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In control of exports: prevent risks by recognising ‘red flags’

Many organizations only think of ‘export control’ if it turns out that an authorisation is required when making the customs declaration. In reality, export control often comes into play much earlier: at the first sketch of a product, during a sales conversation or even at the very first contact with a customer. It is precisely in this early phase that signals can emerge that indicate risks. We call these signals: ‘red flags’.

A red flag is not a prohibition sign but is a warning signal. It indicates that there is an increased risk of undesirable or potentially illegal behaviour. If you recognize such a signal, it is time for further investigation and extra caution. The red flags in this publication come from our experiences in practice.

Gepubliceerd: 17 Sep 2025
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1. Who is this publication for?

This publication is suitable for persons who are responsible for (export) compliance in the different types of companies in the export chain. Think of the freight forwarder, who as a gatekeeper ensures a complete and correct customs declaration; the exporter, who is in principle responsible for the information contained in the declaration; or the middleman, who often receives too little information to serve his customers properly.

After reading this document, you will be able to:

  • independently recognize the red flags;
  • identify risks in a timely manner; and
  • make an informed decision.

We will discuss the consequences of non-compliance in another publication.

First of all, we answer the question what are the red flags? Then we describe how you can recognize the red flags and finally we give you practical tips.

2. Red flags

In this publication, we address the following red flags:

  • Commodity code
  • Land
  • End user
  • Payment
  • Transport

In addition, the ‘gut feeling’ can also be a good counsellor. So be critical of other signals as well. We will deal with each red flag individually below.

3. Commodity code

A commodity code does not immediately appear to be a red flag. Nevertheless, it is often the starting point or the first indication of whether export control measures apply. Based on the commodity code, corresponding document codes and footnotes may be required. These codes, determined by the commodity code, must be entered in the customs declaration system.

Determining the correct document code is not a ‘tick-the-box exercise’; it requires careful analysis. An incorrect commodity code or document code may result in a failure to identify applicable obligations or prohibitions. To avoid such risks, it is advisable to start at the beginning of the supply chain, for example, during the product design phase or when negotiating the first commercial contracts. Determining the commodity code can be complex. For more information, refer to our separate publication on this topic.

Companies, start-ups, and research institutions are often unaware that the technology or products they are developing are either directly listed as dual-use items or could fall under dual-use controls with relatively minor modifications. A product, software, or technology is considered a dual-use item if it can be used for both civilian and military purposes. There are also situations where companies trade in a semi-finished product that is harmless in itself but ultimately becomes part of a military end product or forms a crucial component of another dual-use item.

The export of dual-use items and military goods is subject to an authorisation requirement. This obligation can be identified, among other things, via the commodity code and the associated document codes. Awareness at an early stage is therefore essential, not only when preparing the customs declaration, but already when determining the correct commodity code during product development.

If you export goods without the required authorisation, you commit an economic offence. If you use an incorrect commodity code, you submit an inaccurate declaration. The consequences of such actions will be addressed in a separate publication, but it is clear that such situations can have serious repercussions.

It is evident that the commodity code can be a red flag.

4. Land

Once the commodity code has been assessed, the next red flag to check is whether the destination country raises specific concerns. Certain countries are subject to sanctions. These are international measures targeting a country, organisation or individual. They may include prohibitions on the trade in certain goods, services, or financial resources.

Various types of sanctions exist:

  • financial sanctions: such as freezing bank accounts or other assets. Or not allowed to invest in certain countries.
  • Trade restrictions: think of the ban on the trade in special products, such as technology or raw materials from which a country earns a lot.
  • arms embargoes: banning the import and export of military goods.
  • travel and visa restrictions: for example, preventing certain people from travelling to the EU.

The primary focus of EU sanctions is usually a ban on the export of specific goods to certain countries. The most prominent example is the EU’s sanctions against Russia, which prohibit the export of a wide range of goods, regardless of whether the end use is military.

The diversity of these sanctions is considerable: not only are high-tech items prohibited, but also seemingly unrelated goods such as pumps, roses, or putty.

It may seem that this red flag does not apply if you do not trade directly with a sanctioned country such as Russia. However, this is misleading. Indirect supply is also prohibited. For instance, export via Kyrgyzstan, a so-called ‘fallback country’, is common. Although this country is not subject to EU sanctions, onward delivery from Kyrgyzstan to Russia is.

In short, not trading directly with Russia is not sufficient to disregard this red flag. You have a duty to investigate possible onward delivery routes. Furthermore, dozens of other countries are listed in EU sanctions regulations, so the red flag must not be limited to Russia alone.

Always verify whether the final destination appears on a sanctions list.

5. End user

Once you have verified the destination, it is important to examine the end user. Export control risks often lie not only in the nature of the goods or the destination, but in the identity and intentions of the end user. This is the company who ultimately receives and uses the goods.

The end user is not always known in advance. This is not automatically prohibited but may be cause for further investigation, depending on the circumstances.

Lack of transparency can be a warning sign, especially if an intermediary refuses to disclose for whom they are placing the order. This may allow goods to end up with sanctioned entities. Risks may also arise when the declared end-use does not match the business context. Examples include a small company with no relevant technical expertise acquiring high-tech goods, or research institutions in high-risk countries seeking access to dual-use technology.

 

Unwillingness or deliberate vagueness in providing end-use information is a red flag in itself. In combination with a suspicious destination, it becomes a dark red flag.

6. Payment

Discrepancies in payments or contracts are a classic red flag in export controls, as financial flows are often the first to show attempts at concealment. When a payment does not come directly from the contracting counterparty, but goes through a third country or an unknown intermediary, doubts about the transaction are more than justified. Criminals regularly use these types of constructions for money laundering. They carry out transactions to give criminal money a seemingly legal origin. You also run the risk that payments contribute to terrorist financing. This is a collective term for acts that materially support terrorist activities. There is also a chance that a sanctioned person, group or entity will benefit from your shipment.

Pay close attention to different payment methods, as they can be a signal of increased risk. When a customer insists on payment in cash, crypto, or an uncommon currency for no apparent reason, an alarm bell should go off for you. Such choices often indicate attempts to evade supervision by banks and authorities. Illogically low or extremely high invoice amounts also pose a risk, because they can indicate invoice fraud or attempts to move goods out of sight.

The risk with this type of red flag lies in your indirect involvement in suspicious transactions. If you cooperate in dubious payment or contract constructions without a critical test, you may be committing unlawful acts.

7. Transport

Transport can also be a red flag. For example, if the buyer suddenly changes the delivery address or the contracting party changes during the process, there is a clear risk of circumvention. Requests for delivery to a different country, third party, or non-business address without clear business justification often point to diversion. Deliveries to PO boxes, freight forwarders, or private addresses reduce traceability and increase the risk of misuse.

The customer’s behaviour during the transport process can also be a red flag. Refusal to accept standard documentation – such as container seals, agreed Incoterms, or receipt confirmations – suggests a lack of transparency.

If a shipment is transported unsealed, or routed through illogical detours, the risk of unauthorised unloading or substitution increases. Detours through known transit hubs such as Dubai, Turkey, or China require extra vigilance.

 

Transport is a central element in export control and frequently exposes risks at an early stage.

8. Do you recognize the red flags?

Now that we have named and described the red flags, it is important to know how to recognize a red flag. Below is a table summarising key indicators:

Red flag Description
Commodity code Normally follows from commercial documentation. In the absence of a code, you must obtain a clear and verified classification. A basic sanity check is always necessary. The exporter remains responsible for its accuracy.
Sanctioned countries A list of sanctioned countries can be found on the EU Sanctions Map. However, this does not contain countries that act as pass-through countries, the so-called ‘fallback countries’. Be keen on this too.
End user End user unknown, lack of transparency, or absence of an online presence (e.g. no website).
Payment Payment routed via third countries or different accounts. Use of cryptocurrency or unusual currencies. Banks also act as gatekeepers; respond appropriately to their questions.
Transport Unexplained changes to delivery address or contracting party, delivery to PO box or private address, refusal of standard transport documentation or routing via known transit hubs.

9. Five tips for practice

It is understandable that, due to the large amount of information in this publication, it may be difficult to see the course through all the red flags. To help apply this knowledge in practice, we offer the following tips:

  1. Always check the commodity code. Depending on your role in the chain, you may be legally responsible for its accuracy.
  2. Always record agreements and confirmations explicitly. Especially when last-minute changes occur.
  3. Establish clear internal procedures and controls. Apply the four-eyes principle and ensure continuity in compliance processes.
  4. Complete and traceable transaction file: Provide a good papertrail and ensure that there is a link between quotation, purchase order (PO), invoice, packing list, Bill of Lading and other documents.
  5. Use common sense. A gut feeling is often a valuable early warning tool.

10. Conclusion

The red flags to watch for are:

  • commodity code;
  • land;
  • end user;
  • payment; and
  • transport

A red flag does not necessarily mean that a transaction must be stopped, but it does mean that further investigation may be required. Often, it is a chance to prevent serious consequences.

Be in control from the very start. Export control does not begin with the authorisation or the customs declaration. It begins much earlier, during product design, first customer contact, and initial commercial agreements.

The red flags described in this publication help you identify risks early and make informed decisions. This is not only a legal obligation, but also good business practice: it protects your organisation and enables responsible international trade.

Never underestimate the power of your own judgement. Experience and intuition are often your best advisors.

We will address the consequences of non-compliance in a separate publication.

Customs Knowledge supports companies and institutions in identifying red flags, establishing effective export compliance processes, and applying for the necessary authorisations. Contact us for advice or training.

While every care has been taken in the preparation of this publication, Customs Knowledge accepts no liability for any errors or omissions, nor for their consequences. This article is not intended as specific advice. Please also refer to the General Terms and Conditions of Customs Knowledge BV.