A Perth-based livestock exporter failed to properly keep track of its sheep in Jordan, where they were treated cruelly before being slaughtered at roadside stalls.
A federal government investigation found the sheep had been handled and slaughtered outside of facilities approved under the Exporter Supply Chain Assurance System (ESCAS).
The inquiry came after an animal welfare group complained to the Department of Agriculture in June, providing video and photographs of Australian sheep being dragged by the hind leg, restrained by a foot on the neck and transported in the boots of cars.
The department determined the sheep were also unduly stressed by the way they were prepared for slaughter, struggling and slipping on wet tile floors.
It recorded a non-compliance against Livestock Shipping Services (LSS) relating to "unauthorised movement" of its animals but said it had complied with extra export conditions imposed in July and October, including the use of a supply chain officer to monitor the animals and conduct daily reconciliation of sheep.
Animals Australia, which lodged the complaint, said livestock exporters should face serious repercussions for ESCAS breaches, including loss of their export licences.
Otherwise, "they have no reason to take these regulations seriously", a spokeswoman said.
LSS was being sought for comment.