UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation on April 15 , 20 10



### NOTICE OF ACTION TAKEN

-- DOCKET DOT

- OST

- 20 10

- 0047

_____________________________________________________________________________________________________________________________ ___ This serves as notice to the public of the action described below, taken by the Department official indicated (no

additional co nfirming order will be issued in this matter).

Applicant: CHINA SOUTHERN AIRLINES COMPANY LIMITED (China Southern)

Date Filed: February 24 , 20 10

Relief requested: E xemption from 49 USC § 4 1301 to permit the applicant to engage in scheduled foreign air transportation of property and mail between any point or points in the People’s Republic of China (PRC) and any point or points in the United States open to scheduled service, via any intermediate points and beyond to any po ints outside

the United States.

China Southern states that it currently engages in scheduled all

- cargo service between Shanghai and/or Shenzhen, on the one hand, and Anchorage and Chicago, on the other. By virtue of this application, it plans to include New York (JFK) as an additional co

- terminal point on its PRC

- Chicago freighter route, and to introduce entirely new freighter service between Shanghai, on the one hand, and Los Angeles and Dallas/Ft. Worth, on the other hand.

Applicant representative: George U. Carneal , 202

- 637

- 6546 DOT analyst: Brett D. Kruger , 202

- 366

- 8025

Responsive pleadings: On March 11, 2010, Federal Express Corporation (FedEx) filed an answer to China Southern’s application

. FedEx states that it support s China Southern’s application

, provided that any grant of authority to China

Southern to operate coterminalized all

- cargo routes between points in the United States be conditioned on the government of China ’s promptly granting similar requests by FedEx to operate new coterminalized all

- cargo routes between p oints in China , including Beijing, Guangzhou

, and Shanghai

- Pudong

, without limitation on U.S. all

- cargo carriers’ coterminalization rights going forward. In support of its answer, FedEx states that even though the coterminalization rights it seeks were plainly part of the package of mutual benefits negotiated by and agreed to by the governments of the United States and China, going as far back as 1999 and continued in subsequent amendments to the

U.S.

- Ch ina Air Transport Services Agreement in 2004 and 2007

, China’s General Administration of Civil Aviation (CAAC) , since the winter 2008/2009 scheduling season, has refused to approve FedEx ’s requests to add new co

terminalized segments on its U.S.

- China all

- cargo services.

On March 25, 2010, China Southern filed a reply to the answer of FedEx. 1 China Southern stat es that the proposal of

FedEx to co

- terminalize Beijing, Guangzhou, and Shanghai

- Pudong is restricte d by a n April, 2009 domestic PRC

traffic mana gement regulation which prohibits the CAAC from granting additional co

- terminalization at these points ; and that the new regulation is being applied on a non

- discriminatory basis, affecting China Southern as well as FedEx

. China Southern states that its exemption requested here is explicitly authorized under the U.S.

- China Air Transport Agreement and urges the Department to promptly approve the application.

DISPOSITION

Action: Approved , subject to conditions ( specifically including the condition concerning coterminalization, see Remarks below).

Action date: April 15 , 20 10

Effective dates of authority granted: April 15 , 20 10 , through April 15 , 20 1 1

.

Basis for approval: United States

- China Air Transport Services Agr eement

1 China Southern accompanied its reply with a motion for leave to file late. We grant the motion.Special conditions/Remarks: We are seriously concerned that FedEx has not been permitted to use its bilaterally

- agreed rights to conduct coterminal services in China. These rights were expressly agreed to by the PRC Government in a formal international agreement , and we fully expected and continue to expect that the Chinese aeronautical aut horities will honor those rights . The U.S. Government, for its part, agreed to coterminalization for PRC airlines which we ar e ready to allow in respons e to China Southern’s present application at such time as FedEx’s coterminalization requests are approved by CAAC. In the meantime, while we will now grant China Southern the expanded bilaterally

- agreed authority it seeks to serve additional U.S. points, we are not prepared at this time to permit China Southern to serve any of these newly

authorized points on a coterminal basis or otherwise expand its coterminal operations

. 2 We will vacate this coterminalization limitation upon receipt in the instant dock et of written confirmation from FedEx that it has secured CAAC approval for its bilaterally

- authorized coterminalization requests.

Except to the extent exempted/waived, this authority is subject to the terms, conditions, and limitations of our standard

e xemption conditions (attached), and to the otherwise

- applicable terms, conditions, and limitations of China Southern’s foreign air carrier permit (Order 2001

- 11

- 4).

Action taken by: Paul L. Gretch, Director

, Office of International Aviation

_________ ______________________________________________________________________________________________________________________ Under authority assigned by the Department in its regulations, 14 CFR Part 385, we found that (1) our action was consistent w ith Department policy; (2) the applicant was qualified to perform its proposed operations; (3) grant of the authority was consist ent with the public interest; and (4) grant of the authority would not constitute a major regulatory action under the Energy Poli cy and Conservation Act of 1975. To the extent not granted/deferred/dismissed, we denied all requests in the referenced Docket. We may amend, modify, or revoke the authority granted in this Notice at any time without hearing at our discretion.

Persons ent itled to petition the Department for review of the action set forth in this Notice under the Department’s regulations, 14 CFR §385.30, may file their petitions within seven (7) days after the date of issuance of this Notice. This action was effec tive

when taken, and the filing of a petition for review will not alter such effectiveness.

An electronic version of this document is available on the World Wide Web at: http://www.regulations.gov

2 To the extent China Southern is currently exercising coterminalized authority, nothin g in the instant Notice of Action Taken is intended to restrict those operations.

### Foreign Carrier Exemption Conditions

In the conduct of the operations authorized, the foreign carrier applicant(s) shall:

(1) Not conduct any operations unless it holds a currently effective authorization from its homeland for such operations, and it has filed a copy o f such authorization with the Department;

(2) Comply with all applicable requirements of the Federal Aviation Administration, the Transportation Security Administration, and with all applicable U.S. Government requirements concerning security, including, but not limited to, 14 CFR Parts 129, 91, and 36 and 49 CFR Part 1546 or 1550, as applicable. To assure compliance with all applicable U.S. Government requirements concerning security, the holder shall, before commencing any new service (including charte r flights) from a foreign airport that would be the holder’s last point of departure for the United States,

contact its International Industry Representative (IIR) (formerly referred to as International Principal Security Inspector) to advise the I IR of it s plans and to find out whether the Transportation Security Administration has determined that security is adequate to allow such airport(s) to be served ;

(3) Comply with the requirements for minimum insurance coverage contained in 14 CFR Part 205, and, prior to the commencement of any operations under this authority, file evidence of such coverage, in the form of a completed OST Form 6411, with the Federal Aviation Administration’s Program Management Branch (AFS

- 260), Flight Standards Service (any change s to, or termination of, insurance also shall be filed with that office);

(4) Not operate aircraft under this authority unless it complies with operational safety requirements at least equivalent to Annex 6 of the Chicago Convention;

(5) Conform to the airworthiness and airman competency requirements of its Government for international air services;

(6) Except as specifically exempted or otherwise provided for in a Department Order, comply with the requirements of 14 CFR Part 203, concerning waiver of Warsaw Convention liability limits and defenses;

(7) Agree that operations under this authority constitute a waiver of sovereign immunity, for the purposes of 28 U.S.C. 1605(a), but only with respect to those actions or proceedings instituted against it in any court or other tribunal in the United States that are: (a) based on its operations in international air transportation that, according to the contract of carriage, include a point in the United States as a point of origin, point of destination, or agreed stopping place, or for which the contract of carriage was purchased in the United States; or (b) based on a claim under any international agreement or treaty cognizable in any court or other tribunal of the United States. In this condition, the t erm "international air transportation" means "international transportation" as defined by the Warsaw Convention, except that all States shall be considered to be High Contracting Parties for the purpose of this definition;

(8) Except as specifically auth orized by the Department, originate or terminate all flights to/from the United States in its homeland;

(9) Comply with the requirements of 14 CFR Part 217, concerning the reporting of scheduled, nonscheduled, and charter data;

(10) If charter operation s are authorized, except as otherwise provided in the applicable aviation agreement, comply with the Department's rules governing charters (including 14 CFR Parts 212 and 380); and

(11) Comply with such other reasonable terms, conditions, and limitations required by the public interest as may be prescribed by the Department, with all applicable orders or regulations of other U.S. agencies and courts, and with all applicable laws of the United States

. This authority shall not be effective during any period when the holder is not in compliance with the conditions imposed above. Moreover, this authority cannot be sold or otherwise transferred without explicit Department approval

under Title 49 of the U.S. Code.

1 2/2007