What are Importer Security Bonds?
There are many industries in Canada that rely on the shipment of merchandise to or from other countries. The success of such companies is highly reliant on the import process. Importer security bonds are a great choice when it comes to facilitating this process. Just as the name suggests, they provide security, ensuring that everything runs smoothly with the Canada Revenue Agency when it comes to payment of taxes. Here is an overview of custom bonds, how they work in Canada, the types involved, and how you can obtain one.
How Bonds Work
Importer Security Bonds are used to ensure that all duties and taxes are paid for goods coming into Canada. A custom bond works similar to an insurance policy. It will cover your importation taxes falling within the value of the bond. This acts as a guarantee to CBSA that you are capable of fulfilling any financial responsibility associated with taxes, duties, or penalties, when asked to.
Parties Involved in an Importer Security Bond
A customs bond is usually a binding contract among three parties regardless of the type of bond involved. These are:
- 1) The importer – This is the principal, i.e., the party that receives the bond. In essence, they are responsible for the financial obligation of any claim filed against the bond.
- 2) The Canada Borders Services Agency (CBSA) – This is the party that is in requirement of the bond from the principal. They have the right to specify the terms of the bond. If these are not adhered to, they can file a claim to be compensated. In this case, the claim’s amount will be equal to the payment of taxes and duties that the principal has not met.
- 3) The surety company – This party is responsible for the issuance of the bond to the principal. They are liable for any defaulted payments by the principal due to non-compliance to the rules and regulations of importation.
Customs Bonds in Canada
As a Canada importer, you can post security with the CBSA in order to be eligible for the Release Prior to Payment Privilege (RRP). This will grant you the advantage of having your goods released before payment is done. With the financial security of a bond, an importer is entitled by the RRP to:
- Release of goods by CBSA before payment of duties of taxes
- Defer the accounting for goods
- Defer payment of duties and taxes
Initially, importers could comfortably use custom bonds from their custom brokers to obtain importer security. Since the creation of the CBSA’s Assessment and Revenue Management (CARM), importers are now being advised to get their own custom security bonds as the former will no longer hold in the future.
Whether or not to get a customs bond in Canada will depend on the type of goods, their total value, and importing reasons. However, securing one is not always necessary when importing goods into Canada. Nonetheless, it is something you should consider, especially if you are a frequent importer. You will be able to reap the following benefits:
- It gives you credibility with the CBSA since it acts as a guarantee that you will be able to fulfill your financial duties.
It ensures a quick release which will facilitate a smooth movement of your goods.
Getting an Importer Security Bond
You can secure a custom bond with any surety company in Canada. The process is more like that of obtaining insurance. However, there are a lot of complexities involved in this case. To make it easier, you can ask your customs broker to assist you through the process.
Before getting the bond, you will need to know the amount that it will cost to secure it. This usually depends on the value and type of merchandise you import and the frequency in which you do so.
Your customs broker will therefore need to go through your current and previous imports and the duties involved. The insurance company may request to see a company’s most recent financials before approving the bond. Once they approve the issuance of the bond, it will need to be sent to CBSA in Ottawa for them to update their system with the bond information against your importer/business number.
Conclusion
From giving you credibility at the border to offering payment protection and a quick release of your goods, there are several benefits that you can get from importer security bonds. Whether you are doing it by choice or as a requirement by the Canadian government, you can contact us to get a customs bond suitable for you and your business.
