Fictitious Cargo Pickups: the nasty little secret no one wants to talk about
A generation ago, thieves stole loaded trucks out of parking lots and rest stops. Today, the trucking industry’s widening use of GPS devices, high-tech locks and other advanced security measures have forced criminals to adopt new methods.
One of the more successful methods is impersonating a trucking firm. Freight security firm CargoNet says that fraud has played a role in about 10% of all cargo theft in recent years. In 2014, the average value of a load lost to a fictitious pickup was more than $140,000. Some estimates put total cargo theft losses at $15 billion and up. Others say theft adds as much as 20% to the cost of consumer goods.1
These thefts are little known and seldom talked about outside of the commercial trucking world. Companies that have been victimized are reluctant to talk about their losses because they are embarrassed to tell anyone that they haven’t properly vetted carriers and drivers. In addition, most states don’t have separate criminal laws covering cargo theft.
Impersonating an existing trucking firm isn’t all that difficult. The ease of falsifying trucking entities is illustrated by the father-and-son heist team Jon and Kyle Dickerson. Over a 14-year period, they impersonated a number of trucking firms: D&T Trucking, Night Line Trucking and Fish and More. When one company racked up safety violations or came under suspicion, they just started a new firm.
In addition, reviving a defunct trucking firm and reactivating its dormant Department of Transportation (DoT) Interstate Operating Authority number from a government website is another method increasingly being used by thieves. It can cost as little as $300. Using falsified credentials, thieves can pretend to be a long-established firm with a seemingly good record.
Then there’s “loadboards” – websites like Dat.com and Truckstop.com - where shipping brokers list loads in need of delivery. While the content of the loads aren’t listed, thieves can spot the valuable ones based on details, such a those requiring high insurance minimums, loads requiring a team of drivers or loads coming out of particular locals like technology corridors or food and beverage warehouses.
While thieves are interested in electronics, electronics are easily traced. The biggest target is food and beverages (about 30% of fictitious pickups) which are easy to sell on the black market and hard to trace. Keith Lewis, CargoNet’s Vice President of Operations, says that he’s “never seen a serial number on a package of chicken, and once you eat the chicken, the evidence is gone.”
The biggest target is food and beverages (about 30% of fictitious pickups) which are easy to sell on the black market and hard to trace."
Here’s what shippers, motor carriers, freight brokers, and freight forwarders need to know:
1. Keep the cargo moving – cargo at rest is cargo at risk. (See FFF article on “Thanksgiving Day Dinner Risks” and “Blackjacked”)
2. Focus on “hot spots” and “hot times” – fictitious pickups spike during the holidays and are highly concentrated in just a few states: California, Florida, Texas, New Jersey, Indiana, Nebraska and Wisconsin. Over half of the fictitious pickups occur at the end of the week, on Thursdays and Fridays, when the main concern of shippers and brokers is in meeting a delivery date and satisfying the customer. This urgency causes some shippers, brokers and warehouse operators to slack off on driver and carrier screening.
3. If theft occurs, report it promptly – Don’t delay in reporting attempts or incidents of fictitious pickups to law enforcement agencies. Even a minor delay can mean you won’t see the shipment again. Subscribe to a reporting service such as CargoNet, FreightWatch, or SC-ISAC, which will help you monitor and respond to theft activity.
4. Know with whom you are working – having your cargo stolen from an unattended lot is one thing, but getting deceived by a thief in broad daylight because you didn’t perform proper due diligence is another. Put in place a carrier qualification process and follow it consistently. The same is true for the brokers you work with and the employees you hire. Trust, but verify. Here’s what the Journal of Commerce2 recommends:
• Request 3 forms of identification from the driver, including both a government issued and a company issued ID plus the driver’s US DOT Medical Examiners Certificate before releasing cargo.
• Take a close-up photo of the driver (with a clearly visible picture of the face) and, if possible, record biometric data such as a fingerprint. High-definition photos of ID’s are very useful for police investigations and criminal prosecution.
• Check all documentation including bills of lading and photograph truck and license plates, carefully noting tags, ID numbers and signage. Use ID Verify, available online, to validate driver and transportation personnel identities.
• You can use GPS to track your trucks, but what if you are using someone else’s truck to transport the shipments? Track your shipments using RFID technology. These chips can be placed directly on the pallet or imbedded within consolidated loads.
Get the right insurance coverage
If you are the shipper (the consiginee or consignor) of the property, determine if the trucker’s standard liability will cover your loss. This usually will be limited to a dollar amount or value per pound, which could be less than the value of your property. Increase the liability to the full amount of the property. It will cost a bit more, but it is worth it.
Better yet, buy a Shipper’s Interest insurance policy, which is an Inland Marine coverage. This covers all of your shipments within the parameters agreed to between you and the insurance company. It is low maintenance, as you normally only report values shipped once a year, after the policy expires. If you ship more than expected, you’ll pay an additional premium; if less, you should receive a return premium (subject to a minimum amount). In this way, you know exactly what coverage you have, and don’t have to rely on the trucker’s liability to protect your interests.
If you are a motor carrier with a freight forwarding or freight brokering operation, or specialize in freight forwarding or brokering only, you need Motor Truck Cargo coverage with a Contingent Coverage Endorsement. This endorsement will remove a clause in the Property Not Covered section of your insurance policy (which eliminates insurance for freight forwarding or brokering operations), giving the coverage “back”.
XL Catlin provides Shipper’s Interest insurance and Motor Truck Cargo insurance, the latter coverage through its premier transportation product: Motor Truck Cargo Coverage Solutions. XL Catlin is generally speaking not a market for businesses that only perform freight brokering and forwarding, but will provide contingent coverage when insuring a trucking operation.
About the author
Alexander McGinley is Vice President and Underwriting Manager for Inland Marine in XL Catlin’s Americas region. Contact Alexander at 860-709-3695 or firstname.lastname@example.org.
1 “It fell off the back of the Internet”: Freight thieves are becoming cybercriminals, David z. Morris, Fortune.com, July 29, 2015.
2 ’Cyber’ Cargo Crime Called Growing Threat, William B. Cassidy, Journal of Commerce, JOC.com, March 21, 2014.
The information contained herein is intended for informational purposes only. Insurance coverage in any particular case will depend upon the type of policy in effect, the terms, conditions and exclusions in any such policy, and the facts of each unique situation. No representation is made that any specific insurance coverage would apply in the circumstances outlined herein. Please refer to the individual policy forms for specific coverage details.
XL Catlin is the global brand used by XL Group Ltd’s insurance subsidiaries. In the US, the insurance companies of XL Group Ltd are: Catlin Indemnity Company, Catlin Insurance Company, Inc., Catlin Specialty Insurance Company, Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance America, Inc., XL Insurance Company of New York, Inc., and XL Specialty Insurance Company. Not all of the insurers do business in all jurisdictions nor is coverage available in all jurisdictions.