunities for contractors with offerings that are sought by foreign militaries.

While not called out specifically in the EO, Foreign Military Financing (FMF) is a popular facilitating mechanism for DCS. FMF provides grants and loans to certain foreign governments to purchase U.S. defense products and services. The FMF rules are also likely to be streamlined by the EO. The specific effects of the EO will remain unclear until the agencies’ final plans are released. In the meantime, contractors should remain diligent in tracking changes to the FDS approval process.

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