Your prices do seem steep. Do the Canadian sellers have an option to buy postage via etsy? I know its cheaper for people in the states.
I would find a way to make your packaging lighter and cheaper. I send my knits out in padded envelopes. Also buy a postage scale, and know what the postage will be upfront (at least as close as you can). The USPS website will give you amounts, not sure if the Canadian post office will.
Also, this below phrase in your policies is a bit weird. Why wouldn't you refund anything lower than $3 if it was off that much? If I saw that as a buyer, I would rethink making a purchase because, if shipping was really $5 for you, but I was charged $6.50, why wouldn't I get that $1.50 refund? That would discourage me from buying.
"there is more than a $3 difference between the price you paid for shipping and the actual cost I will refund you the difference."