Global logistics: UPS takes over Korean operations

SEOUL, Korea—UPS said earlier today it has reached an agreement with The Korea Express Co. Ltd. (KEC), a logistics services provider, to acquire KEC’s 40 percent interest in the UPS-KEC express joint venture company in Korea.

Financial terms of the arrangement were not disclosed.

UPS said in a statement that this transition from a joint venture to a wholly-owned subsidiary will allow UPS to grow its business in Korea and better serve shippers in the country that is the United States seventh-largest trading partner. KEC and UPS began their joint venture more than ten years ago.

“Korea is the third largest economy in Asia, and what we are seeing is a lot of intra-Asia acceleration in traffic,” said John Flick, UPS spokesman, in an interview. “Currently, we have a flight that goes from Qingdao to Seoul, and we used to have a common carriage flight that went from Qingdao to Seoul. It immediately became full, though, so we switched to a [UPS] aircraft. The fact that we are now fully owned in Korea gives us more control in terms of time of flights and going directly to customers, which makes this a good deal for UPS.”

What also makes this move beneficial, he said, is that there is a pending U.S.-Korea Free Trade Agreement, which adds to the logic behind the decision for UPS to control its operations in Korea, he said.

And with Seoul, Korea as a major manufacturing hub for automotives, high-tech, and consumer electronics, UPS has always had flights into Seoul, even at the very beginning of its Asian network. This move gives UPS more face-to-face customer contact, as well as “seamless” service, explained Fick.

Although UPS and KEC no longer will collaborate on the joint venture, the companies inked a cooperation agreement for future collaboration, focused on leveraging UPS’ global network and infrastructure and KEC’s local network and customs brokerage operations.

UPS added in a statement that it “expects to enhance its levels of reliability and to further build its brand presence in Korea.” And to that effect it said it plans to provide total integrated logistics services by integrating its Supply Chain Solutions operation with the newly-formed package express entity to offer a single UPS branded portfolio.

The statement added that UPS began operating in Korea in 1988. It now operates 31 weekly flights to and from Incheon Airport using B-747, B-767 and MD-11 aircraft connecting Seoul to Qingdao, Shanghai, Taipei and Anchorage.

“With the establishment of wholly-owned operations in Korea, UPS will have the flexibility it needs to invest in facilities, infrastructure, technology and employee development and to expand operations,” said Derek Woodward, president of UPS’s Asia-Pacific Region. “And our customers will have the confidence of knowing we can stay ahead of demand in a market that is rapidly growing in importance, particularly in light of the pending U.S.-Korea Free Trade Agreement.”