Australian small businesses exporting to the US are facing a sudden new hurdle: The de minimis exemption, which allowed goods valued under $800USD to enter tariff-free, has ended. From this week, shipments from Australia between $100 and $800USD will attract either a 10 per cent tariff or a flat US$80 fee – whichever is higher.
International carriers are suspending US deliveries while they reconfigure systems to process the new charges. Small Australian businesses have seen their US-bound orders left in limbo for the time being – and their entire export strategies upended.
Vincent Candrawinata is one such business owner. His company relied on splitting shipments into sub-US$800 bundles to save on freight costs, but that option is now gone.
“People think Australia is being slapped with a minimal tariff,” he told ISB. “But what sounds like a little is actually a lot. What am I going to say to the customers?”
For Candrawinata and owners like him, the impact is more than financial.
“The profit has taken a hit, but in terms of my dreams, and emotionally, it’s a mixture of anger and sadness,” he said.
So where does this leave Australian SMEs hoping to grow in the US market?
Should businesses give up on the US?
Despite the added cost, many entrepreneurs argue the US remains too big an opportunity to ignore.
“The American market is a very big market, and the volume there will do wonders for our growth,” small-business owner Beatrice Toh told ISB. Toh had already invested significantly in expanding her business, Hey Doodle, to the US when the new tariffs were announced earlier this year – and decided to remain in the market rather than pull out.
“If you want to play in their game, then you’ve just got to play by their rules,” she said.
E-commerce strategist Lyn Nguyen agreed. “If you wanted to really grow your business and brand, I would still move into the US,” she said. “The US market is so big that there’s such good opportunity there.”
Workarounds and risks
Australian businesses who want to keep exporting to the US are already finding ways to absorb the costs. Toh is currently developing more cost-effective products and reviewing her freight strategy.
“Previously, we would send less than container load, but now we’re consolidating shipments so that we have a full container,” she said. “You can save quite a bit doing that.”
Nguyen recommended using a US-based third-party logistics provider to manage compliance and fulfilment. She also urged businesses to weigh manufacturing options, but noted that for most, producing in lower-cost countries will remain more economical than moving production stateside.
Meanwhile, she’s already seeing businesses using new loopholes. For instance, some businesses are lowering their tariff bills by reclassifying part of what they pay suppliers as “labor” instead of “goods,” which reduces their taxable import value.
But Nguyen cautioned that such tactics may be short-lived. “I don’t know how long that will last. I feel like the US government will probably put something in place that says just the whole value of the invoice [will be taxed].”
Uncertainty bites hardest
It’s this unpredictability that Vincent Candrawinata finds the most worrying.
“The tariff isn’t the biggest problem – I will plan and find a way,” he said. “It’s the uncertainty that is the most worrying. I continue to feel very supported by the Australian government, but they genuinely have no idea. It’s scary when officials find out about this at the same time as everyone else.”
It’s still uncertain when carriers will resume shipments to the US as they scramble to adapt to the changes. Currently, Australia Post is working with a third-party shipping company, Zonos, to restart parcel delivery to the United States. Speaking to the Australian Financial Review, a Zonos spokesperson said system updates will be “up and running as soon as possible”.
On its website, Australia Post has advised business customers to set up a Verified Account with Zonos once postal services resume to ensure shipments are accepted and processed in time.