Configuring IFS Cloud for ITAR Compliance in Aerospace & Defense

If regulators audited your IFS Cloud system today, could you prove that every piece of export-controlled data is secure, contained, and restricted to the right personnel? It’s the kind of question that separates compliant programs from suspended contracts.

The International Traffic in Arms Regulations (ITAR) govern how defense-related technical data is stored, accessed, and transmitted. Once that data enters a cloud-based ERP system like IFS Cloud, you are responsible for how it's handled down to the configuration level.

Enforcement moves from policy to penalties fast. The State Department’s $200 million ITAR settlement with RTX in 2024 shows what’s at stake when export-controlled data isn’t governed correctly in enterprise cloud systems. IFS Cloud can support ITAR compliance, but only if you apply the right controls, limit access to authorized users, and verify your configurations with evidence. This guide shows you how to do it.

Understanding ITAR Compliance Requirements for Cloud-Based ERP Systems

Cloud services used to manage defense-related data fall directly under ITAR regulations. ERP platforms like IFS Cloud are now responsible for storing, processing, and controlling access to sensitive information that’s subject to national security laws. To maintain compliance, you need a clear understanding of what ITAR covers, who enforces it, and what technical safeguards are required from your service providers.

What Types of Data and Systems Fall Under ITAR

The ITAR framework applies to all defense-related articles and technical data listed on the United States Munitions List under ITAR, as defined by the Arms Export Control Act. This includes CAD files, manufacturing instructions, source code, maintenance procedures, and system specs related to defense technologies.

Once this type of ITAR-controlled information enters an ERP or any cloud-based services used in your environment, that entire system becomes subject to ITAR. This includes not just primary storage, but also archives, third-party integrations, and collaboration tools that transmit or duplicate controlled data.

Who Enforces ITAR and How Violations Are Triggered

The Department of State, through its Directorate of Defense Trade Controls (DDTC), oversees ITAR compliance and investigations. Enforcement is triggered by unauthorized access, improper exports, or failure to maintain sufficient controls over how data is stored and accessed.

Companies are expected to implement enhanced service controls that limit exposure and prevent unauthorized use of defense-related articles and services. Vendors are not held liable; the organization using the system is responsible for the operational compliance of its own cloud environments and service architecture.

Core Compliance Requirements for ITAR-Compliant ERP Platforms

ITAR compliance requirements for platforms like IFS Cloud break down into four technical pillars:

1. Access Control: Only authorized U.S. persons may access ITAR-controlled technical data. This includes administrative users and support personnel. Verification must be embedded into system roles and provisioning workflows.

2. Data Security and Encryption: All ITAR data must be encrypted at rest and in transit, using standards such as FIPS 140-2 validated encryption keys. This prevents exposure during storage, backup, and transmission across networks.

3. Auditability and Logging: Organizations must maintain complete, immutable logs that capture all access and changes to sensitive defense data. Logs must support compliance monitoring and withstand third-party review.

4. Data Residency and Isolation: ITAR requires operational and physical isolation of controlled data within the United States. No replication, access, or storage outside of approved domestic regions is permitted, including via third-party service providers.

Failure in any one of these areas can result in unauthorized access, violations of export controls, and potentially millions in fines. Maintaining ITAR compliance means addressing these risks head-on through systems design, policy enforcement, and routine verification.

Why Cloud ERP Systems Put ITAR Compliance at Risk

Enterprise cloud services have redefined how defense contractors manage sensitive data. But flexibility without control leads to exposure. Platforms like IFS Cloud support a wide range of deployment options, yet none of them meet ITAR requirements by default. Compliance is only achieved when each system is configured to restrict access, log actions, and isolate sensitive environments.

Why Most ERP Platforms Fall Short of ITAR Requirements

Most ERP systems prioritize global usability. They allow multi-region backups, shared tenancy, and remote administrative access, features that conflict with ITAR's need for containment and control. When cloud environments are rolled out without constraints, they create violations before anyone notices.

Too many organizations rely on vendor claims instead of validating their own environments. The reality is simple: compliance depends on the decisions made during configuration, not the features listed in a product brochure.

Misconfiguration Is the Most Common Compliance Failure

Export control violations often stem from weak or inconsistent system controls. The most common missteps include:

• Backups stored in non-U.S. data centers

• Admin privileges granted without U.S. person verification

• Disabled or incomplete system logging

• Third-party apps that bypass access governance

• File-sharing tools that expose controlled data to unauthorized users

Each of these failures can trigger a review, enforcement action, or program hold. These failures are common. They appear in systems where internal reviews are missing or ignored. For organizations using IFS Cloud, working with experts in IFS ERP Implementation can help ensure your system is configured with compliance in mind from the start.

Noncompliance Disrupts Operations, Not Just Budgets

ITAR penalties can exceed seven figures, but the bigger risk is operational. A failed audit can pause contracts, limit eligibility, and force re-architecture under regulatory supervision. Delays in corrective action affect production timelines and damage credibility with prime contractors.

To meet ITAR and CMMC compliance standards, cloud ERP environments must apply strict access controls, log every interaction with sensitive data, and ensure that export-controlled information stays within approved regions. Compliance isn’t a one-time task. It requires continuous enforcement and validation.

What Happens When You Violate ITAR in Cloud-Based ERP Systems

ITAR compliance failures lead to enforcement. That enforcement often stems from how cloud systems are configured. When export-controlled data is mishandled, regulators act. The impact affects finances, operations, and reputation.

Enforcement Examples That Hit the Defense Industry Hard

In 2022, the U.S. Department of State concluded a $51 million settlement with Boeing for 199 violations of the Arms Export Control Act and ITAR. These violations involved unauthorized exports of defense articles, including technical data. The breakdown occurred over several years due to poor internal controls and a lack of oversight. 

This enforcement shows what happens when organizations fail to implement and maintain reliable compliance programs. System-level weaknesses are not excused by intent.

The Most Common Cloud ERP Missteps

ITAR violations in systems like IFS Cloud often trace back to configuration failures. The most frequent include:

• Storing ITAR-controlled data in non-domestic content delivery networks

• Allowing admin access without verifying U.S. person status

• Mixing regulated and non-regulated data without isolation

• Using undocumented or unsecured authorization workflows

• Relying on third-party tools that do not meet protection requirements

These failures are not unusual. They appear in environments where compliance was assumed, not verified.

Compliance Responsibility Is Yours

Cloud service providers offer infrastructure and tools. They do not configure your system, document your controls, or validate your access restrictions. The Directorate of Defense Trade Controls (DDTC) holds the company, not the vendor, accountable for any violation.

Whether your system runs on Microsoft Azure Government or a private deployment, responsibility does not shift. You are required to control who can access ITAR-controlled data, keep that data within authorized regions, and maintain audit logs. Only documented, enforced controls maintain compliance and protect national security assets.

How IFS Cloud Enables a Compliant ITAR Security Framework

IFS Cloud provides the technical foundation for ITAR compliance, but features alone do not make you compliant. Controls like encryption, logging, and access restrictions only reduce risk when configured intentionally and maintained over time. The platform is a tool. You are responsible for how it is used.

Compliance Features That Matter

IFS Cloud supports role-based access control tied to U.S. person status, U.S.-only deployments, FIPS 140-2 validated encryption, and detailed audit logs. These tools align with ITAR, CMMC, and NIST expectations. When implemented correctly, they help prevent unauthorized access, protect sensitive data, and ensure you can demonstrate control over export-regulated content. But if left unconfigured, they offer no protection.

Choosing the Right Deployment Model

On-premises deployments offer maximum control but come with higher costs and overhead. Government-authorized clouds, such as Microsoft Azure Government, offer compliant infrastructure but still require a secure setup. Hybrid models provide flexibility but demand strict segmentation and documentation. Your architecture must be chosen with compliance in mind, not just convenience.

Configuration Is What Proves Compliance

Compared to other ERP systems, IFS Cloud offers more built-in control over access, encryption, and data residency. That matters, but only if you use it. Compliance is not in the feature list. It is in how you design, govern, and monitor your system.

IFS Cloud supports ITAR compliance. Your team makes it happen.

Step-by-Step: Configuring IFS Cloud for ITAR Compliance

IFS Cloud can support ITAR compliance, but only when it is configured with a purpose. Every setting, policy, and permission must be traceable to an actual requirement. Partnering with Astra Canyon, a leader in IFS ERP Implementation, helps ensure your system is built to meet ITAR requirements from day one. Architecture sets the foundation, but compliance is only proven through oversight and documentation.

Step 1: Identify and Classify Export-Controlled Information

Start by tagging all export-controlled and controlled unclassified information (CUI) in IFS Cloud. This includes engineering files, defense-related supplier data, and sensitive project documentation. Use an internal classification scheme that aligns with ITAR definitions and avoid over-tagging. Excessive classification increases operational cost and audit fatigue, while missed records create serious compliance gaps.

Step 2: Restrict Access to U.S. Persons

Configure role-based access controls (RBAC) to allow access only to verified U.S. persons. Roles should be mapped to job functions and regularly reviewed by compliance experts. Add automated workflows that revoke access when employment status changes or clearance lapses. You must be able to show who can access each file, and why they’re authorized.

Step 3: Enforce U.S.-Only Data Storage

Select U.S.-only hosting through authorized service providers. This applies to all IFS Cloud services for ITAR, including production systems, backups, and system logs. Conduct configuration audits to ensure no data flows through global content delivery networks or international failover regions. Keeping regulated data within the United States is required to protect sensitive information and control the export of defense articles.

Step 4: Activate Full-System Logging

Enable audit logging across all modules, including financials, supply chain, and manufacturing. Log every interaction with ITAR-controlled data, such as viewing, editing, downloading, and administrative access. Store logs in immutable formats and set a quarterly review schedule. These logs are critical to support ongoing compliance and satisfy oversight requirements during audits or investigations.

Step 5: Establish a Continuous Review Process

Create a cross-functional review process involving IT, compliance, and legal teams. Meet quarterly to review system access, control configurations, and documentation status. Document all findings, risk areas, and corrective actions. This structure supports CMMC compliance and streamlines validation when regulators request proof of due diligence.

Step 6: Document Every Control and Decision

Maintain written records of all system configurations, access policies, training sessions, and compliance procedures. Regulators do not accept assumptions or verbal explanations. Documentation is your evidence. Build a library of configurations, approvals, and audit trails to demonstrate you’ve met the expectations laid out in the parts of ITAR that apply to your business.

Integrating IFS Cloud into Your A&D Compliance Framework

Configuring IFS Cloud alone doesn’t guarantee ITAR compliance. To maintain compliance, your ERP environment must operate as part of a broader ecosystem that includes PLM, MES, collaboration tools, and third-party vendors. Every connection, policy, and integration must actively enforce export controls and prevent data exposure.

Define Shared Ownership Across Teams

IT, legal, and compliance must share responsibility for system-level enforcement. Legal teams interpret the parts of ITAR that apply to your operations. Compliance experts define and validate controls. IT teams implement those controls inside IFS Cloud and other systems. Without collaboration, access control and enforcement break down.

Extend Policies Beyond ERP

IFS Cloud often integrates with other platforms that handle controlled unclassified information, technical files, or project communications. Your ITAR policies must cover every system where regulated data moves. That includes PLM, file-sharing tools, and supplier portals. Data security is not limited to a single platform; it depends on how systems interact. Review those integration points for gaps, and confirm that services for ITAR can help manage shared risk.

Make Compliance Part of Change Control

Change management introduces exposure. When your business adds new modules, updates software, or acquires another company, every change creates risk. Build compliance validation into each phase of change control. Review configurations after updates. Re-audit access policies when teams merge. This is how you prevent breakdowns in compliance with ITAR and avoid violations caused by misalignment.

Treat Governance as a Daily Practice

Training must go beyond awareness. Every user who touches regulated data should know their obligations and follow a documented process. Access approvals, role changes, and configuration edits must be logged. These are more than best practices. They are baseline expectations for regulatory compliance.

Final Takeaway: ITAR Compliance Is Built, Not Assumed

ITAR compliance in IFS Cloud doesn’t happen automatically. It depends on how well your system is configured, documented, and aligned with internal controls and regulatory expectations.

IFS Cloud offers the right capabilities, but it’s your responsibility to manage access, safeguard sensitive data, and maintain oversight. Compliance is a result of clear decisions and sustained enforcement, not default settings.

If your organization handles defense-related data in IFS Cloud, now is the time to review your configuration. Talk to an A&D Compliance Expert at Astra Canyon to assess your environment and strengthen your compliance posture.