Officials at United Parcel Service are vehemently fighting back rumors that their company practices "package apartheid" by refusing to deliver to Jewish settlements in the West Bank while offering service to Palestinian communities behind the Green Line.

A UPS spokesman said that the inability to serve some locations in Israel's disputed territories is purely a matter of economics rather than an effort to deny service to Jewish customers in the West Bank.

"This has nothing to do with politics, nothing," John Flick, a UPS international spokesman, repeatedly told FOXNews.com in two phone interviews.

The charges blew up in UPS' face last week after columnist Debbie Schlussel investigated a claim by one of her readers who was told she could not have a package delivered from the United States to Gush Etzion, a religious Jewish outpost in the West Bank located just 15 minutes from Jerusalem.

Click here to read Debbie Schlussel's investigation of UPS.

The reader told Schlussel that she was told UPS would not deliver beyond the Green Line, the marker that represents the boundary drawn between Israel and the territory captured from Jordan in the 1967 Six Day War. But when asked about delivery to Palestinian city of Ramallah, the home of Palestinian Authority headquarters in the West Bank, the service representative said packages could be sent there.

"Last night, I called UPS to verify this, and, in fact, it is true. Not only is it true, but UPS will not recognize even parts of Israel that are within the 'Green Line,' such as the Golan Heights," Schlussel wrote in the first of several updates on the story. "Today, they won't deliver to Jewish areas. Tomorrow, it will be Christian areas. But the Islamic terrorist-infested areas, no prob. UPS: Official delivery service of the Jihad. DHL: Still free and strong."

Flick said the confusion started because the automated system used by UPS service representatives to assist customers is based on postal codes and if a customer calls in to send a package to an area without a postal code, the service representative tells the customer that UPS can’t deliver to that area. Israel, where UPS has been operating since 1988, does not use postal codes.

"This issue is one of incorrect information in our systems for our customer service centers," Flick said. "We definitely screwed up and we are now addressing the postal code gap."

Flick said the publicity UPS received over being an alleged participant in an ongoing Arab boycott demonstrated failings in the system, which are now being fixed.

"All these calls have brought this gap of our system to our attention and we’re moving as fast as possible to address it," Flick said, acknowledging that the online reservation system still requires postal codes for orders to be completed.

A call to UPS customer service showed that several Jewish cities like Efrat, in Gush Etzion, and Ariel, which is just 25 miles from Tel Aviv and has a population of nearly 17,000, are labeled "out of territory." The Palestinian city of Jericho in the West Bank, with a population of 57,000, was also listed as out of territory.

When asked to explain the service gap, the customer service representative read a stock statement that says UPS serves "99 percent of the population in Israel outside the West Bank except for a few remote areas in the Golan Heights and Negev Desert." The statement goes on to say that UPS delivers in all but the most remote areas of the West Bank.

Lior Sagie, UPS Israeli operations manager, noted that during the Israeli conflict with Lebanon over the summer, UPS delivered packages from the United States and elsewhere to northern Israel "under shower of Katyusha rockets."

Sagie told FOXNews.com in a phone interview from Israel that Israel's domestic postal service also does not provide door-to-door service in some smaller Israeli towns and that some areas within the Golan Heights are just too far to make financial sense for UPS. Other places, however, like Katzrin, the largest city in the Golan Heights, is on UPS' delivery route.

"Our service is at par or better than our competitors," Sagie said.

Sagie, an Israeli Jew, acknowledged that some locations do not get service because they are too off the beaten path or not worth the expense. Too few deliveries to those areas combined with Israeli army roadblocks make occasional requests to those areas a cost-prohibitive, half-day project.

"We make only business decisions" about where to deliver packages in Israel, Sagie said, adding that if the charges of observing an Arab boycott weren't so serious, he would be offended by claims of an anti-Jewish UPS policy.

"It's really bizarre," he said of the recent attention.

Sagie said 450 Israeli Jews work for UPS inside the country and UPS-branded drivers deliver to Jewish settlements throughout the West Bank. On the other hand, all Palestinian areas are serviced by Palestinian subcontractors who aren't counted as UPS employees. In all, 80 percent of the population in the West Bank is serviced by UPS.

Palestinian subcontractors "also don't cover 100 percent of Palestinian territories," he said. Some Palestinian subcontractors will deliver packages to violence-torn Gaza, however, where they are residents.

Flick said the shortcoming in the automated system had increased his awareness of the Israeli-Arab conflict, saying he had not known the sensitivity of the issue until confronted by the clarion call to Jews to point out UPS' perceived delivery bias.

"I'm a German from Minnesota, I can't answer you here," Flick said when asked about the Arab boycott of Israel. "A lot of times, it's responses like this that create changes in the system."