Mysterious Loss Of Cargo: Defining and Dealing With Misappropriation

When cargo goes missing, shock waves hit the entire supply chain. Whether it’s the instability of emerging markets, falling commodity costs, or a variety of other reasons that your goods are put at risk in the supply chain, cargo misappropriation is a persistent threat.

What Is Misappropriation?

Cargo misappropriation is a form of theft and is defined as the fraudulent misrepresentation or illegal, unauthorized use of cargo by any person who’s responsible for the care of the goods. This may involve actual physical removal of cargo or documentary fraud.

Bluntly speaking, financial gain is what tempts cargo handlers to perpetrate misappropriation. This theft or fraud typically occurs with goods that can be quickly sold for cash, such as grain, sugar, and petroleum products. Because it can be difficult to claim and prove liability, misappropriation is often called “mysterious loss of cargo.”

How Do You Deal With Misappropriation?

In the shipping industry, there are several established best practices to help protect cargo from misappropriation:

• Reserve dedicated warehouse space to avoid commingling cargo
• Install video surveillance on vessels, vehicles, warehouses, and any locations where cargo will be “at rest”
• Clearly label containers with unique identification numbers that can be tracked
• Hold frequent, unannounced stock inspections
• Review stock inventory lists often (instead of just when cargo is entering or exiting storage facilities)
• Hire trusted local colleagues at all operations sites
• Work with inspectors who diligently check each container instead of quickly scanning the entire load
• Use original documents with original signatures and stamps — emailed or faxed documents can be easily falsified
• Obtain a comprehensive insurance policy that covers cargo misappropriation

Incorporating these preventative measures for cargo misappropriation into your risk management strategies will go a long way toward protecting your assets if an incident happens. Falvey Cargo Underwriting can also advise you on limiting losses through clearly defined contractual liability.