Declare the correct value on the Customs form?

let me add a different perspective, with a European brain (Eastern European, even worse)

We deal with taxes and customs and fees every day. It's a nightmare. A price tag of X really means 3X at the end. It's pretty normal to be "lean" every possible way and use standard low numbers when declaring value. It can totally NOT be a red flag, just routinely avoiding getting screwed. Many times, customs doesn't care if it's an item returned back to its origins. They are trained to screw you. They have quotas. I could write a book about my stories sitting in their offices with my beaten up laptop as they claimed I was trying to sneak it into the country and sell it. 

On the other hand, $1200 for a record, not as described IS a red flag. 

@OP Did you pay duties on receipt of the album and if so, did the seller declare the full value, i.e the price you were paying them, when they exported the goods to the US?

Sorry but hope you can afford the loss. 

My holier-than-thou assumption is you're out 1200 bucks.

Lots of holier-than-thou people assuming that someone is cheating here and ignoring the fact that noting is being imported so no duty is due.

You don't even want to know my thoughts on this...

Ouch. I hope you can afford the loss on this, but it doesn't sound good. 

what someone else said. You’re returning used goods. There should be no charge.On the other hand, what customs inspector is going to question a value of $50 for one LP? No LP ever made is worth $1200. They might be more inclined to question such a huge value. Then there’s your own self interest; you want your money back.

I don't know anything about customs but the above comments are spot on, fraud is bad on any level and if you got something that wasn't nearly as described, and you put a $50.00 value on it, your refund will be $50.00

Of course if it is "not as described", then perhaps $50 is an accurate value.

I do not profess to know the intricacies of US customs costs, but if the shipper charged you $1,200 for something that was "not as described", I would not trust him to do what's right for you.

Now, or ever, is no time to engage in fraud.

Totally agree with the logic carlsbad2 is stating. There is a "return for repair" box right on the customs form one fills out with the couriers, I would fill that out. But here is the issue- the album ends up snapped in half at the consignee, it is only insured for $50 (you can't insure for a higher amount then the declared value). Now the fight goes on for who is on the hook for the 1200 paid. This assumes the carrier will even entertain paying for damaged items. Last I enquired they only would cover loss, not damage, unless it was original packaging from the manufacturer, which seems odd when you are talking about an album. I would still do it (mark it at $50) with the understanding that the original shipper is on the hook. 

Wait, did you say $1200 for one album?! 

The seller should not be paying any import duty on an item that was shipped out and returned.  He isn't importing anything, the item started in his country and is ending therre.  Duty should not apply.    I shipped a streamer to europe for upgrade and it took a while but I eventually figured out a code that didn’t charge either of us import duties.

In your case, it sounds like the seller is just trying to minimize the import duty that he is wrongly charged so I would support that. Better answer would be to find the harmonized tariff code for "returned goods" or something similar so that he is not charged anything.

Jerry