Viewpoint: Cargo Theft Continues to Threaten Supply Chains

After a few tumultuous years, many of the logistical and manufacturing challenges that have plagued global supply chains are finally beginning to stabilize. One unfortunate trend that has not leveled off is cargo theft. With lingering inflation and other economic pressures, swindlers are continuing to swipe items from shipping containers — and to steal entire containers — to pad their income and counter lingering scarcity. This blog will explore the latest cargo theft trends, highlight recent data from the North American market, and delve into the investigation of cargo theft losses.

When it comes to stolen cargo, we see two main types of activity:

• Pilferage: These are generally unsophisticated and low-value crimes of opportunity. People see idle containers on trains or trucks or in warehouses and grab what they can. Two factors that have created greater opportunities for “rail heists” and other pilferage in recent years are the rise in online shopping and related transport of goods and the backlogs of cargo that plagued rail yards and shipping ports during the COVID pandemic.
• Organized crime: These are more sophisticated, planned crimes that require cooperation from someone with insider information along the transit route. Perpetrators go to great lengths to identify valuable cargo like electronics and pharmaceuticals, falsify licenses and shipping documents, and create fake trucking lines and other deceptive schemes in order to run off with merchandise. If the plans are executed well, it can take days for legitimate shippers and owners to realize that a container has been stolen.

Criminals are familiar with the vulnerabilities in today’s transit system — including insufficient security. Cargo transported by air is well protected by airport security

personnel and policies, so thieves know targeting ground transport is a safer bet. Further, labor shortages have left seaports, rail yards and other transit depots with inadequate staffing in recent years, which means containers are sitting idle and unmonitored for longer than they should. A third factor is the number of handoffs involved in getting cargo from point A to point B; various logistics brokers and subcontractors handle containers throughout the course of their journey, and each transfer weakens the security of the links in the supply chain.

Additionally, there is a growing movement in a few states to decriminalize petty theft below certain dollar values to combat rising incarceration rates. Some in the insurance community are concerned that lack of consequences may embolden more people to pilfer small amounts of cargo.

Data from marine cargo losses administered by Sedgwick corresponds with wider trends. According to CargoNet, a centralized U.S. database and information-sharing system managed by crime analysts and industry experts, a total of 1,778 supply chain events were recorded in the U.S. and Canada last year — marking a 15% increase over 2021. An estimated $223 million in cargo was stolen across both countries in 2022. About half of that occurred in the three most targeted states: California, Texas and Florida; theft in California increased year-over-year by 41%. The average value of cargo theft events in 2022 was over $200,000, which indicates a lot more organized crime than pilferage.

The most common locations for theft were warehouses/distribution centers, parking lots and truck stops. Thieves most often took household goods, a diverse category that includes appliances, furniture, tools, toys and other items. Electronics and food/beverage items were the second- and third-most popular categories for heists. Of note, computer theft went down 37% over 2021, but the theft of TVs and other displays nearly doubled. Vehicles and their accessories, building materials, and commercial and industrial items were also frequent theft targets in 2022.

Regardless of whether goods are stolen from a ship, train, truck or warehouse, cargo losses occurring in transit are generally covered under marine insurance policies. Carriers for whom Sedgwick handles marine investigations turn to us to help them establish liability at the time of theft events (if we can determine that negligence by any of the logistics brokers or subcontractors led to the theft, then they must assume responsible for the loss), as well as to recover stolen goods and reduce the risk of future losses.

Cargo theft claims give our marine investigators an opportunity to don their detective hats. We partner closely with law enforcement to track down stolen cargo and find the responsible parties. Our investigators visit the last known location of the goods and work to collect evidence that will identify the thieves and/or those responsible for negligence in the cargo-handling process. This can include taking photographs, hunting down security footage, and looking into the validity of the relevant shipping documents and drivers’ licenses.

Here’s an example: I was recently involved on a claim where a container full of TVs was stolen from a Texas trucking company’s yard just one mile away from the rail line on which it arrived. I learned from the trucking yard’s owner that the front gate was locked throughout the three-hour window when the heist occurred, which meant someone with inside knowledge of the security code was involved. Two days later, a private investigator found the stolen container — empty. (It turns out that the cargo was taken to Mexico.) Thanks to our collaborative investigation, we uncovered video showing the merchandise being loaded into a plain white-box truck and the trucking company’s logo being illegally reproduced on the side of the truck! Within a couple of weeks, one of the company’s clerks was arrested for his role in executing this inside job and several others. Our involvement helped to take an organized crime group off the streets and mitigate future losses.