A Senate subcommittee on Thursday heard from stakeholders from law enforcement and the retail and trucking industries about ways to address the ever-growing cargo theft and related freight fraud crises.
The Senate Subcommittee on Surface Transportation, Freight, Pipelines, and Safety held a hearing headlined “Grand Theft Cargo: Examining the Costly Threat to Consumers and the U.S. Supply Chain.”
Witnesses included:
- Lewie Pugh, executive vice president of the Owner-Operator Independent Drivers Association
- Adam Blanchard, principal and CEO of Tanager Logistics and Double Diamond Transport
- Robert Howell, Chief Supply Chain Officer with Academy Sports and Outdoors
- Chief Will Johnson, Chief Special Agent with the BNSF Railway Police Department and the second vice president of the International Association of Chiefs of Police
Sen. Todd Young (R-Indiana), who convened the hearing, highlighted the small-business cargo theft impacts and those felt by the supply chain as a whole on down to the average consumer. While cargo theft used to be “carried out by crude criminals,” he said, it now “includes sophisticated domestic and international groups.”
Underscoring the small-business impact, OOIDA Executive VP Lewie Pugh noted the factors contributing the rise in theft and fraud -- weak freight rates, overcapacity and increased competition, advanced technologies, and a lack of federal oversight and enforcement. Several OOIDA members that he knew of, he said, have out-and-out lost their business “after falling prey to a single case of freight fraud.”
The transportation industry is “asking for Congress to take action,” Young said, adding that “they want us to work together with their industry to address this threat and come up with some concrete solutions.”
Challenges that the Federal Motor Carrier Safety Administration face trying to address theft and fraud were front and center, too. The agency, he said, “doesn’t have adequate protections in place to identify fraudulent actors or remove them from its system, nor does the agency have the statutory authority to assess civil penalties for violations of its safety or commercial regulations.”
[Related: How carriers can respond to the rash of cargo thefts hitting the industry]
Illustrating reputational damage, enforcement challenge for all victims of theft/fraud
Adam Blanchard -- who operates a 90-truck fleet along with a brokerage -- opened his testimony with a personal example from the Tanager Logistics brokerage side of his business. “About a year ago, our American dream turned into a nightmare when some unscrupulous criminals stole our identity,” he said. “By capitalizing on our good name, they tarnished the reputation we had spent over a decade to earn.”
Criminals posed as Tanager Logistics and brokered loads to unsuspecting motor carriers who delivered the freight, while the criminals pocketed the money, Blanchard said. This was done by spoofing the company’s emails, so the carriers hauling the loads were “tricked into believing we had made the request for the transportation” of the loads.
Even today, two Tanager Logistics LLC profiles are present in FMCSA’s Safety and Fitness Electronic Records (SAFER) website -- one being the real Tanager based in San Antonio, the other being the fraudsters.
“We provided this evidence to FMCSA, but they refused to take it down,” Blanchard added. Reputational damage to Tanager included being blacklisted by factoring companies, for one, he said, adding that when trying to report the crimes, the company “kept hitting dead ends” at the federal, state and local levels of law enforcement.
“We did our due diligence, but the message was clear: You’re on your own,” Blanchard said. “We might be on our own, but we are far from alone. Cargo theft is rapidly becoming a crisis.”
Chief Will Johnson highlighted how jurisdictional challenges make cargo theft and fraud difficult to pursue, and advocated that Congress allow prosecution venues to be established at the place of offense, as well as in the victim’s U.S. corporate place of residence. He said this would allow for improved prosecution and reporting efforts -- hopefully to avoid situations like those Blanchard ran into.
[Related: Hacked? How to contain the damage, or better avoid the hackers entirely]
What can be done?
Suggestions to subcommittee members on ways Congress could help ran the gamut.
For Blanchard, at the top of his list was directing FMCSA to remove illegitimate carriers and brokers from its registration system and SAFER website, which the industry, he said, should be able to trust to have only legitimate entities listed.
He also advocated for Congress to pass the Safeguarding our Supply Chains Act, introduced in the last Congressional session. It would establish a Supply Chain Crime Coordination Center within the Department of Homeland Security’s Homeland Security Investigations (HSI) and a Supply Chain and Theft Task Force led by HSI and the Federal Bureau of Investigation (FBI). Blanchard and Pugh both called for the passage of the Household Goods Shipping Consumer Protection Act (HGSCPA) to restore FMCSA’s authority to impose civil penalties against fraudulent actors, among other things.
Blanchard pointed to the MC and USDOT number trade, where bad actors have been seen to purchase numbers that were previously in good standing, making it more difficult for shippers, carriers and others detect fraud before it’s too late.
[Related: FMCSA guidance on buying and selling MC numbers]
Pugh urged passage of provisions in the HGSCPA that would require brokers to register with a legitimate physical address. “It’s a minor change that could have a major impact on motor carriers,” he said.
Pugh also advocated for Congress to use its oversight to ensure existing programs to help prevent fraud are better prioritized. This includes FMCSA’s National Consumer Complaint Database (NCCDB), which he said “seems to be where complaints go to die,” noting a common lack of response from FMCSA when OOIDA members file complaints there. He added that it could be helpful to rename the system, as the current name doesn’t appear to have anything to do with trucking.
Pugh also noted the impacts on safety of freight fraud and cargo theft. When a longtime owner-operator, often among the safest truck drivers on the highway, goes out of business, that’s one less safe driver on the road, he said. Additionally, if carriers accept and complete a load that they end up not getting paid for due to fraud, it could have a downstream impact on their ability to maintain their equipment.
Johnson endorsed legislation introduced last session as well, but noted funding could better be directed to dedicated federal prosecutors to tackle cargo theft cases. He recommended modernizing FMCSA’s vetting process to include stronger authentication methods (which the agency has said it's working on), increasing criminal penalties for cargo theft cases, and providing law enforcement agencies with more resources to support investigations into criminal networks.
[Related: FMCSA moves on registration-system update]
