The essential ITAR compliance checklist for businesses
ITAR is a set of laws that regulate defense-related products and services in the United States. Any business that builds or manufactures such products or services must comply with ITAR regulations to avoid legal consequences.
However, navigating the complex ITAR regulations can be daunting, especially for businesses that are new to or unfamiliar with ITAR. This article provides an essential ITAR compliance checklist to help your business comply with ITAR regulations and avoid potential penalties.
We will discuss the key ITAR requirements, including registration, licensing, and record-keeping, and provide tips to ensure your business is ITAR compliant. So, let’s dive right in.
What is ITAR?
ITAR stands for International Traffic in Arms Regulations. It’s a set of mandatory U.S. government regulations that control the export and import of defense-related articles and services on the United States Munitions List (USML).
The USML includes firearms, ammunition, explosives, spacecraft, and specialized military technologies. ITAR protects U.S. national security and prevents sensitive information from falling into the wrong hands. (You can find the USML in its entirety here.)
The regulations apply to businesses involved in manufacturing, selling, or distributing items on the USML and individuals who work with or have access to these items. Failure to comply with ITAR can result in significant penalties, including fines and criminal charges. For example, violating ITAR regulations landed Keysight Technologies a $6.6 million penalty in 2021 and a $3.9 billion penalty for Airbus in 2020.
Who needs to be ITAR compliant?
ITAR compliance is compulsory for any organization that deals with defense-related goods, services, or technical data. This includes companies manufacturing, exporting, or importing defense articles, services, software, or technical data. Here are some examples of organizations that need to be ITAR-compliant:
- Defense contractors and subcontractors
- Aerospace companies
- Companies that design and manufacture military-grade electronics and equipment
- Companies that provide defense-related services such as I.T. support or consulting
- Software and hardware vendors providing applications to organizations selling defense-related products or services. For example, cloud hosting providers, like AWS.
- Universities and research institutions that research defense-related technologies
Compliance with ITAR helps protect sensitive information and intellectual property from being misused or stolen. It also helps engineering firms to maintain good relationships with clients and to be eligible for U.S. Defense contracts or to do business with the U.S. Government.
In Duro’s case, as a platform that supports distributed and collaborative teams building hardware products, ITAR compliance is indispensable for customers in aerospace and defense to protect their technical data and meet regulatory requirements.
What to include in your ITAR compliance checklist
To secure complete compliance and its oversight, companies should follow a comprehensive ITAR compliance checklist to structure their business’s and team’s requirements.
In this section, we’ll outline some essential items to include in your checklist, starting with registration with the Directorate of Defense Trade Controls (DDTC).
1) Register with the Directorate of Defense Trade Controls (DDTC)
The DDTC is the federal agency responsible for enforcing ITAR regulations. All businesses dealing with defense-related products, information, and services must register with the DDTC. This includes manufacturers, exporters, brokers, and research institutions.
Registration allows the DDTC to track and regulate the flow of defense-related products and information. To register with the DDTC, businesses should:
- Determine if registration is needed: Businesses should review the ITAR regulations to determine if they deal with defense-related products or information that requires registration with the DDTC.
- Submit registration materials: Businesses should submit their materials to the DDTC, including a completed registration form and a fee.
- Wait for approval: The DDTC will review the registration materials and notify the business of its acceptance or denial.
2) Classify USML-listed items according to USML categories
The USML lists defense-related items, software, and technology regulated under ITAR.
Businesses should review each USML category and determine the appropriate classification for their USML-listed items. Getting this right is essential because it determines the level of control and regulation that applies to each item.
- Identify which items on the USML list your business handles.
- Research and understand the specific USML categories that apply to those items.
- Determine the appropriate classification for each item based on the USML categories.
3) Attain licenses and agreements
Attaining licenses and agreements is a critical step in ensuring ITAR compliance. Businesses that want to export, import, or deal with ITAR-controlled items, software, or technology must get the proper licenses.
The licenses and agreements that may be required include the following:
- Export licenses for exporting defense-related items, software, or technology.
- Temporary import licenses for importing defense-related items, software, or technology for an interim period.
- Technical assistance agreements (TAAs) for providing technical assistance to foreign entities related to defense-related items, software, or technology.
- Manufacturing license agreements (MLAs) to manufacture defense-related items, software, or technology outside of the United States.
To attain these licenses and agreements, a business must apply to the DDTC and provide detailed information about the items, software, or technology being exported or imported and the foreign entities involved in the transaction.
4) Train your employees on ITAR compliance
Employees and staff who handle ITAR-controlled items or technical data should understand the regulations and requirements associated with ITAR compliance. This includes engineers and project managers, and support staff, such as administrative assistants and your operations team, who may come into contact with sensitive information.
Training should cover how to identify ITAR-controlled items, how to handle them, and how to report any suspected violations. Companies should also establish protocols for reporting violations or potential violations.
This training can be conducted via in-person sessions, webinars, or online courses. Businesses should keep records of all employee training and regularly update their materials to align with any changes to ITAR regulations.
You should also add controls or encrypt certain data types to prevent access by unauthorized users.
5) Know your end users and screen your suppliers
To comply with ITAR regulations, you must ensure your products and technical data are not exported to unauthorized end-users or countries. This involves implementing safeguards to protect sensitive data, conducting due diligence on customers, suppliers, and partners, and screening them against prohibited lists. Businesses should establish clear screening protocols and record screening activities.
Review all clients, employees and suppliers against the DDTC Debarred Parties List
Additionally, companies must obtain the necessary permissions and licenses to export defense articles or services, such as military equipment or blueprints. To safeguard against unauthorized access, companies should also consider implementing end-to-end encryption and establishing an export compliance program.
6) Fulfill all reporting requirements
Maintaining accurate records of ITAR activities can help companies demonstrate their compliance and avoid potential violations. This includes recording the transfer and sale of USML-listed items and other ITAR activities.
Companies must also be prepared to provide documentation during an audit or investigation. This may require providing access to I.T. systems to demonstrate compliance with ITAR requirements. To protect against unauthorized access, companies should also establish access control protocols for I.T. systems containing sensitive ITAR data.
Certain exemptions exist within ITAR regulations. For example, specific personal protective equipment is exempt from ITAR regulations, so you must understand the particular needs of your products and technical data.
7) Select ITAR compliant software vendors
ITAR includes specific rules about how data is used and moved. As a result, any software you use for storing or accessing regulated data must also be ITAR compliant. Software vendors will work with you to ensure data protection and should also register with the DDTC.
However, it’s ultimately your responsibility to review your unique configuration and check that the way users interact with the software is compliant.
8) Determine if you require a third-party audit
If needed, you can hire a third-party company to conduct an audit and provide a Letter of Attestation of ITAR compliance. While this service will be an additional cost, it will provide confirmation that a third-party as audited your controls and they have found you in compliance.
These audits will review your product classifications, shipping, training programs, procedures for visitors, order processing systems, and record keeping, as well as several other categories.
Make an ongoing commitment to ITAR compliance
ITAR compliance is a complicated multi-step process. You’ll likely have to adapt as you add new employees, data and products to your portfolio.
In addition, ITAR requirements themselves, including restrictions on the export of defense-related items, can change. For example, in 2022 the DDTC made some amendments. Therefore, regularly reviewing and updating your ITAR compliance program is essential to ensure continued compliance and safeguard your business.
Additionally, ITAR isn’t the only regulation that’s required: It’s also important to be familiar with other important regulations, such as Export Administrations Regulations (EAR) and the Federal Risk and Authorization Management Program (FedRAMP). EAR provides further guidance on exporting defense items and related technical data.
Protect your business from ITAR compliance risks with Duro
At Duro, we understand the complexities of ITAR compliance and offer a secure platform for managing ITAR-relevant product data.
Through our partnership with AWS GovCloud, Duro offers fully isolated hosting options for its PLM. Companies have complete control over their data and systems, making it an ideal choice for aerospace and defense organizations that must adhere to strict regulations.
Duro’s agile hardware development solution also provides a way to track and manage change orders and revisions for audits. As a result, you can quickly visualize changes to your BOM and update sourcing, enabling you to identify and rectify any regulatory and operational issues quickly.
To ensure your business is ITAR compliant, you should follow our compiled checklist, which includes registering with DDTC, classifying USML-listed items, obtaining licenses and agreements, training employees, screening customers and suppliers, fulfilling reporting requirements, and implementing tracking and controls.
Request a demo today to learn how Duro can help your business stay ITAR compliant.
Disclaimer: The information provided on this blog is for educational and informational purposes only and does not constitute legal advice. We make no representations or warranties about the accuracy, completeness, reliability or suitability of the information. Readers should only act upon this information after seeking professional legal counsel. We are not responsible for any actions taken or not taken based on the information provided on this blog.