Date: Monday, January 9, 2023
Source: Sourcing Journal
The crime wave that’s targeted the sprawling retail supply chain has gotten the attention of merchants and lawmakers alike since the Covid-19 pandemic began may be overshadowing a key issue with wider implications—cargo theft.
Estimated by the National Insurance Crime Bureau (NICB) at anywhere between $15 billion and $35 billion in annual losses, cargo theft only got worse in 2022, according to CargoNet, a cargo theft prevention and recovery solution from risk management firm Verisk.
While theft and fraud complaints across the U.S. filed with CargoNet from Aug. 1-Dec. 14 rose 27 percent year over year, the holiday season only compounded the problem. Complaints filed between Dec. 1-14 leaped 40 percent from the previous period, CargoNet pointed out.
It didn’t take long for cargo thieves to strike in 2023’s earliest days.
On Tuesday, Memphis police arrested two suspects who were allegedly stealing about $60,000 worth of Nike merchandise from five CSX railway boxcars. Devonta Lipscomb and Shekeva Taylor were taken into police custody after fleeing their vehicles, where authorities discovered boxes each containing six pairs of shoes valued at $600 apiece. Both parties were charged with fifth-degree burglary and property theft, while Lipscomb was also charged with possession of burglary tools. Authorities returned the recovered merchandise to CSX. Nike didn’t immediately respond to a request for comment.
The rail giant, with a recent market cap of $65 billion, addressed the Memphis incident head on.
“CSX is committed to protecting the safety of its property and that of its customers. We take criminal activity very seriously and also remind the public that any activity near or on rail equipment is very dangerous,” a CSX representative told Sourcing Journal. “Railroads are privately owned property and unauthorized activity is considered criminal trespassing and violators will be prosecuted. CSX appreciates the valuable partnerships we have with local law enforcement in Memphis, who are crucial when it comes to investigating incidents and prosecuting individuals responsible for theft. We commend the actions of the Memphis police officers who performed their duties with professionalism, technical skill and integrity.”
Memphis has been a hotbed for both cargo theft and retail crime recently due to its positioning as a major U.S. transportation, shipping and warehousing hub. In September, thieves made off with an $800,000 haul of Nike products after breaking into 20 trailers by the athletic giant’s rail-adjacent distribution center.
Alongside five major railroads, Memphis is home to the world’s second-busiest air cargo airport, and the country’s fifth-largest inland port, making it a target area for criminals hoping for an easy, valuable score. Railyards have their own police forces that patrol and aim to prevent cargo theft, including major rail companies like CN, Norfolk Southern, BNSF Railway, CSX and Union Pacific.
The incidents in port cities like Memphis magnify the larger problem across the U.S., and also illustrate some of the weakness in the current system to prevent widespread theft.
According to Keith Lewis, CargoNet’s vice president of operations, approximately 300 law enforcement agencies in the U.S. were dedicated to preventing cargo theft when he worked at the Georgia Bureau of Investigation more than 15 years ago. That number has since dwindled to 50, with state resources now allocated to fight supply chain and retail crime.
“They’re not full-time cargo. If you look at, and these are the best task forces that are out there—California Highway Patrol, Miami-Dade Police Department, New Jersey State Police, Florida Highway Patrol—they’re not solely focused on cargo theft. They’re spread so thin now,” Lewis told Sourcing Journal. He commended Memphis for operating a dedicated Cargo Theft Task Force, which was created by the Federal Bureau of Investigation, but noted that most task forces are “being pulled in different kinds of directions,” even touching areas such as homicide.
Multiple members of the Memphis Cargo Theft Task Force did not respond to Sourcing Journal’s request for comment.
California leads US in reported cargo theft
Home to America’s busiest ports, California has been the face of major cargo theft, with a recent bust in November recovering more than $18 million worth of merchandise cargo and resulting in the arrest of 22 suspects. The Los Angeles Police Department’s Train Burglary Task Force (TBTF) said that the operation completed a year-long investigation into the burglary of commercial railroad cargo containers on tracks running through the City of Angeles.
The 22 people arrested face charges of burglary, cargo theft and receiving stolen property. Officials said they stored the stolen merchandise in their homes, cars and other warehouse facilities, and sold items in L.A. County and as far as Arizona. At the time, police said they were still working to identify more people involved in these thefts, but believed they had completely shut down this particular group of criminals.
In December, the California Highway Patrol (CHP) recovered more than $750,000 in stolen Best Buy merchandise, arresting a suspect in connection with the scheme in Fresno County. Later that month, the CHP’s Cargo Theft Interdiction Program (CTIP) recovered approximately $414,000 of stolen The North Face products at a Public Storage facility in Sun Valley, Calif. The CTIP alongside the Visalia Police Department ran the joint investigation to recover the stolen cargo from two storage lockers and arrests two suspects.
On a state-by-state basis, California led reported thefts by a large margin at 371 last year, well beyond the 209 thefts that took place in Texas and Florida’s 134.
Arguments are made for harsher prosecution methods
Prosecution, or lack thereof, is one of the primary reasons for California’s high cargo theft rate, according to Lewis. In January 2022, Union Pacific revealed that while its agents had made “hundreds” of cargo theft-related arrests, “less than half” are booked and some are released in less than 24 hours.
In a letter sent to Los Angeles County District Attorney George Gascón on Dec. 20, 2021, Adrian Guerrero, Union Pacific’s general director of public affairs, urged the office to reconsider the policies related to prosecuting criminals who target cargo.
“Criminals are caught and arrested, turned over to local authorities for booking, arraigned before the local courts, charges are reduced to a misdemeanor or petty offense and the criminal is released after paying a nominal fine,” Guerrero wrote. “Even with all the arrests made, the no-cash bail policy and extended timeframe for suspects to appear in court is causing re-victimization to Union Pacific by these same criminals.”
Lewis framed the problem more bluntly. “If I wanted to be a cargo thief, I’d move to California, because I’m never going to jail.”
No matter the route, cargo theft is a chain-wide concern
Beyond any individual state prosecution measure, the reality is that interstate highway systems across the U.S. are so exposed that cargo theft can realistically happen across many areas of the supply chain. And not only is it a multi-modal problem but it isn’t just limited to one specific region.
While 47.4 percent of retailers experienced cargo theft when shipments were en route from distribution centers to stores, 42.1 percent said cargo theft occurred at stores, according to a survey from the National Retail Federation (NRF) and Appriss Retail. Another 35.1 percent said shipments were stolen while in transit from manufacturers to distribution centers.
Cargo theft also occurs equally at distribution centers and other third-party facilities, according to 31.6 percent of retailers. And 29.8 percent of retailers say they’ve had cargo stolen when shipped from one store to another.
Shipment tracking tech aims to breed optimism in theft prevention
One location tracking technology provider believes it has the answer to the cargo theft problem. Tive provides real-time location and condition tracking devices that can be attached to any shipping container transported via truck, offering the user readings on measures such as temperature, light and shock.
The devices’ light sensor is the operative technology here, according to Josh Allen, chief revenue officer of Tive. The company’s clients can better detect the theft of cargo by learning when and where their shipment is exposed to light, normally when the back of a truck gets opened. The sensor is designed to detect all changes in ambient light levels.
This can be useful to shippers, carriers and brands alike, as the sudden fluctuations in light may indicate that a shipment has been moved into or out of a dark container. These changes are captured by the tracker, along with the current location, then sent to the Tive platform, and are marked as an event or alert that triggers an email or SMS notification.
“It’s amazing how many blind spots exist with high-value cargo. There’s a lot of places where you can fall off the map in terms of like the shipment itself,” Allen said. “There’s enough data now that everyone knows where the truck is, everyone knows where the boat is, but not necessarily everyone knows where the shipment is.”
This data can help companies make better decisions on which routes to avoid on future shipments, or which carriers they should be working with, particularly if one is more susceptible to getting pilfered by thieves. The information is also aimed at helping companies gain more context when they file insurance claims after a theft occurs.
Allen also hopes that Tive can help shed light on the state of cargo theft as a whole. He said that one of the problems today is that brands don’t want to talk about it, which buries the issue and prevents proper awareness—unlike retail crimes such as shoplifting which often happen right in front of other customers.
“They almost feel like they have a scarlet letter for the fact that they have all these thefts that are happening,” Allen said. “The amount of money and costs, especially when you get into luxury goods, is where we hear about it the most, and where it’s hardest to get a press clipping that we can use from these luxury brands.”
CargoNet’s Lewis joined Allen in stressing the importance of data in fighting the cargo theft problem.
“People are operating blind,” Lewis said. “You’ve got to have your finger on the pulse. You’ve got to know where the problems are … If you’re sending your child to school, and there’s a bad guy on the street corner every day, wouldn’t you want to know? Yeah, you’d want to know. If you’re sending your freight out there to be delivered, you’d want to know where the bad guys are and what their methods are.”