Canada Gazette, Part I, Volume 156, Number 48: Regulations Amending Certain Regulations Administered and Enforced by the Canada Border Services Agency

November 26, 2022

Statutory authorities

Customs Act
Customs Tariff

Sponsoring agency

Canada Border Services Agency

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the regulations.)

Executive summary

Issues

The processes and systems currently in place to support the importation of commercial goods into Canada are burdensome for the CBSA and TCPs alike. They require substantial manual processing and paperwork, and rely on an assortment of aging IT systems, some of which are more than 30 years old. The current processes are inefficient and costly for TCPs, as accounting for imported commercial goods and assessing the applicable duties and taxes involve considerable administration by importers and other TCPs.

Alongside the outdated processes and systems, the existing regulatory framework reinforces outdated methods for managing import accounting and the payment of amounts owed to the Government of Canada. Specifically, the current regulatory framework

• requires TCPs to submit paper-based documentation to specific CBSA officers or locations, which is administratively cumbersome for TCPs and the Government of Canada alike;
• requires financial security to be provided in the form of cash, a certified cheque, or a paper-based bond rather than by electronic means, which results in administrative burden for TCPs to manually submit the security to the CBSA, and for the CBSA to store, process and track it;
• relies on paper-based accounting and correction processes, which creates inefficiencies, creates the potential for records to be inadvertently destroyed or misplaced, and creates challenges to assembling a clear picture of an entity’s compliance with accounting and payment obligations; and
• prescribes multiple payment due dates for various amounts associated with the importation of commercial goods, which creates confusion for TCPs that are often required to make multiple payments to the CBSA each month rather than one comprehensive monthly payment, and that need to manage multiple deadlines for the purposes of submitting corrections to accounting documents.

The CARM project was also included in the 2021 Digitalization and Technology-Neutral Regulations Roadmap in the second round of the Treasury Board of Canada Secretariat’s targeted Regulatory Reviews. Through the Review, stakeholders had commented that current CBSA processes for commercial imports and assessing duties and taxes require extensive administration, rely on aging IT systems, and are inefficient and costly for importers.

Regulatory amendments would support the implementation of CARM — a major initiative to update IT systems and modernize the collection of import duties and taxes. The regulatory amendments are required to support an import accounting, payment and financial security framework that is consistent with, and better aligned with, current commercial importation business practices that favour electronic communication and transactions methods and that are not bound to specific geographic locations.

Background

The CBSA’s mandate is to provide integrated border services that support national security and public safety priorities while facilitating the free flow of persons and goods that meet all requirements under its program legislation. Managing the efficient importation of commercial goods into Canada, including the accurate and effective assessment and collection of duties and taxes owed to the Government of Canada, is key to the facilitation aspect of the CBSA’s mandate. In 2021, the CBSA collected $28.2 billion in duties and taxes on imported goods valued at approximately $564 billion.

To address the heavy administration load of the CBSA and TCPs in the duties and taxes assessment and collection process, the CARM IT system has been built. The CARM system is designed to address many issues the CBSA and TCPs face in the importation process, including (i) inefficiencies resulting from a reliance on manual and, in some instances, paper-based processes; (ii) difficulties in collecting on debts owed to the Government of Canada and in facilitating compliance with the trade rules and regulations governing the importation of commercial goods into Canada; and (iii) challenges in navigating overly complex processes and rules related to commercial accounting and payment of owed amounts, including non-harmonized payment due dates.

The CARM project would modernize and simplify the accounting process related to imported goods, providing a more efficient means for TCPs and the CBSA to interact during the importation process and when accounting for commercial goods, and when corrections to accounting documentation are required. CARM has been designed to give TCPs improved access to their import account information with the CBSA, and to make it easier for them to communicate with the CBSA and remain compliant with commercial goods accounting requirements.

Trade chain partners

In addition to the importer, there are many parties involved in the importation process that participate in the exchange of information with the CBSA with respect to the commercial importation of goods, as well as the payment of associated duties or the provision of financial security against owed amounts. These TCPs may be affected by the proposed regulations:

• A customs broker is a person or company that obtains, prepares and submits release and accounting information or documentation on behalf of an importer. They are the only service providers granted authority under the CA to account and pay duties and taxes on behalf of importers.
• A carrier is the person or company that transports commercial goods into Canada. The carrier is responsible for providing goods (cargo) and conveyance information to the CBSA.
• A freight forwarder arranges for the transportation of commercial goods to Canada with a carrier and may separate a shipment of goods at a customs sufferance warehouse in Canada on behalf of an importer or the person receiving the goods. The freight forwarder is considered a secondary party in the international transportation chain. The freight forwarder is responsible for providing information to the CBSA that builds upon the information supplied by the carrier, such as the name of the person receiving the goods and the delivery address.
• A duty free shop (DFS) is a qualified person licensed to acquire goods free of certain duties and taxes for sale to travellers who will immediately export the goods from Canada. The DFS operator must post financial security to protect the duties and taxes associated to the goods in the shop.
• A customs bonded warehouse is a private facility that participates in the CBSA’s Customs Bonded Warehouse program. These operators provide secure facilities in which companies can store goods duty free for up to four years until they are released (when duties and taxes become payable) or are exported.
• A customs sufferance warehouse is a privately owned and operated facility licensed by the Minister for the control, short-term storage and examination of imported goods until they are released by an officer or exported from Canada.

There are a number of other entities that may be impacted by these regulations, including those involved in supplying financial security to guarantee that owed duties will be paid for goods imported into Canada when those duties are not paid at the time of entry. While the importer could manage that process unilaterally, they can also employ the services of financial security providers as articulated in section 4 of the Canadian Payments Act (CPA),^{footnote 1} or as otherwise specified by the Treasury Board. Other entities such as accountants, trade lawyers, collection agencies, and other professional service entities (such as customs trade consultants) may also be impacted by these regulations.

The CARM project history

In 2014, the CBSA began the design and implementation of the CARM project in order to update its processes and systems related to the importation of commercial goods and to facilitate international trade. The CARM project is a $526.8 million multi-year initiative designed to modernize processes for the importation of goods into Canada. CARM is also designed to be the central portal for commercial import accounting and revenue reporting and management. CARM would be the main system that TCPs use when accounting and making payment of duties and taxes for commercial importations into Canada. Through CARM, the CBSA hopes to provide modern, fair, and fiscally responsible assessment of duties and taxes owed on imports, and thereby improve revenue management processes for the Government of Canada (i.e. how the CBSA assesses, collects, refunds and remits duties and taxes paid on imported goods). The CBSA aims to ensure the accurate collection of Government of Canada revenues by establishing a more controlled and stringent process for the assessment of duties and taxes, and by providing an improved capacity to analyze TCP compliance with accounting and payment requirements.

A key component of the CARM project is the CARM Client Portal (CCP) — an innovative self-service tool that modernizes how the trade community interacts with the CBSA. The portal simplifies and secures ways to transact with the CBSA by making it easier for the trade community to account for goods that are being imported into Canada. The CCP offers online access to importers’ accounting transactions, such as viewing their statement of account with financial transactions, making payments and submitting appeals and rulings requests to the CBSA.

In addition to the use of the CCP, TCPs may decide to use Electronic Data Interchange (EDI) to communicate with and provide information to the CBSA. The EDI is a standardized way of electronically exchanging information between and within businesses, organizations, government entities and other groups. These standards specify the formats, character sets, and data elements used in the exchange of business documents and forms. The use of the EDI will not be mandatory for TCPs following full CARM implementation.

The CARM project is being released in three phases. The first two phases were released in 2021^{footnote 2} and the third, Release 2 (CARM R2), is targeted to be launched in October 2023; the timing is contingent on the finalization of this regulatory proposal. The launch of CARM R2 is also contingent on CARM system readiness, which includes testing system functionality, identifying issues and making fixes. Regulatory changes will not come into force, nor will the CBSA launch of CARM R2, unless the Agency is confident that the CARM solution is ready and absent of any major defects that could cause significant operational issues.

In order to support the implementation of CARM R2, regulatory amendments are needed in the following three broad areas: (i) electronic communication and payment; (ii) the provision of financial security electronically; and (iii) billing cycles.

Electronic communication and payment

A key objective of the CARM project is to allow TCPs to communicate electronically with the CBSA. Under existing regulations, in some instances, TCPs are required to notify or submit paper documentation to a specific person (such as the chief officer of customs) at a specific place (such as a specific port of entry), as opposed to being able to communicate and submit documentation to the CBSA electronically. It is for this reason that regulatory amendments are required.

Specifically, following the enactment of this regulatory proposal and the launch of CARM R2, the CCP would provide TCPs with the ability to check the status of their financial accounts and transaction history with the CBSA, to communicate directly with the CBSA on issues related to their imported goods, and to electronically access multiple reports relating to their import activity (such as statements of account, transaction history, invoices, submitted declarations, and Commercial Accounting Declaration [CAD] reports). Allowing TCPs to communicate with the CBSA electronically would increase CBSA efficiency by reducing the administrative burden associated with paper-based processing (e.g. manually keying in information from a paper form into a CBSA system, storing paper documents). It would also allow the CBSA to make more informed decisions related to compliance, rulings, reviews and program management, since all relevant documentation would be easily accessible to CBSA officers via the CCP. Additionally, it would allow TCPs who operate nationally, such as carriers, to implement streamlined processes in all aspects of their interactions with the CBSA, rather than being obliged to deal with a specific CBSA office or officer in a specific geographic location.

Through CARM R2, the CBSA also intends to introduce functionality that would make it easier for TCPs to make electronic payments directly to the CBSA via the CCP (via credit card, online banking or pre-authorized debit), or by EDI. While the CBSA would prefer electronic payments, the Agency would continue to accept payment by other means (e.g. if an importer arrives at the border to pay the duties on their imported goods, they would be permitted to pay using cash).

To allow TCPs and the CBSA to interact electronically through the CCP, including for the purpose of making electronic payments, the CA was amended to allow the Act to be administered and enforced by electronic means and to remove most requirements for paper-based communication between the CBSA and persons with whom it interacts. These amendments received royal assent via Bill C-19, Budget Implementation Act, 2022, No. 1 (2022 BIA) in June 2022 and are expected to come into force in time to support this regulatory proposal.

As the broad authority to collect electronic payments already exists, only minor regulatory adjustments are needed to support this objective (i.e. removing the requirement for the Canada Post Corporation to pay duties to the CBSA via cash or cheque and replacing it with a requirement to pay electronically).

Provision of financial security electronically

Through CARM R2, the CBSA intends to transition to an electronic process for TCPs to submit financial security to meet their program requirements (e.g. in order to obtain a customs broker licence or to obtain the release of goods prior to the payment of duties and taxes). Currently, the CBSA requires financial security to be provided in the form of a paper-based bond that TCPs are required to manually submit to the CBSA, or as a security deposit in the form of cash or a certified cheque.

As of CARM R2, a TCP that has an obligation to provide financial security under the CA would be required to electronically provide the CBSA with information about a valid written security agreement between the TCP and a financial security provider to confirm that they are meeting their financial security requirement with the CBSA. Alternately, TCPs would be required to post a deposit on the CCP for the purposes of financial security, eliminating the need to rely on paper-based processes to provide proof of adequate financial security to the Minister.

To enable the shift toward electronic confirmation and transmission of financial security information, as well as the ability for TCPs to post a deposit on the CCP for the purposes of financial security, regulatory amendments and the introduction of new regulations are required. The new regulations would establish the terms and conditions for financial security agreements between a TCP and a financial security provider and outline how these security agreements would be enforced. This would support the Agency in ensuring that financial security providers and TCPs understand their obligations with respect to financial security and that relevant amounts owed are recovered if a TCP does not pay by the payment due date. This would reduce the amount of uncollected debt owed to the Government of Canada, as it is currently extremely challenging to call on financial security when amounts owed under the CA or other customs-related statutes are outstanding.

To allow for the creation of these new regulations, legislative amendments were required. These amendments received royal assent via Bill C-30, Budget Implementation Act, 2021 (2021 BIA) and the 2022 BIA, and established an authority to specify terms and conditions for other types of security, including security that is to be provided electronically. These legislative amendments would come into force concurrently with proposed regulatory amendments at CARM R2.

Billing cycles

A billing cycle refers to a combination of three things: the billing period that captures all transactions that appear on a TCP’s statement of account; an accounting due date, which is the date by which a TCP needs to account for goods imported during the billing period; and a payment due date for amounts owing. The following billing cycles are specific to the CBSA program under which the goods are being imported:

• High value shipments (HVS) / Low value shipments (LVS)
• Courier low value shipments (CLVS)
• Continuous transmission commodities (CTC)
• Customs self-assessment (CSA) Program

For example, there are currently specific time frames for importers to account for high-value shipments (within five business days of release), but different time frames for them to account for low-value shipments (no later than the 24th of the month following the month when they are released). In either case, the importer has to pay owed amounts by the last business day of the month in which the billing cycle ends. CTC goods such as oil and gas, on the other hand, enter Canada in a continuous fashion via pipelines and are subject to a billing cycle that is based on monthly import volumes rather than discrete shipments crossing the border on a specific date.

Taken as a whole, the existing regime of billing periods and accounting and payment due dates is complex, administratively burdensome to manage, and introduces unnecessary complexity for TCPs and the CBSA to ensure compliance with payment due dates and to manage corrections and the accrual of interest.

CARM R2 would introduce changes to certain aspects of the billing cycle in order to simplify matters for TCPs. These changes would be supported by changes in regulation that include the following:

• Adjusted billing periods for some programs. When CARM R2 is implemented, the CBSA would administer two billing periods for imported goods. The first type of billing period is currently in place and runs from the first day of the month to the last day of the month; it applies to CLVS shipments and CTC commodities. The second new billing period would run from the 18th of a month until the 17th of the following month and would apply to HVS/LVS shipments. CSA participants would have the option of choosing either billing period. This change would result in a reduction of the number of available billing periods (from three to two), and is intended to respect the unique operating realities of certain programs (such as CLVS and CTC) while allowing alignment with the harmonized payment due date for all TCPs that is described below.
• A change to accounting due dates for specific CBSA import programs. Specifically, TCPs who import low-value shipments would operate according to the same accounting requirement of five business days as TCPs who account for high-value shipments. In addition, TCPs who participate in the CSA Program would operate according to the same accounting deadline (which would be the payment due date) regardless of which of the two CSA billing options they choose.
• A harmonized payment due date for all CBSA import programs. While TCPs would still operate according to program-specific billing periods and accounting due dates, as noted above, all TCPs would be able to receive their statement of account via the CCP on the 25th of a month. The statement of account would summarize transactions processed during the program-specific billing period, and would indicate amounts owing (or credits on the account). In addition, all TCPs would operate according to the same payment due date, which is 10 weekdays after the 17th of the month in which the statement of account is issued.

To further simplify accounting for TCPs, CARM R2 would offer technical capacity to administer “versionable accounting” with a correction period (using a CAD that can have multiple versions) that would be supported by the above-noted regulatory amendments to simplify accounting and payment due dates. Currently, accounting and corrections are managed via two separate paper-based processes. TCPs are only permitted to make corrections to an accounting declaration within a billing period if it is a matter of clerical error; that is, nothing that would impact the calculation of duties. For example, if a TCP submitted an accounting declaration today and incorrectly declared the number of items they were importing, it could result in the TCP underpaying or overpaying the amount of duties owed to the CBSA. In this situation, the TCP would need to wait until after the payment due date to submit an adjustment request, and would then be required to either pay the additional amount of duties owing if there was an underpayment or be issued a refund by the CBSA in the event of an overpayment.

Once CARM R2 is fully implemented, TCPs would have the ability to make penalty-free corrections to any information on their previously submitted Commercial Accounting Declaration (CAD) from the time the CAD was submitted to the CBSA up until the payment due date, which would result in errors being identified and resolved prior to when TCPs are required to pay the duties on their imported goods. In the same example, the TCP who incorrectly declared the number of goods they were importing would now be permitted to make a correction to their CAD, which would result in the amount of duties owed being updated in CARM and the TCP paying the correct amount owed to the CBSA on the payment due date.

The introduction of the versionable correction period, supported by regulatory amendments to identify a “prescribed day” when payments are due, is expected to encourage TCPs to maintain up-to-date accounting information by simplifying the process of making corrections and reducing the administrative burden associated with making corrections after the payment due date.

Objective

This proposal has three main objectives.

1. Make regulatory changes needed to enable the CBSA and TCPs to move away from costly paper-based methods of communication and payment to more modern, electronic communication and transaction methods.

The regulatory proposal would enable TCPs to communicate electronically with the CBSA via the CCP or EDI rather than with specific individuals (e.g. the chief officer of customs) by paper means, as is currently required in many circumstances. As part of this proposal, electronic communication would be made available for certain processes (e.g. for applications for a sufferance warehouse, customs broker, or bonded warehouse licence; to notify the Minister of changes to CSA Program information) but would be required in others (e.g. when accounting for goods; for submitting duty free shop applications). The CBSA would allow for the submission of accounting information using non-electronic means in exceptional circumstances, such as in the event of a CARM system outage or natural disaster that would prevent the TCP from using CARM.

2. Make regulatory changes needed to modernize and simplify processes related to providing financial security.

The regulatory proposal would require a move from financial security being provided through a paper-based process such as a customs bond, to an electronic process. To support this move, this regulatory proposal includes new regulations, titled Financial Security (Electronic Means) Regulations, to establish the terms and conditions by which importers and other TCPs must abide when they are required to provide financial security under the CA or the CT. The new regulations would provide direction to importers, brokers, warehouse operators, and other TCPs about their obligations to provide an electronic deposit or electronic confirmation that financial security has been secured from a financial security provider in order to secure the release of goods prior to the payment of duties and taxes, or to obtain a licence (such as a broker’s licence or to operate a bonded warehouse).

Besides the overall benefit associated with going paperless, the new regulations would provide clarity and guidance to TCPs by clearly indicating the obligations of the debtor (i.e. the importer or other TCP) and the financial security provider in relation to a security agreement. The Agency would continue to accept payment by other means in limited circumstances (e.g. permitted to use cash at a port of entry). The proposal is designed to simplify the process of the Minister making a claim against financial security provided electronically if a TCP defaults on payment, as all parties would have a clearer understanding of their obligations and liability to pay under the CA and the new regulations.

3. Make regulatory changes needed to enable the CBSA to introduce updated billing cycles for TCPs.

The regulatory proposal would introduce new billing periods and modified accounting due dates for certain CBSA import programs, a harmonized payment due date for all CBSA import programs, and would anchor a correction period that makes use of versionable accounting processes in the AIGPDR. This proposed approach aims to reduce the administrative burden on TCPs and the CBSA by reducing the number of payments to be made and processed during the billing cycle, and by making the monthly statement of account more understandable. The introduction of a harmonized payment due date also supports a simplified process for making corrections and would reduce the administrative burden associated with making corrections after the payment due date.

Description

The regulatory proposal would amend nine regulations under the CA and three regulations under the CT. It would also introduce new regulations, the Financial Security (Electronic Means) Regulations, under the CA.

The proposed regulatory updates fall into three broad categories: (i) electronic communication and payment; (ii) the provision of financial security electronically; and (iii) billing cycles. The proposal would also make housekeeping amendments to update outdated references and nomenclature, and reflect current program policy.

1. Electronic communication and payment

Electronic communication

The proposed regulatory amendments concerning electronic communication would affect individuals or businesses who wish to enroll in a CBSA program (for example Release Prior to Payment,^{footnote 3} customs broker or bonded carrier); import goods into Canada; transport imported goods within Canada; operate a duty free shop or customs warehouse; or who are authorized to transact with the CBSA on behalf of clients (e.g. customs broker, trade consultant, or lawyer).

The CBSA is proposing regulatory amendments related to electronic communication to the following regulations:

• Accounting for Imported Goods and Payment of Duties Regulations (AIGPDR);
• Customs Bonded Warehouses Regulations;
• Customs Brokers Licensing Regulations;
• Customs Sufferance Warehouses Regulations;
• Duty Free Shop Regulations; and
• Special Services (Customs) Regulations.

These amendments can be broken down into two subcategories: (i) facilitation; and (ii) requirements.

Facilitation

The proposed amendments to facilitate electronic communication via the CCP or EDI would remove the requirement for TCPs to notify or submit documentation to a specific person (e.g. chief officer of customs) at a specific place (e.g. customs office) and replace it with a requirement to notify or submit documentation to the Agency more broadly. This would allow TCPs to notify or submit documentation to the CBSA electronically, though it would not introduce a requirement in regulation for electronic communication.

The CBSA is also proposing regulatory amendments to Schedule 1, Part 3, of the Designated Provisions (Customs) Regulations that are consequential to the changes described in the paragraph above. These Regulations specify the contraventions for which a person may be issued a penalty; the proposed amendments remove the requirement for customs brokers to notify the chief officer of customs in writing for specific changes listed in the Customs Brokers Licensing Regulations (e.g. change in the address of a business office at which a broker transacts business; change in the legal or business name of the partnership or corporation; change in the officers or directors of the corporation). Instead, customs brokers would be required to notify the Agency more broadly, and failure to do so would represent a contravention for which a penalty could apply.

Requirements

In addition to providing the option for TCPs to communicate electronically, the regulatory amendments would require electronic communication for the following:

• To account for goods;
• To submit duty free shop licence applications;
• To submit documentation to the Agency for the purposes of operating a duty free shop; and
• To notify the Agency of a proposed change in the beneficial ownership of the shares of a corporation operating a duty free shop.

The proposed amendments related to duty free shop operations would ensure that the CBSA is better able to centrally monitor and administer the activities of this highly regulated industry, in which dutiable goods are permitted to enter and leave duty free shop facilities without duties having been paid under specific conditions. Required electronic transmission of documentation would help the CBSA ensure accurate tracking of duty free shop inventories and would ensure consistent and updated file management with respect to duty free shop ownership and operation.

The proposed regulatory amendments related to accounting would require TCPs to account for goods using electronic means, as specified in the Electronic Commerce Client Requirements Document (ECCRD), subject to prescribed exceptions as determined by the Minister (e.g. should there be an issue with required IT systems, if there were extenuating circumstances like a natural disaster or if it is impracticable for a person, due to circumstances outside their control, to account for goods using electronic means). While TCPs would be required to account for goods electronically, TCPs who have obtained authorization from the CBSA for interim accounting (e.g. the Department of National Defence who imports military equipment) would continue to be permitted to submit interim accounting to the CBSA using a paper-based process as per a policy decision made by the CBSA.

In practice, this would mean that following the coming into force of the regulations, paper-based accounting for goods would not be accepted by the CBSA except for the purposes of interim accounting or in exceptional circumstances.

Electronic payment

The proposed regulatory amendments concerning electronic payment would affect the Canada Post Corporation, who is required to pay duties to the CBSA on goods imported as mail. The AIGPDR would be amended to remove a requirement for the Canada Post Corporation to make payments by cash or certified cheque and would instead prescribe that those payments be made via electronic means.

2. Provision of financial security electronically

The proposed regulatory amendments concerning financial security to be provided electronically would affect individuals or businesses who are required to provide an electronic deposit or electronic confirmation that financial security has been secured from a surety provider in order to obtain the release of imported goods prior to payment or to obtain a licence (such as a brokers licence or to operate a bonded warehouse).

The CBSA is proposing regulatory amendments to the following regulations related to requiring financial security electronically:

• AIGPDR;
• Customs Bonded Warehouses Regulations;
• Customs Brokers Licensing Regulations;
• Customs Sufferance Warehouses Regulations;
• Duty Free Shop Regulations;
• Special Services (Customs) Regulations;
• Special Services Regulations;
• Temporary Importation (Excise Levies and Additional Duties) Regulations;
• Temporary Importation (Tariff Item No. 9993.00.00) Regulations; and
• Transportation of Goods Regulations.

These regulatory amendments to each of the above-noted regulations would remove the requirements for TCPs to submit paper-based forms of security to the Agency in order to meet their security requirement to participate in a CBSA program. The regulatory amendments would also specify that program applicants must provide financial security in accordance with the requirements of the new proposed Financial Security (Electronic Means) Regulations. This new regulation would (i) establish the obligation for TCPs to confirm or provide information concerning financial security electronically to the CBSA; and (ii) establish certain terms and conditions for the security agreement between the person required to give security (the debtor) under the CA or CT and the financial security provider.

Specifically, the proposed new regulations would require the following to be provided to the CBSA electronically to confirm the security agreement:

• the agreement number;
• the names of the parties;
• the relevant Agency program;
• the applicable business number;
• the amount of the security;
• the applicable legislative authority; and
• the validity period of the agreement.

In addition, the regulations would require the debtor and surety to provide an update within two days if any of the above-noted information changes. The debtor or surety would be required to electronically provide a copy of the security agreement to the CBSA when requested to do so, and the surety would be obliged to electronically provide the CBSA with 30 days’ notice of the termination of a security agreement. Further, the regulations outline the process under which the CBSA would make a claim against the security agreement when the debtor fails to pay amounts owed under the CA or the CT, and specifies the obligation of the surety to pay the amount claimed.

The new regulations would also maintain the option to provide a deposit to the CBSA. TCPs would be required to do this through approved electronic payment methods. The proposed new Regulations include specific exceptions as determined by the Minister in which non-electronic forms of security would be accepted (e.g. should there be an issue with required IT systems, if there were extenuating circumstances like a natural disaster, or if it is impracticable for a person, due to circumstances outside their control, to provide proof of security by electronic means).

To support the transition from financial security being provided through the paper-based system to the provision of financial security electronically under the new regulations for goods released prior to payment of duties, the AIGPDR would include a transition period. This amendment would permit importers to obtain release of their goods prior to the payment of duties for up to 180 days following the coming into force of the regulations without posting security, as long as the importer has registered for an account on the CCP. The purpose of the transition period is to incent onboarding in the CCP by granting importers the time they need to shift from a paper-based customs bond to submitting financial security electronically to meet their obligations in order for their goods to be released prior to payment of duties.

Some importers are expected to already have compliant forms of financial security in place and active accounts in the CCP when the regulations come into force. These importers would not need to make any adjustments to be in compliance with the proposed regulations and, therefore, are not expected to need the transition period.

3. Changes needed to implement simplified billing

The proposed regulatory amendments would make changes to billing periods, update accounting due dates for certain CBSA import programs, introduce a harmonized payment due date, and enable a versionable correction period. Taken as a whole, these amendments would affect individuals or businesses who participate in an import program that involves a regularized billing and payment cycle as compared to paying duties at the time goods are released. These amendments would also impact those entities authorized to transact on an importer’s behalf, such as customs brokers.

The following regulatory amendments are being proposed to the AIGPDR to implement simplified billing cycles:

• Adjusted billing periods for some programs. Amendments would reduce the number of available billing periods from three to two. The first type of billing period is currently in place and runs from the first day of the month to the last day of the month; it applies to CLVS, CTC and importations by CSA participants who choose this billing option. The second, new billing period would run from the 18th of a month until the 17th of the following month and would apply to HVS/LVS and importations by CSA participants who choose this billing option. This change is intended to respect the unique operating realities of certain programs (such as CLVS and CTC) while allowing alignment with the harmonized payment due date for all TCPs that is described below.
• A change to accounting due dates for specific CBSA import programs. Proposed regulatory amendments would modify the accounting due dates for TCPs who import low-value shipments and for CSA importers. Specifically, TCPs who import low-value shipments would operate according to the same five-business-day accounting requirement as TCPs who account for high-value shipments. TCPs who participate in the CSA Program would operate according to the same accounting deadline (which would be the payment due date) regardless of which of the two CSA billing options they choose.
• A harmonized payment due date for all CBSA import programs. The regulations would be amended to ensure all TCPs operate according to the same payment due date, which is 10 weekdays after the 17th of the month in which the statement of account was issued. For the purposes of the harmonized payment due date, weekdays would be calculated as any day from Monday to Friday, inclusive of holidays.
• A versionable correction period. The proposed regulatory updates would set the above noted harmonized payment due date as the “prescribed day” for the purposes of amendments to section 33.4 of the CA, which describes that interest begins to accrue on the day after the prescribed day. The definition of the “prescribed day” also establishes the anchor for a correction period, or the outermost day in a billing cycle by which a TCP could make corrections to the origin, tariff classification of value for duty on accounting documents without triggering a redetermination process or incurring a penalty. This “versionable accounting” capacity would be enabled through technical capacity available at CARM R2, and would be further supported by amendments to subsection 32.2(3) of the CA that specifies that only corrections submitted after the prescribed day would be treated as a re-determination. These CA amendments received royal assent in the 2021 BIA and would come into force to coincide with these regulatory amendments as well as the availability of the necessary technical capacity at CARM R2.

November 26, 2022

Housekeeping amendments

The CBSA is proposing additional amendments to the following regulations to ensure they are kept up to date with the appropriate nomenclature, changes to the name and specific provisions of referenced statutes, and to formalize in regulation current CBSA program policy decisions:

Accounting for Imported Goods and Payment of Duties Regulations (AIGPDR)

• replace “Agency” with “Minister of National Revenue” in the definition of “business number” and remove the incorrect specification that business numbers are only issued to importers or carriers; and
• remove the reference to Commissioner and Director General in the nomenclature.

Customs Brokers Licensing Regulations

• correct nomenclature, from “Canada Customs and Revenue Agency” to “Agency”; and
• eliminate the requirement to surrender a licence to the Agency and replace with the requirement to stop displaying the licence.

Customs Sufferance Warehouses Regulations

• eliminate the customs sufferance warehouses licensing fee;^{footnote 4} and
• change the reference to the “Atomic Energy Control Act” and “Atomic Energy Control Regulations” to the “Nuclear Safety and Control Act” and “General Nuclear Safety and Control Regulations.”

Storage of Goods Regulations

• replace “Minister of National Revenue” with “Minister” in the definition of “place of safe-keeping”; and
• change the reference to the “Atomic Energy Control Act” and “Atomic Energy Control Regulations” to the “Nuclear Safety and Control Act” and “General Nuclear Safety and Control Regulations.”

Temporary Importation (Excise Levies and Additional Duties) Regulations

• change reference to “section 21” of the Excise Tax Act to “section 20” in the definition of “duties.”

Regulatory development

Consultation

The CBSA began consultations with stakeholders on CARM-related issues in 2013, and stakeholder input has informed the design and development of the vision for CARM and its associated regulatory proposal. In 2018, robust consultations were formalized under the direction of the CARM Change Enablement Division, a group within the CBSA tasked with overseeing all consultations in connection with the CARM project. This division created formal stakeholder forums to encourage regular engagement with the TCP community, including the CARM TCP Working Group (TCP WG) and multiple technical sub-working groups, which include representatives from across key domains (brokers, importers, etc.) and associations, representing large, medium and small businesses. These organizations have continually shared information with their members about the upcoming changes that CARM and this associated regulatory proposal seek to introduce, and how they could impact their respective areas.

More specifically, the CBSA consulted commercial importers, customs brokers, exporters, carriers, couriers, freight forwarders, duty free shop operators, customs bonded warehouse operators, sufferance warehouse operators, surety companies and financial institutions. Given the size of the Canadian trade community impacted by CARM implementation, the Agency was not able to consult with each individual stakeholder. However, representatives were included from many associations, federations and societies in consultation sessions and engagement events (e.g. the Canadian Association of Importers and Exporters, the Surety Association of Canada, the Canadian Federation of Independent Businesses, and the Canadian Society of Customs Brokers).

From 2018 to June 2022, the CBSA consulted with stakeholders via

• 35 TCP WG consultation sessions;
• 15 TCP WG monthly calls;
• 63 TCP Sub-Working Group Deep-Dive and/or TCP Technical Working Group sessions;
• 169 engagement events (targeted audience and/or association events to ensure information was shared to members);
• 63 communications products; and
• 38 additional outreach events.

The CBSA has also heard from stakeholders through the Digitalization and Technology-Neutral Regulations Roadmap.

As part of the aforementioned consultations, TCPs had the opportunity to feed into the design of the CARM system, raise concerns related to future state processes, and discuss how the CARM system would modify key business requirements and the way they conduct business with the CBSA. Through these consultations, the CBSA was able to gather insight on stakeholder positions related to the key changes that could arise as a result of CARM R2 and the associated regulatory proposal. Key issues raised include the following.

CARM implementation approach

TCPs have raised concerns about the “big bang” approach to CARM implementation, where many functionalities would be released at once upon the coming into force of this regulatory proposal. Based on this feedback and lessons learned from other jurisdictions, the CBSA developed R0 and R1, which created the technological foundations for CARM and allowed TCPs to begin onboarding onto the CCP and to familiarize themselves with the new requirements. The CBSA is also planning to provide time between the finalization of these regulations (targeting spring/summer 2023) and CARM R2 (targeting October 2023) to allow TCPs to familiarize themselves with the requirements. This was designed to decrease the overall risk of CARM R2 implementation and help with Agency and TCP readiness. Proposed regulatory amendments include a transition period to allow importers who wish to continue to have their goods released prior to the payment of duties to comply with the requirement to provide their financial security electronically. The transition period was also established to decrease the risk of operational impacts and delays once CARM R2 is implemented.

While the CBSA has heard from TCPs that they would appreciate an even more gradual CARM implementation approach, the CBSA is limited by the fact that CARM cannot be run in parallel with legacy systems. That means that some CARM functionalities (beyond those included in R0 and R1) cannot be released while maintaining existing legacy systems. For that reason, the coming into force of the proposed regulatory changes aligns with CARM R2 to ensure that TCPs are able to comply fully with the regulations and that the CBSA can activate the full functionalities of the CARM system via the CCP and begin decommissioning legacy systems.

Electronic communication

Overall, TCPs have responded positively to the changes that would allow for electronic communication, as TCPs would no longer be required to send the CBSA paper documents. However, TCPs from the CLVS stream have raised some concerns about the requirement to create an account on the CCP to meet their regulatory requirements under this proposal. The CBSA is currently in discussions with CLVS stakeholders to determine strategies to respond to their concerns.

Provision of financial security electronically

While TCPs have largely supported the move to electronic transmission of information regarding their financial security, many have raised concerns about making significant IT system investments and changes to meet these (and other CBSA) financial security requirements until they are made aware of their specific obligations laid out in regulations, including the terms and conditions for acceptable financial security that would be included in the new Financial Security (Electronic Means) Regulations. They have also indicated that they will need sufficient lead time (up to one year) to make the necessary changes to their IT systems to meet the new financial security requirements. To respond to these concerns, this regulatory proposal includes a transition period. The transition period would give additional time (180 days after the coming into force of the regulations) for importers who wish to continue to have their goods released prior to the payment of duties to onboard and prepare for the new financial security requirements.

Billing cycles

TCPs have generally been supportive of the changes to introduce the updated billing cycles. The changes would establish a simplified and more streamlined process for TCPs submitting accounting to the CBSA and would eliminate complexities identified in the past when they were required to manage multiple payment due dates each month. In cases where a TCP may have an issue submitting their accounting information electronically, flexibility is being proposed in the regulations, whereby importers who are unable to comply with electronic accounting requirements in exceptional circumstances would be able to use legacy processes to meet their accounting requirements. TCPs have also been supportive of the introduction of a penalty-free correction period, and the ability to make corrections and adjustments online, as it would support them in providing the CBSA with the most accurate up-to-date information possible and would not penalize them if they make changes to their accounting information for an import prior to the payment due date.

Modern treaty obligations and Indigenous engagement and consultation

As required by the Cabinet Directive on the Federal Approach to Modern Treaty Implementation, an assessment of modern treaty implications was conducted. The assessment examined the geographical scope and subject matter of the initiative in relation to modern treaties in effect and did not identify any potential modern treaty impacts or obligations. The Agency will continue to assess potential impacts as new modern treaties are implemented.

Instrument choice

Regulatory amendments are required to allow for electronic communication and payments. This is because the CBSA’s existing regulatory framework establishes specific communications and payment requirements, in some cases requiring TCPs to use legacy processes (e.g. laying out a requirement to submit paper documentation). The CBSA billing cycles and payment due dates are also currently laid out in regulation, meaning that changes are required in regulation to move towards the desired model.

The CBSA has also chosen to propose new Financial Security (Electronic Means) Regulations to lay out obligations for TCPs to provide proof of financial security electronically to the Agency, and setting out terms and conditions for the security agreement between the debtor and the surety provider. It was decided that the Agency would set out the requirements in regulation, rather than relying only on operational procedures or allowing the industry to set their own requirements. The proposed regulatory approach was selected to allow the CBSA to (i) be certain that financial security provided is sufficient to release an importer’s goods or meet program requirements; (ii) ensure that the security agreement is legitimate (e.g. from an approved surety provider); and (iii) to put the CBSA in a better position to successfully claim against the security if applicable debts are not paid.

Regulatory analysis

Benefits and costs

Summary

The full cost-benefit analysis report measures the costs and benefits attributed to stakeholders that will be using CARM once it is rolled out. The estimates included in this document represent the impact of the CARM program to the Government of Canada and trade chain partners, specifically importers, custom brokers, and surety companies. It is expected that CARM would result in efficiencies for both the Government and TCPs, and while switching to the new program would lead to transition costs, it is anticipated that the benefits would more than offset these costs.

The benefits and costs occur over a period of 10 years, and are discounted at a 7% discount rate. With the full implementation of CARM, costs to all stakeholders will total $545.8 million over the entire forecast period (fiscal years 2023–24 to 2032–33), equivalent to an annualized cost of $77.7 million. Benefits to all stakeholders are expected to total $1.6 billion over 10 years, equivalent to an annualized value of $228.1 million. The benefits of the project outweigh the costs by $1.06 billion over the entire forecast period, or $150.4 million annually.

Analytical framework

Baseline scenario

The baseline scenario refers to the situation which would transpire in the absence of any regulatory action and the status quo would be maintained. In the absence of the proposed regulatory amendments and new regulations, the CBSA would be unable to launch CARM, and the CBSA would be required to continue using legacy processes consistent with the current regulations involving extensive administration by both the CBSA and TCPs. In the baseline, CBSA would

• not be permitted to rely on electronic communication and would be required to maintain paper-based communication between the CBSA and TCPs;
• not be able to accept a security deposit or confirmation of security electronically;
• prescribe multiple payment due dates for diverse costs associated with importing goods, maintaining the confusion for payees who are faced with multiple payment due dates;
• follow processes that remain out-of-step with other countries; and
• CARM would not lead to the realization of any anticipated benefits for the CBSA or TCPs.

The baseline scenario also assumes the CBSA policy decision to require RPP participants to secure their own security rather than using that of their customs brokers would be implemented regardless of whether regulatory changes are made.

Regulatory scenario

Under the proposed regulatory scenario, the CARM system would be fully implemented with the proposed regulatory amendments and new regulations in place. TCPs would be required to update their internal accounting systems, as well as undergo personnel training on the CCP and/or EDI.

In particular, the proposed regulatory changes would permit

• the CBSA and TCPs to move away from paper-based communication to electronic communications;
• TCPs to post a security deposit electronically or provide confirmation that they have received security;
• the CBSA to make a claim against the security of a TCP should they default on payment and all efforts to collect the overdue amount are unsuccessful;
• the CBSA to introduce a new harmonized payment due date for all transactions that occur within a single billing period;
• the CBSA to reduce administrative barriers and overhead required to import goods; and
• TCPs to benefit from improved ease of doing business with the CBSA, creating cost efficiencies and reducing revenue leakage.

The difference between the baseline scenario and the regulatory scenario is the incremental impact (costs and benefits) from the CBSA moving to an electronic system.

Requirements of the regulations: Comparing the baseline and regulatory scenarios

Table 1: Requirements contained in the baseline scenario compared to those in the regulatory scenario

Requirement	Baseline scenario	Regulatory scenario
Subsection 5(1): All security must be given by means of the electronic system specified by the Minister	The process is entirely paper based. Electronic transactions are not allowed.	Only electronic transactions are allowed except under specific conditions.
Subsection 5(2): Information requirements	This is information, provided using manual processes, that needs to appear in a D120 customs bond, and are already required in the current regulations: Indicating the bond number, if applicable. Stating the specific bonded activity that will be secured. Identifying the relevant authority by writing in the appropriate legislation. Writing the amount of security in words. Writing the amount of security in figures. Consulting the applicable D-Memorandum for completion instructions, as the period of validity of a bond varies depending on the program and purpose for which it is issued. Stating the CBSA office where the activities are to be conducted. Stating the principal’s name and address, along with the principal’s business number. Affixing the signatures of two duly authorized officers of the principal indicating their names and titles and impressing with the corporate seal. Stating the surety’s name and address. Affixing the signature of authorized individuals of the surety company, indicating their names and titles and impressing with the corporate seal. Affixing the signature of witnesses, if required. Stating the date the bond was signed and sealed.	Under the new regulations, the information would be provided electronically thus leading to a cost savings.
Subsection 5(3): Information update	If a debtor makes a change to a customs bond, they need to obtain a rider or endorsement from the surety provider to register the change, and then send a copy to the physical CBSA office.	In the regulatory scenario, changes can be made in the system and the surety can confirm the change within two days.
Section 6: Copy of the security agreement	The CBSA receives a copy of the agreement by default.	In the regulatory scenario, the CBSA would request a copy by exception, thus removing the requirement for TCPs to provide copies of agreements unless requested.
Subsection 7(1): Termination of the security agreement	The provision provides the surety to give 30 days’ notice of the termination date of the security agreement.	This provision would continue under the regulatory scenario but is now possible by electronic means.
Subsection 9(1): Enforcement process	The CBSA may send the surety a notice of claim, with any other document or information to substantiate the claim, if the debtor has failed to pay an amount that they owe by the day the amount is payable.	This enforcement process provision would continue and the CBSA would enforce the terms and conditions of the security agreement in the regulatory scenario.
Subsection 9(2): Limitation period	The CBSA must send the notice of claim within one year after the date of the agreement’s expiry or termination.	This limitation period provision would continue in the regulatory scenario, and claims can still be made by the CBSA for the D120 Customs Bond.
Subsection 9(4): Decision	If the surety provides information rebutting the notice of claim, the CBSA must review the information, make a decision, and notify the surety of its decision.	This decision provision would continue in the regulatory scenario. It is operational practice, and failure to notify the surety of the CBSA’s decision means that the notice of claim is never concluded.

Stakeholder engagement

Impacted stakeholders have been engaged on CARM and its associated regulatory changes since 2018, including the TCP working and sub-working groups and CARM engagement events. Through these consultations, TCPs had the opportunity to discuss how CARM would modify key business requirements and the way they conduct business with the CBSA, and the costs and benefits associated with these changes.

The new interfaces, functionalities, services and solutions enabled by CARM are aimed at addressing the needs of various stakeholder groups by changing the way importers account for goods being imported into Canada. However, most stakeholders would need time to prepare, and to comply and understand their new obligations. The COVID pandemic and uncertain general economic outlook has made stakeholders more concerned than ever with the costs that they would bear with CARM implementation, and they are concerned about finding the correct balance.

Government of Canada / CBSA

Many branches and operational groups within the CBSA will be involved in the adoption of new CARM processes and the use of new solutions and tools supported by the regulatory changes. These contributions put the CBSA in a position to improve its ability to provide services for commercial importation through increased efficiency and productivity, resulting in cost savings and increased revenue for the Government of Canada.

Trade chain partners

Impacted trade chain partners (TCPs) have been involved in significant consultation throughout the development and design of CARM, most notably

Importers and customs brokers

Importers would be able to follow a simpler process to submit their accounting electronically through using the CCP or EDI. Through the ability to interact with the CBSA electronically, importers would benefit from cost savings as a result of simplified and electronic processes. Importers would also benefit from simplified billing and payment matters through the introduction of new billing cycles and a harmonized payment due date, as well as a simplified electronic process to post financial security for participation in the RPP Program. Similarly, these efficiencies and simplified processes also benefit customs brokers, as they are often hired by importers to conduct business on their behalf.

Other TCPs

Other TCPs, such as duty free shop operators, would also benefit from cost savings as a result of simplified and electronic processes. Additionally, those who are required to post financial security with the CBSA to meet their program requirements would benefit from the ability to do so electronically.

Surety providers

The security provision requirements for the RPP Program would no longer allow importers to utilize their customs broker’s bond, which would reduce potential Government of Canada revenue leakage. In its place, surety providers (surety companies and financial institutions) would be required to assume responsibility for unpaid duties owed by importers that they agree to guarantee through a security agreement.

Estimated benefits and costs

The regulatory amendments and new regulations would primarily benefit the Government of Canada through higher efficiency gains and increased revenue from the switch to electronic communications with TCPs. The switch to electronic communication between the CBSA and TCPs is expected to significantly decrease administrative costs for all stakeholders, and would ensure that the CBSA can spend more time verifying transactions. The costs associated with implementing the regulatory amendments would primarily fall on the CBSA, from upfront costs due to implementation, and recurring costs from maintaining the CARM system. TCPs (specifically importers) are also expected to incur some costs once CARM is fully implemented, as they would require IT updates and training to familiarize themselves with the CARM system.

Table 2: Benefits and affected stakeholders

Benefit	Explanation of the benefit	Affected stakeholders
Reduced administrative costs	Once CARM is implemented, the majority of paper forms would be eliminated and many activities would be simplified. It is expected that administrative costs (e.g. the cost of submitting a paper form to the CBSA) would be reduced.	TCPs
Revenue from additional verifications completed	The process to gather and analyze data for verifications is currently paper based. By moving to an electronic system, these tasks would be streamlined as CARM would automatically gather and analyze verifications data, boosting the CBSA’s revenues.	Government of Canada
Revenue from higher yields per verification	CARM’s method of targeting verifications based on advanced analytic techniques would optimize verification yields and shorten the time spent by officers on lower yield verifications. It would also increase the yield of targeted verifications by automatically adjusting all non-compliant transactions for a given importer based on the findings from the verification, generating higher revenues.	Government of Canada
Cost savings associated with new verification approaches	The CBSA could verify more cases due to advanced analytics and systems checks expected with CARM.	Government of Canada
Revenue attributed to increased compliance	The CBSA relies on importers to assess their own duties and taxes owed based on their interpretation of customs tariffs. CARM enables TCPs to properly assess their own taxes and duties owed.	Government of Canada
Revenue from improved collection of bad debt	Through a paper-based system, the CBSA is unable to recover all duties and taxes owning. CARM would utilize an early warning signal to identify companies that are at a high risk of default, instigating quicker collection efforts.	Government of Canada
Reduced cost of clerical work	The switch to CARM would eliminate the majority of paper forms and manual tasks, automate routine and labour-intensive activities and transfer ownership of certain activities to clients through the online self-service portal.	Government of Canada
Reduced maintenance cost of trade and revenue management IT systems	There are currently 33 systems that support commercial processes at the CBSA, many of which are outdated and not able to support current needs. CARM would replace 15 of these systems, significantly reducing maintenance and technical support costs.	Government of Canada
Reduced costs from posting financial security electronically	Following CARM implementation, TCP groups would be required to post security by electronic means.	TCPs

Table 3: Costs and affected stakeholders

Cost	Explanation of the cost	Affected stakeholders
Delivery of CARM	Annual CARM operating costs, including ongoing maintenance.	Government of Canada
Update internal systems	CARM would introduce new accounting due dates, billing periods, a penalty-free correction period, and a harmonized payment due date in order to simplify billing and payment processes. This would require importers and TCPs to update their IT and accounting systems.	TCPs
Transition and learning costs	The CARM program would require personnel training or hiring, especially those who have experience with IT systems and the electronic submission of data. CARM is an entirely new system, and while the cost of training is not expected to be significant, it would be carried by numerous stakeholders. This cost is attributable to regulations, since without the regulations there would be no CARM.	Sureties and TCPs
Implementation, communication, and outreach	Updating CBSA departmental memoranda and work instruments, as well as responding to functional guidance requests.	Government of Canada

Estimated benefits and costs

Results

The benefits and costs of the CARM program are estimated over a period of 10 years and are discounted at a 7% discount rate. With the full implementation, costs to all stakeholders would total $545.8 million over the entire forecast period (fiscal years 2023–24 to 2032–33), which is equivalent to an annualized cost of $77.7 million.

Benefits to all stakeholders are expected to total $1.6 billion over 10 years, or an annualized value of about $228.1 million. Overall, the benefits of the project outweigh the costs by $1.06 billion, which is equivalent to an annualized value of $151.9 million.

Breaking down the results further, costs to industry would total $207.4 million over 10 years ($29.5 million annualized), while benefits would total $607.6 million over 10 years ($86.5 million annualized). For the Government of Canada, costs would come in at $338.4 million ($48.2 million annualized) and benefits would total $994.5 million ($141.6 million annualized) over the next 10 years.

Distributional analysis and sensitivity analysis

While the overall objective of the proposed regulatory amendments and new Financial Security (Electronic Means) Regulations is to make the processes associated with the assessment and collection of duties and taxes on imported goods simpler and more efficient, the impact of these improvements on TCPs may vary. Data from Statistics Canada indicates that approximately 97% of businesses operating in industries that trade goods (NAICS^{footnote 5} 31-33, 41, 44) are considered small businesses; and 98% of businesses of TCPs (NAICS 48-49) are considered small businesses, while approximately 96% of sureties are considered small businesses. Using that proportion generates about 221 160 importers, 36 598 other TCPs, and 1 633 sureties who are small businesses that are expected to be impacted by CARM.

A small number of TCPs may not access the CCP because of geographic location (e.g. limited Internet access) or religious reasons, among others. These TCPs would be permitted to continue to use paper-based processes to meet their regulatory requirements with the CBSA if it is determined that they meet the exceptional circumstances for being unable to comply with the electronic requirements outlined in regulation. In addition, any TCP may decide to use a service provider to submit documentation to the CBSA electronically via CARM on their behalf to ensure they remain compliant with their obligations, and not necessarily use the CCP themselves.

The benefits and costs of the regulatory amendments are very likely sensitive to assumptions underlying the analysis. A sensitivity analysis was performed to assess the impact of a 10% increase in the number of shipments expected over the forecast period, a 10% increase in the number of verifications performed by the Government, and a 10% rise in CARM maintenance and operating costs.

This sensitivity analysis would imply that the benefits of CARM would be $1.69 billion over 10 years, while costs would come in at $576.7 million. The benefits of CARM would continue to outweigh the costs, with the total impact being $1.12 billion in 2020 present value dollars over 10 years, or $159.3 million annually.

Cost-benefit statement (mandatory for proposals with a significant cost impact)

• Number of years: 10 (2023 to 2032)
• Base year for costing: 2020 Canadian dollars
• Present value base year: 2023 Canadian dollars
• Discount rate: 7%

Table 4 : Monetized benefits

Impacted stakeholder	Description of benefit	Year 1	Year 5	Year 10	Total (PV)	Annualized value
Importers and other TCPs	Reduced administrative costs for Canadian importers and other TCPs	$49,165,218	$39,323,969	$29,744,493	$387,349,738	$55,149,888
Government	Revenue from additional verifications completed	$27,814,063	$22,878,422	$17,921,654	$225,468,275	$32,101,610
Government	Revenue from higher yields per verification	$10,409,680	$8,562,469	$6,706,974	$84,382,890	$12,014,225
Government	Cost savings associated with new verification approaches	$26,484,111	$26,455,935	$18,862,649	$252,421,372	$35,939,125
Government	Revenue attributed to increased compliance	$10,784,642	$28,948,413	$21,745,639	$248,098,397	$35,323,630
Government	Revenue from improved collection of bad debt	$2,393,222	$3,332,723	$2,662,309	$30,500,769	$4,342,623
Government	Reduced cost of clerical work	$12,016,441	$10,403,796	$8,688,839	$102,728,607	$14,626,243
Government	Reduced maintenance cost of trade and revenue management IT systems	$3,426,779	$5,895,361	$4,640,795	$50,853,789	$7,240,435
Importers and other TCPs	Posting financial security electronically	$29,303,066	$22,355,169	$15,938,926	$220,219,348	$31,354,281
All stakeholders	Total benefits	$171,797,222	$173,187,129	$136,567,785	$1,602,023,184	$228,092,060

Table 5: Monetized costs

Impacted stakeholder	Description of cost	Year 1	Year 5	Year 10	Total (PV)	Annualized value
Government	Delivery of CARM	$37,931,750	$31,323,368	$24,657,578	$308,724,843	$43,955,472
Importers and other TCPs	Update internal systems	$55,292,594	$7,750,117	$5,525,727	$121,479,685	$17,295,974
Importers, other TCPs and sureties	Transition and learning costs	$85,898,837	$0	$0	$85,898,837	$12,230,062
Government	Implementation, communication and outreach	$29,719,626	$0	$0	$29,719,626	$4,231,406
All stakeholders	Total costs	$208,842,807	$39,073,485	$30,183,305	$545,822,990	$77,712,914

Table 6: Summary of monetized costs and benefits

Impacts	Year 1	Year 5	Year 10	Total (PV)	Annualized value
Total benefits	$171,797,222	$173,187,129	$136,567,785	$1,602,023,184	$228,092,060
Total costs	$208,842,807	$39,073,485	$30,183,305	$545,822,990	$77,712,914
NET IMPACT	−$37,045,585	$134,113,644	$106,384,480	$1,056,200,194	$150,379,146

Qualitative impacts

While there are numerous quantified costs and benefits associated with the full implementation of CARM, there are also qualitative impacts associated with the project and associated regulatory changes. These are detailed in Table 7.

Table 7: Qualitative impacts

TCPs	Section 6: Copy of the security agreement Under the current paper-based process, the CBSA receives a copy of the security agreement by default. Under the new scenario, the CBSA will request a copy by exception, thus removing the requirement for TCPs to provide copies of agreements unless requested. This may lead to only minor cost savings for TCPs, and thus is not monetized in this report.

Small business lens

There would be significant benefits of the CARM program for small businesses, especially since many activities would be simplified for TCPs with CARM, such that costs associated with the CBSA’s administrative requirements and clerical work would be reduced. However, there are some administration and compliance costs that they would need to absorb in order to successfully interact with the CBSA after transitioning to CARM. For instance, importers and TCPs would be required to update their internal IT systems in order to communicate electronically with the CBSA. Moreover, importers, TCPs and surety companies would need to undergo training on the new systems in order to familiarize themselves with CARM. Although these tasks represent a cost to stakeholders, the CBSA expects that there would be large productivity gains by moving to an electronic system. Once CARM is fully implemented, it is anticipated that small businesses would benefit from these efficiency gains.

The CBSA would provide some flexibilities for small business to mitigate the new compliance costs. For example, TCPs would experience reduced administration costs from certifying financial security electronically, which would provide a time savings compared with the paper-based format. Still, importers that are unable to comply with the electronic requirements would be able to use legacy processes to meet their accounting requirements in exceptional circumstances. In addition, a transition period would be established to allow importers who wish to have their goods released prior to the payment once CARM R2 is implemented.

While the CBSA collects data on the total number of importers (228 000), currently there is not reliable data outlining the number of people employed at importers that deal with the CBSA. Additionally, it is challenging to establish the proportion of these that would be small, medium-sized or large businesses. Therefore, data from Statistics Canada was used to determine the number of small businesses that would be impacted by the proposed regulations.

Data from Statistics Canada indicates that in 2021, the top three industries (in terms of value of imports of goods into Canada) were those companies involved in wholesale trade (NAICS 41), manufacturing (NAICS 31-33), and retail trade (NAICS 44-45).^{footnote 6}

Table 8: Top three industries (in terms of imports of goods into Canada)

	Small business (0-99)	Medium business (100+)
Wholesale trade (41) table b8 note a footnote 7	56 661	1 229
Manufacturing (31-33)	47 132	3 455
Retail trade (44-45)	140 207	2 896
Total	244 000	7 580
Percent	97	3
Table b8 note(s) Table b8 note a Source: Statistics Canada Table (Canadian Business Counts, with employees, June 2018): 33-10-0092-01: June 2018 Return to table b8 note a referrer

These estimates indicate that approximately 97% of Canadian businesses are classified as small business (havingfewers than 100 employees). This proportion does not significantly vary by industry. By applying this percentage to the total number of importers (228 000), the CBSA estimates that the number of small businesses who import into Canada to total approximately 221 160.

Similarly, the CBSA keeps track of the total number of TCPs impacted by the proposed regulations (36 598), but it does not distinguish between small, medium or large TCPs. Using Statistics Canada data, it is estimated that the majority of TCPs that would be impacted by the proposed regulations operate in the transportation and warehousing industries (NAICS 48-49), where 98% are considered small businesses.

Table 9: Transportation and warehousing TCPs

	Small Business (0-99)	Medium Business (100+)
Transportation and Warehousing (48-49) table b9 note a	66 586	1 237
Percent	98	2
Table b9 note(s) Table b9 note a Source: Statistics Canada Table (Canadian Business Counts, with employees, June 2018): 33-10-0092-01: June 2018 Return to table b9 note a referrer

The CBSA does not collect data on the number of surety companies, but the number of small businesses that would be impacted by the proposed regulations is estimated to be 1 633 (from a total of 1 702 surety companies).^{footnote 7}

Small business lens summary

To estimate impact on small businesses, the total estimated costs and benefits have been multiplied by the share of small businesses in the total number of businesses by affected sector.

Number of small businesses impacted: 258 659
Number of years: 10 (2023 to 2032)
Base year for costing: 2020
Present value base year: 2023
Discount rate: 7%

Table 10: Compliance costs

Activity	Annualized value	Present value
Update internal systems (importers)	$14,477,175	$101,681,617
Update internal systems (TCPs)	$2,323,841	$16,321,683
CARM system training (importers)	$10,170,651	$71,434,398
CARM system training (TCPs)	$1,632,568	$11,466,474
CARM system training (surety companies)	$75,923	$533,252
Total compliance cost	$28,680,158	$201,437,425

Table 11: Administrative costs

Activity	Annualized value	Present value
Administrative savings from electronic submission (importers)	($46,161,874)	($324,221,683)
Administrative savings from electronic submission (TCPs)	($7,409,791)	($52,043,268)
Administrative savings for providing proof of surety based on agreements between debtor and TCP (importers)	($26,244,339)	($184,329,253)
Administrative savings for providing proof of surety based on agreements between debtor and TCP (TCPs)	($4,212,677)	($29,588,079)
Total administrative cost	($84,028,680)	($590,182,283)

Table 12: Total compliance and administrative costs

Totals	Annualized value	Present value
Total cost (all impacted small businesses)	($55,348,522)	($388,744,858)
Cost per impacted small business	($208)	($1,502)

One-for-one rule

The one-for-one rule applies to this regulatory package, since there is an overall incremental decrease in administrative burden on business. Though one new regulatory title would be created, this would not be counted as a title in for the purposes of the one-for-one rule. It is expected that the annualized average reduction in administration costs would be $41,097,651 in 2012 dollars and discounted to 2012 using a 7% discount rate.

The following paragraphs describe the analysis and the application of the one-for-one rule for each of the two regulatory instruments in this package.

Regulations Amending Certain Regulations Administered and Enforced by the Canada Border Services Agency

The one-for-one rule applies, since there is an incremental decrease in administrative burden on business, and the proposal is considered burden out under the rule. No regulatory titles are repealed or introduced. The average annualized decrease in administrative burden is $26,201,406 in 2012 dollars and discounted to 2012 using a 7% discount rate.

Currently, TCPs use paper forms to submit requests to the CBSA for advance rulings, assessments, and adjustments, among other requests or communications. Though the majority of these documents are submitted by importers or a service provider on an importer’s behalf, other TCPs (e.g. customs brokers and warehouse operators) are also required to submit paper-based documentation, such as application forms to obtain a licence, to the CBSA.

Once CARM is implemented, the majority of paper forms would be eliminated, and many activities would be simplified for TCPs. As a result, it is expected that costs associated with the CBSA’s administrative requirements and clerical work for TCPs (e.g. the cost of submitting a paper form to the CBSA, the additional time it takes an employee to complete a paper form as opposed to an electronic form) would be reduced.

Financial Security (Electronic Means) Regulations

The one-for-one rule applies, since there is an incremental decrease in administrative burden on business. Though a new regulatory title would be created, the provisions result in administrative burden relief, thus the new regulation would not be counted as a title in for the purpose of the one-for-one rule. The annualized average decrease in administrative burden is $14,896,245 in 2012 dollars and discounted to 2012 using a 7% discount rate.

Currently, TCPs must provide the CBSA with a paper copy of security agreements. The regulatory change would remove the requirement for TCPs to provide copies of agreements, and instead the CBSA could request a copy by exception.

Regulatory cooperation and alignment

The development of the CARM system was informed by best practices and initiatives from other border service organizations. Specifically, the CBSA has been in discussion with the United States Customs and Border Protection (US CBP) to understand lessons learned from their experiences with a similar initiative, the Automated Commercial Environment (ACE), and to ensure that necessary alignments would exist to facilitate ongoing trade. This cooperation also included discussions on the specific US CBP regulatory approach used to support ACE to identify key lessons learned.

Strategic environmental assessment

The new regulations and changes to existing regulations do not have unique environmental impacts. Given that the changes allow TCPs and the CBSA to communicate electronically and move away from a number of manual processes that are primarily paper-based, this results in positive environmental outcomes, as there would be a reduction in paper-based documentation.

Gender-based analysis plus

The gender-based analysis plus (GBA+) and other distributional issues were considered in the context of CBSA policies and programs, in both design and delivery. The proposed regulatory amendments and new regulations would not change the audiences reached by the CBSA, and the CBSA has been proactive in considering the needs of TCPs as part of solution design through its TCP WG (and sub-working groups) and the Agency Revenue Management Advisory Board.

In the development of CARM, the CBSA has considered the impact that a TCP’s geographic location might have on their ability to meet key requirements of the proposal (e.g. limited Internet access impacting their ability to transmit information electronically to the CBSA). While the CBSA believes that this would impact a very small number of TCPs, the Agency expects that these importers may choose to use a service provider to support them to meet electronic obligations and to communicate with the CBSA (and many would already be doing so in the current state). The CBSA has also created an exception in the regulations where TCPs can continue to use paper-based processes if the Minister determines they are unable, because of factors outside of their control, to comply with electronic requirements.

While the CBSA’s changes related to financial security would put new requirements on importers and other TCPs to utilize electronic means for the purposes of security, there may be individual challenges (e.g. age, ability, language) that could impact the ability for some TCPs to make the move to electronic processes. Therefore, the CBSA has considered strategies to make use of the electronic system as easy as possible for all stakeholders, including ensuring accessibility of the CCP and other relevant materials for TCPs. For example, the CBSA has conducted significant reviews of training materials to ensure that they meet the most up-to-date Standard on Web Accessibility, and that they are fully accessible to all impacted groups.

Implementation, compliance and enforcement, and service standards

Implementation

The coming-into-force date for the proposed regulatory amendments, the new Financial Security (Electronic Means) Regulations, and the CA amendments in the 2021 BIA and the 2022 BIA that anchor the regulations, would be the same date as CARM R2 (currently targeting October 2023). The reason the dates must align is so the CBSA is not placing legal obligations on TCPs until the functionality is available in the CARM system for TCPs to be able to meet those obligations. For example, if the regulatory amendments to the AIGPDR were to come into force sooner, TCPs would be required to submit their accounting to the CBSA electronically; however, the functionality to submit an accounting declaration electronically would not be available to TCPs until CARM R2. If the legislative or regulatory amendments were to come into force before CARM R2, TCPs would not be able to meet their obligations.

The CBSA is undertaking significant testing to ensure that the CARM system is fully functional and ready for CARM R2 implementation, including identifying issues and making fixes, and establishing a CARM Experience Simulation. This Simulation follows best practices for large-scale IT transformations by giving TCPs and CBSA employees the opportunity to simulate a series of complex end-to-end business processes and familiarize themselves with the CCP and other CARM-related obligations (e.g. the requirement to submit a CAD electronically [via the CCP or EDI]) to ensure shared confidence of system readiness. The CBSA is also conducting continuity planning exercises to guarantee that the CBSA will be well prepared if system issues are to occur during or after implementation.

Communication and outreach activities

Should the proposed regulatory amendments and new regulations come into force, the CBSA would amplify information about the updates and new regulations via the TCP WG, which includes representatives from key stakeholder communities (e.g. Surety Association of Canada; Canadian Association of Importers and Exporters; Canadian Society of Customs Brokers), as well as through the use of CARM social media channels and email distribution lists.

To help TCPs learn about the CARM system and how to onboard to the CCP, the CBSA already has the following resources available for TCPs on the Agency’s website:

• Information about CARM
• How the trade community can prepare
• CARM Client Portal
• Client support
• Video tutorials

Partner institutions

In preparation for CARM R2, the CBSA worked with a number of partner institutions including the Canada Revenue Agency (CRA), the Department of Finance, Statistics Canada and the US CBP. Outreach activities were conducted to ensure that the proposed regulations in support of CARM implementation were aligned on a national level and had no unintended consequences on other government departments, and took into consideration lessons learned from similar initiatives in the U.S. context.

The CRA in particular will play a critical role in the final implementation of CARM R2 due to the system integration between the CARM system and CRA systems (e.g. for the issuance of business numbers). Because of this integration, the CARM R2 system go-live date must align with a CRA system release window, which only occurs in May and October of each year. Therefore, the CBSA can only launch CARM R2 in either May or October.

Cooperation and coordination activities

The CBSA has been in regular communication with impacted federal departments (e.g. Shared Services Canada, Public Services and Procurement Canada) throughout the project, who have been actively included in CARM project governance. The CBSA has also closely considered and communicated possible impacts to other government departments and has worked collaboratively to identify and resolve risks and find opportunities for collaboration. For example, the CBSA is working collaboratively with relevant governmental organizations (Department of Finance, Statistics Canada, CRA) to update necessary agreements to facilitate information sharing at CARM R2 and to ensure that new data capabilities from CARM would provide benefits to the Government of Canada more broadly.

Operational guidance

TCPs would be provided with support to understand their specific obligations at CARM R2. Below is an overview of some of the planned key activities that would help external clients to understand how CARM R2 would work under the new regulations:

• The ECCRD, a document that provides comprehensive information about business and system requirements of various electronic transactions with the CBSA, would be updated to reflect TCP requirements as of CARM R2.
• TCPs would be given user guides that would provide detailed information on specific functionalities, including step-by-step guided information.
• Webinars would continue to be provided to walk through processes, and key webinars would be recorded and made available in documentation form for TCPs who were not able to attend the sessions.
• TCPs would be provided with clarification documents (including the CARM R2 Playbook) outlining new terms, processes, etc.
• The CBSA would develop step-by-step videos that would provide TCPs with more information on how processes will work at CARM R2.
• Additional topic-specific materials may also be shared based on a needs assessment or input from the TCP community.
• Formal operational guidance (e.g. D Memoranda) would also be updated to reflect the new obligations for TCPs at CARM R2.

Performance measurement

Once fully implemented, the CBSA will track and monitor the progress of CARM to ensure that desired benefits are being realized as planned, including for reduced administrative burden for TCPs, increased Government of Canada revenue, and improved CBSA efficiencies. Specific key performance indicators will be established and measured to support the CBSA to make future decisions for CARM and to identify where adjustments may be needed to optimize benefits for TCPs and the Government of Canada.

Compliance and enforcement

Electronic communication and electronic payment

Unless there is an exceptional circumstance determined by the Minister, accounting (with the exception of interim accounting) would be required to be submitted to the CBSA electronically. Following finalization of the proposal, paper-based accounting would not be accepted by the CBSA except in exceptional circumstances. If the Minister determined that a TCP did not meet one of the exceptions to providing accounting electronically, the CBSA would not accept paper accounting and, therefore, a TCP would not be able to have their goods released by the CBSA until accounting was submitted electronically.

Though TCPs would not be required to pay electronically and would continue to be permitted to make paper-based payments, electronic payments would be encouraged by the CBSA, as they can be processed more efficiently. This would be done through training, operational guidance and by making payments easier through the CCP.

Financial security provided by electronic means

Through the CPP, the CBSA would be able to monitor an importer’s financial security utilization and send notifications or “nudges” to the importer indicating that they need to make a payment on their account or increase their security, in order to remain compliant with their security obligations. These nudges would support TCPs to remain compliant and earlier nudges would be targeted primarily to impact those who are voluntarily compliant and those who are trying to comply with CBSA requirements.

Table 13: Overview of the compliance monitoring and nudging framework

Culpability	Utilization	Notification	Timing	Notification
Voluntarily compliant	>75%	Nudge	Day 0	Notification would highlight the security utilization limit may be reached soon, and the importer should make a payment on their account or increase their security.
Trying to comply	>100%	Second nudge	Day 0	Notification would highlight that the security utilization limit has been reached and to make a payment on their account or increase their security.
Avoiding compliance		Third nudge	Day 6	Notification would highlight above.
Resisting compliance		Fourth nudge	Day 10	Notification would highlight above.
		Fifth nudge	Day 25	Notification would highlight above. The CBSA will initiate a case to determine if sufficient security exists to continue allowing goods to be released prior to payment.

If an importer does not increase their financial security or make a payment after receiving the above-mentioned notifications on the CCP, the CBSA would create a case to initiate further collection activities (e.g. initiating a claim against the importer’s security or sending their account to the CRA for collection).

Billing cycles

Should the proposed regulatory amendments to the AIGPDR and other customs-related regulations be finalized, TCPs would be required to follow the new billing cycle specific to their program and submit payment on the prescribed payment due date. As with the current system, if a TCP does not make a payment by the payment due date, a late payment penalty would be issued in accordance with Memorandum D22-1-1: Administrative Monetary Penalty System.

Contact

Janine Harker
Director
Commercial and Trade Policy Division
Strategic Policy Branch
Canada Border Services Agency
Email: CBSA.OCT/CECO.ASFC@cbsa-asfc.gc.ca

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council proposes to make the annexed Regulations Amending Certain Regulations Administered and Enforced by the Canada Border Services Agency under

• (a) section 8.6^{footnote a}, subsection 9(5), sections 30^{footnote b} and 32^{footnote c}, paragraphs 164(1)(d), (i)^{footnote d} and (j) and subsections 166(1)^{footnote e} and 167(1) of the Customs Act ^{footnote f}; and
• (b) paragraphs 99(f)^{footnote g} and 133(k)^{footnote g} of the Customs Tariff ^{footnote h}.

Interested persons may make representations concerning the proposed Regulations within 30 days after the date of publication of this notice. They are strongly encouraged to use the online commenting feature that is available on the Canada Gazette website but if they use email, mail or any other means, the representations should cite the Canada Gazette, Part I, and the date of publication of this notice, and be sent to Janine Harker, Director, Commercial and Trade Policy Division, Strategic Policy Branch, Canada Border Services Agency, 10th Floor, 100 Metcalfe Street, Ottawa, Ontario K1A 0L8 (email: CBSA.OCT/CECO.ASFC@cbsa-asfc.gc.ca).

Ottawa, November 17, 2022

Wendy Nixon
Assistant Clerk of the Privy Council

Regulations Amending Certain Regulations Administered and Enforced by the Canada Border Services Agency

Customs Act

Special Services Regulations

1 The long title of the Special Services Regulations ^{footnote 8} is replaced by the following:

Special Services Regulations

2 Section 1 of the Regulations and the heading before it are repealed.

3 Section 4 of the Regulations is replaced by the following:

4 If the chief officer of customs for the place or area in which a special service is to be performed is of the opinion that security is required to guarantee the payment of charges incurred in providing that service, the person requesting that service must give security in accordance with the requirements of the Financial Security (Electronic Means) Regulations and in an amount determined by the Minister.

Storage of Goods Regulations

4 The long title of the Storage of Goods Regulations ^{footnote 9} is replaced by the following:

Storage of Goods Regulations

5 Section 1 of the Regulations and the heading before it are repealed.

6 The definition place of safe-keeping in section 2 of the Regulations is replaced by the following:

place of safe-keeping

means a place designated by the Minister under section 37 of the Act for the safe-keeping of goods; (lieu du dépôt)

7 Subsection 3(3) of the Regulations is replaced by the following:

(3) If goods in a customs office are nuclear substances as defined in section 2 of the Nuclear Safety and Control Act or prescribed equipment as defined in section 1 of the General Nuclear Safety and Control Regulations and have not been removed from the customs office within 14 days after the day on which the goods are reported under section 12 of the Act, the goods may be deposited in a place of safe-keeping as provided in subsection 37(1) of the Act.

8 Subsection 5(3) of the Regulations is replaced by the following:

(3) For the purposes of subsection 39(1) of the Act, goods that are nuclear substances as defined in section 2 of the Nuclear Safety and Control Act or prescribed equipment as defined in section 1 of the General Nuclear Safety and Control Regulations and that have not been removed from a place of safe-keeping within 24 hours after they were deposited there are, at the termination of that period of time, forfeit.

Special Services (Customs) Regulations

9 The long title of the Special Services (Customs) Regulations ^{footnote 10} is replaced by the following:

Special Services (Customs) Regulations

10 Section 1 of the Regulations and the heading before it are repealed.

11 Section 7 of the Regulations is replaced by the following:

7 If the chief officer of customs for the place or area in which a special service is to be performed is of the opinion that security is required to guarantee the payment of charges incurred in providing that service, the person requesting that service must give security in accordance with the requirements of the Financial Security (Electronic Means) Regulations and in an amount determined by the Minister.

Accounting for Imported Goods and Payment of Duties Regulations

12 (1) The definitions billing period and chief officer of customs in section 2 of the Accounting for Imported Goods and Payment of Duties Regulations ^{footnote 11} are repealed.

(2) The definition business number in section 2 of the Regulations is replaced by the following:

business number

means the unique number assigned to a person by the Minister of National Revenue; (numéro d’entreprise)

(3) Section 2 of the Regulations is amended by adding the following in alphabetical order:

weekday

means a Monday, Tuesday, Wednesday, Thursday or Friday, including any holiday that falls on one of those days. (jour de semaine)

13 The Regulations are amended by adding the following after section 2:

2.1 For the purposes of subsection 32.2(3) and paragraph 33.4(1)(a) of the Act, the prescribed day is the 10th weekday after the 17th day of the month following the month that includes the earlier of

• (a) the day on which the goods are accounted for; and
• (b) the last day on which the goods are required to be accounted for.

14 The Regulations are amended by adding the following before section 3:

2.2 (1) Except as otherwise provided for in the Act or these Regulations, every person required by subsection 32(1), (3) or (5) of the Act to account for goods must do so by electronic means, in accordance with the technical requirements, specifications and procedures for electronic data interchange that are set out in the Electronic Commerce Client Requirements Document.

(2) Despite subsection (1), the Minister may require that goods be accounted for by any other means that is made available or specified by the Minister for that purpose if the Minister determines that

• (a) the infrastructure is inadequate or incompatible with the electronic means set out in the Electronic Commerce Client Requirements Document;
• (b) a natural disaster, a national crisis or any other exceptional circumstance prevents or impedes the use of the electronic means or makes using them unreliable; or
• (c) it is impracticable for a person, due to circumstances outside of their control, to account for goods by the electronic means.

15 The portion of subsection 3(1) of the Regulations before paragraph (a) is replaced by the following:

3 (1) Except as otherwise provided for in the Act or these Regulations, every person required by paragraph 32(2)(a) of the Act to make an interim accounting in respect of goods, must do so

16 Subsection 5(2) of the Regulations is repealed.

17 Paragraph 7.2(d) of the Regulations is replaced by the following:

• (d) upon request of the Minister, the courier presents evidence indicating that the courier meets the conditions set out in paragraph 7.1(b) and paragraphs (a) and (c).

18 Section 7.5 of the Regulations is replaced by the following:

7.5 If goods have been accounted for in accordance with section 7.4, the person required by subsection 32(5) of the Act to pay the duties on the goods must do so no later than the 10th weekday after the 17th day of the month following the month in which the goods are released.

19 Section 8.3 of the Regulations is replaced by the following:

8.3 (1) The Canada Post Corporation must pay, by means of the electronic system specified by the Minister, the duties required under subsection 147.1(6) of the Act in respect of goods imported as mail not later than the last business day of the month following the month in which the release period ends.

(2) Despite subsection (1), the Canada Post Corporation may pay the duties described in that subsection by any other means that is made available or specified by the Minister for that purpose if the Minister determines that

• (a) the Corporation’s infrastructure is inadequate or incompatible with the electronic system specified by the Minister; or
• (b) a natural disaster, a national crisis or any other exceptional circumstance prevents or impedes the use of that system or makes using it unreliable.

20 Sections 10 and 10.1 of the Regulations are replaced by the following:

10 If commercial goods are released under paragraph 32(2)(a) of the Act in accordance with section 9, the person required by the Act to account for the goods must do so in the manner described in paragraph 32(1)(a) of the Act within five business days after their release.

10.1 If commercial goods are released under section 33 of the Act in accordance with section 9, the person required to pay duties on those goods must do so no later than the 10th weekday after the 17th day of the month following the month that includes the earlier of

• (a) the day on which the goods are accounted for; and
• (b) the last day on which the goods are required to be accounted for.

21 (1) Paragraph 10.3(1)(b) of the Regulations is replaced by the following:

• (b) the period beginning on the 18th day of a month and ending on the 17th day of the following month.

(2) Subsections 10.3(2) and (3) of the Regulations are replaced by the following:

(2) A CSA importer who chooses the period set out in paragraph (1)(a) must account for goods released in that period and pay the duties on those goods by the 10th weekday after the 17th day of the month following the month in which the goods are released.

(3) A CSA importer who chooses the period set out in paragraph (1)(b) must account for goods released in that period and pay the duties on those goods by the 10th weekday after the end of that period.

22 Subsection 10.4(1) of the Regulations is repealed.

23 (1) Subsection 10.8(1) of the Regulations is replaced by the following:

10.8 (1) Every CSA importer must, in respect of changes to the information provided in accordance with paragraph 10.5(1)(b), notify the Minister in writing at least 30 days before they occur.

(2) The portion of subsection 10.8(2) of the Regulations before paragraph (a) is replaced by the following:

(2) Despite subsection (1), every CSA importer must immediately notify the Minister in writing of any of the following changes:

24 Section 10.9 of the Regulations is repealed.

25 Section 11 of the Regulations is replaced by the following:

11 The security required under paragraphs 7.2(b), 7.3(b), 9(a) and 10.5(2)(f) must be given in accordance with the requirements of the Financial Security (Electronic Means) Regulations and in an amount determined by the Minister.

26 Paragraph 12(1)(b) of the Regulations is replaced by the following:

• (b) gives security in accordance with the requirements of the Financial Security (Electronic Means) Regulations and in an amount determined by the Minister.

27 Section 13 of the Regulations is replaced by the following:

13 If commercial goods are released under paragraph 32(2)(a) of the Act in accordance with section 12, the person who made the interim accounting must account for the goods in the manner described in paragraph 32(1)(a) of the Act and pay any duties on the goods by the 10th weekday after the 17th day of the month following the month that includes the earlier of

• (a) the day on which the goods are accounted for; and
• (b) the last day on which the goods are required to be accounted for.

28 (1) Paragraph 14(2)(b) of the Regulations is replaced by the following:

• (b) gives security in accordance with the requirements of the Financial Security (Electronic Means) Regulations and in an amount determined by the Minister; and

(2) The portion of paragraph 14(2)(c) of the Regulations before subparagraph (i) is replaced by the following:

• (c) undertakes to notify the Minister as soon as feasible in writing of

29 Section 15 of the Regulations is replaced by the following:

15 If goods referred to in subsection 14(1) are released under subsection 32(2) of the Act, the goods must be accounted for under subsection 32(3) of the Act within 12 months after the applicable date referred to in subparagraph 14(2)(c)(i), (ii) or (iii), and the duties on those goods must be paid, in the case of goods imported by a CSA importer, no later than the 10th weekday after the 17th day of the month following the month in which goods are accounted for and, in all other cases, at the time of the accounting.

30 (1) The Regulations are amended by adding the following after section 15:

16 Despite paragraphs 7.2(b) and 9(a), an importer or owner of commercial goods is not required to give security under those paragraphs if they are registered in the electronic system specified by the Minister.

(2) Section 16 of the Regulations is repealed.

31 Item 34 of Schedule 2 to the Regulations is repealed.

Transportation of Goods Regulations

32 The long title of the Transportation of Goods Regulations ^{footnote 12} is replaced by the following:

Transportation of Goods Regulations

33 Section 1 of the Regulations and the heading before it are repealed.

34 Subsection 6(2) of the Regulations is replaced by the following:

(2) The security must be given in accordance with the requirements of the Financial Security (Electronic Means) Regulations.

Customs Sufferance Warehouses Regulations

35 The long title of the Customs Sufferance Warehouses Regulations ^{footnote 13} is replaced by the following:

Customs Sufferance Warehouses Regulations

36 Section 1 of the Regulations and the heading before it are repealed.

37 Subsections 3(1) and (2) of the Regulations are replaced by the following:

3 (1) For the purposes of section 24 of the Act and subject to subsection (3), the Minister may issue a licence to any person who makes an application for a licence in accordance with subsection (2) and gives the security required under section 4.

(2) Any person who wishes to apply for a licence must submit to the Minister an application in the prescribed form, together with a detailed plan of the proposed sufferance warehouse.

38 (1) Subsection 4(1) of the Regulations is replaced by the following:

4 (1) An applicant must, before a licence is issued to the applicant, give security in accordance with the requirements of the Financial Security (Electronic Means) Regulations and in an amount determined by the Minister.

(2) Subsection 4(3) of the Regulations is repealed.

39 Section 5 of the Regulations and the heading before it are repealed.

40 Subsection 15(3) of the Regulations is replaced by the following:

(3) If goods in a sufferance warehouse are nuclear substances as defined in section 2 of the Nuclear Safety and Control Act or prescribed equipment as defined in section 1 of the General Nuclear Safety and Control Regulations and have not been removed from that warehouse within 14 days after the day on which the goods are reported under section 12 of the Act, the goods may be deposited in a place of safe-keeping as provided for in subsection 37(1) of the Act.

Customs Brokers Licensing Regulations

41 The long title of the Customs Brokers Licensing Regulations ^{footnote 14} is replaced by the following:

Customs Brokers Licensing Regulations

42 Section 1 of the Regulations and the heading before it are repealed.

43 Sections 7 and 8 of the Regulations are replaced by the following:

7 An application for a licence must be made in the prescribed form and be submitted to the Minister in writing.

44 Section 10 of the Regulations is replaced by the following:

10 Before a licence is issued or renewed, the applicant must give security in accordance with the requirements of the Financial Security (Electronic Means) Regulations and in the amount of $50,000.

45 Subsection 11(3) of the Regulations is replaced by the following:

(3) A renewal fee must be refunded if, before the 15th day of February preceding the day on which the licence will expire, the customs broker withdraws the request for renewal by written notice.

46 Section 13 of the Regulations is replaced by the following:

13 A licence authorizes the holder to transact business as a customs broker at any customs office if the holder maintains at least one business office in Canada.

47 The portion of paragraph 14(b) of the Regulations before subparagraph (i) is replaced by the following:

• (b) immediately notify the Minister in writing of any change

48 Subsection 15(2) of the Regulations is replaced by the following:

(2) Notice of the date, time and place of an examination must be posted on the Agency’s website not less than 60 days before the date of the examination.

49 Paragraph 16(a) of the Regulations is replaced by the following:

• (a) submit an application in writing in the prescribed form at least 30 days before the date of the examination; and

50 (1) Paragraph 17(1)(b) of the Regulations is replaced by the following:

• (b) a copy of each customs accounting document made while transacting business as a customs broker, a copy of all supporting documents and a copy of the information transmitted by electronic means to the Agency while transacting business as a customs broker;

(2) Paragraph 17(1)(d) of the Regulations is replaced by the following:

• (d) separately, all of the records, books of account and copies referred to in paragraphs (a) to (c) relating to business transacted under section 13.

51 Section 19 of the Regulations and the heading before it are replaced by the following:

19 Every customs broker that ceases to transact business as a customs broker or whose licence has been cancelled must immediately stop displaying their licence.

Duty Free Shop Regulations

52 The long title of the Duty Free Shop Regulations ^{footnote 15} is replaced by the following:

Duty Free Shop Regulations

53 Section 1 of the Regulations and the heading before it are repealed.

54 Subsection 3(2) of the Regulations is replaced by the following:

(2) The person must submit the application for a licence in the prescribed form by means of the electronic system specified by the Minister.

55 (1) Subsection 4(1) of the Regulations is replaced by the following:

4 (1) An applicant must, before a licence is issued to them, give security in accordance with the requirements of the Financial Security (Electronic Means) Regulations and in an amount that is determined by the Minister and that is not less than $10,000.

(2) Subsection 4(3) of the Regulations is repealed.

56 Subsection 16(2) of the Regulations is replaced by the following:

(2) Before any goods are taken into a duty free shop, the licensee must provide to the Minister, by means of the electronic system specified by the Minister, any documents required under the Act or any of its regulations.

57 Section 17.1 of the Regulations is replaced by the following:

17.1 Every licensee that is a corporation must provide to the Minister, by means of the electronic system specified by the Minister, written notice 90 days before a proposed change in the beneficial ownership of the shares of a corporation referred to in subsection 3(3).

Designated Provisions (Customs) Regulations

58 The portion of items 1 to 6 of Part 3 of Schedule 1 to the Designated Provisions (Customs) Regulations ^{footnote 16} in column 2 is replaced by the following:

Item	Column 2 Short-form Description
1	Failing to immediately notify the Minister in writing of a change in the address of a business office at which broker transacts business
2	Failing to immediately notify the Minister in writing of a change in the legal or business name of the partnership or corporation
3	Failing to immediately notify the Minister in writing of a change in the membership of the partnership
4	Failing to immediately notify the Minister in writing of a change in the officers or directors of the corporation
5	Failing to immediately notify the Minister in writing of a change in the ownership of the business or corporation
6	Failing to immediately notify the Minister in writing of a change in the individuals meeting the specified knowledge requirement

59 The portion of item 8 of Part 5 of Schedule 1 to the Regulations in column 2 is replaced by the following:

Item	Column 2 Short-form Description
8	Failing to present required documents to the Minister before goods are taken into a duty free shop

Customs Tariff

Temporary Importation (Excise Levies and Additional Duties) Regulations

60 The long title of the Temporary Importation (Excise Levies and Additional Duties) Regulations ^{footnote 17} is replaced by the following:

Temporary Importation (Excise Levies and Additional Duties) Regulations

61 Section 1 of the Regulations and the heading before it are repealed.

62 The definition duties in section 2 of the Regulations is replaced by the following:

duties mean any duty imposed under section 20 of the Act or any duty or tax imposed under the Excise Act or the Excise Tax Act, other than tax imposed under Part IX of that Act; (droits)

63 Section 6 of the Regulations is replaced by the following:

6 For the purposes of subsection 106(1) of the Act, an application for relief from the payment of duties on goods referred to in paragraph 3(a) must be accompanied by security given in accordance with the requirements of the Financial Security (Electronic Means) Regulations and in an amount fixed by the Minister of Public Safety and Emergency Preparedness

• (a) if the goods are not covered by a carnet; or
• (b) if the goods are covered by a carnet but not exported by the date of expiration of the carnet.

Customs Bonded Warehouses Regulations

64 The long title of the Customs Bonded Warehouses Regulations ^{footnote 18} is replaced by the following:

Customs Bonded Warehouses Regulations

65 Section 1 of the Regulations and the heading before it are repealed.

66 Subsection 3(2) of the Regulations is replaced by the following:

(2) Any person who wishes to apply for a licence must submit to the Minister an application in the prescribed form, together with a detailed plan of the proposed bonded warehouse.

67 Section 4 of the Regulations is replaced by the following:

4 For the purposes of subsection 91(4) of the Customs Tariff, security must be provided in accordance with the requirements of the Financial Security (Electronic Means) Regulations.

Temporary Importation (Tariff Item No. 9993.00.00) Regulations

68 (1) The portion of subsection 5(1) of the Temporary Importation (Tariff Item No. 9993.00.00) Regulations ^{footnote 19} before paragraph (a) is replaced by the following:

5 (1) Subject to subsection (3), if goods referred to in section 2 are not accompanied by a valid carnet, the importer of the goods must give security in accordance with the requirements of the Financial Security (Electronic Means) Regulations and in an amount determined by the Minister in accordance with the conditions set out in tariff item No. 9993.00.00, to ensure

(2) Subsection 5(2) of the Regulations is repealed.

Coming into Force

69 (1) These Regulations, other than subsection 30(2), come into force on the day on which section 303 of the Budget Implementation Act, 2022, No. 1, chapter 10 of the Statutes of Canada 2022, comes into force, but if they are registered after that day, they come into force on the day on which they are registered.

(2) Subsection 30(2) comes into force 180 days after the day on which subsection 30(1) comes into force.

Terms of use and Privacy notice

Terms of use

It is your responsibility to ensure that the comments you provide do not:

• contain personal information
• contain protected or classified information of the Government of Canada
• express or incite discrimination on the basis of race, sex, religion, sexual orientation or against any other group protected under the Canadian Human Rights Act or the Canadian Charter of Rights and Freedoms
• contain hateful, defamatory, or obscene language
• contain threatening, violent, intimidating or harassing language
• contain language contrary to any federal, provincial or territorial laws of Canada
• constitute impersonation, advertising or spam
• encourage or incite any criminal activity
• contain a language other than English or French
• otherwise violate this notice

The federal institution managing the proposed regulatory change retains the right to review and remove personal information, hate speech, or other information deemed inappropriate for public posting as listed above.

Confidential Business Information should only be posted in the specific Confidential Business Information text box. In general, Confidential Business Information includes information that (i) is not publicly available, (ii) is treated in a confidential manner by the person to whose business the information relates, and (iii) has actual or potential economic value to the person or their competitors because it is not publicly available and whose disclosure would result in financial loss to the person or a material gain to their competitors. Comments that you provide in the Confidential Business Information section that satisfy this description will not be made publicly available. The federal institution managing the proposed regulatory change retains the right to post the comment publicly if it is not deemed to be Confidential Business Information.

Your comments will be posted on the Canada Gazette website for public review. However, you have the right to submit your comments anonymously. If you choose to remain anonymous, your comments will be made public and attributed to an anonymous individual. No other information about you will be made publicly available.

Comments will remain posted on the Canada Gazette website for at least 10 years.

Please note that public email is not secure, if the attachment you wish to send contains sensitive information, please contact the departmental email to discuss ways in which you can transmit sensitive information.

Privacy notice

The information you provide is collected under the authority of the Financial Administration Act, the Department of Public Works and Government Services Act, the Canada–United States–Mexico Agreement Implementation Act,and applicable regulators’ enabling statutes for the purpose of collecting comments related to the proposed regulatory changes. Your comments and documents are collected for the purpose of increasing transparency in the regulatory process and making Government more accessible to Canadians.

Personal information submitted is collected, used, disclosed, retained, and protected from unauthorized persons and/or agencies pursuant to the provisions of the Privacy Act and the Privacy Regulations. Individual names that are submitted will not be posted online but will be kept for contact if needed. The names of organizations that submit comments will be posted online.

Submitted information, including personal information, will be accessible to Public Services and Procurement Canada, who is responsible for the Canada Gazette webpage, and the federal institution managing the proposed regulatory change.

You have the right of access to and correction of your personal information. To seek access or correction of your personal information, contact the Access to Information and Privacy (ATIP) Office of the federal institution managing the proposed regulatory change.

You have the right to file a complaint to the Privacy Commission of Canada regarding any federal institution’s handling of your personal information.

The personal information provided is included in Personal Information Bank PSU 938 Outreach Activities. Individuals requesting access to their personal information under the Privacy Act should submit their request to the appropriate regulator with sufficient information for that federal institution to retrieve their personal information. For individuals who choose to submit comments anonymously, requests for their information may not be reasonably retrievable by the government institution.