What’s going on here?

The shipping company filed against the U.S. Commerce Department, calling it a “law enforcement agency”

What inspired such soul-searching? FedEx claims it shouldn’t be held liable for unknowingly shipping products that violate the Trump administration’s ban on U.S. exports to certain Chinese companies. 

Driving the news: some mischief, some earnings

Mischief first. Though many thought this suit was about Huawei (the blacklisted lightning rod in the U.S.-China thunderstorm), FedEx CEO said it was actually about the five new Chinese companies blacklisted under “extraordinarily transparent requirements.”

But Huawei would have been a good guess…

• Last month, China said it would investigate FedEx after two packages destined for Huawei addresses were diverted to the U.S. FedEx said they were “misrouted in error”. 
• Last week, a FedEx package carrying a Huawei phone to the U.S. got return-to-sender’d back to Britain. FedEx blamed an “operational error.” 

Now, facing a “virtually impossible task,” FedEx feels like it’s also been caught in the U.S.-China storm. It believes it has to a) risk legal penalty or b) refuse to ship any packages that seem even a little fishy. 

• The Commerce Dept. told Fox the regulation only means FedEx can’t “knowingly ship” banned items.
• FedEx says it receives about 15 million packages daily for shipment and gets roughly 7% of revenue from China. Smith said fines for violations could be $250k/package.

And the earnings? Even though FedEx topped profit expectations and met revenue forecasts, shares fell about 1% after hours yesterday. Smith called 2019 a year of “challenge and change,” and the company said it can’t give full 2020 guidance because of accounting uncertainties.

Bottom line

FedEx’s punctuation of choice these days is the question mark. Don’t expect easy answers.

• Will it face backlash (or worse, blacklisting) from the Chinese?
• Could the dual Amazon/Uber threat grow?

Content source: Freyman. N. (2019) What FedEx Isn’t…. Morning Brew. Available from: https://www.finimize.com/wp/news/take-it-to-the-bank/ [Accessed 27 June 2019]