A cooperative effort
By J.J. Lamb, AJOT
Cargo hijacking, lost shipments, use of non-authorized shipment modes, and lax seaport/airport security can be significantly reduced, if not stopped entirely, but it requires the cooperation of the shipper, insurer, and law enforcement agencies.
“High tech cargo theft increased 600% during the past three years in the US,” said San Francisco police lieutenant William Gitmed during a session at this year’s recent Risk and Insurance Management Society (RIMS) conference in San Francisco.
“In addition, the FBI estimates annual cargo thefts are at the $6 billion level,” he said, “while another organization puts the figure at $10 billion. But because for every cargo theft reported to law enforcement, five go unreported, and it is impossible to know what the real dollar loss is.”
Most unreported incidents, added Gitmed, who is assigned to San Francisco’s airport division, are the result of the shipper or carrier wanting to avoid bad publicity.
Sitting on the same panel, John Tichenor, senior staff surveyor-marine risk management for insurer ACE USA, said cargo theft was at epidemic proportions, “and in my opinion, about 95% of the cases are inside jobs.”
Some of the questions a shipper needs to ask, he said, include whether the freight forwarder is actually doing the cartage, or whether he has turned it over to a third party unknown to the shipper; whether an air cargo shipment is actually flown to its destination, or whether it is trucked to save the carrier money?
While the title of the seminar: “Sitting on the Dock, In the Bay, Watching Your Cargo Roll Away,” may have seemed humorous, panel members took the subject matter quite seriously.
And Tichenor emphasized his belief that seaports today are much safer than they once were, and certainly more secure than airports, primarily as a result of containerization.
“Air cargo is much more vulnerable to theft because of the high volume of high tech, high value shipments,” he said. “In addition, there is a lot more water damage to cargo at air terminals, which is rather ironic.”
Still, he said, the highest risk is in the inland movement of cargo. For that reason, he strongly suggested that shippers insist on background checks for every driver, ideally for the past 10 years.
“I realize that isn’t always feasible, but at least try for a five-year record,” he added.
Joan Dyer, assistant risk manager for BellSouth Corporation in Atlanta, noted that her company’s insurance carrier almost dumped them because of high loss ratios—193% and 596% in 1994-95 and 1995-96 respectively—in shipping cell phones and network equipment to Latin America and Israel.
“It was only after we worked out a program of warranties with our shipping partners” she said, “that we saw a sharp reduction in our loss ratio, which dropped to 53% in 1996-97 and last year was 65%.”
The warranties included shrink wrapping, certain kinds of security boxes, security tape for sealing, and no interim storage that has not been inspected and approved.
“Since 1996, we have experienced no losses from theft or pilferage where those warranties were explicitly followed by our carriers,” said Dyer.
“Thirty percent of losses for underwriters are the result of theft,” said Tichenor, noting that part of the problem is the “ship it yesterday” approach used by many sales departments.
“There has to be a balance between security and the efficient movement of the cargo,” he said. “Loss control should not impede commerce.”
Both Tichenor and Gitmed emphasized the importance of cooperation, good communications, strict prevention policies, and prompt reporting of incidents to law enforcement.
“Today, there are 33 cargo theft and task force units in the US,” said Gitmed, “and by next year, that number should double.”
Tichenor stressed that insurance investigators and law enforcement people cannot do their jobs properly with out immediate notification and detailed information about missing cargo. “A shipper should be abl