CARM basics – What you need to know
On March 10, 2022, the Canada Border Services Agency notified the industry that CARM Release 2 would be postponed and not come into force in May 2022 as originally planned. CBSA has said that it does not intend to proceed with the implementation of CARM Release 2 before January 2023.
What is CARM?
CARM (aka CBSA Assessment and Revenue Management) is a project by the Canada Border Services Agency aiming to streamline and digitize the process of importing commercial goods into Canada. Through this modernization initiative, the CBSA is transforming how it will interact with importers and customs brokers, how customs information will be reported to the CBSA in the future, how duties and taxes will be paid, as well as making import information available online to importers via a web portal, called the CARM Client Portal (CCP).
Is participation in CARM obligatory?
CARM’s online functionality is being rolled out in two phases:
- Release 1 (R1): May 2021 [voluntary]
- Release 2 (R2): January 2023 [mandatory]
Participation in CARM and registration on the CCP will be compulsory for any importer of commercial goods once R2 goes into effect. Registration on the CCP must be completed before R2, which is scheduled for January 2023.
Failure to comply with the new requirements will result in the importer being prohibited from bringing commercial goods into Canada until the CCP registration process has been completed and all CARM requirements have been satisfied, including posting financial security (e.g., a customs bond) with the CBSA to maintain release prior to payment privileges.
Although registration on the CCP is voluntary under R1 (launched earlier this year in May 2021), importers of commercial goods should first familiarize themselves with the changes being implemented under CARM and the steps needed to successfully register their business on the CCP.
Once the business is registered on the CCP, the importer must delegate access to its employees who manage the company’s customs activity as well as delegate authority to its acting customs broker(s).
It is estimated that more than 200,000 Canadian importers (resident and non-resident importers) will be making the transition to CARM. W2C recommends preparing your business well in advance and making the transition to CARM sooner rather than later to avoid the bottleneck of late registrants, which will certainly occur as we get closer to the R2 implementation date.
How will CARM affect importations of commercial goods into Canada?
Once Release 2 (R2) of CARM goes into effect in January 2023:
- All importers who import commercial goods into Canada must have registered their business on the CARM Client Portal (CCP). After January 2023, your import shipments cannot be accounted with the CBSA without a CCP account.
- Once your business is registered on the CCP, your employees that manage the customs activity (e.g., who manage relationships with brokers and carriers, who purchase imported goods, who oversee customs compliance, or who will make payments directly to the CBSA for your duties and taxes) must have created their personal profiles on the CCP and the business must delegate access to the CCP account for its relevant employees.
- Customs clearance will continue to be a two-step process under CARM. This means that import shipments must be (a) released by the CBSA at the entry port, then (b) the customs declaration must be accounted with the CBSA within prescribed time limits after the shipment has been released. As a commercial importer, your company must delegate authority, via the CCP account, to your customs broker for that broker to continue to account for your released shipments. If you do not delegate authority to your broker through your CCP account, your broker will be unable to transmit Commercial Accounting Declarations (CAD) for your released goods once CARM R2 goes into effect. (Note: CARM will not bring any significant changes to the way in which goods are released at the border or ports of entry. Carriers must still report their cargo to CBSA and transmit cargo control documents (i.e., manifests) to brokers per existing carrier obligations. Moreover, brokers must be in receipt of commercial and shipping documents/information in order to transmit release data to the CBSA for incoming shipments.)
- At R2, your customs broker(s) will no longer pay the CBSA on your behalf for any duties or taxes assessed on your import transactions. Importers will pay all their duties and taxes directly to the CBSA. (Note: The GST Direct option will no longer exist once CARM R2 goes into effect.)
- Before R2, all importers must post security with the CBSA, in the form of a cash deposit or an annual customs bond, to maintain release prior to payment privileges. The security must also be linked to the importer’s CCP account. Whichever option you select (cash or bond), the security posted by your company must be sufficient to cover the estimated amount of duties and taxes for your highest month of import activity. (Note: As of writing this article, the CBSA has not agreed to a single entry bond option. Presently, the only two financial security options being considered by the CBSA are cash deposits or annual customs bonds.)
CARM – What do I need to do today?
For your business and internal teams, CARM represents a new way of working with the CBSA and with your customs broker(s). While your customs broker(s) can still process the customs release and final accounting of your customs entries, help you manage your financial activity, as well as render other peripheral customs services much in the same way brokers do today, under CARM you will need to:
- register your business on the CARM Client Portal (CCP) before January 2023 at the very latest
- delegate access internally to employees who have created their own personal profiles on the CCP
- post financial security (e.g., annual customs bond) with the CBSA
- delegate authority to broker(s) who account for your released shipments, as well as grant the broker(s) the necessary level of access to your CCP for said broker(s) to help your company manage its CCP activities
- begin to pay all your duties and taxes directly to the CBSA on a monthly basis
Consequently, you need to begin today to learn about these changes and consider how your import operations will be affected and start taking the necessary steps to prepare. You will need time to learn about your CARM obligations and how the web portal works, so that you may determine:
- Which person in your organization will be the Business Account Manager (BAM) who registers your business on the portal and, by default, is granted full access and control over your CCP account. This involves understanding the registration process, knowing your company’s profile details with the Canada Revenue Agency, and, more importantly, putting together the correct information that your BAM will need to respond to the affinity questions the CCP will ask when carrying out the initial registration of your business on the portal.
- Which other persons in your company will need access to the CCP, which processes they will manage and what level of access to the CCP they will require. Some employees will have daily activities, whereas others will have monthly activities to fulfill through the CCP. Some employees need only read-only access, while others an access level that authorizes them to perform operational activities on the portal. This also requires your team members to create their personal profiles on the CCP and will require the BAM to delegate access for them to manage various monitoring activities or make payments, or both.
- You will need to analyze your current customs broker relationship(s) and determine jointly with your broker what level of access to your CCP each broker will need to render the customs brokerage services expected by your company. While brokers will be able to provide support services to assist you with your CARM obligations, brokers will not have automatic access to their client’s CCP unless the client delegates this authority to them.
- In order to satisfy the financial security requirements (i.e., cash or annual bond) prescribed under CARM, you need to know what bond or cash amount your company will be required to secure with the CBSA, as well as learn about the processes involved to post cash or to apply for an annual customs bond through your broker or through an insurer.
- More than anything else, the shift to electronic payments will likely have an impact on your company’s internal processes. You will need to learn about and understand the CBSA’s monthly payment timeframes and adjust your payables workflows accordingly. CARM affords no flexibility to the importer with respect to payment terms with the CBSA.
- Under CARM, all importer payments due the CBSA, including customs duties, import-GST, anti-dumping or countervailing duties, excise duties, surtaxes, interest charges or penalties, must be done electronically. Implementing electronic payments through your financial institution could take several weeks to set up and to test. Moreover, not all Canadian or U.S. banks (e.g., for non-resident importers) are currently set up for electronic payments to the CBSA. Your company must look into this. Certain banks also limit amounts that can be paid electronically. You must also consider your bank’s e-transfer timelines. All these issues must be reviewed to ensure they will function within your payment conditions with the CBSA under CARM.
Consider participating in the CBSA’s existing Importer Direct Security program
W2C recommends that importer-clients consider voluntarily registering today for the Importer Direct Security program. Most of the requirements being implemented under CARM already exist under the current Importer Direct Security program, albeit to a lesser degree.
Applying today to Importer Direct Security will give your team the chance to become familiar with the process of paying the CBSA directly and electronically for all amounts owed to the CBSA, as well as familiarize your team with the CCP prior to it becoming compulsory under CARM Release 2.
The customs bond your company will post under the current Importer Direct Security program can be easily transitioned to your CARM account once R2 goes into effect. Of greater significance, your company will avoid the bottleneck of thousands of importers registering for CARM portal accounts and applying for annual bonds at the last minute just before the advent of CARM Release 2. The time needed for sureties to carry out the risk evaluation of your company before issuing a bond will have been done well in advance of R2 and your team will already be familiar with CARM functionalities, thus ensuring the continuity and seamless importation of your goods throughout R1 and R2 of CARM.
W2C can help you prepare for CARM
CARM’s two-phased releases give your business and team time to learn about the new requirements, understand the changes and the impacts on your operations, as well as determine how to implement the necessary adjustments to your importing procedures.
W2C Customs Trade Management Inc. is committed to making your transition to CARM as smooth and pain free as possible. W2C offers webinars on various aspects of CARM. We are also expanding our service offerings to help our clients satisfy their various obligations under CARM and help transition their processes to this new environment.
Contact your W2C representative today to learn how we can help make CARM easier for you.