Pre-shipment inspection (PSI) ensures quality and quantity maintenance of cargo that clients deal with in import-export business. It ensures that the production complies with the specifications as mentioned in a purchase order or Letter of Credit. PSI serves the purpose of minimizing the risk of phishing and fraud relating to internet commerce. All goods do not require PSI, there are some exceptions. It entirely depends on upon destination country policy. The importer and exporter and the bank can agree upon it.
Governments implement PSI programmes in order to ensure that the imports comply with their regulations. Non-compliance with these regulations can thus result in:
- The loss of valuable duty and of tax revenue
- The loss of foreign exchange reserves (in the countries where exchange controls exist)
- The potential importation of the substandard or the prohibited goods
Pre-Shipment Inspection (PSI)helps to maximize duty collections. By undertaking duty assessment in the country of export, the importers have no opportunity in order to pressurize customs to assign lower rates.
Compliance with the World Trade Organisation (WTO) Agreement on the Customs Valuation is now mandatory for all the members.
As a PSI programme takes effect, so a vast database of a vital trade information is thus created, which can be however supplied to the Client Government in a variety of formats, as an aid to economic decision making and in order to induce confidence in the donors .
Pre-Shipment Inspection (PSI) is done through four steps :
Initial production inspection– the first step is to remove substandard product prior to the production process which in turn diminishes the risk of non-compliances.
During production inspection– check semi-finished or finished goods during the production process. The advantage lies in timely correction of the goods during the process.
Final random inspection– when 80 % of the order has been produced and export packed, samples are checked randomly according to established standards and procedures. It ensures production complies with specifications.
Container loading supervision– After inspection of goods, the bank issuing Letter Of Credit and the buyer receive an inspection certificate to initiate the money transfer. The issuance of certificate assures the government that they get correct revenues collection from import/export. Displaying the goods along with the packaging makes the inspection easier.
PSI is thus carried out at different stages before shipment like controlling of the quality or the consistency of goods, checking all the documents, quantity of goods for the test reports, verification of the compliances with standards of final destination nation. It thus prevents the movement of substandard cargo and also encourages a movement of the potential cargo. The exporter’s country also carries out a pre-shipping inspection in order to ensure the nature of goods. Next step is thus an inspection of the invoice and also of other documents in order to assign custom tariff code. This is thus done in compliance with the World Trade requirements.
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