FedEx Sues U.S. to Ease Ban on Supplying Huawei -- WSJ

Date : 06/25/2019 @ 8:02AM
Source : Dow Jones News
Stock : Fedex Corp. (FDX)
Quote : 167.13  1.75 (1.06%) @ 1:00AM

FedEx Sues U.S. to Ease Ban on Supplying Huawei -- WSJ

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By Charlie McGee 

This article is being republished as part of our daily reproduction of articles that also appeared in the U.S. print edition of The Wall Street Journal (June 25, 2019).

FedEx Corp., after botching some deliveries for Huawei Technologies Co., filed a lawsuit Monday to stop the U.S. government from requiring the package giant to enforce a crackdown on the Chinese telecommunications-gear maker.

The lawsuit, filed in a federal court in Washington, D.C., claims the U.S. Commerce Department's latest restrictions are essentially forcing FedEx to police millions of packages it ships daily to ensure prohibited items aren't being exported to Huawei. It is a task, FedEx claims, that is legally and logistically impossible.

"FedEx is a transportation company, not a law-enforcement agency," the company said in a statement.

A spokesman for the Commerce Department said it hadn't yet reviewed FedEx's complaint but the agency intended to defend its role in U.S. national security.

The Commerce Department, citing national-security concerns, said in May it was adding Huawei and its affiliates to its "entity list," preventing companies from supplying U.S.-origin technology to Huawei without U.S. government approval.

Huawei has warned the U.S. restrictions could knock as much as $30 billion from its revenue this year and next. Several U.S. suppliers, including chip maker Broadcom Inc., have warned of a hit to their own sales from the escalating trade dispute.

Monday's 19-page complaint doesn't name Huawei, but FedEx has been caught up in the larger dispute between the U.S. and China. Last month, FedEx apologized after it misrouted some of Huawei's packages, including two that were sent to its global hub in Memphis, Tenn., instead of China.

Huawei publicly complained and Chinese officials said they were opening an investigation into FedEx.

The Wall Street Journal reported the parcels were misrouted after FedEx changed its internal systems to comply with the Commerce Department's new restrictions.

FedEx apologized again last week after a Huawei smartphone being shipped by a journalist in the U.K. to the U.S. was returned to its sender.

In its lawsuit, FedEx claims that as a common carrier -- much like the U.S. Postal Service or a telecommunications company -- it is generally not liable for the contents of messages or shipments.

The suit says FedEx screens the names of shippers and recipients to ensure they aren't on the entity list. Even if it opened each package, FedEx argues in its suit, it wouldn't be able to make technical determinations about whether contents violated the U.S. restrictions.

Steve Gaut, a spokesman for United Parcel Service Inc., said UPS hasn't experienced any extraordinary circumstances regarding its operations.

"We have not had any particular issues with shipping for Huawei or any of our other customers, and we would not be supportive of joining such a lawsuit or making such claims," Mr. Gaut said.

The Trump administration, amid a broader trade dispute with China, has mounted a global campaign against Huawei, the world's biggest telecom-gear supplier, which some U.S. officials believe is beholden to the Chinese government. Huawei says its gear isn't a security risk and it operates independently of the Beijing government.

China's Commerce Ministry said in response that it was setting up an "unreliable entity list" -- a blacklist of foreign companies, organizations and individuals that break contracts, harm Chinese companies for noncommercial reasons or damage national security interests.

China has been a key market for both FedEx and UPS, which carry components and finished goods into and out of the country's manufacturing hubs. FedEx will likely face questions about the standoff when it reports quarterly results Tuesday evening.


(END) Dow Jones Newswires

June 25, 2019 02:47 ET (06:47 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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