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.