Federal fuel excise tax extension: what it means for your freight budget, not your duty line
Bill C-38 extends the federal fuel excise tax relief until January 31, 2027. The savings sit in your freight and drayage costs, not your customs duty or GST base. Here's where the landed cost impact actually shows up.
The extension is real, the duty angle isn’t
Bill C-38 received Royal Assent this week, extending the temporary suspension of the federal fuel excise tax until January 31, 2027. Finance is calling it the Canadian Fuel Affordability Act. The headline number is a $5+ saving every time a typical consumer fills a 50-litre tank. For Canadian importers, the angle that matters is drayage, LTL and cross-border trucking rates staying lower than they’d otherwise be for another fifteen months.
What this does not do: lower your customs duty or import GST. Freight costs from the place of direct shipment to Canada are excluded from the value for duty under the Customs Act s.48, and they don’t touch the GST calculation base either. The fuel excise relief flows through to your landed cost and your cash outlay on freight invoices, but the duty line and the GST line on the CAD stay exactly where they were.
I’m writing this up because we field the question every time fuel policy changes hands in Ottawa. The short version: this is a freight budget story, not a customs one.
Where the savings actually sit
The federal fuel excise tax normally sits at 10¢ per litre on gasoline and 4¢ per litre on diesel. The suspension zeroes both out until the end of January 2027. After that, Bill C-38 steps the rates back in over two months: 50% of the normal rate in February 2027, full rate from March 1, 2027 onward.
For cross-border trucking, drayage out of the Port of Montreal, and LTL consolidation runs, the fuel component is a meaningful line item in the all-in rate. Most carriers build fuel surcharges into their pricing using a published index tied to pump prices. The excise suspension keeps those surcharges lower than they’d be with the tax in place. When the tax steps back in next February, expect fuel surcharges to tick up in lockstep unless crude prices drop enough to offset it.
If your freight contracts renew in Q1 2027, that’s the window where the math changes. Carriers will be pricing against a higher fuel cost base starting March 1. The excise relief bought fifteen months of relative stability. That window closes in four months.
Why this doesn’t move your duty or GST calculation
Canadian value for duty is the transaction value adjusted to the place the goods are shipped directly to Canada from, under Customs Act s.48. International freight and insurance from that point to Canada are not part of the dutiable value. If your supplier’s invoice price is on CIF or DDP terms that bundle in freight, you’re allowed to back the freight and insurance out of the value for duty, as long as the amounts are documented and separately identified.
The excise tax relief lowers what you pay your trucker or forwarder, but it doesn’t change the declared value on the CAD. Same story for import GST: the GST base is value for duty plus customs duty plus excise duties and taxes, per Excise Tax Act s.215. Freight from outside Canada to Canada isn’t in that stack. Lower drayage invoices mean lower cash out the door on the freight side, but the CBSA assessment and the GST you remit through your CARM Statement of Account stay flat.
The one real customs angle is if an importer paid duty on a supplier’s delivered price without splitting out freight and insurance. That’s a s.74 overpayment claim you can file within four years. But that’s a documentation and valuation question, not a fuel tax question. The excise relief itself doesn’t create a refund opportunity on past CADs.
Landed cost impact: real but narrow
Landed cost is value for duty plus duty plus GST plus freight plus broker fees plus any sufferance warehouse handling. The fuel excise suspension keeps the freight line lower than it would be otherwise. For volume importers moving containers weekly out of Montreal, that’s a few hundred dollars per unit over the course of a year. Not transformative, but it shows up in your monthly landed cost variance if you’re comparing 2026 actuals against a 2025 baseline that didn’t have the relief.
If you’re running FENGYE’s Montreal sufferance warehouse for release prior to payment and cross-dock staging, the drayage leg from the port to our Lachine facility is where the fuel cost sits. The excise relief keeps that line predictable through January. When the tax steps back in, the per-move cost ticks up a few percentage points unless diesel prices drop. Most drayage contracts adjust monthly based on published fuel indices, so the passthrough is automatic.
The bigger landed cost lever is still the exchange rate, the HS classification, and whether you’re claiming CUSMA or CETA origin correctly. Fuel excise relief is a second-order cost line. It matters for annual freight budgeting and for importers on thin margins where every dollar per unit counts, but it’s not the first place to look if your landed cost is out of line with forecast.
What changes February 1, 2027
Bill C-38 steps the fuel excise tax back in over two months. February 2027 reinstates 50% of the normal rate: 5¢ per litre on gasoline, 2¢ per litre on diesel. March 1, 2027 brings back the full rate: 10¢ and 4¢ respectively.
Carriers and 3PLs will adjust their fuel surcharge indices to match. If you’re negotiating a multi-year freight contract in Q4 2026 or Q1 2027, build in the step-up. The fuel component of your all-in LTL or FTL rate will be higher starting March than it was in January, assuming crude prices hold flat. That’s not a customs issue, but it’s a landed cost and cash flow issue worth flagging now before the renewal cycle hits.
If you want a second look at how your freight costs and your duty base interact, or if you’re not sure your supplier’s CIF pricing is being split out correctly on the CAD, get in touch. We run those landed cost models every day.
Source: CSCB