Common Mistakes in Trade Compliance: What Are They & How To Avoid

Key takeaways

• Trade compliance requirements are becoming more complex due to evolving regulations, sanctions, and tariff changes, increasing the need for proactive oversight across global supply chains.
• The most common compliance mistakes, such as incorrect HS classification, valuation errors, improper origin claims, and screening failures, can trigger audits, penalties, higher landed costs, and shipment delays.
• Strong internal controls, accurate documentation, automated screening, and disciplined recordkeeping are critical to prevent financial losses, protect reputation, and preserve market access in high-enforcement environments.

What is trade compliance and why is it important?

Trade compliance refers to a company’s ability to follow all laws, regulations, and procedures governing how goods move across international borders. This includes correctly classifying products, preparing accurate documentation, screening restricted parties, paying required duties and taxes, and complying with sanctions or export controls. These rules are constantly updated by governments and global regulatory bodies, making compliance an ongoing responsibility rather than a one-time task.

Trade compliance components. Source: LinkedIn

For global trade companies, effective compliance is critical because even a single mistake can lead to costly penalties, shipment delays, product seizures, or long-term damage to business reputation. More importantly, non-compliance disrupts supply chains, introduces financial risk, and weakens trust with customers and partners.

As supply chains become more complex and businesses expand into new markets, the need for accurate compliance oversight grows. Tariffs, licensing requirements, import quotas, and embargo restrictions can vary widely from country to country, and overlooking these details can result in unexpected expenses or missed opportunities.

Ultimately, trade compliance strengthens operational reliability, protects against legal and financial risk, and enables companies to scale confidently in global markets. Businesses that treat compliance as a strategic investment, rather than a simple administrative task, gain a competitive advantage through smoother shipments, stronger partnerships, and greater flexibility in navigating international trade environments.

Is the trade compliance landscape changing?

Yes, today’s trade compliance landscape is shifting rapidly, becoming more complex and resource-intensive than ever before!

Regulatory updates, geopolitical tensions, and expanding transparency requirements continue to reshape how companies move goods across borders. Sanctions, counter-tariffs, new trade agreements, and evolving customs laws introduce challenges that directly impact time, cost, and internal compliance workloads.

2024 global trade regulatory updates. Source: Visual Compliance

This complexity is also reflected in real market behavior.

For example, the Harmonized Tariff Schedule (HTS) website is now receiving an additional 120,000 visits per day compared to 2024, as companies track frequent tariff changes. With recent tariff expansions and shifting trade measures, businesses must stay current on duty rates, rules of origin, and export controls to avoid unexpected penalties or delays.

At the heart of this environment is the Harmonized System (HS), used by more than 98% of global merchandise trade. Accurate HS code classification is essential, not only for calculating duties, but also for preparing key documents such as invoices, certificates of origin, packing lists, and customs declarations. An incorrect code can disrupt shipments, increase costs, or trigger audits.

Sanctions and export controls are also tightening. As of July 2025, the European Union lists 5,410 sanctioned individuals and entities across 36 regimes. Meanwhile, the United States, United Kingdom, and EU are imposing export restrictions on advanced technologies, especially in telecommunications and cybersecurity, due to heightened concerns surrounding espionage, intellectual property security, and critical infrastructure protection.

What are the consequences of non-compliance?

Non-compliance with international trade regulations can lead to significant operational, financial, and legal setbacks. With enforcement actions rising by 15% in 2024, regulators are applying more pressure on companies to maintain proper oversight. When businesses overlook compliance requirements, the impact can extend beyond a single shipment and disrupt broader supply chain performance.

Key consequences include:

• Financial penalties: Depending on the jurisdiction, fines can reach up to 10% of annual global turnover or approximately US$1 million per violation, creating substantial financial strain.
• Reputational damage: Compliance failures can diminish customer trust, weaken investor confidence, and limit future business opportunities.
• Operation disruption: Customs delays, goods seizures, and export restrictions can halt supply chains, delay deliveries, and increase storage costs.
• Legal implications: Criminal charges, sanctions, and license revocations can leave lasting legal records, restricting market access and increasing compliance scrutiny.

As global enforcement tightens, compliance gaps become strategic vulnerabilities. Companies that invest in proactive controls, accurate data, and automated monitoring are better equipped to protect their supply chain resilience and long-term competitiveness.

7 common mistakes in trade compliance & how to avoid them

1. Misclassification of goods (HS code errors)

Misclassification occurs when a product is assigned the wrong Harmonized System (HS) code, often because teams reuse historical codes, overlook material changes, or rely on marketing descriptions instead of technical specifications. This issue becomes more complex when dealing with multi-material goods, embedded electronics, or dual-use components subject to export controls.

An incorrect code can result in either underpaid duties, which customs treat as revenue loss—or inflated duty rates that increase landed costs. Modern customs platforms use risk-scoring algorithms to flag classification inconsistencies across shipments, increasing audit likelihood.

Common triggers for misclassification include:

• Ignoring updates in HS explanatory notes, particularly across Chapters 84–90, where technical variations affect coding.
• Failing to reassess classification when a product receives new features, coatings, or embedded firmware.
• Defaulting to generic “basket” codes without referencing binding classification decisions.

To avoid this, companies should:

• Conduct detailed material composition breakdowns, noting percentage changes that may shift classification headings.
• Maintain internal classification catalogs with version control tied to engineering change orders.
• Validate national subheadings when entering new markets, as 8–10 digit tariff lines vary beyond the global 6-digit base.
• Benchmark against binding rulings from customs authorities for similar product classes.

Be clearly aware of HS Code formula and where to find to avoid this mistake. Source: LinkedIn

For faster, more accurate classification, companies can leverage platforms like yTrade’s HS Code Coverage, which provides real-time visibility into global shipment activity by HS code, country, or counterparty.

With granular data up to (and beyond) the 6-digit level, users can track demand shifts, detect volume changes early, and anticipate market movement, reducing the risk of outdated or incorrect classifications.

Explore HS Code insights with yTrade.

2. Incorrect customs valuation and omitted cost elements

Incorrect valuation occurs when importers declare only the invoice value and fail to include additional dutiable costs defined under WTO valuation rules.

Customs authorities expect the declared transaction value to reflect the true cost of importation, including inland freight, packaging, assists (e.g., free tooling or software provided by the buyer), royalties, and commissions. Auditors routinely compare financial records to customs declarations, and discrepancies often lead to reassessments.

Common valuation gaps include:

• Omitting freight insurance premiums or destination handling charges.
• Excluding tooling or mold costs that were provided free to the manufacturer.
• Understating commissions or technical royalties linked to the product.

To avoid this, companies should:

• Use landed-cost templates that itemize every cost component tied to the transaction.
• Align customs declarations with finance and procurement records to ensure consistency.
• Flag royalty agreements and technical assistance contracts for valuation implications.
• Conduct annual valuation reviews to catch omitted elements across product lines.

3. Failing to screen restricted or denied parties

Screening failures happen when companies check only direct buyers and overlook indirect participants such as freight forwarders, banks, and end-users. Regulatory bodies like OFAC and EU authorities expect complete transaction-chain screening.

Violations are publicized, causing immediate reputational damage, even when ignorance, not intent, is the cause. Drop-ship and reseller models are particularly vulnerable because the final consignee often isn’t vetted.

Common screening oversights include:

• Only screening initial purchase orders rather than at shipment release.
• Ignoring ultimate end-users in multi-tier distribution structures.
• Relying on static, outdated restricted-party lists.

To avoid this, companies should:

• Implement automated screening at multiple checkpoints (order entry, booking, dispatch).
• Screen financial institutions involved in the transaction when required by jurisdiction.
• Set automated re-checks when shipment timelines exceed 30 days, as restricted-party lists update frequently. Companies can strengthen this step using yTrade’s Sanctions & Compliance Monitoring, which not only tracks global watchlist updates in real time but also re-screens every party in the trade chain automatically — including freight forwarders, intermediaries, and sub-tier partners that traditional tools often overlook.

4. Incorrect Country of Origin (COO) determination and marking

Country of Origin errors occur when companies rely on supplier statements or basic assembly location rather than applying substantial transformation tests. Customs authorities evaluate where meaningful processing happens, not where packaging or minor finishing occurs. Incorrect COO marking can result in relabeling orders, reinspection fees, and shipment rejections at the port of entry.

Common COO pitfalls include:

• Treating final assembly as origin when major components come from other countries.
• Failing to reassess origin when switching sub-suppliers or part configurations.
• Using generic “Made in” labels without verifying transformation criteria.

To avoid this, companies should:

• Apply substantial transformation guidelines for each product category.
• Maintain supplier declarations tied to lot or batch numbers, not blanket annual statements.
• Update COO determinations when engineering changes alter component sourcing.
• Document manufacturing flowcharts to demonstrate transformation steps.

5. Inaccurate or missing certificates of origin under trade agreements

Under preferential trade agreements, goods must meet specific Rules of Origin (ROO) to qualify for reduced duty rates. Many companies claim preferences without validating regional value content (RVC) or product-specific rules. During audits, customs can retroactively disallow preferential claims and require duties dating back years.

Common ROO mistakes include:

• Assuming eligibility based on final assembly instead of component sourcing.
• Using outdated RVC calculations after supplier changes.
• Completing Certificates of Origin with incomplete HS references.

Make sure to fill out the Certificate of Origin correctly. Source: FedEx

To avoid this, companies should:

• Calculate RVC at the bill-of-materials level for each shipment batch.
• Update ROO assessments when switching suppliers or modifying part content.
• Validate Certificates of Origin against product-specific rules, not generic guidance.
• Retain supporting documents for the duration required by the importing jurisdiction.

6. Insufficient export control management for dual-use items

Export control violations occur when controlled technologies are shipped, or even electronically shared, without the proper export license. Dual-use items (civilian but with military applications) fall under evolving control regimes such as U.S. EAR and EU dual-use regulations. Many violations arise from intangible exports, like emailing controlled technical drawings to foreign engineers.

Common export control triggers include:

• Overlooking embedded encryption functions in telecommunications hardware.
• Providing remote server access to foreign nationals.
• Shipping repair parts linked to controlled platforms without license checks.

To avoid this, companies should:

• Classify both physical goods and controlled technical data.
• Review MEU/MIEU lists for ownership-based restrictions.
• Segment network access based on nationality and project assignment.
• Request commodity jurisdiction determinations for ambiguous technologies.

7. Poor recordkeeping and weak audit trail management

Recordkeeping failures happen when companies cannot produce documentation required to substantiate classification, valuation, or ROO claims. Customs audits often span 5–7 years, and missing version histories, expired Certificates of Origin, or mismatched invoice copies can result in adverse findings.

In jurisdictions offering trusted trader benefits, sloppy documentation can disqualify companies from expedited clearance programs.

Common audit-triggering gaps include:

• Storing only final invoice copies without draft revisions or packing list versions.
• Losing lot-number traceability for origin-sensitive shipments.
• Failing to archive correspondence confirming preferential eligibility.

To avoid this, companies should:

• Use digital repositories with metadata and version control.
• Link documentation to SKU-level identifiers for quick retrieval.
• Conduct quarterly internal audits simulating customs queries.
• Assign document retention responsibility to specific compliance roles.

Conclusion

Most compliance teams don’t set out to make mistakes. They’re under pressure, juggling new rules, and trying to keep shipments moving. But small oversights, like outdated HS codes or missing documents, can slow everything down.

What many teams really need is clarity. yTrade provides live shipment insights and HS code coverage, so you can see changes as they happen, not after a delay hits your inbox.

If you want more confidence in every declaration and decision, live experiment on how yTrade's specialist can help today. Contact us now!