CARM, Surety Bonds and Posting Security: What You Need to KnowCARM and Importer Security Bonds
One of the biggest changes introduced by the Canada Border Services Agency (CBSA) Assessment And Revenue Management (CARM) is the need for importers to provide their own financial security in order to enjoy Release Prior To Payment Privileges (RPP).
RPP allows goods to be released into Canada before the duties and taxes have been paid to CBSA. This security protects CBSA from any losses if the importer fails to remit their outstanding payables after the goods enter Canada. RPP also allows importers to defer final accounting of their goods until after release.
Until now, importers were able to use their customs broker’s bonds for security, but that will end with the introduction of CARM Release 2 in Spring 2022. Under CARM, for an importer to continue using Release Prior To Payment Privileges to defer the payment of duties and taxes until after their goods are released, the importer will need to post their own security with CBSA.
Some importers already choose to post their own security with customs rather than using their broker’s security. For these importers, CARM will not change how security is posted.
How to Post Security
Importers have three options to post their own security with CBSA:
- a cash bond
- a continual surety bond
- a one-time single entry bond
A cash bond is posted online through the CARM Client Portal. The value of the cash bond must be equal to the highest monthly amount that the importer owed to the CBSA out of the last twelve months. This option will not be available until the second release of CARM in Spring 2022.
A continual surety bond is obtained from a surety company. The value of a continual surety bond must be equal to 50% of the importer’s highest monthly amount owed to CBSA out of the past twelve months. The minimum required amount for a continual surety bond is $25,000; the maximum is $10,000,000. If you choose to use a continual surety bond, your customs broker can help you apply for one.
A one-time single entry bond will be available as an option to importers but as yet no details about this option have been made available.
How to Determine Your Security Amount
First, decide what kind of security you plan to post. This will determine how much security is required.
Next, calculate how much you have paid to CBSA in each of the past twelve months. This includes duties, taxes and SIMA assessments but does not include penalties (AMPS) or brokerage costs. You can request this information from your customs broker.
Determine the month in which you had the highest payables. If you have used multiple customs brokers in the past twelve months, you will need to total the payables from each.
If you plan to post a cash bond, your bond amount will be equal to your highest monthly payables. You can post this security through the CARM Client Portal.
If you plan to use a continual surety bond, you can contact your customs broker and request they obtain a bond on you behalf. This bond will need to be equal to 50% of your highest monthly payables from the past twelve months, with a minimum of $25,000. CBSA D Memo D17-1-8 outlines the process of applying for a surety bond in more detail.
Here are a few examples:
- The highest amount my import business owed to CBSA in a single month in the past year was $10,000 and I want to post a cash bond. I will need to post $10,000 security through the CARM Client Portal.
- The highest amount my import business owed to CBSA in a single month in the past year was $5,000 and I want to post a continual surety bond. My customs broker will help me obtain a surety bond for $25,000.
- The highest amount my import business owed to CBSA in a single month in the past year was $100,000 and I want to post a continual surety bond. My customs broker will help me obtain a surety bond for $50,000.
- I am a new importer and have never paid duties or taxes to CBSA before. For my first import, no security needs to be posted. Once I have imported goods that result in a payment due to CBSA, CARM will notify me that security now needs to be posted.
If You Choose Not to Post Security
If an importer does not have security posted with CBSA, duties and taxes must be paid before their goods can be released into Canada. This can be paid through the CARM Client Portal or directly to a cashier at a CBSA office.
What happens if my security is insufficient?
As a business imports goods, it is possible they may end up with payables that exceed their posted security. The CARM Client Portal will update importers as they get close to their security limit, and will notify them if their security needs to be increased.
When should I start?
As soon as you can! Importer-backed security will be required on the first day that CARM Release 2 goes live. There are many more importers than there are surety companies, and there is almost certainly going to be a rush of importers applying for surety bonds right before CARM Release 2.
To avoid delays, we recommend importers register with the CARM Client Portal and start obtaining their security as soon as possible.
CARM and Importer Security Bonds
One of the biggest changes introduced by the Canada Border Services Agency (CBSA) Assessment And Revenue Management (CARM) is the need for importers to provide their own financial security in order to enjoy Release Prior To Payment Privileges (RPP).
RPP allows goods to be released into Canada before the duties and taxes have been paid to CBSA. This security protects CBSA from any losses if the importer fails to remit their outstanding payables after the goods enter Canada. RPP also allows importers to defer final accounting of their goods until after release.
Until now, importers were able to use their customs broker’s bonds for security, but that will end with the introduction of CARM Release 2 in Spring 2022. Under CARM, for an importer to continue using Release Prior To Payment Privileges to defer the payment of duties and taxes until after their goods are released, the importer will need to post their own security with CBSA.
Some importers already choose to post their own security with customs rather than using their broker’s security. For these importers, CARM will not change how security is posted.
How to Post Security
Importers have three options to post their own security with CBSA:
- a cash bond
- a continual surety bond
- a one-time single entry bond
A cash bond is posted online through the CARM Client Portal. The value of the cash bond must be equal to the highest monthly amount that the importer owed to the CBSA out of the last twelve months. This option will not be available until the second release of CARM in Spring 2022.
A continual surety bond is obtained from a surety company. The value of a continual surety bond must be equal to 50% of the importer’s highest monthly amount owed to CBSA out of the past twelve months. The minimum required amount for a continual surety bond is $25,000; the maximum is $10,000,000. If you choose to use a continual surety bond, your customs broker can help you apply for one.
A one-time single entry bond will be available as an option to importers but as yet no details about this option have been made available.
How to Determine Your Security Amount
First, decide what kind of security you plan to post. This will determine how much security is required.
Next, calculate how much you have paid to CBSA in each of the past twelve months. This includes duties, taxes and SIMA assessments but does not include penalties (AMPS) or brokerage costs. You can request this information from your customs broker.
Determine the month in which you had the highest payables. If you have used multiple customs brokers in the past twelve months, you will need to total the payables from each.
If you plan to post a cash bond, your bond amount will be equal to your highest monthly payables. You can post this security through the CARM Client Portal.
If you plan to use a continual surety bond, you can contact your customs broker and request they obtain a bond on you behalf. This bond will need to be equal to 50% of your highest monthly payables from the past twelve months, with a minimum of $25,000. CBSA D Memo D17-1-8 outlines the process of applying for a surety bond in more detail.
Here are a few examples:
- The highest amount my import business owed to CBSA in a single month in the past year was $10,000 and I want to post a cash bond. I will need to post $10,000 security through the CARM Client Portal.
- The highest amount my import business owed to CBSA in a single month in the past year was $5,000 and I want to post a continual surety bond. My customs broker will help me obtain a surety bond for $25,000.
- The highest amount my import business owed to CBSA in a single month in the past year was $100,000 and I want to post a continual surety bond. My customs broker will help me obtain a surety bond for $50,000.
- I am a new importer and have never paid duties or taxes to CBSA before. For my first import, no security needs to be posted. Once I have imported goods that result in a payment due to CBSA, CARM will notify me that security now needs to be posted.
If You Choose Not to Post Security
If an importer does not have security posted with CBSA, duties and taxes must be paid before their goods can be released into Canada. This can be paid through the CARM Client Portal or directly to a cashier at a CBSA office.
What happens if my security is insufficient?
As a business imports goods, it is possible they may end up with payables that exceed their posted security. The CARM Client Portal will update importers as they get close to their security limit, and will notify them if their security needs to be increased.
When should I start?
As soon as you can! Importer-backed security will be required on the first day that CARM Release 2 goes live. There are many more importers than there are surety companies, and there is almost certainly going to be a rush of importers applying for surety bonds right before CARM Release 2.
To avoid delays, we recommend importers register with the CARM Client Portal and start obtaining their security as soon as possible.
