United StatesChange Country

FX International Payments

EU Aims to Reduce Parcel Delivery Costs for International Trade

By Zack Andresen

A provisional agreement reached by the European Commission in December 2017 aims to improve the affordability of cross-border parcel delivery, addressing a key barrier to international trade for U.S. and EU businesses.1,2 The agreement is part of the Commission's efforts to boost e-commerce by making it easier for small- and medium-sized enterprises (SMEs) and consumers to buy and sell products online across the EU.3

The High Cost of Cross-Border Parcel Delivery Among EU Countries

 

The Commission's 2015 Consultation on Cross-Border Parcel Delivery found high prices to be a primary concern among exporters and EU consumers alike.4 A 2015 report from Université Saint-Louis Bruxelles found that cross-border parcel delivery between EU member states was 471 percent more costly on average than domestic shipping for the same or similar products.5 A 2016 report from French postal service company Le Groupe La Poste found that less than 50 percent of the price differential could be reasonably attributed to economic drivers, leading the authors to presume that over half the increased cost of cross-border parcel delivery represented additional profit for delivery operators.6 Notably, while one in six EU-based companies made an online sale in 2016, only 44 percent of those companies made sales to other EU member states, according to an EU analysis.7

 

The new EU agreement increases parcel delivery oversight by national regulatory authorities and implements price transparency measures for the services most commonly used by SMEs and consumers in international trade.8 While it does not specifically impose a defined cap on delivery prices, the new regulation aims to lower costs by fostering competitive pressure among delivery service providers across the EU.9 The agreement seeks to encourage buyers to purchase from a wider range of sellers domestically and abroad, while also opening the door for more businesses to engage in international trade with other EU member countries.10

 

Potential International Trade Benefits for U.S. Exporters

 

In 2014, a report from the U.S. International Trade Commission (USITC) investigated the top trade barriers impacting exports to the EU, as perceived by U.S. SMEs.11 It found that while the barriers to international trade between U.S. SMEs and EU countries varied by industry, logistical challenges were common themes. Those challenges included the low reliability and high cost of shipping, as well as understanding and complying with customs requirements and obtaining the correct Harmonized System (HS) customs classification. According to the report, SMEs cited a lack of dependability with some EU postal systems, saying that packages were often lost or delayed. Because of this, some businesses used private couriers, resulting in higher costs that were harder for SMEs to absorb, or ruled out international trade with EU member countries altogether.12

 

The European Commission's new provisional agreement outlines a plan for National Regulatory Authorities (NRAs) to assess whether parcel delivery tariffs subject to the universal service obligation are "unreasonably high" for businesses engaged in international trade.13 The Commission said that previous non-legislative action tied to a 2013 roadmap for single market parcel delivery laid out by the Commission had not improved affordability.14 As a result, NRA assessments detailed in the agreement will look at objective cost factors such as parcel volume, handling costs, and domestic delivery costs to ensure cross-border delivery prices reflect the true costs of service.15 The Commission intends to publish delivery prices online so that SMEs and others engaged in international trade can compare costs across providers.16

 

The new agreement is part of the Commission's Digital Single Market strategy: a set of policies designed to "ensure access to online activities for individuals and businesses under conditions of fair competition, consumer and data protection, removing geo-blocking and copyright issues."17

 

Just 7 percent of EU SMEs online sell cross-border, according to the EU.18 Exports by EU countries to other member states totaled just over 3 trillion euros (roughly $3.7 trillion) in 2015.19 For comparison, U.S. businesses exported just under $272 billion in goods across the EU that year.20 According to the U.S. Census Bureau, more than 98,000 U.S. companies exported to the EU in 2014.21 Of those companies, more than 90 percent were SMEs with fewer than 500 employees.22

 

Logistical issues are not the only challenges for U.S. companies engaged in international trade with EU countries. Others include technical barriers such as stringent local standards and data localization.23

 

The

Takeaway:

A new regulation provisionally agreed by the European Commission aims to drive down international parcel delivery costs and open more opportunity for SMEs to engage in international trade with customers across the EU. While the European Commission's provisional agreement still needs the official approval of the European Parliament and Council, the Commission expects the measures laid out in the agreement to go into full effect in 2019.24 Assuming the measure goes through as planned, SMEs and buyers in EU member states and around the globe may see increased transparency from EU delivery service providers.

Zack Andersen - The Author

The Author

Zack Andresen

Zack Andresen is a business technology writer based in Brooklyn, NY, but currently traveling the world with his wife and son. Learn more at ZackWrites.com.

Sources

1. Trade Barriers That U.S. Small and Medium-sized Enterprises Perceive as Affecting Exports to the European Union, United States International Trade Commission; https://www.usitc.gov/publications/332/pub4455.pdf
2. “EU agrees to make parcel delivery more affordable,” European Commission; http://europa.eu/rapid/press-release_IP-17-5203_en.htm
3. Ibid.
4. “Summary of Responses to the European Commission's 2015 Public Consultation on Cross-border Parcel Delivery,” European Commission; http://ec.europa.eu/growth/content/consultation-cross-border-parcel-delivery_en
5. Econometric study on parcel list prices, Université Saint-Louis Bruxelles; http://ec.europa.eu/DocsRoom/documents/14647
6. The Drivers of Cross-Border Parcel Delivery Prices: An Econometric Study at the EU Level; Le Groupe La Poste; http://www.posteurop.org/NeoDownload?docId=463880
7. “E-commerce in EU enterprises - 1 in 6 EU businesses sold on the web in 2016 - Some difficulties still hinder cross-border sales,” European Commission; http://europa.eu/rapid/press-release_STAT-17-5281_en.htm
8. “Cross-border parcel delivery: What is changing?,” European Commission; http://europa.eu/rapid/press-release_MEMO-17-5246_en.htm
9. “EU agrees to make parcel delivery more affordable,” European Commission; http://europa.eu/rapid/press-release_IP-17-5203_en.htm
10. “Cross-border parcel delivery: What is changing?,” European Commission; http://europa.eu/rapid/press-release_MEMO-17-5246_en.htm
11. Trade Barriers That U.S. Small and Medium-sized Enterprises Perceive as Affecting Exports to the European Union, United States International Trade Commission; https://www.usitc.gov/publications/332/pub4455.pdf
12. Ibid.
13. “EU agrees to make parcel delivery more affordable,” European Commission; http://europa.eu/rapid/press-release_IP-17-5203_en.htm
14. “Cross-border parcel delivery: What is changing?,” European Commission; http://europa.eu/rapid/press-release_MEMO-17-5246_en.htm
15. Ibid.
16. Ibid.
17. “Shaping the Digital Single Market,” European Commission; https://ec.europa.eu/digital-single-market/en/policies/shaping-digital-single-market
18. “Better access for consumers and business to online goods,” European Commission; https://ec.europa.eu/digital-single-market/en/better-access-consumers-and-business-online-goods
19. “Intra-EU trade in goods - recent trends,” Eurostat; http://ec.europa.eu/eurostat/statistics-explained/index.php/Intra-EU_trade_in_goods_-_recent_trends
20. “Trade in Goods with European Union,” United States Census Bureau; https://www.census.gov/foreign-trade/balance/c0003.html
21. 2014 Exports by Company Employment Size to World Areas and Selected Countries, United States Census Bureau; https://www.census.gov/foreign-trade/Press-Release/edb/2014/exh5a.pdf
22. Ibid.
23. Ibid.
24. “EU agrees to make parcel delivery more affordable,” European Commission; http://europa.eu/rapid/press-release_IP-17-5203_en.htm

Related Articles

WTO and the Rules of Global Trade
Global Trade Growth Shows Recovery
The Integration of Developing Economies into the Global Financial System has Reshaped International Trade

Make International Payments

Existing FX International Payments customers log in here