Glossary—pre-shipment inspection (PSI)

GISTnet Glossary—pre-shipment inspection (PSI)

(General) An inspection by a buyer's representative or a destination government representative (typically a cargo inspection bureau) of transaction documents and cargo immediately prior to shipment. This type of inspection is to help assure that the goods being shipped conform to sample or specification, as reflected in the sales contract or purchase order, and that they also conform with the shipping documents, especially the commercial invoice and transport document. If other documents have been issued in connection with the shipment, such as letter of credit, import license or import permit, the inspection bureau may also be requested to make findings of conformity with these. The purpose of a pre-shipment inspection is to prevent commercial fraud, either on the part of the seller or jointly between the seller and buyer to mislead customs authorities. If the inspection is performed by an inspection bureau, a report of findings and/or inspection certificate will be issued to the party that engaged the bureau, plus such other parties as have been designated to receive this report.

(by destination country government) Certain countries (approximately 40, as of early 2003) have Import Verification Programs (IVPs) which require pre-shipment inspection of at least some import shipments from some countries (typically higher-value shipments from countries with strong currencies which may be subject to currency controls by the importing nation). The purpose is to prevent commercial and customs fraud, and to prevent illegal expatriation of wealth from the country.

Inspection bureaus, contracted by countries to perform pre-shipment inspection, must fulfill the particular service requirements of the contract they have entered into with each country they serve, and through such contract are also made subject to the WTO Agreement on Preshipment Inspection. Most of these contractors are also members of the International Federation of Inspection Agencies (IFIA) (http://www.ifia-ac.org/).

An importing country with an IVP program contracts with one or more inspection bureaus to conduct required pre-shipment inspections on its behalf according to whatever program requirements it sets forth. It is the responsibility of the importer to inform his supplier that the goods will require pre-shipment inspection, with the name of the inspection bureau(s) for the supplier to contact when the shipment is ready.

The inspection fee is paid for by the importer or the contracting government which issues an inspection request of authorization as part of its import license, import permit or letter of credit issuance process. Costs of making the goods available for inspection and facilitating the inspection with needed labor and MHE, are borne by the shipper, as are additional expenses of the inspection bureau to re-schedule inspections for goods not available during the initial appointment.

The inspection bureau typically receives its authorization to inspect a particular shipment from the government of the importing country. The contract between the government and the inspection bureau, perhaps with additional instructions for the particular shipment, tells the inspection bureau staff:

What information to verify or evaluate (e.g., if a price or quality verification is required, or only verification that the goods are in apparent conformity with the type and quantity on the commercial invoice);
What to physically inspect for (and perhaps when inspection is to be waived);
The type of report of findings required to be submitted to the contracting government; and,
What document(s) to issue to whom (e.g., an inspection certificate or "security label" issued to the supplier which he will need to receive payment under a letter of credit).

If the inspection bureau is charged with a price or quality verification, and/or if a decision must yet be made on whether or not to physically inspect the cargo, upon initial contact from the supplier the bureau will request copies of the commercial invoice, perhaps with a copy of the L/C and/or sales contract pertaining to the shipment. They will then schedule the inspection after reviewing these documents.

At some point, either at the time of initial supplier contact, or following receipt of the supplier's documents, the inspection bureau will schedule an appointment for physical inspection of the goods, if one will be required. This inspection occurs at the supplier's facility after the goods have been packaged or otherwise prepared for immediate shipment. If laboratory analysis is required or inspection must be made prior to preparation for shipment because of the nature of the goods, the inspection time and circumstances may vary. If the goods are to be loaded into an intermodal container by the supplier, the destination country rules may require inspection as the goods are loaded, and sealing of the container by the inspector upon completion of loading.

There are a number of companies that governments have contracted with to perform pre-shipment inspection and other services pursuant to IVP programs. Information as to which countries require pre-shipment inspection, and the companies they have contracted with, is available on web sites operated by the respective contractors; see GISTnet PSI referrals.