CARM adjustment reason codes: which code fixes which audit finding?

How is a CARM reason code built?

Every change to a Commercial Accounting Declaration (CAD), whether a correction before the payment due date or an adjustment after it, needs a reason code. The list is Appendix A of CBSA Memorandum D17-2-1, dated October 21, 2024, the day CARM became the system of record. D17-2-1 defines a reason code as the code "which corresponds to the applicable legislative issue and reason for the request". So the code says two things: which law lets you make the change, and why.

You can read most codes from their parts:

The middle of the code is the section: 74-1-E is paragraph 74(1)(e) of the Customs Act, 32-2-2 is subsection 32.2(2). The suffix is the reason: .TC tariff classification, .TT tariff treatment, .VFD value for duty, .TYPO a clerical error, .QTY quantity. A surtax code ends with the Customs Tariff section the surtax order was made under: -53 for subsection 53(2), -55 for 55(1), -63 for 63(1), -68 for 68(1), -77-1 and -77-6 for the China safeguard sections, and -78 for 78(1).

Which code fixes which audit finding?

This is the table to keep next to your audit results. It covers the findings a post-entry audit of CADs most often produces. The direction column matters: the same error is an R3 code when you underpaid and an R2 code when you overpaid.

Two codes in this table have a twist worth knowing before you file.

Unclaimed CETA, CPTPP or UK preference. Paragraph 74(1)(c.11) covers goods from Israel and from every country or territory in Part 4 of the Customs Act schedule, which lists CUSMA, CETA, CPTPP, CUKTCA, CEFTA, CKFTA and others. D17-2-1's label for R2-74-1-C11 names only CIFTA, CCRFTA and CUSMA, an older list. But the memorandum describes R2-74-1-E.TT, the only other code for a tariff treatment refund, as covering a change "other than as described in section 74 (1) (c.1) or (c.11)". An unclaimed CETA or CPTPP preference falls in (c.11) under the Act, so E.TT is excluded by its own wording and R2-74-1-C11 is the code whose authority matches. Customs Notice 26-03 also uses R2-74-1-C11 for "the application of a preferential tariff treatment" without naming an agreement. The same split runs the other way: subsection 32.2(1) covers an unsupported preference under any free trade agreement, so R3-32-2-1-TT applies to a failed CETA or CPTPP claim even though its label names only NAFTA, CCFTA and CUSMA, and R3-32-2-2.TT expressly excludes agreement preferences. The time limit for a (c.11) refund is four years. Confirm the code with your broker before a large claim, since D17-2-1 says a code with the wrong legislative authority is rejected.

Surtax codes follow the order, not the country. The suffix is the Customs Tariff section the surtax order was made under. Customs Notice 25-19, on the United States Surtax Remission Order (2025), tells importers to use R2-74-1-GR-53 when remission was missed and the adjustment comes after the payment due date. For other orders, read the section from the order's enabling clause or its customs notice. Which order applies to which line is covered in why your CAD shows the wrong surtax.

Is it a correction or an adjustment, and does the code change?

The code family changes with the date. Memorandum D17-1-5 defines a correction as a change made between the CAD's acceptance and 11:59:59 pm Eastern on the payment due date, open only to importers in the Release Prior to Payment program and the broker that filed the CAD. Corrections use the four R5 codes:

• R5-00-CCL for classification
• R5-00-CTT for tariff treatment
• R5-00-CVA for value for duty
• R5-00-COT for anything else, which Customs Notice 25-19 uses for a missed surtax remission

After the payment due date, D17-1-5 says the adjustment period starts. D17-2-1 describes the R5 correction codes as "prior to the CAD payment due date", so an adjustment uses the R2, R3 and R4 codes (R1 codes are the CBSA's own). A post-entry audit almost always lands in the adjustment period, so most audit findings use R2 and R3 codes. How the section 32.2 and section 74 routes and their deadlines fit together is set out in correcting a Canadian entry.

How do you use more than one code on one line?

D17-2-1 allows up to three reason codes on an adjustment. The order matters because CARM uses it to work out interest. Customs Notice 26-03, effective February 2, 2026, sets the rule for mass adjustments; D17-2-1 sets no order for a single adjustment, and since the interest reason is the same, following the notice's order there too is the safe choice:

1. Net refund on the line: the refund code goes in commodity reason code 1.
2. Net amount owing, or no revenue change: the code supporting the amount owed or the non-revenue change goes in reason code 1.

The notice gives its own examples. A move from a surtax-subject tariff item to a non-subject item with the same duty rate is a surtax refund, so reason code 1 is R2-74-1-G-53 (or R2-74-1-GR-53 if a remission order is claimed) and reason code 2 is R3-32-2-2.TC. A higher-rate classification combined with a preferential tariff treatment claimed under R2-74-1-C11, where the line nets to a refund, lists R2-74-1-C11 first and R3-32-2-2.TC second.

This matters for section 32.2 as well. Subsection 32.2(5) says the correction obligation does not "require or allow a correction that would result in a claim for a refund". The classification error is still a section 32.2 matter, so it carries the R3 code, but the line's money moves under the refund code, listed first.

What does a mixed line look like in practice?

One CAD line, accounted for in May 2026, on goods not covered by any surtax order. The rates are illustrative; check the real item and date in the duty calculator.

• As declared: value for duty CAD 40,000, a tariff item at 3% Most-Favoured-Nation (tariff treatment 002). Customs duty CAD 1,200. GST at 5% on CAD 41,200: CAD 2,060.
• Audit finding 1: the goods belong under an item at 6.5% MFN. On its own, that is an underpayment of CAD 1,400 (6.5% of 40,000 is CAD 2,600).
• Audit finding 2: the goods are US-originating, and the importer held a CUSMA certification of origin when the goods were accounted for. Under the United States Tariff (treatment 010), the correct item is free.

The line nets to a refund, so commodity reason code 1 is R2-74-1-C11 and reason code 2 is R3-32-2-2.TC. The certification of origin and the classification support go up in the CARM Client Portal on the same day: D17-2-1 rejects a refund adjustment whose documents are not uploaded by 11:59:59 pm Eastern on the day it is submitted, and "legislative time limits will not be protected". The CAD 1,200 duty comes back as a credit on the importer's CARM account. The CAD 60 of GST does not: D17-2-1 says the CBSA decides the GST change but does not credit it, so a GST registrant recovers it as an input tax credit and a non-registrant applies to the Canada Revenue Agency with the Statement of Adjustment.

Had the importer not held a certification at the time of accounting, finding 2 would fail and the line would be a pure underpayment of CAD 1,400 under R3-32-2-2.TC, plus GST of CAD 70 on the extra duty, plus interest.

What does the Statement of Adjustment tell you about your codes?

Every processed adjustment produces a Statement of Adjustment (SoAdj). D17-2-1 says it shows the previous and adjusted values, the change in duties and taxes, the legislative authority and your appeal rights. The codes on it tell you what happened:

• Your code, version approved: the change went through as filed.
• Your version rejected, a new version mirroring the old one approved: the request was rejected or denied. The reason code on the SoAdj tells you which.
• Fields reset to their old values on an approved version: a partial approval. The denial codes and the officer's comments explain which changes were refused.
• R2-74-4-B(DENY): the origin, classification or value you claimed is itself wrong.
• R2-74-5(DENY): the refund was refused because complete or accurate documentation was not provided, or on another ground outside subsection 74(4). D17-2-1 notes this denial is not treated as a re-determination.

D17-2-1 also says there is no EDI message when an officer processes an adjustment, so a broker filing by EDI has to check the portal for the decision.

Which mistakes get adjustments rejected?

• A code from the wrong family or in the wrong order. An R5 code after the payment due date, or an R3 code in reason code 1 on a line that nets to a refund.
• The wrong legislative authority. D17-2-1 rejects the request outright.
• A refund without same-day documents. Time limits are not protected.
• SIMA mixed into a customs adjustment. D17-2-1 says SIMA issues go to the CBSA as a re-determination request, under the R4 codes.
• A mass adjustment whose codes do not fit every line. Customs Notice 26-03 rejects the whole case and does not protect time limits. The mass process is set out in CARM mass adjustments and pre-CARM B3s.

What should you do next on your own entries?

Map each finding in your audit to a direction and a code before anything reaches your broker: underpayments to R3 codes and a 90-day clock under section 32.2, overpayments to R2 codes inside the four-year limit in subsection 74(3), or one year for a Chile preference claim under paragraph 74(1)(c.1). Sort mixed lines by their net result so the code order is right, and group lines that share the same codes and result, since those can travel together as one mass adjustment. TariffSense audits CAD lines against the tariff measures in force on each line's date and gives each finding its direction, the corrected values and the reason code that matches it, so the filing your broker makes is already sorted. What a full CAD audit checks is in the CAD audit guide, and the post-entry audit page shows what goes in and what comes back. Confirm the codes on any large or unusual claim with your licensed customs broker.