PreVeil for Japanese Defense Suppliers: Achieving CMMC, DFARS, and ITAR Compliance Without Disrupting Your Business

The US-Japan defense partnership is entering a new phase of depth and urgency. Japan has approved a record ¥9 trillion defense budget for FY2026 — a 9.4% increase — as part of a five-year buildup program that will make Japan the world’s third-largest defense spender. Bilateral cooperation on defense equipment, technology co-development, and supply chain integration is expanding rapidly. The US Army Corps of Engineers Japan District has already indicated that all solicitations and contracts will require CMMC certification.

For Japanese suppliers participating in the US defense supply chain, this means that CMMC, DFARS, and ITAR compliance is no longer a future consideration — it is an immediate operational requirement. CMMC Phase 1 enforcement began in November 2025, with mandatory third-party certification under Phase 2 commencing in November 2026. Major US primes including Lockheed Martin and Boeing are already requiring compliance from their international supply chains.

The challenge for Japanese organizations is that the compliance solution they are most likely to encounter first — Microsoft GCC High — requires migrating the entire IT environment to US Government sovereign cloud. This is untenable for Japanese companies: it conflicts with Japanese data protection requirements, forces non-defense data offshore, disrupts workflows between defense and commercial divisions, and imposes disproportionate cost on what may be a small defense-focused unit within a larger enterprise.

PreVeil offers a fundamentally different approach. As an end-to-end encrypted overlay on existing IT infrastructure, PreVeil stores only CUI (Controlled Unclassified Information) on US sovereign cloud — fully encrypted and inaccessible to any third party — while leaving all other corporate data exactly where it resides today. Its Compliance Accelerator provides assessment-ready documentation, video tutorials, and direct expert support, guiding Japanese suppliers through a compliance framework many are encountering for the first time — saving over $100,000 in documentation costs and compressing the path to certification to four to six months. Over 2,500 defense contractors use PreVeil today, including divisions of major international enterprises. More than 60 have achieved CMMC certification, all with perfect 110/110 scores.

Japan’s 2022 National Security Strategy marked a historic shift in defense posture. The five-year Defense Buildup Program allocates ¥43 trillion ($275 billion) in defense-related spending through FY2027, with the goal of reaching 2% of GDP — a target Japan is now on pace to achieve two years ahead of schedule.

This buildup is deepening bilateral defense-industrial ties with the United States. Joint Leaders’ Statements have committed both nations to expanded cooperation on defense equipment co-production, technology development, and supply chain integration. The alliance encompasses co-development programs, Foreign Military Sales exceeding $20 billion in active cases, and Direct Commercial Sales of over $12.5 billion in defense articles since 2015.

For Japanese companies, this expanded cooperation brings a specific compliance obligation: protecting Controlled Unclassified Information (CUI) in accordance with US cybersecurity standards. Whether a Japanese company is a direct supplier to the US Department of Defense, a subcontractor to a US prime, or a partner in a co-development program, it must meet DFARS, CMMC, and in many cases ITAR requirements to continue participating.

Japanese suppliers in the US defense supply chain face three overlapping regulatory frameworks:

• DFARS 252.204-7012 and CMMC Level 2. These require CUI to be stored and shared in accordance with the 110 security controls of NIST SP 800-171. Cloud services must meet FedRAMP Moderate Baseline Equivalent standards. Encryption must be FIPS 140-3 validated. CMMC Level 2 certification requires a third-party assessment by an authorized C3PAO (Certified Third-Party Assessment Organization). Phase 1 enforcement began November 2025; Phase 2, with mandatory C3PAO certification for most contracts, begins November 2026.
• ITAR (22 CFR Part 120–130). ITAR restricts access to defense articles and technical data to US persons. Under ITAR §120.54, end-to-end encrypted cloud storage is permitted without US-sovereign infrastructure, provided that encryption is end-to-end with no access by the cloud provider or intermediary, the data owner retains exclusive control of decryption keys, and no unencrypted data is accessible to non-US persons.
• DFARS 252.204-7020 (CMMC Flowdown). CUI protection requirements must flow down through the supply chain to subcontractors at all tiers. Japanese suppliers who receive CUI from US primes must ensure their own subcontractors handle it compliantly.

For large US defense enterprises with dedicated IT teams and predominantly defense-focused operations, Microsoft GCC High (Government Community Cloud – High) is a well-established compliance solution. It is far less suited to small and mid-sized enterprises, and to companies with mixed defense and commercial business — precisely the profile of most Japanese defense suppliers, where a defense division or subsidiary typically represents one part of a broader enterprise.

GCC High presents five structural problems for Japanese organizations.

1. Limited Availability

GCC High is a US Government sovereign cloud environment with limited availability outside the United States. A Japanese organization may not be able to procure GCC High tenancy, making the approach impossible from the outset.

2. Forced Migration of All Data to US Sovereign Cloud

GCC High requires the entire organization’s Microsoft environment — email, file storage, collaboration tools, and all associated data — to be hosted on US Government Cloud infrastructure. It does not allow selective migration of only CUI-bearing data.

This is the crux of the problem. Storing CUI on US sovereign cloud is entirely appropriate — CUI is subject to US regulations and belongs there. But GCC High does not distinguish between CUI and non-CUI data. A Japanese company would be required to host all of its corporate data — including data related to domestic commercial projects, Japanese government contracts, and allied-nation programs — on US Government servers.

3. Conflict with Japanese Data Protection Requirements

Japan’s data protection framework imposes requirements on how personal and corporate data is stored and transferred internationally. Because GCC High forces all corporate data — not just CUI — onto US Government Cloud infrastructure, it can directly conflict with these requirements. A Japanese supplier should not be placed in the position of choosing between US defense compliance and adherence to domestic data governance obligations — particularly when the conflict arises only because GCC High is indiscriminate about what data it migrates.

4. Workflow Disruption Between Defense and Commercial Divisions

In most Japanese enterprises, the defense-related business represents one division, subsidiary, or project team within a larger organization. The rest of the company operates on commercial, domestic government, or international programs. GCC High is architecturally designed to restrict communication between GCC High tenants and commercial Microsoft 365 tenants. If the defense unit migrates to GCC High, routine communication and collaboration with colleagues in the commercial part of the enterprise — email, shared documents, calendars — becomes constrained. This disruption to daily business operations is unacceptable in organizations where defense and commercial teams work in close coordination.

5. Prohibitive Cost and Complexity

Even where technically feasible, GCC High migration is expensive. The migration itself — covering email history, file repositories, user configurations, and application integrations — typically exceeds $100,000 in professional services fees alone. Per-user license costs are also significantly higher than commercial tiers. And because GCC High provides no compliance documentation, organizations must separately invest in developing their own SSPs, SOPs, and assessment materials — a process the DoD estimates at $150,000. The total cost of a GCC High compliance path can easily exceed $250,000 before ongoing license fees. For a Japanese organization where only a small team handles US defense CUI, this cost is entirely disproportionate.

In summary: The problem with GCC High for Japanese suppliers is not that CUI is stored on US sovereign cloud — that is appropriate and necessary. The problem is that GCC High is indiscriminate, forcing all corporate data onto US Government infrastructure. For Japanese organizations, the resulting combination of limited availability, conflict with domestic data protection requirements, workflow disruption, and disproportionate cost makes GCC High untenable.

PreVeil is purpose-built for enclave deployments — the operating model that Japanese defense suppliers need. In many Japanese enterprises, major corporations maintain defense-focused subsidiaries or divisions alongside extensive commercial operations. PreVeil’s enclave model is designed precisely for this structure:

• Only personnel handling US defense CUI use PreVeil.
• The rest of the organization continues on existing commercial IT systems without any change.
• Defense personnel retain full access to both systems: PreVeil for CUI, existing tools for everything else.
• There is no architectural barrier between defense and commercial personnel for non-CUI communication.

Several major Japanese enterprises already use PreVeil through their defense-focused subsidiaries and divisions — confirming that this enclave model works at scale within the organizational structures typical of Japan’s industrial groups.

Deploying a compliant platform is necessary but not sufficient. CMMC Level 2 certification requires extensive documentation — a System Security Plan (SSP) covering all 110 controls and 320 objectives, Standard Operating Procedures for all 14 control families, a Shared Responsibility Matrix, network and CUI flow diagrams, and assessment checklists. The DoD estimates that generating this documentation can cost $150,000, requiring either substantial internal effort or expensive external consultants.

GCC High provides no compliance documentation. Organizations that adopt it must develop their entire documentation package independently.

PreVeil’s Compliance Accelerator provides a complete set of assessment-ready, C3PAO-validated documentation covering all 320 CMMC objectives, requiring only minimal customization to the customer’s specific environment. The package includes pre-filled SSPs, SOPs, Shared Responsibility Matrices, network diagram templates, assessment checklists, a step-by-step Roadmap to CMMC video tutorial series guided by compliance experts and assessors, and direct access to PreVeil’s in-house Certified CMMC Professionals for one-on-one support.

For Japanese suppliers — who may be encountering the CMMC framework for the first time and lack the institutional familiarity that US contractors have built over years of DFARS compliance — this guided approach is especially valuable. PreVeil does not simply provide the technical system; it provides the system, the documentation, and the expertise to reach certification. Customers report saving over $100,000 on documentation alone and reducing their compliance timeline to four to six months.

DFARS and CMMC require that CUI protection obligations flow down through the supply chain. Japanese suppliers who receive CUI from US primes must ensure their own subcontractors — whether in Japan or elsewhere — handle CUI compliantly.

PreVeil addresses this through its freemium model. Any external party — a subcontractor, a supplier, a partner — can create a free PreVeil Express account and immediately begin exchanging encrypted email and files. There is no license cost for these external collaborators. This is particularly advantageous for Japanese suppliers with extensive domestic and regional subcontractor networks, enabling compliant CUI flow-down without imposing cost on each node in the chain.