What Is ITAR Compliance? Regulations, Penalties & More
The International Traffic in Arms Regulations (ITAR) controls the sale, manufacture, import, and export of defense-related services, articles, and technical data on the United States Munitions List (USML).
ITAR is a set of US regulations overseen and administered by the State Department designed to protect the national security interests of the United States. ITAR applies to defense companies that handle military and defense-related information, including universities and research centers.
Due to its security implications and foreign relations interests, the United States highly regulates information relating to its defense industry. Therefore, there are stiff penalties for violating or mishandling the sensitive data specified by USML.
The overall thrust of ITAR regulations is to ensure military technology, both physical materials and technical data related to defense, are restricted to only United States citizens or those otherwise authorized, with access provided on a compliant network.
The overriding objective of ITAR is to safeguard defense-related goods, especially defense technologies and information, to ensure they don’t fall into the wrong hands, such as unauthorized parties.
Below are the items subject to ITAR control, organized by their 21 USML categories based on the Electronic Code of Federal Regulations (e-CFR):
- Category I—Firearms and related articles
- Category II—Guns and Armament
- Category III—Ammunition and ordnance
- Category IV—Launch vehicles, guided missiles, ballistic missiles, rockets, torpedoes, bombs, and mines.
- Category VI—Surface vessels of war and special naval equipment
- Category VII—Ground vehicles
- Category VIII—Aircraft and related articles
- Category IX—Military training equipment and training
- Category X—Personal protective equipment
- Category XI—Military electronics
- Category XII — Fire control, laser, imaging, and guidance equipment
- Category XIII — Materials and miscellaneous articles
- Category XIV—Toxicological agents, including chemical agents, biological agents, and associated equipment.
- Category XV— Spacecraft and related articles.
- Category XVI—Nuclear weapons-related articles.
- Category XVII—Classified articles, technical data, and defense services not otherwise enumerated.
- Category XVIII — Directed energy weapons.
- Category XIX — Gas turbine engines and associated equipment.
- Category XX — Submersible vessels and related articles.
- Category XXI — Articles, technical data, and defense services not otherwise enumerated.
In addition to weaponry and equipment, the defense-related articles profusely mentioned in the list include military gear, technical documentation, software, and instruments.
What Does It Mean to be ITAR-Compliant?
To be ITAR-compliant means to dutifully abide by its regulations.
First and foremost, ITAR applies to any company that conducts business with the US military. Secondly, it involves any organization, whether third-party or otherwise, that deals with defense services, articles, or data specified in USML.
This applies to various types of organizations, such as contractors, manufacturers, wholesalers, technology/hardware/software vendors, and third-party suppliers involved in manufacturing, distributing, and selling ITAR services or products.
If you are among these companies or work with companies in your supply chain that handle ITAR-controlled items, then you must remain ITAR-compliant.
All of the following are the necessary steps to become or remain ITAR-compliant:
Step 1: Register with the Directorate of Defense Trade Controls (DDTC) of the Bureau of Political-Military Affairs under the State Department's auspices.
First-time entrants pay the $2,250 application fee. ITAR registration must be renewed every 12 months with a renewal fee of between $2,250 and $2,750 per year. However, your registration renewal documents must be submitted 60 days before the registration expiration date.
Step 2: Setting up formal ITAR compliance programs inside the business.
There are procedures necessary for the protection of ITAR-related technical data. Implementing this requires understanding how ITAR regulations apply to the company’s USML goods, services, or data.
This understanding equips the organization to define and implement the processes and programs needed to demonstrate and strengthen a commitment to ITAR compliance.
Step 3: Utilizing cloud-compliant storage
A secure data center to protect technical data is cardinal to ITAR compliance. This cloud storage should have sufficient controls to prevent access to unauthorized foreigners, individuals, or governments.
This demands implementing data security controls to ensure technical data that travels through the cloud and endpoints with end-to-end encryption. Moreover, strict key management protocols must be applied such that the decryption keys aren’t accessible by a third party.
Step 4: Keeping a comprehensive record of defense goods
This includes the recipients' identity and their country, including the end-use and end-users of the defense item.
While the steps enumerated above should be followed, the best practice for companies handling ITAR-regulated materials is to adhere to the data security guidelines specified in NIST SP 800-53, which defines the standards for safeguarding information systems that federal agencies should comply with.
ITAR Penalties and Violations
Due to the high-security stakes involved, there are severe penalties for violating ITAR:
- Civil fines imposed up to $500,000 for each violation
- Criminal fines rise to $1,000,000 per violation
- Ten years of imprisonment per violation
The cumulative impact of these penalties can be steep, depending on the severity of the offense. For instance, the US Justice Department compelled Airbus SE to pay over $3.9 billion — although it also involved bribery charges — in penalties regarding ITAR non-compliance.
In addition to these penalties, the US government can take additional punitive measures, like banning the entity from participating in further ITAR-controlled transactions. Moreover, organizations incur a loss of reputation and business due to non-compliance.
ITAR Compliance Checklist
While not an exhaustive list, the following points are meant to act as a guide to ensure a baseline of ITAR compliance is established:
1. Establish the legal authority over your product
Identifying ITAR-related information requires organizations to effectively locate, classify, and secure data that needs to be in ITAR compliance. Significant data classification is necessary to determine whether military material falls into any of the following categories:
- Defense services — encompassing training, engineering, manufacturing, providing assistance, design, development, repairs, and so on.
- Technical data — covers blueprints, plans, photographs, and information besides software used for design, development, and production.
- Confidential data — This covers national security data classified by the US government.
2. Accurately map data and permissions
ITAR compliance requires tracking and reviewing sensitive data files, especially those with open access.
Hence, secure file sharing should be adopted while identifying all users within the system and establishing the hierarchy of who has access to what data. Then, administrators, users, groups, and folders are mapped with the right file permissions.
3. Implement robust identity and access management controls
Organizations must manage access control to restrict access to only authorized persons to effectively manage high-risk users and groups.
4. Monitor traffic to detect anomalous behavior
The ability to detect suspicious activity before they morph into real threats. This prevents security breaches in the form of misconfigurations or malware that might rear their head. In addition to remediation, this also requires the ability to audit the security infrastructure and event activity to identify vulnerabilities.
5. Training and regular review
Employees handling ITAR material should be trained on its regulations and procedures. Furthermore, the organization’s ITAR compliance procedures should be regularly reviewed and updated.
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