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The amount I insured the package for is what I would have charged for the ponies I made if I was selling them instead of doing a trade. Edit: It's a custom swap I'm doing with an arena member, via Deviant Art. Any time I ship overseas, I get insurance on the pony(-ies) in the package, as I've had ponies go AWOL every time I didn't.
What is the appeals process in her country? I have had similar things happen, where an item was 'declared' at $100 and I got dinged with customs fees, and it was supposed to be only $10. I appealed, and had to get a signed letter from the sender stating that the value of $100 was an error. Perhaps she can pay the duty fees, and then appeal to get at least part of it back?
Import duties and fees are just a fact of life, sadly. Your trade partner should be aware of what the guidelines are in their country. Sending it back isn't a good idea, IMO. Paying to ship it both ways again would be costly. And if the item was insured for that much, then presumably you don't want to risk it getting lost, especially if you resend it without insurance. Since it was a trade, maybe you two could split the cost of the fees if you want? You're not obligated to of course.