Fraud in Freight Forwarding: Are You Aware Of These 3 Scams?
June 5, 2023 Uncategorized
Shipping fraud is an enormous issue in the logistics industry. In 2021, there was a 780.5% global year-on-year increase in shipping fraud. When comparing levels of fraud from 2019 to 2021, there was a mammoth 1,500%+ growth. Global freight transport insurer TT Club also reported that carrier fraud accounted for 84% of claims involving fraud or deception in 2022.
There are various types of freight forwarding scams that businesses need to be aware of. We highlight the most common below.
One common type of scam in the import and export of goods is known as piggyback consignments, where fraudsters combine legitimate shipments with illegal or unauthorised goods.
In 2011, the Australian Parliament conducted an inquiry into the adequacy of aviation and maritime security measures to combat serious and organised crime. The inquiry referred to “piggybacking” as:
[a] criminal importing syndicate using the identity and credentials of an unsuspecting legitimate importer to clear [a] shipment through customs without the knowledge of the listed consignee, thereby ‘riding on the back’ of the legitimate consignee’s reputation.
More recently, the Australian Border Force in a 2021 industry update recognised piggybacking as:
… when an unscrupulous entity uses the identifying details of a legitimate entity on the Cargo Report or the Full Import Declaration (FID) for a consignment, without the knowledge of the legitimate entity.
By concealing illicit items within legitimate cargo, scammers attempt to bypass customs inspections and increase the chances of successful smuggling. This poses a significant risk to businesses unknowingly transporting illegal goods.
Bill of lading scams
Another type of freight forwarding scam involves bill of lading fraud. This occurs because bills of lading are crucial documents used in international trade to confirm the receipt and transportation of goods. Fraud using this document can occur in various ways.
Manipulating or generating counterfeit bills of lading
By altering the details or creating fake bills, scammers can divert or steal shipments, leaving businesses without their goods – ultimately facing substantial financial losses.
A fraudster will assume the identity of the consignee, enabling them to receive the cargo from the carrier. In cases where the bill is issued in favour of the bearer rather than a specific individual, the fraudster may go to great lengths to obtain and fabricate the bill, allowing them to claim the right of delivery.
Similarly, if the bill is ‘to order’ and transferable (in other words, if it is in favour of an individual), the fraudster might counterfeit the bill and create a false endorsement from the consignee to themselves.
As a result, when the legitimate consignee requests the delivery of the cargo and presents the original bill, the carrier is caught off guard, having already been deceived by the counterfeit bill presented by the scammer.
Bill of lading ransom
Another common tactic in the international import and export of goods is ‘bill of lading ransom’.
This is where an importing business orders goods and pays their supplier, while finding (and paying for) a freight forwarder to transport their goods from A to B.
In a usual shipment, once your cargo is boarded onto a vessel, you would receive a bill of lading indicating that you are the true owner of the goods.
However, some forwarders will hold your bill of lading ransom – and demand that you pay double or triple in order for them to release the bill of lading. Businesses may be left with no choice but to make the payment in order to receive their goods.
Fake freight forwarders
Businesses should be cautious of fake freight forwarders who operate under false pretenses. These scammers will set up bogus companies or impersonate reputable freight forwarders, enticing businesses with attractive shipping rates or promises of exceptional service.
For example, a prevalent form of freight forwarding scam involves the creation of counterfeit websites that closely resemble legitimate company sites. While it is not uncommon for companies to share similar names, certain fraudulent websites are specifically designed to deceive unsuspecting clients and fraudulently obtain their money. These bogus sites capitalise on clients’ inability to distinguish between genuine and fraudulent platforms. Once the shipments are handed over, these fraudulent individuals or entities disappear, leaving businesses stranded, out-of-pocket and their goods lost or abandoned.
How to avoid freight forwarding scams
Conduct thorough research and due diligence
Before engaging with any freight forwarder or shipping service, it is crucial for businesses to conduct thorough research and due diligence into that service.
- Verify credentials and accreditations
Look for freight forwarders that hold relevant licenses and certifications, such as membership in reputable industry associations like the International Federation of Freight Forwarders Associations (FIATA). This association is well known across the industry, representing around 40,000 logistics and forwarding companies around the world.
You can see here that our freight forwarding service, International Cargo Express, is a FIATA member!
- Check references and reviews
Reach out to other businesses or industry contacts for references and recommendations. Additionally, check online reviews and testimonials to gather insights into the experiences of previous clients.
These resources can provide valuable information about the reliability and trustworthiness of a freight forwarder.
Stay vigilant for red flags and suspicious practices
Being aware of common red flags and suspicious practices, such as:
- Unrealistically low prices
Exercise caution if a freight forwarder offers significantly lower prices than competitors. While competitive pricing is important, prices that seem too good to be true might indicate hidden fees or subpar service quality.
- Lack of proper documentation
Ensure that the freight forwarder provides comprehensive documentation, including written contracts and insurance certificates. Scammers often lack proper documentation or provide falsified paperwork.
- Poor communication and transparency
Beware of freight forwarders who exhibit poor communication or avoid answering specific questions. Legitimate operators are transparent and provide clear and timely information regarding shipments, costs and procedures.
Hire a reliable freight forwarder
By partnering with an established and trustworthy company, businesses can benefit from their expertise, industry connections, and robust security measures.
- Discover their reputation
Research potential freight forwarders extensively and assess their reputation in the industry. Look for established companies with a proven track record and positive client testimonials. Ask for a few referrals before engaging with a freight forwarder.
- Ask relevant questions to test the forwarder’s knowledge
A reliable forwarder will have established relationships with carriers, customs agents, and other logistics professionals, ensuring smooth and secure transportation of goods. Ask for specific details about the service provided and pay attention to the level of knowledge and confidence in the answers provided.
- Look for a transparent and professional approach to business
Select a freight forwarder that maintains open lines of communication, provides transparent pricing and terms and demonstrates professionalism in all interactions.
By following the various tips outlined above, you as an importer can enhance your safeguards against freight forwarding scams and establish a secure and reliable supply chain for your international shipments.
Looking for a professional freight forwarder? Contact ICE!
International Cargo Express is here to provide you with exceptional service and peace of mind. With over three decades of commitment to excellence, we understand the complexities of international logistics and customs regulations, as well as the importance of seamless supply chain management for businesses.
So don’t leave your international shipments to chance – reach out to our freight forwarding experts and experience the difference firsthand! You get in touch with one of our many offices right here.Request a Quote
or call us on 1300 227 461
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