Yes, it can. Sometimes, when a PO hasn't seen a type of label before they will reject it not realizing what it is. Take it to the PO, ask them to explain why it was returned.
If it was one of the reasons stamped on the package that doesn't apply because it was an Etsy label (postage was paid for via an electronic method/no stamps, & the customs form was submitted electronically) then ask them to educate the person who rejected it so it doesn't happen again and to accept it for mailing without additional postage since it shouldn't have been rejected.