ITAR Compliance: What Every CIO and CSO Needs to Know

When we think about data protection and security, it seems obvious that it would apply to every industry and business type. But when it comes to industries like defense and space systems, there’s an assumption that security is more built-in due to the underlying infrastructure being so critical in these sectors.  

While that assumption is valid, these industries still require stringent standards for controlling defense and space-related articles and services in the United States.  

ITAR, the International Traffic in Arms Regulations, is a United States regulation that came into effect on March 9, 2020, and is put in place to restrict and control the manufacturing, sales, and exporting of defense, military and space-related technologies.  

What is ITAR compliance? 

The primary goal of ITAR, which the U.S. Department of State administers, aims to prevent the unauthorized export of defense-related technology and ensure that military and space-related technology and data do not fall into the wrong hands. Compliance with ITAR means adhering to regulations that control the export and import of defense-related articles and services on the United States Munitions List (USML). 

Under ITAR, companies involved in manufacturing, selling, or distributing defense articles or services must register with the Directorate of Defense Trade Controls (DDTC).  

ITAR compliance also involves: 

• Stringent record-keeping requirements 
• Restrictions on transfer of controlled information (including technical data) 
• Limitations on foreign nationals’ access to this information 

Much like other regulations, ITAR compliance is about following a set of rules, but implementing a security and awareness culture within the organization is even more important. That culture should include training employees, establishing IT security protocols, and regularly auditing and updating compliance measures.  

Key ITAR regulations 

A critical component of ITAR is the control over “technical data” — plans, photos, and documentation used to build military gear. For organizations, this means implementing stringent access controls to ensure that only authorized U.S. citizens have access to such sensitive information. 

Who needs to be ITAR-compliant? 

It’s important to note that ITAR compliance is not limited to traditional defense contractors, and applies to any company that handles, manufactures, designs, sells, or distributes items listed on the United States Munitions List (USML).  

Any private or public company that does business with the U.S. military or deals with information related to services, items, or technical data covered on the USML must comply.  

Third-party contractors, as well as companies in the aerospace, software development, and oil and gas industries may also need to comply. 

Securing ITAR data 

When securing ITAR data, a comprehensive approach is required — one that includes encryption, access controls, and regular audits — so that technical data is stored securely and shared only with authorized personnel. Implementing robust IT security measures and employee training programs are equally crucial for protecting sensitive information and maintaining ITAR compliance. 

Companies complying with ITAR should also be practicing good security hygiene, such as: 

• Having an Incident Response Plan 
• Deploying robust physical and network security 
• Applying data classification methods 
• Relying on legal and compliance support 
• Vendor and Third-Party Management 
• Secure Disposal

Common ITAR violations 

Non-compliance with ITAR can have severe consequences, including civil fines of up to $500,000 per violation and criminal penalties. The repercussions transcend the bottom line, as non-compliance may damage a company’s brand or reputation.  

In this context, ITAR compliance represents a critical aspect of corporate responsibility and risk management. 

Here are a few of the fundamental ITAR violations to be aware of. 

Unauthorized export of technical data: Sharing controlled technical data with foreign nationals, even unintentionally, is a common violation. 

Inadequate record-keeping: Failing to maintain accurate records of ITAR-controlled transactions can lead to compliance issues. 

Lack of employee training: Employees not up to speed on ITAR regulations can inadvertently cause violations. As such, regular training is crucial.

ITAR exemptions and exceptions 

ITAR regulations are stringent, but there are certain exemptions and exceptions that organizations can leverage. Understanding these exemptions can help organizations navigate ITAR more effectively, but they should be applied carefully to maintain compliance. The full list of exemptions can be found in the final rule.   

Public domain exemption: Information already published and generally accessible to the public falls outside ITAR controls. 

Fundamental research exemption: Basic and applied research in science and engineering where the resulting information is ordinarily published and shared broadly within the scientific community may be exempt. 

Educational information exemption: Information commonly taught in schools and universities is not subject to ITAR restrictions. 

Recent ITAR updates and reforms

In recent years, the U.S. State Department has set out to improve clarity, streamline language, and ensure the ITAR rules stay aligned with new technologies and global defense partnerships.

In March 2022, the Department announced a multi-year initiative to modernize ITAR through a series of rule revisions. The goal is to reduce redundancy, simplify complex language, and reorganize content for better accessibility and understanding. The first example of this initiative was the restructured Part 120, which took effect in September 2022, and focuses on refining the foundational definitions and purpose statements that underpin ITAR.

Following public feedback, minor refinements were made and finalized in early 2023 to address inconsistencies and improve alignment with federal data collection practices.

Changes have also been made to the scope of allowable exports, particularly under defense trade treaties and exemptions involving Canada, the U.K., and Australia. Effective May 2023, new rules expanded the range of permissible transfers involving certain naval and undersea technologies—like torpedo systems and submarine control platforms—under treaty-based exemptions.

Another noteworthy revision came in May 2023, when the U.S. Munitions List (USML) was updated to reflect advances in commercial technology. Some components, including specific high-energy capacitors, were removed from control under Category XI, while clearer thresholds (like the 125-volt standard) were added to define which items still require regulation.

Lastly, in June 2023, the State Department reinforced its enforcement posture by debarment of individuals found guilty of violating the Arms Export Control Act (AECA). These individuals are barred from participating in ITAR-regulated activities for a minimum of three years.

The rise of cloud and AI in ITAR compliance

As more defense and aerospace organizations migrate to cloud environments, compliance with ITAR is evolving. The regulation hasn’t changed, but how companies meet its requirements has. Ensuring ITAR compliance in a cloud-first, AI-driven world means organizations must address new complexities in data visibility, access control, and vendor management.

Modern cloud infrastructure introduces several challenges to ITAR compliance:

Multi-tenant risks: Public cloud platforms may host ITAR-regulated data alongside other tenants, creating the potential for cross-contamination if not properly isolated.

Data residency uncertainty: Cloud storage can obscure where data is physically located—an issue when ITAR requires data to stay within U.S. borders or access-limited environments.

Third-party exposure: As SaaS usage skyrockets, so does reliance on vendors who may not be ITAR-compliant by default.

Meanwhile, AI introduces risk and opportunity. Generative AI platforms, if not governed correctly, can inadvertently process or expose ITAR-sensitive content. On the other hand, machine learning can significantly improve detection and monitoring, especially in unstructured environments like file shares, messaging platforms, and cloud collaboration tools.

To maintain compliance, companies should:

• Choose cloud providers with FedRAMP Moderate or High authorization to ensure proper controls are in place.
• Use automated data discovery and classification tools to find and flag ITAR-regulated content.
• Monitor AI platform usage and restrict ITAR data from being processed by external or unmanaged tools.
• Enforce U.S. Persons-only access through identity management, conditional access policies, and network segmentation.

How Concentric AI can help with ITAR compliance 

Leveraging the same tools we’ve developed for compliance with numerous regulations, Concentric AI offers robust solutions for ITAR compliance.  

With Concentric AI, there are three key steps to ensure organizations are compliant with ITAR: 

• Data discovery and identification 
• Risk monitoring and classification 
• Remediation of data risk

Data discovery and identification 

Concentric AI’s Semantic Intelligence solution uses sophisticated machine learning technologies to autonomously scan and categorize data — from defense data to PII/PHI/PCI to intellectual property to business confidential information – wherever it is stored. 

Our Risk Distance analysis autonomously identifies that data, learns how it’s used, and determines whether it’s at risk. With Concentric AI, you will always know where any applicable ITAR data resides, whether it’s in unstructured or structured data repositories, email/messaging applications, cloud or on-premises — all with semantic context. 

Risk monitoring and classification 

With Concentric AI, you can autonomously discover how your data is being used, who it is being shared with, and who accessed it — to quickly and accurately pinpoint risk from inappropriate permissioning, risky sharing, and unauthorized access. Data classification is a crucial step in achieving ITAR compliance because it allows you to identify, categorize, and organize data according to its level of sensitivity and importance. This is particularly important under ITAR, given the strict requirements on how companies handle such sensitive data. 

Remediation of data risk issues 

Concentric AI leverages deep learning to compare each data element with baseline security practices used by similar data to identify risk without rules and policies. Best of all, our solution can remediate these access risks as they happen – whether it’s fixing access control issues or permissions, disabling sensitive file sharing with a third party, or blocking an attachment on a messaging service.  

Our solution does its all without upfront policies and doesn’t require large teams to operationalize.  

For CIOs and CSOs, the complexity of ITAR compliance cannot be understated. With the right tools and understanding, it’s a manageable task that can significantly contribute to the security and integrity of your organization. 

Book a demo today to see firsthand — with your own data — how Concentric AI can quickly and easily be deployed to manage ITAR compliance in your organization.