FedEx Suing US Government Over "Impossible" Policing Against Huawei and China

Jun 27, 2019, 00:56
FedEx Suing US Government Over

The effects of the United States' ban on Huawei has reached far and wide, resulting in a lot of hoops for the Chinese company to jump through.

Huawei has accused FedEx of having a "vendetta" against it, after the courier failed to deliver one of its smartphones from the United Kingdom to the USA - which it blamed on an operational error - and rerouted two packages through the U.S. that were sent from Japan to China.

And, FedEx posted its defense: "FedEx can accept and transport all Huawei products except for any shipments to listed Huawei entities on the U.S. Entity List".

"Our fiscal 2020 performance is being negatively affected by continued weakness in global trade and industrial production, especially at FedEx Express", Chief Financial Officer Alan Graf said in a statement.

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The delivery company complains that the rules "essentially deputize FedEx to police the contents of the millions of packages it ships daily even though doing so is a virtually impossible task".

"The United States policy since 1934. was to expand global trade and now we have a huge dispute with China where the U.S. has basically become protectionist, defined as 'I'll make everything I need in my own borders'". The U.S. says it believes Huawei could use its technology to spy on behalf of the Chinese government, a charge that Huawei has repeatedly denied.

In an interview, FedEx CEO Fred Smith said that "they can not be the policeman for the Department of Commerce". When PCMag checked into the reason behind the return, the site was given the following response: "Parcel returned by FedEx, due [sic] US Government issue with Huawei and China Government". The smartphone giant said that FedEx was planning to do the same thing with two other Huawei packages, also bound for Huawei offices in China.

The mishandling of Huawei packages has put FedEx in danger of being added to China's Unreliable Entities List. UPS has also confirmed it will not ship to addresses on the blacklist but will continue delivering Huawei products.

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FedEx apologized at the end of May for "misrouting" a "small number" of Huawei packages but said no third party had asked the parcels be transferred. It's noteworthy knowing FedEx had no business ties with Huawei. Huawei has said the restrictions may cost it $30 billion of revenue.

FedEx wasn't able to respond to Fortune's request for comment in time for publication, but executives will likely have to answer similar questions later this evening when the company convenes its earnings call for the fiscal fourth quarter.

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.

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