A newly released State Department fact sheet reported the three-year rolling average of implemented Foreign Military Sales (FMS) was down to $47 billion in fiscal year 2021 compared to nearly $54 billion in FY ‘20.

The department notes that given multiyear implementation for many arms transfers and defense trade cases, it uses a three-year rolling average to report average values, which means the FY ‘21 numbers average the values from FY ’19 to ‘21. The State Department disclosed the latest figures on Dec. 22.

The State Department also listed the total value of implemented FMS cases, which was down to $34.81 billion in FY ‘21 compared to $50.78 billion in FY ‘22. 

The three-year rolling average of privately contracted Direct Commercial Sales (DCS) issued by the State Department from FY ‘19-’21 was $114.1 billion, with the total authorized value for FY ‘21 at $103.4 billion. That total value covers the hardware, services, and technical data from exports, reexports and re-transfers. This is in contrast to the higher FY ’20 DCS average of $125.2 billion with a total authorized value of $124.3 billion.

The department says by the end of FY ‘21, almost 14,000 entities were registered with the Directorate of Defense Trade Controls to perform defense trade activities, “which is a slight increase from FY 2020.”

When combining the FMS and DCS three-year rolling average, international arms sales shrunk from $179.1 billion in FY ‘20 to $161.1 billion in FY ‘21.

In a report, investment bank Cowen Inc.’s Washington Research Group said they are “surprised by the magnitude of the drop, which suggests FMS/DCS sales will be a headwind for large-cap defense primes with FMS exposure.”

Cowen noted the Biden administration is averaging around $2.5 billion in new monthly FMS announcements compared to about $6 billion per month under the Trump administration. Due to the long pipeline on FMS deals, Cowen did not expect to see any immediate hit to companies, but it could become an issue going into 2023. 

“The FMS backlog…should be relatively full from the Trump term, but we are concerned by the big percent drop in implemented cases. This will be something to consider in the future whether outstanding Trump cases are converted into firm cases and revenue,” the group added.

In November, Cowen noted over the previous 10 months, the Biden administration approved $25 billion in 37 deals, although December’s approvals were higher at five deals worth $11 billion.

“Still the Biden monthly average is less than half Trump’s $6 billion, excluding the first two months of FY21 which was a fire sale ($64 billion in two months, some which we view as unlikely or double counting). Trump’s FMS was significantly higher than Obama, which was about $3 billion/month. The Biden [administration’s] more selective FMS policy could mean a reversion back to Obama-like sales and that appears to be what’s happening,” Cowen added.