Supply chain disruptions increasing cargo theft risk

04/11/20140 Comments
Sean Kilcarr
The recent rough winter season – one of the coldest in the U.S. and resulting in the 10th largest snow cover in the Lower 48 states, dating to 1966, according to the Rutgers University Snow Lab – often scrambled much of the country’s freight transportation network. But such “supply chain disruptions” due to weather or other factors are also now being viewed as ripe targets of opportunity for cargo thieves.

“What we’re finding is that when the supply chain gets disrupted such as by a massive blizzard or say a port worker strike, a lot of transportation companies being doing things outside of their normal ‘safe’ practices due to excessive shipment backlogs, etc.,” Sam Rizitelli, national director for transportation at Travelers Inland Marine division, explained to Fleet Owner.

“During ‘disruptive’ events, there’s confusion and companies are often shorthanded – especially if it’s a weather event,” he added. “Things begin to back up, there’s chaos, and so the normal procedures for handling freight get put aside. That creates an opportunity we see more cargo thieves trying to exploit.”

Scott Cornell, director of the Specialty Investigations Group (SIG) within the Inland Marine division at Travelers, used a Hurricane-induced port closure to illustrate this issue.

“When the port closes, now you have cargo container ships offshore that can’t unload; cargo within the port than can’t get moved; and trucks inbound to the port parked at truck stops, rest areas, and other locations unable to deliver their shipments,” he said. “All this freight – particularly on the trucks – is now idle and exposed, often in unsecured locations. It’s got nowhere to go and thus creates a ‘buffet’ of cargo for thieves to choose from.”

Cornell added that once the storm passes and the port reopens, all of that delayed cargo must now get moved – and moved quickly. “Now all of this cargo has to get pushed into and out of the port at a faster rate, again leading to another ‘buffet’ style situation as the focus is on speed and not necessarily proper security procedures,” he explained.

The upshot, Rizitelli noted, is that carriers and shippers alike must learn never to lower their guard where cargo in transit is concerned – but that especially goes double when transportation networks get “unsettled” by weather and other disruptive events. “In a way, it’s like football: who owns the clock owns the game,” he explained.

Yet Walt Fountain, safety and enterprise security director for TL carrier Schneider National, stressed that cargo thieves are just taking advantage of the “vulnerabilities” presented by carriers and shippers alike.

“For example, if our industry continues to solicit bids for loads on open websites – and then broker loads with little or no vetting of the potential carrier – absolutely the thieves will continue to determine ways to misdirect legitimate freight operations to their advantage,” he explained.

“Should we be surprised when a thief takes advantage of a situation where [some] contract with an unknown, or unverified, company to move loads in a tight capacity market? I think not,” Fountain added. “Recognizing our own vulnerabilities and then committing to mitigating their risk is our approach to security and safety.”

Forwarders put on alert over new Chinese freight scam

By Isabel Lesto, October 29 2013

Freight forwarders are falling victim to fraudulent Chinese freight operators demanding ransoms totalling thousands of dollars to release Bills of Lading.

In the UK over the past year, ransoms totalling US$33,500 have been reported.

The British International Freight Association (Bifa) warned operators this month [October] to be wary of emails from unknown Chinese forwarders, looking for UK partners and offering cheap ocean rates.

Once a signed and stamped agency agreement is in place between both parties and business starts, all appears to be normal. This is until the cargo arrives at the UK port and no-one has received the original Bill of Lading.

When contacted the Chinese forwarder then demands a large ransom for the release of the original Bills of Lading.

Companies which refuse to pay find themselves on an expensive rollercoaster ride of meetings with customers, lawyers, insurers and shipping lines in order to obtain the original Bills of Lading to release the cargo.

By spreading shipments around a number of shipping lines, fraudulent forwarders make this recovery process even more onerous.

Determining whether that mail shot is from a legitimate forwarder in China or part of a scam in the first place can be difficult, however just asking for a signature on an agency agreement with an overseas partner is not good enough, said Bifa.

Dan Harris, a lawyer at Harris & Moure and co-author of the China Law Blog, which focuses on assisting foreign companies doing business in China, writes in one of his blogs on how to avoid Chinese business scams: “There is probably no document that has not been faked thousands of times in China. I have seen fake Bills of Lading, fake bank statements, fake contracts, fake purchase orders, fake company registrations, fake IP registrations, even fake lawyers.”

If you are going to rely on paper, he said, at least do more than just rely on the document itself. At the very least businesses should check with the company or the governmental body that purportedly issued the document.

“Put all of the documents you receive under a microscope. Even the most experienced scammers nearly always make some mistake in their fake documents.

“Try to get the company’s official corporate records from the official Chinese government sources. Though doing this is neither inexpensive nor easy… it can be incredibly enlightening in that it usually goes far beyond the information provided by the basic company search firms.”

It is hard to measure the scale of the Bills of Lading scam at present. Only two incidents have been reported in the UK to-date, although The Loadstar understands that forwarders in Australia have also posted warnings about this type of fraud.

The reasons for this could be that either these types of incidents are in their infancy or are underreported.

Michael Yarwood, claims executive for specialist freight insurer TT Club, said the techniques used in the scam are in line with fraudulent activity experienced throughout Europe, where entities pose as legitimate freight forwarders and hauliers with the sole purpose of cargo theft.

He said that the use of cargo clearing websites (or freight exchanges) to carry out theft is increasing.

Fraudulent forwarders pose as legitimate companies with spare capacity. They arrive on-time to collect loads and then disappear.

Another frequently seen scam involves organised gangs creating their own websites and advertising themselves as freight forwarders. These sites are characterised by very basic information, freemail accounts, and mobile phone or Skype contacts only, Mr Yarwood warned.

A third type of fraud commonly seen is where criminal organisations buy failing operators and continue to trade under their name in a state of virtual insolvency. They are able to identify and accept cargo which is subsequently stolen in transit. This type of scam is hard to identify, however checking with Companies House to determine whether there have been any recent changes in a company will help operators avoid being caught out by this type of fraud, Mr Yarwood suggested.

Companies need to perform due diligence in selecting carriers, he argued: “Request original documents rather than electronic copies which are much easier to doctor.”

He admits this is difficult with time-sensitive cargo and it is with these types of shipments that forwarders take risks they normally wouldn’t take.

However, Mr Yarwood maintained that it is commercially less damaging to suggest a customer delays collection than to take a risk with an unknown operator.

Handicraft dealers raise concern over cargo thefts

Srinagar, Nov 2: Next time you receive a consignment through a transport company, make sure every item has reached to you.
A group of businesspersons selling Kashmir handicraft outside the state, mostly in Bengal, alleged that goods sent through transport companies from here don’t reach in full quantity to the destinations.
“It has become almost a routine that some articles from the total lot supplied through private transport companies are stolen during the transit although it is the responsibility of the companies to deliver the entire consignment without any damage or theft of goods,” they said.
A local trader from Srinagar, Farooq Ahmad said that last year he had sent 127 pieces of shawls under the firm name “Fancy Arts” to West Bengal through private company TCI.
He alleged that on delivery the recipient found only 114 items in the parcel.
“I had paid transportation charges for 127 shawls from Srinagar to West Bengal. I was surprised when the recipient informed me that 13 pieces were missing from the consignment,” Farooq added.
He said that he had to suffer loss of Rs 10,000 due to the alleged theft of goods in transit. Farooq alleged that “most often it is the drivers who commit this offence for pecuniary interests.”
“It has happened with many businessmen several times. It has in fact created a sense of insecurity among us,” he said.
Farooq said: The transport companies should make drivers responsible and accountable.
He said that recently various drivers were caught while staging fake accidents on Jammu-Srinagar highway in order to grab the goods of owner for pecuniary bias.
Mushtaq Ahmad Khan, owner Fancy Arts said it had happened hundreds of times with him. “We communicated the complaint to officials of TCI but they did not act,” he said.
A small scale unit holder and Managing Director of JK Cements Private Limited, Muhammad Yasin Magray said: “Cargo theft is a problem affecting consumers and businesses alike. Officials should frame law of liability for companies carrying out transportation of merchandise.”
He said that the credentials of drivers working with transport companies should be verified by the company before assigning them the work which involves trust.
Aijaz Ahmad, a trader said that “effective hiring controls are the most important step in reducing theft loss during transportation.”
“We recommend complete background checks for all job applicants especially of drivers.”
Manager TCI, AK Sagwan however rejected the charge. “If any of our customers has any such grievance, let him contact us and we’ll look into his claim,” he said.
He said that the goods are properly packed in the godown to avoid any tempering.

More than half of container thefts occur with contractors

4 April 2012 | Adam Leach

Buyers should put subcontractors used by logistics suppliers under greater scrutiny, as more than half of supply thefts happen when goods are in their possession.

Analysis by transport and logistics insurer TT Club on supply chain related claims found, in value terms, theft was the cause of 29 per cent of claims. Within theft, the research showed that 54 per cent of the overall claims value was a result of “theft in transit” while the goods were in the possession of subcontractors. Thefts when logistics companies themselves had possession of the goods themselves accounted for just 8 per cent. 

But the study also showed in relation to thefts from premises, goods are safer when held by contractors, with 12 per cent of the overall value of goods stolen, compared to 13 per cent when on their own sites. A further 7 per cent resulted from stocktaking loss and six per cent as a result of other causes.

“To prevent theft you must know your contractors,” said Laurence Jones, director of global risk assessment at TT Club, in a presentation at a supply chain conference in Hong Kong.

He highlighted the importance of completing pre-employment checks before working with contractors. He also advised buyers to look at how long the contractor has been active, its country of origin and to see if they are affiliated with any trade bodies. He said to reduce the risk of thefts in transit in general, alter routes for regular deliveries.