Accounts Receivable Ledger Project (ARL) BCCC CARM Sub-Committee Updates and New Scenarios

1. Accounts Receivable Ledger Project (ARL)BCCC CARM Sub-CommitteeUpdates and New Scenarios March 25-26, 2013 session Version 12.0

2. Purpose • To provide examples and updates of how ARL will affect the commercial process between Importers, Brokers, and the CBSA. • To get approval of scenarios from the BCCC Trade members

3. ARL Design Adjustments

4. Summary of Prior Feedback

5. Design Adjustments related to BCCC input

6. ARL Design Scenarios

7. Introduction • The Accounts Receivable Ledger is a fully integrated commercial client-based accounting system that will provide the CBSA with a financial controls framework. • ARL will allow for the detection of unexplained differences between the receivables legacy system and the general ledger for financial reporting. Moreover, it will: • Introduce electronic payment remitting options (EDI and internet banking) to importers and brokers; • Provide the CBSA Commercial clientele with an electronic, enhanced and comprehensive daily & monthly statement of account; • Move client accounting information from multiple legacy systems to a fully integrated and centralized client based accounting system; and • Introduce a process which will allow the CBSA to consolidate regional client accounting by offsetting credits against debits.

8. Perfect World/New Process (Non-CSA) Multiple Brokers’ and Importer payments are applied against an Importer’s SOA (Non-CSA) T- Accounts (14), posting/clearing (Non-CSA) Reconciliation process Cash B3 Automatic Allocation of Incoming Payments (Non-CSA) Importer NSF cheque process Broker NSF cheque process Late Accounting (Non-CSA) Offset/Disbursements (Non-CSA) B2-1 Detailed Adjustment Statement (DAS): Credit recipient to be decided by broker (B2 Adjustment Request) (Non-CSA) B2-1 (DAS) – Broker submits B3/CBSA generates DAS (Non-CSA) B2-1 (DAS) – No Broker Involved (Non-CSA) Duplicate payment recovery process B2-1 (DAS) – 2 Brokers involved / DN’s & SOA’s (Non-CSA) Importer Transacts with Wrong Broker (Non-CSA) Broker’s Transaction appears on another broker’s account – CBSA Error (Non-CSA) Importer’s Transaction appears on another importer’s account – CBSA Error (Non-CSA) Importer’s Transaction appears on another Importer’s Account – Broker Error (non CSA) Overrides (Non-CSA) GST Option (Non-CSA) Importer Direct Security (IDS) Option (Non-CSA) RSF & Payment Importer / Broker Submits Paper B3 to a Non-Terminals office (NTO) (Non-CSA) CLVS posting (Non-CSA) SOA & DN for Importer where there is a residual credit greater /equal to and smaller than the threshold (Non-CSA) Temporary Admission Permit (E29B) – Cash only RMD Corrector Scenario Index

9. Scenario 1: Perfect World/New Process (Non-CSA) • Clients import commercial goods into Canada. • Proper import/release documentation is provided; goods are released. • Importers and/or Brokers submit CBSA coding form (B3) by the final accounting due date. • ARL will generate a Daily Notice (DN) of all recorded transactions for that day. • Brokers and Importers using RPPP will receive DN’s. If there are no transactions, no DN will be generated. • The transaction section of the SOA will show DN summary totals of the accounting period i.e. the 25th of a month to the 24th of the following month. This is the same billing period as the current process. The major difference being that the DN/SOA are comprised of all transactions; not only B3’s and LAP’s. SOA will also be generated sooner than currently. • On the 25th day of every month, Importers and Brokers will receive a SOA displaying daily summary totals of financial activity for each day of the previous billing period. For Brokers, SOAs will be broken down by client. • Brokers/Importers may pay electronically via their Financial Institution (FI), or provide payment at a CBSA office by the last business day of the month in which the SOA was generated. Details of payments can be found in scenario 4. • Payments made will appear on the CBSA clients’ following DN.

10. Scenario 1 Daily Notice January 29

11. Scenario 1 Daily Notice January 30

12. Scenario 1 Daily Notice February 5

13. Scenario 1 Statement of Account February 25

14. Scenario 2: Multiple Brokers’ and Importer payments are applied against an Importer’s SOA (Non-CSA) • The following pages will show: • Importer DN with partial payment to its account • Broker 1 DN with partial payment to Importer account • Broker 2 DN with partial payment to Importer account • Importer SOA with due amounts

15. Scenario 2 – Importer DN

16. Scenario 2 – Broker DN

17. Scenario 2 – Broker DN

18. Scenario 2 – Importer SOA

19. Scenario 3: T- Accounts, posting/clearing (Non-CSA) Bottom Line: Account is in good standing BCCC Working Group Discussion

20. Scenario 3: Short-Pay Scenario, no B2 (Non-CSA) Bottom Line: Account underpaid by $50 BCCC Working Group Discussion

21. Scenario 3: B2 Adjustment Request (Non-CSA) Bottom Line: Account in good standing ($50 credit) BCCC Working Group Discussion

22. Scenario 3: Short-Pay Scenario, B2 (Non-CSA) Bottom Line: Account in good standing on March 25th Statement

23. Scenario 3: AMPS, no appeal (Non-CSA) Bottom Line: Account underpaid by $10 BCCC Working Group Discussion

24. Scenario 3: AMPS not yet due (Non-CSA) Bottom Line: $90 remains on account until NPA payment due date reached. BCCC Working Group Discussion

25. Scenario 3: Cancellation/Reversal in same period (Non-CSA) Bottom Line: Account is in good standing BCCC Working Group Discussion

26. Scenario 3: Cancellation/Reversal in next period (Non-CSA) • Steps: • Reverse $50 payment clearing • Reverse NPA • Reverse interest • Clear $50 B3 BCCC Working Group Discussion Bottom Line: Account is in good standing

27. Scenario 3: Payment in advance of SOA (Non-CSA) Bottom Line: Account is in good standing BCCC Working Group Discussion

28. Scenario 3: Late B3 (Non-CSA) BCCC Working Group Discussion Bottom Line: Account is in good standing

29. Scenario 3: AMPS appealed prior to SOA (Non-CSA) BCCC Working Group Discussion Bottom Line: Account is in good standing

30. Scenario 3: AMPS appealed post SOA but prior to payment due date (Non-CSA) Bottom Line: Account is in good standing however the $100 remains and will incur interest if the appeal is unsuccessful BCCC Working Group Discussion

31. Scenario 3: Interest in cases of lost appeal (Non-CSA) Bottom Line: Account is in good standing BCCC Working Group Discussion

32. Scenario 3: NPA Appeal after SOA Payment Due Date (Non-CSA) Bottom Line: Account is in good standing BCCC Working Group Discussion

33. Day 2

34. Recap Items • What is presented on a Daily Notice (DN)? • What is presented on a Statement of Account (SOA)? • What information should be available on the Portal? • What information is used when a transaction is posted Today’s scenarios will resume with an overview of how payment allocation (clearing) will work.

35. What is presented on a Daily Notice (DN)? • An importer’s Daily Notice (DN) will contain: • Importer Name and Business Number (BN) • Effective Date (of the DN) • Summary of all payments processed on that day • Summary of refund cheque issued to that importer that day • Itemized documents processed that day: • Document Type and Document # • Release Date • Port • Customs and Duties, SIMA, Excise Tax, Taxes, Other • In addition, a broker’s Daily Notice will contain: • Broker Name and Business Number (BN) • Summary of all payments processed on that day • Summary of refund cheque issued to that broker that day • Per Importer BN15 under that broker • Itemized documents processed that day • Summary of all payments processed that day

36. What is presented on a Statement of Account (SOA)? • An importer’s SOA will contain: • Importer Name and Business Number (BN) • Effective Date (of the SOA) • A summary total under that BN15 for that period: • Payment Due Date, Previous SOA Balance, Payment, Refunds, Unpaid Balance, Interest, Transactions, Other Charges, Total Payable • Summary of all DNs issued during that period • In addition, a broker’s SOA will contain: • Broker Name and Business Number (BN) • Payment Due Date • Per BN15 under that broker, a summary total: • Transactions, Other Charges, Total Payable • Summary of each DN in that period

37. What information should be available on the Portal? • For an importer, the portal will make available: • Each Daily Notice (DN) • Each Statement of Account (SOA) • For a broker, the portal will make available: • Each of the broker’s Daily Notices (DN) • Each of the broker’s Statements of Account (SOA) • Outstanding questions/future design considerations: • Can/will the broker see each importer’s DN & SOA in cases where the importer has beenauthorized? • Can/will the portal show a running balance?

38. What information is used when a transaction is posted • Example information recorded when a transaction is posted:

39. Scenario 4: Reconciliation Process • Importers and/or Brokers will remit their payment electronically (internet banking) by the last business day of the month in which the SOA is generated. They may also elect to make their payment in person at a CBSA office. • Broker pays electronically (2 Options): • EDI 820 compliant where a Broker sends a file consisting of the total payment made to the CBSA by that Broker in addition to a breakdown of that global payment by client account (BN15) and amount. • Internet banking. The Broker pays each account individually (BN15 and amount) via their FI (telephone banking may also be used). • Once the payment file has been received by the CBSA in ARL, the original global payment is recorded on the account (Broker). This global amount is then redistributed to the Importers’ accounts as per the payment file breakdown received (Broker Instructions). • Broker pays in person at a CBSA office: • The Broker provides a cheque for the global amount it wishes to pay for. The “Broker Instructions” are sent electronically via EDI 820 providing a detailed list of client accounts (BN15) and amounts. If this cannot be available electronically in time for implementation, a hard copy “Broker Instructions” document will be provided along with the cheque to the CBSA and manually keyed in. • The BSO or cashier will retrieve the Broker account in ARL and post the cheque amount. • The BSO or cashier will generate a Cash Receipt for the amount, in the name of the Broker. • Once the cheque amount is entered in ARL and the “Broker Instructions” are received electronically or manually keyed in, automatic redistribution to identified client accounts will occur. • Clearing transactions will be automatically done using the CBSA pre-defined payment allocation rules (see scenario 6). • In order to clear only the transactions related to a specific Broker, ARL will cross-reference transactions with the Broker ASEC provided within the transaction numbers. • Any specific importer item (single) which needs to be paid may be paid at a CBSA office with ARL access. • Brokers/importers may provide interim payments at any time.

40. Scenario 5: Cash B3 Scenario • Client arrives at a CBSA office to account for and release commercial goods. • Proper import/release documentation is provided. • Importer/Broker submits coding form (B3). • Payment for the B3 is received by the CBSA. • The CBSA will provide the client with a K21 Cash Receipt. • Cash B3s will not appear on DNs but will be posted to client account. • Upon request, a client may receive a printout of their client account which would include these cash B3’s. • A cash payment is blocked from the clearing process until the B3 data is received through the CCS/ARL interface.

41. Scenario 6: Automatic Allocation of Incoming Payments (Non-CSA) • The allocation process will match incoming payments and clear outstanding transactions that are due based on the following rules: • A payment for a single transaction may be made at an ARL office; • Transactions that have a status of Secured or Appealed will be excluded from the allocation process; and • Only transactions that are ‘due’ will be reviewed for clearing with incoming payments. If a transaction is not due, it will be ignored for allocation purposes. • Then: • Credit Transactions (B2-1 AP, miscellaneous credits, K32 credits); • Dishonoured payments (NSF) – Fee of $25 and other various charges; • Administrative K23 invoice charges; • Penalties (K9, LAP and NPA) • Interest Charges for Overdue Amounts • Unsecured Transactions B3, B2-1 AR • Unapplied residual payment - in cases where there is a residual value for the payment and the following transactions are outstanding but not yet due, the residual amount will be held on account until the transaction becomes due then clear these transactions: K9, NPA or B2-1AR.

42. Scenario 6: Commercial clients making a payment to CBSA via EDI • Commercial clients transmit an EDI 820 to their financial institution to initiate a CBSA electronic payment. The 820 will be transmitted toCBSAby the FI. The file is to contain the payment amount, the client identifier(s), for which the payment is to be applied against. • FIs generate a confirmation of payment completed. • FIs post the payment transaction in the importer/broker bank account. • FIs deposit the money with Bank of Canada. • FIs provide payment details to CBSA. • The CBSA System receives and decrypts the transformed payment details file. • A unique payment identification number will be assigned for each payment. • CBSA ARL will distribute the payment amounts to their specific accounts according to the “Broker Instructions” provided. • Clearing transactions in ARL will be automatically done using the CBSA pre-defined payment allocation rules. • CBSA reconciles with GBS.

43. Scenario 6: Commercial clients making a payment to CBSA via EDI

44. Broker Statement of Account (Non-CSA) Importer #1 (312345678 RM0001) Broker ASEC1 Importer #2 (314536229 RM0001) Bottom Line: Broker is in good standing

45. Broker Short Pays (Non-CSA) Broker ASEC1 Importer #1 (312345678 RM0001) 20 Importer #2 (314536229 RM0001) Bottom Line: Importer #1 account’s ASEC1 transactions underpaid by $20

46. Scenario 7: Importer NSF cheque process • On January 31, 2013, Importer « Guy & Mike’s Imports Inc. » submits a cheque in the name of the Receiver General for Canada at a CBSA office with ARL access. • A CBSA employee enters the information in the ARL. Importer transactions are subsequently cleared according to the CBSA Payment Allocation Rules. • On February 15, 2013, the CBSA receives notice that the January 31, 2013 cheque from « Guy & Mike’s Imports Inc. » to the Receiver General for Canada has not cleared due to insufficient funds (NSF cheque). • The CBSA employee receiving such information completes the following steps: • In ARL, reverses the January 31 importer payment. This will trigger the payment reversal to the importer account and « unclear » the related transactions; • Log the NSF cheque in the importer record in ARL; • Contact the importer advising of the NSF cheque; • Issue an administrative NSF charge, currently set at $25; • Interest will be calculated on the Importer account for the non or late payment. • AMPS issued.

47. Scenario 8: Broker NSF cheque process • On January 31, 2013, « The Best Brokers Inc. » submits a cheque in the name of the Receiver General for Canada at a CBSA office with ARL access, providing also the Broker Payment Instructions for redistribution of sums to their identified client accounts. • A CBSA employeeenters the information in the ARL and the sums are redistributed accordingly. Importer transactions are subsequently cleared according to the CBSA Payment Allocation Rules. • On February 15, 2013, the CBSA receives notice that the January 31, 2013 cheque from « The Best Brokers Inc. » to the Receiver General for Canada has not cleared due to insufficient funds (NSF cheque). • The CBSA employee receiving such information completes the following steps: • In ARL, reverses the January 31 broker payment. This will trigger the reversal of payments to all importer accounts from that payment made and to « unclear » the related transactions; • Log the NSF cheque in the broker record in ARL; • Contact the broker advising of the NSF cheque; • CBSA employee will issue an AMP (C336) to the broker; • Each importer affected by that NSF cheque is considered an individual occurrence, e.g. 70 Importers under that cheque equals 70 x the AMP penalty to be applied; • Issue an administrative NSF charge, currently set at $25; • Interest will be calculated on all accounts affected for the non or late payments.

48. Scenario 9: Late Accounting (Non-CSA) • Once commercial goods have been imported using RPPP, Importer/Broker submits B3 after the final accounting due date. • A late accounting penalty (LAP) is generated for the late transaction. (LAP cancellation or waivers may still be done as per the current process). • If a cancellation is applied, a credit will appear on the client’s following DN (See example of such credit in scenario 1, third DN). • Where the LAP is issued and subsequently credited, this will be properly reflected on the importer SOA as long as the credit is posted within the same billing period. • If the cancellation and posting is performed after the generated SOA, the $100 LAP will form part of the current SOA total amount but a credit of this same amount will be on the importer account and will be reflected on the following month SOA. • The importer/broker has the option of paying the full SOA amount and receive credit once the LAP credit posting occurs or has the option to short pay the SOA by $100, knowing that the credit has/will occur.

49. Scenario 9: Late Accounting (Non-CSA) Late Accounting Penalty : Cancellation prior to SOA Since the LAP cancellation occurred prior to the SOA date, the SOA generated on Feb 25th shows only the $ 3000 due.

50. Scenario 9: Late Accounting (Non-CSA) Late Accounting Penalty : Cancellation after the SOA, prior to the payment date. The SOA on February 25th would show $3100. The Importer would see on the DN the LAP cancellation credit. If they chose to only pay $3000, The next SOA would show a zero balance assuming no other activity occurred in the account.