Export Red Flag Indicators

Since September 11, 2001 the US Government has implemented strict controls on exports, and placed the responsibility of monitoring goods leaving the country on individuals, companies, and entities involved in these transactions.  Because the US Government does not want new technology, money, weapons, etc. in the arms of potential terrorists or companies that fund terrorism, they insist that export compliance is followed via the exercise of reasonable care.  If companies fail to comply with export control standards, they face extensive fines, loss of export privilege, or potential jail time for parties involved.  Although export control covers a vast spectrum of instructions that in no way can be summed up in one article, there are red flag indicators that all exporters should consider prior to shipping goods outside of the US.

The Bureau of Industry and Security (BIS), an agency within the US Department of Commerce, monitors export control to prevent proliferation of weapons and ensure national security.  They publish a list of red flag indicators to consider before exporting goods.  Although many of these warnings may seem obvious from a common sense perspective, they can be overlooked, especially for companies that deal in high volume export operations.

Several of these red flag indicators involve knowing the buyer or customer.  If a customer is evasive or reluctant to offer information regarding the use of the purchased good, have little or no business background, are unfamiliar with the product, or if they insist on paying cash when financing would be more appropriate, then an exporter should thoroughly investigate prior to doing business.  Also, it is important to ensure the buyer is not on a denied party list that forbids the US engaging in trade deals with them.  While knowing a customer or being able to obtain pertinent information from them regarding business transactions is crucial to responsible exporting practices, it is also essential to pay attention to the logistics aspect of the trade deal.

Exporters need to be cognizant of where the goods are being shipped and how the goods are routed to reach the final destination.  Obscure destinations or vague delivery dates should be red flags that prompt a closer look before shipping goods.  If a freight forwarding company is listed as final destination, follow up with inquiries to discern reason.  If the shipping route is inconsistent with the product and the end location, request the customer specify why.  Knowing the buyer and understanding the logistics side of a shipment are critical aspects to export control, but it is also smart to consider the product itself.

US exporters should ensure that the packaging is compatible with the product and the final destination.  They also need to consider if the purchase of the product makes sense to the buyer’s line of work.  For example, why is the owner of a small grocery store purchasing high tech sophisticated electronics?  Also consider the country the product is being shipped to.  BIS notes that it would not make sense to ship semiconductor manufacturing equipment to a country that does not have an electronics industry.  Heeding these precautions allows the seller to exercise due diligence in their export control program.

Because of the potential disastrous effects of goods falling into the wrong hands and the severity of repercussions for sellers that fail to observe careful export management, it is imperative that people are aware of red flag indicators before completion of transactions.  If something seems off, it is worth further investigation to comply with regulations.  If you would like assistance tightening up your export control process, please contact Allyn International at sales@allynintl.com for more information.