Importers and exporters take note—costs associated with violating certain trade compliance rules levied by the U.S. Department of Commerce are set to increase Jan. 15.
Among civil penalties set to be hiked are foreign trade zone violations, and breaches of the 2018 Export Control Reform Act (ECRA).
The fees have been adjusted due to inflation, but will still be implemented if the associated violation occurred before the cost increase date.
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The Commerce Department states that the actual penalty assessed for a particular violation will depend on a variety of factors.
Maximum violations of ECRA are set to increase from $364,992 to $374,474 as of mid-January, while maximum foreign trade zone violations will increase from $3,558 to $3,650, according to international trade law consultancy Sandler, Travis & Rosenberg, P.A.
These increases are relatively minor, in many cases rising by just a few hundred dollars per breach. Other abuses include wildlife import/export violations and seafood import/export violations, as well as violations of the International Emergency Economic Powers Act (IEEPA).
“The cost of non-compliance is just not worth it,” said Kyle Grobler, global trade compliance manager at electrical components manufacturer TE Connectivity, in a post on LinkedIn. “Companies and organizations alike need for foster a compliance mindset. I have seen more fines/penalties over the last six months of my career than ever before.”
Escalating compliance costs are just one of various supply chain expenses that are set to increase in 2025, as shippers are awaiting potential tariffs expected to be implemented after President-elect Donald Trump returns to the office in late January. Trump has threatened to hit imports from Canada and Mexico with new tariffs of up to 25 percent, as well as an additional 10 percent duty on products coming out of China.
On top of the “will he or won’t he” application of probable Trump-era tariffs, companies will have to keep an eye on the potential for de minimis provision reform. That current trade exemption allows foreign shipments worth $800 or less to enter the U.S. market duty free, but has been under scrutiny from American lawmakers and businesses alike due to concerns that foreign-owned marketplaces like Shein and Temu have skirted taxes in recent years.
January’s penalty increases follow a tri-seal note published by the Departments of Commerce, Justice and Treasury last March. That note was targeted at foreign-based companies and individuals, advising them to take seriously the impacts of U.S. sanctions and export control laws on their business and operations.
“The Department of Justice is authorized to bring criminal prosecutions pursuant to IEEPA and ECRA for willful violations of U.S. sanctions and export control laws,” the note said. “Conduct prohibited under these statutes includes ‘caus[ing] a violation of any license, order, regulation, or prohibition issued’ pursuant to IEEPA as well as ‘caus[ing]’ or ‘induc[ing]’ the doing of any act prohibited, or the omission of any act required by ECRA or the Export Administration Regulations (EAR). Willful violations of either statute are punishable by imprisonment of up to 20 years and a $1 million fine.”
FMC reiterates it can resolve class action disputes
As the Commerce Department ups their fines, the Federal Maritime Commission (FMC) made sure to remind shippers that it is an “appropriate” venue where they can resolve class action disputes.
“The guidance yields important benefits to parties that might otherwise be hesitant to initiate legal actions at the FMC for fear of retaliation or because the amount of money in dispute may be less than the cost of litigation for an individual claimant,” the commission said in a statement. “The availability of the class action mechanism will help create a more level playing field for private parties seeking protection from potentially unlawful conduct.”
The FMC says its policy statement has sought to reduce barriers for private party litigants seeking redress of potential violations of the Ocean Shipping Reform Act (OSRA)
The agency first issued a policy statement in December 2021 clarifying that shippers’ associations and trade associations can file complaints on behalf of others alleging violations of the law.
Six months later, the FMC implemented a process for charge complaints, as set out in OSRA, which are aimed at providing individuals with a simplified and expedited way to challenge some invoices levied by carriers.
More than $3.5 million in fees have been voluntarily waived or refunded by common carriers through the commission-administered charge complaint process since June 2022.
The FMC also says it has ensured timely settlements on a “record” number of pending proceedings that have been filed at the commission in recent years by adding resources to the Office of the Administrative Law Judges.
OSRA’s signing and enactment in 2022 effectively expanded the FMC’s powers, as the bill gave the agency oversight to investigate complaints related to carrier detention and demurrage charges, and levy and enforce penalties.
