AGREEMENT ON PRESHIPMENT
INSPECTION
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:
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.
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4. The term "preshipment
inspection entity" is any entity contracted or mandated by a Member
to carry out preshipment inspection
activities.1
Article 2
Obligations of User Members
Non-discrimination
1. User Members shall ensure that
preshipment inspection activities are carried out in a nondiscriminatory
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 standards2 apply.
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
1It
is understood that this provision does not obligate Members to allow government
entities of other Members to conduct
preshipment inspection activities on
their territory.
2An
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.
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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;
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(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
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
3It
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".
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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 verification4 according
to the following guidelines:
(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
4The
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.
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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.
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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
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;
5It
is understood that such technical assistance may be given on a bilateral,
plurilateral or multilateral basis.
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(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.
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.
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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.
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.
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.
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.