n an effort to better align its import regulations with those of the United States, Canada’s Border Services Agency (CBSA) announced that it would begin requiring importers to secure a bond for shipments valued at more than CAD $3,300. And, under the new CBSA CARM initiative, the Canadian government requires importers to post a bond to clear their cargo through customs.
The CBSA has since decided to delay the implementation of this new rule until the next fiscal year, citing a lack of industry readiness as the reason for this delay. To date, it is unclear whether the new deadline will be announced before the original date or not.
One of the biggest sources of frustration this delay has caused is whether you need to obtain a bond to import goods into Canada. There are reasons why you don’t need an importer security bond, and, in this post, we will explain what bonds are, why you don’t need one right now, and why you should care about this change if you are importing goods into Canada.
But first, let us start with understanding the difference between security and surety and what the CBSA requires.
Security vs Surety
Security is a deposit of money or another guarantee (for example, a bond or letter of credit) that the Canada Border Services Agency (CBSA) holds until you comply with all customs requirements. Security depends on your customs compliance record and how much you import. Canada Customs requires a security payment on most goods imported into Canada, and so CBSA requires Importer Security, also known as Financial Security, for your imports. The two most common forms of Financial Security are bonds and cash deposits.
A surety is a type of financial security posted to guarantee an importer’s payment of duties and taxes owing to the CBSA. It is a legally binding contract whereby an importer guarantees that they will comply with the Customs Act, the Customs Tariff and other applicable legislation, including payment of all duties. For a Surety Bond, or Importer Security Bond, the amount is based on an assessment of the importer’s level of risk as determined by CBSA. Still, it is not insurance against loss or damage of your imported goods.
What is an Importer Security Bond?
The release procedure for all goods imported into Canada requires that customs duties, taxes, and other fees be paid before the release of your shipment. And the purpose of an Importer Security Bond is to guarantee payment of those fees if not paid. An Importer Security Bond is also referred to as a Customs Bond.
So, if you are in the business of importing goods into Canada, you have probably considered obtaining an Importer Security Bond, or Surety Bond, as a guarantee that you will comply with all customs laws and regulations. An Importer Security Bond is required for goods valued at CAD $3,300 or higher and serves as a contractual agreement between three parties:
- The principal (the Importer)
- The obligee (the Government of Canada)
- The surety company issuing the bond
If an importer does not pay the owed duties and taxes, Canada Customs will go to the surety company to get the payment. The surety company will then look for reimbursement from the importer for whatever amount was paid.
It is important to note that having an importer security bond does not mean you will be able to defer payment for duty and taxes. It simply means you are eligible for Release Prior to Payment (RPP). Once your goods have been released from customs, you will still be required to pay duty and taxes within 30 days or at your pre-determined payment schedule.
CARM and the Need for an Importer Security Bond
An Importer Security Bond is great to have because it allows you to import into Canada without paying cash up front, and it also proves your financial capacity and stability. Moreover, with the implementation of the CBSA’s Assessment and Revenue Management (CARM), importers who want to participate in the Release Prior to Payment (RPP) program are required to secure and post an import bond.
But CBSA recently announced that it would be delaying Release 2 of its CARM initiative. This release necessitated that all Canadian importers post a bond themselves for all imports into Canada, which was previously acceptable through customs brokers. This delay poses an important question as to whether a bond is required at the moment.
Why You Don’t Need to Obtain a Bond Right Now
You may be experiencing a case of FOMO (Fear of Missing Out) and thinking, “I need to get a bond right now, or I’ll miss out!” With everyone talking about why you need to obtain a bond, we are here to tell you that you don’t — at least not at the moment. So, before you go out and spend money on a bond, consider these four reasons why you may not actually need one:
Reason #1: The CARM Client Portal (CCP) does not currently upload or display bonds
When CARM was first announced, CBSA had indicated that they would implement a system where importers could submit their bond electronically and update it as required. Unfortunately, this functionality is not yet in place. While it does appear that the CARM Client Portal is open for business (at least for some clients), it cannot currently upload or display bonds. That means that technically, if you have a bond, CBSA may not be able to see it online, and it will have to be submitted manually on paper each time you need to apply for it.
Reason #2: Posting security is not legally binding right now
There is much confusion around posting security. For one, there is no legislation in place requiring importers to post security right now. The Canadian government knows that this will change soon, but they have not yet come up with legislation that would require posting security on imports. So, while the CBSA requires importers to file a bond, they can not legally force an importer to post this bond. Moreover, since inequities exist in the proposed model of posting security, the trade and business community have open lobbies seeking adjustment before legislation.
Reason #3: CBSA is advising against obtaining bonds right now
Senior CBSA Officials responsible for developing and implementing the CARM program are actively advising not to obtain bonds right now. Given that there is no requirement for importers to have a bond in place at this time if your company does not have an operational need for a bond for any other purpose (advance ruling, Customs Self Assessment, etc.), they do not recommend obtaining one until it becomes mandatory for all importers. We will keep you up-to-date on any developments regarding the implementation of the CARM program once CBSA announces them.
Reason #4: There is no reason to incur unnecessary costs
Let’s face it, importing into Canada is not a simple process. There’s a lot of paperwork involved, and if you make a mistake, you can be faced with hefty fines. From the fees and duties to the shipping and delivery of your goods, there are many moving parts involved in international trade. And in today’s business environment, this costs a lot of time and money; the last thing you need is to add to the already long importing process, especially if it is unnecessary in terms of cost, time, and documentation.
If you want to learn more about importer security bonds and why you don’t need one right now, sign up for our complimentary webinar on surety and security with Canada Customs. You can also get in touch with one of GHY’s Global Trade Services experts to streamline the process of importing into Canada – Book a Meeting with us today!