Canadian Import Duties for Ecommerce: A Margin Guide

Every example and amount on this page is illustrative. It shows the method and is not a benchmark, a quote or advice.

What Canadian Import Duties Ecommerce Actually Measures

Canadian import duties ecommerce calculations measure the customs cost attached to goods entering Canada. The relevant shipment is the product crossing the border, not the order total by itself. The importer of record is generally responsible for paying the duty to customs. That may be the merchant, a distributor, or another party named in the shipping arrangement. Even when a supplier or customer pays the bill directly, the economic cost can still affect the merchant through a higher purchase price, lower selling margin, or reduced demand.

The calculation connects four views of the same cost. Duty paid can increase the product’s landed cost and therefore the inventory value recorded for units still on hand. For units sold, that cost flows into COGS and reduces gross profit and gross margin. The result should be assessed by product and shipment, because a duty affecting one SKU does not necessarily affect the rest of the catalogue. Supplier origin, classification, packaging, and shipping terms also create supplier risk: a change in any of them can change the cost of replenishment.

This scope excludes Canadian sales taxes, such as GST or HST, unless the analysis explicitly asks a tax question. It also excludes payment processing, advertising, fulfilment labour, software, payroll, rent, and other operating expenses. Those costs matter for contribution or net profit, but they are not import duties. ORVX can use a merchant’s product cost model to report product profitability and inventory position, including remaining stock value; the duty input must still be represented correctly in that cost model. For related cross-border margin context, see How US Import Costs Change Ecommerce Margins.

Duty Rate, Landed Cost, and Margin Impact Are Different Measures

A duty rate is a percentage applied to the relevant customs value. It answers: “What rate applies to this imported product, and what customs charge does that rate produce?” A 10% duty rate on a $40 customs value creates $4 of duty, not $8 on an $80 selling price. The rate is useful for classifying exposure by product and estimating the customs charge before a shipment arrives.

Landed cost is the product’s total cost to get into sellable inventory. It can include the supplier cost, duty, brokerage, freight, insurance, and other import-related charges. Landed cost is the right measure for purchasing, pricing, inventory valuation, and product-level gross profit. A duty rate can remain unchanged while landed cost rises because freight or brokerage rises.

Margin impact goes one step further. It measures how import costs change profit relative to realized revenue, after the other costs included in the margin definition. Product cost, advertising, discounts, payment fees, fulfilment, refunds, and returns can all change the result. A product with a low duty rate can still have weak contribution if acquisition costs are high; a product with a higher rate may remain profitable if its realized selling price and other costs support it.

For illustration only, a $4 duty charge is 10% of the $40 customs value but 5% of an $80 selling price before any other costs. That distinction does not show the profit at risk: the answer also depends on how many units sell, whether orders are returned, the product’s cost model, and the advertising attached to those orders. ORVX can calculate realized revenue from delivered orders, product costs, gross profit, net profit, and contribution after advertising, so the operational question becomes the margin change, not the tariff percentage alone. See how US import costs change ecommerce margins for the broader margin treatment.

The Formula, Stated Plainly

Start with one shipment and one currency. Define the inputs as follows: customs value is the value accepted for duty assessment, usually the product transaction value plus any additions required under the applicable customs rules. Duty rate is the percentage applied to that customs value. Duty is customs value × duty rate.

Add the costs that get the inventory to your sellable location. Brokerage is the broker's clearance charge and any related entry fees. Freight is the transportation cost allocated to the shipment. Landed shipment cost is customs value + duty + brokerage + freight, plus any other import cost you deliberately include. Landed unit cost is landed shipment cost ÷ units in the shipment. If brokerage or freight is quoted for the whole shipment, allocate it consistently across units rather than attaching the full charge to one product.

For margin analysis, use realized revenue from delivered orders, not cancelled or returned orders. Gross profit per order is realized revenue per order − landed product cost per order − any other costs included in your gross-profit definition. Gross margin is gross profit ÷ realized revenue × 100. Change in profit per order is new profit per order − old profit per order. If the only change is an added duty, and selling price and all other costs stay constant, the change is negative duty per order: (new landed unit cost − old landed unit cost) × units sold in the order.

• Use customs value and duty to check the import charge itself.
• Use landed unit cost to set product economics, compare suppliers or routes, and assess whether a SKU remains viable after import costs.
• Use gross margin to judge product-level pricing and cost performance.
• Use change in profit per order to quantify the commercial effect of a duty or freight change. Include payment fees, fulfilment, advertising allocation, refunds or other costs only when your chosen profit definition includes them.
• Keep customs, brokerage, freight, revenue and profit inputs in the same currency before doing the arithmetic; do not combine a Canadian-dollar revenue figure with US-dollar costs without a stated conversion.

A Worked Example From Shipment to Gross Margin

Take a shipment of 500 units priced at US$18 each. The customs value is therefore 500 × $18 = $9,000. Freight to Canada adds $1,200 but is tracked separately from the customs value in this example. At a 8% duty rate, the import bill is $9,000 × 8% = $720. At a revised 18% rate, it becomes $9,000 × 18% = $1,620, a $900 increase.

The original landed cost is product cost $9,000 + freight $1,200 + duty $720 = $10,920, or $21.84 per unit. The revised landed cost is $9,000 + $1,200 + $1,620 = $11,820, or $23.64 per unit. The duty change therefore raises cost by $1.80 per unit, even though the product price and freight are unchanged.

Assume each unit sells for $49 before advertising, payment fees, returns, and other variable selling costs. Original gross profit is $49 − $21.84 = $27.16 per unit, or $13,580 across the shipment. Gross margin is $27.16 ÷ $49 = 55.4%. Under the revised duty, gross profit falls to $25.36 per unit, or $12,680 total, and gross margin falls to 51.8%. Contribution after advertising requires subtracting ad spend from this product-level gross profit; it is a separate decision measure from the customs duty itself. A product cost model should use the revised $23.64 landed cost when evaluating current economics, as described in how US import costs change ecommerce margins.

The Mistakes That Make the Number Wrong

A clean-looking spreadsheet can still produce the wrong Canadian import number when its inputs describe the sale rather than the shipment. Retail price is not automatically customs value: a product sold to a customer for US$60 may have a much lower declared transaction value. Using the retail figure builds your markup into the duty base and overstates the charge.

Classification and origin are separate fields, not interchangeable assumptions. The tariff classification determines which rate applies, while country of origin can affect the applicable treatment. Do not infer origin from the US warehouse, seller location, or carrier route. Use the classification and origin supported by the import documentation.

Currency errors are equally easy to miss. A US-dollar invoice, Canadian-dollar duty assessment, and store report in another currency cannot be added as if they were one figure. Convert using a stated rate and date, then preserve the original currency for reconciliation. ORVX keeps a merchant’s trading currency and does not mix currencies in one figure.

Separate the customs-duty calculation from the full landed-cost calculation. Omitting freight or brokerage understates what each unit costs to get into Canada; adding those charges to the duty base when they do not belong there overstates duty. Apply the tariff rate to the correct customs base, not to retail price, total landed cost, or an already duty-inclusive amount.

Finally, do not automatically classify every border charge as COGS. A tax that is recoverable under the business’s registration and filing position is generally tracked as a recoverable tax or cash-flow item, while nonrecoverable charges may belong in cost. Record duty, freight, brokerage, and recoverable taxes as separate fields so margin analysis can show both product economics and cash required at import.

A worked example with real numbers

Assume a US merchant ships 300 units into Canada. Use CAD throughout: the customs value is CAD 40 per unit, so the shipment value is 300 × $40 = $12,000. At a 18% duty rate, the customs charge is $12,000 × 0.18 = $2,160, or $7.20 per unit. Freight and brokerage add $900, but they are separate from the duty calculation.

The landed cost is therefore $12,000 + $2,160 + $900 = $15,060, or $50.20 per unit. If all 300 units sell at CAD 79, realized revenue is 300 × $79 = $23,700. Product cost, duty, freight and brokerage leave gross profit of $23,700 − $15,060 = $8,640, a 36.5% gross margin.

Looking only at duty would show $2,160. That is the right measure for checking the customs charge or modelling a rate change, but not for pricing or profitability. Before duty and logistics, the apparent gross profit would be $11,700, or 49.4%. If advertising costs $3,000, contribution after advertising falls to $5,640, or 23.8% of realized revenue.

This is the practical distinction also covered in How US Import Costs Change Ecommerce Margins: use the duty figure for customs planning, landed cost for unit economics, and gross or contribution margin for commercial decisions.

General information only: tax, duty and import rules change and depend on your situation, so check with an accountant or the official source before acting.