UGG Australia is one of many brands that will be scrambling to find a solution after Australia Post halted certain services to the US due to Donald Trump's impending tariff change. (Source: Facebook/Getty)
The iconic UGG Australia brand has been using Australia Post for the entirety of the 44 years it's been in business. CEO Lena Fishman told Yahoo Finance that 90 per cent of their direct-to-consumer sales go to customers in the US
"It's a bit of a shock," she said. "We're still receiving US orders today, and our greatest concern is how everything will be processed."
Products from Australia that do eventually get into the US will be hit with a 10 per cent tariff.
But if they're valued over a certain amount, they'll attract an additional tax when imported.
Fishman said their average price point per sale is around $200, and they are prepared to take the $20 hit for each pair of UGGs that reaches American customers once a solution is found.
But she admitted that this comes at a fairly brutal time for retailers like hers who are trying to keep the lights on while they battle against online marketplaces like Shein and Temu.
"The Australian marketplace is not doing well," she told Yahoo Finance.
"In our industry, people are selling a variety of synthetic products, or falsely advertised as Australian-made, especially from overseas, either through warehouses or direct-to-consumer."
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Aussie businesses set to suffer from Trump change
Dr Nicola Charwat has warned that UGG's troubles will be similar to many Aussie businesses that deal with US customers.
The Monash Business School senior lecturer said operators will be searching for answers after Australia Post's move.
“The impact in Australia will primarily be felt by small businesses that sell directly to American consumers," she said.
"This includes businesses specialising in sustainable clothing and gifts, as well as distinctly Australian goods such as cosmetics, food and wine."
Charwat said American consumers will be the "real losers" of the postal service's decision as they will either be restricted from accessing certain goods or be forced to pay much higher prices if retailers pass the extra import costs onto them.
Since Trump's tariff announcement back in April, Shippit said there has been a 36 per cent drop in shipments from Australia to America.
The shipping software company's co-founder and joint CEO, Rob Hango-Zada, told Yahoo Finance it's been a "chaotic" period for Aussie businesses and Australia Post's decision, which he called "completely unexpected", is just another nail in the coffin.
"Everybody's been trying to clarify the requirements and really figure out how to implement the mechanisms to collect duties and taxes to calculate them accurately," he said.
"The risk of misdeclaration could mean things are held up in customs, or at the very worst, they could be pursued for legal fees and fines. So there's been quite a fair amount of compliance work that's needed to happen in order to meet the deadline."
Why did Australia Post suspend its services to the US?
Donald Trump is suspending the De Minimis exemption for inbound goods on August 29.
This exemption used to allow goods worth under US$800 (AUD$1,233) to arrive in the US without attracting extra taxes.
However, from Friday, these items will be subject to new tariffs associated with their country of origin or a flat fee of more than $80.
Only parcels worth US$100 (AUD$154) or less will be exempt from fees.
Aussie businesses with customers in the US have been forced to find other ways to send products across the Pacific Ocean after Australia Post's decision. (Source: Getty)·Xinhua News Agency via Getty Images
“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," Australia Post Executive General Manager, Parcel, Post & eCommerce Services, Gary Starr, said.
“Australia Post continues to work with US and Australian authorities and international postal partners to resume postal service to the US as a priority.”
The temporary suspension will affect Australia Post's Business Contract, MyPost Business and Retail customers.
It is now working with Zonos, an authorised US Customs and Border Protection (CBP) third-party provider, to find a solution.
Australia Post joins bevy of other postal services in halting operations to the US
Australia Post's move is part of a global trend ahead of the August 29 deadline.
India, Germany, Italy, Austria, the UK, Japan, South Korea, Singapore, Thailand, Belgium, Denmark, and New Zealand have all announced plans to pause or reduce certain services for US customers.
Global transport company DHL revealed on Monday that it would stop accepting parcels containing goods from business customers headed for the US.
Sendle, an Australian-based virtual courier company, announced a similar move.
"If a parcel is delayed and gets caught in the transition, a small business could face a large bill that they can't pass on to their customer," said James Chin Moody, co-founder and president of Sendle.
"This is why many carriers, including Sendle, have temporarily suspended services. It's a giant risk to small businesses, and it's our priority to protect them."
However, FedEx revealed it will continue to send packages from Australia to the US.
"As an express carrier, our international express offerings are not impacted by the decisions of postal operators," Peter Langley, Regional Vice President, FedEx said.
"Amid these shifts, we continue to focus on delivering the outstanding service and expertise our customers know and expect."
