Many shippers, especially those that have grown through mergers and acquisitions, have transportation operations around the world, including the United States and the European Union. While taking a standardized approach to transportation management and procurement would facilitate visibility and control, the fact is that the operating realities of each market are different.
In a recent episode of Talking Logistics, I discussed the similarities and differences between the U.S. and EU truckload markets with Jeroen Eijsink, Present of C.H. Robinson Europe.
“If you look at it from a macro point of view, there are many similarities between the U.S. and EU,” said Eijsink. “We have a very fragmented carrier market in Europe. Most of the carriers that we work with and haul the majority of the freight have maybe 4-10 vehicles. About 90 percent of the carriers in Europe have less than 50 trucks, so that is not dissimilar to the United States.”
That said, “although we have the EU, Europe is not the ‘United States of Europe,’” added Eijsink. “Europe is still a set of sovereign states, which is continuously enlarged,” and this presents both opportunities (such as having an expanding carrier base), as well as challenges (such as staying in compliance with country-specific regulations).
One area where the EU differs from the U.S. is cabotage. A driver in the EU can carry 3 loads in 7 days in a destination country. After that, they can either return empty to their home country or take a cross-border shipment. In contrast, while U.S. carriers can drive into Canada to make pick-ups or deliveries, they have to return back to the United States — that is, U.S. carriers are not allowed to pick up loads in Canada and deliver to another destination in Canada (the same applies to Canadian carriers with regards to operating in the U.S.). More restrictive rules apply along the U.S.-Mexican border, where pickups and deliveries are generally confined to a border zone.
Simply put, cabotage in the EU can ease capacity constraints in certain cases, and also creates competition between Western and Central/Eastern European carriers, which puts downward pressure on costs.
“Cabotage is still a very small percentage of the freight moved [less than 2 percent] because of the restrictions we have around the 3 loads per week,” explained Eijsink. “We believe those restrictions need to be loosened to create a common market, but that will take some time because all of the member states need to allow it.”
Here in the U.S. there is a lot of discussion about there being a diver shortage and about the impact of regulations on driver productivity and carrier capacity. Similar challenges exist in the E.U., especially when it comes to regulations related to minimum wage, as Eijsink explains in the short clip below:
“Recently there’s been a big debate about minimum wage in Europe, where low-pay jobs like those of truck drivers have been subject to minimum wage regulations,” said Eijsink. “Unfortunately, those regulations are made at the member state level and that’s challenging because they are different by country. That means if a Polish truck driver goes from his home base through Germany to deliver a load in France, he is subject to his home rules when he departs, to German rules while in-transit through Germany, and to French rules when he arrives in France. And everybody calculates minimum wage differently.” In short, there’s a lot of administrative work involved and you need to have the right controls in place to make sure you’re in compliance with these regulations.
I encourage you to watch the rest of my conversation with Jeroen for additional insights and advice on this topic, including the similarities and differences between shipper-carrier contracts and how fuel surcharges are managed.
The bottom line is that while there are many similarities between the U.S. and EU truckload markets, there are also many differences, and if you don’t fully understand them and factor them into your transportation strategy and approach, you will have a hard time succeeding in the market.