Check Call: New legislation targets freight fraud

Yahoo

15-04-2025

Freight fraud has continued to be a hot topic of discussion in the freight brokerage space. Last week at the Transportation Intermediaries Association annual conference, TIA President Chris Burroughs provided some guidance on the agency's plan to tackle freight fraud.
Burroughs referenced 2020 Federal Motor Carrier Safety Administration data showing the agency had more than 80,000 complaints of freight fraud. He called the figure 'staggering and quite frankly unexpected.'
He doubled down on the need for enforcement: 'We're also working directly with Congress and the federal agencies to push forward and getting regulations that are already on the books enforced.'
Prosecuting and otherwise doing more than just reporting bad actors and stolen freight has long been a struggle for the entire freight industry. It seems there is some hope to be found in this arena after all. A bipartisan bill has been brought to the Senate in hopes of cracking down on flash mob robberies and intricate retail theft schemes.
The Combating Organized Retail Crime Act of 2025 would establish a coordinated multiagency response and create tools to tackle evolving trends in organized retail theft. The two main sponsors of the bill are Senate Judiciary Committee Chairman Chuck Grassley, R-Iowa, and Sen. Catherine Cortez Masto, D-Nev.
The proposed law would create a department under the Department of Homeland Security and develop means to investigate and prosecute thieves.
Grassley said: 'Our bill improves the federal response to organized retail crime and establishes new tools to recover stolen goods and illicit proceeds, and deter future attacks on American retailers.'
Cortez Masto added: 'Large criminal organizations are constantly evolving their tactics to steal goods from retailers and the supply chain in communities across the Silver State [Nevada]. The rise in organized retail crime has left businesses scrambling, and it is time for Congress to pass this bipartisan legislation to help law enforcement agencies keep our communities safe.'
Grassley and Cortez Masto introduced similar legislation in 2022 and 2023. Here's hoping the third time is the charm.
Legislation like this could not come at a better time. There is a strong fear that more fraud will occur as tariffs continue to change and surge between the U.S. and China.
Grace Sharkey notes in a FreightWaves article: 'Importers facing steep duties are resorting to creative, and sometimes illegal, methods to avoid paying the required fees. Mislabeling goods, undervaluing shipments and falsely declaring the country of origin are just a few tactics being employed to bypass customs inspections.'
Sharkey also brings up the historical precedent for tariff evasion. 'These types of fraudulent activities have already had significant financial implications. In one case from the early 2000s, a group of importers used fraudulent schemes to misrepresent the country of origin of textiles from China to evade tariffs. In that instance, the perpetrators were caught, but not before costing the U.S. Treasury over $100 million in lost duties.'
A new artery for fraud and no way to stop the bleeding are the last things the supply chain needs. Last year estimated losses to fraud were $454.9 million. That's just the reported number; it's likely much larger once you get into loss of revenue, loss of business and financial fraud. The average value per theft also rose to $202,364 in 2024, up from $187,895 the previous year.
Market Check. Ontario, California, typically serves as a strong barometer for the freight market in the U.S. It's a trendsetter. With most West Coast imports coming through the ports of LA and Long Beach and then heading inland, Ontario serves as that gateway. That being said, there is plenty of excess truck capacity and most outbound lanes have decreasing spot rates.
Inbound container ships have seen a drop-off in volumes amid the threat of tariffs, which has pulled significant volume from the market. The prognosis for spot rates isn't much better as the Outbound Tender Rejection Index is 2.12% – half the national average. Ontario saw a 1.49% drop in rejection rates, which is great for shippers and brokers in the market as contract carrier compliance is incredibly high for this time of year.
Who's with whom. Tariffs on goods coming into the U.S. from Mexico were subject to a 25% tariff before tariffs were paused for 90 days. It seems as though that number is subject to an increase. President Donald Trump has brought up a long-running water dispute between the U.S. and Mexico as a reason to possibly levy higher tariffs. The spat is over a 1944 water treaty, the 'Treaty Relating to the Utilization of Waters of the Colorado and Tijuana Rivers and of the Rio Grande.'
The gist of the treaty is that the U.S. is obligated to deliver 1.5 million acre-feet of water annually to Mexico from the Colorado River and Mexico is obligated to deliver 1,750,000 acre-feet of water over a five-year cycle to the United States from the Rio Grande, with an average annual delivery of 350,000 acre-feet.
Why does a treaty about water stand to disrupt cross-border freight? Great question. The current administration is saying Mexico has not fulfilled its water obligation. Mexican President Claudia Sheinbaum claims the drought has made it difficult for Mexico to comply fully with the treaty. However, the International Boundary and Water Commission, the organization that enforces the treaty, has been working to identify solutions that benefit both countries.
The water shortage is negatively impacting produce grown in the Rio Grande Valley, which can also negatively impact the freight market, especially since produce season is around the corner.
There has been no official word on whether additional tariffs would be levied or what possible actions could be taken against Mexico. The main impact seen from this will be decreased produce volumes from South Texas in a few weeks.
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