International order not collected in time – Amazon refunds customer in full – Buyer collects item

Can somebody please explain how this works/is allowed?

1) Item sold on Amazon Italy from UK. Posted via Royal Mail International Tracked.

2) Item was attempted delivery on time (04 November)

3) Buyer messages days after delivery attempt to claim item didn’t arrive.

4) I explained that you should have received instructions on how to collect your order from the local postal network.

5) They don’t response, they open an A-Z claim. Amazon refunds for non delivery.

6) Over 1 month later (12 December), the item is marked as collected.

7) Amazon email me today to say that it won’t be counted as a defect (ODR) but the buyer is entitled to a full refund.

Why is the buyer entitled to a full refund when they didn’t collect the item on time? How is any of this my fault? If Amazon refunded the customer with MY money, then Amazon owe me that money back. How is this allowed? Because the buyer didn’t collect? In what world is that my fault?