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Transactional Red Flags

  • The customer or its address is similar to one of the parties found on the Commerce Department’s (BIS’s) list of denied persons.
  • The customer or purchasing agent is reluctant to offer information about the end-use of the item.
  • The product’s capabilities do not fit the buyer’s line of business, such as an order for sophisticated computers for a small bakery.
  • The item ordered is incompatible with the technical level of the country to which it is being shipped, such as semiconductor manufacturing equipment being shipped to a country that has no electronic industry.
  • The customer is willing to pay cash for a very expensive item when the terms of sale would normally call for financing.
  • The customer has little or no business background.
  • The customer is unfamiliar with the product’s performance characteristics but still wants the product.
  • Routine installation, training, or maintenance services are declined by the customer.
  • 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 state method of shipment or destination.
  • When questioned, the buyer is elusive and especially unclear about whether the purchased product is for domestic use, for export, or for re-export.

Potential Penalties for Violations of the Export Control Regulations

EAR VIOLATIONS:
Penalties for violation of the Export Administration Regulations (EAR) can include:
Criminal:  Willful violations – a fine of no more than $1,000,000 and imprisonment for not more than twenty (20) years, or both, for each violation.
Civil:  A fine not to exceed the greater of $250,000, or an amount that is twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed.
Administrative Penalties Could Include: For each violation of the EAR any or all of the following may be imposed:

Seizure or forfeiture of goods;
The denial of export privileges;
Placement of company on denied part list.

Temporary Denial Orders:are issued by the Assistant Secretary for Export Enforcement, denying any or (typically) all of the export privileges of a company or individual to prevent an imminent export control violation.  These orders cut off not only the right to export from the United States, but also the right to receive or participate in export from the U.S.


ITAR VIOLATIONS:
Penalties for violation of the International Traffic in Arms Regulations (ITAR) can include:
Criminal: Corporation AND Individual - A fine of up to $1,000,000 or imprisonment up to 10 years, or both.
Civil: Corporation AND Individual - Each violation, a fine of not more that $500,000
Administrative Penalties Could Include: 

Seizure or forfeiture of goods;
The denial of export privileges;
Debarment from government contracting;
Placement of company on denied part list.