Page199
AGREEMENT ONPRESHIPMENT INSPECTION
Members,
Noting thatMinisters on20September 1986 agreed thattheUruguay Round ofMultilateral
Trade Negotiations shallaimto"bring about further liberalization andexpansion ofworld trade",
"strengthen theroleofGATT" and"increase theresponsiveness oftheGATT system totheevolving
international economic environment";
Noting thatanumber ofdeveloping country Members haverecourse topreshipment inspection;
Recognizing theneedofdeveloping countries todosoforaslongandinsofarasitisnecessary
toverify thequality, quantity orprice ofimported goods;
Mindful thatsuchprogrammes mustbecarried outwithout giving risetounnecessary delays
orunequal treatment;
Noting thatthisinspection isbydefinition carried outontheterritory ofexporter Members;
Recognizing theneedtoestablish anagreed international framework ofrights andobligations
ofbothuserMembers andexporter Members;
Recognizing thattheprinciples andobligations ofGATT 1994 apply tothose activities of
preshipment inspection entities thataremandated bygovernments thatareMembers oftheWTO;
Recognizingthatitisdesirabletoprovidetransparencyoftheoperationofpreshipmentinspection
entities andoflawsandregulations relating topreshipment inspection;
Desiring toprovide forthespeedy, effective andequitable resolution ofdisputes between
exporters andpreshipment inspection entities arising under thisAgreement;
Hereby agree asfollows:
Article 1
Coverage -Definitions
1. ThisAgreement shallapply toallpreshipment inspection activities carried outontheterritory
ofMembers, whether suchactivities arecontracted ormandated bythegovernment, oranygovernment
body, ofaMember.
2. Theterm"user Member" means aMember ofwhich thegovernment oranygovernment body
contracts forormandates theuseofpreshipment inspection activities.
3. Preshipment inspection activities areallactivities relating totheverification ofthequality,
thequantity, theprice, including currency exchange rateandfinancial terms, and/or thecustoms
classification ofgoods tobeexported totheterritory oftheuserMember.Page200
4. Theterm"preshipment inspection entity" isanyentity contracted ormandated byaMember
tocarry outpreshipment inspection activities.1
Article 2
Obligations ofUserMembers
Non-discrimination
1. User Members shallensure thatpreshipment inspection activities arecarried outinanon-
discriminatory manner, andthattheprocedures andcriteria employed intheconduct oftheseactivities
areobjective andareapplied onanequal basistoallexporters affected bysuchactivities. They shall
ensure uniform performance ofinspection byalltheinspectors ofthepreshipment inspection entities
contracted ormandated bythem.
Governmental Requirements
2. UserMembers shallensure thatinthecourse ofpreshipment inspection activities relating to
theirlaws, regulations andrequirements, theprovisions ofparagraph 4ofArticle IIIofGATT 1994
arerespected totheextent thatthese arerelevant.
SiteofInspection
3. UserMembers shallensure thatallpreshipment inspection activities, including theissuance
ofaClean Report ofFindings oranoteofnon-issuance, areperformed inthecustoms territory from
which thegoods areexported or,iftheinspection cannot becarried outinthatcustoms territory given
thecomplex nature oftheproducts involved, orifbothparties agree, inthecustoms territory inwhich
thegoods aremanufactured.
Standards
4. UserMembers shallensure thatquantity andquality inspections areperformed inaccordance
withthestandards defined bytheseller andthebuyer inthepurchase agreement andthat,intheabsence
ofsuchstandards, relevant international standards2apply.
Transparency
5. UserMembers shallensure thatpreshipment inspection activities areconducted inatransparent
manner.
6. UserMembers shallensure that,when initially contacted byexporters, preshipment inspection
entities provide totheexporters alistofalltheinformation which isnecessary fortheexporters to
comply withinspection requirements. Thepreshipment inspection entities shallprovide theactual
information when sorequested byexporters. Thisinformation shallinclude areference tothelaws
andregulations ofuserMembers relating topreshipment inspection activities, andshallalsoinclude
theprocedures andcriteria usedforinspection andforprice andcurrency exchange-rate verification
1Itisunderstood thatthisprovision doesnotobligate Members toallow government entities ofother Members toconduct
preshipment inspection activities ontheir territory.
2Aninternational standard isastandard adopted byagovernmental ornon-governmental body whose membership is
open toallMembers, oneofwhose recognized activities isinthefieldofstandardization.Page201
purposes, theexporters 'rights vis-à-vis theinspection entities, andtheappeals procedures setupunder
paragraph 21.Additional procedural requirements orchanges inexisting procedures shallnotbeapplied
toashipment unless theexporter concerned isinformed ofthese changes atthetimetheinspection
dateisarranged. However, inemergency situations ofthetypes addressed byArticles XXandXXI
ofGATT1994,suchadditionalrequirementsorchangesmaybeappliedtoashipmentbeforetheexporter
hasbeeninformed. Thisassistance shallnot,however, relieve exporters fromtheirobligations inrespect
ofcompliance withtheimport regulations oftheuserMembers.
7. UserMembers shallensure thattheinformation referred toinparagraph 6ismade available
toexporters inaconvenient manner, andthatthepreshipment inspection offices maintained by
preshipment inspection entities serve asinformation points where thisinformation isavailable.
8. UserMembers shallpublish promptly allapplicable lawsandregulations relating topreshipment
inspection activities insuchamanner astoenable other governments andtraders tobecome acquainted
withthem.
Protection ofConfidential Business Information
9. UserMembers shallensure thatpreshipment inspection entities treatallinformation received
inthecourse ofthepreshipment inspection asbusiness confidential totheextent thatsuchinformation
isnotalready published, generally available tothirdparties, orotherwise inthepublic domain. User
Members shallensure thatpreshipment inspection entities maintain procedures tothisend.
10. UserMembers shallprovide information toMembers onrequest onthemeasures theyaretaking
togiveeffect toparagraph 9.Theprovisions ofthisparagraph shallnotrequire anyMember todisclose
confidential information thedisclosure ofwhich would jeopardize theeffectiveness ofthepreshipment
inspection programmes orwould prejudice thelegitimate commercial interest ofparticular enterprises,
public orprivate.
11. User Members shallensure thatpreshipment inspection entities donotdivulge confidential
business information toanythird party, except thatpreshipment inspection entities mayshare this
information withthegovernment entities thathavecontracted ormandated them. UserMembers shall
ensure thatconfidential business information which theyreceive frompreshipment inspection entities
contracted ormandated bythemisadequately safeguarded. Preshipment inspection entities shallshare
confidential business information withthegovernments contracting ormandating themonlytotheextent
thatsuchinformation iscustomarily required forletters ofcredit orother forms ofpayment orfor
customs, import licensing orexchange control purposes.
12. UserMembers shallensure thatpreshipment inspection entities donotrequest exporters to
provide information regarding:
(a) manufacturingdatarelatedtopatented,licensedorundisclosedprocesses,ortoprocesses
forwhich apatent ispending;
(b) unpublished technical dataother thandatanecessary todemonstrate compliance with
technical regulations orstandards;
(c) internal pricing, including manufacturing costs;
(d) profit levels;Page202
(e) theterms ofcontracts between exporters andtheirsuppliers unless itisnototherwise
possible fortheentity toconduct theinspection inquestion. Insuchcases, theentity
shallonlyrequest theinformation necessary forthispurpose.
13. Theinformation referred toinparagraph 12,which preshipment inspection entities shallnot
otherwise request, maybereleased voluntarily bytheexporter toillustrate aspecific case.
Conflicts ofInterest
14. User Members shall ensure thatpreshipment inspection entities, bearing inmind alsothe
provisions onprotection ofconfidential business information inparagraphs 9through 13,maintain
procedures toavoid conflicts ofinterest:
(a) between preshipment inspection entities andanyrelated entities ofthepreshipment
inspection entities inquestion, including anyentities inwhich thelatterhaveafinancial
orcommercial interest oranyentities which haveafinancial interest inthepreshipment
inspection entities inquestion, andwhose shipments thepreshipment inspection entities
aretoinspect;
(b) between preshipment inspection entities andanyother entities, including other entities
subject topreshipment inspection, withtheexception ofthegovernment entities
contracting ormandating theinspections;
(c) withdivisions ofpreshipment inspection entities engaged inactivities other thanthose
required tocarry outtheinspection process.
Delays
15. User Members shallensure thatpreshipment inspection entities avoid unreasonable delays
ininspection ofshipments. UserMembers shallensure that,onceapreshipment inspection entity and
anexporter agree onaninspection date,thepreshipment inspection entity conducts theinspection on
thatdateunless itisrescheduled onamutually agreed basisbetween theexporter andthepreshipment
inspection entity, orthepreshipment inspection entity isprevented fromdoing sobytheexporter or
byforce majeure .3
16. UserMembers shallensure that,following receipt ofthefinaldocuments andcompletion of
theinspection, preshipment inspection entities, within fiveworking days, either issueaClean Report
ofFindings orprovide adetailed written explanation specifying thereasons fornon-issuance. User
Members shall ensure that, inthelatter case, preshipment inspection entities giveexporters the
opportunity topresent theirviews inwriting and,ifexporters sorequest, arrange forre-inspection
attheearliest mutually convenient date.
17. UserMembersshallensurethat,wheneversorequestedbytheexporters,preshipmentinspection
entities undertake, priortothedateofphysical inspection, apreliminary verification ofpriceand,where
applicable, ofcurrency exchange rate,onthebasis ofthecontract between exporter andimporter,
theproforma invoice and,where applicable, theapplication forimport authorization. UserMembers
shallensure thatapriceorcurrency exchange ratethathasbeenaccepted byapreshipment inspection
entity onthebasis ofsuchpreliminary verification isnotwithdrawn, providing thegoods conform
totheimport documentation and/or import licence. They shall ensure that, after apreliminary
verification hastaken place, preshipment inspection entities immediately inform exporters inwriting
3Itisunderstood that,forthepurposes ofthisAgreement, “force majeure ”shallmean "irresistible compulsion orcoercion,
unforeseeable course ofevents excusing from fulfilment ofcontract".Page203
either oftheiracceptance oroftheirdetailed reasons fornon-acceptance oftheprice and/or currency
exchange rate.
18. UserMembers shallensure that,inorder toavoid delays inpayment, preshipment inspection
entities sendtoexporters ortodesignated representatives oftheexporters aClean Report ofFindings
asexpeditiously aspossible.
19. UserMembers shallensure that,intheevent ofaclerical errorintheClean Report ofFindings,
preshipment inspection entities correct theerrorandforward thecorrected information totheappropriate
parties asexpeditiously aspossible.
Price Verification
20. User Members shallensure that,inorder toprevent over- andunder-invoicing andfraud,
preshipment inspection entities conduct price verification4according tothefollowing guidelines:
(a) preshipment inspection entities shallonlyreject acontract price agreed between an
exporter andanimporter iftheycandemonstrate thattheirfindings ofanunsatisfactory
price arebased onaverification process which isinconformity withthecriteria set
outinsubparagraphs (b)through (e);
(b) thepreshipment inspection entity shallbaseitsprice comparison fortheverification
oftheexport priceontheprice(s) ofidentical orsimilar goods offered forexport from
thesame country ofexportation atorabout thesame time, under competitive and
comparable conditions ofsale,inconformity withcustomary commercial practices
andnetofanyapplicable standard discounts. Suchcomparison shallbebased onthe
following:
(i) onlyprices providing avalid basis ofcomparison shallbeused, taking into
account therelevant economic factors pertaining tothecountry ofimportation
andacountry orcountries usedforprice comparison;
(ii) thepreshipment inspection entity shallnotrelyuponthepriceofgoods offered
forexport todifferent countries ofimportation toarbitrarily impose thelowest
price upon theshipment;
(iii) thepreshipment inspection entity shalltakeintoaccount thespecific elements
listed insubparagraph (c);
(iv) atanystage intheprocess described above, thepreshipment inspection entity
shallprovide theexporter withanopportunity toexplain theprice;
(c) when conducting price verification, preshipment inspection entities shall make
appropriate allowances fortheterms ofthesales contract andgenerally applicable
adjusting factors pertaining tothetransaction; these factors shallinclude butnotbe
limited tothecommercial levelandquantity ofthesale,delivery periods andconditions,
priceescalation clauses, quality specifications, special design features, special shipping
orpacking specifications, order size,spotsales, seasonal influences, licence orother
intellectual property fees,andservices rendered aspartofthecontract ifthese arenot
4Theobligations ofuserMembers withrespect totheservices ofpreshipment inspection entities inconnection withcustoms
valuation shall betheobligations which theyhave accepted inGATT 1994 andtheother Multilateral Trade Agreements
included inAnnex 1AoftheWTO Agreement.Page204
customarily invoiced separately; theyshallalsoinclude certain elements relating to
theexporter 'sprice, suchasthecontractual relationship between theexporter and
importer;
(d) theverification oftransportation charges shallrelate onlytotheagreed price ofthe
mode oftransport inthecountry ofexportation asindicated inthesalescontract;
(e) thefollowing shallnotbeusedforprice verification purposes:
(i) theselling price inthecountry ofimportation ofgoods produced insuch
country;
(ii) theprice ofgoods forexport from acountry other thanthecountry of
exportation;
(iii) thecostofproduction;
(iv) arbitrary orfictitious prices orvalues.
Appeals Procedures
21. UserMembers shallensure thatpreshipment inspection entities establish procedures toreceive,
considerandrenderdecisionsconcerninggrievancesraisedbyexporters,andthatinformationconcerning
suchprocedures ismade available toexporters inaccordance withtheprovisions ofparagraphs 6and7.
UserMembers shallensure thattheprocedures aredeveloped andmaintained inaccordance withthe
following guidelines:
(a) preshipment inspection entities shall designate oneormore officials whoshall be
available during normal business hours ineachcityorportinwhich theymaintain
apreshipment inspection administrative office toreceive, consider andrender decisions
onexporters 'appeals orgrievances;
(b) exporters shallprovide inwriting tothedesignated official(s) thefactsconcerning the
specific transaction inquestion, thenature ofthegrievance andasuggested solution;
(c) thedesignated official(s) shallafford sympathetic consideration toexporters 'grievances
andshallrenderadecisionassoonaspossibleafterreceiptofthedocumentationreferred
toinsubparagraph (b).
Derogation
22. ByderogationtotheprovisionsofArticle2,userMembersshallprovidethat,withtheexception
ofpartshipments, shipments whose value islessthanaminimum value applicable tosuchshipments
asdefined bytheuserMember shallnotbeinspected, except inexceptional circumstances. This
minimum value shall form partoftheinformation furnished toexporters under theprovisions of
paragraph 6.Page205
Article 3
Obligations ofExporter Members
Non-discrimination
1. Exporter Members shallensure thattheirlawsandregulations relating topreshipment inspection
activities areapplied inanon-discriminatory manner.
Transparency
2. Exporter Members shall publish promptly allapplicable lawsandregulations relating to
preshipment inspection activities insuchamanner astoenable othergovernments andtraders tobecome
acquainted withthem.
Technical Assistance
3. Exporter Members shalloffertoprovide touserMembers, ifrequested, technical assistance
directed towards theachievement oftheobjectives ofthisAgreement onmutually agreed terms.5
Article 4
Independent Review Procedures
Members shallencourage preshipment inspection entities andexporters mutually toresolve
theirdisputes. However, twoworking daysaftersubmission ofthegrievance inaccordance withthe
provisions ofparagraph 21ofArticle 2,either party mayrefer thedispute toindependent review.
Members shalltakesuchreasonable measures asmaybeavailable tothemtoensure thatthefollowing
procedures areestablished andmaintained tothisend:
(a) these procedures shallbeadministered byanindependent entity constituted jointly by
anorganization representing preshipment inspection entities andanorganization
representing exporters forthepurposes ofthisAgreement;
(b) theindependent entity referred toinsubparagraph (a)shallestablish alistofexperts
asfollows:
(i) asection ofmembers nominated byanorganization representing preshipment
inspection entities;
(ii) asection ofmembers nominated byanorganization representing exporters;
(iii) asection ofindependent trade experts, nominated bytheindependent entity
referred toinsubparagraph (a).
Thegeographical distribution oftheexperts onthislistshallbesuchastoenable any
disputes raised under these procedures tobedealtwithexpeditiously. Thislistshall
bedrawn upwithin twomonths oftheentry intoforce oftheWTO Agreement and
5Itisunderstood thatsuch technical assistance maybegiven onabilateral, plurilateral ormultilateral basis.Page206
shallbeupdated annually. Thelistshallbepublicly available. Itshallbenotified
totheSecretariat andcirculated toallMembers;
(c) anexporter orpreshipment inspection entity wishing toraiseadispute shallcontact
theindependent entity referred toinsubparagraph (a)andrequest theformation of
apanel. Theindependent entity shallberesponsible forestablishing apanel. This
panel shallconsist ofthree members. Themembers ofthepanel shallbechosen so
astoavoid unnecessary costs anddelays. Thefirstmember shallbechosen from
section (i)oftheabove listbythepreshipment inspection entity concerned, provided
thatthismember isnotaffiliated tothatentity. Thesecond member shallbechosen
fromsection (ii)oftheabove listbytheexporter concerned, provided thatthismember
isnotaffiliated tothatexporter. Thethirdmember shallbechosen fromsection (iii)
oftheabovelistbytheindependententityreferredtoinsubparagraph(a).Noobjections
shallbemade toanyindependent trade expert drawn from section (iii)oftheabove
list;
(d) theindependent trade expert drawn from section (iii)oftheabove listshallserve as
thechairman ofthepanel. Theindependent trade expert shall takethenecessary
decisions toensure anexpeditious settlement ofthedispute bythepanel, forinstance,
whether thefactsofthecaserequire thepanelists tomeet and,ifso,where sucha
meeting shalltakeplace, taking intoaccount thesiteoftheinspection inquestion;
(e) iftheparties tothedispute soagree, oneindependent trade expert could beselected
from section (iii)oftheabove listbytheindependent entity referred toin
subparagraph (a)toreview thedispute inquestion. Thisexpert shalltakethenecessary
decisions toensure anexpeditious settlement ofthedispute, forinstance taking into
account thesiteoftheinspection inquestion;
(f) theobject ofthereview shallbetoestablish whether, inthecourse oftheinspection
indispute, theparties tothedispute have complied with theprovisions ofthis
Agreement. Theprocedures shallbeexpeditious andprovide theopportunity forboth
parties topresent theirviews inperson orinwriting;
(g) decisions byathree-member panel shallbetaken bymajority vote. Thedecision on
thedispute shallberendered within eightworking daysoftherequest forindependent
review andbecommunicated totheparties tothedispute. Thistime-limit could be
extended uponagreement bytheparties tothedispute. Thepanel orindependent trade
expert shallapportion thecosts, based onthemerits ofthecase;
(h) thedecision ofthepanel shallbebinding upon thepreshipment inspection entity and
theexporter which areparties tothedispute.
Article 5
Notification
Members shallsubmit totheSecretariat copies ofthelawsandregulations bywhich theyput
thisAgreement intoforce, aswellascopies ofanyother lawsandregulations relating topreshipment
inspection, when theWTO Agreement enters intoforce withrespect totheMember concerned. No
changes inthelawsandregulations relating topreshipment inspection shallbeenforced before such
changes havebeenofficially published. They shallbenotified totheSecretariat immediately after
theirpublication. TheSecretariat shallinform theMembers oftheavailability ofthisinformation.Page207
Article 6
Review
Attheendofthesecond yearfrom thedateofentry intoforce oftheWTO Agreement and
every three years thereafter, theMinisterial Conference shallreview theprovisions, implementation
andoperation ofthisAgreement, taking intoaccount theobjectives thereof andexperience gained in
itsoperation. Asaresult ofsuchreview, theMinisterial Conference mayamend theprovisions of
theAgreement.
Article 7
Consultation
Members shallconsult withother Members uponrequest withrespect toanymatter affecting
theoperation ofthisAgreement. Insuchcases, theprovisions ofArticle XXII ofGATT 1994, as
elaborated andapplied bytheDispute Settlement Understanding, areapplicable tothisAgreement.
Article 8
Dispute Settlement
Anydisputes among Members regarding theoperation ofthisAgreement shallbesubject to
theprovisions ofArticle XXIII ofGATT 1994, aselaborated andapplied bytheDispute Settlement
Understanding.
Article 9
Final Provisions
1. Members shalltakethenecessary measures fortheimplementation ofthepresent Agreement.
2. Members shallensure thattheirlawsandregulations shallnotbecontrary totheprovisions
ofthisAgreement.