CBP updates 301 bond form
New bill proposed to fight fraud in trucking
red-flag fraud, by Andrew Spector, Esq.
identifies cargo theft trends
proposes increase in FMC optional bond rider
Updates on liquidated damages for Periodic Monthly Statement
CBP updates mitigation guidelines for
advance cargo information violations
U.S. government urges companies to
strengthen Internet security
associations ask NHTSA to examine truck crashworthiness
Ways to red-flag fraud
By Andrew R. Spector, Esq.,
Hyman, Spector & Mars, LLP
During the course of evaluating any cargo
claim, itís important to understand the framework of the
buyer/seller dispute. Typically, when cargo is moving in
transit, there are two parties to the sales contract. These
entities will negotiate amongst themselves to allocate the
risk of loss through contractual terms, which could include
the Incoterms that pertain to insurance or a declaration of
value for a cargo loss.
most standard legitimate business disputes regarding loss or
damage to cargo in transit, the shipper or consignee will
have either allocated risk through contractual terms between
themselves, including an obligation to insure one of the
ends of the transport. Fraud, however, causes losses and
claims, which may not always pertain to a loss in transit as
the cargo may never have existed.
During our many years of defending
freight forwarders, customs brokers, carriers and logistics
providers from lawsuits, we have seen certain trends that we
refer to as ďred-flags.Ē These trends are relevant to the
analysis of issues concerning potential fraudulent conduct.
Surely, most claim scenarios will be presented as routine,
with a commercial invoice and perhaps no reason to doubt
packing lists, piece counts, pick slips and other
documentation to indicate what cargo was shipped.
In some instances, however, there are
unusual facts that suggest a careful scrutiny should be
made. The fact pattern of the claim may also indicate a
breakdown in terms of the methodical standard buyer/seller
Below are some of the red-flags that
may be evidence of potential fraudulent conduct:
Discrepant documents. Valuation on a commercial invoice
does not match the import valuation.
Declaration of value for insurance is inconsistent with
the commercial invoice.
Absence of commercial invoices, packing lists and/or
Replacement costs vs. contract price. The standard for
determining the value of a cargo claim separate and
apart from limitation of liability can be the contract
price or the replacement cost. Which value is being used
by the shipper and why? Is the cargo specially
manufactured for a definite purpose?
valued shipments that were not insured or underinsured.
customers. Many speculative large claims are first-time
customers. Are they litigious? Why did they switch
service providers? How often do they switch?
Accounts receivable. Companies that havenít paid several
outstanding invoices will often conveniently manufacture
a claim to avoid remittance of unrelated prior invoices.
logistics provider is requested to issue an on-board
bill of lading or other documents indicating the receipt
of cargo that wasnít received.
Requesting a special favor or accommodation with a
promise for further lucrative business.
logistics provider being placed in the middle of a
buyer/seller dispute can emerge from a failed letter of
credit transaction. Details of the document should be
Unreasonable terms of sale and delivery. A review of
email chronology between staff and customers could
indicate ďset-up language,Ē meaning that the shipper or
consignee insisted on unreasonable terms such as a
guaranteed time or special services via email (email
of the customerís business. Does it seem legitimate and
legal? Is the shipper or importer violating a law or
public policy, such as circumventing specific government
Initiation of business relationship. How was the
business generated? Was the logistics provider contacted
by the shipper or importer? Was any investigation
conducted regarding the legitimacy of the shipper or
Details of the shipper, consignee and/or importer. Does
the email address correspond to the business? Look for
Gmail and Yahoo accounts, particularly for large
businesses, which almost always have their own domain
name. Was a P.O. Box provided instead of a physical
inexperienced entity presents a complicated shipping
transaction to an obscure or dangerous place in the
Absence of documentation to prove contents of cargo.
of cooperation during the claims process. Claims
processes should be routine and systematic.
shipper or consignee that is highly impatient and
unrealistic about the claims process may constitute a
Requests to release cargo without presenting the
original bill of lading.
In trying economic times, studies show that fraud
becomes more prevalent. The logistics provider can minimize
exposure to fraudulent claims for cargo loss of damage by
paying close attention to the red-flags that can be an
indication of improper conduct. This means the company needs
to be thoughtful as it evaluates the type of services and
transactions at hand. Awareness of the unfortunate reality
that logistics providers may be victimized by fraud is an
essential step in avoiding the risk of fraud.