Why Trade Compliance Is Now a C-Suite and Board Priority

A global sourcing team finds a new component supplier in China with attractive pricing and strong manufacturing capabilities, the kind of vendor that could ease supply chain disruptions almost overnight. Procurement moves quickly. The business unit is eager to close the deal.

Months later, the company discovers that the supplier manufactures technology with potential dual-use applications subject to export controls. No one in procurement recognized the risk, so no one escalated the relationship for review. No comprehensive trade compliance assessment occurred before the agreement was signed.

The legal department gets called. Outside counsel comes in. Internal investigations begin. Whether a legal violation occurred is only part of the question. The bigger one is how a decision this risky got made without the right controls, oversight, and escalation mechanisms in place. This scenario is hypothetical, but it isn’t far-fetched.

A related type of tariff-compliance breakdown showed up in the Ceratizit case. In December 2025, the Department of Justice announced a $54.4 million settlement with Ceratizit USA over allegations that the company misrepresented the country of origin of Chinese-manufactured products transshipped through Taiwan to avoid Section 301 tariffs. The misconduct began with ordinary documentation and classification decisions and shows how decisions made in the ordinary course of business can create real trade-compliance exposure.

From Niche Legal Issue to C-suite Concern

For years, trade compliance, including export controls, sanctions compliance, tariff classification, and customs-related obligations, was treated as a specialized legal or operational discipline. In many organizations, responsibility lived within legal, finance, customs, logistics, or a dedicated trade function.

Today’s environment is different. The geopolitical landscape of 2025 and 2026 has turned trade risk into a C-suite concern. Aggressive tariff actions affecting major trading partners, expanded export control restrictions, evolving sanctions programs, and heightened geopolitical tensions have increased the complexity of doing business internationally.

The enforcement numbers show what’s at stake. OFAC’s civil penalties in 2025 totaled just more than $265 million, including a single enforcement action exceeding $215 million. On the export control side, Cadence Design Systems agreed to a $95 million civil penalty from the Bureau of Industry and Security for unauthorized exports to Chinese entities connected to military supercomputing, part of a coordinated resolution with the Department of Justice that brought combined penalties and forfeiture above $140 million. 2025 also saw heavy coordination among OFAC, BIS, and DOJ, including joint advisories and coordinated civil and criminal actions.

Ethics and compliance leaders are feeling this. In recent conversations, compliance executives say trade risk has jumped up their priority list fast. What was once a niche legal issue is now an enterprise risk. Broader survey data backs this up. AlixPartners’ 2026 U.S. Risk Survey of 500 senior legal, compliance, and risk executives found that only about 35% of organizations consider themselves very prepared for potential changes in sanctions, down from 44% just a year earlier.

A Risk That Reaches Far Beyond the Loading Dock

Trade compliance has never been legally limited to physical border crossings. Still, many organizations have treated it mainly as a shipping, customs, or logistics issue. Today, software access, technology transfers, deemed exports, third-party relationships, financial transactions, and sourcing decisions create exposure throughout the organization.

• A sales representative may engage with a customer located in a sanctioned jurisdiction.
• A software engineer may share technical data that falls under export control restrictions.
• A procurement professional may onboard a supplier without understanding sanctions or export control implications.
• A financial services employee may facilitate transactions involving restricted parties.
• A consulting firm may transfer controlled technical information to foreign nationals working on a client engagement.
• A technology company may provide software access that triggers export compliance obligations.

In each case, the root cause often traces back to a failure in compliance program design, training, communications, monitoring, or risk management. Consider the compliance failures that most E&C leaders spend their careers addressing. Anti-corruption violations often happen because employees fail to recognize red flags, misunderstand expectations, or work around controls. Data privacy failures can occur when organizations don’t build effective governance and oversight structures. Third-party misconduct frequently stems from weak due diligence and monitoring. Trade compliance failures often follow the same pattern.

Many ethics and compliance programs weren’t originally built with global trade compliance risk in mind. Today’s environment requires organizations to strengthen several capabilities.

Maintain Risk-Based Sanctions Screening and Ongoing Trade Risk Monitoring

Organizations should build and maintain risk-based sanctions screening and monitoring processes. Depending on the nature of the business and the risks involved, this may include periodic or ongoing rescreening of customers, suppliers, beneficial owners, intermediaries, and other counterparties. This matters most for companies with complex supplier networks. Effective sanctions compliance requires processes that continuously evaluate whether third parties remain appropriate business partners, including whether ownership structures, geographic footprints, or business activities create heightened sanctions risks.

Regulators are reinforcing this directly. OFAC has extended its recordkeeping requirement from five years to 10, increasing the period organizations must retain relevant transaction and compliance documentation. BIS’s September 2025 Affiliates Rule would generally extend Entity List and other list-based restrictions to foreign entities that are 50% or more owned, directly or indirectly, by listed parties. BIS then suspended implementation from November 10, 2025, through November 9, 2026, in connection with the U.S.–China economic and trade arrangement. Companies should watch whether the rule resumes and use the suspension period to strengthen beneficial-ownership diligence.

Similarly, organizations with export compliance obligations need ways to flag when products, technologies, services, or technical information might trigger additional review.

The goal is to catch decisions with elevated trade risk before commitments are made.

Train Commercial Teams to Recognize Trade Compliance Triggers

Many organizations have sophisticated trade specialists, but those specialists aren’t always in the room when the initial business decision gets made. Sales teams are usually first to engage prospective customers. Procurement teams typically select suppliers. Engineering teams routinely exchange technical information. Business development teams evaluate international partnerships. If those frontline groups can’t spot trade-related red flags, the trade compliance function may never get the chance to weigh in.

Traditional compliance training has focused heavily on anti-corruption, conflicts of interest, speaking up, data privacy, and workplace conduct. Trade compliance deserves a place in that lineup. Training shouldn’t try to turn employees into export control or sanctions experts. Instead, it should focus on how to recognize potential risks, how to seek guidance, and how to escalate problems. The objective is the same as in other compliance domains: teach employees to recognize how a risk might show up in their day-to-day jobs and when it needs expert involvement.

Ensure Trade Risk Is Integrated into the Compliance Risk Assessment

Trade-related risks touch multiple parts of the business and can carry real financial, operational, reputational, and regulatory consequences.

Organizations should ask questions such as:

• Where are we sourcing products and services?
• Which jurisdictions create heightened sanctions exposure?
• How much technical information crosses borders?
• Which business units engage with high-risk customers or intermediaries?
• What regulatory developments could affect our operating model?
• How dependent are we on suppliers located in higher-risk regions?

A mature risk assessment process weighs these questions alongside other enterprise compliance risks.

Ensure Your Third-Party Risk Management Program Addresses Trade Risk

Many TPRM frameworks were built primarily to address anti-corruption, fraud, financial crime, privacy, cybersecurity, and reputational risks. Trade compliance often gets far less attention than those other areas, which can leave gaps in controls.

Organizations should check whether their third-party risk processes adequately address questions such as:

• Does the third party operate in sanctioned or high-risk jurisdictions?
• Does it manufacture, distribute, or handle controlled products or technologies?
• Does its ownership structure create sanctions exposure?
• Could the relationship facilitate unauthorized technology transfers?
• Are there indicators suggesting potential export control concerns?
• Could the third party create tariff, customs, or country-of-origin risks?

The challenge is especially acute for multinational organizations with extensive supplier and distributor networks. As global trade compliance requirements grow more complex, third-party risk programs have to keep pace. The most effective approach folds trade compliance considerations into existing due diligence, monitoring, onboarding, and escalation workflows.

The Board Conversation

Directors need visibility into leading indicators that show whether the organization’s trade-related controls are working. The data backs this up. In WTW’s Global Directors’ and Officers’ Survey Report 2026, geopolitical risk, including trade wars, sanctions and tariff regimes, and supply chain fragmentation, entered the top seven risks facing directors and officers for the first time in the survey’s history. The survey also found that directors can be named personally in both civil and criminal enforcement actions involving sanctions and export restrictions.

Boards increasingly want visibility into:

• Significant trade-related exposures
• High-risk jurisdictions
• Emerging regulatory developments
• Third-party risk concentrations
• Management’s preparedness for change

These metrics turn trade compliance from a technical legal discussion into a business risk conversation boards can oversee.

That doesn’t mean the chief ethics and compliance officer (CECO) should own every aspect of trade compliance. Legal, trade, logistics, finance, procurement, and business leaders all play critical roles. But ethics and compliance leaders are well positioned to make sure trade risk gets folded into the organization’s broader compliance and reporting architecture.

A New Dimension of Compliance Leadership

Trade compliance is increasingly a test of organizational decision-making. The organizations that handle today’s environment best won’t necessarily be the ones with the largest trade compliance departments. They’ll be the ones that build trade risk awareness into every part of their compliance program.