The widely reported cargo business raid codenamed “Cumulus” occurred in Germany on Wednesday, October 7, and involved some 1,200 police and customs officers raiding 150 premises. They swept the offices of ground handlers, forwarders, and airlines in Frankfurt (FRA), Germany’s most important cargo hub, and also Munich (MUC), Stuttgart (STR), and Leipzig (LEJ). Potential charges included the illegal hiring of workers, tax evasion, and failure to forward pay packet social welfare deductions to authorities.
     At least four main suspects had been arrested, according to the German news agency DPA.

Collateral Damage?

     On Thursday, October 8, a German news source highlighted ground handler Celebi as being at the center of the action; however, this statement saw an early correction. It turns out that Celebi Cargo, an employer that meticulously observes local laws and holds above-average employment conditions—as well as Lufthansa Cargo, DHL, FRAPORT and others—were mere witnesses, as evidence was sought by investigators to make their case at the reported 150 locations.
     In point of fact, the aforementioned companies were not suspected of any direct non-compliance with German and European tax and employment laws.

Roots of a Dust Up

    What the dust up is all about is a singularly large case of tax evasion and circumventing German social insurance requirements.
    Reportedly the initial tip-off came from a raid made at offices of German flag carrier Lufthansa, their affiliate, Handling Matters, and service providers, namely Wisskirchen Cargo in early 2014.
    Sources say following the trail of money, consulting and service contracts, and tax records made it clear that there was more to it than initially assumed.

Handling Circus

    Since the liberalization of the handling market in the 1990s, the competition between service providers in FRA and elsewhere has been reported as nothing short of ‘cut-throat.’
    FRAPORT formerly enjoyed a quasi-monopoly in FRA (its only competition were self-handlers Lufthansa and Pan Am [later Delta] and independent handler Luftfracht-Umschlag-GmbH LUG), but was forced to outsource cargo-handling activities to their 100 percent subsidiary FCS (Fraport Cargo Services), which was recently merged with WfS (Worldwide Flight Services).
    All service providers and handling companies at German airports make use of contractors, subcontractors, and sub-subcontractors; and in many cases have closed down their own handling divisions because external service providers were deemed cheaper.
    In a nutshell, the dawn raid in FRA and elsewhere may or may not have scratched the tip of the iceberg, but it certainly sent a clear message that the law will come down hard on some of the most obvious evaders of tax and social contributions.
    Whether the case is made and fundamental change in aggressive policing of these matters continues will by and large depend on the ‘witnesses’ whose offices were raided for supporting evidence.
    Stay tuned.
Jens