To catch a thief

An unintended (but welcome) consequence of the emphasis on homeland security is that supply chains have become more secure against theft. What equates to good operational procedures helps reduce losses in international commerce, but domestic distribution operations have a long way to go to catch up.

Most recoveries of stolen cargo are the result of a routine traffic stop, say George Gazey and Kirk Rider, senior marine loss control consultants for Fireman's Fund Insurance. What isn't apparent is how much chance enters into that scenario.

The most vulnerable parts of the supply chain are where shipments come to rest — in a drop yard, at a distribution center (DC) or at truck stops. New Hours of Service rules may have inadvertently made it easier for thieves as more DCs use drop-and-hook operations to minimize the time a driver has to be at their facility. Gazey advises shippers not to let a load sit. When the trailer is loaded, move it.

Estimates of the economic impact of cargo loss are extremely difficult to obtain. Gazey and Rider suggest the $5 billion to $15 billion that is usually quoted could be as much as five to seven times greater when other factors like replacement product, lost sales (demand satisfied by the stolen product) and transportation costs are included.

A major reason officials have an incomplete picture of cargo theft losses is that the Uniform Crime Reporting system doesn't include a cargo theft code. This may be changing as the U.S. Congress considers action that would include a cargo theft category. The thefts are typicallyrecorded as vehicle thefts, say Gazey and Rider. Thieves take a $100,000 tractor trailer, remove the cargo and abandon the vehicle. When the vehicle is recovered, the $1 million cargo portion of the theft goes essentially unreported or falls into a general theft category, they point out.

Reporting cargo theft as cargo theft can be important for a number of reasons.Companies looking for a good site for their DCs would avoid areas where cargo crimes are high, Gazey points out. Another factor is the attention actual statistics would focus on the underlying problem when it comes to funding prevention efforts and law enforcement. A third important area is in sentencing for criminals who are convicted of cargo theft.

On this latter issue, Gazey, a former law enforcement officer, notes that the penalties for cargo theft are often insignificant. The defendant can often plead down the charge from a felony theft to a misdemeanor and end up with a fine and serve time under probation. Viewed as a vehicle crime where the vehicle was recovered, this may sound reasonable. But the company that lost $1 million in cargo may view it differently.

The nature of the case against a thief will depend on the plaintiff. An insurance company that has indemnified the loss is limited in its attempts to recover on the loss to 110% of the loss. The shipper may have a much larger stake, but much depends on assembling the costs and presenting them adequately to convince a court that may be unfamiliar with cargo theft issues.

The cost of the goods may be based on the cost to manufacture, but the company also loses its mark up or profit on those goods. In addition, new product must be manufactured and shipped to meet the customer order — often on an expedited basis. There are also the lost sales resulting from the stolen goods that enter the market and compete with legitimate product.

Crime statistics will also affect a company's DC site selection. No one would site a DC in an area where cargo theft is particularly high, and this would have an economic impact on the region. With no central resource for such information, prevention and response are also affected. Crime task forces in Florida have centered on cargo and have had a significant impact, says Rider. From his base in Atlanta, he says he can see the law enforcement efforts pushing the criminal activity out of the region and into other areas of the Southeast.

Task forces have a good understanding of the issues, says Gazey, but cargo theft is a challenge for the "cop in the street." The opportunity to solve a cargo crime usually comes during a routine traffic stop. On occasion, something will raise the suspicion of the police officer and the crime will be detected, but more often the officer is checking the driver's license to ensure it is valid and the driver has the qualifications to be driving the vehicle if it's a commercial vehicle.

Traffic stops also check for safety violations, but the officer rarely asks to see a bill of lading or checks the bill of lading against the load. The absence of a bill of lading would be a very simple clue that something was wrong, says Gazey, but the officers aren't necessarily trained to ask for the document. Consider, he points out, that a city like New York has thousands of field police officers but only a relative handful will be working on cargo theft.

With little to deter a cargo crime, Rider and Gazey focus much of their attention on prevention. In the meantime, they continue to work with groups like the International Cargo Security Council, Technology Asset Protection Association and others to resolve some of the issues that stand in the way of a response to cargo crime.

resources

Fireman's Fund Insurance
www.firemansfund.com
International Cargo Security Council
www.cargosecurity.com
Tactical Operations Multi Agency Cargo Anti Theft Squad (Tom Cats)
www.dot.state.fl.us/mcco/cargo_theft/cmvct.htm
Technology Asset Protection Association
www.tapaonline.org

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