First - because of his use of a freight forwarder - he forfeited his buyer protection. Second, because it was returned to sender, it also mostly cost him his buyer protection - if you purchased postage without altering the address provided by ebay. When you receive this item back, depending upon your morals, you can then refund the buyer any amount you wish up to the full payment he made. But, you could deduct a processing fee if you wish that covers the amount of the transaction fee ebay collected (a full refund would entitle you to a refund of the fees from ebay - I believe you need to request a credit back for them directly with customer service etc.).
If they want to repurchase from you, balance your response accordingly. But, definately relist on ebay for them to repurchase if yes. Explain to them that they have to process the address in their ebay account first because, you are not permitted to manually alter that address once they accept the purchase process. It endangers seller protections doing so.
