Do you mean the buyer has opened an Item Not Received dispute?
There are restrictions on you while the dispute is open. Ugh.
Did you use a Delivery Confirmed service? If so, in the Dispute give the DC number (the shipping invoice number). Also add the payment date, shipping date, and mention that the parcel is coming from Canada during the busy holiday season.
That should at least put the dispute on the back burner. When the parcel delivery is Confirmed, the Dispute will end. Your PITA can still leave feedback unfortunately.
If you did not use DC, you would be best to offer a full refund immediately, just to end the Dispute. Then, if you used Small Packet, you can eventually go to Canada Post with an insurance claim. Small Packet is insured up to $100 against loss or damage. Or ask the buyer to refund the refund when the parcel does arrive. Many will, especially when the holiday stress is over and sanity returns.
It helps a little to keep in mind that you don't lose the selling price of the item. Your real loss is the procurement cost+ ebay fees+ PP fees+shipping cost. , which is less than the selling price (+++ the other costs). A little, not much.