China regulators penalize FedEx over letter deliveries

The State Post Bureau said local regulators in the city of Tianjin and in Sichuan province imposed penalties on China units of FedEx Express earlier this month for delivering letters, in violation of the China Post Group’s legal monopoly.
The bureau said in a statement that the Tianjin regulator imposed unspecified “administrative penalties” while the Sichuan regulator fined the local branch of FedEx 3,000 yuan.
China opened its domestic express market to foreign competition at the end of 2005 in accordance with promises made on entering the WTO. However, postal law still restricts letter delivery to China Post Group
The penalties are the first to be levied against a foreign express courier.
“FedEx is currently working with the authorities to ensure full compliance with local laws and regulations. We are not at liberty to discuss details,” said a media officer with FedEx China.
An industry source told XFN-Asia that the source of the dispute is the ambiguous definition of “letters” in the current postal law, which has been in place since 1987.
Margins are also high for “document” delivery which could include letters – and this means the major foreign express couriers including FedEx, DHL and UPS as well as domestic private companies are all very likely to be involved in the business.
The source added that FedEx cut prices sharply for domestic document services recently, prompting complaints from local rivals.
FedEx’s prices for a typical Beijing-Shanghai express delivery under one kilogram are currently at 21.6 yuan for “next morning delivery” and 18 yuan for “next day delivery,” down over 70 pct from charges collected in June 2007.
The commerce ministry is currently investigating FedEx’s price cuts , according to the source.