In this article, Mike Yarwood, Managing Director Loss Prevention, TT Club, talks about ways to prevent container misappropriation, and provides due diligence steps for further protection.
Supply chain security often focuses on cargo, but that is not alone as target for thieves. While the circumstances are typically more complex, containers and trailers are also subject to theft globally. This type of theft reveals methods that are quite distinct from cargo theft incidents, so being aware of the threat landscape is critical.
Freight crime is a concern often highlighted by TT Club, focusing much on the cargo side. However, there are other aspects that impact the industry. Container traffic in 2021 has been estimated to be around 240 million movements, of which about 142 million are laden. There have been widespread problems relating to availability through the pandemic and arising from congestion in various parts of the world, but indisputably demand for available containers continues to be high.
It is increasingly widely accepted that all actors in the freight supply chain – including operators of containers – need to exercise diligence in relation to their counterparties, particularly when contracting with those who are new or there is an apparent change in expected behaviour.
Misappropriation of containers has proved to be a particular problem when units are seized (often in respect of the contents), subject to commercial disputes or implicated where cargo has been abandoned.
Re-energise due diligence
It is prudent to establish documented processes, to monitor completion of carriage and return of equipment. Early identification of an issue assists as it provides the possibility to investigate and take timely action. Where appropriate, legal advice should be obtained to facilitate the recovery of containers.
It is prudent to establish documented processes, to monitor completion of carriage and return of equipment
It can of course be challenging to predict which transactions present risk in this context. There are, however, a number of steps that operators may build into ‘know your counterpart/customer’ (KYC) processes to mitigate risk exposure.
Isolated instances of container not being returned may be more difficult to counter. However, many notable instances of container misappropriation involve multiple containers. Being mindful of these risks when securing contracts relating to batches of containers is essential, building in additional due diligence steps to protect your interests.
While not exhaustive, additional steps could include:
Customer
Robust know your customer processes are essential in mitigating this area of risk. Do you know the customer? Does the current request for equipment fall within expected parameters of former behaviour? Is the customer a reputable company? Are there any financial concerns, commercial or operational circumstances that raise suspicion?
Robust know your customer processes are essential
Insurance
Can the customer demonstrate that they have adequate liability insurance in place to cover the value of the equipment while in their care, custody and control? Beware of fraudulent documentation, applying appropriate verification checks (such as contacting the insurer) – allowing sufficient time to complete such checks.
Cargo
What type of cargo is being booked for shipment? This allows simple checks to ensure that the cargo is consistent with the customer’s activities, as well as acting as an indicator of additional risk. For example, waste, recycling or low value cargoes might be considered red flags when coupled with other factors described in this article.
Route/destination
Consider the route, from the point units are released for packing all the way through to the consignee. Does it raise any concerns? For example, if the cargo being packed is waste, ensure that it is not being transported through or to a forbidden country. Equally, does this customer frequently ship containers to this destination?
Deployment of technology
One practical challenge in all instances where units go missing can be actually locating the containers and/or verifying the last known location. The advent of ‘smart’ containers with the ability to track (amongst other things), might provide an opportunity to mitigate this particular risk. However, some form of active monitoring may be required to overcome the risk that jamming equipment may block GPS signals.
Unusual activity
This ‘catch all’ links to each of the former items. Is the requirement suspiciously urgent in nature? Is the number of containers requested beyond your business’ typical appetite? Is the customer making unusual demands regarding supply and period of use?
Audit trail
Maintain robust processes, monitoring stock and container movements, and undertaking regular control checks. This may assist in identifying suspicious activity at an early stage, even taking into account the complex variations in supplying units. Often these issues occur over long periods (several years); as a result establishing indicators may assist in identifying problems at an early stage, potentially preventing large scale losses.
Act quickly
Implementing practical KYC checks will undoubtedly assist in mitigating the risks discussed. However, where it is identified that problems may be unfolding, then it is imperative to escalate the concern as early as possible, making it possible to intervene.
The old adage, “if it seems too good to be true…then it probably is…” is certainly applicable in this context. Bookings may be welcome, but always be alert.
Above article has been initially published in TT Club’s website and is reproduced here with author’s kind permission.
The views presented hereabove are only those of the author and not necessarily reflect those of SAFETY4SEA and are for information sharing and discussion purposes only.
