Trade compliance is one of the buzzwords in modern global logistics. Businesses that operate at a global level are driving towards ensuring that they follow established compliance procedures as it is crucial for maintaining visibility, accountability and trustworthiness. However, given the complexity of laws and procedures, becoming compliant can be a difficult undertaking. Therefore, understanding some essentials can be helpful in cutting through the confusion.

Legislation for penalties

The penalties for compliance violations have been established by a number of legislative acts. These include the Export Administration Regulations (EAR) and Export Administration Act of 1979 (EAA). According to the U.S. Department of Commerce (DOC) these legislations have established administrative and criminal penalties for businesses that violate regulations. Apart from that, the International Emergency Economic Powers Act (IEEPA) has also established civil penalties for businesses that violate regulations.

In the event of a violation, the Administrative Case Review Board (ACRB) investigates the case and then advises the Assistant Secretary of Export Enforcement accordingly.

Financial amounts for penalties

The penalty is dependent on the kind of administrative guideline that is relevant to a given shipment. For example a trade compliance violation which is governed by the EAA can result in penalties that include a $1 million fine per violation and imprisonment for 20 years. Violations that are governed by the EAR result in penalties that include $11,000 for each violation committed. This amount can go up to $120,000 if the violation results in a compromise of national security.

The IEEPA has also enforced strict penalties of violations as well. Violating compliance rules can result in a civil penalty of $1 million, imprisonment for 20 years and extra administrative penalties, which can go as high as $250,000 for every transaction.

Hence the financial cost of penalties can rack up exponentially if there are multiple compliance violations. The highest cost of violations that the US government has enforced till now is $100 million. This was inclusive of a monetary penalty of $48 million, a civil penalty of $50 million and a criminal penalty of $2 million.

Will a shipment be seized if it is in violation of compliance standards?

According to U.S. Customs and Border Protection (CBP), shipments that are in violation of compliance laws are released to the supplier. The release however, is dependent on a standard payment the amount of which is determined by the shipment’s monetary value and the condition that the shipment is not connected to any activities of an illegal nature. The following are the listed amounts

  • $500 standard payment for a shipment worth less than $15,000
  • $1,000 standard payment for a shipment worth $15,001 to $25,000
  • $2,500 standard payment for a shipment worth $25,001 to $40,000
  • $5,000 standard payment for a shipment worth $40,001 to $70,000
  • $10,000 standard payment for a shipment worth $70,001 to $120,000
  • $30,000 standard payment for a shipment worth $200,001 to $500,000
  • $50,000 standard payment for a shipment worth $500,001 to $1,000,000

If a shipment is worth more than $1 million, the penalty amount is decided by the Customs Treasury policy and delegation.