We’re a US-based apparel brand shipping to Europe. We’re considering using Shopify Markets to collect duties and VAT at checkout (DDP) so customers see the full landed cost upfront.
One thing we haven’t been able to get a clear answer on is returns.
If a customer returns an item where duties/VAT were collected at checkout:
If the item is returned, is there any mechanism for the merchant to reclaim those duties/VAT, or are merchants typically expected to refund the customer out of pocket?
Does Shopify offer any workflow for duty/VAT reversal on returns, or does the customer have to pursue a customs refund themselves?
Would love to understand how Shopify expects merchants to handle this scenario in practice.
Hey @CDWstore! This is a great question and it can be tricky.
The short answer: Once an order is fulfilled and shipped, duties/VAT are gone. There’s no automated mechanism in Shopify to reclaim them, and you’ll typically be refunding the customer out of pocket for that portion.
Here’s how it actually works:
Before fulfillment: If you cancel/refund before the order ships, you can refund duties and VAT to the customer, and those funds come back to you (since you haven’t purchased the DDP label yet).
After fulfillment (the tricky part): Once you buy that DDP label and ship, the duties and VAT get remitted to customs authorities.
The carrier doesn’t return the duty/VAT portion of DDP labels
Shopify doesn’t provide a workflow for duty/VAT reversal
If you want to refund the customer for duties/VAT, that comes out of your margin
Can you reclaim from customs yourself? Technically, you can contact the destination country’s customs authority to try to recover import taxes. But the process to recover import taxes can vary between regions, and import taxes that have been paid to a country or region’s customs authority aren’t always recoverable.
In practice? For individual returns, this is rarely worth pursuing. The paperwork and time involved usually exceeds the value you’d recover.
What most merchants do:
Update your return policy to clearly state duties/VAT aren’t refundable on returns
Offer store credit instead of refunds for international orders (you retain the sale, customer gets value)
For low-value items, consider “returnless refunds” where you refund without requiring the item back (avoids paying return shipping + losing duties twice)
Build duty costs into your margins if you want to offer full refunds as a customer experience play
If you’re using Managed Markets specifically: Same deal - After the Managed Markets order is fulfilled, refunds aren’t provided for duties, customs fees, or VAT.
There is one more detail to consider: if the value of your shipments falls below the low value consignment simplifications IOSS and UK VAT thresholds, you should register. Not only is VAT liability removed on returns, it is automatically returned when working with EAS Project.
For DDP shipments, VAT is possible, in theory, to recover but duty is gone.
We are expanding our DDP which is currently available for Swiss merchants only. The more advanced data management and integrations allows us to return the VATs of returned DDP shipments as well. Automatically.
Good question — duty refunds on returns are one of the trickiest parts of DDP international shipping.
The short answer: it depends on the carrier and the destination country. In most cases, the merchant absorbs the duty on returned items. Here’s why:
When you ship DDP, you pre-pay duties to the carrier (FedEx, DHL, etc.), who pays the destination country’s customs authority on import. If the customer returns the item, the customs authority doesn’t automatically refund the duty. You’d need to file a formal drawback claim, which is usually only worth it for high-value shipments.
In the EU specifically, VAT on returned goods can sometimes be reclaimed if the goods are re-exported and you have documentation proving the return. But it’s a manual process through each country’s tax authority, and most SMB merchants don’t bother because the administrative cost exceeds the refund.
Practical approaches most merchants use:
First, factor a small returns buffer into your pricing for EU markets. If your return rate is 5-10% and duties average 3-5% of product value, that’s a 0.15-0.5% margin impact — usually absorbable.
Second, for high-value items, consider offering exchanges instead of refunds for international orders. The exchanged item ships out under a new customs declaration and the duty situation is simpler.
Third, make sure your HS codes and Country of Origin are accurate on every product. Wrong codes can mean you’re overpaying duties in the first place, which makes the return loss worse. If you have a large catalog, search the Shopify App Store for “hs code classification” — accurate codes upfront reduce the duty you’re paying and potentially losing on returns.