Do You Ship Goods to Canada? Prepare for These New Rules

SEPTEMBER 3, 2024

On October 1, 2024, a new surety bond requirement will be implemented for organizations that ship goods to Canada. Companies will no longer be able to use their customs broker's Release Prior to Payment (RPP) security to clear shipments before paying duties and taxes. Companies that want to participate in the RPP program will be required to post their own financial security and register on the Canada Assessment and Revenue Management (CARM) client portal. Once CARM becomes the official system of record, companies will have 180 calendar days to make their own financial security arrangements using the following options:

1. Surety bond: Posting this financial security instrument guarantees payment for the import program if the company fails to meet its obligations. The amount of the bond must be equivalent to 50% of the highest monthly accounts receivable (the money owed to the company by its customers), including Goods and Services Tax (GST). Regardless of the calculated amount based on accounts receivable, the surety bond must not be less than $5,000 per import program.
2. Cash: Post cash deposit for 100% of their highest monthly accounts receivable (inclusive of GST).

Surety Bond Considerations and Best Practices

Using a surety bond to clear shipments for exports to Canada involves certain practices to ensure compliance and minimize potential issues. Failure to adhere to Canada Border Services Agency (CBSA) requirements can lead to penalties, fines, and shipment delays.

Organizations should stay informed about CBSA requirements and changes in trade regulations. Consider the following when using a surety bond to minimize potential disruptions to your supply chain:

• Ensure accurate and complete documentation of all shipping records, including commercial invoices, packing lists, and bills of lading. Proper classification and valuation of goods are crucial.
• Review bond coverage and adjust the amount if necessary to reflect the highest potential duties and taxes. This ensures the bond remains sufficient to cover liabilities.
• Work with reputable surety providers. Partner with experienced and financially stable surety companies that understand international trade and Canadian customs requirements.
• Conduct regular audits and reviews of shipments and customs entries to ensure compliance and identify any discrepancies early.
• Invest in training for any staff involved in export operations to ensure they are knowledgeable about customs procedures and the importance of maintaining compliance.
• Consider employing a Canadian customs broker who can navigate the complexities of customs regulations, manage documentation, and ensure compliance.
• Maintain open lines of communication with customs officials and your surety provider to promptly address any issues that may arise.
• Plan for potential financial liabilities by setting aside reserves or obtaining insurance to cover unexpected customs costs.

Overall Improvements in Canada’s Importing System

CARM has launched a digital initiative that will streamline and modernize the collection of duties and taxes for goods imported into Canada. Per their news release, CARM will provide several benefits, including:

• Providing a modern interface for importing into Canada.
• Giving importers self-service access to their information.
• Improving consistency of compliance with trade rules.

In October 2024, CARM will become the official system of record for the imposing or levying of duties and taxes. In addition to requiring the changes to the RPP program mentioned above, CARM will also introduce:

• Electronic commercial accounting declarations that you can correct and adjust.
• Harmonized billing cycles.
• New offsetting options.
• Electronic management of appeals and compliance actions.
• The ability to register for a Business Number (BN9).
• Enrollment in various CBSA commercial programs.

Transitioning to the New RPP Program

The RPP program allows participants to obtain the release of goods from the CBSA before the final accounting and payment of duties and taxes. In anticipation of these changes, the CBSA has developed a plan to help importers transition to the new requirements. Visit their website for details.