FedEx confirms Huawei mail ban as new 'mistake' reignites Chinese ire

Kanishka Singh and Sijia Jiang, Reuters

Posted at Jun 25 2019 08:38 AM | Updated as of Jun 25 2019 08:39 AM

FedEx Corp has apologized for another Huawei delivery "mistake," reigniting Chinese ire and drawing the fire of state media which suggested the US delivery firm could end up on China's upcoming list of companies that harm national interests.

The firm on Sunday said it returned a package - identified as containing a Huawei phone - due to an "operational error," and that it would deliver all products made by Huawei Technologies Co Ltd to addresses other than those of Huawei and affiliates placed on a US national security blacklist.

FedEx on Monday said it has filed a lawsuit in US District Court seeking to stop the Department of Commerce from enforcing new export prohibitions contained against the package delivery company.

"This puts an impossible burden on a common carrier such as FedEx to know the origin and technological make-up of contents of all the shipments it handles and whether they comply" with restrictions, the company said in a statement.

China's foreign ministry on Monday nevertheless asked for a full explanation. Technology news outlet PCMag, formerly known as PC Magazine, reported that its writer in Britain had attempted to send a Huawei P30 handset to a colleague in the United States.

FedEx returned the phone and told the sender that it could not deliver the package because of a "US government issue" with Huawei and the Chinese government, PCMag reported.

The incident comes as Chinese authorities investigate FedEx for misrouting packages sent by Huawei last month. Meanwhile, China is also drawing up an Unreliable Entities List of foreign firms, groups and individuals.

The list mirrors the US Entity List that Huawei was added to in May, essentially barring it from buying US technology upon which it was heavily reliant. The US added more Chinese entities to the list on Friday.

The Beijing News, a municipal government-run newspaper, in an editorial on Monday, said FedEx had misinterpreted the US ban and called on US firms to be "rational" and not to over-react.

FedEx rival United Parcel Service Inc also confirmed it would not ship to Huawei addresses on the Entity List but had no "general ban" on Huawei products.

A Huawei spokesman said the Chinese firm was not currently using either FedEx or UPS services. On Sunday, Huawei tweeted it was not within FedEx's right to prevent the delivery and said the courier had a "vendetta."

UNRELIABLE

The latest incident sparked renewed criticism of FedEx on Chinese social media, with the topic "FedEx apologizes again" trending on Weibo, China's Twitter-like microblog platform.

State-run newspaper Global Times on Sunday tweeted that FedEx is likely to be added to China's Unreliable Entities List.

Neither China's commerce ministry nor FedEx responded to Reuters' requests for comment on the likelihood of FedEx being added to the list. State news agency Xinhua previously said authorities' investigation into FedEx misrouting Huawei packages should not be regarded as retaliation.

Being in the "crosshairs" of the Chinese government "is a tremendous headwind and risk" for FedEx, Trip Miller, said managing partner at Memphis-based Gullane Capital Partners, which holds a FedEx position valued at roughly $7 million.

"Can you imagine if FedEx was banned from doing business? China could get our attention pretty quick if it did something like that," said Miller, adding that such a move would significantly disrupt global trade networks.

FedEx's operational error comes against a backdrop of increasing tension between the world's two biggest economies. The United States and China have been engaged in a trade fight for nearly a year on issues such as tariffs, subsidies, technology, regulations and cyber security.

A telephone call between US President Donald Trump and Chinese President Xi JinPing last week, as well as confirmation the two will meet in Japan on the sidelines of a Group of 20 summit, have rekindled hopes of a detente.