Canada Still Working Through Issues With New ARL Customs Accounting System; Some Resolution in 3 Months

NIAGARA-ON-THE-LAKE, Ontario -- The Canada Border Services Agency is “still stabilizing” its new Accounts Receivable Ledger (ARL) customs accounting and payment system, some nine months after it went live in January 2016, CBSA Comptroller Jen O’Donoughue said at the Canadian Society of Customs Brokers National Conference on Sept. 26. Many of the most serious issues are the result of payment misallocations that plagued the early stages of the transition, causing some importers to receive notices they owe debts despite having given money to their customs brokers to pay on their behalf. Those issues should no longer occur once CBSA works through a backlog of misallocated payments from February and March, which should be done in the next three months, she said.

The transition was particularly complicated in that it included a switch from transaction-based to an importer account-based accounting, O’Donoughue said. CBSA underestimated how big a change that would be, she said. Only about 10 percent of accounts had larger issues with misallocations, so CBSA is targeting those importers and working directly with them to resolve issues. Many of the errors were the result of complex payment packages, such as multiple checks for a single account or one check to pay off several accounts, she said. A “big challenge” for CBSA has been understanding the complex and varied forms that relationships between brokers and importers can take, because “not every business model is the same” and “we all do something different,” said fellow panelist Candace Sider of Livingston International.

The problems are causing serious headaches -- and driving up costs -- for Canadian customs brokers, Sider said. Brokers are forced to compare their daily notices with their monthly statements at the end of every month to find discrepancies and attempt to reconcile them, sometimes without success, she said. “Every single month since we came into ARL there’s been anomalies.” Though O’Donoughue advised paying debts in full as one of the best ways to avoid issues, she said brokers are not going to pay in full when they know there are errors.

The problems are also causing client dissatisfaction and broader issues for importers, Sider said. Payments made by brokers on behalf of their importer clients have been misallocated, causing the Canada Revenue Agency (CRA) to issue a notice of arrears to the importer. The importer then goes to the broker asking what happened to the money it gave the broker to pay on its behalf. It’s “embarrassing,” jeopardizing the “integrity” of the broker and possibly costing it the importer’s business, said customs brokers in attendance during discussion. Another importer had its application for Canada’s Partners in Protection trusted trader program rejected because it owed debts that were actually the result of misallocation issues, Sider said.

The misallocation issues should no longer occur after CBSA works through its backlog, O’Donoughue said. Though earlier estimates were that the process would be completed in six weeks, more complex issues could require more time, she said. For example, a CBSA employee “took all of her time for two weeks to get to the right result” when working to resolve one broker’s issues. However, other issues with ARL will remain. Importers without account security numbers have “limited visibility into their accounts,” Sider said.

CBSA is also working out its process for issuing refund checks for importers with positive balances, such as in cases of overpayments, drawback and adjustments. Under the new system of “offsets,” positive balances are normally applied to the amount owed. Importers with irregular activity, such as seasonal importers, will eventually get their positive balances refunded via check after two months of inactivity. Otherwise if an importer has a high balance and regular, large amounts owed -- for example, a positive balance of $1.1 million but $500,000 in duty payments every month -- the positive balance will be run down quickly. But an importer with a $1.1 million positive balance and only $100,000 in monthly payments will see their money sit in their ARL accounts, unable to put it to use. For now, the importer will have to send an email requesting a refund, Sider said. It’s “not perfect,” but ARL offsets, just deployed in August, is still in its “early stages,” she said.