US tariffs force Australia Post to impose delivery freeze
Small retailers face devastating losses as Australia Post halts US shipments, with some forced to abandon up to 30 per cent of their revenue stream overnight.
Small retailers only just starting to forge their paths in the US market have been left reeling by Australia Post’s sudden decision to stop regular shipments to the US.
“This has certainly put the handbrake on,” says Glenn Corbet who set up Stryper Golf in Queensland nine months ago and has been shipping his patented golf aids to the US in growing numbers since then.
Until the shock announcement Corbet had been shipping about six of his $300 products per week to the US at a cost of about $70 per item. Using a specialist shipping firm such as DHL came in at about double the price. “It just wasn’t viable with any of the others,” he says.
That’s the brutal twist. Larger companies with greater scale can negotiate significantly better rates than small retailers through the likes of FedEx and DHL.
Australia Post has suspended its regular postal services to the US and Puerto Rico in response to “recent significant changes” to customs and import taxes. US President Donald Trump has scrapped the De Minimis exemption for inbound goods (below $US800) and now requires the prepayment of tariffs prior to items landing in the US.
“We are disappointed we have had to take this action; however, due to the complex and rapidly evolving situation, a temporary partial suspension has been necessary to allow us to develop and implement a workable solution for our customers,” said Gary Starr, Australia Post’s executive general manager of parcel, post and e-commerce services.
Co-founder of maternity clothing brand Apero, Laz Smith, made the tough decision last week to close off orders to the US in preparation for Australia Post’s decision on Monday. The market accounts for 25 to 30 per cent of Brisbane-based brands’ total revenue of up to $10m last year.
“That’s a mitigation of risk for us. We didn’t want the reputational damage or the risk of customers getting stuck in this,” Mr Smith said.
He and his designer wife, Rachel, are now looking for alternative ways to sell products in the US, including third-party logistics hubs or by setting up an American entity with stock on hand.
They are hoping to still take advantage of peak Black Friday trade in just 13 weeks, but are running out of time to adjust their stock levels on order from suppliers.
“As it stood, we were doing a lot of revenue in the US,” Mr Smith said.
“It’s a very, very hard thing to forecast...because are we building in 30 per cent downturn in our sales projections? Or do we think we can pivot?”
Clothing designer Ashley Dyer says 20 per cent of her handmade clothes usually sell to the US, where she has a “really solid customer base.”
Dyer is currently in a production lockdown as she creates the next line of clothing for her Uncle Phuncle label and is hoping that by the time she opens orders on all her new stock, this shipping crisis with the US will be finished.
“It’s a mess really,” Dyer sighs.
The Melbourne-based fashion designer is part of a small tight-knit group of creatives who are all dependent on every sale they can get to stay afloat. “We rely on every single order so I’m hoping this will get sorted out.”
Dyer says shipping to the US was already a complex maze of paperwork and fears these latest changes will push some in her community to breaking point.
“It’s so expensive to ship to the US as it is, and I think a lot of people will just think ‘stuff it,’ because they just don’t have the bandwidth to deal with these extra changes.”
Companies such as FedEx have already set up systems to ensure shipments can continue and Australia Post said it is still able to ship products through its “commercial lanes,” which requires companies to have an account manager.
The temporary halt to normal shipments is, “in-line with action taken by numerous other postal operators globally,” said Australia Post in a statement. Most European countries halted shipping to the US on Monday.
Australia Post refused to comment on value of the amount of shipments that would be impacted by its sudden decision to stop services. It asked customers to register with US firm Zonos, as a third party operator that calculates all tariffs and charges once it resumes services.
Freight & Trade Alliance director Paul Zalai says while “some logistics providers anticipated and prepared for the changes, postal authorities globally have been caught short,” by the changes, which he predicts will “devastate” smaller retailers and manufactures.
Many Australian businesses manufacture in China or Vietnam, so the tariff shock is higher than the 10 per cent Trump handed down to Australia.
It’s the same problem Corbet faces with his Stryper golf aids.
Using the Zonos system that Australia Post has asked customers to use, Corbet’s top selling product, which retails for $268, will now be subject to import duties of $113.63 if he uses China as the country of origin, plus an estimated freight charge of $70.
If he uses Vietnam instead (his product uses parts from both countries) his import duties are $66 on top of the estimated $70 freight charge.
On top of that, he will be charged about $32 per order from Zonos. All these charges mean it will cost more to sell his products in the US than it does to make them.
“I understand people will say ‘well you should get your product made in Australia,’ but the cold hard reality is that I tried to do that, and it was approximately 2.5 times the cost. I would not have been able to even make it for what I sell it for.”
For Corbet now comes the tough part. He will need to change his website to prevent US customers ordering and refund existing orders.
“The thing is, it’s my invention,” says Corbet. “It’s not like it’s a cheap Chinese knock-off flooding their market - it’s a unique product. Just because it was manufactured in another country that the US happens to dislike, that’s a huge penalty on us.”
For enamel pin and novelty sock maker Tasha Miller from Jubly-Umph the writing was on the wall before Australia Post’s announcement. She pulled the pin on US orders before Tuesday’s announcement.
“We made the call because there was just no certainty for us,” says Miller.
Before this week, the US was 30 per cent of her revenue and she hopes that Trump might back track on the De Minimis decision.
“They’ve backtracked on some decisions and we are all hoping that will happen again.”
Opposition small-business spokesman Tim Wilson has weighed in on the decision, calling on the Albanese government to sort it out as quickly as possible.
A lot of small businesses depend on Australia Post to ship small goods internationally,” Mr Wilson told Sky News.
“Small businesses are going to be the ones most impacted by this decision.”
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