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How Do Release of Payment (RPP) Bonds Work?
How Do Release of Payment (RPP) Bonds Work?
The RPP Bond is a requirement that stems from CARM, the multi-year initiative implemented by Canada Border Services Agency (CBSA). CARM stands for CBSA Assessment and Revenue Management and is intended to modernize and streamline the process of imports into Canada.
Under CARM, importers will need to secure and post their own import bond in order to participate in the Release Prior to Payment Privilege (RPP). This is a significant change that impacts importers and customs brokers. Prior to CARM, customs brokers were allowed to extend use of their own customs bond to any importer.
CARM Customs Bond Requirement Details
CARM Phase 0 went into effect in January of 2021. Release 1 is scheduled to launch Spring 2021 and Release 2 in the Spring of 2022.
As of Release 2, an importer must post security using one of the following two options to be eligible for RPP:
- A surety bond for 50% of their highest monthly accounts receivable with a minimum bond of $25,000
- – OR – a cash security for 100% of their highest monthly accounts receivable
The RPP Bond will allow the importer to:
- Obtain the release of goods from the CBSA before paying duties and taxes
- Defer accounting for goods
- Defer payment of duties and taxes (including GST)
There are three parties involved in the contract of an Import Bond:
Principal – the party that must post the bond in order to do business with CBSA, such as an importer.
Surety – the party that guarantees the principal on the bond. The surety is a company that has been pre-approved by the Department of Treasury to write bonds up to a specific limit. By writing the bond, the surety agrees to pay amounts due to CBSA if the principal fails to do so.
Obligee – the beneficiary of the contract CBSA.
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