The problem is that real life is not reflected properly in the game. Neutrals were indeed considered off limits, but when mistakes were made they were treated fairly lightly. This even includes the several times when a u-boat sank a German or Italian ship that was travelling outside of its designated areas. The other problem was that neutrals sometimes travelled in Allied convoys. When this happened they were considered fair game.
You can adjust the settings in Data/Cfg/Basic. I reset neutrals for 0, so I don't get punished for sinking them but neither do I get rewarded, thus rendering them a waste of good ammunition. I also have my friendly ships set for -1 rather than -10, for similar reasons.
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