Visit the
BIS Red Flag
Indicators page and always
check the parties to your
export transactions against
BIS's Denied Persons List.
BIS's
web site is http://www.bis.doc.gov.
Certain provisions in the
Export Administration
Regulations (EAR) require an
exporter to submit an
individual validated license
application if the exporter
"knows" that an
export that is otherwise
exempt from the validated
licensing requirements is for
end-uses involving nuclear,
chemical, and biological
weapons (CBW), or related
missile delivery systems, in
named destinations listed in
the regulations.
BIS has issued the
following guidance on how
individuals and firms should
act under this knowledge
standard. This guidance does
not change or revise the EAR.
1. Decide whether there are
"red flags."
Take into account any
abnormal circumstances in a
transaction that indicate that
the export may be destined for
an inappropriate end-use,
end-user, or destination. Such
circumstances are referred to
as "red flags."
Included among examples of red
flags are orders for items
which are inconsistent with
the needs of the purchaser, a
customer's declining
installation and testing when
included in the sales price or
when normally requested, or
requests for equipment
configurations which are
incompatible with the stated
destination (e.g.--120 volts
in a country with a standard
of 220 volts). Commerce has
developed lists of such
"red flags" which
are not all-inclusive but are
intended to illustrate the
types of circumstances that
should cause reasonable
suspicion that a transaction
will violate the EAR.
2. If there are "red
flags."
If there are no "red
flags" in the information
that comes to your firm, you
should be able to proceed with
a transaction relying on
information you have received.
That is, absent "red
flags" (or an express
requirement in the EAR), there
is no affirmative duty upon
exporters to inquire, verify,
or otherwise "go
behind" the customer's
representations. However, when
"red flags" are
raised in the information that
comes to your firm, you have a
duty to check out the
suspicious circumstances and
inquire about the end-use,
end-user, or ultimate country
of destination.
The duty to check out
"red flags" is not
confined to the use of general
licenses affected by the
"know" or
"reason to know"
language in the EAR.
Applicants for validated
licenses are required by the
EAR to obtain documentary
evidence concerning the
transaction, and
misrepresentation or
concealment of material facts
is prohibited, both in the
licensing process and in all
export control documents. You
can rely upon representations
from your customer and repeat
them in the documents you file
unless "red flags"
oblige you to take
verification steps.
3. Do not self-blind.
Do not cut off the flow of
information that comes to your
firm in the normal course of
business. For example, do not
instruct the sales force to
tell potential customers to
refrain from discussing the
actual end-use, end-user and
ultimate country of
destination for the product
your firm is seeking to sell.
Do not put on blinders that
prevent the learning of
relevant information. An
affirmative policy of steps to
avoid "bad"
information would not insulate
a company from liability, and
it would usually be considered
an aggravating factor in an
enforcement proceeding.
Employees need to know how to
handle "red flags."
Knowledge possessed by an
employee of a company can be
imputed to a firm so as to
make it liable for a
violation. This makes it
important for firms to
establish clear policies and
effective compliance
procedures to ensure that such
knowledge about transactions
can be evaluated by
responsible senior officials.
Failure to do so could be
regarded as a form of
self-blinding.
4. Reevaluate all the
information after the inquiry
The purpose of this inquiry
and reevaluation is to
determine whether the
"red flags" can be
explained or justified. If
they can, you may proceed with
the transaction. If the
"red flags" cannot
be explained or justified and
you proceed, you run the risk
of having had
"knowledge" that
would make your action a
violation of the EAR.
5. Refrain from the
transaction, disclose the
information to
BIS [See how to
report a possible violation],
and wait.
If you continue to have
reason for concern after your
inquiry, then you should
either refrain from the
transaction or submit all the
relevant information to
BIS in
the form of an application for
a validated license or in such
other form as
BIS may specify.
Industry has an important role
to play in preventing exports
and re-exports contrary to the
national security and foreign
policy interests of the United
States.
BIS will continue to
work in partnership with
industry to make this front
line of defense effective,
while minimizing the
regulatory burden on
exporters. If you have any
question about whether you
have encountered a "red
flag,' you may contact
BIS's
Office of Export Enforcement
or use this form to submit a
confidential tip. [Please note
that use of the form will not
generate any return e-mail to
you so that the information
you submit will remain
confidential. If using this
form please select
"Enforcement
Lead/Tip" from the
pull-down menu as the subject
to ensure the confidentiality
of the information submitted.
