Governments, particularly in developing and least-developed nations, often hire private organizations to do pre-shipment inspections. The inspections involve checking shipment specifics including the cost, quantity, and quality of the items before they leave the country of exportation. Preshipment inspection agencies are used by governments for many purposes. They include stopping capital flight, undervaluing imports, and making up for weak administrative and customs systems. The parties to this Agreement are all WTO members. On January 1st, 1995, the Agreement became operative. It has no time limit.
The Agreement
The Uruguay Round was used to negotiate the Agreement on Preshipment Inspection. It acknowledges that pre-shipment inspection agencies fall under the guiding principles and requirements of the GATT of 1994 and other WTO Agreements. The Customs Valuation Committee serves as the forum for reviewing the operation of various Members’ pre-shipment inspection regimes and the implementation of the WTO Agreement on Preshipment Inspection. This is according to a decision made in 1999 by the WTO Working Party on Preshipment Inspection, which was approved by the General Council. The pre-shipment inspection process should not be subject to unnecessary delays or disparate treatment, as per the agreement. It established an independent, unbiased review body to settle disagreements between importers and pre-shipment inspection businesses and defines an agreed-upon set of open procedures for these inspections, including timeframes.
The Practice
According to the Agreement, developed members and developing members were no longer required to use pre-shipment inspections concerning tariff classification and customs valuation as soon as the agreement was in effect. The agreement also encourages WTO Members not to implement any new pre-shipment inspection requirements of any kind. Many developing nations conduct pre-shipment inspections to check potential imports before they are transported from the exporting nation. The private businesses that conduct the inspections make sure that the order is being fulfilled by comparing the price, currency rate, financial terms, quantity, and quality of the transaction.
Benefits of the arrangement
By outlining fair and transparent methods and deadlines and holding importing nations’ governments accountable for the conduct of the PSI firms they hire, the Agreement aims to enhance the pre-shipment inspection process. When an exporter receives an order from a buyer in a nation that needs pre-shipment inspections, they are instructed to get in touch with a certain PSI business to schedule the inspection. According to the PSI Agreement, the company is required to give the exporter a detailed list of what it will be looking for during the inspection and the standards it will use. Inspections must be conducted under the Agreement on the day that the exporter and the PSI business agree upon. Within five working days of the inspection, the exporter must get from the PSI company either a Clean Report of Findings (which signifies approval of the shipment) or a thorough justification in writing for why such a Report could not be granted. Price verification must adhere to the rules specified under the Agreement. PSI firms must make sure that any secret company information is not disclosed and are prohibited from requesting specific business proprietary information.
Dispute resolution provisions in the agreement
Preshipment inspection issues must first be handled by getting in touch with the PSI business and attempting to resolve the issue directly. According to the Agreement, the PSI business must designate a representative to address all appeals from exporters. The procedures outlined in the Agreement should be consulted when speaking with an appeals representative of a PSI company. An independent entity (IE) was created by the WTO Agreement to hear complaints from exporters. A professional employee of the World Trade Organization serves as the Independent Entity’s Director. Two days after submitting a formal appeal to the PSI business, exporters may ask for an IE review of their case. No later than 90 days after a PSI business either issues a Clean Report of Findings or notifies you of its refusal to produce a Report, you may request an IE review by submitting a completed Standard Application form to the IE.
