Mailing phone with battery prohibited?

I sold an iphone on ebay recently and tried to mail it today; the post office told me it's prohibited to mail the phone outside of Japan because of the lithium ion battery inside of it.

I find this absolutely ridiculous and unbelievable; it is written on Japan Post's website that Lithium Ion batteries are considered hazardous however thousands of businesses in Japan are mailing electronics with batteries overseas.

Does anyone have experience sending something like a digital camera or a cell phone with a battery in it overseas?

Yes, shipping LiIon Batteries is prohibited, and you are also not supposed to pack them in checked luggage when travelling. Other countries also prohibit them in mail so it isn't just a Japanese thing.

The English info on the japan post website, however, is unclear whether you can ship by surface mail (a less than ideal option).

Personally, I have shipped numerous things such as pdas and other electronics containing lithium batteries without being aware of the restrictions and the post office didn't bring it up. Perhaps list it as a pda, or used electronics in the customs form? That's usually sufficient for customs and insurance purposes.

http://www.post.japanpost.jp/int/use/restriction/poison...
http://www.post.japanpost.jp/int/question/12_en.html