Cargo theft – a reader’s experience and dilemma

Received below message from Richard about cargo theft and his real life experience.. If anyone has had similar experience, please share on the options that Richard has..

All comments, suggestions are welcome to help out Richard..

image for cargo theftThis nightmare just happened to us and discovered last week when the container / cargo arrived at the destination.

We brought 25 tons (one container) of aluminum scrap from a supplier in China. We personally supervised loading the scrap in the container, placed seals on the container doors ourselves, followed the container to the port of Xingang and delivered it to the shipping company’s warehouse on July 16.

At that time, when the container was delivered to the port, we paid the supplier.
The container was loaded on board the vessel on July 20.

When the container arrived in Santos, Brazil, it was weighed and found to be 2.9 tons light. Alarms went off immediately.

Our seal and the shipping company seal were both intact.

When the container was opened by the Brazil Customs and Pest Inspection agents, there was no aluminum scrap inside!

cargo theftThe container was full of bricks!!!

The aluminum scrap cargo must have been removed and replaced with bricks at the shipping company warehouse or at the dock sometime during the 4 days before it was loaded on the vessel.

The supplier / shipper term was CIF.

Who should be held responsible for this crime? Who do we file a claim with?

Is there any realistic expectation that we will be able to recover all or any portion of our approximately $40,000 loss?

Any help, information or advise will be greatly appreciated. Thank you!


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36 comments on “Cargo theft – a reader’s experience and dilemma”

  1. By Saeed Mirza Reply

    Ramana, that means the shipping company by applying ” said to weigh and said to contain” or ” Shipper’s load and count ” clause can replace the whole expensive cargo with sand and bricks and still get away with the fraud. Custom and other agencies check the contents of containers and verify same on the shipping documents. Even the weight of containers is as per the weigh bridge reading.
    There must be someway to get the claim, you cannot let the shipping line get away with it. Any body from Insurance can comment please for knowledge of all.

  2. By A S Sukumar Reply

    I encountered a similar case in India (as carrier). It was found that the trucker was involved in the theft. Such thieves have discovered a method to remove the container doors by removing the hinges and leaving the seals untouched. So, there will be no evidence of any tampering of seals. High security seals, GPS monitoring are some of the precautions shipper/consignees can take. Carrier, obviously will disclaim any liability. Probably the buyer will have to claim insurance under the marine cargo policy if such thefts were clearly covered by the policy.

  3. By Murthy ramana Reply

    BLs would have clauses in bills of lading ” said to weigh and said to contain” or ” Shipper’s load and count ” . As Carrier is not present at the time of stuffing of container and they go strictly as per the information provided by shipper in declaring quantity , no. of packages and description if cargo in the bill of ladibg. To protect themself against any claims from cargo owners they use the above causes. .

    Further , in the instant case seals of the container are intact so neither the Carrier nor insurance Co would accept any claim.

    A similar case ” Container fraud – port of Santos , Brazil – liability for theft from sealed container was referred to the United States Court of Appeals in 1984. The court held the owners liable for damages for loss of contents.

    I presume, carriers might have started using Clauses such as ” said to weigh and said to contain ” Shipper’s load and Count in the bill of lading only after court decisions such as MV Salvador

    Ramana Murthy

  4. By Saeed Mirza Reply

    I dont know the procedure in China but as per here and probably same in India, the shipper before handing over the cargo to shipping line or NVOCC gets the contents as well as the papers of declared cargo checked by Customs. Customs appraisement and preventive both check the contents to varify the cargo and sign the papers/ shipping documents authenticating the contents and than the container is sealed in their presence with the shipping line seal which is the official seal and same is declared on the documents. Other seals may be applied. Now I believe when the shipping line takes custody of the cargo they become responsible, shippers load stow and count clause does not indemnify the shipping line from their responsibility. Since the customs is varifying the contents the claim can be justified and insurance can help in getting the claim. But it is not easy to dish out the money from the shipping line or the NVOCC. Uaually this type of theft occurs when the shipping line yard is some distance from the port of loading and when the container is moved from the yard to port it is at the mercy of the trucker and whoever he is working with to carry out this operation in as short a time as possible and is usually doors are opened bypassing the seals.

    • By Carlos

      Hi Saeed, In my experience, I’ve had to deal with prior to shipment inspections from anti narcotics police and customs including complete devaning of the cargo and even x-ray machine only to find something wrong (pilferage, contraband, etc.) at destination. After many investigations, a conclusion we have reached is that there is a big exposure also at container transshipment points. It is interesting how I was able to conclusively demonstrate this. For our reefer containers, we place our own temperature recorders inside and with those instruments we’ve been able to demostrate to the shipping line and the authorities that ambient air ingressed into the unit at a specific date and time which coincides with the waiting period at a transshipment port. Since we operate mainly in the tropical regions of the world, the temperature difference from -20.0ºC (our standard set point) to the ambient air is such that it will be registered by the recorder as a spike when graphed. When confronted with this evidence, the dialogue with the shipping lines changed and improvements were noticeable. Needless to say, it has helped with the authorities also. EXPLAINER: Contraband is the opposite of pilferage, when an unwanted element, usually illegal, is placed inside the container along with your undisturbed cargo. The modus operandi is the same, somehow the doors are removed, leaving the seals intact.

  5. By Carlos Reply

    It is truly a sinking feeling when you open the container and find it pilfered. As I learned in my very first job: locks (seals, in this case) are meant to keep honest people honest. In my experience (700×40’RF & 1600×20’DR last year), your only hope is to claim against the insurance purchased by your supplier. In a case like this it is very difficult to claim against the carrier because of the clause “shipper’s load and count” or “said to weigh-contain” (SLAC/STW-C) notwithstanding the fact that the container yard at the port is –in most cases– a subcontractor of the shipping line. To answer your specific questions:
    1. When we deliver / check in a container/cargo to their NVOCC, is that the same as delivering / checking it in to H-L? Is delivering it to H-L’s NVOCC actually delivering it to / in the name of / on behalf of H-L? Specifically who takes legal possession/responsibility for the cargo at that point? H-L or their NVOCC? ANSWER: YES; YES; HLAG is liable to you, as principal and the NVOCC to HLAG, as its subcontractor.
    2. If NVOCC Is a seperate entity, at what point is the possession / legal responsibility transferred to H-L? ANSWER: Look at the terms of your carriage contract. If it says CY/CY, then the container is in the care, custody and control of the NVOCC and by proxy of HLAG the moment it enters the container yard (CY). EXPLAINER: If HLAG had lost the entire container then they would be settling with you. In your case, as far as HLAG is concerned, they delivered the container as per the terms agreed on the carriage contract.
    3. Since the cargo was checked in / delivered to H-L via their designated NVOCC, and the theft / switch occurred after that point, then shouldn’t H-L be held responsible / liable since it happened on their watch? ANSWER: NO, they delivered the container as agreed. Certainly HLAG is delivering it not with what you stuffed into it but read your carriage contract: it says something like “shipper’s load and count” or “said to weigh-said to contain” (SLAC/STW-C). EXPLAINER: Again, had HLAG lost the container overboard (for example) then they would have failed in their part of the agreement. Another example is water ingress, had the container yard (CY) flooded immersing the container in two feet of water, ruining a portion of the cargo (not applicable in your case but yes in mine when we ship boxed items and the cartons are ruined) then HLAG is responsible for improper care (HLAG’s insurance will ‘repeat’ against the NVOCC, but that’s another story).

    Some lessons that come to mind that can be shared from your awful experience (in my case, about 10 years ago, were sacks of sand instead of bricks) are:
    1.- INCOTERMS – Use the one that applies to your commercial agreement. CIF is customary but not applicable in this case as it is only for ALL-water movements. It is old school and old habits are difficult to break. Note: this applies to the insurance portion, the shipping does not care about the INCOTERMS agreed on your commercial transcation.
    2.- CIF, like FOB, applies only after the cargo is on board (again, ALL-water movements). The shipper may ‘think’ that the cargo is in the care, custody and control of the shipping line because they turned in the container to the shipping line’s container depot as instructed but it is actually in a legal limbo insurance-wise: it is almost on-board but not quite so the CIF term is not quite perfected. Note: INCOTERMS are not terms of the carriage contract; SD/SD or SD/CY or CY/SD or CY/CY are terms relevant to the carriage contract.
    3.- RECORD/Document/Photograph the Stuffing – You did this so you have evidence to support your claim to the insurance that you actually loaded what was declared. Document the whole process from the receipt of the empty container, through the stuffing, the closure, all the way to the placement of seals. This last step is important in case they are removed and replaced or supplanted (last time for me, bandits made seals of the same color, same number but different shape) you can defend yourself from questioning by the authorities, for example. Note: the shipping line only cares about what you declare as contents in the container insofar as to identify dangerous/restricted goods for proper placing of the container onboard of the vessel.
    4.- INSURANCE – Get your own. If you don’t know how, learn; US$40K pays for a full year at an expensive university. Look at it from the vendor’s side: he/she is under the obligation to maximize profit so they are going to get the cheapest insurance possible. Therefore, best you can expect is minimum coverage. Also, the vendor is the insurance company’s customer (not you). When you get your own insurance, you are the customer and if that insurance company wants repeat business from you, they’re more likely to help you. I’m not saying that a claim will be an easy process (it seldom is) but at least you’ll be dealing with someone that started on your side, hopefully located near you and probably speaks your language. On CIF you rely on the goodwill of the vendor to help you out with the claims process and that only add more difficulties to what is already an up hill battle.

  6. By Mike Reply

    Essam, Thanks for the pictures! In additional to having a seal you can trust, we recommend using a 1.5 meter long cable seal and wrapping the cable around both bars. Take a look at our video at https://youtu.be/K4o-5b0KIeo that shows how to properly close a high security seal. For this reason, it is never a good idea to use a bolt seal.

  7. By Stephen Mwangi Reply

    I am sorry for what happened. The first question that has crossed my mind after reading your question is whether the customs supervised the stuffing of the subject container at the the shipper’s warehouse. Here in Kenya,customs must supervise the stuffing of a container and fix their own seals before the container is transferred to the shipping company’s warehouse. They have to transmit the information of what has been stuffed and the seal nos electronically to their colleagues at the port of loading. Before the container is shipped on board,it has to undergo a scan.
    You can try to look for more evidence since there are many ways of opening a container and leaving the seals intact.

  8. By Essam Hamed Reply

    First of all, if you didn’t ask your supplier for Clause A “all risks” Insurance policy you will not be able to claim for anything from the insurance company.
    The available scenarios:
    =*= SORRY; you and your supplier agreed to do that for any reason such money laundering or defrauding the insurance company. SORRY
    =*= As you said the seals were found intact, so you have to prove that the container was opened by someway illegal, you can look at these pictures:

    Image 1
    Image 2
    Image 3
    Image 4

    By this way any one can open the container door and replace its cargo then close it and keeping the seals intact.

    Essam Hamed
    Export manager
    Egypt

  9. By Lisa Jennings Reply

    What type and brand of seals were utilized in this situation? Seals are very easy to break into, even if using ISO 17712 high security compliant seals. My first thought is about risk management and how to eliminate this from happening again (and it will if correct steps are not taken.) Red Flag seals are a company that comes to mind (https://www.redflag.cc/) as their seals are part of a Security Transit Mgmt system and allow for immediate identification of where/when seals have been tampered with. This very important piece of information will confirm what both shipper and purchaser need to know has occurred within the supply chain in order to implement new, more secure strategies.

    • By A S Sukumar

      Yes. I came across several cases in India where the cargo was pilfered without seals being tampered by removing the hinges. Container manufacturers will have to introduce high security hinges which cannot removed.

  10. By Richard Chalk Reply

    Great Thanks to everyone for your comments and advice.
    One key point I would appreciate if someone could provide some insight / clarification about – re: the precise legal relationship between the shipping company (in this case Hapag-Lloyd H-L) and their NVOCC and their respective responsibilities and liabilities.
    Our cargo / container was delivered to H-L’s NVOCC at the port.

    1. When we deliver / check in a container/cargo to their NVOCC, is that the same as delivering / checking it in to H-L? )
    Is delivering it to H-L’s NVOCC actually delivering it to / in the name of / on behalf of H-L?
    Specifically who takes legal possession/responsibility for the cargo at that point? H-L or their NVOCC?

    2. If NVOCC Is a seperate entity, at what point is the possession / legal responsibility transferred to H-L?

    3. Since the cargo was checked in / delivered to H-L via their designated NVOCC, and the theft / switch occurred after that point, then shouldn’t H-L be held responsible / liable since it happened on their watch?

    • By Bukky

      Please, don’t waste your money to hire any lawyers, Is just a tough luck. Because i sued the NVOCC and the cargo company nothing came out of it. Cargo company said they are just carrier and the NVOCC company said they went by what was listed on the bill of lading. The insurance claimed that since the goods was not lost or there was no signed of broken seal, that they are not liable for it. The Chinese Embassy would refer you to their site and ask you to contact the police. knowing very well that the Police don’t speak English. Lots of run around. Very sorry for your lost. I lost $25,000dollars. They switched my Vegetable oils with Bags of Dirt soil,

    • By Richard Chalk

      Hi Hariesh!
      A Multimodal Transport or Port to Port Shipment Ocean Bill Of Lading.
      The insurance only covers loss when the cargo is in transport on the vessel. No coverage whenever the cargo is on a dock anytime during the transport, such as the port of loading, port of transhipment or offloaded on the port of discharge.

      It appears that our seal, which we placee on the container at shippers yard was switched for a duplicate counterfeit seal because the numbers on the seal (same numbers as our seal) on the container at the port of discharge were not aligned like the numbers on the original real seal.

      The police said this has happened many times at this port but they haven’t been able to catch anyone red-handed.

      We have photos, videos, documentation and witnesses to substantiate the correct cargo was delivered to the NVOCC for Hapag-Lloyd. So there is a high probability that this happened while the container was in the possession of the NVOCC / H-L.

      I believe the key question is – what is the legal relationship of the NVOCC and the shipping company?

      When I book/contract the transport of cargo with Hapag-Lloyd, and H-L instructs me to deliver that contracted cargo to the custody of H-L’s designated NVOCC, then in that case doesn’t H-L assume legal supervisory responsibility, and legal liablity for safeguarding / protecting our cargo against theft?

      Who do we file a claim with for the total loss / theft of our cargo, and the shipping cost ?

      Thanks very much!

    • By Hariesh Manaadiar

      Dear Richard, first and foremost can you clarify what you mean by “H-L instructs me to deliver that contracted cargo to the custody of H-L’s designated NVOCC”.. Shipping lines do not have a designated NVOCC.. NVOCCs are normally customers of the shipping line, not the other way around.. Who did you book the cargo with..?? With the NVOCC or Hapag Lloyd.. Who issued the bill of lading to you..??

  11. By Wawang Kustianto Reply

    Dear Richard,

    I will to try to share my opinion, I apologize due to my English not good.
    1. Make sure that when the container opened witnessed by local port authority and shipping company who has the container.
    2. Ask them to issue the letter that describing the condition of the cargo.
    3. Since the term of payment is CIF (costs, insurance, and freight) so you can involving the Insurance Company to solve this case.
    4. Provide with some pictures for condition of the container before opened. Picture of the container doors and close up of SEAL.
    5. After you collect all above, then send to the shipper / seller.
    hopefully your problem will solve soon.
    best regards,
    WAWANG

  12. By Barai Overseas (@baraioverseas) Reply

    First we need to see which Insurance cover you have as per Institute cargo clause ??? Do you have A, B or C ?? Generally people don’t know about this and always opt for cover C which is too low insurance cover. In cover C theft is not included. In CIF it the full responsibility of importer to claim the Insurance in your case. First I would like to suggest you to call insurance co for spot survey, we need to see that is it theft or what ??? If it is negligence of exporter or any kind, you may recover your amount.

    Cordially Yours,
    Kishan Barai
    http://www.baraioverseas.com

  13. By Gregg Branquinho Reply

    Ouch, CIF, means insurance(any no matter the quality) is obtained by the supplier, but seeded to you(the buyer), and the cargo should belong to you. You are going to have to look in the insurance policy and what is covered, then debate whether the cargo where was yours when the good where handed over to the carrier or when they left the port. and where the theft happened.

    CIF are also not suitable for container traffic. It is important to note that the risk transfer point in FCA and CIP is the same, and this is essentially when the goods are handed over to a third party.

    Next time CIP as it is more clear for containerized Cargo, or when in doubt, you someone you trust and FCA.

  14. By majid Reply

    This is really a sad incident.The only way is to claim from your cargo insurance company.You have to ask your insurer to depute a surveyor to assess the volume of loss and they will in turn take all the procedure to find out the activities happened in between.
    I think this is the only remedy,but the process will take some time and continues follow up.
    All the very best.

    • By Aleksi Minchv

      Hi,

      I believe in the CIF case, once the seller delivered the good in the posession of the carrier and issued a Bs/L, then it means seller has delivered the goods to the carrier, and he will comply with L/C in terms of documentation and bank will pay for the amount to the seller, I think the buyer can claim from the insurance that he is granted from the CIF agreement.
      But in my opinion carrier’s subcontractors should be investigated in terms of the ports having ISPS measures in the port. And this is the job of the carrier to take care of his subcontractors, because customer will only know the carrier as the party that they are contracted with.

      Thank you.

    • By Aleksi Minchv

      But Again I think this case will go back to the shipper, as per the term on the B/L shippers load and count,
      Then it is going to be something between the seller and the shipper,
      this is serious case,

  15. By TITH sela Reply

    If you buy CIF Term, seller should be responsible to the loss of the Aluminium because the delivery will at destination. Even the transferring of responsibility from seller to buyer was taking lace at the loading port, but according to the CIF Term, seller have to buy insurance to insure the goods up to the destination on behalf of buyer and buy will pay when the container arrive at destination port via his bank if payment term is L/C. Buyer may ask seller to claim to insurance company for the loss and he may hold the payment due to the term stated in the L/C. Insurance company may do the investigation for the reason of loss started from the supplier’s warehouse. It is not difficult for them to investigate because the was still in touched, the goods inside was lose. But it may take time.
    s

    • By Gregg Branquinho

      The seller can assist in filing the claim for the Buyer, but is not the party of record so cannot receive the funds for the claim, these would have to go directly to the Buyer(insured party).

      Why would the seller increase his risk for cargo that he had already sold, and held up his end of the bargin.

  16. By Bukky Reply

    The same thing happened to me about few yrs ago the only difference was that i did not supervised loading of my vegetable oil. I lost everything because there was no signs of broken of seal, and the shipping company seal were both intact.The insurance company refused to pay me anything and the supplier in china are of no help. Even their consulate office refused to help. I shared my experienced with Mr. Hariesh Manaadia.

    • By Richard Chalk

      Hi Kate,
      Yes, the seals were intact, both our seal and line’s seal. Two different styles of seals. So either the thieves had access to equipment to counterfeit both seals or they simply removed the container doors by the hinges, leaving the seals intact, which is the more likely scenario.

  17. By Kate Ankers Reply

    An extremely interesting scenario – personally, I am interested in the seals – originals still intact ?? One assumes then that parties carrying out these types of operations have access to ways of copying container seals……. ????

    • By shiv soni

      here, you should file this complain to International court with support of your Chamber of Commerce and at the same time insurance coverage is important. however , here we should to think about other cases also similar to you. my suggestions to every here in this impact is that their should enact a special team of investigation agency in international marine shipping / logistics to solve this kind of problems/ thief / fraud and those who did should liable with higher penalty or prison terms to avoid this situations

    • By Yousuf Zahid Hussain

      As long as the seal has not been altered or tampered with, the consignee or shipper cannot question or hold the carrier liable for the shortage because the carrier was not present at the time of the packing of the container and carrier doesn’t know what the Shipper Loaded, Stowed or Counted.. Bill of lading shows the details that was provided by the shipper, so the consignee must contact the shipper to take up this issue..

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