Cargo loss control can save millions

The cost of global cargo theft is $50bn a year, according to an analysis by the National Cargo Security Council and almost all of the loss involves some kind of criminal intent, writes Captain John Dalby, founder & CEO of Marine Risk Management Ltd, in the latest issue of Brink from Marsh & McLennan Cos, and reprinted in the just published The Changing Tide Of Risk from broker Marsh.

Dalby said that in the loss control world one dealt predominantly with bulk cargoes, because these were the easiest and most profitable to manipulate, either physically or by mismeasurement. A major difference between liquid bulk and dry bulk cargoes was that the latter can be tested in terms of the quantity loaded by means of a draft

survey. Unfortunately, said Dalby, that method, using the supposedly neutral ship owner data, was open to abuse.

“All that is needed in each case is a basic knowledge of physics and the ability to manipulate the instruments and gauges without being detected; an easy task in a busy tank farm, silo, laboratory, or on board the vessel”, he said.

With liquid cargoes, all that was required was a basic understanding of the relationship between temperature, density and/or specific gravity, and volume. If the sample size of one litre were used as a representative sample for 1m barrels, then even the tiniest intervention would have a massive impact on the shipment as a whole. A 0.1% change in the declared volume would result in the loss or gain of 1,000 barrels, or roughly $52,000 at current prices “If the independent inspector is instructed (or “guided”) to maximize covered insurance losses of just 2% — presto — 20,000 barrels have just magically disappeared, or appeared, as the case may be”.

Dalby noted that by definition there was no such animal as an independent inspector as long as someone was paying for such services. The independent inspector working for the shipper would ensure that the measurements and calculations reflect a higher quantity shipped than was the case, whilst his “opponent” acting for the cargo buyer would want it to be understated. This principle held true, but in reverse at the port of discharge, he said.

Dalby said that his article was simply meant to be “an eye opener on another aspect of the vast reach of the world’s illicit economy that passes largely unseen by the majority of the population, benignly ignorant of its impact and importance for the economy at-large”.