Short answer: every cross-border return crosses customs twice, once on the way back and once as paperwork. The return parcel needs its own commercial invoice or customs declaration marked clearly as returned goods, with a reference to the original shipment. If the goods come back to the US, you can reclaim the import duties you paid through returned-goods relief, but only if the paperwork chain is intact. If you route returns to an EU hub instead, the return leg stays inside the EU and the customs question disappears, though VAT treatment still needs attention.
A return is a second customs event
Most brands plan the outbound leg in detail and treat the return as a shipping problem. Customs treats it as an import. When an EU customer mails a parcel back to your US warehouse, that parcel is an import into the United States the moment it lands. It needs a declaration, a value, and an HS code, same as any other import. Parcels declared as "return" with no value and no code get held, opened, or assessed at an arbitrary value, and the warehouse ends up paying storage while someone figures out what the box contains.
The same logic applies in reverse. If your goods were imported into the EU on a DDP basis and the customer returns them to an EU returns hub, the return leg moves within the EU customs territory and no new import declaration is needed. The customs friction concentrates entirely on the returns that physically cross a border back out. That asymmetry is why the routing decision, US warehouse versus EU hub, is really a customs decision wearing a logistics costume.
The paperwork for the return leg
For a return going back to the US, generate a commercial invoice or pro-forma invoice for the return shipment, just as you would for a sale. Mark it clearly as returned goods, state the original order number and the date of the original export, and list the goods with their HS codes and the value at which they were originally exported. The value matters: customs needs it to process the shipment and, later, to calculate any duty relief. A zero-value declaration invites an assessed value you cannot control.
Include proof of the original export in the document set you keep, not necessarily in the box. The export invoice, the original customs declaration reference, and the tracking record that shows the goods left the US are the documents that support a returned-goods relief claim later. Carriers can generate the return label and its electronic customs data from a template, but the template has to be built: most shipping apps default return labels to generic descriptions and missing codes, which is exactly the data quality problem that gets parcels held.
Claiming returned-goods relief in the US
US customs law allows duty-free re-import of goods that were exported from the US and are returning in the same condition, under the returned-goods provision. If you paid import duty bringing the goods into the US originally (for example, inventory imported from your factory), and then exported them to an EU customer, a return that comes back can re-enter without paying duty again, provided you claim the relief and document the chain.
The conditions are specific. The goods must not have been advanced in value or improved in condition while abroad, normal wear from a customer trying them on is fine, but repairs or alterations are not. You need the export documentation showing the goods left, and the import documentation showing they came back. The claim is made at the time of the return import through your broker or your filing process. Miss the export documentation step and the relief claim has no legs, which is why the paperwork discipline has to start at the outbound sale, not at the return.
VAT and duty on the EU side of a return
On the outbound sale, if you shipped DDP with IOSS, you collected VAT at checkout and remitted it. When the customer returns the goods, the VAT you remitted for that sale is generally adjustable: IOSS filings can be corrected for returns, so you are not stuck paying VAT on a refunded order. But the correction only happens if you file it. Brands that never adjust their IOSS returns quietly overpay VAT on every return, month after month.
If you shipped DAP and the customer paid duty and VAT on delivery, a return does not automatically refund those charges to the customer. Whether the customer can recover them depends on the member state and the carrier's process, and in practice most of it is unrecoverable. This is one of the quiet arguments for DDP on EU orders: returns are cleaner for the customer because the brand, not the shopper, controls the duty and VAT paper trail.
What to fix in your returns flow this month
First, decide the routing. If return rates to the US are high enough that re-import paperwork is a weekly chore, price an EU returns hub and compare the hub cost against the duty relief you are leaving on the table plus the warehouse delays. Second, build the return customs template in your shipping app: returned-goods marking, HS codes, original values, order references. Third, brief your broker or filing process on returned-goods relief so the claim is made at import, not discovered months later when the documentation has gone cold.
Returns will never be free, but they do not have to be a customs surprise. The brands that handle this well treat the return as a planned import with planned paperwork, not as a box that shows up and causes problems.
Do we need the customer to fill out customs forms for the return?
No, and you should not ask them to. Generate the return label and its electronic customs data yourself, with the returned-goods marking and the correct codes. Customers filling out customs declarations by hand is how you get parcels declared as "clothes, value 0" and held for weeks.
What if the returned goods were manufactured outside the US?
That is the normal case for most DTC brands. Returned-goods relief in the US applies to goods exported from the US regardless of where they were made, as long as you can document the export and the goods return in the same condition. The origin of manufacture does not disqualify the claim; the missing export paperwork does.