Canada Border Services Agency announces transition period and new process for certain customs adjustments

On 2 August 2024, the Canada Border Services Agency (CBSA) announced in Customs Notice 24-25 that a transition period for submitting adjustments to commercial import transactions will be in effect from 1 September 2024 to 20 October 2024. During this period, importers and trade chain partners are asked to refrain from submitting single Form B2 adjustments, blanket B2 adjustments and voluntary disclosure requests. Processing of submissions during this time period will be delayed as the CBSA will be transitioning to Release 3 of the CBSA Assessment and Revenue Management (CARM R3) system, which is currently scheduled for 21 October 2024.

In addition, the CBSA has provided draft guidance on the post-CARM R3 process for submitting adjustments to commercial imports accounted for prior to the CARM R3 go-live date in draft Memorandum D17-2-4: Preparation and Presentation of Pre-CARM Adjustments (pdf).

This Tax Alert provides a brief overview of the latest information released by the CBSA with respect to the CARM R3 system

Background

The CARM R3 system is scheduled to become the official system of record that importers and other trade chain partners (TCPs) will use to account for commercially imported goods and to pay any duties and taxes owing to the CBSA. Once the CARM R3 system is implemented, Form B2, Canada Customs — Adjustment Request (Form B2), will be discontinued. Instead, adjustments will be submitted against a Commercial Accounting Declaration (CAD) directly via the CARM Client Portal (CCP).

Pre-CARM R3 transition period

During the pre-CARM R3 transition period, the CBSA will accept single B2 adjustments, blanket B2 adjustments and voluntary disclosure requests submitted on or after 1 September 2024, but they are unlikely to be processed before 21 October 2024. During this period, the CBSA will still require blanket B2 requests to contain both a B2 blanket authorization application and a completed Form B2 adjustment request. To avoid additional delays, the CBSA encourages submission of adjustments via the CARM system instead of using Form B2.

Any Form B2s that the CBSA does not process before the CARM R3 system is live will be manually entered in CARM starting 21 October 2024. The CBSA advises TCPs that although the CBSA's service standard of 90 days to process an adjustment will not change before (or after) the CARM implementation, processing delays may be encountered during this transition period. To minimize the accrual of interest, TCPs are encouraged to submit Form B2s with payments for amounts owed to the Receiver General. Any payment processed after the CARM R3 system is live will be posted to the importer's account and not allocated to the adjustment specifically; account-based accounting will offset any credit according to the clearing order.

Post-CARM R3 adjustment procedures for pre-CARM transactions

Starting 21 October 2024, TCPs must first submit an "As Declared" CAD before filing an adjustment to a transaction involving commercial imports accounted for prior to the implementation of the CARM R3 system. The "As Declared" CAD must reflect the values declared on the original Form B3-3, Canada Customs Coding Form (Form B3), and include any adjustments that were made.

The CBSA will not accept any Form B2s on or after 21 October 2024.

For single adjustments of pre-CARM transactions:

• A pre-CARM "As Declared" CAD must be generated for the transaction to be adjusted.

• An adjustment request must be submitted using the CCP, Electronic Data Interchange (EDI) or Web Service (API).

For pre-CARM Courier/Low Value Shipment transactions (Type F transactions):

• A pre-CARM "As Declared" CAD must be generated for each shipment.

• The unique shipment number must be used as the transaction number on the pre-CARM "As Declared" CAD, and the consolidated Form B3 Type F transaction number must be used in the previous transaction number field.

• Once the above steps are completed, an adjustment or mass adjustment can be submitted.

For blanket adjustments of pre-CARM transactions:

• If an adjustment is required for 100 or more Form B3 transaction lines within a 12-month period and a pre-CARM "As Declared" CAD has not been generated for the B3 transactions to be adjusted, the CBSA will permit TCPs to submit a pre-CARM blanket request.

• Pre-CARM blanket requests can only be submitted via the CCP; the CBSA will not accept submissions made by EDI, API, mail or email.

• The procedure to submit a pre-CARM blanket request is as follows:
  • The TCP must create a mass adjustment case number in the CCP.
  • The TCP must upload a pre-CARM Blanket Request Form, as well as an electronic workbook with a worksheet detailing all accounting data originally submitted on the B3 lines and the requested changes.
  • The request form and workbook must be clearly labeled as a Pre-CARM Blanket Form and include the importer's name and mass adjustment case number (similar to the current blanket B2 request process).

For purposes of meeting the 90-day reason to believe timeframe in section 32.2 of the Customs Act, the filing date of a pre-CARM blanket request is the date the request is submitted via the CCP. If the request is rejected, the 90-day timeframe will restart from the date of the CBSA's rejection.

Next steps

Importers should seriously consider setting up a CCP in CARM as soon as possible and investing time to familiarize themselves with the CCP's functionalities as the CARM R3 system implementation date is rapidly approaching.

In particular, it will be important for importers to develop separate procedures for filing amendments to pre-CARM R3 transactions and post-CARM R3 transactions. Pre-CARM R3 adjustment procedures will apply for transactions accounted for up to four years leading up to the CARM R3 go-live date, and there are important procedural differences between the CBSA's policy for processing pre-CARM and post-CARM adjustments.

Lastly, note that although the CBSA is requesting that importers avoid submitting Form B2 adjustments, blanket B2 adjustments and voluntary disclosure requests during the CARM R3 transition period, importers are still expected to meet the 90-day reason-to-believe obligation under section 32.2 of the Customs Act. Should an importer's reason-to-believe timeframe come due during the CARM R3 transition period, the CBSA has indicated that it will use its discretion in applying penalties and prescribed interest on adjustments.