Combating Cargo Crime

Combating Cargo Crime

April 2015    |    By Craig Harris

Billions of dollars of commercial cargo transported across Canada is at risk from increasingly sophisticated organized criminal networks that have found a new take on “high-reward, low-risk” activity.

Thieves have pinpointed vulnerabilities in transportation security and exploited patchwork law enforcement to steal valuable merchandise and redistribute it to grey/black markets or overseas buyers.

The estimated costs of cargo crime range widely – from hundreds of millions to as much as $5 billion per year. Part of the problem is that the trucking industry doesn’t have a precise handle on the losses due to reporting issues.

“It’s very difficult to give a firm number; we get asked that question all the time,” says Jennifer Fox, vice president of trade and security for the Canadian Trucking Alliance (CTA), a federation of provincial trucking associations.  “But we know it’s a big problem and getting bigger.”

For Marsh Canada’s national transportation risk leader Greg St. Croix, only about one in four cargo theft losses are actually reported. He estimates that cargo crimes amount to $5 billion per year, with $500,000 in trailer merchandise stolen from the Greater Toronto Area each day.

“If anything, the numbers are low,” St. Croix says. “The thieves are not the guys in balaclavas or gangs walking down railway lines. These are very sophisticated criminal networks; they have technology, and in many cases they are tracking loads and schedules from the safety of their own homes, usually with an intended market to sell to.”

Organized crime networks have latched onto a particularly profitable niche in the trucking industry, a $65 billion sector of the economy that accounts for the movement of roughly 90% of consumer goods and foodstuffs in Canada.

“Regardless of the cargo stolen, it's always a 100% profit margin,” notes Clive Thomson, national transportation portfolio executive, Zurich Canada. “These thefts are often committed through organized crime groups, with the cargo targeted and stolen to order.  A trailer load of cargo with a value of $50,000 that's sold for 10 or 20 cents on the dollar is a substantial return for a couple hours work.”

Sources cite many specific examples of this type of theft in action. “T-shirts (get) stolen from Brampton, Ontario at 3 a.m.,” says Garry Robertson, national director, investigative services for the Insurance Bureau of Canada (IBC). “At 8 a.m. the same day, half the load is being offered for sale at a flea market in Port Elgin, Ontario, while the other half is containerized and being trucked to Los Angeles for shipment to India. The theft gets reported at 9 a.m. during a yard check.”

Robertson notes that cargo theft has a “significant effect” on the Canadian economy with organized distribution schemes in the black market “that equal that of commercial logistics.”

In fact, several sources now use the term ‘cargo crime’ to reflect the expanded nature of criminal activity involved in these losses. “It is not just theft of a trailer or merchandise, but we are increasingly seeing cyber crime, identity theft, hijacking, smuggling and infiltration of carriers,” Fox says. ‘’Theft’ doesn’t really take into account what is going on.”

The IBC became involved with cargo crime four years ago, working with the CTA as a subject matter expert on a report showing the links to organized crime and terrorist fundraising, according to Robertson. That report, released in May 2011, was shared with the federal government and continues to be a focal lobbying point for the trucking and insurance industry.

Robertson says that statistical reporting of cargo thefts is an ongoing challenge for the trucking industry. There is, in fact, no distinct criminal code or legal reporting field for cargo theft, which falls somewhere between personal auto theft and theft over $5,000. Thus, the industry has to parse through law enforcement agencies and Statistics Canada to find numbers related to cargo crime.

“There are little or no statistics showing the extent of the problem or the underlying losses to the (trucking) industry and the insurance industry,” Robertson observes. “One of the biggest issues surrounding the collection of data on the topic is the lack of uniform reporting of the loss.”

IBC began a pilot reporting project in 2011 with its insurance company members and the trucking industry to allow standardized cargo loss information to be shared with law enforcement agencies across Canada. That cargo reporting program was extended in 2014, with notice reports sent to Canadian and U.S. border agencies and better search capabilities to help identify recovered property, according to Robertson.

The insurance industry is also working with Statistics Canada on a report encompassing two years of trailer thefts. “This could give us a very good starting point to see what property was stolen, where it was stolen from and if (any) at all was successfully recovered,” says Robertson.

“The data collection is a vicious circle,” Fox says. “We need the statistics to show government the extent of the problem, but we have to rely on various agencies to collect the data in the first place. Fortunately, with the IBC’s cooperation we are making progress.”

Fox also notes that the CTA and related organizations, including the Ontario Trucking Alliance, Veririsk Crime Analytics, CargoNet and select police agencies in Ontario, launched “Project Momentum” in the fall of 2013 to raise greater awareness of cargo crime in Canada.

“We often find there is a stigma involved in cargo losses,” she says. “Trucking companies don’t want to report them because they don’t want to be singled out. But we have found that these types of crimes affect carriers of all sizes, with varying levels of security. ”

Cargo crime can also happen anywhere in Canada, although there are hot spots, according to St. Croix. One obvious area is the Highway 401 corridor between Windsor and Montreal, with cross-border and port opportunities between the two points. Cities with large ports and import/export infrastructure, such as Vancouver and Halifax in Canada and Miami and New Jersey areas in the U.S., are also prime candidates for high cargo crime activity.

Fox says the trucking industry is addressing cargo crime by raising awareness about the sophisticated nature of the thieves and emphasizing simple strategies to curb losses, such as improved lot security and driver training.

St. Croix notes that Marsh encourages trucking companies to conduct a comprehensive security review at least once a year, which should address issues such as hiring practices and background checks for drivers, particularly for criminal records. Driver training programs could include an orientation on crime awareness, as well as information about high-risk regions and safety practices.

Truck carriers should also look at logistics and the tracking of loads and trailers through GPS and telematics, as well as security policies and procedures for on-site premises, according to St. Croix.

“We see far too much theft from so-called ‘secure lots,’” he says. “This kind of security review would be a big step forward.”

Zurich’s Thomson agrees that security is often overlooked in the trucking industry. “On any day of the week you can drive around a busy commercial area and see trailers parked, unattended and vulnerable,” he says. . “I would suggest that you could walk up to many of those trailers, open the doors, see what's inside and never be approached by anyone questioning your presence.”

Thomson adds that Zurich is intent on helping truck carriers reduce losses.

“Through facility and over the road security operational evaluations, we work with our customers to develop security protocols,” he notes. “Prevention can be as simple as closing a gate and limiting access to a facility, or installing telematics technology in equipment to help safeguard the driver and the cargo.”

One insurance company in the U.S., Travelers Insurance, has a dedicated cargo theft unit, which uses a high-tech cargo “bait trailer” to catch criminals. However, this approach has not yet been used in Canada, mainly due to a lack of law enforcement resources necessary for this type of surveillance.

Many sources note that police and other law enforcement agencies are often unable or unwilling to pursue cargo criminals to the fullest extent of the law. “We need stiffer penalties,” Fox says. “Those found guilty of cargo crime usually pay a fine and don’t get jail time. This should not just be treated as theft over $5,000.”

In Ontario, only a relatively small number of police forces have a dedicated cargo theft unit. For example, York and Peel Regional Police both operate commercial auto crime units, but the practice is not widespread, especially given the number of police jurisdictions that span the 401 corridor.

“Aside from the extreme cases, cargo theft is primarily seen as a victimless crime,” Thomson says. “The police have limited resources and with the numerous avenues available to introduce stolen products into the market place, the issue is beyond the scope that the police can manage.”

Marsh’s St. Croix argues that it’s time to rethink the “victimless” label of cargo crime.

“I get extremely frustrated when this is called a victimless crime,” he concludes. “The proceeds go to organized criminal networks, which traffic in drugs, guns and violent crimes. This is inter-connected, and we know that. It’s time for all those involved to get serious about it.”

Please note a version of this trends paper has previously been published in an industry publication.

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