🇺🇸United States

Civil and Criminal ITAR/EAR Penalties from Inadequate Export Control Tracking

3 verified sources

Definition

Defense and space manufacturers that misclassify items, export without required licenses, or fail to maintain mandated export records incur multi‑million‑dollar ITAR/EAR penalties. These failures are almost always rooted in weak or fragmented export control compliance tracking (manual spreadsheets, poor recordkeeping, lack of audit trail).

Key Findings

  • Financial Impact: $1M–$100M+ per enforcement action (civil fines up to the greater of $500,000–$1,000,000 per violation under ITAR and $300,000 per violation or twice the transaction value under EAR; large settlements in the tens of millions are documented)
  • Frequency: Recurring (regulators publish multiple enforcement cases every year and emphasize that violations commonly stem from systemic tracking and recordkeeping failures, not one‑off errors)
  • Root Cause: Reliance on manual or homegrown systems for export control tracking, inconsistent classification and screening processes across business units, and failure to maintain required records of exports, licenses, and technology transfers—each of which is explicitly identified by BIS and DDTC as a common source of violations such as exporting without a license, false statements, and failure to comply with recordkeeping obligations.[3][8][10]

Why This Matters

This pain point represents a significant opportunity for B2B solutions targeting Defense and Space Manufacturing.

Affected Stakeholders

Export Compliance Officers, Trade Compliance Managers, Program Managers (Defense Programs), Legal/General Counsel, Supply Chain and Logistics Managers, IT and Security Leaders responsible for export tracking systems

Deep Analysis (Premium)

Financial Impact

$1,000,000 to $100,000,000+ per enforcement action; ITAR civil fines $500,000-$1,000,000 per violation; criminal penalties up to 30 years imprisonment; EAR civil fines $300,000 per violation or 2x transaction value; plus loss of export privileges, contract termination, reputational damage • $1,000,000–$100,000,000+ per enforcement action. ITAR violations: up to $500,000–$1,000,000 per violation. EAR violations: up to $300,000 per violation or twice transaction value. Civil penalties compound per item misclassified or exported without authorization. • $1,000,000–$100,000,000+ per enforcement action. Unauthorized disclosure of export-controlled technical data to foreign nationals or international employees violates ITAR (criminal penalties up to 30 years) and EAR. Loss of DoD contract eligibility if CMMC Level 2 certification lapses due to inadequate CUI safeguarding.

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Current Workarounds

Disconnected classified property databases, manual clearance verification, paper-based accountability records, informal export control tracking for classified equipment • Disconnected property databases, manual export control verification, email-based approvals for international transfers, incomplete audit documentation • Email requisitions, verbal approval from manager, uncontrolled supplier lists, manual denied-party screening (human lookup vs. automated)

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Methodology & Sources

Data collected via OSINT from regulatory filings, industry audits, and verified case studies.

Evidence Sources:

Related Business Risks

Misclassification of Defense and Dual‑Use Items Driving Licensing Errors and Costly Rework

$100k–$5M+ per year in a mid‑large defense manufacturer (external re‑classifications, legal reviews, re‑work of licenses, blocked or cancelled orders, and margin loss from overly conservative classifications); misclassification that results in violations can escalate total losses into the tens of millions once penalties and remediation programs are included

Product Development and Manufacturing Delays from Manual ITAR/EAR Data Controls

$1M–$10M+ per year in delayed revenue and higher engineering and program costs for large defense manufacturers (lost margin from late deliveries, liquidated damages under defense contracts, and additional engineering hours to work around access and tracking issues)

Extended Order‑to‑Cash Cycle Due to Slow License and Export Approval Tracking

$500k–$5M+ per year in incremental working capital and financing costs for a large exporter (each week of added DSO on high‑value defense and space shipments can tie up tens of millions of dollars in receivables)

Lost and Deferred Export Revenue from Overly Conservative or Disorganized Compliance Tracking

$1M–$20M+ per year in lost or deferred revenue at mid‑ to large‑scale exporters (cancelled foreign orders, customers switching suppliers due to delays, and inability to bid on certain international programs because compliance tracking cannot support them)

Unauthorized Use and Transfer of Controlled Technical Data Enabled by Weak Tracking

$1M–$50M+ per detected scheme when including internal investigations, disciplinary actions, remediation programs, and potential penalties or debarment, in addition to hard costs related to lost contracts if government customers lose confidence

Rework and Contractual Corrective Actions Due to Export Documentation and Tracking Errors

$250k–$2M+ per year for a high‑volume defense exporter in additional labor, re‑filed paperwork, shipping rework, and internal/external audit remediation associated with export documentation errors and subsequent corrective actions

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