My family owns an awards shop outside of a military base. we design and make imaged awards using graphics programs and these awards include digital images of unit insignia, branch and rank insignia, division patches etc. all of these designs are created by The Institute of Heraldry as to the colors shape and size of each.
we were informed that the only conditions under which we could utilize these images were if we were commissioned by a member of the armed forces to produce a gift or award to be given by them. we are not allowed to use these images for retail purposes, such as placing on mugs or apparel unless we purchase a permit, which would be beyond the budget allowance for a small business such as ours.
My argument is that it is our (the citizen's) tax dollars that pay for the staff that creates these symbols and we should have free access to use them. I understand that making military insignia that replicates uniforms, badges etc that could pass as genuine equipment could be used for nefarious purposes but a baby onesie with a unit coat of arms seems to be a safe item.