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China Considers Blacklisting FedEx After Huawei Delivery Errors

Bloomberg News

(Bloomberg) -- China is considering adding FedEx Corp. to a list of so-called unreliable entities, people familiar with the matter said, a move that would escalate tensions with the U.S.

Authorities in China have almost completed the preparations that would be needed to blacklist FedEx, the people said, declining to be named because the information hasn’t been made public. A final decision would be made by senior Chinese leaders, the people said.

China’s Commerce Ministry announced the creation of the list in late May to target firms that the government says damage the interests of domestic companies. That followed U.S. curbs on Huawei Technologies Co. FedEx drew the ire of Chinese officials after Huawei said that documents it asked to be shipped from Japan to China were instead diverted to the U.S. without authorization.

The ministry didn’t respond to a request for comment, and the Foreign Ministry declined on Monday to comment on whether FedEx would be placed on the list.

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“We hope we satisfied them that this wasn’t any nefarious activity on our part,” FedEx Chief Executive Officer Fred Smith said on Fox News. “It was just a well-intentioned FedEx teammate that made an error. We’ll just have to wait and see.”

The shares fell 1.9% to $157.86 at 9:44 a.m. Tuesday in New York. FedEx was little changed this year through Monday, while the S&P 500 climbed 17%.

U.S. President Donald Trump and China’s Xi Jinping are scheduled to resume talks later this week at the G-20 summit in Osaka, Japan, with no signs their tit-for-tat trade war will end any time soon. Blacklisting Memphis, Tennessee-based FedEx could have a significant impact on its business in China. The Commerce Ministry has yet to release details about the consequences of being added to the unreliable entities list.

FedEx in September said that package deliveries between the U.S. and China represent 2% of total sales, which would be about $1.3 billion based on 2018 revenue. The company, which doesn’t typically break out sales by country, hasn’t given an amount for its entire China business.

China’s Global Times newspaper tweeted on Sunday about the likely blacklisting.

FedEx apologized last month for delivery mistakes on the two diverted Huawei packages.

The company is suing the U.S. Commerce Department to block enforcement of tougher restrictions on exports and imports, saying the curbs force it “to police the contents” of millions of packages.

The global courier, scheduled to report quarterly earnings Tuesday afternoon, says it’s being made to choose between operating under the threat of U.S. punishment and facing potential legal trouble from customers and foreign governments.

(Updates with FedEx U.S.-China sales in eighth paragraph.)

--With assistance from Yan Zhang and Miao Han.

To contact Bloomberg News staff for this story: Steven Yang in Beijing at kyang74@bloomberg.net

To contact the editors responsible for this story: Ville Heiskanen at vheiskanen@bloomberg.net, Tony Robinson

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.