No Bull: Export Compliance Red Flags You Can’t Afford to Miss (2025 Update)

If your idea of a red flag revolves around a conquistador and a bull, I hate to tell you this—the myth that bulls charge at red flags has been debunked. (In the popular series Mythbusters, it was proven that the bull is actually lured by the movement of the flag, not its color.)

So, if bullfighters don’t need to worry about red flags, who does?

You do.

In international trade, red flags aren’t just metaphors. They’re warning signs that your shipment might violate U.S. export laws. And if you miss them—or worse, ignore them—you could face:

• Massive fines
• Loss of export privileges
• Criminal prosecution

And here’s the kicker: You’re expected to spot these flags even when your buyer seems legitimate on the surface.

In this guide, we’ll break down:

• What export red flags are and why they matter
• Official red flag indicators 
• How to respond if you spot one
• Real-world examples

What Is a Red Flag in Export Compliance?

In export compliance, a red flag isn’t just a gut feeling—it’s a signal that something in your transaction might not be right.

The Export Administration Regulations (EAR) define red flags as:

Any abnormal circumstances in a transaction that indicate that the export may be destined for an inappropriate end-use, end-user, or destination.

That could mean a buyer who won’t explain how they’ll use the product, a shipment route that doesn’t make sense or a payment method that raises eyebrows.

The key takeaway? If something feels off, you have a legal duty to stop and investigate. U.S. regulations expect exporters to practice what the Bureau of Industry and Security (BIS) calls “reasonable care” and “due diligence.”

What Are Red Flag Indicators in Export Compliance?

Because every export process, shipper, customer and situation is unique, there is no single complete list of red flag indicators. There are, however, several ways to identify red flags.

The Bureau of Industry and Security (BIS) provides "Know your Customer Guidance" that includes the following red flag indicators:

• A customer or their address is similar to one of the parties found on any of the government's denied persons or restricted party lists.
• A customer or purchasing agent is reluctant to offer information about the end use of an item.
• A product doesn't match the buyer's line of business (for example, a small bakery places an order for sophisticated computers).
• An item is too advanced for the country's known capabilities, such as semiconductor manufacturing equipment being shipped to a country with no electronics industry.
• A customer is willing to pay cash for a very expensive item when the terms of sale would normally call for financing.
• A customer has little or no business background.
• A customer is unfamiliar with the product's performance characteristics but still wants it.
• A customer declines routine installation, training or maintenance services.
• Delivery dates are vague, or deliveries are planned for out-of-the-way destinations.
• A freight forwarding firm is listed as the product's final destination.
• The shipping route is abnormal for the product and destination.
• Packaging is inconsistent with the stated method of shipment or destination.
• When questioned, the buyer is evasive and especially unclear about whether the purchased product is for domestic use, for export or for re-export.

⚠️ This List Is Not All-Inclusive

I can’t emphasize this enough—this list of red flags is not all-inclusive. As BIS states, it is “intended to illustrate the types of circumstances that should cause reasonable suspicion that a transaction will violate the EAR.”

Industry-Specific Red Flag Scenarios

Red flags don’t always look the same across industries. Here are a few real-world examples of how suspicious behavior might show up in different export environments:

• Electronics & Semiconductors: A small distributor with no website and a Gmail address requests advanced technology and provides a vague end-use description like “general testing.” They also ask for expedited shipping to a freight forwarder in a third country.
• Medical Devices: A customer in a sanctioned or high-risk country places a bulk order for diagnostic imaging equipment typically used in hospitals but lists a residential apartment as the final destination.
• Chemicals: A company in a country with no known biotech sector orders a precursor chemical used in vaccine manufacturing. They refuse to disclose the end-user and won’t provide documentation proving legitimate use.
• Industrial Machinery: A distributor places a large order for dual-use machines but declines installation and training—despite the complexity of the equipment—and offers to pay cash upfront.

Each of these examples could trigger one or more of the official red flags. If something seems off, it probably is—and it’s your responsibility to pause and investigate before proceeding.

When Do Red Flags Appear in the Export Process?

A red flag can show up at any point in a transaction—not just during shipping or final checks. It’s important to be vigilant and pay attention to red flags all the time: from introductions to after the sale has been completed.

Here are common stages where red flags may arise:

• Initial inquiry: The buyer is vague about the end use, uses a free email address, or asks for unusually large or sensitive items with no clear reason.
• Order processing: Shipping and billing details don’t match, or the destination is a known transshipment point.
• Document creation: The customer asks you to omit or alter standard information like the end user or destination.
• Logistics coordination: The route doesn’t make sense, or packaging and shipping requests are inconsistent with the product type.
• Post-sale: The customer requests a re-export, refuses follow-up, or brings in an unfamiliar third party.

Red Flags vs. Restricted Party Screening: What’s the Difference?

While they’re often mentioned together, red flags and restricted party screening (RPS) serve different roles in export compliance:

• Restricted Party Screening checks names against government watch lists (like the Denied Persons List or Entity List). If someone’s on a list, you may be legally barred from doing business with them.
• Red Flags are warning signs that something about a transaction feels off—even if the party isn’t on any list. Think vague end-use details, unusual shipping routes, or cash payments for high-tech goods.

You need both for full compliance. You can learn more in my blog post Checking Lists Isn't Enough for Export Compliance. The easiest way to screen all of your customers is with Restricted Party Screening Software—try ours for free.

Identifying Diversion Risks

In addition to red flags, your company must stay alert to notifications from the U.S. government. BIS sometimes notifies companies and universities about foreign parties of national-security concern, even if those parties are not publicly listed.

In July 2024, BIS issued official guidance that clarifies how it uses:

• Supplier List Letters (identifying potential diversion parties)
• Project Guardian Requests (asking companies to deny or pause named transactions)
• Red Flag Letters (informing recipients of possible violation history)
• “Is Informed” Letters (triggering supplemental license requirements)

What to Do If You Encounter a Red Flag

If there are no red flags, proceed with your business. However, if you’re suspicious, BIS says this:

When "Red Flags" are raised in the information that comes to your firm, you have a duty to exercise due diligence to inquire regarding the suspicious circumstances and ensure appropriate end-use, end-user or ultimate country of destination in the transactions you propose to engage in.

Here’s what you should do:

1. Don’t Self-Blind

“Self-blinding” means intentionally avoiding or ignoring information that might raise red flags. The Bureau of Industry and Security (BIS) warns that:

• Willful ignorance is not a defense.
• Telling sales staff not to ask about end use or end users is a compliance violation in itself.
• What your employees know can be attributed to your company.

Make sure your staff is trained and you have clear, written policies and compliance procedures in place.

2. Put the Transaction On Hold and Make the Necessary Inquiries

If you encounter a red flag, stop the process immediately. If your company has an export compliance official or team, now is the time to bring them up to speed with what you've found. And then someone at your company needs to start asking questions. For example: Why is the customer not telling you what they intend to do with the product? Why are we shipping to a foreign freight forwarder rather than the customer's warehouse? Why has the customer chosen such an unusual payment method?

3. Evaluate the Risk

If you can explain away the red flag, the BIS says you can proceed with the transaction. However, if the red flag can’t be explained or justified and you proceed, you risk being held liable under the EAR.

4. Stop the Transaction, Disclose the Information to BIS, and Wait

If you continue to have reason for concern, you should either stop the transaction or submit all the relevant information to BIS as an application for an export license or other form.

If you have any questions about whether you have encountered a red flag, you should contact the Office of Export Enforcement or use their confidential enforcement lead/tip form to submit a tip. You can also report any violation you believe may be taking place or has occurred to the Department of Commerce hotline: (800) 424-2980.

The Bottom Line: Red Flags Are Your Responsibility

It is the exporter's responsibility to take seriously the threat of exports that are contrary to U.S. national security and foreign policy interests. By understanding and acting on red flags, businesses protect not only national interests but their own.

By following the law, exporters can avoid the civil and criminal penalties that result from non-compliance. You can read more about these penalties in Don’t Let This Happen To You.

This article was first published in May 2015 and has been updated to include current information, links and formatting.