November/December 2013
The theft of metal from inside shipping containers has been plaguing the industry. The circumstances of these crimes—which often leave the container seals intact—have scrap traders frustrated and seeking answers.
By Deirdre Bannon
It can happen in seconds: $100,000 of nonferrous metal stolen from a container en route to a customer overseas, with no trace left behind—the container and its seal appearing intact and untouched. Often it’s not until days or weeks later, when the company that purchased the metal receives the container and weighs it, that anyone becomes aware that the shipment is short. By then the thieves are long gone, and the recycler or broker that shipped the material is on the hook for the difference and is left to figure out what might have gone wrong, and how, in a country far away.
The problem with this type of theft—aside from the obvious financial loss—is that it happens so quickly and under such cover that companies that ship metal don’t know exactly where or when it happened or who did it. But as scrap recycling associations and other groups collect information about such thefts, some patterns have emerged that can help recyclers and traders better understand the risks—and how to protect themselves—when shipping metal overseas.
Taking Stock
“It’s an easy type of theft,” says Robert Voss, managing director of Voss International (Rickmansworth, England) and chair of the Bureau of International Recycling’s International Trade Council (Brussels). “When you compare robbing a bank to stealing some copper scrap, I know which one looks [like] less of a risk.”
Likewise, when a thief is facing two containers, one filled with new flat-screen televisions and the other with copper, for example, the copper container easily wins out as a more appealing crime, Voss says. Its value is high, and unlike the televisions, scrap copper is not uniquely identifiable. It’s sold all over the world and easily can be converted into cash on the open market without having to revert to underground sales.
Ala Metals, an international trading group in Dubai, United Arab Emirates, knows far too well how easy it is: It lost a considerable amount of copper to container theft in 2012, says Muzammil Haji Amin, company president. Because Amin wants others to know how easy it is to break into a container, he made a video of how it’s done and posted it on YouTube (view it at tinyurl.com/qezrgt2). In the video, Amin films a two-man crew removing bolts and hinges from a container door. In seconds—and without touching two bolt seals—they swing open the door, and bales of copper are ripe for the taking. With equal ease and speed, the men replace the hardware damaged in the process with rusted replicas that look just like the others on this travel-worn container, which itself now looks exactly like it did when Amin began filming.
It’s hard to quantify precisely how often this crime is occurring and how much it has cost the scrap industry, in part because it’s a global problem and an underreported crime. Scott Horne, ISRI’s general counsel and vice president of government relations, says he believes incidents have been increasing over the last 12 to 18 months, based on the number of members who have called the association to voice concern about the issue and to report that they are “feeling a lot of pain” from such losses. One company interviewed for this story told Scrap it’s happening “very often;” another said it’s been rising over the past two years, reaching an all-time high this year; and yet another said that in their experience over the past 10 years, it’s been “automatic that every container with copper would be broken into.”
Copper Is King
Criminals target copper most often because it has one of the highest market values of the commonly exported base metals, but to a lesser degree, they also steal aluminum, brass, and Zorba from containers, according to several scrap recyclers and metal traders.
“Several large U.S. recycling traders have experienced considerable losses,” says Michael Howlett, deputy director of the International Maritime Bureau’s Commercial Crime Services division (London), which is part of the International Chamber of Commerce. The values of the incidents that IMB looked into “ranged from $1,500 to over $100,000. If you repeatedly get hit with these [losses], it does hurt you,” he adds.
A common scenario is for criminals to steal about 10 percent of the copper load from a container, Voss says. A standard 40-foot overseas shipping container will hold about 40,000 pounds of copper. If copper is selling for $3.30 a pound, that container would be worth $132,000, and 10 percent of that could yield criminals $13,200. ReMA estimates that $1 million or more of material could have been stolen each month over the last year and a half, Horne says.
“We’re concerned about every load that gets tampered with,” says Mark Malloy, a vice president with Metal Exchange Corp. (St. Louis), a global processor and trader of nonferrous metals that has experienced container theft over the past three years. “Even for a large organization, one missing truckload is a significant ordeal for
us. It affects our insurance policy, our bottom line—whether it’s a $40,000 load of aluminum or a $100,000 load of copper, it’s a major deal that needs to be addressed.”
Chasing Ghosts
Part of the process of stopping or preventing container theft is figuring out where these crimes are happening. When containers are moving, they are less likely to be tampered with, Voss says. It’s when they stop that they are the most vulnerable. For containers being shipped overseas, transit ports—where containers often sit idle for several days before they’re routed to their final destination via smaller, more localized transport—seem to be a place where metals disappear from containers, scrap traders say. Incidents have been reported in Southeast Asia, Eastern Europe, Central America, and the United States, but today’s hot spots include transit ports in Hong Kong and Southern China, including those along the Pearl River Delta, where most containers with a final destination in China must stop, sources say.
“We’ve had several containers broken into this year alone—all similar material, all in one location, all in exactly the same manner, where the containers are opened without the seals being broken,” Voss says. “We believe that it’s happening in and around transit ports in Hong Kong.” Ports along the Pearl River Delta could receive 3,000 to 4,000 containers of scrap metal a month, with each one remaining for several days, he adds. Thieves take about 10 percent of a given load so as not to ring any alarm bells at the port, and then the crime isn’t noticed for another two or three weeks, typically when the container arrives at its final destination and the customer verifies that the shipment is short, “which is ideal for the criminals,” Voss says. “It’s a crime of opportunity, and very few are caught.”
Even if you know where these crimes occur, finding the criminals has been almost impossible. “A lot of hands touch containers on their way to China,” says Randy Goodman, executive vice president of Freedom Metals (Louisville, Ky.). “A container can be moved” while under the authority of the transit port, Amin says, “it can go out and back in—anything can happen to it.”
The speculation among recyclers and brokers is that someone along the line gets access to the shipping manifest and knows what’s inside the container. “It is those that have the time and opportunity to attack containers that are believed to be responsible for the losses,” says the Maritime Bureau’s Howlett, who adds that gangs or organized crime groups are the most likely culprits. Malloy agrees. “It takes more than one person to pull this off,” he says. “In a transparent world, where shipping documents can become transparent, it’s all about who’s controlling the information, who is getting it, and what they’re doing with it. A lot of people along the way have the ability to see the shipping information, from transportation to government to security workers.” Although a standard bill of lading might say something like “scrap metal for recycling,” a shipbroker’s documents most likely state the exact metal inside a container, such as copper. Steamship and forwarding agents also likely have documents stating exactly what’s in a container.
Alpert & Alpert Iron & Metal (Los Angeles) experienced container theft several years back, says Michael Diehl, director of copper, and the company speculates that it happened at a transit port in Chiwan, China. “Someone had to have access to the manifests because our aluminum and Zorba containers were never hit, but our copper always was,” he says.
“Ports are the most logical places for these crimes to occur—they tend to be large, and you can hide stuff,” Horne says. “But ports are not porous places.” For thefts to occur at this scale, “there’s got to be some complicity with security and customs, but we’ve not been able to document it.” Recyclers have envisioned several scenarios that could illustrate how the thieves make off with the stolen metals. Bob Stein, senior vice president at Alter Trading Corp. (St. Louis) believes it would be impossible for thieves to know what’s inside a container without being tipped off by someone within a limited group that has access to a shipment’s paperwork, such as customs officers, employees, or brokers. “Cheap material is almost never missing, but usually high grades of copper scrap, insulated wire, and now even Zorba is being stolen,” he says. And several people have to be involved to pull off the theft, he adds, including those who remove, transport, and then fence the stolen scrap.
And thieves could employ several methods to get inside the container. “There are eight common ways containers are breached and violated in less than 35 seconds without noticeable evidence of tampering when conventional devices are deployed,” says Ray Fernandez, vice president of Sealock Security Systems (Doral, Fla.), a company that manufactures container seals and shows companies how to protect their shipments while in transit. Amin demonstrated one technique in his YouTube video, but any hinge on a container wall or door could be a weak spot that allows criminals to steal what’s inside while returning the exterior to what appears to be its original state.
Who Is Responsible?
Skimming metals from the end of a container load appears to be more common than stealing a container outright, Voss says, in large part because the crime goes undetected for several days or weeks, so criminals get away with it far more easily than they would if they stole an entire container. But it’s precisely because of that time lapse and not knowing exactly where the crime took place that makes naming the party responsible for security—and the recovery of losses—much more difficult.
In most shipping agreements, the steamship carrier is responsible for the safe and secure transfer of goods all the way through to when the container is delivered to the customer. If the container has been unmistakably compromised under the carrier’s watch—for example, if there is a hole in the floor, a door is not replaced correctly, or the seal is broken—then it’s clear that the carrier is responsible. But when the seal remains intact and the shorted shipment isn’t detected until weeks later, the carrier company can say no one knows for sure where and when the crime took place. If you can’t prove that the metal went missing on their watch, they could wriggle out of being held responsible for it, Diehl says. That’s the case even though the carrier companies usually decide which transit ports they will dock at to get the container to its final destination.
Some say it’s time to start specifying which ports are used—and which are not. “If U.S. companies tell steamship lines that they won’t ship with them if they go to certain ports, and that they would use another shipping company instead—because every time they go in and out of a certain port, 40 percent of their container load goes missing—you would think the shipping companies would comply because they want to engage in good business practice,” Diehl says, but he has not found that to be the case. Because steamship lines typically experience only nominal losses in container thefts, these companies have “no incentive to do anything different,” he says. “They should want to help.”
Taking Charge
The scrap recycling industry is starting to raise awareness about this problem and get help solving it. About two years ago, BIR approached IMB to discuss the industry’s container-theft problems. The two organizations worked together to survey BIR members and other scrap metal companies to gather data on their experiences with container theft. The goal of the study is to create a database and analyze it to find patterns in these crimes—for example, what routes the ships are taking, where the theft is happening, how often it’s happening, and how much is stolen. Once armed with that information, the association’s goal is to influence elected officials and law enforcement agencies around the world to take action to stop these crimes.
One survey respondent revealed that about 100 of its containers were compromised in a 12-month period, Voss says—but it’s hard to know if that’s typical because both BIR and IMB say the response rate was low. “Companies don’t like to admit that this happened to them,” Voss says. “They think it makes them an easy target for thieves.”
While some ReMA members have reached out to Horne, he agrees that “few want to admit they’ve been a victim of this crime. It’s a competitive industry, and some might think that it makes them look weak.” Companies also worry that if container theft appears to be a problem, freight and insurance rates might go up in response, he adds. Howlett urges recyclers who get hit with such crimes to report them, however. “We need more examples from companies so we can start to zoom in on the problem,” he says. “Right now we only have a partial picture, and it needs to be more complete.” The survey is ongoing; any party that has experienced such losses can submit information, anonymously if it prefers, to imb@icc-ccs.org. “The more documented cases there are, the more power we have to compel governments and law enforcement to monitor container theft and its trouble spots more closely,” says Stein, who would like to see a multilevel approach to the problem that involves Interpol as well as affected governments, trade associations, and businesses. “Without data, forget it,” he says.
Amin, who spoke openly about his experience with container theft at the BIR Rome conference in 2012—giving a presentation that included details about his shipments and shipping routes as well as his YouTube video—was disappointed that no other companies followed his lead at the conference, and few companies have come forward since. “If we want to bring this issue to the government of Hong Kong, one company can’t go it alone,” Amin says. “We have to join hands together and tell the government what has happened; otherwise nothing is going to change.” He believes that government could implement measures that prevent theft while containers are in transit from the Hong Kong port, which he believes is “safe and secure,” to their final destination.
Scrap recyclers and traders also would like ReMA and BIR to “be a driving force and bring all the stakeholders to the table, including shipping companies,” Malloy says. They hope ReMA and BIR have the power to convince shipping companies to provide greater protection, to hold the carriers liable for losses, and to influence them not to dock at certain ports. “It’s hard for one company to take on foreign governments and shipping companies,” Malloy says. “It would be far better for ReMA and BIR to take the lead” on the issue, which he hopes will become a centerpiece for both associations.
Making Choices
Until things change, scrap shippers must protect themselves as best they can—and most protections come at a cost. Three years ago, Alpert & Alpert decided it would no longer sell copper to businesses located in Southern China. “We have choices,” Diehl says. “We can sell metal to one market at a higher price but know that we are at risk for material being stolen, or we can go to another market where we feel more comfortable and sell for a price that might be a penny less [a pound]. I’m going to send it to the place that’s known to have fewer problems, and by doing so, it’s like I’m building in my own insurance.”
Ala Metals recently made a similar decision: It will not do business in Southern China unless the buyer takes responsibility for any shortages after the company provides two weight tickets. But, Amin says, “it’s not a solution” because trade is not flowing freely and because both the customers and the metal trading companies are losing out.
Another option is to ship metals FAS, which in shipping agreements means “free alongside” or “freight alongside ship”: The customer pays for the metal up front, and once the container leaves the seller’s port—which can be defined as an inland location, like St. Louis or Louisville—the responsibility for the shipment shifts to the buyer. “It’s the safest way for the shipper to ensure they don’t have to make up any shortages,” says Goodman, who adds that this approach works well for small to medium export companies, offering them a sense of ease. Diehl also says some companies might find this strategy worthwhile.
Several common-sense precautions also can help prevent or mitigate potential losses to container theft. “Use better seals,” Howlett says. In the BIR/IMB survey results, one company reported that after it switched from a typical bolt container seal to one that wraps around the locking bars on both doors, incidents of container theft dropped dramatically. This reinforces the opportunistic nature of these attacks, Howlett says. This seal design makes it harder to get into the container without breaching the seal, so it’s clear the container has been tampered with. That’s enough to deter some thieves.
Use multiple seals on each container, Voss says, likening them to the multiple locks on a New York City apartment door. Thieves will choose the container with the fewest obstacles to overcome, he suggests.
If you do use bolt container seals, don’t put the seal on the door handles—instead, hook them to the bottom of the container using the “cam keeper,” Amin says, because thieves will be forced to break the seal to open a container with bolts affixed that way. By doing so, importers can hold the shipping line responsible for not delivering a container with an intact seal.
Some high-tech tools, like GPS tracking, cameras in containers, or smart-box technology, which can detect the slightest light or movement entering the container, could be extremely helpful in securing metal shipments, but the costs could outweigh the benefits—and the value of the metal shipment, Howlett says.
And document everything, several scrap recyclers and traders say. Fill out all paperwork accurately and completely, including scale tickets, and take photographs of the container at every step while it’s being loaded and sealed—“It’s the most important thing you can do to protect yourself,” Diehl says. In years past, a couple of photos might have been adequate, but now eight to 10 are expected for sufficient documentation. Taking these steps can help with an insurance claim, Voss says, and it can help ease any tension when a customer several oceans away starts asking if perhaps you didn’t load the container with the specified amount—especially when photos also can demonstrate that the container has been compromised.
Take the time to build strong, trustworthy business relationships, and if you know a port isn’t safe, don’t use it, Voss says. Know who you are dealing with at every stage of the process, do background checks, and get the appropriate level of insurance, he adds. Malloy suggests that when working with new customers, talk with each one about the best ports to use, and work with the consignee to find out where the risks might be and what the costs are for all parties involved. “It’s a big, wild world, and it’s not for the faint of heart,” he says. “The risks are high, and you have to find good people to work with.”
After you’ve taken every precaution, “remember nothing is infallible,” Voss says. “Sometimes you just have to pray.”
Deirdre Bannon is a contributing editor to Scrap.
The theft of metal from inside shipping containers has been plaguing the industry. The circumstances of these crimes—which often leave the container seals intact—have scrap traders frustrated and seeking answers.