The Defense Security Cooperation Agency has broadened third-party financing options under the U.S. Foreign Military Sales program by allowing partner nations the use of letters of credit in their purchases.
The new Bank Letter of Credit policy follows the Credit Assured Payment Schedules term of sale codified in January providing FMS partners with a standby letter of credit as an alternative to the standard term of cash with acceptance. BLOC and CAPS are part of a broader U.S. effort to offer greater financing options for military purchases of America’s allies, the DSCA said.
A letter of credit may be used to replace routine payments through national funds in the FMS Trust Fund or to supplement national funds on one or more letters of offer and acceptance. BLOC may also be used to secure payment schedules under the CAPS term of sale.
The DSCA is compiling a database of eligible banks interested in BLOC participation and will provide the list to allies and partner nations upon request. An eligible bank is either a U.S. bank with an “A” credit rating or an A-rated foreign bank in the United States licensed by the Office of the Comptroller of the Currency, an independent bureau of the Department of the Treasury.
