Lost during shipping - Priority Flat Rate Box - What Can I do?

I sent an iPhone 5S to Saudi Arabia from America. I shipped it via USPS Priority Flat Rate Box. The last update I've received was that it processed through Chicago, 32 days ago. Never said accepted into customs or anything. I sold this on eBay, and now the buyer is demanding a full refund. What can I do?

I realize now that I should have shipped Express or FedEx or something, but I didn't ship it that way… I've called all the post offices and customs and have been told basically, there's not much I can do. Has anyone experienced this or can anyone advise me at all with something I can do to soften the Full Refund blow?

There's no softening of the blow for this. You're sunk.

By the way, do NOT ship to the Middle East for any reason. That includes all African countries. Even when the actual customer is honest the customs workers aren't. Most of the time it ends like this. Italy and South America is the same along with most members of the former Soviet Republic. Spain used to be pretty bad but lately there have been fewer complaints from that area.

I'm kinda surprised because Saudi Arabia isn't normally associated with this kind of issue, but, you now see the advantage of keeping a package in the hands (chain of custody) of one company. Post Office is especially an issue, before you mail something, you have to ask yourself, how reliable is the PO at the other end.