If it was me, I would cover the cost or some it as a lesson learned and refund them the $38.13 as long as you're financially able to...don't take a complete loss. Then, I would double down on adding this info to your listings in addition to Etsy's policies and also ship methods that won't incur these fees in the future.

As a customer I would be upset that this surprise fee happened. You might end up getting a bad review regarding unexpected fees because of the way you shipped it. That might cost you $38 or more in lost future potential revenue. The important thing is not to allow this situation to be repeated.

Just my 2 cents. I know this sub tends to tell customers to screw off because it's in the policy/terms, but sometimes goodwill can go a long way. Again, if your product profit is like $2, then obviously you might have to go another route.