The landscape of international trade compliance has become increasingly complex, with EU sanctions enforcement reaching unprecedented levels and Incoterms (International Commercial Terms) remaining the cornerstone of global commercial transactions. As we progress through 2025, businesses must navigate these interconnected frameworks with precision to avoid costly violations and maintain competitive advantage.
The European Union has significantly strengthened its sanctions enforcement mechanisms, creating a more rigorous compliance environment for international traders. The implementation of Directive (EU) 2024/1226, which requires Member States to harmonize their sanctions enforcement laws by May 2025, marks a watershed moment in trade compliance.
Key Changes in 2025
- Enhanced Personal Liability: Trade compliance officers, managers, and employees now face personal accountability for sanctions violations. This shift from corporate to individual responsibility means that negligent or intentional violations can result in personal fines and imprisonment for responsible parties.
- Expanded Sanctions Packages: Throughout 2024 and into 2025, the EU has introduced multiple new sanctions packages, including the 13th, 14th, and 15th packages targeting Russia, with additional measures affecting Belarus and other jurisdictions. These packages have expanded restrictions on imports, asset freezes, and business relationships.
- Criminalizing Violations: The new directive explicitly criminalizes sanctions violations, including inciting, aiding, or abetting such violations. This creates a zero-tolerance environment where even indirect support for sanctioned activities can result in criminal charges.
Incoterms 2020: Still the Global Standard
Incoterms 2020 was published by the International Chamber of Commerce (ICC). These internationally recognized trade terms continue to define the allocation of costs, risks, and responsibilities between buyers and sellers in international transactions.
Incoterms play a crucial role in sanctions compliance by determining:
- Point of Transfer: Where ownership and risk transfer between parties
- Transportation Responsibilities: Who controls shipping and logistics
- Customs Clearance: Which party handles export/import procedures
- Documentation Requirements: Who prepares and submits compliance documentation
The Critical Intersection: Where Sanctions Meet Incoterms
Understanding how EU sanctions interact with Incoterms is essential for maintaining compliance while executing international trade contracts. The intersection occurs at several critical points:
- Due Diligence Obligations - Regardless of the chosen Incoterm, both buyers and sellers must conduct thorough due diligence on their counterparties. This includes screening against EU sanctions lists, which are regularly updated to reflect new designations and restrictions.
- Transportation and Logistics Control - Different Incoterms assign varying levels of control over transportation and logistics. When sanctions restrict certain shipping routes, carriers, or intermediaries, the party responsible for transportation arrangements under the chosen Incoterm must ensure compliance.
- Payment and Financial Transactions - EU sanctions often include financial restrictions that can impact payment terms and methods. The chosen Incoterm may influence which party bears responsibility for ensuring payment compliance with sanctions regulations.
- Documentation and Reporting - Certain Incoterms require specific parties to handle export/import documentation. With enhanced EU sanctions enforcement, accurate documentation and reporting have become critical compliance requirements.
Best Practices for 2025 Compliance
- Implement Robust Screening Procedures
- Choose Incoterms Strategically
- Maintain Clear Documentation
- Regular Training and Updates
- Adopting Holistic Technology Solutions
The intersection of EU sanctions and Incoterms represents one of the most critical compliance challenges facing international traders in 2025. With enhanced enforcement mechanisms, personal liability for violations, and expanding sanctions packages, the stakes have never been higher.
Success in this environment requires a comprehensive approach that integrates sanctions compliance with traditional trade practices. Companies that invest in robust compliance systems, maintain current knowledge of regulatory requirements, and implement best practices will not only avoid costly violations but also gain competitive advantages in the global marketplace.
This article is based on the Directive 2024/1226 which can be found here and the EU Sanctions Factsheet on Incoterms "Ex Works" rule which can be found here.
