Raytheon's International Sales Manual Draws Rave Reviews

What started out as an internal reference handbook for employees of defense contractor Raytheon Co. has become a coveted resource for executives and government officials involved in the business of international arms sales.

Raytheon recently published the fourth edition of “A Basic Guide to International Sales." At just 154 pages, it is the Cliffnotes for international defense executives.

First published by Raytheon in 2007, it was updated in 2009 and 2011. The guide’s original purpose was to give company employees an "easy to use reference manual to better understand and navigate the rules, policy statements, regulations and protocols attendant to doing defense and commercial business in the international arena," says the introduction. The guide is well known within the FMS (foreign military sales) community in the United States and abroad. Raytheon offers it free-of-charge to friendly defense officials and trade associations. The intended audiences are those “interested in understanding the basics of defense and aerospace international sales.”

FMS is big business, involving sales and assistance to 227 countries. Only a few countries are ineligible, including Iran, Venezuela, North Korea, Belarus, Cuba, China, Cyprus, Somalia and Syria.

The U.S. government office that oversees FMS, the Defense Security and Cooperation Agency, currently manages 12,800 active FMS cases valued at $394 billion.

In five chapters, Raytheon’s guide offers a crash course in direct commercial sales, foreign military sales, foreign military financing, export licensing, the Foreign Corrupt Practices Act and offsets.

The updated handbook arrives just as U.S. military contractors are being hit by declining Pentagon sales and are increasingly turning to foreign customers. As the guide points out, "With U.S. defense sales falling as the result of sequestration, U.S. defense and aerospace companies will be looking to increase their foreign sales in order to ease the impact of falling U.S. sales."

The guide explains in detail the Obama administration’s latest export reforms, which are hard to follow even for seasoned professionals. The changes seek to simplify the export licensing process for U.S. manufacturers by consolidating multiple fiefdoms in the Defense, State and Commerce Departments into a single export control list, a single export enforcement agency, a single information technology system and a single export licensing agency.

These efforts will “hopefully lead to major changes in the way the U.S. does export licensing in the near future,” says the manual.

FMS neophytes are warned to pay attention to terms that may sound similar but are entirely different, such as FMS and FMF (foreign military financing). “FMS refers to a method or channel used to procure U.S. origin defense articles and services. FMF refers to a source of funds used to pay for such articles and services.”

FMF is a vital resource for U.S. exporters because it provides loans and grants to 71 eligible nations for the purchase of U.S. equipment and services.

The U.S. government, for instance, authorized $5.2 billion for foreign military financing in 2012. Most of the funds went to the “Big Three” of the FMF world: Israel ($3 billion), Egypt ($1.3 billion) and Jordan ($300 million).

In the aftermath of the Egyptian military coup that ousted Mohammed Morsi and the Muslim Brotherhood in Egypt in early July 2013, the Obama administration moved to withhold “certain large-scale military systems and cash assistance.” The State Department said it would still provide spare parts for U.S. military equipment as well as military training and education.” But the administration this week reversed course and decided to approve the sale of Apache helicopters to Egypt to help fight extremists in the Sinai.

The lesson from this, the manual says, is that the State Department “can decide to withhold FMF funds to any country at any time.”

Raytheon’s guide has won accolades in the international defense sales community for breaking down the complex FMS lingo. A defense procurement official at the Swiss Embassy called it the “best FMS reference manual in town.” At the State Department’s international cooperation and military affairs offices, the guide is used to train and educate new employees.

The company warns that it takes no responsibility for how the information in the guide might be used. “This guide is not intended to, nor does it, provide legal advice,” says the handbook. “The topics addressed in this guide are complex and users are encouraged to seek their own legal counsel.”

Topics: International, Procurement