Landed Cost for Canadian E-Commerce Sellers

When a Canadian e-commerce seller places a purchase order with a supplier in China, the U.S., or anywhere else outside Canada, the price on the invoice is the starting point, not the final cost. By the time the goods arrive at your warehouse or fulfillment centre, duties, brokerage fees, freight, insurance, and import GST/HST have all been added. Recording only the invoice amount as inventory cost produces a COGS figure that is materially understated, and a margin picture that is wrong.

This guide covers what landed cost includes, how to calculate it, how to record it, and the common mistakes that cause it to be understated or ignored.

What landed cost includes

Landed cost is the total cost of acquiring and receiving imported goods. For a Canadian e-commerce seller importing from overseas, the components are:

Purchase price. The amount on the supplier invoice, stated in the invoice currency. If the supplier invoices in USD or another foreign currency, the amount is converted to CAD at the exchange rate on the purchase date for accounting purposes.

International freight. The cost to ship the goods from the supplier to Canada. This includes ocean freight, air freight, or courier charges paid to the carrier or freight forwarder. If freight is included in the supplier price on an incoterms basis (CIF or DDP), it may not appear as a separate line, but it is present in the total.

Import duties. Canada Border Services Agency (CBSA) assesses duties on imported goods based on the tariff classification (HS code) and the country of origin. The duty rate applies to the customs value of the goods, which is generally the transaction value stated on the commercial invoice. Rates vary by product category and can range from 0% to over 20% depending on the goods and trade agreements in effect.

Customs brokerage fees. Importers typically use a licensed customs broker to prepare the customs entry, classify the goods, and interact with CBSA on their behalf. Brokerage fees vary depending on the number of line items, the complexity of the entry, and the broker’s fee schedule. Brokerage fees directly related to importing inventory are generally included in landed cost because they are part of bringing inventory to its present location and condition.

Import GST/HST. GST/HST is assessed on most commercial imports into Canada. The amount is generally calculated on the value for tax determined by CBSA, which typically includes the customs value of the goods and applicable duties, along with certain adjustments prescribed under customs legislation. If you are registered for GST/HST, the import GST/HST paid at the border is recoverable as an Input Tax Credit (ITC). Because it is recoverable, it is not a true cost, but it must be tracked separately. The ITC claim appears on your GST/HST return, not in COGS.

Insurance. Cargo insurance on the shipment, if purchased separately, is part of the cost of getting the goods to Canada. In practice, some sellers include this as a direct shipping cost; others track it as landed cost. Either treatment is acceptable as long as it is consistent and not excluded entirely.

Destination charges. Port handling, drayage from the port to the warehouse, duty drawbacks if applicable, and any fumigation or inspection fees imposed at entry are also part of the cost. These are less commonly tracked as separate line items by smaller sellers, but they belong in landed cost when material.

Why it matters

The consequence of ignoring components beyond the invoice price is a COGS figure that does not reflect actual acquisition cost. When COGS is understated, gross margin appears higher than it is. Pricing decisions made on that margin data lead to prices that cannot sustain the actual cost structure.

For a seller importing a product with a supplier cost of CAD $10 per unit, the landed cost might realistically be CAD $13 to $15 per unit after duties, freight, and brokerage are included. A margin analysis based on $10 per unit is fundamentally wrong and compounds with every unit sold.

The same distortion appears in inventory valuation. Recording inventory at invoice cost alone understates inventory on the balance sheet. When units are sold, COGS is also understated, causing gross profit to appear higher than it actually is.

For sellers tracking SKU-level profitability, landed cost is often the largest missing variable. Marketplace fees are visible in Amazon, Shopify, or Walmart reports. Freight, duties, brokerage, and import costs usually are not. A SKU profitability report built on supplier cost alone can look precise while still producing the wrong margin.

Calculating landed cost per unit

Landed cost per unit requires allocating the total shipment cost across the number of units received.

For a single-product shipment, the calculation is direct:

• Total shipment cost: invoice amount + freight + duties + brokerage + insurance + destination charges
• Less: import GST/HST (recoverable as ITC, not a cost)
• Divide by units received

For a mixed-product shipment containing multiple SKUs, the allocation requires a method. Common approaches are:

Proportional to purchase price. Each SKU is allocated a share of the freight and duty costs proportional to its share of the total invoice value. This works when units have similar sizes and weights.

Proportional to weight or volume. More accurate for shipments where freight cost correlates with weight or cubic volume, such as heavy goods alongside lightweight goods.

Per-unit duty calculation. Import duties are assessed at the SKU level by CBSA based on tariff classification. The duty on each SKU can be calculated directly, leaving only freight and brokerage to allocate.

Most e-commerce accounting workflows use the proportional-to-cost method because it requires only the invoice and a total freight figure, without detailed weight data. The method used should be documented and applied consistently.

Import duties and HS codes

The duty rate applied by CBSA depends on how the goods are classified under the Harmonized System (HS) code. Each product category has a specific code, and the corresponding duty rate depends on both the category and the country of origin.

Canada has tariff preferences under several trade agreements that can reduce or eliminate duties. Goods imported from countries with which Canada has a free trade agreement, including the United States and Mexico under CUSMA, and countries under CPTPP and CETA, may qualify for reduced rates if specific rules of origin are met.

For many goods imported from China, the Most Favoured Nation (MFN) tariff rate applies because China is not covered by Canada’s major preferential trade agreements. Duty rates vary significantly by product category. Some products attract no duty, while others may carry substantial duty rates depending on their tariff classification.

The HS code classification determines not only the duty rate but also whether additional measures apply, such as anti-dumping duties or surtaxes. Some product categories that are common in e-commerce, including textiles, clothing, footwear, and certain electronics, carry rates that can meaningfully affect landed cost.

Customs brokers typically prepare and submit the customs accounting declaration and apply HS classifications based on the information provided. The importer remains responsible for the accuracy of the classification used. If you import the same product repeatedly, confirming the HS code and associated rate before placing the first order is useful. CBSA offers an advance ruling service that provides a binding tariff classification determination for specific goods.

Import GST/HST

GST/HST is assessed on most commercial imports into Canada. The taxable amount is the customs value of the goods plus applicable duties. For a shipment with a customs value of CAD $10,000 and duties of CAD $1,200, GST would be assessed on CAD $11,200.

If you are a GST/HST registrant, the import GST/HST paid at entry is fully recoverable as an Input Tax Credit (ITC) on your GST/HST return, provided the goods are for use in commercial activity. Most GST/HST registrants claim the ITC based on the customs accounting documentation and import tax paid on commercial imports, subject to the normal ITC documentation and reporting requirements.

The practical effect is that import GST/HST is a cash flow timing item, not a permanent cost. You pay it at the border and recover it on the next GST/HST return. The amount should be tracked as a recoverable ITC receivable in your books, not embedded in COGS.

For sellers who are not GST/HST registrants, the import GST/HST is a real cost with no recovery, and it should be included in landed cost per unit.

Recording landed cost in your books

The accounting entries for a landed-cost import follow a straightforward structure.

When the purchase order is placed:

No entry at this stage unless a deposit is paid. If a deposit is required, record it as a prepaid asset until goods are received.

When goods arrive and the customs entry is processed:

• Debit: Inventory (at full landed cost per unit, excluding recoverable GST/HST)
• Credit: Accounts payable (supplier invoice amount)
• Credit: Accounts payable or cash (freight, brokerage, insurance, destination charges)
• Debit: GST/HST ITC receivable (import GST/HST, if registered)
• Credit: Accounts payable or cash (import GST/HST paid to CBSA or broker)

When the import GST/HST is recovered on the GST/HST return:

• Debit: GST/HST payable (reduces the net remittance)
• Credit: GST/HST ITC receivable

Most e-commerce accounting software handles landed cost in one of two ways: some allow you to apply additional costs directly to an inventory receipt, which distributes them across units automatically. Others require a separate landed cost journal entry. Regardless of method, the result should be the same: inventory on the balance sheet reflects full acquisition cost per unit, and COGS when units are sold reflects that full cost.

Working with a customs broker

For regular importers, using a licensed customs broker for each shipment is standard practice. The broker:

• prepares and submits the customs accounting declaration and related entry documentation to CBSA
• classifies goods using the correct HS codes
• calculates duty payable
• communicates with CBSA on any holds, inspections, or queries
• issues a statement of account to the importer showing the duty, brokerage fee, and import GST/HST paid

The customs broker statement is the primary source document for your landed cost calculation. It shows each duty amount, the brokerage fee, and the import GST/HST paid. Combined with the supplier invoice and the freight invoice, it provides all the numbers needed to calculate landed cost per shipment.

For smaller sellers using courier services (DHL, FedEx, UPS international), the courier may clear customs on your behalf and charge a disbursement fee. The courier’s import duty and tax invoice serves the same function as a customs broker statement. The same amounts belong in landed cost; the same GST/HST recovery applies.

Incoterms and what they change

The supplier invoice alone does not tell you the full landed cost. Incoterms determine which costs are included in the supplier price and which are billed separately.

Under FOB (Free on Board) terms, the supplier is responsible for delivering goods to the named port of export. From that point, the importer pays international freight, customs clearance, duties, and import taxes. These costs are visible and separately invoiced.

Under CIF (Cost, Insurance, and Freight) terms, the supplier’s price already includes international freight and cargo insurance to the named destination port. Those amounts are embedded in the invoice total rather than billed separately. The importer still pays duties, brokerage, and destination charges.

Under DDP (Delivered Duty Paid) terms, the supplier or their logistics provider handles customs clearance and includes duties and import charges in the amount invoiced. The importer receives goods without a separate duty bill, but the costs are still present inside the invoice total. DDP also means the supplier or agent becomes the importer of record, which can create complications for Canadian GST/HST ITC recovery if the import documentation is not in the buyer’s name.

Under EXW (Ex Works) terms, the supplier’s price covers only making goods available at their premises. All costs from that point, including export loading, freight, duties, and import taxes, fall to the importer.

Before calculating landed cost, identify the Incoterms on the purchase order so costs are neither omitted nor counted twice. A seller receiving a DDP shipment who also adds duties and brokerage to their landed cost calculation would be double-counting what the supplier already included in the price.

Practical example

A Canadian seller imports 500 units of a product from a Chinese supplier.

For illustration purposes, duty is shown as a percentage of the supplier invoice amount. Actual customs valuation may differ depending on CBSA valuation rules.

The import GST/HST of $280 is recovered as an ITC and excluded from COGS. The per-unit cost for inventory and COGS purposes is $13.25, not $10.00.

If this seller priced the product at $25.00 and assumed a $15.00 gross margin, the actual margin after landed cost is $11.75 per unit, not $15.00. On 500 units, that difference is $1,625 in misidentified profit.

Common mistakes

Recording only the supplier invoice in inventory. Freight, duties, and brokerage are part of the cost of the goods, not separate operating expenses. Treating them as period expenses distorts both gross margin and inventory value.

Including recoverable import GST/HST in COGS. For registered sellers, import GST/HST is a recoverable ITC. Including it in landed cost overstates COGS and understates the ITC balance, resulting in both a distorted income statement and an understated refund claim.

Using a single flat-rate landed cost estimate. Some sellers estimate landed cost as a percentage of the invoice rather than calculating it per shipment. Duty rates, freight rates, and brokerage fees vary. A flat-rate estimate becomes increasingly inaccurate as product mix and origin country change.

Forgetting destination charges. Port drayage, warehouse receiving fees, and domestic freight from the port to the fulfillment centre are part of the cost of getting inventory to a sellable state. If these are material, they belong in landed cost.

Not updating landed cost when rates change. Import duty rates can change following trade policy updates, anti-dumping investigations, or tariff schedule revisions. The landed cost per unit should be recalculated for each shipment rather than carried forward indefinitely.

Related Guides

• Inventory as a Cash Flow Problem covers how purchase timing, payment terms, and stock levels affect cash, which intersects directly with import payment cycles.
• GST/HST for Multi-Platform Canadian E-Commerce Sellers explains GST/HST registration and ITC recovery, which determines whether import GST/HST is a cost or a recoverable credit.
• Multi-Channel Reconciliation: Amazon, Shopify, and Walmart covers how to match COGS against revenue when products sell across multiple channels.

Scope of This Guide

This guide covers landed cost calculation and recording for Canadian e-commerce sellers importing goods for resale. It does not cover:

• Customs compliance, classification disputes, or CBSA audit procedures
• Customs bonded warehouses or duty drawback programs
• Anti-dumping and countervailing duty investigations
• Provincial sales tax on imports in British Columbia, Saskatchewan, or Manitoba
• Detailed ITC recovery mechanics for partially exempt businesses

The goal is to ensure that every unit of inventory arriving at your location carries an accurate cost, and that COGS reflects what it actually cost to acquire and receive that unit.

Many sellers know their supplier cost per unit but have never built a consistent landed cost process. The result is that inventory, COGS, and SKU profitability are all based on incomplete numbers.

The question is not whether freight, duties, brokerage, and import taxes exist. The question is whether they are being allocated consistently enough that every SKU reflects its true acquisition cost. Without that number, inventory valuation, COGS, and profitability reporting are all built on incomplete information.