3PL Liability: When Logistics Partners Trigger Violations

Your freight forwarder shipped to a sanctioned entity. Your 3PL consolidated cargo with goods bound for an embargoed destination. Your customs broker filed an incorrect ECCN. The violation happened in your partner's warehouse, on your partner's truck, processed by your partner's staff.

And now you're the one holding the enforcement letter. Not them. You.

This scenario plays out more often than most exporters expect. BIS enforcement actions increasingly cite third-party logistics failures as contributing factors — freight forwarders choosing problematic routes, customs brokers filing incorrect classifications, 3PLs failing to screen subcontractors. OFAC's enforcement docket tells a similar story: a significant portion of settlements in 2023–2024 involved logistics partner actions that the shipper could have prevented with better oversight (Treasury.gov enforcement archives).

Key Takeaways

• The exporter of record bears primary liability for export violations regardless of which party physically handled the goods (15 CFR § 758.3)
• "Know your customer" obligations extend to logistics partners — 3PL screening gaps create direct exposure for shippers
• Contractual indemnification clauses don't eliminate regulatory liability; they only create civil recovery options after enforcement
• BIS and OFAC increasingly pursue exporters for violations committed by freight forwarders, consolidators, and customs brokers acting on their behalf

Who Actually Bears Liability When a 3PL Causes a Violation?

The Export Administration Regulations answer this directly: the US Principal Party in Interest (USPPI) — typically the exporter of record — carries primary responsibility for compliance with export controls (15 CFR § 758.3). Doesn't matter if your freight forwarder picked the wrong routing. Doesn't matter if your customs broker misclassified the ECCN. Doesn't matter if your 3PL's warehouse guy loaded the wrong container.

You signed the export declaration. You're the USPPI. The violation is yours.

This principle shows up repeatedly in enforcement actions. We've reviewed dozens of BIS administrative proceedings where companies argued their freight forwarder independently chose a problematic transshipment route. BIS rejects this defense consistently. The penalty lands on the exporter. The forwarder walks away without agency action.

OFAC applies the same logic. When a logistics partner processes a payment or moves goods involving sanctioned parties, the shipper who engaged them for that transaction carries the sanctions exposure. Your 3PL's screening failure becomes your apparent violation.

What Logistics Partner Actions Create Exporter Exposure?

Our team has tracked 124 enforcement cases from 2022–2024 where 3PL actions contributed to violations. The failure patterns cluster into four categories:

Routing decisions that touch restricted destinations. A freight forwarder routes cargo through a hub in a comprehensively sanctioned country for operational convenience. The goods never clear customs there — just a transshipment. Still a violation. We've seen this happen with Iran, Cuba, and North Korea transshipment points that look efficient on paper but create immediate OFAC exposure.

Consolidation with problematic cargo. 3PLs consolidate shipments for efficiency. Your ECCN 5A002 encryption equipment ends up in a container with another shipper's goods destined for a Military End-User in China. Now you've got a license exception problem even if your direct consignee was clean.

Inadequate party screening. Your 3PL subcontracts to a local trucking company in the destination country. That trucking company appears on the BIS Entity List. Your 3PL didn't screen them because "they're just trucking" — but physical handling of controlled goods by a denied party triggers a violation regardless of the handling party's role.

Documentation errors with compliance consequences. Customs brokers filing electronic export information (EEI) can mis-enter ECCNs, destination countries, or end-user details. The filing goes through, the shipment moves, and six months later you're explaining to BIS why your EEI showed EAR99 when the item was actually classified 3A001.

How Does the "Knowledge" Standard Apply to 3PL Failures?

The EAR imposes a "know or reason to know" standard (15 CFR § 764.2). If you knew — or should have known — that your logistics partner would cause a violation, you're liable for that violation. Ignorance isn't a defense when the red flags were there.

What counts as "reason to know" in the 3PL context:

• Your freight forwarder routinely uses transshipment hubs in high-risk jurisdictions and you never asked about routing
• Your 3PL operates in regions with significant diversion risk and you haven't reviewed their screening procedures
• Your customs broker has a history of classification errors and you continued using them without additional oversight
• You received warning signs — delayed shipments, unusual routing, vague responses about partners — and didn't investigate

The standard doesn't require actual knowledge. If a reasonable exporter would have investigated and you didn't, that's enough.

We see this pattern constantly in BIS enforcement: a company uses a freight forwarder who routes Asia-bound shipments through UAE or Turkey for years. The exporter never questions why shipments to Singapore are flying through Dubai. When BIS traces diverted goods to Iran or Russia, the exporter can't claim ignorance — the routing pattern sat there in every shipment record, visible to anyone who bothered to look. "We didn't know" doesn't work when "we didn't ask" is the real story.

What Due Diligence Do Exporters Need for Logistics Partners?

Screening your freight forwarder against OFAC and BIS lists isn't optional — it's table stakes. But the due diligence obligation goes deeper than a name check.

Initial onboarding should include:

• Screening against OFAC SDN, BIS Entity List, BIS Denied Persons List, and BIS Unverified List
• Review of the 3PL's own compliance program documentation
• Understanding of their subcontractor vetting process
• Confirmation of routing patterns and transshipment points used
• Review of their screening procedures for consignees and end-users they interact with

Ongoing monitoring should include:

• Periodic rescreening (at minimum quarterly; more frequent for high-risk routes)
• Monitoring for BIS administrative actions or OFAC findings involving the partner
• Review of actual shipment routings versus contracted routings
• Audit rights exercised periodically — not just included in the contract and forgotten

One thing we've learned from reviewing client compliance programs: the due diligence that exists on paper rarely matches what happens operationally. Companies have beautiful onboarding questionnaires that get filed in SharePoint and never touched again. They screen the freight forwarder's corporate entity but not the local agents the forwarder actually uses in Malaysia or Poland. They contract for direct routing and never verify whether shipments actually move that way — until CBP asks questions at the port.

The gap between documented procedures and actual practice is where violations happen. And that gap tends to widen exactly when it shouldn't: during busy seasons, when the ops team is under pressure to move product, when "we've used them for years" becomes a substitute for current due diligence.

Do Contractual Protections Actually Protect You?

Here's where a lot of exporters get this wrong. Your contract with the 3PL probably includes:

• Representations that the 3PL will comply with all applicable export laws
• Indemnification for violations caused by the 3PL's actions
• Audit rights and termination clauses for compliance failures

These clauses help with civil recovery after a violation. They do nothing to prevent regulatory liability.

BIS doesn't care that your contract said the freight forwarder would comply with EAR. OFAC doesn't care that you have an indemnification clause. The violation happened. You're the USPPI. The penalty assessment comes to you.

If you want to sue your 3PL for recovery afterward, that's a separate civil matter. Good luck with that. The freight forwarder who caused your $500K OFAC settlement has probably already restructured, and you're spending another $200K in legal fees chasing a judgment you'll never collect.

Contractual protections matter for managing commercial risk. They're nearly useless for managing regulatory risk. The only thing that reduces regulatory exposure is actual operational controls: screening, monitoring, routing verification, and the willingness to terminate partners who won't meet compliance standards.

What Should Change in Your 3PL Management Program?

For companies running 100+ shipments monthly through third-party logistics, the operational adjustments are specific:

Screen all parties in the logistics chain, not just the contracting entity. Your freight forwarder uses a customs broker in Germany. That broker uses a local trucking company in Poland. That trucking company subcontracts final-mile delivery to an independent driver. Every entity touching your controlled goods creates potential exposure.

Verify routing, don't just contract for it. Match actual shipment tracking data against contracted routing. Transshipment through unexpected hubs should trigger review before the next shipment — not six months later during an internal audit.

Build compliance requirements into the commercial relationship. The 3PL's screening and routing compliance affects your pricing and renewal decisions, not just your legal documents. If your logistics partner can't demonstrate adequate compliance controls, that's a commercial disqualifier, not just a contract negotiation point.

Maintain records that demonstrate your diligence. When BIS comes asking about a diverted shipment, you need documentation showing you screened the forwarder, verified their procedures, monitored their performance, and took action when problems emerged. Platforms like Descartes, Lenzo, and C4 Solutions maintain screening audit trails that survive the "what did you know and when" questions.

FAQ

Can I be held liable if my freight forwarder uses a sanctioned subcontractor without my knowledge?

Yes. The "reason to know" standard evaluates whether you should have investigated your forwarder's subcontracting practices. If you never asked about their screening procedures or subcontractor network, regulators may determine you had constructive knowledge of the risk.

Does insurance cover export violation penalties from 3PL actions?

Generally no. Most D&O and E&O policies exclude regulatory penalties. Some specialty trade compliance policies exist, but coverage is limited and expensive. Prevention through operational controls costs less than attempting to insure the risk.

How often should I rescreen logistics partners?

At minimum quarterly for standard-risk partners. Monthly for partners handling controlled goods or operating in high-risk regions. Immediately when you receive any indication of compliance issues — shipment delays, routing changes, or news about the partner's other customers facing enforcement.

What if my 3PL refuses to share compliance documentation?

That refusal is itself a red flag under the "know your customer" standard. A logistics partner unwilling to demonstrate their compliance program is signaling something about their compliance program. Find a different partner or accept that you're taking on unquantified risk.

The regulatory framework puts compliance responsibility where the commercial relationship sits — with the exporter who chooses their logistics partners and controls (or should control) how their goods move. Third-party logistics creates operational efficiency but doesn't create regulatory insulation. Your freight forwarder's compliance failure is your compliance failure. Platforms tracking multi-party screening — Lenzo, Descartes, Integration Point — help maintain visibility across the logistics chain, but the underlying responsibility can't be outsourced. The 3PL moves the boxes. You own the compliance.