Hazardous cargo
World Trade; Irvine; Nov 1998;
Copyright World Trade Magazine Inc. Nov 1998
Abstract:
Experts cite estimates of $10 billion worth of cargo is stolen
each year in the US and $30 billion worldwide. High value merchandise
is the most popular target: most notably high-tech goods such as
computer chips, components, peripherals, but also perfume, athletic
shoes, even seafood. The standardization of intermodal shipping
containers and the electronic exchange of data, two of the
revolutions facilitating the worldwide boom in trade and
transportation, also make it easier for thieves to identify and
attack the most vulnerable and valuable cargo. Recommended measures
to reduce cargo theft include: 1. packaging the cargo so the product
is not easily identified, 2. using shrink wrap or other measures
which make it immediately apparent when a shipment has been breached,
and 3. using and tracking serial numbers or other
identification.
The pallets were delivered to a secure storage facility belonging to Thompson Litho Ltd. in East Kilbride, Scotland on Friday afternoon, July 17. Sometime that night, the fire door was forced open. Someone loaded the sheets of printed paper into one of Thompson's vans and drove away. The stolen vehicle was later found. The stolen paper-worth an estimated $17 million-was not.
The booty in this theft was not currency or bearer bonds, but might as well have been. The stolen cargo, marked with serial numbers and using sophisticated holographic technology, was the latest shipment of authentication certificates for Microsoft Windows 98. With them, a counterfeiter could duplicate the CD-ROMs and manuals and pass off as many as 115,000 illegal copies of the world's leading computer operating system as the genuine article.
It was the second time in less than a year that crime hit the Thompson facility, which manufactures software products under license to Microsoft. In November of 1997, four masked gunmen bound and gagged employees and made off with an estimated $16 million worth of certificates and CD-ROMs.
A few years ago, MaryLu Korkuch, strategic initiatives manager for the technology insurance department of Chubb Group (www.chubb.com) and executive director of the Technology Theft Prevention Foundation, testified before a Congressional committee. She compared the growing incidence of often-violent crimes against high-tech industries and the transportation companies that serve them to the post-WWI epidemic of bank robberies, when outlaw Willie Sutton simply shrugged and said that he robbed banks "because that's where the money is."
"Today, Congressmen, the money is in computer components," Korkuch told the 1996 hearing. "And the firms that manufacture, warehouse, and ship these components are under siege from today's high-tech terrorists."
As large corporations fortify their own operations, thieves are increasingly turning to smaller businesses and transportation companies, according to Korkuch.
"Virtually anyone involved in the movement of high-tech goods-from components and peripherals to finished products, including everything from laptop computers to computercontrolled medical devices-is vulnerable to attack, wherever in the stream of commerce these products are destined," she says.
An estimated 40% of cargo theft is related to organized crime. And as the war on drugs lumbers on, criminals are happy to switch to trafficking in merchandise that is as valuable, pound-for-pound, as cocaine. Semiconductors are untraceable, legal to possess, and the penalties for those convicted of cargo theft are notoriously lenient. Computer chips are in such high demand that stolen chips generally fetch about 50% of their value (compared to only 10% for most hot goods). In fact, those criminals that do still engage in the drug trade sometimes prefer to be paid in chips rather than in cash.
Cargo at Risk
Today, most experts cite estimates of $10 billion worth of stolen cargo each year in the U.S. and $30 billion worldwide. But they also agree these figures are extraordinarily conservative, since most cargo theft goes unreported. And these figures reflect only the value of the items, not the administrative, shipping, or other expenses involved with their replacement.
"Most companies are switching to just-in-time inventory," says Bryan Rettman, director of global insurance services for Danzas Corporation (www.danzas.com) in Bellevue, Wa. 'A loss of cargo doesn't just mean the loss of that [value], but the loss of a sale or the loss of customer or the loss of a revenue on empty shelf space. That's the real cost."
Cargo is carried off from air cargo facilities, railyards, and ocean freight terminals, pilfered from supposedly secure warehouses, hijacked off trucks, boosted off of freight trains, or pirated cargo ships on the high seas. Highvalue merchandise is obviously the most popular target: not just computer chips, but perfume, athletic shoes, and even seafood. The standardization of intermodal shipping containers and the electronic exchange of data, two of the revolutions facilitating the worldwide boom in trade and transportation, also make it easier for thieves to identify and attack the most vulnerable and valuable cargo.
"There's stuff moving all the time. It's not like it used to be where you went down the street to pick up local goods. Henry Ford set up his motor company where raw materials and steel mills were close by. Now, you have got to go all over the world for this stuff," says David Hummer, managing director of the new logistics security consulting practice set up last August by Pinkerton's Inc., the Los Angeles-based investigation and security firm (www.pinkerton.com). The company aims to help multinational corporations such as Whirlpool and Hewlett Packard reduce losses of products and components in all the stages of manufacturing, storage, and distribution.
"The average offshore shipment goes through 16 different cycles before it reaches the end-user," Hummer adds.
"That's an awful lot of opportunity for theft, pilferage and damage."
Hijackings are a serious risk on overland routes in countries ranging from Ireland to Italy to Mexico. Some hijackings in the Eastern bloc are railoriented, while elsewhere they occur on the open sea (primarily in China, where navy gunboats are sometimes involved, Hummer suspects).
In the United States, professional gangs hijack shipments and immediately move them out of reach of U.S. law enforcement. "By the time authorities respond to it and there is an investigation, the goods are already across the borders and on their way to other countries," he says.
Enforcement & Penalties
Security professionals complain that reducing U.S. cargo crime is hampered in three ways: no centralized data, no coordination, no penalties.
"We don't have accurate information on how much is stolen, what is stolen, and where it is stolen," says Edward Badolato, chairman of the National Cargo Security Council (www.cargosecurity.com) in Alexandra, Va. He complains that since the U.S. Department of Transportation closed its Office of Transportation Security in 1982, there has been a lack of official support for serious studies of cargo theft. "Without the capability to do effective analysis, we don't have the tools to think ahead before the crooks start to steal large amounts of specific types of cargo."
Cargo crime often falls between the cracks of gerrymandered jurisdictions. By the time local police and district attorneys can coordinate with federal authorities ranging from U.S. Customs to the DEA and FBI, the trail is cold. In three of the nation's busiest areas for international trade-Southern California, New York/New Jersey, and Miami-multidisciplinary task forces are attempting to join forces to get the problem under control.
In Southern California, for example, the Los Angeles County Sheriff's Department, California Highway Patrol, FBI, Port of Los Angeles Harbor Police, and City of Vernon Police Dept. joined forces in 1990 to create the Cargo Criminal Apprehension Team. In it's first five years, the "Cargo CATS" recovered more than $100 million worth of stolen cargo and made 681 arrests.
Another factor encouraging cargo crime has been outdated laws and sentencing guidelines for those criminals who are apprehended.
"The laws on interstate cargo theft have changed little since they were written in 1913-the year Henry Ford opened his first Model T plant," says Sen. Frank Lautenberg (D-N.J.), who introduced Senate Bill 1512, the Cargo Theft Deterrence Act. At the time goods were mainly moved by horse and wagon and the intermodal container was half a century away. Today, criminals sometimes escape prosecution because the terminology in the laws is incorrect. If they do get convicted, weak sentencing guidelines make the justice system a revolving door. At a public forum last June, for instance, the senator was shown the 13-foot-long police record of a professional cargo thief; he had been arrested 16 times, but-in actuality-had served a total of only four months in jail.
"Steal Me" Packaging
"Both shippers and carriers are becoming more cognizant of the risks," Rettman says. But he adds, "There's no brilliant solution to the problem. It all goes back to the basics."
Solutions to cargo theft range from old-fashioned to high-tech. In the newly independent states of the former Soviet Union trucks often travel in convoys with armed guards-not much different from trains or stage coaches in the American West. But new satellite tracking devices on truck trailers (and possibly soon in containers) can pinpoint the location of a missing high-value shipment anywhere on earth. In Mexico, carriers are required to stay on toll roads rather than use remote back roads, because they are easier to patrol and monitor Thieves in the U.S. once made off with a trailerload of high-priced athletic shoes only to find a whole load of left feet-the right shoes were sent separately.
Some advice from experts:
Package cargo so the product is not easily identified. Some goods are shipped-even overseas-so that they can be placed directly onto retail shelves when they reach their destination. (Rettman calls this "Steal Met packaging, because it is so easy to identify, steal, and resell.)
Use shrink wrap or other measures which make it immediately apparent that a shipment has been breached.
Use and track serial numbers or other identification. Often law enforcement recovers stolen goods, but has no way to return them to the owner.
Screen employees and keep shipping information on a need-to-know basis. Make sure that information and intelligence on your most valuable cargoes isn't being delivered to criminal elements-be careful about hiring, protect information systems, be alert to who carries shipments. According to NCSC research, about 80% of all cargo theft is in one way or another related to insiders.