The U.S. Department of Commerce is set to raise penalties for violations of its import and export rules, with significant financial consequences looming for businesses engaged in international trade. The new regulations, which will take effect after January 15, have emerged amid increasing scrutiny over compliance, particularly relating to seafood, wildlife, and provisions outlined within the 2018 Export Controls Act.
Over the past six months, trade penalties have surged, raising alarms among compliance operatives. According to trade law consultancy Sandler, Travis & Rosenberg, businesses violating these rules could face hikes of hundreds of dollars per breach. For example, the maximum penalty for violating the 2018 Export Controls Act will increase from $364,992 to $374,474. Although some may view these increases as minor, experts argue they come at a time when consequences for non-compliance could already be considered excessive.
Hugo Pakula, CEO of Tru Identity and a customs expert, stated the urgency of compliance: “It has never been more important to stay ahead of non-compliance – and it has never been more costly [not to comply].” With fines accumulating, the potential financial strain on businesses is notable, especially for those already grappling with fluctuative market conditions.
While the adjustments may seem small, many within the shipping and trading community believe the growing complexity around these regulations translates to increased exposure to risk. Silvia Carter, an export and cross-border ecommerce expert, pointed out, “The rules keep on changing… increasing financial risk,” underscoring the challenges businesses face amid constant regulatory evolution.
Companies dealing with these facets of international trade must now prioritize compliance or risk facing penalties. Kyle Grobler, the global trade compliance manager at TE Connectivity, echoed the sentiment, raising red flags about rising operational costs. He remarked, “The cost of violating these regulations is just not worth it,” urging fellow businesses to cultivate thorough compliance practices. Grobler's insight reflects the broader sentiment within the industry, with him noting, “I have seen more fines and penalties over the last six months of my career than ever before.”
Underpinning these modifications is also heightened concern over U.S. national security. Earlier this year, the Departments of Commerce, Justice, and Treasury issued tri-seal notes outlining the potential for malign regimes leveraging interconnected global markets to undermine the nation's security. These warnings have undoubtedly influenced the move toward stricter enforcement and penalties.
Trade analysts now anticipate companies to ramp up their compliance infrastructures ahead of the income of these new penalties. The ramifications of failing to comply can extend beyond simple financial penalties to include significant disruptions to supply chains and reputational damage. Firms are, as a result, being driven to dedicate substantial resources to compliance training and monitoring to mitigate risks associated with import/export regulations.
The new penalties are expected to affect stakeholders within both state and local economies deeply. Particularly for businesses reliant on marine resources, the increased pressure now demands rigorous compliance measures to adhere to the upcoming rules, which may require them to invest heavily to align their practices with legal expectations.
With the deadline nearing, time is short for businesses to adjust to the new compliance environment. Many compliance leaders are calling for greater clarity and support from the government to navigate these regulations effectively. Ensuring full awareness of the potential risks and necessary adaptations has never been more urgent.
This increase highlights the broader trends affecting U.S. trade regulation—notably how they are influenced by national security policy, market volatility, and the need for compliance-driven operations. With the stakes higher than ever, businesses will need to adopt strategies prioritizing adherence to regulations to safeguard their operations and reputations against potentially catastrophic penalties.
Time will tell how effectively companies can adapt to such fast-evolving export and import rules and whether these penalties will achieve their intended effect of fortifying compliance for national security reasons.