An Editor's Note: with Release 2 now having no set date, as of Feb 2022, kindly bare this in mind while reading.
One of the biggest changes to the Canada Border Services Agency (CBSA) Assessment And Revenue Management (CARM) is the need for importers to secure and post their own importing bond if they would like to participate in the Release Prior To Payment Privilege (RPP). Historically, customs brokers were allowed to extend use of their customs bond to any importer that wanted it. This all changed under CARM and importers are now encouraged to obtain their own security bond sooner rather than later to avoid the backlog that most surety companies will face as we approach Release 1 and 2.
What Is An Importer Security Bond?
Importers and customs brokers post security with the Canada Border Services Agency (CBSA) to obtain release of goods with deferred accounting and payment privileges. This privilege is known as the Release Prior to Payment Privilege (RPP). The RPP entitles importers and licensed customs brokers who have posted financial security and obtained an account security number to:
- Obtain the release of goods from the CBSA before paying duties and taxes
- Defer accounting for goods
- Defer payment of duties and taxes
Importers who do not wish to post financial security with CBSA can currently use a licensed customs broker with RPP privileges to transact business with the CBSA on their behalf, but this soon will end.
How CARM Is Changing This Process
Enter CARM, a multi-year initiative that will transform the collection of duties and taxes for goods imported into Canada.
CARM targets only the revenue and cash management systems currently in place for assessing and collecting duties and taxes. It simplifies the process and includes electronic payment options.
With CARM Release 2 the RPP security posted by a customs broker will no longer extend to importers who avail their services.
Importers will be required to post their own financial security (via either a surety bond or CBSA cash deposit) to obtain release of their goods prior to accounting and payment of any applicable duties and taxes with the CBSA.The release date for CARM 2 is planned for June 2022.
How Importers Can Post Security (And Payment Options Without It)
Security may be posted in the following ways:
- A cash bond
- A (continual) surety bond
- A one-time single entry bond
Without RPP security, an importer will be required to pay in advance on the CARM Client Portal (CCP) or pay a CBSA cashier at the time of clearance, in order for the goods to be released by CBSA.
The posted financial security will secure all accounts payable, including duties and taxes (GST), interest, adjustments, ascertained forfeitures, and Special Import Measures Act (SIMA) fees.
The bond will secure any penalty fees, however, penalties are not used in the calculation of the amount of bond required to cover the account.
As of CARM Release 2, to be eligible for RPP, an importer must use one of the following options:
- Post a cash bond which is equal or greater than 100% of the importer’s highest monthly accounts payable to the CBSA within the most recent 12-month period. The cash bond can be posted to the account by making a deposit through the CARM Client Portal (CCP).
Note: Posting a cash bond is not possible until Release 2 goes live in June 2022.
- Post a continual surety bond for 50% or more of the highest monthly accounts payable to the CBSA within the most recent 12-month period. Importers without a 12-month history will need to estimate the amount of duties and taxes. The bond is subject to a minimum of $25,000 and a $10 million maximum.
Examples: The highest monthly accounts payable is determined to be $100,000, the importer is to post a surety bond for $50,000. Alternatively, the highest monthly accounts payable is $20,000, the importer is to post a surety bond for $25,000.
- Post a one-time single entry bond - details on this have not yet been released by CBSA.
- Zero accounts payable. If an importer’s highest monthly accounts payable is zero within the most recent 12-month period, no bond is required. If the importer starts to import goods which results in a payable, or if the importer is issued a penalty within the Administrative Monetary Penalty System (AMPS) or an adjustment, the CARM system will monitor and measure the importer’s security utilization and nudge them to provide increased security. If the importer does not normally have dutiable/taxable goods but has a dutiable and taxable shipment coming in they can choose to apply a single one-time entry bond or make an interim payment of duties and taxes.
How And When To Calculate Your Bond Amount
It is important to note that CBSA will display the required bond amount on the CCP only as of CARM Release 2. Considering that RPP security is mandatory as of Day 1 of Release 2 it is recommended that importers calculate their required bond amount prior to this release.
The importer should start to calculate the duties and taxes on all transactions for the most recent 12-month period. This should include calculating the duties and taxes for all shipments transacted by each customs broker (if you have more than one) in the most recent 12-month period. An importer can request this information from their customs broker(s).
Although CARM Release 2 is currently scheduled for June 2022, importers should begin discussions with a surety company well ahead of this date to obtain a surety bond prior to CARM Release 2.
CBSA Memorandum D17-1-8 outlines the process for securing a surety bond.
In the meantime should you have any questions contact CARM Engagement.