Date: Monday, May 1st, 2023
Source: Wall Street Journal
When Expeditors International of Washington Inc. discovered on a Sunday in February last year that hackers had penetrated its network, the global logistics company shut down most of its operating and accounting systems to protect its data and infrastructure. That, in turn, limited its ability to ship freight, manage customs processing and distribute customers’ products. The outage went on for three weeks.
Fourteen months after the incident, Expeditors is still dealing with the fallout, battling longtime customer iRobot Corp. in court over the delays and lost business. Though the $2.1 million being sought by the Roomba robot vacuum maker is small change for either company, the case reflects the long tail of a cyberattack and the fragility of the global supply chain where a major shipping company’s operations can be derailed by hackers.
“The timing of this cyberattack could not have been worse,” said Steve Ferreira, chief executive of Ocean Audit Inc., a logistics-auditing company. “I liken this cyberattack to the Ever Given stuck in the Suez Canal,” he said, referring to the massive container ship that became wedged across the waterway for a week in 2021 and disrupted global shipping for weeks. After Expeditors’ hack, he said, “there were other impacts and delays. Products stopped moving.”
Expeditors, which provides logistics services for auto makers, retailers, manufacturers and pharmaceutical companies, hasn’t said what kind of hack it experienced.
The company didn’t respond to requests for comment.
The episode already has cost Expeditors $47 million in extra charges for prolonged use of shipping containers at depots and terminals, according to its latest annual report. An additional $18 million has been spent on technology products and services to investigate and recover from the incident and to cover claims related to shipping problems at the time, the report said.
The Expeditors incident came amid cargo pileups at U.S. ports due to equipment shortages and supply-chain snarls related to the Covid-19 pandemic, said Mr. Ferreira. Plus, companies based at Belgium’s Port of Antwerp-Bruges were infected with ransomware at about the time Expeditors disclosed its attack. Weeks before, hackers had hit two fuel-logistics companies in Germany and firms based at ports in the Netherlands.
With costly disruptions rippling through the supply chain, the Federal Maritime Commission voted to exempt Expeditors from having to file required documents about tariffs while it dealt with the incident. “Recognizing that these cyberattacks are becoming more common and more companies will be impacted, we’ve tried to be a cooperative regulator,” said John DeCrosta, a spokesman for the commission, which oversees international ocean transportation.
Two commissioners urged companies at ports to give Expeditors’ customers a break on storage charges as cargo sat in containers, but many continued to issue penalties, Mr. Ferreira said. It is likely that some of Expeditors’ customers demanded reimbursement, as iRobot is doing, he said.
Expeditors said it can’t estimate for other potential litigation or claims, adding that it isn’t fully insured for cyber incidents because, as with earthquakes and terrorism, “it is not deemed economically feasible or prudent to do so.” The cost of cyber insurance is high and climbing.
Failed negotiations with Expeditors in 2022 led iRobot to sue in January, according to court papers. The company accused its logistics provider of 15 years of breaching contractual promises to ship products and provide real-time data on inventory. Expeditors denied the allegations in court filings.