Keith Sherwood, associate vice-president and commercial surety manager with insurance broker NFP, at his workplace in Thornhill, Ont., on April 23.Laura Proctor/The Globe and Mail
Long before U.S. President Donald Trump first uttered threats of tariffs in North America, another trade crisis was already quietly brewing in Canada. It is now just days away from a potential boiling point that experts warn could lead to major import bottlenecks at the border.
The federal government is implementing a new online payment regime for duties and taxes on commercial goods entering Canada. Known as CARM, which stands for Canada Border Service Agency Assessment and Revenue Management, the system requires importers to make new financial commitments by May 20 or risk having their goods held at the border.
But according to government data, only a small fraction of importers have met those requirements so far, leading experts to warn of potential supply disruptions for common household staples. The new regime is also arriving as importers are being forced to navigate Mr. Trump’s complex web of tariffs and Canada’s retaliatory tariffs, adding another layer of costs, stress and uncertainty on the situation.
“These tariffs probably couldn’t come at a worse time because CARM is just about to go live,” said Keith Sherwood, associate vice-president and commercial surety manager with insurance broker NFP. “Is there going to be a bottleneck? For sure. Is it going to be chaos? Absolutely. I think so. Are we prepared for it? As an industry I think we are ready to go, we knew this was going to happen.”
Importers have long enjoyed access to a privilege called “release prior to payment” that allows commercial goods to enter Canada without duties and taxes being paid immediately on arrival. RPP, as it is known, allows for the swift flow of trade across the border, but that privilege is now in jeopardy.
In order to qualify for RPP, importers need to post financial security – either in cash or, more often, in the form of a guarantee known as a surety bond – on the CARM system. That security ensures the government gets paid even if the importer lacks the funds, which often occurs in cases of bankruptcy.
The CARM system is responsible for collecting roughly $40-billion per year in import duties and taxes, making it the federal government’s second-largest source of revenue after income taxes.
Before CARM, importers could rely on the financial security put up by their customs broker, as the entire customs brokerage industry is built around the idea of facilitating the import and export process. Post-CARM, however, the burden of financial security is shifting from a group of less than 400 licensed customs brokers to Canada’s nearly 200,000 active importers.
When CARM first came online in Oct., 2024, importers were given a six-month transition period – initially until April 19 – to comply before facing the risk of having their goods prevented from entering Canada until all fees had been paid. Yet by March 19, 2025, just one month before the transition period was set to expire, the CBSA said only 14 per cent of importers had posted financial security to CARM.
Without it, importers could have their RPP privileges revoked, which the CBSA warned “will cause significant delays at the border.”
While the transition period was extended by one month, to May 20, financial security providers say importers are still not signing up for their products in large enough numbers to avoid logistical bottlenecks.
Industry insiders say surety bonds can be provided to importers within a matter of minutes under ideal circumstances. But the concern is that if too many importers wait until the last minute, many could find themselves on the wrong side of the new requirements with their goods stuck at the border while they wait for the backlog to clear.
Importers who wait until the last minute, says Mr. Sherwood, “are going to be mad because they can’t get a bond in eight minutes because there are 100,000 others in line in front of them and they don’t realize that everybody did the same thing that they did, but that is where we are right now,” Mr. Sherwood said.
He adds: “Our doors are open, but unfortunately we are going to need a floodgate. There are going to be some long wait times.”
Steve Ness, president and chief operating officer of the Surety Association of Canada, a trade advocacy group that represents the industry, said the SAC has no sense of how many importers could be planning to make an eleventh-hour dash for compliance.
Part of the reason that figure is unknown is because there is no data available differentiating between importers who bring goods across the border on a daily or weekly basis and those who might only bring in a handful of shipments per year. That means a certain proportion of importers can afford to wait until after the May 20 deadline passes if they are not planning to receive any shipments until weeks or even months later.
“One of our nightmares is that the day before all of this comes due, we are going to have a lineup of 200,000 people outside our doors looking for a bond,” Mr. Ness said.
Trucks cross the Blue Water Bridge border crossing between Canada and the U.S. as a freighter moves cargo along the St. Clair River near Sarnia, Ont., on April 3.GEOFF ROBINS/AFP/Getty Images
Customs brokers, who had previously paid customs and duties on imports and were able to charge a percentage-based fee to importers for that service, are also in the dark about what could happen to their clients who fail to obtain their own financial security in time.
Technically, goods coming into Canada by an importer without RPP would be held at the border until all duties and taxes have been paid, according to Janine Harker, president of the Canadian Society of Customs Brokers. Whether that will actually happen in real life, she said, was uncertain.
“It is quite a volatile mix of ‘what ifs’ at this point that is causing a lot of stress in the system,” Ms. Harker said. “What you have is a perfect storm for importers trying to get their goods to enter efficiently into Canada.”
When the CBSA extended the CARM transition period by one month to May 20, the reprieve was far less than the year-long delay the Canadian Federation of Independent Businesses wanted.
“We had pushed for a year,” said Corinne Pohlmann, executive vice-president of advocacy at the CFIB. “This is going to add complications. You have to get a security bond or put up a cash bond and that adds to the costs of a small business that is struggling to figure out this whole system.”
Rebecca Purdy, a spokesperson for the CBSA, said the government put years of planning, consultation, testing and training into launching the new CARM system, which is aimed at eliminating cumbersome paper-based processes, improving compliance and enforcement and ensuring importers pay what they owe.
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Ms. Purdy said importers were given a series of phased-in deadlines since April, 2024, including a 180-day transition period announced last August. As of May 2, more than 157,000 “trade chain partners” had registered in the CARM portal.
Customs brokers will also be able to use their business numbers until October in cases where importers do not yet have a CARM account, she added.
“For those who have not yet registered, it only takes 10 minutes and can be done online or in person at a kiosk at one of our border crossings,” she said in an e-mailed statement.
Despite the looming deadline, not everyone is concerned about the widespread lack of CARM compliance.
Barb Miller, a licensed customs broker and CEO of Otimo Customs Inc., said any logistical bottlenecks are unlikely.
“That is what people claim but that is not realistic. That is not what is going to happen,” Ms. Miller said. “CBSA has been doing a really good job of their outreach. They are pushing notifications like crazy to the importer CARM portal. Every single importer logging into that portal has a big, huge notice.”
The system requires importers to make new financial commitments by May 20 or risk having their goods held at the border.Supplied
Not every importer needs to hit that May 20 deadline either, said Tracy McLean, senior vice-president of insurance and surety broker American Global Canada.
“It is all subject to when they actually do their importing,” Ms. McLean said. “I think the intent of the CBSA is they are not going to hinder or block business at the border. Everyone in the industry is well aware of what is happening so I think it is more a case of clients taking their time in deciding when they want to onboard. I don’t think it is a question of them not accepting it.”
Complicating matters further is that one of the main consequences of Mr. Trump’s trade war has been a rerouting of global supply chains, leading Canadian importers to find new, non-U.S.-based suppliers. For many importers, that could mean completely redoing the calculations for what they might have to pay in duties and taxes at the border because import duties can vary depending on their country of origin.
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The trend has already led to a 20 per cent year-over-year increase in the Bank of Nova Scotia’s supply chain finance and working capital business as importers look to protect themselves as they build new trade ties. Supply chain finance products function in a similar way to import surety bonds, but instead of guaranteeing payment of duties and taxes, they guarantee payment for the product itself.
They are often used in newly established import-export relationships before the trading partners can establish the trust that comes from working together over long periods of time.
“You are seeing a lot of Canadian companies and Mexican companies starting new relationships, with Canada a lot more on the sourcing side for things like produce,” said Matthew Parker-Jones, Scotiabank’s senior vice-president of global transaction banking. “People are not completely rerouting, but they are diversifying. They are building second paths where historically they might have had one path.”
As the only Canadian bank with operations in Mexico, Mr. Parker-Jones said Scotiabank has a unique position to observe the increasing economic connections forming between America’s northern and southern neighbours. What he has seen from that vantage point is a flurry of new trading relationships being established, particularly among smaller businesses, leading to much wider use of supply chain finance products.
“It has changed the dynamics of what has in the past been a kind of niche, sleepy product into something that is now much more mainstream,” he said.
“Historically it is a product that has been used by the larger, more sophisticated counterparties that has moved from the larger corporate space down market into commercial and smaller businesses.”
Having importers directly take on financial security requirements has also upended the business model of many in the customs broker business. Under the previous regime, customs brokers could pay taxes and duties on commercial goods they brought across the border on behalf of their importer clients, charging those clients a fee ranging from 1 to 3 per cent of that total for the service.
Now, under CARM, they face the loss of that revenue, which for some firms can be substantial.
“Customs brokers have traditionally kind of operated as a bit of a bank in that regard,” said Steve Bozicevic, CEO of A&A Customs Brokers. “It isn’t a huge part of our particular business, but it is for many customs brokers, so it is a very massive hit for them.”
For customs brokers who were more reliant on the revenue that came from what were effectively loans, Mr. Bozicevic said they will now have to increase the rates they charge for other services to compensate and, as a result, many importers are considering changing their customs brokers just as the CARM transition period is set to expire.
“There has been a lot of notes to customers going out there now saying, ‘We have to double or triple your rates,’” Mr. Bozicevic said. “So we get a lot of inbounds from customers looking around for other options.”
Adding yet another layer of confusion to the situation is the fact that tariffs are not necessarily included as part of the calculations used to determine the size of a bond an importer might need. According to the SAC’s Mr. Ness, importers need a bond that is worth 50 per cent of the highest month of shipments they brought into the country over the previous year.
For example, if a Canadian company imported $2-million worth of oranges in February, 2024, but brought in less than that for every other month of the year, that company would still need a $1-million bond for 2025.
Fresh produce was among the products that had duty-free status in Canada, meaning that orange importer actually wouldn’t have needed a bond at all. That changed in March, however, when oranges were included in a list of U.S. products to face Canadian retaliatory tariffs and importers started getting asked to post financial security despite never having had to deal with that requirement before.
“One of our biggest customers does produce, where they have no duty, no GST, but because of those 25-per-cent surtaxes [tariffs] they now need a $1.5-million bond,” Ms. Miller said.
The regulations governing financial security requirements for imports specifically exempt tariffs from being included in surety bond calculations, she said, meaning a produce importer still should not be required to have a bond. The situation has led to widespread confusion.
“When all of these regulations started, they didn’t anticipate getting into a trade war,” Ms. Miller said. “That, to me, is important, because we had better figure that out pretty quick.”
NFP’s Mr. Sherwood said the vast majority of Canadians don’t realize the situation could impact them directly. That will change if common household staples face delays at the border that keep them off of store shelves.
“They’ll know when they start going down the aisles of the supermarket and saying, ‘What do you mean there is no cereal?’ That is when they’ll start asking questions and that is when the general public will start asking what is going on at the border,” Mr. Sherwood said.
American Global Canada’s Ms. McLean said the potential for wide-ranging consequences are all the more reason why the industry has “a responsibility to get that message out there.”
“There shouldn’t be anybody going to the cereal aisle and realizing there is no cereal,” she said. “We all play a role in helping to ensure that cereal is there. And I don’t foresee the cereal not being there because of CARM.”
Ultimately, Ms. Miller said the only way to ensure a potential supply chain crisis is avoided is to ensure Canadian importers are compliant with the new CARM rules before the May 20 deadline.
“Importers are going to have to step up and be a little bit more accountable,” she said. “There is absolutely no reason why any importer should not have financial security by May 20 because there has been huge outreach. Do I think that the ceiling is going to fall? If it does, the only people they will have to blame are themselves.”
(May 5, 2025) This article was updated to add information about the planning, consultation, testing and training offered in the leadup to the May 20 deadline for new CBSA Assessment and Revenue Management (CARM) system requirements.