Release of Goods Prior to Payment Bonds
Changes to CBSA’s Financial Security requirements means importers who are importing into Canada (resident or nonresident) will be required to post their own security to ensure CBSA releases their goods without prior payment.
Canada Border Services Agency (CBSA), through an initiative led by the CBSA Assessment and Revenue Management (CARM) project, will soon be enacting changes to its financial security requirements that may impact importers in Canada1. In order to maintain Release Prior to Payment (RPP) privileges, importers will need to start posting their own RPP Security in order to cover their duties and taxes owed to the CBSA, either in the form of cash, certified cheque, money order, or a surety bond; and will need to do so before CARM goes live in May 2022.
What is a Surety Bond?
Surety is a form of credit extension, often uncollateralized, where a surety company agrees to secure certain future liabilities of a company by providing a bond. CBSA grants importers the option to post a customs bond, allowing importers to fulfill their security requirements without tying up cash that would otherwise be held by CBSA in perpetuity2. Currently bonds are paper documents that require an ink signature and seal from the surety and the importer before being mailed to CBSA but under CARM customs bonds will be delivered electronically.
How can Marsh help you?
Marsh Canada is amongst the largest surety brokers in the country, with offices from coast to coast, placing billions of dollars in surety bonds annually and is an important source of business to North America’s surety carriers. Marsh utilizes a proprietary system to manage and monitor our surety program that enables us to benchmark and assess market trends and negotiate the best terms and pricing for our clients. The CARM initiative will see as many as 230,000 importers require security by May 2022 — a significant undertaking. Marsh’s surety team has the resources and expertise to guide you through the CARM changes, represent you in the bond procurement process, and will work with you to ensure your release prior to payment privileges are not jeopardized.
| Security Feature | Current State | Future State |
|---|---|---|
| Who Provides RPP Security? | Customs Brokers — 90% Importers — 10% |
Customs Brokers — 0% Importers — 100% |
| What RPP Bond Covers? | Duties, taxes, GST, penalties, interest, redeterminations | Duties, taxes, GST, penalties, interest, redeterminations |
| Formula for RPP Bond Amount — Resident Importer | Monthly average duties and taxes payable in the previous 12 months | 50% of the highest monthly duties, taxes, and GST payable in the previous 12 months |
| Formula for RPP Bond Amount — Non-resident Importer | Monthly average duties, taxes and GST payable in the previous 12 months | 50% of the highest monthly duties, taxes, and GST payable in the previous 12 months |
| Maximum RPP Bond Amount | $10,000,000 | $10,000,000 |
| Minimum RPP Bond Amount | $5,000 | $25,000 |
Summary of CARM Changes:
- Shift from Customs Broker Security to Importer Direct Security
- Importers will need to post security to CBSA by May 2022 to avoid the risk of losing their Release Prior to Payment (RPP) privileges
- GST will be included in the formula for setting the security limit; GST Direct Payment Option letter will be eliminated
- In anticipation of 230,000 importers posting security, Customs bonds will soon go paperless
About Our Surety Practice
The Surety practice at Marsh is organized in a way that provides seamless service through local experts and corporate resources across North America and around the globe, supporting a variety of industries. Our specialists have unique backgrounds in banking, broking and underwriting, giving them a depth of understanding unparalleled in the industry.
We maintain strong relationships with the top surety bond markets built on our market knowledge, technical acumen, professional esteem, trust, and experience. Marsh helps clients succeed by defining, designing, and delivering innovative industry-specific solutions that help them effectively manage risk.
1https://www.cbsa-asfc.gc.ca/prog/carm-gcra/
2https://www.cbsa-asfc.gc.ca/publications/dm-md/d1/d1-7-1-eng.html