RESTRICTED
WORLD TRADE G/PSI/W/1
20July1995
ORGANIZATION(95-2089)
Preshipment Inspection
LEGAL STATUS OFTHE INDEPENDENT ENTITY UNDER
ARTICLE 4OFTHE AGREEMENT ONPRESHIPMENT INSPECTION
Note bytheSecretariat
1. Thepresent noteiscirculated following therequest oftheCouncil forTrade inGoods atits
meeting on3July1995. Delegations should communicate anycomments theymight havetothe
Secretariat (Market Access Division) notlaterthan15September 1995, sothataformal decision can
betaken bytheCouncil forTrade inGoods attheearliest opportunity thereafter.
I. BACKGROUND
2. Article 4oftheAgreement onPreshipment Inspection (PSI) provides thatanindependent entity
shallbesetupjointly byanorganization representing preshipment inspection entities andanorganization
representing exporters. Members haveagreed thatthese organizations shall, forthetimebeing, be
theInternational Federation ofInspection Agencies (IFIA) andtheInternational Chamber ofCommerce
(ICC).
3. TheIndependent Entity (IE), including itspanels, needs tobenefit from certain immunities
fortheindependent exercise ofitsfunctions, inparticular protection against legalsuitbytheparties
toareview orbythirdparties. Onthebasis ofaBackground NotebytheSecretariat (PC/IPL/W/8,
dated 4October 1994), theUruguay Round Sub-Committee onInstitutional, Procedural andLegal
Matters, atitsmeeting on7October 1994, therefore requested theSecretariat, inconsultation with
interested delegations andwiththeIFIAandICC, toprepare adraftforformalising, inwriting, the
status oftheICC, theIFIA andtheIndependent Entity (PC/IPL/M/6, paragraph 60). TheCouncil
forTrade inGoods, atitsfirstmeeting on20February 1995, confirmed theSecretariat 'smandate,
requesting ittopursue itsconsultations withinterested delegations andwiththeICCandIFIA, with
aviewtoputting forward asolution tothequestions ofthestatus oftheIndependent Entity andthe
legalliabilities oftheIndependent Entity, itsstaffandpanellists, forconsideration byallWTO Members
(G/C/M/1, paragraph 3.3). Atthesame time, theCouncil forTrade inGoods tooknoteofthefact
that,untilasolution hadbeenfound tothese questions, theIndependent Entity would notcome into
existence and,therefore, norecourse could bemade toit(G/C/M/1, paragraph 3.2).
II. PROPOSED SOLUTION
4. IntheconsultationscarriedoutbytheSecretariatwithinteresteddelegations,anumberofpossible
solutions were explored. Only oneofthese metwithbroad approval, including theapproval ofthe
ICCandIFIA. Theelements ofthissolution would bethefollowing:
- theCouncil forTrade inGoods would establish theIndependent Entity;
- theIndependent Entity would belocated intheWTO Secretariat inGeneva andstaffed
byWTO Secretariat staff;G/PSI/W/1
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- Independent Entity panellists would receive anadhoccontract similar tothecontract
given toWTO panellists;
- anagreement would bereached, between theWTO ontheonehandandtheInternational
ChamberofCommerce(ICC)andInternationalFederationofInspectionAgencies(IFIA)
ontheother, confirming theroleofICCandIFIAunder Article 4ofthePSIAgreement
anddefining theirfunctions.
5. Under thisapproach, thequestion oflegalliability oftheIE,itsstaffandpanellists would be
taken careofwithin theexisting WTO framework. Being established bytheCouncil forTrade inGoods,
theIEitself would havethestatus ofasubsidiary body thereof andbecovered under Article VIIIof
theWTO Agreement; furthermore, being located intheGeneva headquarters oftheWTO, theIE
would becovered bytheWTO 'sHeadquarters Agreement withSwitzerland. TheIE'sstaff, asstaff
oftheWTO, would becovered under Article VIIIoftheWTO Agreement. TheIEpanellists would
receive cover byvirtue oftheiradhocWTO contracts. TheICCandIFIA would bekeptatarm's
length oftheindependent review procedures and,therefore, notrequire protection fromlegalsuitby
theparties toareview orbythirdparties.
6. TheIEwould report totheCouncil forTrade inGoods onabasis tobedecided, e.g.atleast
onceayear, butmore frequently ifnecessary.
7. Theagreement between theWTO andtheICC/IFIA would include fulfilment ofthefollowing
functions bytheICCandIFIA:
- assisting thestaffoftheIEwiththeinitial drafting ofIErulesofprocedure andrelated
documentation, andwiththeamending thereof asandwhen necessary inthelightof
practical experience;
- drawing up,andupdating annually, theirrespective listsofexperts asprovided for
inparagraphs (b)(i) and(ii)ofArticle 4ofthePSIAgreement, andassisting theIE
indrawing upandupdating thelistofindependent experts asprovided forin
paragraph (b)(iii) ofthatArticle;
- printing anddisseminating (onacostrecovery basis-nominal charge) IEdocumentation
viatheirconstituents (local offices ofinspection entities, andnational Chambers of
Commerce);
- regular reporting totheIEofgrass-roots views ontheoperation oftheindependent
review procedures;
- keeping thestaffoftheIEinformed ofdevelopments intheareaofpreshipment
inspection.
Adraftofsuchanagreement, which reflects theelements listed above, istobefound inAnnex I
tothisnote.
III. STAFFING IMPLICATIONS
8. TheICCandIFIAdonotexpect aheavy case-load fortheIndependent Entity, perhaps some
10to12cases perannum, requiring apart-time Director oftheIEassisted byapart-time secretary.
Thefunctions oftheDirector andsecretary would beassigned, respectively, toaprofessional staff
member andasecretary aspartoftheirduties. These staffmembers would need, whenever arequest
forindependent review werereceived, tobeabletodropallother work andconcentrate onIEduties
asrequired, bearing inmind the8-day deadline forthecompletion ofthereview. Appropriate back-up
arrangements would needtobemade incaseofabsence oftheDirector orsecretary. Some work would
alsobegenerated fortheWTO 'stranslation services (essentially before thestart-up, tohave IE
documentation available inallthreeWTO languages) andforitsadministrative andfinancial services,G/PSI/W/1
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withrespect tothecontracts ofIEpanellists, receipt ofdeposits, apportionment ofcosts andrefund
ofdeposits (seeparagraphs 10and11below).
IV. FINANCIAL ASPECTS
9. Article 4(g)ofthePSIAgreement provides thatthecosts ofanindependent review shallbe
apportioned based onthemerits ofthecasebythepanel orindependent trade expert. TheFinancial
Rules forTrust Funds, which govern thefinancial transactions oftheWTO, stipulate thatsuchfunds
cannot becommitted before having beenreceived. Thus, foreachindependent review, itwillbe
necessary forbothparties tomake fulldeposits against theanticipated costs ofthecasebefore the
procedures canbeputinmotion, i.e.before therequest forreview canbedeemed tohavebeenreceived
(start ofthe8-day time-limit forthepanel decision).
10. Theadministrative procedures would bethefollowing, based onthebudget inAnnex IIto
thisnote, which assumes thatpanel members willneedneither tomeet nortoinspect theshipment
inquestion:
(i) eachparty would make aninitial deposit ofatotalamount ofSwF17,500 intheWTO bank
account;
(ii) assoonasbothdeposits would havebeenreceived, theWTO Personnel Division would recruit
thepanellist(s) upon therecommendation oftheIndependent Entity;
(iii) ifthepanellist(s) inaspecific caseweretofindthattheyneeded totravel (either tomeetamongst
themselvesortoinspecttheshipment),theWTOFinanceDivisionwouldrequesttheappropriate
additional deposits from bothparties, upon receipt ofwhich panellists would beauthorized
totravel;
(iv) oncethereview concluded, theWTO Finance Section would prepare thefinalaccounts ofthe
case(including the14%charge foroverheads required under theTrust Fund rules);
(v) theWTO Finance Section would refund theunspent balance ofthedeposits totheparties in
accordance withtheapportionment decided bythepanel orindependent trade expert.
V. REVIEW
11. Article 6ofthePSIAgreement provides that"attheendofthesecond yearfrom thedateof
entry intoforce oftheWTO Agreement (i.e.endof1996) andevery three years thereafter, the
Ministerial Conference shallreview theprovisions, implementation andoperation ofthisAgreement,
taking intoaccount theobjectives thereof andexperience gained initsoperation. Asaresult ofsuch
review, theMinisterial Conference mayamend theprovisions oftheAgreement." Anyarrangement
entered intoatpresent would, therefore, havetobeoperational forlittleoveroneyearbefore itwould
bereviewed -atwhich timethePSIAgreement itself could beamended ifnecessary.G/PSI/W/1
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ANNEXI
Agreement between theWorld Trade Organisation andtheInternational Chamber ofCommerce
(ICC) andtheInternational Federation ofInspection Agencies (IFIA) withrespect tothe
Implementation ofArticle 4oftheWTO Agreement onPreshipment Inspection
DRAFT
With respect totheimplementation ofArticle 4(Independent Review Procedures) oftheAgreement
onPreshipment Inspection (referred tobelow asthe"PSIAgreement"), itishereby agreed that:
- theorganizations mentioned inArticle 4(a)ofthePSIAgreement shallbeasfollows:
- theorganization representing preshipment inspection entities forthepurposes ofthe
Agreement shallbetheInternational Federation ofInspection Agencies (IFIA), and
- theorganization representing exporters forthepurposes oftheAgreement shallbethe
International Chamber ofCommerce (ICC);
- intheperformance oftheir functions relating totheestablishment andoperation ofthe
Independent Entity under theprovisions ofArticle 4ofthePSIAgreement, theICCandIFIA
shalljointly:
- assist theIndependent Entity, established bytheWTO Council forTrade inGoods,
withtheinitial drafting ofitsrulesofprocedure andrelated documentation, andwith
theamending thereof asandwhen necessary inthelightofpractical experience;
- draw up,andupdate annually, their respective listsofexperts asprovided forin
paragraphs (b)(i) and(ii)ofArticle 4ofthePSIAgreement, andassist theIndependent
Entity indrawing upandupdating thelistofindependent experts asprovided forin
paragraph (b)(iii) ofthatArticle;
- printIndependent Entity documentation andmake itavailable attheinformation points
maintainedinpreshipmentinspectionofficesinaccordancewithparagraph7ofArticle2
ofthePSIAgreement, itbeing understood thataminimal charge maybemade for
suchdocumentation solely forthepurpose ofrecovering thecosts thereof;
- report annually totheIndependent Entity theviews oftheirconstituents ontheoperation
oftheindependent review procedures;
- keeptheIndependent Entity informed ofdevelopments intheareaofpreshipment
inspection;
- perform anyother tasks asmaybeagreed jointly bytheWTO, ICCandIFIA;
- alloftheabove arrangements shallbereviewed attheendof1996, ontheoccasion ofthe
firstperiodic review oftheprovisions, implementation andoperation ofthePSIAgreement,
tobecarried outbytheWTO Ministerial Conference pursuant totheprovisions ofArticle 6
ofthePSIAgreement.G/PSI/W/1
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ANNEXII
Budget Estimate foranIndependent Review
Thefollowing isbased ontheassumption ofa3-person panel for8working days, without
meeting ofthepanellists orinspection ofthegoods (ifeither ameeting orinspection wererequired
anadditional deposit would beassessed asappropriate).
SwF
1)Feesforpanellists
(3panellists for8days: SwF600x3x8) 14,400
2)Lump sums forcommunication costs
(mail, telephone, fax)
for(i)theChairman1
(ii)theother twopanellists (SwF250x2)SwF500
SwF500
1,000
Sub-total 15,400
3)WTO overhead costs: 14%2
Total 17,500
1based ontheassumption oftwoconference callswiththeother panel members.
2inaccordance withTrust Fund rules.