The Canada Border Services Agency (CBSA) is set to roll out a major update—CARM (CBSA Assessment and Revenue Management) Release 3—on October 21, 2024. This initiative is part of a multi-year project aimed at modernizing the assessment and collection of duties and taxes on commercial goods entering Canada. For Canadian importers, this update introduces a critical shift in how they conduct business, with far-reaching financial and operational implications.
What is CARM Release 3?
CARM Release 3 will require all importers into Canada to post their own financial security, either through a surety bond or a cash deposit, to qualify for the “Release Prior to Payment” (RPP) privilege. This allows importers to obtain the release of their goods from customs before paying duties and taxes—a significant advantage for cash flow management.
Historically, importers could rely on their customs broker’s security to benefit from RPP, but this will no longer be an option under the new rules. Importers must take responsibility for their own security arrangements. A surety bond must cover at least 50% of the highest monthly duties and taxes owed to the CBSA over the past year, with a minimum bond amount of $5,000. Alternatively, importers can post a cash deposit covering 100% of their monthly payables.
Why Should Importers Act Now?
The lead-up to CARM Release 3 is expected to create significant demand for surety bonds. Importers are urged to act quickly to avoid processing delays. Given the number of importers (upwards of 70,000) that will require new bonds, waiting until the last minute could lead to administrative bottlenecks and a potential disruption in your business.
Additionally, failing to post the required security before the deadline will result in consequences: importers will not be able to release their goods without paying duties and taxes upfront. This could strain cash flows for many businesses and slow down supply chains.
How to Prepare for CARM Release 3
Here are the key steps importers need to take to prepare:
1. Register on the CARM Client Portal (CCP): Importers need to create a profile on the CARM Client Portal. This portal is the hub for managing transactions, security, and payments with the CBSA.
2. Determine Security Requirements: Review your financials from the past 12 months and calculate the highest monthly amount owed to the CBSA. This will help you decide whether a surety bond or cash deposit is the best option for your business.
3. Secure a Surety Bond: If you choose the surety bond route, start working with your customs broker or a surety broker such as Axis Insurance as soon as possible to arrange for your bond. CBSA will allow for a 180-day grace period for importers to post security. Delays in securing a bond could disrupt your import activities.
4. Delegate Authority to Customs Brokers: If you rely on a customs broker to handle CBSA transactions on your behalf, ensure that you delegate the necessary authority through the CARM portal. This will allow your broker to manage your bond, duties, and tax payments.
Financial and Operational Impacts
CARM Release 3 not only shifts financial liability onto importers but also introduces new compliance and operational requirements. Importers must ensure they have sufficient liquidity or access to credit to meet bond requirements. Furthermore, businesses may need to adjust their internal accounting processes to accommodate the new billing and payment cycles enforced by CARM.
The financial security posted with the CBSA covers more than just payment obligations for duties and taxes; it also secures penalties and interest, although penalties are not included in the bond calculation. This makes it vital for importers to monitor their account balances closely to avoid disruptions.
Conclusion
CARM Release 3 is more than just a compliance update; it represents a significant shift in how Canadian importers manage financial security and customs processes. Preparing for the changes now is crucial to maintaining business continuity and avoiding costly delays. Importers should proactively engage with customs brokers, surety companies, and their internal finance teams to ensure a smooth transition to the new system.
By understanding the intricacies of CARM Release 3, Canadian businesses can avoid disruptions and position themselves for continued success in the evolving trade landscape.
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Samantha Jones
Account Executive, Construction & Real Estate, Surety
Hello, I’m Samantha Jones, an Account Executive specializing in Surety at Axis Insurance, where I’ve been part of the team since May 2019. My career in the insurance industry began in 2014, and over the years, I have honed my expertise in surety bonds, providing robust financial security and contract compliance solutions for our clients.
Would you like to apply for a Commercial Bond, or have any questions about Commercial Bonding in general? View my biography and get in touch.
