WASHINGTON — The Senate Commerce Committee’s Subcommittee on Surface Transportation, Freight, Pipelines and Safety held a hearing on Thursday, Feb. 27. to address the rise of cargo theft and other crimes in the trucking industry.
The hearing was convened by committee chair Senator Todd Young (R-Ind.) and focused on the rise in cargo theft, specifically on crimes within the supply chain like brokering scams, fraudulent trucking companies and train robberies by highly organized gangs. The hearing aimed to examine potential solutions, including increased coordination and enforcement by federal agencies like the Federal Motor Carrier Safety Administration (FMSCA) and the Department of Homeland Security to stop theft and fraud.
“We are addressing an urgent and growing concern of cargo theft,” Young said.
According to Young, in the fall, PFL Logistics, a third-party logistics provider in Indiana, lost a $60,000 shipment when its cargo was stolen by a previously trusted carrier.
“For a small company, a loss like this absolutely devastating,” Young said. “One that employees and customers ultimately bear. It drives inflation at a time when inflation is top of mind of our constituents.”
Young noted that PFL is just one of many companies that have fallen victim to cargo theft across the county and that the trucking industry is asking congress to take action.
“They want us to to work together with their industry to address this threat and come up with some concrete solutions,” Young said.
Young noted that the rise in e-commerce has brought additional threats and challenges. He also pointed out that the FMCSA does not have adequate protections in place to identify fraudulent actors or remove them from its system.
“Nor does it have the authority to assess civil penalties for violations of its safety or commercial regulations,” Young said.
Young emphasized the need to modernize safeguards.
“I’m hopeful that, together, we can begin the process of establishing and implementing those safeguard reforms today,” Young said.
Trump Administration Setting Freight Safety Back
Sen. Gary Peters also emphasized the need for greater safety and the prevention of cargo theft, but believes that the Trump Administration is taking steps to eliminate safety regulations that are already in place.
“Since taking office, instead of increasing federal law enforcement capacity and effectiveness, which I believe is the first step we need to take to address this criminal trend like cargo theft, and fraud,” Peters said. “President Trump has prioritized politicizing and gutting federal law enforcement.”
Peters noted that Trump fired much of the Federal Bureau of Investigation senior leadership including the head of the criminal, cyber, response and services branch which is responsible for criminal and cyber investigations world wide. He also fired the heads of multiple critical FBI officers and dozens of prosecutors across the country for working on Jan. 6 cases. Trump also implemented a hiring freeze preventing agencies from recruiting new talent.
“You are asking for more law enforcement, but there is a freeze on new talent coming into law enforcement,” Peters said.
The subcommittee heard from a variety of witnesses at the hearing including, chief Will Johnson, chief special agent, BNSF Railway Police Department and second vice president of International Association of Chiefs of Police of Fort Worth, Texas; Robert Howell, chief supply chain officer, Academy Sports and Outdoors of Katy, Texas and Adam Blanchard, principal and CEO, Tanager Logistics and Double Diamond Transport of San Antonio, Texas.
Owner-Operator Independent Drivers Association
OOIDA executive vice president Lewie Pugh also testified during the hearing.
“OOIDA’s mission is to promote and protect the interests of our members and any issues that impact their safety and success which increasing includes freight fraud,” Pugh said.
Freight Fraud Easy to Commit
“Cargo theft and freight fraud are so incredibly easy to commit it doesn’t even take a savvy or experienced criminal to pull it off,” Pugh said. “Everyone from shippers, receivers, motor carriers and brokers are vulnerable targets. Often, the perpetrators of these crimes are based internationally far beyond the reach of American enforcement agencies. While there are certainly cases of physical theft occurring within our industry, most of the problems small business truckers face involves being scammed by fraudsters or swindled by unscrupulous brokers.”
According to Pugh, these illegal activities exploded in recent years, increasing by 600% over the course of just 5 months between 2022 and 20231. Estimates indicate these crimes costs the industry roughly $1 billion annually.
Factors Contributing to Freight Fraud
“There are several factors contributing this recent explosion in freight fraud,” Pugh said. “Weak freight rates, overcapacity, increased competition, leading to greater susceptibility to fraud among small trucking businesses. Advanced technology, coupled with a lack of federal oversight and enforcement of regulated entities has also created an environment where fraudulent actors can thrive.”
Most small-business truckers – who are not contracted with a larger motor carrier – acquire loads from brokers on platforms called load boards. As shippers have become less likely to work directly with small carriers, reliance on load boards has increased dramatically over the years among owner-operators.
“Unfortunately, small trucking businesses are both the most vulnerable to fraud and least likely to be able to recover from it,” Pugh said. “Most commonly, motor carriers are held responsible for the loss of the cargo due to fraud. With costs ranging from tens of thousands to hundreds of thousands of dollar per incident.”
According to Pugh, several OOIDA members have lost their businesses after falling prey to a single case of freight fraud.
One Scam to Lose it All
“This is not hyperbole,” Pugh said. “It only takes one scam to completely ruin a small trucking business. “Fraudulent activities include double brokering, criminals posing as legitimate brokers, rerouting schemes, identity theft, purchase of authority by fraudsters and more.
Double Brokering
Double Brokering is when criminals pose as motor carriers to acquire loads from brokers, then pose as brokers looking for truckers to complete hauls. When the freight is delivered, the legitimate broker issues a payment to the fraudulent actor, and the trucker who actually hauled the cargo is left high and dry. It is entirely possible brokers are unaware any fraudulent activity has occurred in these cases, but there are instances of fake motor carriers working closely with unscrupulous brokers to take advantage of small trucking businesses via double brokering.
Another scam involves the theft of a broker’s identity to arrange the shipment of a load with a motor carrier. The trucker delivers the load and submits the appropriate paperwork to the fake broker, who then forwards the documents to the real broker, collects the payment and disappears. Making matters worse, small trucking businesses are also forced to absorb all the additional costs associated with moving the freight, including fuel, tolls maintenance and other expenses.
Reroute Schemes
Some motor carriers have also fallen victim to reroute schemes. While hauling a fraudulently brokered load, the scammers contact the unknowing trucker with a new delivery address, often offering extra payment for covering the additional miles. Once delivered, the load is transferred to another truck and stolen, leaving the carrier responsible for the lost freight.
Identity Theft
In other cases, a motor carrier’s identity is stolen and used to secure a load from a broker. The fraudster then delivers the load to a warehouse, where it is transferred and stolen. The legitimate motor carrier, whose authority was compromised, is ultimately held liable for the value of the stolen load. It is not particularly difficult to accomplish this type of scam. Every motor carrier is assigned a USDOT Number, which, along with addresses and phone numbers, can be easily viewed on FMCSA’s website. As a result, it is incredibly easy to take that information, hijack the authority of a legitimate motor carrier, acquire loads, and receive payments. Fraudsters can also assess the safety records of motor carriers to choose victims that are most likely to be selected by brokers.
No Help for the Victims
“Truckers are doing everything they can to protect themselves, but they are limited in their capabilities,” Pugh said. “For example, an OOIDA member doesn’t have the resources to identify the sophisticated scammers. They lack the authority to ensure brokers are complying with existing transparency regulations. While there are systems in place that can combat fraud, the federal government is struggling to provide support to shippers, motor carriers and brokers as needed.”
What Should the Government Do?
Pugh said the first step that should be taken is legislation by congress.
“Passing Senate Bill 337 which is bipartisan legislation introduced by Senators Fischer and Duckworth,” Pugh said. “This bill, which is supported by a wide variety of industry stake holders gives the Federal Motor Carrier Safety Administration the authority to level civil penalties against fraudsters. It also requires brokers to register with a physical address. This is something carriers have had to do for years. It’s a minor change that can have a major impact in protecting motor carriers.”
Pugh said that congress should also use its oversight to ensure existing programs can help prevent fraud.
“This includes improving FMCSA’s National Consumer Complaint Database (NCCDB), which OOIDA has advocated for for years,” Pugh said.
Regulatory Efforts
Pugh noted that congress must also support regulatory efforts that are currently underway, such as insurance compliance, broker bond requirements and by creating a new registration system.
“Additionally, if FMCSA fails to produce a final rule that ensure compliance with existing broker transparency regulations, congress must compel the agency to do so,” Pugh said.
How Quickly Fraud Can Happen
At this point in the hearing, Pugh had been speaking for approximately 5 minutes.
“Since I began my testimony, a small business trucker has likely fallen prey to fraud that could jeopardize their entire business,” Pugh said. “That’s how commonplace freight fraud is becoming in trucking. We believe we have identified several critical steps congress and FMCSA must take to weed out fraudulent actors.”
Young thanked Pugh for his testimony and perspective on the issues of fraud in trucking.
Primary Target for Fraud
Young noted that truckload freight is the primary target for fraud.
“98% of respondents identified truckload freight as the most vulnerable mode,” Young said. “This subcommittee oversees the FMCSA and I’d like to better understand how bad actors are acquiring USDOT numbers, MC numbers and other business identifiers to carry out their illicit schemes under the guise of legitimacy.”
FMCSA Lacking
Earlier in the meeting Blanchard testified that a bad actor had posed as his own company, Tanager Logistics, to steal shipments. Young inquired as to how this could happen so easily.
“They are able to do this now through a whole multitude of ways,” Blanchard said. “We have experienced everything…from spoofing our emails and otherwise representing themselves on behalf of out company. There are instances out there now where individuals are out there purchasing MC and DOT numbers on the black market. That is a major issue that we have to address and the FMCSA must do a more efficient job, in our opinion, of ensuring that they go through those companies that are authorized to transport freight in the United States and remove those that are illegitimate.”
Chief Johnson noted that their have been instances of companies that are going out of business that have auctioned off their numbers just as they do pieces of equipment.
“Individuals could buy this numbers through a business liquidation process and then already have an established footprint and assume illicit operations under a previous legitimate (business),” Johnson said.
When Blanchard informed FMCSA about the illicit use of his company, he was told that unless a third party was out these using their MC or DOT number, that FMCSA did not have the ability to investigate this other company that was representing us.
“We provided them with the information we knew at the time,” Blanchard said. “The individual that was behind the other Tanager Logistics, from our investigation, turned out to be somebody from Africa. We also did some investigation internally and through our attorneys that determined that the address that was listed in the SAFER website provided by the FMCSA was an address in Ohio of a woman that had no affiliation to logistics whatsoever.”
What Should Congress do to Equip FMCSA?
Blanchard said that FMCSA should be better equipped regarding its cyber capabilities.
“They are falling further and further behind these criminal organizations,” Blanchard said. “We had an instance where our profile with FMCSA was hacked and somebody changed our address and phone number in an attempt to engage in another fraud…the FMCSA needs to be the group that quarterbacks a unified federal group of agencies and law enforcement groups in order to address these issues, in order to create a database and a repository of data so that it can be coordinated appropriately amongst not only federal law enforcement, but state law enforcement and increase the cyber security that they have to prevent these kinds of things from happening.”
To watch the entire hearing click here.
Dana Guthrie is an award-winning journalist who has been featured in multiple newspapers, books and magazines across the globe. She is currently based in the Atlanta, Georgia, area.
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