FMS Transportation: the Role of the Freight Forwarder

We previously talked about the basics of transporting products for Foreign Military Sales (FMS) cases and how DTC codes work.  Today, let’s look at one of the options in more depth: freight forwarders.

Products sold through the FMS system are transported one of three ways: through the U.S. DTS, by the customer’s military transport system, or by a contracted freight forwarder. If the customer asks the U.S. DoD to provide logistic and transportation support, the DoD usually provides these services directly through its Defense Transportation System (DTS).  The DTS costs are then charged to the customer as part of the total FMS agreement.

From the Green Book (pdf file):

[…] the DoD arranges transportation for the FMS customer using the defense transportation system (DTS).  The prime movers within the DTS are the U.S. Air Force  Air Mobility Command (AMC), the U.S.  Navy Military Sealift Command (MSC), and the  U.S. Army  Surface Deployment and Distribution Command (SDDC).

… When FMS materiel is shipped through the DTS the customer is charged for the cost of transportation either in the price of the materiel or by having a transportation line on the LOA.

However, the DOD has recently been reducing services provided through DTS.  It already eliminated DTS support to South America entirely, and I expect to see increasing cutbacks in coming years as the DoD grapples with the tough budget environment.

This trend creates new challenges for FMS customers.  The FMS customer (the foreign government) faces an additional hassle in identifying and contracting a freight forwarder to ship their materiel.  Shipment of military materiel can be complicated, and not all freight companies are equipped to handle the logistics involved in international shipments.  Furthermore, the customer may face increased costs.  Under DTS, the DoD combined shipments to neighboring countries to reduce costs.  This coordination took place on the DoD end and the savings were passed on to the customer.  In contracting freight services for each purchase, individual countries may have a hard time arranging for delivery of smaller shipments, or the cost may be prohibitive.

However, this trend also creates new opportunities for logistics companies to become involved in FMS sales. Foreign government customers will need freight forwarders that are familiar with the FMS system and can manage the logistics of international shipments.  Many FMS sales are small-ish shipments, and many aren’t hazardous or dangerous materials – FMS covers everything from uniforms to MREs to vehicles.   Small- to medium-sized freight forwarders are perfectly equipped to handle these types of shipments and shouldn’t be scared away by the “military” label.

DISAM has a very useful guide about freight forwarders (pdf file) — while it’s written for the foreign customer, it could also be useful for freight forwarders seeking to understand the FMS process.  As always, the first step in working with FMS?  Registering with DDTC under ITAR regulations.  Take a look at the guide for more info.