Bonds Are The Future of Trade
What Do Importers Need to Know?
Many importers are facing questions like; "how do I qualify for duty and tax deferral?" and/or "is it necessary obtain a Canada Customs Bond, if I don't have one"?
Importers (resident or non-resident) must have direct security on file with their Customs Broker to qualify. The below graphic outlines what type of importer security is required with Canada Customs, focusing on why it is important to obtain a Customs Bond right now. In addition, make note that CARM is coming, and the inevitbility of having to obtain a bond is on the horizon.
Until recently, GHY was able to provide Canadian Importers with $100,000 CAD bonds, requiring only minimal information. However, surety companies offering bonds, including our partner, are changing the application process in Canada and we expect U.S. sureties to follow suit on U.S. Customs bonds.
In light of the COVID-19 pandemic, financial indicators are estimating that the extended closure of business will result in 25 percent of small to medium sized business closing or going bankrupt. As a result, surety companies are not willing to take any risks. Similarily, GHY is unable to assume importers financial risks, but we are working very closely with importers to find solutions as a Trade Facilitator.
What are the Benefits of Obtaining a Bond?
- A Customs Bond acts as an insurance policy against default payment; therefore, protecting your trading partners by ensuring payment.
- Instant qualification for the deferral of duties and taxes through June 30, 2020.
- Preparation for CBSA’s Assessment and Revenue Management program (CARM) as importers will be required to post their own security to qualify for the release prior to payment program.
What Coverage is Required?
- For Canadian Resident Importers - the amount of security required is based on your monthly average of duties & taxes owing, less GST over the previous 12 months.
- For Non-Resident Importers (NRIs) - the amount of security required is based on your monthly average of duties & taxes owing, inclusive of GST over the previous 12 months.
What Will Change?
- Payment of GST and duty is no longer made to GHY, rather directly to CBSA. GHY will continue to invoice for our trade facilitation services.
- On the 25th of each month, GHY will send a monthly statement of account outlining GST and duty owed directly to CBSA. The GST and duty for individual transactions will still be shown on your Canada Customs Coding Form, GHY invoice & reporting for audit and reference.
- Payments to CBSA can be made online.
- CBSA is a selectable payee at most financial institutions. Use your 15-digit business number (e.g. 825292204RM0001) as the identifier when completing a transfer.
How Do I Apply for a Bond?
- The easiest way is through GHY. We can apply on your behalf and will educate you through the process.
- Sign a Direct Security Letter with GHY for all unique business entities.
- GHY can arrange to set up a bond for you through our surety partner.
- Any bond request exceeding $10,000 CAD will be subject to a full credit check.
- Full analysis of the financial statements from the past 3 years.
- Completion of future business viability questionnaire.
- Sign bond application and GHY will complete application and update your profile with CBSA.
- Each unique business entity, using a separate 9-digit business number will require its own bond.
Looking for Additional Information on Trade?
Check out our Trade Updates here.