Technical analysis of Claude Code (version 2.1.277) reveals that support for the AGENTS.md instruction file is gated behind a remote feature flag, causing the file to be ignored if telemetry or nonessential traffic is disabled. The feature is implemented via a built-in plugin named "agents-md" which, as of version 2.1.280, defaults to a false state and requires a successful fetch of the "tengu_agents_md_mod" flag to activate. If the flag cannot be resolved—which occurs when environment variables like DISABLE_TELEMETRY=1 or CLAUDE_CODE_DISABLE_NONESSENTIAL_TRAFFIC=1 are set, or when using third-party gateways like Bedrock and Vertex—the loader silently skips the local AGENTS.md file without providing a warning to the user. Testing using a "canary word" confirms that the file is never read under these privacy-preserving configurations. To circumvent this limitation, users must utilize a one-line CLAUDE.md file containing an "@path" import (e.g., "@AGENTS.md"), as the import mechanism does not depend on the remote feature flag. This behavior forces a trade-off between user privacy and the intended functionality of simplified project instructions, as the plugin's fallback mechanism fails to prioritize the local file when network-based flag resolution fails.