CARM is Imminent. So, What’s Next?

On October 2nd, 2024, the House of Commons Standing Committee on International Trade (CIIT) voted down a motion to delay the release of CBSA’s “CBSA Assessment and Revenue Management” (CARM) system. With that motion out of the way, CARM appears to be full steam ahead for implementation beginning on October 21st, with the two-week blackout already underway at the time of publishing.

Hopefully, if you are reading this, you are already in the CARM Client Portal, and you have questions, concerns, and frustrations. Not to fear, that is what we are here to help with. Getting into the portal was one thing. Now, you have to use it, and while it may seem overwhelming, by the time you reach the end of this article, you will have a better understanding of what CARM is about and what your obligations are with it.

Having said that, if by the end you are still not sure of how to use CARM, we have many additional services and resources available to help supplement your understanding of this new system. We encourage you to visit our CARM Services page, which has all our resources and services, along with links to our upcoming free webinars that dive even deeper into how to use this new system.

But before any of that, read on to try to make sense of this thing and see what the CARM portal can do for you now that you are registered.

Intro to Bonds For CARM

This may seem like a step backward for some of you because we do often count getting a bond for CARM as part of the initial setup, particularly if you have been following the steps on your CARM Insights page, but it is worth going over again because the portal is where both the posting and the management of your bond take place. 

At the time of writing, there are two bonds that the CBSA will accept, and both are managed in the CARM Client Portal - a cash bond and a surety bond.

A cash bond, as the name might suggest, is a bond that is paid for by your business’s individual capital. The amount of cash required for this bond equals 100% of your highest monthly accounts payable for the year.

A surety bond, or as it is often called, a D120 RPP or Import Bond, is a purchasable bond from surety companies. Unlike the cash bond, these only need to account for 50% of your business’s highest monthly accounts payable with a minimum $5,000 face value.

(If this process seems confusing or daunting, that’s ok. Our CARM team at PCB can not only help you decide which bond type makes the most sense for your business but can also help you purchase and install your chosen bond directly into your CARM Client Portal.)

Once you have a bond in place, it serves as insurance for the CBSA should your business be unable to pay your owed duties and taxes.

This is going to be a significant thing to be aware of as the management of this bond is entirely done within the CARM Client Portal, and while it might be tempting to think that once your bond is set, that’s the end of it, you are cautioned to consider the type and its value carefully because your bond amount has another practical function - as a pseudo credit limit for your imports.

CBSA’s ‘Credit Limit’

As your owed duties and taxes accumulate during the billing period, the portal keeps a live tally. This can add to some confusion later when we discuss billing, but for now, it’s important to understand that this is the number that the CBSA will use to monitor your spending to turn a phrase. Your bond amount in the CARM Client Portal works as a limit or gauge for how concerned the CBSA is about you and your imports. Possible scenarios:

You are below your limit with the CBSA: This is where you should be.

You are 75% of the way through your bond amount: At this point, CBSA will notify you within the portal, and you will need to be aware of your situation, particularly if you have more imports coming. 

You are at 100% of your bond limit: At this point, CBSA will send three notifications that action is required on your account, and if 25 days of inaction pass, the CBSA has the authority to generate a case for an officer to review, which can lead to a suspension of your financial security.

This monitoring system has an added element when deciding what kind of bond you should get. A cash bond will only be worth the amount you put in as far as this ‘credit’ is concerned, whereas a surety bond is worth twice as much due to it only needing to be 50% of your highest monthly accounts payable. For example, $1,000 in cash is worth $1,000 of leeway with the CBSA, and $1,000 of surety bond represents $2,000.

Your Statements of Account

The CARM Client Portal is where you will find your monthly statement of account (SOA). The CBSA generates this statement on the 25th of every month, with the due date being ten weekdays, statutory holidays inclusive, after the 17th of the month. Generally, it’s about a week after the statement is released to you, and most often, this will fall on the last business day of the month.

As a note, it is important to pay attention to your statement of account and use it as the primary source of information for what you need to pay in a billing cycle. While the numbers on that statement can change, even after the statement is released, it is the most important document detailing what you need to pay to the CBSA that month.

Adding somewhat to the confusion is a box labeled “Current Open Balance’ that appears in the CARM portal. This is the live and running amount you owe in total to the CBSA at that moment and is more important for the ‘credit limit’ we discussed above. It is not necessarily the amount you actually owe for the current billing cycle. There are several admittedly confusing elements to this new process, and it has been flagged to the CBSA by brokers and business owners alike, but for now, just be vigilant when it comes to your statement of account.

The Billing Cycle, CADs, and the Benefits of Delegation

The CBSA’s billing cycle runs from the 18th of ‘month one’ to the 17th of ‘month two.’ Any releases that happen during that period are payable directly to the CBSA ten weekdays after the 17th of month two, holidays inclusive. Your statement of account is generated on the 25th of the month and includes all the commercial accounting declarations (CADs) accumulated in that period.

CADs are among the most important transactions that will be posted in the portal. These documents serve as digital documents accounting for your imports into Canada. CARM automatically calculates what you owe in duties and taxes based on what is submitted in your CAD. If you are a regular importer, then, in all likelihood, your broker has been handling the submission of this data. Under CARM, this is your responsibility by default, and they must be submitted through the portal within five business days of the release of those goods, or you will face a late filing penalty.

This is where delegating authority during setup becomes so important because if you have not registered in the portal AND delegated authority to your broker, that broker cannot submit a CAD on your behalf. This is important because if, after five business days, there is no CAD submitted, you may get a late accounting penalty with interest potentially applying to those goods.

How to Pay Your Duties and Taxes in CARM

All financial interactions with the CBSA are done through the CARM Client Portal, and that includes the payment of duties and taxes for your imports. These duties and taxes, like taxes in every other part of your business or life, must be paid on time to avoid significant consequences. In the case of the CBSA, a failure to pay on time can incur additional interest charges or potentially the revocation of your cash or surety bond and, with them, your Release Prior to Payment (RPP) privileges.

The steps in the payment process are not overly complicated and are mostly dictated by your method of payment. There are four different ways to pay any taxes owed to the CBSA, only two of which are done through the portal, but they are all recorded and monitored through the portal.

• Pre-Authorized Debit 

The pre-authorized debit agreement is signed in the portal, and once set up, CBSA will automatically withdraw the funds on the due date from the account on the agreement. There are a few caveats associated with which bank can be used, and it is additionally complex for non-resident importers, but generally speaking, this is the simplest way to manage this process.

• Debit Card/Credit Card 

This is processed through the portal as well, but there is a limit. The rule, as mandated by the Canadian Government, is that payments on debit or credit must be for $5,000 or less. Of course, there is nothing stopping you from making multiple lesser payments, but that is one of the foibles to be aware of in this process.

• Online Banking 

The CBSA can be added as a payee in online banking. In general, this is only for Canada but check with your bank, as some US banks maintain Canadian offices and could have the functionality.

• Cheque 

If you must use a cheque, be aware that payments of this type must be couriered to Ottawa, and they must receive it by 4 PM EST on the due date. It is a challenging route to take, but available for those who need it.

As a note, the CBSA will not accept electronic funds transfers, automated clearing houses, or wire transfers.

What We Can Do For You

This has already been a long read, and we haven’t touched the depth this new system represents. If this brief introduction already seems complicated, you’re right to think that - it can be, and it is undeniably a significant leap forward in complexity for importers - particularly old hands at the system as it has existed up to this point. However, if there is one reassurance we can offer, it’s this - you are not alone in this process.

PCB has a suite of services to help at every level of understanding. From helping you acquire your D120 surety bond to providing full month-end and SOA reconciliation services, we understand the complexities involved, and we know how to help you navigate them.

We are also offering a brand new webinar that goes into further detail about the ‘what now’ of CARM. For an opportunity to ask questions pertinent to your business directly to industry experts, consider saving your seat for one of these free webinars.

If you’ve read all of this and it, honestly, seems like a headache you’d prefer to avoid - we have a service just for you. With CARM Payments, you can let PCB take the wheel and manage the majority of the necessary day-to-day CARM portal uses on your behalf. It’s a secure way to ensure that your financial conversation with the CBSA stays positive and straightforward.

For any questions about CARM, our services, or anything at all in the world of international trade, do not hesitate to get in touch with our CARM team today. We would be happy to help!