Sen. Cotton urges DOJ investigation of China-backed parcel carriers

Republican Sen. Tom Cotton has asked the Department of Justice to investigate whether Chinese controlled parcel delivery companies pose a national security and supply chain risk, claiming they leverage unfair foreign subsidies, vast amounts of granular data and shady import practices to take business from American companies.

Logistics analysts acknowledge that Chinese-backed last-mile delivery carriers with an ultra-low cost business model and lower compliance standards are rapidly gaining market share, putting pressure on FedEx, UPS and regional carriers like Veho and OnTrac.

Some say that characterizing Chinese-influenced couriers as a security threat overstates the problem and is a way to appeal to the America-first tendencies of the Trump administration for action.

But others contend these alternative carriers are taking away American jobs by offering below-cost pricing, made possible by deep-pocketed Chinese investors and low labor rates. In a May 19 letter to Acting Attorney General Todd Blanche, Cotton complained that U. S.

-incorporated companies like Gofo, funded by the Zongteng Group, and SpeedX, founded by a veteran of the Chinese freight industry, had “infiltrated” the United States to provide cross-border logistics services for e–commerce platforms like Shein, Temu and TikTok Shop.

Other carriers of concern to the Arkansas senator include Canada-based UniUni, Indonesia’s J&T Express, which counts Chinese multinational technology conglomerate Tencent as an investor, and Zongteng subsidiaries YunExpress and Cirro Logistics.

The carriers typically use independent master contractors, also known as delivery service providers, or app-based gig drivers to make front-door deliveries, as do many independent U. S. -owned delivery companies. “These companies move through American neighborhoods, commercial districts, and roads near critical infrastructure.

They collect detailed data on routes, businesses and homes while undercutting American competitors on price. This is a familiar playbook: Chinese firms enter the United States at subsidized prices, capture market share, and embed themselves into daily American commerce,” Cotton wrote.

Startup parcel carriers began proliferating five years ago on the back of the pandemic-fueled e-commerce boom as Chinese marketplaces took advantage of a previoussly overlooked import loophole to rapidly ramp up B2C sales in the United States. U. S.

policymakers in recent years have similarly investigated China’s near monopoly on ship-to-shore cranes at ports and their potential to be used as spy platforms for the Chinese government and the Trump administration last year pressured a Hong Kong-based company to divest from two port facilities in the Panama Canal over concerns China could control trade flows in the event of a broader conflict.

A coalition of five regional U. S. parcel carriers, including Hovership, has been working behind the scenes on Capitol Hill to bring attention to the Chinese couriers. Hovership shared a copy of the letter with FreightWaves.

Data privacy and competiton questions Large-scale delivery operations inherently generate high-resolution, street-level data with images of homes, access points, delivery patterns and consumer behavior.

When aggregated at scale, that data becomes infrastructure intelligence — raising questions about where it is stored, how it is used, and who ultimately has access, Hovership founder and CEO John Zendejas said in an interview. He likened the problem to TikTok and why the U. S. government in January forced Byte Dance to sell its U. S.

assets to a majority American-owned joint venture. And since virtually all Chinese companies receive financial backing from the government to improve their global competitiveness, those carriers could be forced to share their data with authorities because there are no private sector firewalls there, he added.

“I think that with package delivery, you could infer consumer buying habits in the same way [as TikTok] because the name of the shipper is on the outside of the box. The delivery companies know who the shippers are. They know what people are buying, as well,” Zendejas said. U. S.

delivery companies and their customers sign rigorous data protection agreements, but the Hovership CEO suggested that Chinese counterparts might sell that data to a customer’s competitors or the Chinese government.

And American firms can’t compete with Chinese firms whose primary interest isn’t about making money and who are leading a race to the bottom on pricing in a sector with razor-thin margins, he argued. “Everybody wants to know what they could do with data that’s being sent abroad where we’ve got less legal control,” he told FreightWaves.

“But the main issue, for me, is really the takeover of the supply chain itself and the leverage that could be had if you’re a foreign government owning big chunks of the U. S. supply chain.” Analysts say none of the China-connected startups are making any money yet and will n