*UPS Deal With China Expected to Improve Delivery Service

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Direct marketers shipping packages to China should receive better service next year thanks to a recent decision by the U.S. Department of Transportation to award United Parcel Service, Atlanta, the right to operate six direct flights between the United States and China beginning in April.

UPS serves China through Hong Kong, but John Flick, a spokesman for UPS' international division, said direct marketers would benefit from the direct flights because they "will improve service by a day, most notably to Beijing and Shanghai. Faster transit times mean lower inventory costs, lower carrying costs and lower costs for businesses."

Flick said service through Hong Kong meant unloading cargo onto another carrier's aircraft. This will be eliminated for shipments to Beijing and Shanghai.

"Most of our lift previously was leasing space on other cargo aircraft and in the bellies of passenger aircraft," he said. "All that takes time."

UPS plans to offer six flights per week into Shanghai and Beijing. Four will originate in Ontario, CA, and two will originate in Newark, NJ. All flights will use Boeing 747 aircraft.

UPS was awarded six of the 10 flights available from the DOT. Two were awarded to United Airlines, and Northwest Airlines and FedEx each won one. Currently, however, FedEx is still ahead in China, with 10 flights into China per week. That number will jump to 11 in April.

UPS said the decision would greatly expand its ability to serve the Chinese market, which it has done since 1988 through its agreement with Sinotrans, the transportation arm of the Chinese government.

In this 50-50 partnership, Sinotrans provides UPS with an extensive ground network throughout China, and UPS provides Sinotrans with its global technology infrastructure and management expertise.

"We fly the packages into the mainland, and Sinotrans employees deliver to the end-user," Flick said.

UPS delivers in 120 of the major business centers in China through Sinotrans and offers branded operations -- brown trucks and uniformed drivers -- in 21 of those cities. Those cities combined account for more than 90 percent of the country's international air cargo.

Flick said the new rights would not affect this relationship.

"The DOT made a bold, forward-looking decision that recognizes the new economy and UPS' role in the global marketplace," said Jim Kelly, chairman/CEO of UPS. "This tentative decision will benefit UPS people, American businesses, and the principle that free and fair trade is a vital component to growing our prosperity in this new economy."

U.S.-based DMers say the new flights would help initiate or expand business in China, which will probably be admitted into the World Trade Organization at the end of this year or in early 2001. Being admitted into this organization ultimately opens China's economy -- with its 1.3 billion people -- to foreign competitors and makes it a full partner in the world's trading system.

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