The price of getting compliance wrong: Why forwarders remain exposed

Not someone else's problem 

Freight forwarders have long assumed that compliance obligations – goods classification, party screening, obtaining licenses – sat with exporters. However, over the past decade, regulators across the U.S., EU, UK and Asia Pacific have made it clear through warnings and enforcement actions that this is no longer the case.  

This was made plain in late 2023, when five American agencies issued joint guidance to all logistics providers operating in the U.S. under the heading "Know Your Cargo”. The message was clear: logistics providers, including forwarders and carriers, are responsible for their own compliance actions. They are expected to spot red flags, make inquiries and refuse suspicious shipments, regardless of where errors were originally made.¹

Consequences for businesses found in violation have ranged from financial penalties (often in the millions) to export denial orders, criminal prosecutions for individuals, and civil liability claims brought on by impacted partners. 

Strict liability and due diligence 

Most compliance violations are not deliberate. They are stories of overlooked processes, poor data systems and people making the wrong call under pressure – issues that were once ignored and seldom enforced. But as regulators have grown more willing to penalize, it is important to note that export compliance violations operate on strict liability, meaning intent or ignorance is not an excuse. Under strict liability, an honest mistake can carry the same consequences as a deliberate breach. 

In one BIS settlement, a screening tool matched only an acronym, allowing a controlled shipment to proceed because the restricted party was only listed under its full legal name. In a separate instance, a shipment was correctly flagged during screening, but the alert was overridden and allowed to proceed without sufficient escalation or documentation. 

Neither breach was found to be deliberate, but under strict liability, that doesn't matter. Regulators simply ask whether the system was adequate or not. 

Costs beyond the fines 

Compliance investigations can take years to resolve. By the time a settlement is reached, legal fees compound, internal teams have been consumed with audit work, and the total cost to a business can be more than the fine itself. 

What also matters is that, in export compliance, violations are counted per transaction. A systemic screening failure, for example, running across hundreds of shipments doesn't produce one violation. It can produce hundreds, each with its own penalty. And because these failures often go unnoticed, they often accumulate quietly before they come to a head. 

In one case, screening and documentation gaps went undetected across years of routine freight to sanctioned jurisdictions. The investigation took several years to resolve before eventually settling for a significant amount. The lesson is clear: the longer issues persist without being identified, the greater the eventual penalty. 

For some companies, the fine is not the greatest threat. Denial orders, which prohibit a company from receiving or handling any goods across a jurisdiction, are effectively a shutdown for a logistics business operating across borders. 

In one such case, an audit identified widespread gaps in export documentation processes. The following year, a shipment proceeded to a controlled destination after prior guidance indicated that a license was required. Regulators responded with a multi-year denial order. 

In these instances, there is also the reputational record to consider. Settlement notices and press releases remain publicly available long after fines are paid and denial orders lifted. 

Liability follows the paperwork 

Forwarders who do not export anything themselves are not insulated from compliance exposure. When an importer or exporter is penalized for a violation, one of the questions asked will be who handled the documentation. If that was the freight forwarder, a civil liability claim can follow. 

In one case that went before the U.S. courts, an importer faced significant fines across a series of charges, including incorrect entry of goods subject to anti-dumping orders, deprivation of lawful duties and misclassification across multiple product categories. In this instance, liability fell entirely on the importer, but in cases of this kind, authorities may pursue any party that participated in the false declaration, and importers may bring civil claims against whoever prepared and filed the entries. 

The difficulty for forwarders is that goods classification depends on what customers declare, and customers can get it wrong. A shipment described as "optical sensors" could be standard commercial components or dual-use technology subject to export controls. A forwarder that ships it without the right compliance checks has made an independent decision. 

Keeping up with regulators 

When regulators investigate a compliance failure, they not only ask whether a violation occurred. They also want to know whether the organization had a system capable of preventing it. Was there a screening process? Were decisions documented? Were exceptions flagged through defined channels? Companies that can demonstrate these safeguards can better mitigate enforcement outcomes than those that cannot. 

In one enforcement action, thousands of historical compliance issues were voluntarily disclosed relating to shipments involving sanctioned countries and individuals. These accumulated over several years as operations expanded in scale and complexity. The potential exposure was significant, reaching into the hundreds of millions. 

In determining the outcome, regulators acknowledged that the company did have a sanctions compliance policy in place, albeit one that couldn’t keep up with the complexity of its growing operations. Another mitigating factor was how the company responded. Their voluntary self-disclosure and full cooperation were credited, and the violations were found to be non-egregious.  

Why compliance can’t wait 

The lesson from these cases is that compliance failures are not always avoidable. How they end up depends on what systems are in place before they occur. For freight forwarders, they need to be able to show regulators documented records, evidence of flagged shipments and justifications for why shipments were released.  

The challenge for compliance teams is that delivering that level of scrutiny and consistency across expanding volumes and export controls is extremely hard. The question is no longer whether compliance teams needs better tools, but what those tools need to be capable of – and increasingly, AI is part of the answer. 

This article is the second in a three-part series on what compliance now requires of freight forwarders. ComplianceWise helps freight forwarders screen goods, parties and destinations against export control lists – now with purpose-built AI tools to research and classify commodities automatically. Visit ComplianceWise to learn more. 

Citations 

¹ U.S. Departments of Commerce, Treasury, Justice, State, and Homeland Security. "Know Your Cargo: Reinforcing Best Practices to Ensure the Safe and Compliant Transport of Goods in Maritime and Other Forms of Transportation." Office of Foreign Assets Control, Dec. 2023, ofac.treasury.gov/media/932391/download. Accessed 30 Apr. 2026.