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I. Preamble back to top
A. Text of the Preamble
Members,
Noting that
Ministers on 20 September 1986 agreed that the Uruguay Round of
Multilateral Trade Negotiations shall aim to “bring about further
liberalization and expansion of world trade”, “strengthen the role
of GATT” and “increase the responsiveness of the GATT system to the
evolving international economic environment”;
Noting that a
number of developing country Members have recourse to preshipment
inspection;
Recognizing the
need of developing countries to do so for as long and in so far as it is
necessary to verify the quality, quantity or price of imported goods;
Mindful that such
programmes must be carried out without giving rise to unnecessary delays
or unequal treatment;
Noting that this
inspection is by definition carried out on the territory of exporter
Members;
Recognizing the
need to establish an agreed international framework of rights and
obligations of both user Members and exporter Members;
Recognizing that
the principles and obligations of GATT 1994 apply to those activities of
preshipment inspection entities that are mandated by governments that
are Members of the WTO;
Recognizing that
it is desirable to provide transparency of the operation of preshipment
inspection entities and of laws and regulations relating to preshipment
inspection;
Desiring to
provide for the speedy, effective and equitable resolution of disputes
between exporters and preshipment inspection entities arising under this
Agreement;
Hereby agree as
follows:
B. Interpretation and Application of the Preamble
No jurisprudence or decision of a competent WTO
body.
II. Article 1
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A. Text of Article 1
Article 1: Coverage — Definitions
1. This Agreement shall
apply to all preshipment inspection activities carried out on the
territory of Members, whether such activities are contracted or mandated
by the government, or any government body, of a Member.
2. The term “user Member”
means a Member of which the government or any government body contracts
for or mandates the use of preshipment inspection activities.
3. Preshipment inspection
activities are all activities relating to the verification of the
quality, the quantity, the price, including currency exchange rate and
financial terms, and/or the customs classification of goods to be
exported to the territory of the user Member.
4. The term “preshipment
inspection entity” is any entity contracted or mandated by a Member to
carry out preshipment inspection activities.(1)
(footnote original)
1 It is understood that
this provision does not obligate Members to allow government entities of
other Members to conduct preshipment inspection activities on their
territory.
B. Interpretation and Application of Article 1
No jurisprudence or decision of a competent
WTO body.
III. Article 2
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A. Text of Article 2
Article 2: Obligations
of User Members
Non-discrimination
1. User Members shall ensure that preshipment
inspection activities are carried out in a non-discriminatory manner,
and that the procedures and criteria employed in the conduct of these
activities are objective and are applied on an equal basis to all
exporters affected by such activities. They shall ensure uniform
performance of inspection by all the inspectors of the preshipment
inspection entities contracted or mandated by them.
Governmental Requirements
2. User Members shall ensure that in the
course of preshipment inspection activities relating to their laws,
regulations and requirements, the provisions of paragraph 4 of Article
III of GATT 1994 are respected to the extent that these are relevant.
Site of Inspection
3. User Members shall ensure that all
preshipment inspection activities, including the issuance of a Clean
Report of Findings or a note of non-issuance, are performed in the
customs territory from which the goods are exported or, if the
inspection cannot be carried out in that customs territory given the
complex nature of the products involved, or if both parties agree, in
the customs territory in which the goods are manufactured.
Standards
4. User Members shall ensure that quantity and
quality inspections are performed in accordance with the standards
defined by the seller and the buyer in the purchase agreement and that,
in the absence of such standards, relevant international standards(2)
apply.
(footnote original)
2 An international
standard is a standard adopted by a governmental or non-governmental
body whose membership is open to all Members, one of whose recognized
activities is in the field of standardization.
Transparency
5. User Members shall ensure that preshipment
inspection activities are conducted in a transparent manner.
6. User Members shall ensure that, when
initially contacted by exporters, preshipment inspection entities
provide to the exporters a list of all the information which is
necessary for the exporters to comply with inspection requirements. The
preshipment inspection entities shall provide the actual information
when so requested by exporters. This information shall include a
reference to the laws and regulations of user Members relating to
preshipment inspection activities, and shall also include the procedures
and criteria used for inspection and for price and currency exchange
rate verification purposes, the exporters’ rights vis-à-vis
the inspection entities, and the appeals procedures set up under
paragraph 21. Additional procedural requirements or changes in existing
procedures shall not be applied to a shipment unless the exporter
concerned is informed of these changes at the time the inspection date
is arranged. However, in emergency situations of the types addressed by
Articles XX and XXI of GATT
1994, such additional requirements or
changes may be applied to a shipment before the exporter has been
informed. This assistance shall not, however, relieve exporters from
their obligations in respect of compliance with the import regulations
of the user Members.
7. User Members shall ensure that the
information referred to in paragraph 6 is made available to exporters in
a convenient manner, and that the preshipment inspection offices
maintained by preshipment inspection entities serve as information
points where this information is available.
8. User Members shall publish promptly all
applicable laws and regulations relating to preshipment inspection
activities in such a manner as to enable other governments and traders
to become acquainted with them.
Protection of Confidential Business
Information
9. User Members shall ensure that preshipment
inspection entities treat all information received in the course of the
preshipment inspection as business confidential to the extent that such
information is not already published, generally available to third
parties, or otherwise in the public domain. User Members shall ensure
that preshipment inspection entities maintain procedures to this end.
10. User Members shall provide information to
Members on request on the measures they are taking to give effect to
paragraph 9. The provisions of this paragraph shall not require any
Member to disclose confidential information the disclosure of which
would jeopardize the effectiveness of the preshipment inspection
programmes or would prejudice the legitimate commercial interest of
particular enterprises, public or private.
11. User Members shall ensure that preshipment
inspection entities do not divulge confidential business information to
any third party, except that preshipment inspection entities may share
this information with the government entities that have contracted or
mandated them. User Members shall ensure that confidential business
information which they receive from preshipment inspection entities
contracted or mandated by them is adequately safeguarded. Preshipment
inspection entities shall share confidential business information with
the governments contracting or mandating them only to the extent that
such information is customarily required for letters of credit or other
forms of payment or for customs, import licensing or exchange control
purposes.
12. User Members shall ensure that preshipment
inspection entities do not request exporters to provide information
regarding:
(a) manufacturing data related to patented,
licensed or undisclosed processes, or to processes for which a patent is
pending;
(b) unpublished technical data other than data
necessary to demonstrate compliance with technical regulations or
standards;
(c) internal pricing, including manufacturing
costs;
(d) profit levels;
(e) the terms of contracts between exporters
and their suppliers unless it is not otherwise possible for the entity
to conduct the inspection in question. In such cases, the entity shall
only request the information necessary for this purpose.
13. The information referred to in
paragraph 12, which preshipment inspection entities shall not otherwise request,
may be released voluntarily by the exporter to illustrate a specific
case.
Conflicts of Interest
14. User Members shall ensure that preshipment
inspection entities, bearing in mind also the provisions on protection
of confidential business information in paragraphs 9 through
13,
maintain procedures to avoid conflicts of interest:
(a) between preshipment inspection entities
and any related entities of the preshipment inspection entities in
question, including any entities in which the latter have a financial or
commercial interest or any entities which have a financial interest in
the preshipment inspection entities in question, and whose shipments the
preshipment inspection entities are to inspect;
(b) between preshipment inspection entities
and any other entities, including other entities subject to preshipment
inspection, with the exception of the government entities contracting or
mandating the inspections;
(c) with divisions of preshipment inspection
entities engaged in activities other than those required to carry out
the inspection process.
Delays
15. User Members shall ensure that preshipment
inspection entities avoid unreasonable delays in inspection of
shipments. User Members shall ensure that, once a preshipment inspection
entity and an exporter agree on an inspection date, the preshipment
inspection entity conducts the inspection on that date unless it is
rescheduled on a mutually agreed basis between the exporter and the
preshipment inspection entity, or the preshipment inspection entity is
prevented from doing so by the exporter or by force majeure.(3)
(footnote original)
3 It is understood that,
for the purposes of this Agreement, “force majeure” shall mean
“irresistible
compulsion or coercion, unforeseeable course of events excusing from
fulfilment of contract”.
16. User Members shall ensure that, following
receipt of the final documents and completion of the inspection,
preshipment inspection entities, within five working days, either issue
a Clean Report of Findings or provide a detailed written explanation
specifying the reasons for non-issuance. User Members shall ensure that,
in the latter case, preshipment inspection entities give exporters the
opportunity to present their views in writing and, if exporters so
request, arrange for re-inspection at the earliest mutually convenient
date.
17. User Members shall ensure that, whenever
so requested by the exporters, preshipment inspection entities
undertake, prior to the date of physical inspection, a preliminary
verification of price and, where applicable, of currency exchange rate,
on the basis of the contract between exporter and importer, the pro
forma invoice and, where applicable, the application for import
authorization. User Members shall ensure that a price or currency
exchange rate that has been accepted by a preshipment inspection entity
on the basis of such preliminary verification is not withdrawn,
providing the goods conform to the import documentation and/or import
licence. They shall ensure that, after a preliminary verification has
taken place, preshipment inspection entities immediately inform
exporters in writing either of their acceptance or of their detailed
reasons for non-acceptance of the price and/or currency exchange rate.
18. User Members shall ensure that, in order
to avoid delays in payment, preshipment inspection entities send to
exporters or to designated representatives of the exporters a Clean
Report of Findings as expeditiously as possible.
19. User Members shall ensure that, in the
event of a clerical error in the Clean Report of Findings, preshipment
inspection entities correct the error and forward the corrected
information to the appropriate parties as expeditiously as possible.
Price Verification
20. User Members shall ensure that, in order
to prevent over- and under-invoicing and fraud, preshipment inspection
entities conduct price verification(4) according to the following
guidelines:
(footnote original)
4 The obligations of user
Members with respect to the services of preshipment inspection entities
in connection with customs valuation shall be the obligations which they
have accepted in GATT 1994 and the other Multilateral Trade Agreements
included in Annex 1A of the WTO
Agreement.
(a) preshipment inspection entities shall only
reject a contract price agreed between an exporter and an importer if
they can demonstrate that their findings of an unsatisfactory price are
based on a verification process which is in conformity with the criteria
set out in subparagraphs (b) through (e);
(b) the preshipment inspection entity shall
base its price comparison for the verification of the export price on
the price(s) of identical or similar goods offered for export from the
same country of exportation at or about the same time, under competitive
and comparable conditions of sale, in conformity with customary
commercial practices and net of any applicable standard discounts. Such
comparison shall be based on the following:
(i) only prices providing a valid basis of
comparison shall be used, taking into account the relevant economic
factors pertaining to the country of importation and a country or
countries used for price comparison;
(ii) the preshipment inspection entity shall
not rely upon the price of goods offered for export to different
countries of importation to arbitrarily impose the lowest price upon the
shipment;
(iii) the preshipment inspection entity shall
take into account the specific elements listed in subparagraph
(c);
(iv) at any stage in the process described
above, the preshipment inspection entity shall provide the exporter with
an opportunity to explain the price;
(c) when conducting price verification,
preshipment inspection entities shall make appropriate allowances for
the terms of the sales contract and generally applicable adjusting
factors pertaining to the transaction; these factors shall include but
not be limited to the commercial level and quantity of the sale,
delivery periods and conditions, price escalation clauses, quality
specifications, special design features, special shipping or packing
specifications, order size, spot sales, seasonal influences, licence or
other intellectual property fees, and services rendered as part of the
contract if these are not customarily invoiced separately; they shall
also include certain elements relating to the exporter’s price, such
as the contractual relationship between the exporter and importer;
(d) the verification of transportation charges
shall relate only to the agreed price of the mode of transport in the
country of exportation as indicated in the sales contract;
(e) the following shall not be used for price
verification purposes:
(i) the selling price in the country of
importation of goods produced in such country;
(ii) the price of goods for export from a
country other than the country of exportation;
(iii) the cost of production;
(iv) arbitrary or fictitious prices or values.
Appeals Procedures
21. User Members shall ensure that preshipment
inspection entities establish procedures to receive, consider and render
decisions concerning grievances raised by exporters, and that
information concerning such procedures is made available to exporters in
accordance with the provisions of paragraphs 6 and
7. User Members shall
ensure that the procedures are developed and maintained in accordance
with the following guidelines:
(a) preshipment inspection entities shall
designate one or more officials who shall be available during normal
business hours in each city or port in which they maintain a preshipment
inspection administrative office to receive, consider and render
decisions on exporters’ appeals or grievances;
(b) exporters shall provide in writing to the
designated official(s) the facts concerning the specific transaction in
question, the nature of the grievance and a suggested solution;
(c) the designated official(s) shall afford
sympathetic consideration to exporters’ grievances and shall render a
decision as soon as possible after receipt of the documentation referred
to in subparagraph (b).
Derogation
22. By derogation to the provisions of
Article 2, user Members shall provide that, with the exception of part
shipments, shipments whose value is less than a minimum value applicable
to such shipments as defined by the user Member shall not be inspected,
except in exceptional circumstances. This minimum value shall form part
of the information furnished to exporters under the provisions of
paragraph 6.
B. Interpretation and Application of Article 2
1. In its first report (2 December 1997), the
PSI Working Party(1) made a set of recommendations to user Members to
ensure that they comply with their obligations under Article 2 of the
PSI Agreement.(2)
IV. Article 3
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A. Text of Article 3
Article 3: Obligations of Exporter Members
Non-discrimination
1. Exporter Members shall ensure that their
laws and regulations relating to preshipment inspection activities are
applied in a non-discriminatory manner.
Transparency
2. Exporter Members shall publish promptly all
applicable laws and regulations relating to preshipment inspection
activities in such a manner as to enable other governments and traders
to become acquainted with them.
Technical Assistance
3. Exporter Members shall offer to provide to
user Members, if requested, technical assistance directed towards the
achievement of the objectives of this Agreement on mutually agreed
terms.(5)
(footnote original)
5 It is understood that
such technical assistance may be given on a bilateral, plurilateral or
multilateral basis.
B. Interpretation and Application of Article 3
1. Article 3.3
2. In its first report (2 December 1997), the
PSI Working Party considered that “[t]echnical assistance activities,
which should be administered on a request basis, could include areas
such as tariff and customs administration reforms; simplification and
modernization of systems and procedures; and the development of an
adequate legal, administrative, and physical infrastructure.”(3)
V. Article 4
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A. Text of Article 4
Article 4: Independent Review Procedures
Members shall encourage preshipment inspection
entities and exporters mutually to resolve their disputes. However, two
working days after submission of the grievance in accordance with the
provisions of paragraph 21 of Article 2, either party may refer the
dispute to independent review. Members shall take such reasonable
measures as may be available to them to ensure that the following
procedures are established and maintained to this end:
(a) these procedures shall be administered by
an independent entity constituted jointly by an organization
representing preshipment inspection entities and an organization
representing exporters for the purposes of this Agreement;
(b) the independent entity referred to in
subparagraph (a) shall establish a list of experts as follows:
(i) a section of members nominated by an
organization representing preshipment inspection entities;
(ii) a section of members nominated by an
organization representing exporters;
(iii) a section of independent trade experts,
nominated by the independent entity referred to in subparagraph
(a).
The geographical distribution of the experts
on this list shall be such as to enable any disputes raised under these
procedures to be dealt with expeditiously. This list shall be drawn up
within two months of the entry into force of the WTO Agreement and shall
be updated annually. The list shall be publicly available. It shall be
notified to the Secretariat and circulated to all Members;
(c) an exporter or preshipment inspection
entity wishing to raise a dispute shall contact the independent entity
referred to in subparagraph (a) and request the formation of a panel.
The independent entity shall be responsible for establishing a panel.
This panel shall consist of three members. The members of the panel
shall be chosen so as to avoid unnecessary costs and delays. The first
member shall be chosen from section (i) of the above list by the
preshipment inspection entity concerned, provided that this member is
not affiliated to that entity. The second member shall be chosen from
section (ii) of the above list by the exporter concerned, provided that
this member is not affiliated to that exporter. The third member shall
be chosen from section (iii) of the above list by the independent entity
referred to in subparagraph (a). No objections shall be made to any
independent trade expert drawn from section (iii) of the above list;
(d) the independent trade expert drawn from
section (iii) of the above list shall serve as the chairman of the
panel. The independent trade expert shall take the necessary decisions
to ensure an expeditious settlement of the dispute by the panel, for
instance, whether the facts of the case require the panelists to meet
and, if so, where such a meeting shall take place, taking into account
the site of the inspection in question;
(e) if the parties to the dispute so agree,
one independent trade expert could be selected from section (iii) of the
above list by the independent entity referred to in subparagraph
(a) to
review the dispute in question. This expert shall take the necessary
decisions to ensure an expeditious settlement of the dispute, for
instance taking into account the site of the inspection in question;
(f) the object of the review shall be to
establish whether, in the course of the inspection in dispute, the
parties to the dispute have complied with the provisions of this
Agreement. The procedures shall be expeditious and provide the
opportunity for both parties to present their views in person or in
writing;
(g) decisions by a three-member panel shall be
taken by majority vote. The decision on the dispute shall be rendered
within eight working days of the request for independent review and be
communicated to the parties to the dispute. This time-limit could be
extended upon agreement by the parties to the dispute. The panel or
independent trade expert shall apportion the costs, based on the merits
of the case;
(h) the decision of the panel shall be binding
upon the preshipment inspection entity and the exporter which are
parties to the dispute.
B. Interpretation and Application of Article 4
3. At its meeting of 13 and 15 December 1995,
the General Council established an “Independent Entity” as a
subsidiary body of the Council for Trade in Goods.(4) The International
Chamber of Commerce (representing exporters) and the International
Federation of Inspections Agencies (representing PSI entities) accepted,
in an Agreement concluded with the WTO(5), to constitute jointly the
Independent Entity. In consultations with those organizations, the WTO
defined the structure and functioning of the Independent Entity(6) and
determined the rules of procedure applicable to the conduct of
independent reviews by the Independent Entity.(7)
4. The Rules of Procedure for the Independent
Entity are included in Annex III to the decision by the General Council
establishing the Independent Entity.(8)
5. The Independent Entity reports to the
Council for Trade in Goods on an annual basis.(9)
6. As envisaged in
Article 4(b), the
Independent Entity drew up its list in March 1996(10) and updated it in
April 1997.(11)
VI. Article 5
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A. Text of Article 5
Article 5: Notification
Members shall submit to the Secretariat copies
of the laws and regulations by which they put this Agreement into force,
as well as copies of any other laws and regulations relating to
preshipment inspection, when the WTO Agreement enters into force with
respect to the Member concerned. No changes in the laws and regulations
relating to preshipment inspection shall be enforced before such changes
have been officially published. They shall be notified to the
Secretariat immediately after their publication. The Secretariat shall
inform the Members of the availability of this information.
B. Interpretation and Application of Article 5
7.
In its first report (2 December 1997), the
PSI Working Party stated that when Members notify their laws and
regulations, they “should endeavour to provide additional descriptive
information on how they are implementing the Agreement”.(12)(13)
VII. Article 6
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A. Text of Article 6
Article 6: Review
At the end of the second year from the date of
entry into force of the WTO Agreement and every three years thereafter,
the Ministerial Conference shall review the provisions, implementation
and operation of this Agreement, taking into account the objectives
thereof and experience gained in its operation. As a result of such
review, the Ministerial Conference may amend the provisions of the
Agreement.
B. Interpretation and Application of Article 6
8. At its meeting of 7, 8 and 13 November
1996, the General Council established a working party under the Council
for Trade in Goods to conduct the review provided for under Article 6 of
the PSI Agreement.(14) The terms of reference of the PSI Working Party
were as follows:
“[T]o conduct the review provided for under
Article 6 of the Agreement on Preshipment Inspection and to report to
the General Council through the Council for Trade in Goods in December
1997”.(15)
9. The PSI Working Party issued three reports(16), all of which were approved by the General
Council.(17)
10. At its December 1997 meeting the General
Council agreed that the life of the Working Party on Preshipment
Inspection be extended for one year for the purposes described in
paragraph 8 of Section B of the report in G/L/214.(18)
11. In December 1998, the General Council
agreed to a further extension of the life of the Working Party until 31
March 1999.(19)
12. The Working Party concluded its final
Article 6 review of the Agreement on Preshipment Inspection at its
meeting held on 12 March 1999.(20)
VIII. Article 7
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A. Text of Article 7
Article 7: Consultation
Members shall consult with other Members upon
request with respect to any matter affecting the operation of this
Agreement. In such cases, the provisions of Article XXII of GATT
1994,
as elaborated and applied by the Dispute Settlement Understanding, are
applicable to this Agreement.
B. Interpretation and Application of Article 7
No jurisprudence or decision of a competent
WTO body.
IX. Article 8
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A. Text of Article 8
Article 8: Dispute Settlement
Any disputes among Members regarding the
operation of this Agreement shall be subject to the provisions of
Article XXIII of GATT 1994, as elaborated and applied by the Dispute
Settlement Understanding.
B. Interpretation and Application of Article 8
No jurisprudence or decision of a competent
WTO body.
X. Article 9
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A. Text of Article 9
Article 9: Final Provisions
1. Members shall take the necessary measures
for the implementation of the present Agreement.
2. Members shall ensure that their laws and
regulations shall not be contrary to the provisions of this Agreement.
B. Interpretation and Application of Article 9
No jurisprudence or decision of a competent
WTO body.
Footnotes:
1. With respect to
the PSI Working Party more generally, see paragraph 8 below. back to text
2. G/L/214, section B. back to text
3. G/L/214, page 4. back to text
4. WT/GC/M/9, section 1.(f). back to text
5. WT/L/125/Rev.1, Annex I. back to text
6. WT/L/125/Rev.1, Annex II. back to text
7. WT/L/125/Rev.1, Annex III. back to text
8. WT/L/125/Rev.1, Annex III. back to text
9. The reports of the Independent Entity are
numbered G/L/120, 208, 269, 330 and 410. back to text
10. G/PSI/IE/1. back to text
11. G/PSI/IE/1/Rev.1. back to text
12. G/L/214, page 3. back to text
13. Notice of changes in laws and regulations
received are listed in documents G/PSI/N/1, G/PSI/N/1/Add.1–Add.10. back to text
14. WT/GC/M/16, section 3. back to text
15. WT/GC/M/16, section 3. The terms of
reference can be also found in WT/L/196. back to text
16. The reports can be found in G/L/214,
G/L/273 and G/L/300. back to text
17. See WT/GC/M/25, item 8; WT/GC/M/32, item
13; WT/GC/M/40/Add.3, item 5. back to text
18. WT/GC/M/25. back to text
19. WT/GC/M/32. back to text
20. The final report was circulated in
document G/L/300. back to text
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