In October 2023, the Canada Border Services Agency (CBSA) launched CARM Release 2. CARM, which stands for CBSA Assessment and Revenue Management, is a multi-phase project aimed to modernize and streamline the collection of duties and taxes for commercial goods imported into Canada. This new system will change the way B2B shipments clear customs, with enforcement set to begin in May 2024. In this article, we’ll outline everything US merchants need to know about CARM and how they will be impacted.
- Importers will have to pay duties and taxes through the client portal.
- Commercial shipments where the merchant is designated as the Importer of Record (IOR) are primarily affected.
- DTC and B2C imports into Canada are unaffected unless the merchant registers as an NRI and lists themselves as the IOR.
- Customs brokers can no longer secure Release Prior to Payment (RPP) privileges for shippers.
- Importers will need to purchase their own customs bond, pay duties and taxes up front, or make a cash deposit with CBSA to clear commercial shipments.
The implementation of CARM has been structured into a series of releases. The initial phase of the project launched in May 2021 introducing the CARM Client Portal, a self-service tool that facilitates accounting and revenue management processes with the CBSA. This digital platform allows importers, brokers, and other trade consultants to streamline their customs transactions by accessing account statements, requesting rulings, and paying invoices online.
Release 2, launched in October 2023, allows select industry partners to test their own internal systems and enable service providers to continue to certify their software with the new interface. All commercial businesses who import goods into Canada will need to be registered on the client portal before CARM becomes the official system of record in May 2024.
While phase 3 has not yet been confirmed, it is speculated that it will impact B2C shipments. According to a recent press release by the CBSA, further enhancements are expected to become available in fall 2024 and a forum with key stakeholders will be set up to discuss the rollout and regulatory support.
What’s Changing With CARM?
With the enforcement of CARM, importers will have to pay duties and taxes through the client portal. This means to clear commercial or B2B shipments in Canada you’ll need to:
- Register for an import/export program account to receive a Non-Resident Importer (NRI) number.
- Create an account in the CARM Client Portal (CCP).
- Purchase a D120 Customs Bond in order to participate in the Release Prior to Payment (RPP) privilege – this allows you to obtain the release of goods from the CBSA before paying duties and taxes, deferring accounting – or pay duties and taxes on the spot each time a shipment crosses the border.
- Authorize your customs broker to access your CARM data. While brokers will still submit customs entries, payment must be made in the client portal.
- Reconcile shipments and pay duties and taxes through your CCP account.
The most significant change here is that customs brokers can no longer secure RPP for shippers. Prior to CARM, customs brokers were allowed to extend the use of their own customs bond to any importer. While it's not mandatory to purchase a D120 bond, it's the only way to release commercial shipments without paying duties and taxes up front or making a cash deposit with CBSA.
Who will CARM Impact?
Put simply, CARM applies to commercial shipments and will affect any merchant that is named the Importer of Record (IOR). This means that most direct-to-consumer (DTC) imports or B2C shipments into Canada are currently not impacted because they are considered “casual” entries and not commercial shipments. However, when a US business registers as an NRI and lists themselves as the IOR, these shipments become “commercial” or B2B customs entries, even if they are technically being delivered to customers.
More examples those affected by CARM include US merchants who are:
- Registered for and reporting GST/HST – Once registered, businesses are required to collect and report GST/HST on all shipments. Some brands choose to do this by shipping on their GST/HST number, making them the IOR.
- Selling through Canadian marketplaces that require the US merchant to register for GST/HST – For instance, Hudson’s Bay Company, a Canadian retail business group, requires US merchants to register for a Canadian tax ID to clear shipments through customs.
- Registered for GST/HST due to regulatory reasons – Companies with regulated products may need to name themselves as the IOR because they have an import license for specific commodities.
- Shipping to Canadian warehouses for fulfillment – When merchants ship to fulfillment centers or utilize services like Fulfillment by Amazon (FBA), they must clear customs on their own business number and list themselves as the IOR.
- Shipping to small Canadian retailers – Certain brands distribute their products to smaller Canadian retailers, who may lack the expertise to navigate the new CARM regulations as importers. To avoid potential delays and returned shipments, the US merchant may need to assume the role of the IOR.
Other parties that may face challenges under the new CARM regulations are Canadian retailers who are unfamiliar with import requirements. In the past, customs brokers could handle the clearance of shipments by simply obtaining the retailer's GST/HST ID and power of authority.
Now retailers will need to register for CARM, provide access to all of their carriers and brokers, post financial security themselves to ensure shipments are released, and pay duties and taxes through the client portal.
How Passport Can Help
As a US merchant shipping to Canada, it’s important to understand how CARM may impact your brand and whether you’re required to register. Familiarizing yourself with these new regulations is crucial for ensuring your brand is able to clear shipments efficiently and avoid costly delays due to customs holds. As the landscape of international trade continues to evolve, staying ahead of these changes is imperative for maintaining access to the Canadian market. Passport’s team of customs compliance experts are available to answer any additional questions you have about CARM and how it may affect your business. Simply reach out to us at email@example.com.