Package lost on way to Italy?

A very likely hypothesis is that the package was stopped at customs and the addressee requested to do something - it may be issuing a declaration about the value, it may be paying duties. Usually couriers are much more efficient about this step than the ordinary postal service, that in Italy often charges a few euros just to decide that no duties were to be paid...

@lachera thanks for the reply, that could happen even though Italy said they never got the package? Do you happen to know what happens next if this was the case? How long could it be in customs for? That's what I was originally worried about! The seller I'm returning to in Italy was not be cooperative about the return in the first place...

Could be that the receiver is reluctant to pay the import duties.

Does anyone know what happens if the receiver won't pay customs? Wouldn't the Italian post say that is what was happening if that was the case instead of saying it never got there?

If it was addressed to a person or business and they did not pick it up, I think it's probably at MXP. If you sent it registered, every point at which it is transferred is supposed to be signed off.

You could ask USPS to track it, perhaps retake possession of it and return it to you. Then send it by private service (fedex, UPS, etc),

This happened to me once when I sent something to a friend, and it sat at FCO Customs until they returned from vacation.

@zoe Thanks for the reply, USPS said they cannot track it once they give it to Italy that's why they did an inquiry into it and they said Italy told them they never received it. Any other way to get it back if it's where you think it might be?

I have no other ideas, sorry.

I have just explained a likely explanation. It may also happen that the receiver was notified by ordinary mail that he has a package to clear customs, and this may take some days. But if it is idling at customs and the receiver does not collaborate, it may stay there a long time.

Just for giving an idea about shipping times, some recent experiences: I received to my Italian private address a few Xmas gifts from Japan by ordinary mail. No customs to clear - it was just an heavy envelope - we got our Xmas gifts by the end of February.
I also received three heavy shippings (four or five pieces each), sent to my business address by UPS from a NY address. Two of them cleared customs at Bergamo, one at MXP. In each case the courier contacted me by email asking to confirm the declared value and declare a custom code if known, fairly routine stuff managed by couriers, it took a couple of days to clear customs at Bergamo and four days at MXP. But we are talking UPS, were it managed by postal service I would expect for the thing to take much more time, not being managed by email and being charged a few euros on pickup.

lachera seems to have the most likely scenario since you shipped with USPS. Lesson learned, in the future for expensive items that you need tracked oversees, or that are time-sensitive, always use a private carrier like UPS or FedEX. For one thing, the USPS can only control tracking when its in their possession.

You just need to wait. Maybe the receiver will sign for it and pay any customs dues. Maybe they won't. If they don't it should be returned. That will take a few months for sure.

There is also the slim possibility that it was stolen once in Italy. In that case, you'll never know or hear anything.

If the package isn't picked up, and is returned to you, it will take several months. I purchase foreign language books for a university library and last year I had to return a duplicate copy to amazon.it. UPS shipping cost way more than the value of the book, so we shipped USPS using the label amazon.it provided. Three months later the book was back on campus, as no one had ever picked it up. So hopefully, if the package isn't stuck in customs, it will make its way back to you.