Fix shipment state calculation

core/app/models/spree/shipment.rb

@@ -221,10 +221,10 @@ def determine_state(order)
     # ready      all other cases
     def recalculate_state
       self.state =
-        if order.canceled? || inventory_units.all?(&:canceled?)
-          "canceled"
-        elsif shipped?
+        if shipped?
           "shipped"
+        elsif order.canceled? || inventory_units.all?(&:canceled?)
+          "canceled"
         elsif !order.can_ship?
           "pending"
         elsif can_transition_from_pending_to_ready?

core/spec/models/spree/order_cancellations_spec.rb

@@ -109,6 +109,32 @@
       it "adjusts the order" do
         expect { subject }.to change { order.reload.total }.by(-40.0)
       end
+
+      context "when cancelling all items in a completed order" do
+        let!(:order) { create(:completed_order_with_totals, line_items_attributes: [{ quantity: }]) }
+
+        subject { described_class.new(order).short_ship(order.inventory_units) }
+
+        it "updates all of the inventory units" do
+          expect { subject }.to change { order.inventory_units.canceled.count }.to(quantity)
+        end
+
+        it "updates the shipment state" do
+          expect { subject }.to change { order.shipments.first.reload.state }.to("canceled")
+        end
+
+        context "when the shipment is already shipped" do
+          let!(:order) { create(:shipped_order, line_items_attributes: [{ quantity: }]) }
+
+          it "updates all of the inventory units" do
+            expect { subject }.to change { order.inventory_units.canceled.count }.to(quantity)
+          end
+
+          it "does not update the shipment state" do
+            expect { subject }.not_to change { order.shipments.first.reload.state }.from("shipped")
+          end
+        end
+      end
     end
 
     it "sends a cancellation email" do