Shipping Containers have been the target of thieves since they first started circling the globe with many shipping lines conceding through gritted teeth that an amount of 'natural wastage' or 'mysterious disappearance' is an inevitable part of doing business in certain areas of the world.

The very nature of a freight container may make it prone to attention by criminals, not just because of what can be hidden inside, but also because it can be useful in other ways. Predominantly uniform in size and shape, with little to differentiate one from another aside from the colour of the paint and the CSC plate, both of which it is possible to change. In fact the CSC plate, markings or container number may be irrelevant if the box is no longer to be used as a conventional freight container, whether it be for local storage, housing or scrap.

"The very nature of a freight container may make it prone to attention by criminals, not just because of what can be hidden inside, but also because it can be useful in other ways"

The TT Club StopLoss Bulletin on Container Loss looks into this further and while small scale theft is difficult to eradicate, the problem is more serious when both the quantum and complexity of the theft escalates. In recent times there have been a number of higher profile examples when theft morphs into organised and large scale fraud, when the quantum moves away from being a thousand dollars for a ten year old TEU to a six figure sum for multiple and potentially high value unit losses.

Alert to recent theft

Attention by criminals has been sporadic around the globe, but a recent example arising in Kuwait highlighting the potential pitfalls affecting multiple shipping lines, draws a timely reminder of some of the steps that need to be taken in managing this risk, which affects both lines and agents at the point of arranging the booking.

In this instance, a first time shipper requested a number of units from a range of different lines (totalling over 200 TEU) using fraudulent bookings and licenses. When the containers were not returned laden after a number of days and no bookings had been formalised, one shipping line became suspicious and looked to make contact with the proposed shipper. It transpired that the purported shipper had disappeared, leaving no trace of the containers and no physical assets to target. While the case is still under investigation, initial findings have indicated that on receipt of the containers, the shipper in all probability had them transported to another country and sold to a third party intended primarily for scrap.

Typically, where the units can be located, the party in possession of them may assert rightful ownership and entitlement to scrap or trade the containers. The TT Club, working with its Members and using a local lawyer, as well as its network of experienced claims handlers, is seeking to recover the containers from the scrap yard while at the same time requesting the authorities and courts to prevent the yard operator from painting, damaging or selling on the units until the dispute is resolved.

Review your container booking procedures

While recovering the containers is currently the primary goal of the Club and lines, prevention is always better than cure. The purpose, therefore, of this article is to provide an alert for this particular occurrence as well as highlight the steps that lines, booking departments and agents can take to prevent these situations. Protecting themselves from such fraudulent acts will not only avoid loss of units but also the time and cost of recovery, which can be significant and increasingly difficult in some jurisdictions.

"Where you are working with a shipper for the first time or you find that an existing shipper significantly changes their operating patterns, immediately be on the alert and exercise an increased level of due diligence"

Where you are working with a shipper for the first time or you find that an existing shipper significantly changes their operating patterns, immediately be on the alert and exercise an increased level of due diligence. Be particularly vigilant where the request is for a significant number of units - it may sound like an attractive vein of business, but could equally be too good to be true.

Questionsworth asking

• Why do they need fifty units in one go or why do they need a second batch of units before returning the first?
• Has the new customer been visited to verify they actually exist?
• Is the haulier appointed to pick up the units known?

Requests for a number of high value units, specifically reefer or tank containers, should be treated with suspicion. Have free time extensions been requested up to unusual or unacceptable levels? It may be time for you to review your warning thresholds.

It must be remembered that the only dependable protection when units are given to a shipper is the due diligence already carried out and the financial security received. While financial security is a significant and additional step that the shipper may feel is unwarranted, inconvenient and costly, security in the form of a cash deposit or bank guarantee can be relied upon whereas a promise, Letter of indemnity or cheque are likely to be worthless if it comes from a shipper who chooses to abscond.

These aspects of the risk management process in knowing your customer and receiving adequate security are recommended forms of defence against being targeted and losing out to fraudsters. While much attention is rightly given by lines to cargo management - seeking to ensure that cargo entered into the supply chain is correctly declared, packed and placarded - lines can little afford not to attend to tight stock controls. And the essential 'know your customer' checks are the same for both elements.

We hope that you have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested.

We look forward to hearing from you.

Peregrine Storrs-Fox

Risk Management Director, TT Club