Small businesses in Australia are facing significant challenges following the announcement by Australia Post of a temporary suspension of services to the United States. This decision, made on August 26, 2023, is primarily due to new import tariffs imposed on postal items sent to the US and its overseas territories. For entrepreneurs like Cameron Smith, who sells second-hand car parts through eBay, this suspension threatens to undermine profits and limit market opportunities.
Approximately 10 percent of Smith’s sales last year came from American buyers. He expressed concern regarding the financial impact of the recent changes, stating, “Selling to the US allowed me to benefit from certain car parts being rarer in the American market.” With a wider pool of customers and favorable exchange rates, US sales provided a crucial revenue stream. However, the current situation has forced him to halt sales to American customers.
Changes in Shipping Regulations
The suspension affects all postal items, with Australia Post stating that, until further notice, only letters and documents with no commercial value, along with gifts valued under US$100, can be sent to the US. According to Louise Grimmer, Associate Professor of Marketing at the University of Tasmania, the new tariffs resemble a tax imposed by governments on imported goods to protect local industries. She noted that the US executive order now requires the country of origin to be declared on all shipments, making compliance more complex for businesses.
“This change is going to have a huge impact on small and medium-sized businesses in Australia,” Professor Grimmer said. The Australian Bureau of Statistics indicated that the US was Australia’s fifth largest destination for goods exports in 2024. Given that small and medium enterprises constitute 93 percent of Australia’s exporting businesses, the repercussions of this suspension are likely to be widespread.
Impact on Small Businesses
The timing of this announcement is particularly troubling for small businesses, as many rely on the holiday season to generate a significant portion of their annual sales. Professor Grimmer emphasized that any drop in profits could be detrimental, especially during a cost of living crisis. Smith echoed these concerns, stating that with increased shipping costs, his profits would dwindle to almost nothing. “That would be the point where there isn’t a profit in shipping those items, so you simply wouldn’t,” he explained.
While other shipping services like FedEx and USPS continue to facilitate shipments to the US, concerns remain regarding the potential for goods to become stuck at the border. Smith noted that although alternatives exist, they often come with unsustainable costs, significantly exceeding what Australia Post previously charged. “I did some comparison prices and it was more than double what Australia Post charged for what I send,” he said.
The requirement for specifying the country of origin on shipments adds another layer of complexity for sellers. Smith raised questions about whether he would face tariffs as the Australian exporter or if the duties would apply based on the country of origin, such as Japan for many car parts.
While the immediate impact on Smith is somewhat manageable, he acknowledged that businesses with a larger American customer base would likely suffer more acutely. “I hope it will be resolved quickly,” he said, reflecting the sentiments of many small business owners grappling with the repercussions of this significant change.
