Red Flags Rising

Mike and Brent provide their day-of reactions to July 14, 2026, testimony by U.S. Department of Commerce Under Secretary for Industry & Security, Jeffrey Kessler, before the Foreign Affairs Committee of the U.S. House of Representatives. Although much of the coverage of the hearing and the Under Secretary’s remarks has focused on the Members of Congress questioning why more rules and Entity List additions haven’t been forthcoming, Mike and Brent highlight the Under Secretary’s own emphasis on more enforcement—not more rulemaking or entity-listing—as being the key metric for U.S. national security.
Mike and Brent discuss their main takeaways from the Under Secretary’s testimony (02:00); the increase in monetary penalties imposed by the Bureau of Industry & Security (“BIS”) from 2024 to 2025 and during the first half of 2026 (07:28); what BIS is requesting for FY2027 and what they will do with it, including adding 370 new Office of Export Enforcement Agents (09:43); how the Under Secretary responded to criticism, including his remark that “I do not think that more regulation equates to more national security” (12:12); why misperceived loopholes will continue to lead to liability pitfalls (13:19); the return of U.S. congressional focus on battlefield recoveries (13:56); the Under Secretary’s invitation for Congress to judge his and BIS’s success based on enforcement (16:52); how and why the “high probability” standard is an opportunity for compliance teams in these circumstances to do more with less or on tight budgets (19:40); how taking a fresh look at the meaning of “red flags,” “possibility,” and “probability” can all help take advantage of such opportunities (28:03); and the confirmed death of the AI Diffusion Rule (32:42).
Mike and Brent then conclude with this episode’s “Managing Up” segment (36:24).
Under Secretary Kessler’s prepared remarks, hearing video link, and other materials: https://foreignaffairs.house.gov/committee-activity/hearings/fy27-bis-budget-the-ai-arms-race-and-the-icts-office
Eleanor Olcott, “Nvidia’s Banned AI Chips Double in Price on China’s Black Market,” Financial Times (Jun. 23, 2026) (subscription required): https://www.ft.com/content/57fcd3ce-464f-4dc2-8ea2-5712d4972c69?syn-25a6b1a6=1
Red Flags Rising Episode 22, “All-In on America's AI Action Plan”: https://rss.com/podcasts/red-flags-rising/2140126
Red Flags Rising Episode 39, “Pull, Push, Tap, Aim, Fire - What Recent Settlements and Indictments Teach about Clearing Compliance Jams”: https://rss.com/podcasts/red-flags-rising/2778961
UAE LinkedIn post: https://www.linkedin.com/posts/mhuneke_enhanced-uae-treatment-under-us-export-controls-activity-7481377138542006274-TOBu?utm_source=share&utm_medium=member_desktop&rcm=ACoAAAE_zFwB6ELW6Yitzba7Kt-wYyoqEFq6I6s

Mike and Brent tackle the “de minimis” rule under U.S. Export Administration Regulations (EAR), which would except certain below-threshold value U.S. items from being subject to the EAR. Three recent enforcement actions, all in 2026 and collectively imposing just under $300 million in penalties, underscore the perils of potentially misapplying the rule. Mike and Brent introduce the concept of “weathervane” regulatory language that can sway with the geopolitical and enforcement winds (2:59); the potential relevance of companies’ approaches to transfer pricing and country-of-origin (4:40); the relevance of old-fashioned arithmetic to identifying common nominator and denominator pitfalls (9:10); the recent enforcement action that included an unusually lengthy exposition by the U.S. Bureau of Industry & Security (BIS) of its interpretation of the de minimis rule (15:38); and the parallels to BIS’s rediscovery of the “high probability” standard (18:56). Mike and Brent conclude with the latest installment of Brent Carlson’s “Managing Up” segment (24:41).
BIS “Guidelines for De Minimis Rules”: https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-C/part-734/appendix-Supplement%20No.%202%20to%20Part%20734
Contact Brent: brent@redflagsrising.com
More about Brent: www.redflagsrising.com/founder
Connect with Brent on LinkedIn: https://www.linkedin.com/in/brent-carlson-41ba692/
Contact Mike: michael.huneke@morganlewis.com
More about Mike: https://www.morganlewis.com/bios/michaelhuneke
Connect with Mike on LinkedIn: https://www.linkedin.com/in/mhuneke/
The enforcement actions can all be found at www.bis.gov

Mike and Brent re-boot a prior recording overtaken by events, specifically the Sunday, May 31, 2026, guidance issued by BIS to global data centers and the June 12, 2026, “is-informed” letter by Commerce Secretary Howard Lutnick that caused an AI model company to take down its latest models.
Mike and Brent first update listeners on pending legislation in the U.S. Congress (01:37). They then revisit last year’s May 13, 2025, announced intent by BIS to rescind the Biden-era “AI Diffusion Rule” (06:44), discuss questions around whether that rescission actually happened and, in any event, what was the status of U.S. export controls as a result (10:59), and then break down the May 31, 2025, guidance from BIS (15:53) including the opportunities and limitations of what reads like a “General Prohibition 10 Savings Clause” in the penultimate paragraph (19:43). They next discuss the Friday, June 12, 2026, “is-informed” letter issued by the Secretary of Commerce and its implications for industry (23:58). Then they conclude with a “Gray Rhino” edition of Brent’s “Managing Up” segment (26:18).
Contact Brent: brent@redflagsrising.com
More about Brent: https://www.redflagsrising.com/founder
Connect with Brent on LinkedIn: https://www.linkedin.com/in/brent-carlson-41ba692/
Contact Mike: michael.huneke@morganlewis.com
More about Mike: https://www.morganlewis.com/bios/michaelhuneke
Connect with Mike on LinkedIn: https://www.linkedin.com/in/mhuneke/
The BIS Guidance from Sunday, May 31, 2026: https://www.bis.gov/media/documents/bis-guidance-may-31-2026.pdf
Michele Wucker, The Gray Rhino: How to Recognize and Act on the Obvious Dangers We Ignore (2016): https://www.amazon.com/Gray-Rhino-Recognize-Obvious-Dangers/dp/125005382X

Mike and Brent welcome to the podcast Jeff Stitt, the President of Acacia Trail Consulting. Jeff walks through how he went from becoming an engineer to being an on-the-spot chief compliance offer appointee in 1992 (01:36), to doing compliance at a bank (05:51), to having the opportunity to build and run a compliance program across Sub-Saharan Africa (08:00), and then to integrating a major acquisition into his company’s compliance program (12:10). Jeff explains how compliance programs are really “underwriting” the business’s activities (14:00) and then talks about the opportunity to build-out a global compliance program at a publicly traded company (16:30). Jeff concludes with a discussion about Acacia Trail (19:28) and what he’s seeing in the trade compliance space today (21:14). Mike and Brent then conclude with another edition of Brent Carlson’s Managing-Up (22:11).
Contact Jeff: jeff@acaciatrail.com
More about Jeff: https://www.linkedin.com/in/jeffreylstitt/
Contact Brent: brent@redflagsrising.com
More about Brent: www.redflagsrising.com
Contact Mike: michael.huneke@morganlewis.com
More about Mike: https://www.morganlewis.com/bios/michaelhuneke

Mike and Brent return to discuss lessons from Brent’s Aikido instructor and Marine Corps combat veteran Frank Doran and how those lessons can help trade compliance professional work through compliance jams. Mike and Brent discuss the enforcement wave that unfolded in March 2026 (01:28); their March 10, 2026, National Security Law & Enforcement event in New York City (01:51); how that event was designed to get to practical solutions (02:30); the need today to have a broader “compliance aperture” (03:59); the importance of effective communication up to management and boards, especially around “central compliance risks” (the standard under Delaware law) (04:37); Carole Basri’s prediction that soon many companies will have Chief National Security Officers (05:31); two significant enforcement actions from Q1 2026 (07:42); the DOJ National Security Division’s March 30, 2026, announcement regarding voluntary disclosures (11:37); two significant indictments from Q1 2026 (12:06); boards of directors’ duty of oversight when it comes to national security (13:39); the relevance of increased agitation from the U.S. Congress for more enforcement (18:39); the status of the proposed Remote Access Security Act (19:35); and what is the compliance path forward, including Brent’s Fraud Four Circle Framework (21:57). Mike and Brent then conclude with a special edition of Brent Carlson’s “Managing Up” about Frank Doran and the meaning and importance—to not only infantrymen but also compliance professionals—of “Pull, Push, Tap, Aim, Fire” (24:40).
BIS enforcement actions: https://www.bis.gov/enforcement/export-violations
DOJ NSD Voluntary Disclosure Policy (Mar. 30, 2026): https://www.justice.gov/opa/pr/reporting-voluntary-self-disclosures-violations-national-security-laws-under-department-wide
More about Frank Doran: https://aikido-west.org/frank-doran
Frank Doran, "Pull, Push, Tap, Aim, Fire" (1995): https://aikido-west.org/pull-push-tap-aim-fire
Boards of Directors and the Duty of Oversight: "Boards of Directors Lovin’ It after McDonald’s? A Fresh Look at Directors’ Duty of Oversight in the New Era of Sanctions & Export Control Corporate Enforcement," NYU PCCE Blog (Jan. 12, 2024), https://wp.nyu.edu/compliance_enforcement/2024/01/12/boards-of-directors-lovin-it-after-mcdonalds-a-fresh-look-at-directors-duty-of-oversight-in-the-new-era-of-sanctions-export-control-corporate-enforcement/
Brent’s Fraud Four Circle Framework article: "A Light Shines Through the Darkness in Disputes, Investigations, and Trade Compliance: A Fresh Look at the Classic Fraud Triangle with the Fraud Four-Circle Framework℠," NYU PCCE Blog (Jan. 8, 2026), https://wp.nyu.edu/compliance_enforcement/2026/01/08/a-light-shines-through-the-darkness-in-disputes-investigations-and-trade-compliance-a-fresh-look-at-the-classic-fraud-triangle-with-the-fraud-diamond-framework-sm/