As a transportation claims specialist, I’m increasingly seeing evidence that thieves are exploiting weaknesses within technologies intended to improve efficiency in the supply chain, and the logistics industry is struggling to fight back.
This has led to a spate of recent cargo theft issues in the U.S., which has been driving larger supply chain implications.
As sophisticated fraud schemes surge, including impersonated freight brokers, doctored paperwork, and manipulated load boards, these new threats are exposing gaps in traditional insurance policies and claims processes. Motor truck cargo legal liability policies are written to cover liability for the freight being transported. But in the face of the latest fraud and theft activity, coverage can be insufficient or excluded.
From exclusions like voluntary parting, where cargo carriers unknowingly surrender goods to bad actors, to the legal jurisdiction maze that hampers timely recovery and enforcement when stolen loads traverse state lines, there’s a lot to unpack.
Fraudulent Bills of Lading
Standard practice in the shipping industry is for a bill of lading to be provided to the driver. The driver then takes that document to the shipper, who loads the vehicle with cargo. These exchanges present ample opportunity for savvy threat actors to produce fraudulently doctored bills of lading, impersonate freight brokers and take loads that don’t belong to them. If the shipper and the driver are not prudent enough to evaluate the paperwork and validate its integrity, once the vehicle leaves, the cargo is gone.
Now that perpetrators have figured out how to get a load off the load board and doctor the paperwork, the best defense would be to start developing internal strategies to validate that paperwork. What makes it authentic? What makes it original? Is the information correct? If there is something amiss, what is the process to alert the shipper that there’s something wrong with the paperwork so that they don’t release the load for transport? The answers to these questions are evolving as industry-wide recognition grows about the need to create an accepted format in order to see a reduction in fraud and theft.
Shippers and logistics personnel are gradually getting on board and working with new systems to help themselves. But in the simplest of terms, we could expect to see some level of fraud reduction if the motor carrier simply compares its paperwork with the shipper’s paperwork to ensure that it matches. Do both shipper and recipient have the same destination? Do they have the same description? Is paperwork consistent across systems and touchpoints? These are questions that should be asked at every point of departure. There are measures available on the Federal Motor Carrier Safety Administration website for validating Department to Transportation and motor carrier numbers to assist with this, as well as checking EIN numbers to confirm authenticity of the parties involved with transporting freight.
Validation is so essential because motor truck cargo policies have a voluntary parting exclusion, which states that if the motor carrier voluntarily parts with the cargo they’ve been assigned, it’s typically not covered – even if they’ve voluntarily parted with it based on fraudulent paperwork. The coverage isn’t triggered because it’s a voluntary action, even if the parties involved acted based on falsified information.
The Promise of GPS Tracking And Bioluminescence
A recent trend to prevent theft is to place bioluminescent tracking mechanisms in cargo pallets to track the movement of the load. While tracking is great, bioluminescence is extremely expensive, and many motor carriers can’t afford these sophisticated processes and products. A less expensive alternative is to put a GPS tracking device in pallets between the product, so that as the pallets move around, so does the GPS. The same can be done with GPS tracking on a trailer; if a motor carrier has a good GPS system in place, they can literally track the movement of that product.
One challenge with this technique is that many perpetrators have figured out that if they displace the load in multiple locations, it’s nearly impossible for the freight owner to catch up with them. They may take some of the product to one location and more product to another location, knowing that by the time the victim figures out that they have been robbed, the cargo is long gone.
I had a claim recently in which the motor carrier was watching where the truck was moving through the Northeast—they saw the driver stop eight different times and offload the product and disperse it across the area. To go back and find that product or the perpetrator, disappeared before anybody caught up with him, was nearly impossible.
The biggest obstacle, as this client discovered, is that once the cargo is on the move, trying to get legal authorities to find and stop the vehicle is extraordinarily tricky. Once that cargo leaves the shipper, it’s challenging to catch up with it before it becomes displaced, as local law enforcement won’t get involved as cargo travels. Even if a shipper can literally track their product all through the country, law enforcement will refer them back to authorities in the jurisdiction where it originated—and at that point, it’s already gone.
Wake-up Call
These are issues that are impacting the supply chain and influencing internal processes for shippers and logistics companies of all sizes. They must re-examine their procedures, reconsider how loads are accepted and redetermine what type of checks and balances must be in place to evaluate the paperwork.
This is not an issue for just one set of stakeholders to address. The time has come for a call to action for the industry. The larger motor carriers with great resources behind them and the smaller motor carriers that perhaps don’t have the funds for expensive technology, must work together to develop processes that can be used industry-wide.
Insurance policies are what they are; they provide coverage, but that coverage is predicated on conditions and exclusions that must be met in order to trigger that coverage. Otherwise, the loss falls back to the motor carrier. And as a claims executive, that’s so hard to watch—because so many of these incidents are preventable.
Steinbeck is a senior casualty general adjuster for Crawford. She has years of experience in inland marine and domestic freight, perishable cargo, heavy equipment and related industries. Her knowledge spans dry bulk, general freight, invention and prototype equipment.