“Be very careful” — a mother’s passing comment to her kids as they head outside.

The words describe a way of living that is precise, accurate, and deliberate. It involves both forethought and a heightened sense of awareness.

I wrote this to build awareness in companies involved in manufacturing and trading products for defense and Sat-Com programs.

ITAR

The U.S. government requires all manufacturers, exporters, and brokers of defense articles, defense services, or related technical data to be compliant with the International Traffic in Arms Regulations (ITAR).

Companies are requiring members of their supply chain be ITAR certified or ITAR compliant. Nowhere in the ITAR is it spelled out what “ITAR certified” means. If you speak to different staff members of the Directorate of Defense Trade Controls (DDTC), you may get slightly different answers. To be ITAR compliant, a company needs to register with DDTC, know what is required of them to be in compliance with the ITAR, and self-certify that they possess this knowledge. You should seek legal advice to determine how this applies to your company.

SAM

System for Award Management (SAM) is a federal government owned and operated free website that consolidates the capabilities in CCR/FedReg, ORCA, and EPLS. Future phases of SAM will add the capabilities of other systems used in federal procurement and awards processes. The Central Contractor Registration (CCR) is the primary vendor database for the U.S. federal government. The CCR collects, validates, stores and disseminates data in support of agency acquisition missions.

NADCAP, AS9100, and ISO 9001

National Aerospace and Defense Contractors Accreditation Program (NADCAP), AS9100, and ISO 9001 are other common requirements defense companies demand for the integrity of the product.

Transparency and credibility

Renaissance Electronics Corp. is a design and manufacturing company in business for over 22 years as a key supplier to major defense programs while complying with all of these and other standards.

One of the recent challenges of running our business is increased unfair Chinese competition. Lower quality products can be imported from China and offered at a lower price. With lower manufacturing standards, manufacturing costs in China are far less than in the U.S. But just because something is cheap doesn’t mean it is lower cost. These cheap products imported by some of our competitors end up with high product failures and returns, significantly increasing the cost of a product. Many of the failures show up early in the manufacturing process, but many show up when it is too late, with failures in the field.

Many buyers on major military programs are unintentionally not following the above listed regulations and manufacture systems using substandard Chinese products. These products have no history of quality and reliability, most do not meet military standards, and can jeopardize the safety of our soldiers. The buyer relies on representations from unscrupulous suppliers of products, making decisions strictly on price. Another problem is that this supplier is sharing the manufacturer’s plans and specifications with a Chinese manufacturer. As this continues, how long before that Chinese manufacturer moves further up the supply chain? We are sacrificing our safety and unknowingly setting the stage to ship our own jobs to China as they become more familiar with our products.

A February 2013 article in the Wall Street Journal highlights the far-reaching costs of espionage, competitive disadvantage, job losses, and product impacts.

A number of corporations are pushing the U.S. government to intensify pressure to combat the threat on trade secrets. American Superconductor alleged that the firm’s intellectual property was stolen by its largest customer, a big Chinese wind-turbine manufacturer, with the help of a former employee. Caterpillar is bringing jobs back from Japan. Ford is bringing jobs back from Mexico. After building plants in other countries like China, Intel is opening its most advanced plant right here at home. This year, Apple will start making Macs in America again. Some of these changes reflect changing economics, but the threat on trade secrets clearly has had an impact.

When selecting a supplier, please go the extra mile. It is worth taking a second look at the quality certificate (AS9100/ISO 9001), ITAR registration number, DFAR control factory process documentation, and SAM (CCR) registry. Ask for a copy of the counterfeit management process document. Do an audit of the supplier. Visit the factory to see whether it is an empty warehouse or a trading office.

If you are a military supplier in this very competitive environment, cost is extremely important. Renaissance Electronics Corp., like other quality suppliers, uses state of the art manufacturing technologies and procurement policies to operate at the highest efficiency offering the best value.

For protecting our soldiers and our families, there is a cost. With very little extra effort, we can feel confident that we are doing our part to thank our soldiers for their sacrifices to us. This effort also protects our people and our nation.

Thampy Kurian

President and CEO

Renaissance Electronics Corporation

HXI LLC