Analysis, statistics, publications, downloads, links, etc

WTO ANALYTICAL INDEX: PRESHIPMENT INSPECTION

Agreement on Preshipment Inspection

150pxls.gif (76 bytes)
The texts reproduced here do not have the legal standing of the original documents which are entrusted and kept at the WTO Secretariat in Geneva.

> General
> Preamble
> Article 1
> Article 2
> Article 3
> Article 4
> Article 5
> Article 6
> Article 7
> Article 8
> Article 9

 

> Analytical Index main page


I. General    back to top

1.     Preshipment inspection (PSI) companies have long served private-sector buyers and sellers to ensure that the quantity and quality of goods to be traded conform to sales contract specifications. Government-contracted, comprehensive PSI service arose first in the 1960s. Government contracts with PSI companies have consisted of foreign exchange contracts (where the government’s objective is to prevent capital flight through over-invoicing) and/or customs contracts (where the objective is to prevent loss of customs revenue as a result of undervaluation or misclassification of the goods). PSI companies may also verify product origin, compile statistics, and provide technical assistance.

2.     The PSI Agreement, negotiated in the Uruguay Round, applies to all government-mandated PSI activities carried out on the territory of Members (in the country of export, prior to exportation). Article 2 of the Agreement regulates user Members (those who contract for PSI services) and Article 3 applies to exporter Members. Article 4 provides for an independent entity to settle disputes between exporters and PSI companies. This entity was duly established in 1996, and has settled two such disputes.

3.     The PSI Agreement did not create any administering body. Since 1999, the PSI Agreement has been monitored by the Committee on Customs Valuation, which has maintained a standing agenda item on PSI. Two reviews of the PSI Agreement have been conducted, by a Working Party on Preshipment Inspection in 1996–99, and by the Committee on Customs Valuation in 2006.

4.     The final report on the first review noted in 1999 that:

“The objectives of government-mandated Preshipment Inspection (PSI) programmes have evolved since the early 1960s. Initially they were used almost exclusively to address exchange control concerns, but in more recent years, as trade has become liberalized and exchange controls have been removed, the emphasis of PSI programmes has shifted towards revenue collection. Primarily PSI aims to detect false invoicing, and ensure governments receive the correct revenue. … All Members have accepted that recourse to PSI is a transitional measure to be used only until their national customs authorities are in the position to carry out these tasks on their own.”(1)

5.     Since 1999, the Secretariat has issued periodic lists of countries with PSI programmes. As of March 1999, 35 countries had PSI programmes,(2) but a June 2010 Secretariat Note reported “a marked reduction in traditional PSI programmes with considerable growth in more modern programmes that are less intrusive for exporters”, noting that as of June 2010, 12 countries had PSI programmes for revenue protection, and 16 others had customs support services including destination inspection and/or selective PSI.(3)

 

II. 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.

 

III. Article 1    back to top

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.

 

IV. Article 2    back to top

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. Uniform Application of PSI

6.     The final report on the first review of the PSI Agreement in 1999 included a proposal for a model contract between governments and PSI companies, and noted that the Working Party that conducted the review “broadly supported the aim of the contract on the understanding that it was of a non-binding nature, and that in no way could it affect the rights and obligations of Members under the Agreement. … the Working Party accepted that governments, in drawing up their own contracts, would also ensure compatibility with the PSI Agreement.”(4)

2. Transparency

7.     The Recommendations for immediate action in the PSI Working Party’s first report in 1997 included:

“User Members should ensure that PSI entities are encouraged to establish local focal points in countries where they do not have physical, on-site representation. The establishment of websites by IFIA and by PSI entities with on-line services would enhance efficiency of PSI operations in such areas as procedures, methods, inspection criteria, responses to inquiries, and dissemination of other usable, essential information by importers and exporters. In addition to providing hard copies, PSI entities should be encouraged to communicate Clean Reports of Findings (CRFs) to importers and exporters through electronic means.”(5)

3. Protection of Confidential Business Information

8.     The Recommendations for immediate action in the PSI Working Party’s first report in 1997 also included:

“In furtherance of Articles 2.92.13, user Members shall ensure that contracts with PSI entities or national implementing legislation or administrative regulations specify procedures to be undertaken by such entities to limit the confidential business information they seek from exporters to that provided for under the Agreement and to ensure that any such information obtained by PSI entities is not used for any other purpose than PSI activities for the user Members, as defined in Article 1.3. Any breach of the rule of confidentiality by the PSI entity is an action that may be brought against the PSI entity in the appropriate judicial or administrative forum of the user Member.”(6)

9.     In the Working Party’s final report, in connection with a discussion on the use of price databases by customs administrations as part of risk management and assessment, the Working Party noted that “Where relevant, confidential business information in such databases should be protected.”(7)

4. Delays

10.     The Recommendations for immediate action in the PSI Working Party’s first report in 1997 also included:

“User Members shall ensure that PSI entities issue CRFs to importers and exporters immediately on receipt of the final documents and completion of inspection. As foreseen in Article 2.16, in no case must the issuance of a CRF exceed 5 working days after an inspection. In the event that a CRF has not been issued, the user Member shall ensure that the PSI entity issues a detailed written explanation specifying the reasons for non-issuance.”(8)

5. Conflicts of Interest

11.     The Recommendations for immediate action in the PSI Working Party’s first report in 1997 also included:

“User Members shall ensure that contracts with PSI entities or national implementing legislation or administrative regulations provide for fee structures that do not create incentives for potential conflicts of interest in any way that may be inconsistent with the objectives of the Agreement. Additionally, contracts with PSI entities or national implementing legislation or administrative regulations shall specify that PSI entities should not inspect transactions involving products in which a PSI entity or its related company may have a commercial interest.”(9)

6. Price Verification; Relationship between PSI and Customs Valuation

12.     The Recommendations for immediate action in the PSI Working Party’s first report in 1997 also included:

“Price verification by PSI entities for customs purposes shall be limited to provision of technical advice to facilitate the determination of customs value by the user Member. In this regard, the ultimate responsibility for customs valuation and revenue collection rests with user Members. All activities of PSI entities should be monitored by user Members who should be encouraged to reflect this in national legislation or administrative regulations.

 

In order to ensure compliance with the requirements of Articles 2.5 to 2.8 on transparency, Article 2.1 on nondiscrimination and Article 2.20 on price verification, a user Member should require PSI entities to:

 

(i)     make publicly available a single set of price verification criteria; and

 

(ii)     inform exporters and importers of the applicable valuation methodology.

 

Price verification criteria should include the customs valuation methodology, as specified in user Members’ national legislation or administrative regulations, used when providing technical advice on customs valuation. In this regard, user Members should encourage PSI entities to utilize electronic means for purposes of providing required information to exporters and importers.

 

User Members shall ensure that requests for information do not go beyond Articles 2.12 and 2.20 of the Agreement on Preshipment Inspection. Reciprocally, exporter Members should inform user Members when they become aware that PSI entities‘ requests for information go beyond these Articles.

 

In conformity with Article 2.21, a user Member shall ensure that the PSI entity, when responding to a dispute on price verification, provides a detailed written explanation within 10 days of receipt of the complaint, setting forth the basis of its opinion of value by reference to the specific applicable elements of the price verification criteria.”(10)

13.     In the Working Party’s final report, in connection with a discussion on the use of price databases by customs administrations as part of risk management and assessment:

“The Working Party agreed that price databases must not be used to determine minimum prices, or applied in a way that is inconsistent with the Agreement on Implementation of Article VII of the GATT 1994 (commonly referred to as the Agreement on Customs Valuation) and in particular the provision contained in Article 7.1 thereof.”(11)

14.     In 2006, a panel conducting an Independent Review Procedure under Article 4 of the PSI Agreement considered a dispute concerning whether the value of certain services invoiced by an exporter in connection with the export of goods should be included in the customs value of those goods. The panel noted:

“Since 31 May 2002, Mauritania has been under an obligation to apply the provisions of the Agreement on Customs Valuation. The SGS [a preshipment inspection company], as an agent of the Mauritanian authorities and by virtue of footnote 4 to Article 2, paragraph 20, of the Agreement on Preshipment Inspection, is also under an obligation to comply with the WTO Agreement on Customs Valuation.” (12)

15.     The Independent Entity panel in that case interpreted the Agreement on Customs Valuation and applied it to the facts at issue.

 

V. Article 3    back to top

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

16.     In its first report (2 December 1997), the PSI Working Party considered that “In accordance with Article 3.3, exporter members should ensure that their technical assistance activities are designed to address the specific needs of user Members in implementing the terms and objectives of the Agreement”. It further considered that technical 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.” (13)

 

VI. Article 4    back to top

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 panellists 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

17.     A 1994 Secretariat Note on implementation of Article 4 of the PSI Agreement records that the negotiators of the PSI Agreement agreed that for the time being, the two organizations referred to in Article 4(a) would be the International Federation of Inspection Agencies (IFIA), representing preshipment inspection entities, and the International Chamber of Commerce (ICC), representing exporters, and that these organizations agreed in 1994 to jointly constitute the Independent Entity (IE). (14)

18.     In order to ensure that the IE, including its panels, benefits from immunities for the independent exercise of its functions (in particular, protection against legal suit by the parties to a review or by third parties), it was decided that the IE would be established as a subsidiary body of the Council for Trade in Goods, that the IE would be located in Geneva and staffed by WTO Secretariat staff, that IE panellists would be WTO officials for this purpose, and that there would be an agreement between the WTO, the ICC and IFIA confirming the respective roles of each and defining their functions. (15) Accordingly, in its meeting of 13 and 15 December 1995, the General Council adopted a Decision establishing the IE as a subsidiary body of the Council for Trade in Goods.(16) The annexes to this Decision included an Agreement between the WTO, the ICC and the IFIA by which the ICC and the IFIA agreed to establish the IE, and entrusted the WTO with the task of setting it up and determining its rules of procedure (Annex I); agreed provisions on the structure and functions of the IE, including its management and operational procedures (Annex II); and the rules of procedure for the operation of independent reviews under Article 4 of the PSI Agreement (Annex III).

19.     On 26 March 1996, the Independent Entity announced that it would commence operations as from 1 May 1996. On 28 March 1996, the IE issued the list of experts for panels provided for in Article 4(b).(17) The IE has submitted reports to the Council for Trade in Goods on an annual basis.(18)

20.     In 1999, the final report of the PSI Working Party noted that exporters had been reluctant to use the IE; the ICC suggested that this could be because the Agreement had reduced sources of disputes between inspection agencies and exporters, or because of exporters’ reluctance to confront the PSI companies, or because of the cost of IE proceedings. IFIA suggested that PSI companies and exporters had settled problems between them.(19)

21.     The first two independent review procedures took place in 2005 and 2006. Both were brought by Alcatel CIT against the Société Générale de Surveillance — SGS Holding France (“SGS”), concerning preshipment review conducted by SGS in connection with a tender for mobile telephony equipment in Mauritania. The 2005 review procedure concluded in 31 days, with an amicable settlement between the parties.(20) The 2006 review procedure, based on a separate verification certificate issued by SGS, concerned Alcatel’s claim that the price of certain services should not be included in the customs value of the goods concerned. The panel interpreted the Agreement on Customs Valuation, and applied these rules to the facts at issue; it completed its proceedings in 39 days.(21) In both instances, the costs of the procedure were divided between the parties.

 

VII. Article 5    back to top

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

22.     Laws, regulations and amendments thereto that are notified under Article 5 are circulated in the G/PSI/N series. In its first report, the PSI Working Party recommended that when Members notify their laws and regulations, they “should endeavour to provide additional descriptive information on how they are implementing the Agreement”.(22)

 

VIII. Article 6    back to top

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

23.     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.(23) 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”.(24)

24.     The PSI Working Party issued three reports(25), all of which were approved by the General Council.(26)

25.     At its December 1997 meeting the General Council agreed to extend the Working Party on Preshipment Inspection for one year for the purposes described in paragraph 8 of Section B of the report in G/L/214.(27) In December 1998, the General Council agreed to further extend the Working Party until 31 March 1999.(28) The Working Party concluded its final Article 6 review of the Agreement on Preshipment Inspection at its meeting held on 12 March 1999.(29)

26.     The second review of the PSI Agreement took place at the 6 October 2006 meeting of the Committee on Customs Valuation, and the statements made are recorded in the meeting minutes.(30)

 

IX. Article 7    back to top

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

27.     As of 30 September 2011, no consultations have been requested under Article 7 of the PSI Agreement.

 

X. Article 8    back to top

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

28.     As of 30 September 3011, no complaints have been brought under Article 8 of the PSI Agreement.

 

XI. Article 9    back to top

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

29.     Since 1999, the Secretariat has issued periodic lists of countries with PSI programmes, based on information supplied by IFIA.(31) Also since 1999, implementation of the PSI Agreement has been a standing agenda item in the Committee on Customs Valuation; the Secretariat background document for each annual review of the implementation and operation of the Agreement on Customs Valuation notes the discussion of PSI issues during the preceding year.(32)

 

Footnotes:

1. G/L/300, paras. 5, 7. back to text
2. G/L/300, para. 6. back to text
3. G/L/300, Annex A; G/VAL/W/63/Rev.13 (17 June 2010). back to text
4. G/L/300, para. 11. back to text
5. G/L/214, adopted on 10 December 1997, section B, para. 3. back to text
6. G/L/214, section B, para. 5. back to text
7. G/L/300, para. 18. back to text
8. G/L/214, section B, para. 7. back to text
9. G/L/214, section B, para. 6. back to text
10. G/L/214, section B, para. 1. back to text
11. G/L/300, para. 19. back to text
12. G/PSI/IE/R/2, para. 23. back to text
13. G/L/214, section B, paras. 2 and 9. back to text
14. PC/IPL/W/8, “Implementation of Article 4 of the Agreement on Preshipment Inspection — Background Note by the Secretariat”, 4 October 1994; see also PC/IPL/M/4 and G/C/M/1, para. 3.3. back to text
15. G/PSI/W/1, “Legal Status of the Independent Entity under Article 4 of the Agreement on Preshipment Inspection”, 20 July 1995. back to text
16. WT/GC/M/9, section 1(f). back to text
17. G/PSI/IE/1 (updated once, on 26 April 1997, G/PSI/IE/1/Rev.1). back to text
18. Reports of the Independent Entity: G/L/120, 208, 269, 330, 410, 489, 757, 802, 841, 864, 908 and 945. back to text
19. G/L/300, para. 9. back to text
20. G/PSI/IE/R/1, “Independent Review Procedure (PSI/IE/2005/1) — Decision of the Panel”, 2 November 2005. back to text
21. G/PSI/IE/R/2, “Independent Review Procedure (PSI/IE/2006/1) — Decision of the Panel”, 14 November 2006. See also in the chapter on the Agreement on Customs Valuation. back to text
22. G/L/214, para. XXX back to text
23. WT/GC/M/16, section 3. back to text
24. WT/GC/M/16, section 3. The terms of reference can be also found in WT/L/196. back to text
25. The reports can be found in G/L/214, G/L/273 and G/L/300. back to text
26. See WT/GC/M/25, item 8; WT/GC/M/32, item 13; WT/GC/M/40/Add.3, item 5. back to text
27. WT/GC/M/25. back to text
28. WT/GC/M/32. back to text
29. The final report was circulated in document G/L/300. back to text
30. G/L/809; G/VAL/M/42. back to text
31. G/L/300, Annex A; subsequent lists issued in G/VAL/W/63 and revisions, most recently G/VAL/W/63/Rev.13 (17 June 2010). back to text
32. See, e.g., G/VAL/W/196, 18 October 2010. back to text

150pxls.gif (76 bytes)
 

 

   show next page