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Essay: Cargo theft

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  • Subject area(s): International Relations
  • Reading time: 10 minutes
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  • Published: December 19, 2019*
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  • Cargo theft
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Cargo thieves are becoming more strategic about how they strike.  A thriving black market keeps cargo thieves in business to the detriment of the global economy. Cargo crime is not new and has been around for centuries as history documented robbers attacking merchants on trading roads to pirates seizing ships at sea and to bandits on horseback robbing stage coaches. Cargo crime has been evolving along with technology advancement and cargo transportation methods where trucks have been replaced with horse-drawn carriages.  The cargo criminal syndicates have organized into international crime and today cargo crime is an international problem affecting consumers and businesses alike.  Currently due to global economy, raw materials for manufacturing and sourcing often occur in different part of the world.  The finished product may be warehoused and consumed in another and cargo can be stolen at any point within the supply chain.  Cargo criminals are becoming very professional and work in highly organized groups, targeting specific items and employing people who are specialist to bring a different set of criminal skills to the group.  Take for example professional cargo criminals, whose bases of operations are truck yards, hubs for commercial freight cargoes, airports and sea ports.  While other criminals target cash and valuable items, these professionals make of with other goods.  Cargo criminal used sophisticated operations with well organized hierarchies of leadership.  They employ specialists who can carry out different tasks and responsibilities including hijackers and brokers or fences that help dispose the stolen goods.  Normally the fences work very closely with drivers in moving the stolen cargoes into the black market to be dispersed.  Sometimes foreign labourers are used to move the cargoes and work with drivers in transporting the stolen cargoes from the docks or trucks.  In fencing, cargoes are brought from another party who is in illegal possession of those cargoes.  The cargoes stolen will be disposed through fences for local market and sometimes the cargoes are taken out of the country in a very short time to avoid being detected by the Police.  These professional syndicated  gangs usually employ a specialist who is an expert at foiling the anti-theft locks and GPS system on truck and trailers in order the hijack the truck.  Cargo criminals usually heist whole truck load of cargo of which the average freight on a trailer can be valued up to a few million dollars depending on the type of cargoes.  There are many cases especially cargoes of electronics products being hijacked from Malaysia and found in the black market overseas the next day.  This is how efficient and sophisticated network that the professional cargo criminals have today.

Global economic crisis has increased the worldwide demand for black market goods.  Palmer (2010) revealed that in the United States, it is estimated there are $30 billion worth of cargoes are stolen annually and usually cargo criminals are sophisticated and well organized.  Palmer (2010) revealed that the criminals are often recruited from the United States but trained by Cuban crime syndicates and then deployed to Florida to execute their operations.  The stolen cargoes from the United States is brought to ports and exported in ocean containers to countries such as Paraguay, Venezuela, Colombia, Brazil, Argentina, the Dominican Republic, and Costa Rica.  From there, they are sold through black market distribution channels.  Fleet Owner, Sam Rizzitelli revealed that there are ranges of new cargo crime tactics are being deployed to help criminal to have better control and thus mitigate the risks of the crimes they are trying to commit (Sean Kilcarr, 2013).  Rizzitelli explained that these new tactics fall into three categories: identity theft, fictitious pickups and misdirected loads/fraudulent carriers.  The criminals are very creative and change their methods to develop better ways to get away with cargoes rather than commit straight theft where loads are physically stolen from parking lots or terminals and risking getting spotted and potentially be involved in a high speed chase.  The cargo criminals are trying to be more strategic about committing the crime so they can better pinpoint and steal specific types of cargo.  These strategic kinds of crimes are due to the combination of many factors where more sophisticated technology being used with greater access to information within the logistics industry and the involvement of more intermediaries throughout the supply chain.  This allows cargo criminals to be in better control of the timing and location of a theft.  In many cases, getting the desired cargoes and handed them over to the criminals is easier than having to hunt it down and steal them.

Criminals are becoming increasingly creative in using the internet to pull off cargo crime throughout the supply chain (Bill, 2010).  Cargo criminals are using the internet to track shipments, book transportation with legitimate air carrier and conversely set up bogus transportation operations that will arrange cargo pick-ups for legitimate shippers and forwarders.  These criminal called a legitimate harbour trucking company whose drivers have the credentials to pick up the container at the marine terminal and deliver it to a non-descript warehouse location.  Another ploy is for criminals to advertise on-line as a trucking company.  Interested parties on these cargo or intermediaries whose regular motor carrier is unavailable for a particular job will hire the sham operation.  The fly-by-night operator may hold the cargo hostage and demand a large sum of money to release it, or the criminal may sell the merchandise.

The FBI revealed that cargo crime is a multi-billion dollar criminal enterprise in the U.S. and this organization has setup seven task forces located around the country to combat this problem.  In the Memphis region the theft task force reported that there is an average of one cargo crime a day in the year from January 2011 to September 2011 and they have recovered more than USD$1.5 million in stolen cargoes and vehicles (Conrade, 2012).  Some of these syndicates are so organized that each member has their own specialty, from the break-in expert who can steal a rig in seconds to professional drivers, surveillance experts and the guys who know how to defeat the specialized devices that lock trailers. Conrad (2012) agreed that thieves often rob warehouses on a Friday night and by the time the crime is discovered and reported on Monday morning, the stolen goods may already be on a store shelf or auctioned online.  Cargo crime is sophisticated and is becoming an organized enterprise.

2.8 Cargo Security Preventive Measures

The terrorist attacks on September 11, 2001 had tremendous impact on international trade policy and this incident have changed the landscape of security worldwide.  USA was the first country to introduce cargo security initiatives to prevent cargo theft and monitor the cargo entering into USA.  European Union and other international organizations also began to take preventive measures and established new security programs in order to secured cargo movement across borders.  Some of the programs implemented are Custom Trade Partnership against Terrorism (CTPAT), Authorized Economic Operator (AEO) and many other initiatives.  The United States Custom and Border Protection (US CBP) believed that international trade must work together in trade facilitation.  The intention of United States Custom Border Protection within the supply chain security program is to initiate the CTPAT which was introduced to secure global supply chains with strict measures taken in order to protect all the cargoes entering United States.  The United States government introduced CTPAT as a voluntary program between the authority and the businesses to secure the cargo entering the country.  After the implementation of CTPAT, the European Union also introduced a similar program named Authorized Economic Operator (AEO) which is similar to CTPAT to ensure the security and facilitation of transportation within the supply chain in European countries.

US CBP has also introduced an information processing and forwarding system called the Automated Manifest System (AMS) which is a multi modular cargo inventory control and release notification system for sea, air and rail carriers.  The main aim of the system is to interconnect as many parties in supply chains as possible including the US CBP and other authorities in order to make data related to cargo more accessible and to forward crucial information regarding shipments through this unique system between the players.  The Container Security Initiative (CSI) is in contrast to CTPAT, maritime initiatives implemented in 2002 by US CBP and its aim is to facilitate container movements in sea traffic and to ensure security.  The main idea of the Container Security Initiative is to shift prevention, control and inspection outside of United States borders.  By implementing control measure at the port of departure, high risk containers could be indentified before entering the United States of America (USA).  CSI officers together with authority officers from the bilaterally contracted countries will inspect containers that are being transferred from the port in question to USA.

World Customs Organization (WCO) acts as the independent international and inter governmental organization throughout the world dealing with customs matter and they have developed the following standards, guideline and cooperation such as:

– global standards;

– simplification and harmonization of customs procedures worldwide;

– trade supply chain security;

– the facilitation of international trade;

– the enhancement of customs enforcement and compliance activities;

– anti counterfeiting and privacy initiatives;

– public-private partnerships;

– integrity promotion and

– sustainable global customs capacity building programs

The WCO mission is also to contribute to a more effective flow of cargo in a global world amongst its members, developing security standards such as the SAFE framework, building up networks, stimulating cooperation and fostering collaboration between customs authorities and border regulatory agencies, businesses and governments.   The International Maritime Organization (IMO) has introduced the International Ship and Port Facility Security (ISPS) Code in order to enhance security in maritime transportation worldwide.  The main intention of ISPS code is to create a standardized, stable framework of risk evaluation in order to allow governments to offset changes in threat with changes in vulnerability for ships and port facilities.  According to ISPS code, the only way to defeat threat is to reduce vulnerability.  The ISPS is part of the International Convention for the Safety of Life at Sea (SOLAS) so it is obligatory for 148 SOLAS contracting parties to follow the requirements.  For those countries that are IMO members but not yet included in SOLAS does not have to comply with the ISPS code.  The SOLAS code is mainly focussing on security related requirements for governments, port authorities and shipping companies.  The Maritime Transportation Security Act of 2002 (also referred as MTSA) can be seen as the counterpart to the ISPS Code in the US.

One of the most important components of European Union’s (EU) modified community custom code is called Authorized Economic Operator (AEO).  The intention of this program is to recognize the organization as low risk and more trusted actor under certain circumstances when it comes to actions with customs authorities within the European Union (EU) countries.  It is therefore required that the authorized operator comply the requirements set by the customs authority.  There are three different types of certification based on which alleviation is preferred by the economic operator.  The core part of the European Union’s customs security program is the Import Control System (ICS) which came in effect on January 1st, 2011.  The main intention of this program is to perform risk analysis before the arrival of cargo into the European Union’s countries.  The main focus is the security of the Union and citizens rather than tariff controls but threats such as piracy should be defeated and consumerism strengthened.  In order to declare cargo imported to the EU, an Entry Summary Declaration has to be submitted first.

2.8.1 Cost Impact of cargo security preventive initiatives

The economic effects of crime are significant.  Victim and taxpayer costs of crime continue to escalate and scarcer public funds must now be allocated in ways to more efficiently alleviate the economic pressures of crime.  Fowles, Byrnes and Hickert (2005) studied on the economic consequences of various security intervention programs with the intention to reduce crime based on statistical analysis of 309 studies of the intervention programs.  The analysis provides a menu; which allow decision makers to assess the economic performance of one program relative to another in term of standard monetary measures.

Cost for implementation of any security initiatives is always a concern to the business.  Research conducted by Signoret (2009) after the implementation of Cargo Security Initiatives (CSI) by the US government in several foreign ports found that there is no significant impact on trade flows or implicit costs.  The researcher analyzed detailed monthly data for all containerized US imports from 1999 to 2006, by foreign port and country of origin.  This analysis exploits the longitudinal data at the port level and the carrying starting dates across CSI ports to identify the casual effect of the initiative on import costs.  While significantly higher monetary import charges over time are observed in the data and particularly so for CSI ports, the result found no significant evidence of a CSI effects on these trade costs.  The underlying port specific trends and unobservable trade route heterogeneity are in controlled.

Freight security initiatives do not necessarily result in cost increased or reduced services.  Security improvements can also reduce logistics and supply chain costs by improving supply chain visibility and enhancing transit reliability, resulting in collateral benefits to efficiency and effectiveness of the supply chain.  Supply chain and transportation security improvements may improve security and thus producing collateral benefits to security management within the supply chain.  DAMF Consultants and LP Tardiff & Associates (2005) estimated the post 9/11 costs the Canadian trucking industry about USD$179 million to USD$405 million per annum due to the changes in Unites States border security programs.  A number of issues were raised by carriers and shippers in the study that are contributing to this problem included:

j) the lack of FAST lanes at certain border crossing;

k) having to wait in a general queue in order to get access to FAST lanes;

l) the uncertainty of wait times at the border that causes some truckers to build in a delay factor in the planning of their operations;

m) restricted hours of operation at the border or number or customs booth open at the border, particularly for FDA inspections;

n) the unpredictability and time required by custom brokers to process commercial invoices and then communicate with carriers once the shipment is in compliance.

In some cases, this has resulted in trucks departing earlier in the day or even the day before to allow for, or avoid delay at the border.  Similar impacts were found in the ITS – CVO Border Crossing Deployment Evaluation (IMTC, 2003) which estimated that waiting times approaching the border cost the trucking industry USD$13.8 million and at the booth another USD$0.8 million or USD$14.6 million annually.  Custom broker related costs added USD$7.4 billion for a total of USD$22 billion.  Chow, Frank and  Gados (2006) found the same impacts on investment, costs and operating effectiveness due to security regulations and requirements can be found in the maritime and air sectors as well.  The cost incurred by the carriers and other logistics service providers such as shipping lines and port terminal security are eventually distributed to the shippers or absorbed by the logistics service providers.  Security improvements come at a cost.  A private sector analysis conducted by the International Monetary Fund (IMF) estimated the increase to business costs due to higher security at USD$1.6 billion per year, the extra financing burden of carrying 10% higher inventories at USD$7.5 billion per year.  Another study estimated an increase in commercial insurance premiums of 20 percent at about USD$30 billion a year (Peleg-Gillai, 2006).

Willis, H.H. and Ortiz, D.S. (2004) recognized that supply chain security and efficiency are inseparable.  Improving the supply chain efficiency may or may not improve supply chain security.  For example, labour reductions for the sake of efficiency may decrease security.  Proponents of increased supply chain security often cite efficiency as an auxiliary benefit, although the two properties are often independent.  Increased inspection could create delays that would lead to losses of perishable cargo or to negative economic effects on consignees.  The interconnected nature of supply chain capabilities suggests that security measures that reduce efficiency could have been unintended because stakeholders will look for ways to compensate for or circumvent the security requirements.  Chow (2007) dud a study to develop a total logistics cost model to stimulate alternative logistics scenarios and security strategies to determine the influence of security initiatives on total logistics cost.  The application of the model to the Asia Pacific Gateways demonstrates the usefulness of such model in evaluating how security impacts total logistics cost of using this gateway and subsequently the gateway’s competitive advantage.  The total logistics cost model primarily focused on transportation and inventory cost elements of logistics costs.  Expanded model such as loss and damage cost, reduced insurance costs and packaging costs could be considered as elements of cost.  In addition, security initiatives that impact visibility of freight movements along the supply chain can boost the ability of logistics managers to make improved decisions.  For example, with advanced information required for security, improved advanced planning may results in increased consolidation opportunities, the ability to cross dock freight and advanced capacity planning.  These shift the cost curves facing logistics manager, rather than move along a given cost curve.  Tikkakoski and Solakivi (2011) conducted research on the Impact of Market Structure on the Road Freight Safety and Security in the Baltic Sea region.  The findings revealed that although the global financial crisis in 2008 has severely altered the balance between high good value freight transport demand and supply, service providers and authorities agreed that the level of road safety and security has not deteriorated significantly.

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