CBSA Customs Bonds: What’s new with Importer Direct Security?
The environment for clearing goods into Canada is approaching a fundamental shift. One of the areas where there will be significant change is the security that importers and customs brokers post to the CBSA (Canada Border Services Agency) for release of goods prior to payment of taxes, duties and fees.
One fundamental shift in this area relates to how importers and customs brokers secure taxes if they intend to release goods at the border prior to payment. In the current system, customs brokers are allowed to assume that liability on behalf of their importers through their own customs broker surety bond.
Under the new system the CBSA is moving to a model more similar to the U.S. whereby each importer is responsible for the posting of their own security with the CBSA. This will be in the form of either cash or a customs bond.
To modernize the collection of duties and taxes the CBSA created CARM (CBSA Assessment and Revenue Management) to develop a plan and consult with various stakeholders with the goal modernizing and streamlining the process of importing goods into Canada. The anticipated timeline for these changes to take full effect will likely be in late 2021.
This might seem like a great deal of time. However, to place this shift in context; there are roughly 5,000 importers with their own customs bond (also referred to as a D120 Bond) out of a total estimated pool of 250,000 importers into Canada. This means that by the 2021 deadline, around 245,000 importers will need to find their own bonds.
Many importers and customs brokers realize that they need to be proactive to ensure they get their bonds in place well ahead of the deadline when inevitably surety companies will be faced with a significant influx of requests which they may struggle to deal with.
Customs brokers are working closely with their importer clients to navigate these changes. The stated goal being to provide their importers with the knowledge of the changes and an efficient solution to obtain the required customs bonds.
These changes and how customs brokers deal with them represent an opportunity to provide additional service and strengthen their relationships with their importer clients and build their client list. If you are a customs broker or importer looking to navigate the changes with importer direct surety bonds, please reach out to a member of the FCA team.
Update: November 27th, 2020
During the COVID19 pandemic, to assist importers into Canada, the CBSA agreed to allow a four-month deferral of duties and taxes. Many surety companies had significant concerns with this given that a significant four-month liability that was now being accrued under customs bonds during a period of economic uncertainty.
This has led several companies to underwrite these bonds more closely. There remain a number of markets with interest in writing these bonds but given this environment, it makes it even more important for importers and customs brokers to partner with an insurance broker that understands the business and has the right relationships with surety companies who are in the customs bond business for the long term.