Small-parcel dispute between ministries drags on past deadline

The State Council-directed deadline for two of China's most powerful ministries to settle their differences over the mail imbroglio came and went yesterday without a resolution.

However, talks have not broken down and both sides remain at the negotiating table.

The Ministry of Foreign Trade and Economic Co-operation (Moftec) and the Ministry of Information Industry (MII), which governs the State Post Bureau, were last month given until yesterday to settle differences over restrictions on the carriage of China's mail, documents and small packages.

'We had a 45-minute meeting with government officials in Beijing and they had no resolution to report,' an industry official said.

'They said [Moftec and the State Post Bureau] they were continuing to meet, that they understood our position and that they were continuing to work towards a resolution.'

The MII in February issued document No 64, which restricted forwarders and express operators to carrying packages weighing 500 grams or more.

If carriers elected to handle packages lighter than 500 grams they would have to charge more than China Post.

Carriers in March were given until May 6 to comply or face the consequences of operating an 'illegal' enterprise. The deadline has since been extended to June 15.

Sinotrans, China's national freight forwarding arm governed by Moftec, is a joint-venture partner with every international express operator except Federal Express and as such was also restricted, as were firms in China's freight forwarding community, many of which are Sinotrans subsidiaries.

Moftec does not recognise MII's right to unilaterally impose the new regulations and, through Sinotrans, threatened to shut down China's domestic goods distribution in protest.

The China International Freight Forwarders Association, which has about 540 member companies, said the restriction would eliminate about 60 per cent of its revenue base.

The international express operators, represented by the Conference for Asia-Pacific Express Carriers in the dispute, claim the restrictions run contrary to provisions for acceptance into the World Trade Organisation, which emphasise liberalisation of markets.

The first sign of the pending dispute arose in December when Moftec and the MII issued document No 629, telling express operators they would have to undergo a 'security entrustment procedure', couched as necessary to ward off the threat of bio-terrorism. While discussions are believed to be still at the stage of negotiating ways to achieve that, many saw the move as an attempt by China Post to protect the lucrative market for its Express Mail Service.

'As Moftec was co-signatory to document 629, it is hard for it to now say it doesn't support it,' the industry official said.