Overview of U.S. Export Controls and Sanctions Issues Relating to ...

Under the EAR, “knowledge” includes not only positive knowledge that a
circumstance exists or is substantially certain to occur, but also an awareness
of a high probability of its existence or future occurrence. Awareness may be
inferred from a conscious disregard or willful avoidance of facts. In other words,
exporters may not “self blind” when considering a potential export transaction.
In order to help identify situations where a violation of a General Prohibition
may occur, the EAR includes a list of warning signals, known as “Red Flags.”
See EAR Part 732, Supp. 3. If no red flags reasonably are or should be
apparent, there is no affirmative duty on exporters to perform additional due
diligence related to the transaction. However, if any red flags are triggered in
relation to a particular customer or transaction, the exporter has a duty to
inquire further and investigate any suspicious circumstances. Circumstances
that should trigger further investigation include (but are not limited to):
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
Customer is reluctant to offer information about end use of the product;
Product’s capabilities do not fit customer’s line of business;
Product is incompatible with the technical level of receiving country;
Customer has little or no business background;
Customer is willing to pay cash for expensive items when terms of sale
call for financing;
Customer is unfamiliar with product’s performance characteristics;
Customer declines routine installation, training or maintenance
services;
Vague delivery dates and delivery to out-of-the-way destinations;
Freight forwarder is listed as the product’s final destination;
Abnormal shipping route;
Packaging is inconsistent with the stated method of shipment or
destination; and
Customer is evasive about whether product is for domestic use, export
or re-export.
(d)
Restrictions on Exports to Embargoed Destinations and Other Ineligible Parties
The EAR broadly restricts exports to certain “embargoed” countries, which
currently include Cuba, Iran, North Korea, Sudan and Syria. The prohibitions in
the EAR are designed to be consistent with and operate in conjunction with
various OFAC sanctions relating to these countries, discussed in Section II.3
below.
In certain situations, the U.S. government also denies export privileges to
particular U.S. or foreign entities based on national security or foreign policy
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