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What Can a Violation of Trade Compliance Cost?

Last modified: May 23, 2017

Trade compliance has become a buzzword in modern global business, and ensuring your business adheres to all relevant international trade compliance statutes is essential to maintaining accountability, visibility and public trust of your company. However, the information around the cost of trade compliance violations can be confusing, but you can cut through the noise and hype by understanding a few aspects of trade compliance violations.

What Determines the Penalties of an International Trade Compliance Violation?

The Export Administration Act of 1979 (EAA) and the Export Administration Regulations (EAR) set forth criminal and administrative penalties for entities engaged in international trade that commit violations of regulations, reports the U.S. Department of Commerce (DOC) within the Bureau of Industry and Security (BIS). In addition, the International Emergency Economic Powers Act (IEEPA) also lists civil penalties for violations of unlawful trade acts as well.

Concerning the review of possible violations, the Administrative Case Review Board (ACRB) is responsible for investigating and advising the Assistant Secretary for Export Enforcement on the status of a possible violation.

What Is Financial Penalty for an Export Trade Compliance Violation?

The penalty depends on what type of administrative guideline affects the shipment. In other words, enforcementtrade compliance violation cost of penalties under the EAA can include up to 20 years imprisonment and a fine of $1 million for each violation. Penalties assessed under the EAR can be $11,000 per violation, but the penalty increases if the violation threatens national security, which can cost up to $120,000 per violation.

The IEEPA sets stringent penalties too. In fact, a civil penalty for a violation of trade compliance statutes can be up to $1 million, 20 years imprisonment per violation and additional administrative penalties of up to $250,000 per transaction. However, if the doubled value of the transaction is more than $250,000, the doubled value will be equal to the penalty assessed.

Ultimately, the financial cost can easily rise in the millions when coupled with multiple violations. In fact, the highest violation ever assessed by the U.S. government was $100 million, which included a $50 million civil penalty, a $48 million monetary penalty and a $2 million criminal fine.

Are Shipments Seized for Violations?

Most often, shipments that violate trade compliance statutes are released back to the appropriate party, explains U.S. Customs and Border Protection (CBP). However, this release relies on the payment of a standard amount and no connection to illegal activity. These amounts vary by value of the shipment, which include the following:

  • Less than $15,000 requires a $500 standard payment.
  • $15,001 to $25,000 warrants a $1,000 payment.
  • $25,001 to $40,000 requires $2,500.
  • $40,001 to $70,000 is a $5,000 payment.
  • $70,001 to $120,000 incurs a $10,000 standard payment.
  • $200,001 to $500,000 will result in a $30,000 standard amount.
  • $500,001 to $1,000,000 costs $50,000 in a standard payment.
  • If the value is more than $1 million, the Customs Treasury delegation and policy decide the standard payment.

Unfortunately, seizure or forfeiture of goods or value may be unavoidable in some cases, such as when the transport will result in illegal activities. If the enforcing agency rescinds the forfeiture, getting the items back will also incur the costs associated with seizure and storage of the goods and payment of any unlisted, additional remission costs.

Protect Your Shipment with an Experienced Partner in International Trade Compliance

Since your business could face financial ruin and criminal persecution for violations of international trade compliance regulations, it is in your best interest to ensure your company adheres to compliance standards. Rather than devoting your resources to relentless managing trade compliance, let Flash Global do the hard work for you. Contact Flash Global online, and let us show you how we can help you lessen the cost and burden of managing trade compliance in your organization today.

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