Transparency is essential for ensuring effective and responsible stewardship of the U.S. arms trade. It is a pre-requisite for oversight and accountability, most especially in times of conflict – amidst multi-billion-dollar U.S. military assistance efforts to Ukraine and Israel, such meaningful oversight becomes all the more important. But despite representing a sizeable portion of U.S. arms transfers, public information on commercial arms sales remains especially opaque. And while the Biden administration committed itself to a more transparent national security enterprise, it has continued to cite its obligations to protect proprietary commercial information as justification for concealing data on this key aspect of the U.S. arms trade. In reality, the severity of these disclosure risks are both overstated and unlikely to be exacerbated by improved transparency.
Proprietary Commercial Information
Direct Commercial Sales (DCS) – sales licensed by the Department of State but negotiated and managed directly by a U.S. commercial actor and a foreign recipient – make up more than half of all U.S. arms transfers. In FY2023, the total value for authorized DCS was $157.5 billion, compared to $80.9 billion in defense articles and services transferred in government-to-government foreign military sales (FMS). Despite its scale and scope, information on DCS is far more constrained than its FMS counterpart. Most glaringly, unlike FMS, notifications to Congress for proposed DCS are not made public, drastically limiting the public’s ability to weigh in on these transfers at an especially critical juncture. Data and details on the contents, value, and recipients of DCS are also highly constrained, with even post-facto reporting offering only highly aggregated information that is of little analytical value.
Though demands for greater DCS transparency are longstanding, the U.S. government has increasingly justified its opacity by citing supposed obligations to protect the proprietary commercial information of its industry partners. While the exact nature of this obligation has not been fully clarified, officials have said that the concerns center on revealing information that might put industry partners at a competitive disadvantage. In this context, disclosure of pricing that might allow competitors to theoretically undercut proposed deals would likely be the most pertinent information. Nevertheless, concerns around the potential commercial risks associated with disclosing pricing information may be inflated.
Pricing information for proposed FMS packages is made publicly available with little discernible harm to the commercial actors involved in fulfilling the transactions. Additionally, pricing information is often made available in other forums, albeit without consistency or organization, which may explain why industry representatives have suggested that they are not particularly concerned about U.S. government disclosures in this regard. Moreover, while costs are certainly important to the viability of a DCS, they are not the sole determinants of a successful transaction. At the notification stage, DCS licenses represent complex international commercial transactions that match vendors, foreign clients, and specific capabilities, suggesting that price, while an important consideration, must be weighed against many other factors.
The legal justification for withholding DCS information is also dubious and seems to depend on an unnecessarily restrictive interpretation of U.S. law. The Arms Export Control Act (AECA), one of the principal statutes governing U.S. arms sales, repeatedly demands that the President refrain from classifying arms transfer information unless public disclosure would present a national security risk. Section 38(e) of the AECA reads:
…the names of the countries and the types and quantities of defense articles for which licenses are issued under this section shall not be withheld from public disclosure unless the President determines that the release of such information would be contrary to the national interest.
However, in operationalizing the statute, the State Department’s corresponding regulation interprets the AECA’s language as follows:
…information obtained for the purpose of consideration of, or concerning, license applications shall be withheld from public disclosure unless the release of such information is determined by the Secretary of State to be in the national interest.
The interpretation seems to go beyond the context of the statute and unnecessarily restricts the authority of the President to make DCS information more transparent.
Even under these interpretations, improved public reporting could thread the needles of the concerns expressed by the U.S. government. In addition to the recipient and the description of the capability, public congressional notifications could include the value of the transactions without providing the number of items included in the package, or vice versa. Information on the exact defense articles or services could also be less specific and refer to USML sub-categories rather than make and model. At the very least, and perhaps as an interim measure, public DCS notifications could include the threshold value of the sale (see Table 1) in addition to its intended recipient. Additionally, the U.S. government could provide far greater detail on values and number of items in post-facto reporting, since unit-price information would not long pose even a theoretical risk to the transaction.
| Recipient | Transfer Type | Congressional Review Period | Value Threshold for Major Defense Equipment | Value Threshold for Defense Articles and Services | Value Threshold for Design and Construction | Value Threshold for Firearms |
| NATO, Israel, Japan, Australia, South Korea, and New Zealand | Foreign Military Sale | 15 Calendar Days | $25 million | $100 million | $300 million | N/A |
| Direct Commercial Sale | 15 Calendar Days | $25 million | $100 million | N/A | $1 million |
| All Other Recipients | Foreign Military Sale | 30 Calendar Days | $14 million | $50 million | $200 million | N/A |
| Direct Commercial Sale | 30 Calendar Days | $14 million | $50 million | N/A | $1 million |
Conclusion
While certain private-sector information may warrant greater sensitivity and discretion, improvements in transparency that would aid oversight, accountability, and civic engagement on commercial arms sales seem unlikely to create any acute dilemmas for industry. Pricing information is available in other contexts without creating undue competitive disadvantages, while transparency measures can be tailored to navigate these concerns. Moreover, U.S. arms transfers – whether private or government transfers – have profound implications for U.S. interests and international security. Accordingly, the commercial interests at stake must be seen as subordinate to the national security imperatives surrounding these transfers. Given the ample strategic value in improving public visibility into commercial arms transfers, the U.S. government should adopt stronger transparency measures that more realistically weigh the risks posed to commercial interest.
The Transparency Gap in US Commercial Arms Sales
By Elias Yousif
Conventional Arms
Transparency is essential for ensuring effective and responsible stewardship of the U.S. arms trade. It is a pre-requisite for oversight and accountability, most especially in times of conflict – amidst multi-billion-dollar U.S. military assistance efforts to Ukraine and Israel, such meaningful oversight becomes all the more important. But despite representing a sizeable portion of U.S. arms transfers, public information on commercial arms sales remains especially opaque. And while the Biden administration committed itself to a more transparent national security enterprise, it has continued to cite its obligations to protect proprietary commercial information as justification for concealing data on this key aspect of the U.S. arms trade. In reality, the severity of these disclosure risks are both overstated and unlikely to be exacerbated by improved transparency.
Proprietary Commercial Information
Direct Commercial Sales (DCS) – sales licensed by the Department of State but negotiated and managed directly by a U.S. commercial actor and a foreign recipient – make up more than half of all U.S. arms transfers. In FY2023, the total value for authorized DCS was $157.5 billion, compared to $80.9 billion in defense articles and services transferred in government-to-government foreign military sales (FMS). Despite its scale and scope, information on DCS is far more constrained than its FMS counterpart. Most glaringly, unlike FMS, notifications to Congress for proposed DCS are not made public, drastically limiting the public’s ability to weigh in on these transfers at an especially critical juncture. Data and details on the contents, value, and recipients of DCS are also highly constrained, with even post-facto reporting offering only highly aggregated information that is of little analytical value.
Though demands for greater DCS transparency are longstanding, the U.S. government has increasingly justified its opacity by citing supposed obligations to protect the proprietary commercial information of its industry partners. While the exact nature of this obligation has not been fully clarified, officials have said that the concerns center on revealing information that might put industry partners at a competitive disadvantage. In this context, disclosure of pricing that might allow competitors to theoretically undercut proposed deals would likely be the most pertinent information. Nevertheless, concerns around the potential commercial risks associated with disclosing pricing information may be inflated.
Pricing information for proposed FMS packages is made publicly available with little discernible harm to the commercial actors involved in fulfilling the transactions. Additionally, pricing information is often made available in other forums, albeit without consistency or organization, which may explain why industry representatives have suggested that they are not particularly concerned about U.S. government disclosures in this regard. Moreover, while costs are certainly important to the viability of a DCS, they are not the sole determinants of a successful transaction. At the notification stage, DCS licenses represent complex international commercial transactions that match vendors, foreign clients, and specific capabilities, suggesting that price, while an important consideration, must be weighed against many other factors.
The legal justification for withholding DCS information is also dubious and seems to depend on an unnecessarily restrictive interpretation of U.S. law. The Arms Export Control Act (AECA), one of the principal statutes governing U.S. arms sales, repeatedly demands that the President refrain from classifying arms transfer information unless public disclosure would present a national security risk. Section 38(e) of the AECA reads:
…the names of the countries and the types and quantities of defense articles for which licenses are issued under this section shall not be withheld from public disclosure unless the President determines that the release of such information would be contrary to the national interest.
However, in operationalizing the statute, the State Department’s corresponding regulation interprets the AECA’s language as follows:
…information obtained for the purpose of consideration of, or concerning, license applications shall be withheld from public disclosure unless the release of such information is determined by the Secretary of State to be in the national interest.
The interpretation seems to go beyond the context of the statute and unnecessarily restricts the authority of the President to make DCS information more transparent.
Even under these interpretations, improved public reporting could thread the needles of the concerns expressed by the U.S. government. In addition to the recipient and the description of the capability, public congressional notifications could include the value of the transactions without providing the number of items included in the package, or vice versa. Information on the exact defense articles or services could also be less specific and refer to USML sub-categories rather than make and model. At the very least, and perhaps as an interim measure, public DCS notifications could include the threshold value of the sale (see Table 1) in addition to its intended recipient. Additionally, the U.S. government could provide far greater detail on values and number of items in post-facto reporting, since unit-price information would not long pose even a theoretical risk to the transaction.
Conclusion
While certain private-sector information may warrant greater sensitivity and discretion, improvements in transparency that would aid oversight, accountability, and civic engagement on commercial arms sales seem unlikely to create any acute dilemmas for industry. Pricing information is available in other contexts without creating undue competitive disadvantages, while transparency measures can be tailored to navigate these concerns. Moreover, U.S. arms transfers – whether private or government transfers – have profound implications for U.S. interests and international security. Accordingly, the commercial interests at stake must be seen as subordinate to the national security imperatives surrounding these transfers. Given the ample strategic value in improving public visibility into commercial arms transfers, the U.S. government should adopt stronger transparency measures that more realistically weigh the risks posed to commercial interest.
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