1. What is a Red Flag

Export control does not begin when you fill in a customs form. It starts much earlier — at the product design stage, the first sales conversation, or even the very first contact with a new customer. During these early stages, warning signals can emerge that suggest a transaction may carry legal or compliance risks. We call these signals red flags.

KEY POINT – A red flag is not a stop sign. It is a warning signal that tells you to look more closely before proceeding.

Spotting a red flag does not automatically mean something is wrong — but it does mean you need to investigate further.

2. Who Should Know This?

This guide is relevant to anyone involved in the export chain, including:

• Freight forwarders — who act as gatekeepers and are responsible for accurate customs declarations
• Exporters — who are ultimately responsible for the information declared
• Intermediaries and middlemen — who may have limited information but still carry compliance obligations

By the end of this guide, you will be able to recognise the five red flags, identify risks early, and make informed decisions about whether to proceed with a transaction.

3. Five Main Red Flags

The five red flags covered in this guide are:

• Commodity code
• Destination country
• End user
• Payment
• Transport

In addition to these five, trust your instincts. If something feels off, treat that gut feeling as a red flag too.

Red Flag 1: Commodity Code

A commodity code might not seem like an obvious warning signal, but it is often where export control obligations begin. The commodity code determines which document codes and footnotes need to be included in a customs declaration. Getting it wrong — or not checking it at all — can mean missing a legal obligation or restriction entirely.

IMPORTANT : Assigning a commodity code is not a box-ticking exercise. It requires careful analysis, and the exporter is always responsible for its accuracy.

One particular area of risk is dual-use items. These are products, software, or technologies that can be used for both civilian and military purposes. Many companies — including start-ups and research institutions — are unaware that what they are developing could be classified as dual-use.

Examples can include:

• A product that seems purely commercial but contains components with military applications
• A semi-finished product that becomes part of a military end product further along the supply chain
• Technology that meets the threshold for dual-use classification with only minor modifications

Exporting dual-use or military goods without the required authorisation is an economic offence. This is why it is essential to establish the correct commodity code as early as possible — ideally at the product design stage, not at the point of export.

REMEMBER – If you use an incorrect commodity code, you are submitting an inaccurate declaration.

Red Flag 2: Destination Country

Once you have checked the commodity code, the next step is to look at where the goods are going. Some countries are subject to sanctions — international measures that restrict the trade of certain goods, services, or financial resources.

Sanctions can take several forms:

• Financial sanctions — such as freezing assets or restricting investment in certain countries
• Trade restrictions — banning the import or export of specific products, such as technology or raw materials
• Arms embargoes — prohibiting the trade in military goods
• Travel and visa restrictions — preventing certain individuals from entering particular regions

The most prominent current example is the EU’s sanctions against Russia, which ban the export of a wide range of goods — not just high-tech items, but also seemingly everyday products such as pumps, roses, and putty.

WATCH OUT :  You do not have to be trading directly with a sanctioned country to be caught by this red flag. Indirect supply is also prohibited.

For example, exporting goods via Kyrgyzstan (a so-called ‘fallback country’) with knowledge that they will be onward delivered to Russia is still prohibited under EU sanctions, even though Kyrgyzstan itself is not sanctioned.

You have a duty to investigate possible onward delivery routes. Always check whether the final destination — not just the immediate recipient — appears on a sanctions list.

Red Flag 3: End User

Even if the destination country looks fine, risks can still arise from who ultimately receives and uses the goods. This is the end user.

Not knowing who the end user is does not automatically make a transaction prohibited, but it may be a cause for further investigation, especially if:

• An intermediary refuses to disclose who they are buying on behalf of
• The declared end-use does not match the buyer’s business context
• A small company with no relevant technical expertise is purchasing high-tech goods
• A research institution in a high-risk country is seeking access to dual-use technology

RED FLAG COMBINATION: If a suspicious end user is combined with a concerning destination country, the risk level increases significantly. Treat this as a high-priority alert.

Lack of transparency is a warning sign in its own right. Deliberate vagueness about who will use the goods — or what they will be used for — should prompt serious scrutiny.

Red Flag 4: Payment

Unusual payment arrangements are a classic warning sign in export compliance. Financial flows are often where attempts at concealment first become visible.  Look out for the following:

• Payment comes from a third country or an unknown intermediary, rather than directly from your customer
• The customer insists on paying in cash, cryptocurrency, or an unusual transaction
• Invoice amounts are illogically low or unreasonably high
• Contract or payment structures appear unnecessarily complex or hard to follow

These patterns can indicate money laundering (where criminal funds are given a seemingly legitimate origin) or attempts to benefit a sanctioned individual, group, or entity. They may also signal terrorist financing.

IMPORTANT: Banks also act as gatekeepers in this process. If your bank asks questions about a transaction, take those questions seriously and respond appropriately.

If you participate in suspicious payment or contract arrangements without conducting proper checks, you may be considered complicit in unlawful activity — even if you had no direct involvement in the underlying offence.

Red Flag 5: Transport

How and where goods are transported can itself be a red flag. Look for unexpected changes or unusual patterns in the logistics of a transaction.

Warning signs to watch for include:

• A sudden change to the delivery address or a change in the contracting party during the process
• Requests for delivery to a country other than the originally agreed destination
• Delivery to a PO box, freight forwarder, or private address without a clear business reason
• Refusal to accept standard transport documentation, such as container seals, agreed Incoterms, or receipt confirmations
• Goods being transported unsealed, or routed through illogical detours

Detours through known transit hubs — such as Dubai, Turkey, or China — warrant particular care. These routes can be used to disguise the true final destination of goods.  If traceability is reduced at any point in the transport chain, the risk of unauthorised unloading, substitution, or diversion increases.

4. Quick Reference: Red Flags at a Glance

Red Flag	What to Look For
Commodity Code	Missing or incorrect classification; possible dual-use or military application not identified; exporter cannot confirm accuracy.
Destination Country	Country is on a sanctions list; goods may be routed onward to a sanctioned country via a third country (fallback route).
End User	Identity unknown; lack of transparency; business profile does not match the goods being purchased; no verifiable online presence.
Payment	Payment via third country or unknown account; use of cash, crypto, or unusual currency; invoicing discrepancies.
Transport	Unexplained address changes; delivery to PO box or private address; refusal of standard documentation; routing via known transit hubs.

5. Five Practical Tips

Here are five actions you can take to manage export control risk in practice:

1. Always verify the commodity code. Depending on your role, you may be legally responsible for its accuracy.
2. Record all agreements and confirmations in writing. This is especially important when last-minute changes occur.
3. Establish clear internal procedures. Apply the four-eyes principle and ensure continuity in your compliance processes.
4. Keep a complete transaction file. Ensure there is a clear link between the quotation, purchase order, invoice, packing list, Bill of Lading, and all other relevant documents.
5. Trust your instincts. If something feels wrong, treat it as a signal to investigate — not to proceed.

6. Key Takeaways

Before finishing this article, make sure you can answer yes to the following:

• I know what a red flag is and what it means for my decisions
• I can name the five export control red flags
• I understand that a red flag does not automatically mean a transaction must be stopped — but it does require further investigation
• I know that export control obligations begin early in the commercial process, not just at the point of customs declaration

REMEMBER – A red flag is a prompt to investigate — not a reason to panic, but never a reason to ignore. Identifying risks early protects your organisation and enables responsible international trade.