UPS (NYSE:UPS) today announced an agreement with Sinotrans to take direct control of its international express operations in China's largest and most important cities by the end of 2005.

The agreement, signed on Dec 1, requires a payment of US$100 million by UPS for the transfer of operations in 23 cities across China. Operations in those 23 business centers extend service to an additional 200 cities, which account for more than 80 percent of China's gross domestic product. With an expanded network in place, UPS will offer customers enhanced services and access in and out of the world's fastest growing market.

Starting in January of 2005, UPS will take direct control of operations in five locations: Shanghai, Guangzhou, Shenzhen, Tianjin and Qingdao. By December 2005, UPS will assume control over its express operations in 18 additional locations, and have a total of 1,700 employees.

UPS and Sinotrans will work closely to ensure a smooth transition in these locations. In addition, the two organizations will continue to work together in areas not covered under the agreement.

The deal, which also better positions Sinotrans to develop its own services, will advance a relationship dating to 1988 when UPS first entered the China market in partnership with Sinotrans.

"This agreement opens a wealth of opportunity for UPS customers seeking to do business with China," said David Abney, president of UPS International. "UPS will have the flexibility it needs to expand operations and to invest in facilities, infrastructure, technology and employee development. And our customers will have the confidence of knowing we can stay ahead of demand in a country that's changing the face of worldwide commerce."

With direct control of its own network, UPS expects to improve its already high levels of reliability and to build its brand presence by expanding the number of branded trucks and uniformed drivers. The company also plans to enhance its package-tracking network, expand the shipping software options available and introduce a toll-free telephone customer service hotline.

This is the latest in a string of announcements regarding the expansion of UPS operations in China. Earlier last month, UPS began the first of 12 new flights to China with MD-11 service to Shanghai. The new flights triple the company's earlier service from six to 18 flights a week. As part of that award, UPS plans to begin next year the first non-stop service in the industry between the United States and Guangzhou and establish a Shanghai air hub in 2007.

Even before these enhancements, UPS's export volume in China grew 129% over the third quarter of 2004 compared to the same period last year and by more than 90% year-to-date.

"UPS's long-term strategy throughout Asia is to continue integrating and expanding its networks, improving package delivery options while simultaneously helping companies manage and operate the complex supply chains that now cover the globe," said Ken Torok, president of UPS Asia Pacific. "This agreement with our partner in China is an important step toward fulfilling that strategy."

UPS is the world's largest package delivery company and a global leader in supply chain services, offering an extensive range of options for synchronizing the flow of goods, information and funds. UPS's stock trades on the New York Stock Exchange (UPS) and the company can be found on the Web at UPS.com.

Except for historical information contained herein, the statements made in this release constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements, including statements regarding the intent, belief or current expectations of UPS and its management regarding the company's strategic directions, prospects and future results, involve certain risks and uncertainties. Certain factors may cause actual results to differ materially from those contained in the forward-looking statements, including economic and other conditions in the markets in which we operate, governmental regulations, our competitive environment, strikes, work stoppages and slowdowns, increases in aviation and motor fuel prices, cyclical and seasonal fluctuations in our operating results, and other risks discussed in the company's Form 10-K and other filings with the Securities and Exchange Commission, which discussions are incorporated herein by reference.