What Does It Mean to Be ITAR-Compliant for Military Machining?

Military gear must be rugged enough to survive harsh combat zone conditions, extreme temperatures, and weather. The US Department of Defense (DOD) may also require certain equipment to have radar absorbency, lower weights, greater durability, corrosion resistance, and other specifications. To meet these requirements, the DOD regulates suppliers of products and services sold to the various branches of the US military.

The International Traffic in Arms Regulations (ITAR) regulate how products and services for the US military can lawfully be manufactured, sold, and distributed. Compliant vendors must follow this rigorous regulatory structure, the details of which are defined by the United States Munitions List (USML). For defense manufacturers and contractors that depend on machined components, understanding what it takes to become ITAR compliant is integral to their business model.

ITAR Compliant Machining for the Defense Industry

All companies that design, manufacture, sell, or distribute articles on the USML need to be ITAR compliant. The US Department of State monitors the entities that supply these goods and services through the Directorate of Defense Trade Controls (DDTC). While the State Department keeps a list of companies authorized to provide USML products and services, there’s no such thing as an ITAR-certified company. Instead, vendors must develop their procedures and policies to comply with ITAR, with compliance extending to computer hardware and software providers.

While companies don’t need to be ITAR-certified to do business with the general public, to be authorized to provide goods and services from the USML requires compliance with ITAR. Compliant companies include computer hardware manufacturers, defense contractors, distributors, software makers, third-party vendors, and wholesalers. The whole supply chain needs to comply with ITAR. Certified exporters of goods on the USML must thus ensure they’re not supplying unauthorized foreign powers. For example, if US company A sells to US company B, which in turn sells to a company in a foreign country that’s not authorized for such trade, both companies A and B are in violation. 

Being ITAR compliant extends well beyond actual military hardware. It also restricts the unauthorized sharing of designs, diagrams, photos, plans, and other technical data to produce restricted defense-related technologies. Instead of requiring companies to be certified, ITAR requires companies to pay annual registration fees upon application to the program. There are three tiers of payment under which companies can become ITAR registered, which depend upon the number of favorable export authorizations they’ve received. Infractions of these regulations can result in significant fines, reputational damage, loss of business to ITAR-compliant competitors, and even imprisonment, so it’s essential to play by the State Department’s rules.

The Importance of ITAR Compliance 

ITAR primarily aims to keep defense-related information away from states and other entities hostile to the United States. Machine shops registered with the DDTC have an advantage over competitors, as they already have set protocols in place to make them ITAR compliant. These practices ensure that only authorized US citizens can access restricted information that might compromise national security or jeopardize US foreign policy if it falls into the wrong hands.

As noted, ITAR covers physical items on the USML and their technical specifications. Furthermore, all companies along the supply chain need to be ITAR compliant. For this reason, manufacturers that produce machined items on the USML must work with ITAR-compliant precision machine shops. Regardless of their place in the supply chain, these vendors must be familiar with the high level of documentation needed to ensure compliance with ITAR. Compliant machine shops thus have more motivation to keep abreast of any changes to ITAR security requirements since fines can reach hundreds of thousands of dollars.

In addition, the US State Department requires that auditing, monitoring, and tracking of technical data regarding items listed on the USML be confined to authorized US citizens. Challenges arise, however, with companies that have overseas operations yet need to maintain compliance with ITAR. For this reason, compliant US-based companies with international ties are prohibited from sharing technical data with domestic employees without authorization from the State Department. This same principle also applies to US companies with internationally based subcontractors. Due to the potentially severe penalties resulting from noncompliance, understanding these nuances is incredibly important for any precision machine shop that fabricates whole items or parts on the USML.

Becoming ITAR Compliant

Becoming ITAR compliant involves following several steps regarding the handling and exporting military-related goods and services, along with associated technical data. ITAR registration for a precision machine shop ensures it can legally handle sensitive information or items relating to the US military that appear on the USML. Before anything else, however, it’s important to identify whether a company needs to follow the protocols outlined by ITAR. Certified items, services, or technical data on the USML must all be dealt with according to ITAR regulations.

Once established that ITAR applies, the process involves: 

• Registration: Mandatory for anyone brokering, exporting or manufacturing equipment found on the USML, form DS-2032 needs to be submitted to the State Department’s DDTC, which normally must be accompanied by a registration fee.
• Compliance program: This step requires the implementation of a compliance program that requires the company to: 
  • Establish internal controls to prevent unauthorized access to military-related products and technical data.
  • Safeguard access by setting up security protocols for items and technical data in physical or digital form.
  • Train employees concerning the duties and obligations required to become and remain ITAR compliant.
• Compliance officer: The company should appoint an officer to ensure proper compliance with ITAR regulations, maintain all necessary records, and oversee compliance efforts.
• Categorization: All items and technical data covered by ITAR must be categorized appropriately, as misclassification can potentially lead to legal issues and financial penalties.
• Export license: Companies planning to export items controlled by ITAR must obtain the licenses from DDTC, with separate approvals for each controlled item.
• Maintain records: Under ITAR protocols, detailed records must be maintained for at least five years for every transaction that involves the items on the USML.
• Assessments: Regular audits and assessments should be conducted to prevent any possible breach of ITAR regulations, and policies should be updated when needed to ensure adherence to the most current requirements.

Precision machine shops that follow these steps can open up additional business opportunities once they achieve ITAR compliance. Even outside military-related machining, attaining an ITAR registration shows potential customers that the shop operates to the highest of standards.

ITAR Compliance: Documentation & Security Best Practices

Best practices entail correctly documenting all processes and establishing security procedures to become ITAR compliant.  

Examples of ITAR-compliant documentation and security best practices include: 

• Access control: To block unauthorized access to sensitive military data, key cards for logging into computers, management of decryption keys, deactivation of obsolete usernames, and other access control measures should be undertaken.
• Data protection: Whether technical data is in physical or digital format, what needs to be secured must first be identified; data in physical form should be concealed when not in use, while data in digital form should have end-to-end encryption.
• IT: Any software developed specifically for military machining should be done in-house or by an ITAR-compliant developer.
• Job travelers: Document all specifications for machine shop personnel to fabricate military components.
• NDAs: Non-disclosure agreements should be signed by all on-site employees and visitors to the shop floor or other sensitive areas.
• Network security: If working with a third-party cloud vendor, they need to be ITAR compliant; precision machine shops can also comply by having physical servers onsite that comply with ITAR standards.
• SOPs: The standard operating procedures (SOPs) for an ITAR-compliant precision machine shop should be written out and easily accessible to all employees.
• Threat assessment: Ongoing monitoring should occur to identify and remediate potential threats like cyberattacks, insider threats, security breaches, and other vulnerabilities. 
• Tracking: Any files loaded onto external devices should be tracked while identifying file and folder permissions, groups, and users. 
• Visitors: All visitors to the precision machine shop should be escorted and kept in sight when on the shop floor and in any other sensitive production areas.
• Software: Any software used – including that used for CNC machines – should be highly secure to protect sensitive technical data.

Failure to properly implement security protocols associated with being ITAR compliant results in severe penalties. However, the US State Department can make certain exceptions to regulations regarding access to ITAR-controlled data. For example, the US has standing agreements with US allies, including the United Kingdom, Canada, and Australia.

Staub Advantage: Choose an ITAR Compliant Precision Machine Shop

As there are severe penalties associated with noncompliance regarding ITAR, a compliant precision machine shop like Staub can provide military manufacturers with a significant advantage over their competitors. At Staub, we understand the importance of the security guidelines and quality standards associated with ITAR registration when making items for any branch of the US military. From the design stage to delivery, Staub excels at providing exceptionally high-quality complex components for manufacturers who make items found on the USML. To learn more about Staub’s capabilities, we invite you to contact our ITAR-compliant machine shop today.