By Candace Sider
As the saying often goes, change isn’t easy. But when it’s related to a distant and removed aspect of your daily life, it can also be a chore. And no one likes doing chores.
For countless Canadian businesses, one critical change will have to take place in 2022 with profound consequences for those who neglect to their responsibility. That change is in fact the most significant overhaul of customs process for Canadian importers in more than a generation. The Canada Border Services Agency Customs and Revenue Management initiative or CARM is a multi-phased project set to be fully implemented in the Spring of 2022. For the scant few who have proactively taken the steps necessary to adjust to CARM, the transition will be relatively painless. For the vast majority, however, compliance with CARM may be a sprint to the finish line with some inevitably experiencing disruption.
For the uninitiated, CARM is ultimately a shift toward the digitization of customs-duty accounting and payment. Businesses will now be required to provide direct financial surety for goods entering Canada, rather than using an intermediary, and settle their accounts with the CBSA (though customs brokers are likely to continue to play a role in that regard).
What’s the big deal?
Settling an account online may not seem like much of a burden to many. After all, most of us have myriad service providers who offer the opportunity to view and pay bills online. But customs accounting is slightly more complicated and grows in complexity with the sophistication and breadth of supply chains. For one-time and infrequent commercial shippers, the CARM transition will involve little more than the inconvenience of registering for the CARM Client Portal and securing their own surety (more on this below). However, for larger businesses that import frequently and use multiple customs brokers across multiple geographies, there will be more to consider.
Importing businesses often use multiple brokers for various reasons, ranging from disparate procurement processes across different corporate divisions, to the specializations of a broker’s service offerings, to cost efficiencies and geographic considerations. Each broker typically ensures an importer’s account is settled with the CBSA for payment of duties and taxes associated with the transactions that that individual broker facilitates. However, the introduction of CARM will mean that all duties and taxes incurred by an importer – across all brokers – are consolidated into a single account that must be settled monthly by the importing company, not a broker, unless the company has specifically made advanced arrangements with a broker to facilitate payments on their behalf (and not all brokers will offer this service). Where multiple brokers are being used, such arrangements will have to be made with each broker.
Inevitably, companies will find some brokers willing to carry out payment transactions and others not. The result will be a tangle of transactions each month that importers will have to reconcile and pay in a timely manner or risk having their shipments held at the border until they can settle their accounts. For those importers who want to absolve themselves of this nuisance, the only option may be to consolidate transactions under one broker, but that’s not necessarily an option as not all brokers have the geographic and service capacity to meet all companies’ needs. Moreover, many brokers may no longer take on the risk of paying duties and taxes on a business’s behalf once CARM is implemented.
Preparing for CARM
To effectively transition to CARM, businesses will have to take two critical actions. First, they will have to register on the CARM Client Portal. Second, secure financial surety against the value of imports they bring into Canada.
Registering for the portal can be time-consuming, particularly for those businesses that haven’t been diligent in their customs record keeping. To register, businesses first need to obtain a GCKey – ultimately secure login credentials to set up their account. Obtaining a GCKey requires businesses to answer affinity or security questions, which are usually based on transaction- and account-related information associated with the enterprise. Once access to the Portal has been obtained, each business will need to register using a very prescribed format and assign a Business Account Manager or BAM who will be the primary administrator of the account (additional administrators can be assigned access only by the BAM).
Once registration is complete, importers will need to secure their own customs bond. Traditionally, financial surety for imports is covered by the customs broker’s bond. Under CARM, importers will be required to secure their own bond. The bond must be equal to 50% of the highest monthly accounts receivable for the previous 12-month period and must cover a minimum of $25,000. That means for a business for which the highest monthly AR over the previous 12 months has been $75,000, the bond will still have to be at least $37,500. But even for importers with a monthly accounts receivable of only $10,000, the bond will have to still be at least $25,000. Financial surety must be secured must be obtained from a financial services provider approved by the CBSA. Alternatively, businesses can post a cash deposit, but it must be equal to 100% of the highest monthly AR over the previous 12-month period.
Procrastination no longer an option
CARM Release 2 – where the Portal and surety will become mandatory – is set to take effect on May 25, 2022. Businesses not yet set up in the CARM Client Portal or without some form of surety will find their imports held at the border until they are able to comply with the new process.
Dealing with the particularities of customs processes isn’t something for which importing businesses typically have much patience, which is why customs brokers have traditionally taken on this role. Brokers will continue to play a critical function in the facilitation of import transactions while trade consultants will remain critical to helping businesses comply with ever-changing and always rigid regulatory frameworks. But CARM will usher in a new era of responsibility for importers that will require greater engagement on their part.
To mitigate the complexity and simplify the process, many businesses will want to consolidate transactions under one broker to reduce the number of sources feeding into their CARM account. To do, they will need to ensure their broker of choice is willing to facilitate the transactions on their behalf and have the breadth of capability (as well as the capacity) to take on the additional volume of transactions associated with that consolidation. In other cases, they may want to see if one broker is willing to help them reconcile their account (across all sources) each month to simply reduce the administrative burden.
Whichever path they choose, the universal truth is that the window of opportunity to comply with the new provisions under CARM is rapidly closing, leaving those who further procrastinate the task of getting up to speed on all the new requirements and implementing them within a short timeframe. That will be no easy feat. Time is of the essence.
Candace Sider is the Vice President of Government Relations and Regulatory Affairs, North America, at Livingston International. She sits on the boards of numerous trade and customs-related associations and advocacy groups, including the Canadian Chamber of Commerce’s Canada-U.S. Trade Council.