'We Are Not Law Enforcement:' FedEx Sues the Commerce Department Over Huawei Export Rules

Eamon Barrett
'We Are Not Law Enforcement:' FedEx Sues the Commerce Department Over Huawei Export Rules

FedEx Corp, the U.S. courier group credited with spearheading overnight shipping, was christened Federal Express because founder Frederick Smith thought the name sounded patriotic. Now the logistics firm is suing the U.S. government, because it doesn’t want to be responsible for federal work.

In a court filing with the District of Columbia, FedEx complained that export restriction laws implemented by the Department of Commerce “essentially deputize FedEx to police the contents of the millions of packages it ships daily even though doing so is a virtually impossible task, logistically, economically, and in many cases, legally.”

“FedEx is a transportation company, not a law enforcement agency,” the company later said in a statement.

FedEx has become embroiled in the dispute between Washington and Chinese telecom manufacturer Huawei Technologies and, even though FedEx’s lawsuit doesn’t mention the smartphone company by name, it is the likely source of FedEx’s frustration.

On the ‘entities’ list

Last week FedEx blocked the shipment of a Huawei smartphone, sent by a journalist at tech review site PCMag from the U.K. to the U.S. FedEx returned the phone to its sender with a note explaining the shipment was cancelled due to “U.S. government issue with Huawei and China government.”

The “issue” is that the U.S. Commerce Department placed Huawei on its prohibitive blacklist of foreign “entities” last month, marking Huawei as a threat to national security. U.S. companies need to acquire special permission to work with “entities,” and a number of U.S. firms have pressed pause on relations with Huawei while they figure out whether cooperating with the Chinese firm violates U.S. law.

FedEx says that it does not have a general policy against shipping Huawei products but claims it can’t deliver mail to the addresses of any Huawei affiliates placed on the Commerce Department’s Entity List. The smartphone it refused to deliver was being shipped to PCMag’s New York office, which is, obviously, not on the entity list.

Initially, FedEx claimed the smartphone had been “mistakenly returned” to the shipper but David Canavan, the regional chief operating officer at FedEx Express Europe, told PCMag that a FedEx employee saw the package contained a Huawei product, had “a panic attack of sorts” and decided to return the package.

Carrying a ‘vendetta’?

That might well be true but Huawei Facts, one of Huawei’s official Twitter accounts, accuses FedEx of carrying a “vendetta” against Huawei. Last month, FedEx rerouted four packages destined for Huawei’s headquarters in Shenzhen to a depot in the U.S. FedEx again said the rerouting was a mistake, but Huawei cried foul and has since said it is no longer using FedEx’s services.

Prompted by Huawei’s complaint, Beijing has launched an investigation to determine whether FedEx was instructed by the U.S. government to reroute the Huawei packages. FedEx has already stated that “no external parties” requested the packages be diverted.

Regardless, the timing of these slip-ups is unfortunate for FedEx. China’s Ministry of Commerce is currently compiling a list of “unreliable foreign entities,” comparable to the U.S. Commerce Department’s Entity List. Reporting from state-owned Global Times speculates that FedEx will likely be among the first additions to the new list due to its handling of Huawei shipments.

The consequences of being placed on China’s entity list haven’t been disclosed yet, but for FedEx, which draws around 7% of its revenue from China, the setback could be significant. The courier has watched shares fall 31% over the last 12 months and has downgraded its outlook twice between December and March, in part owing to issues arising from the trade war.

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.

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