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Between November 26, 2022, and January 10, 2023, the Canada Border Services Agency (CBSA) invited interested parties to share their views about proposed regulations and regulatory amendments that are needed to fully implement the CBSA Assessment and Revenue Management (CARM) initiative.
The regulatory proposal includes amendments to 9 regulations made under the Customs Act and 3 regulations made under the Customs Tariff. These amendments are intended to:
support electronic communication between the CBSA and trade chain partners (that is, businesses and individuals with a role in the process of importing goods into Canada)
the proposed amendments remove some requirements for in-person and paper-based communication and add some requirements for electronic communication
update financial security requirements
implement harmonized billing cycles to provide more consistency among billing, accounting and payment due dates for imported goods
update outdated references and terminology in several regulations to correct the titles of named acts, regulations, government directives, Ministers, and to reflect current program policy
The regulatory proposal also introduces a new regulation under the Customs Act to set out the terms and conditions for how financial security will be administered when it is required to participate in CBSA programs.
Key themes
The CBSA appreciates the views expressed by respondents through the consultation process. The detailed feedback sends a clear message that Canada’s trade chain partners are engaged and committed to working with the government to update the regulations and systems that support commercial importation processes.
While the consultation process invited feedback specifically on the regulatory proposal, the majority of the comments received were about CARM more broadly.
A number of themes emerged:
Digitalization
Implementation
Financial security and payment methods
System-specific comments
Digitalization
Several respondents expressed support for electronic methods to account for imported goods and collect duties and taxes. One organization noted a common frustration from their members was the need to go into CBSA offices to manually sign for shipments, and the proposed amendments are an improvement.
The regulatory proposal includes amendments to allow non-electronic accounting methods in very limited circumstances, such as system outages. This led some respondents to ask about the CBSA’s contingency plans in the case of outages or cybersecurity incidents. We will be working with trade chain partners in the lead-up to Release 2 to ensure that contingency plans are in place, and that processes are clear and able to be implemented efficiently, if needed.
Other respondents noted that some rural or remote importers may not be able to reap the full benefits of digitalization as quickly as larger organizations. They emphasized the importance of client support in the form of help desks, call centers and online resources. They highlighted the importance of assisting small and medium-sized businesses to make the move to an online account, as well as the billing, payment and financial security processes with the CBSA, in preparation for Release 2.
CBSA response
The CBSA established a CARM Client Support Helpdesk at Release 1 (May 2021), and is currently expanding its capacity to ensure support is available to assist importers to enroll in, and make use of, the CARM client portal prior to and at Release 2. We will also continue to communicate information about CARM implementation to the trade community, and continue to support the efforts of our trade chain partners and associations, such as the Canadian Society of Customs Brokers and the Canadian Association of Importers and Exporters (IE Canada) to provide education and awareness about CARM as we move towards Release 2.
Implementation
The regulatory proposal includes a 180-day transition period to provide importers with an opportunity to choose and obtain the type of financial security they will need in order to have their goods released prior to the payment (RPP) of duties and taxes. This transition period is available to importers as long as they are registered in the CARM client portal. The 180-day period would begin on the day Release 2 is implemented.
While there was appreciation for the transition period, the feedback revealed mixed views on its duration. Some respondents felt that the period was too short and that up to 24 months would be required to ensure that all importers could obtain RPP financial security. Others, however, did not think an extension of the transition period would offer any benefits.
Several comments suggested that neither industry nor the CBSA is ready for full implementation at Release 2. Some respondents proposed options such as a phased approach, which would allow existing and new systems to run in parallel. Others suggested that certain industries/importers should be considered for a delayed transition to CARM. Respondents from the express carrier industry, in particular, expressed worry about how their business model could adapt to CARM requirements, with some suggesting that commercial shipments in the Courier Low Value Shipment (CLVS) and postal streams be excluded from CARM requirements until after Release 2.
CBSA response
At this time, the CBSA intends to maintain the 180-day transition period to provide flexibility for importers who need a little more time to adjust their processes to meet the financial security requirements of Release 2. We will also continue to support and encourage importers, financial security providers and other trade chain partners to take the necessary steps to ensure their own readiness for Release 2. A key benefit from CARM is to better manage financial risk; however, the CBSA looks forward to continuing discussion on the timing and transition plan for all new requirements. The CBSA appreciates how adapting to a new IT system, at the same time as introducing a full set of requirements creates additional pressure and risk. The CBSA is committed to engaging in more detailed consultation and seeking ways to calibrate the focus and timing of new requirements.
In addition, we continue to explore options to address the concerns of the express carrier community and to ensure the CBSA and industry are prepared to implement Release 2, as planned.
Financial security and payment methods
We received feedback concerning the proposed Financial Security (Electronic Means) Regulations. We appreciate suggestions that some of the clauses in the regulations could be clarified to make it more evident who holds an obligation under the regulations (the debtor or the financial security provider) and when that obligation begins. We’ll be analyzing this feedback to determine if amendments to the regulations should be proposed.
While not related to the regulations, we received several comments about the CBSA’s calculation method to determine the required amount of financial security to secure the duties and taxes on imported goods for the purposes of obtaining RPP. Specifically, respondents felt that GST should not be included in the calculation and that it would result in importers being “over-secured” for their import shipments.
The calculation of the financial security requirements and the minimum threshold was done prior to the start of the CARM system design, with consultation from key representatives of the trade chain partner community. The consultations considered approaches that would ensure all types of importers can afford to post a financial security that suits their needs, whether it is a cash deposit or a financial security product obtained from a third party. The decision to include the GST is intended to secure an important tax revenue for the benefit of Canadians. This will represent better the total debts owed to the Crown.
In addition, customs brokers and other impacted parties re-emphasized their concerns about the CBSA’s decision to require importers to obtain their own financial security as of Release 2, rather than allowing them to continue to rely on their broker’s bond.
Other respondents focused on the payment options available to non-resident importers (NRIs), who are currently obliged to make use of Canadian and American bank accounts or credit cards.
CBSA response
Although the CBSA recognizes that there are some advantages to using broker bonds for importer security, we are unable to appropriately mitigate risks to Crown revenue when they are used. If financial risks warranted the CBSA calling on the broker’s bond to cover a debt, this would result in the loss of RPP privileges for all importer clients secured under that broker’s bond. This would have adverse, unintended consequences for importers and for the flow of goods crossing the border.
While we recognize that the requirement for importers to obtain their own financial security represents a new direction for both importers and brokers, importers will continue to be able to delegate customs brokers to manage their import-related process in CARM, other than offering financial security. The requirement for importer-sourced financial security will not impede the broad suite of professional services and expertise that brokers can offer to their clients.
With respect to payment options for NRIs, the CBSA has worked collaboratively with financial institutions to offer additional payment options. In order for a financial institution in Canada or abroad to be added to the list of participating financial institutions, they need to be able to connect with systems of the Receiver General for Canada to transmit remittance information to the CBSA. Foreign financial institutions may establish direct clearing relationships with Canadian financial institutions to facilitate this process.
The CBSA is currently onboarding new US and international financial institutions. We are also evaluating the use of additional electronic payment methods. NRIs can consult with their financial institution to find out if they can make electronic payments to the CBSA. Alternatively, NRIs may continue to remit payment through their brokers, on their behalf, in Canadian dollars. If none of these options are viable, the NRI can communicate with the CBSA, and we will consider their needs on case-by-case basis.
System-specific comments
A number of comments received were specific to CARM functionality. For example, some expressed the desire for brokers to be able to run queries to ensure their importer clients are registered in the CARM client portal. Some brokers also wanted the ability to confirm that they have been delegated authority for an im
porter’s account and confirm if an importer had sufficient financial security in place to enable the release of goods under RPP. Others addressed a desire to make amendments to the importer of record after accounting has been submitted.
CBSA response
CBSA subject matter experts are reviewing all of the feedback that relates to CARM system functionality and operational procedures to assess if any enhancements are possible for Release 2 or as part of future updates. The feedback we are receiving through the CARM Experience Simulation will also provide important information about system functionality and performance.