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WTO NEWS: 1996 PRESS RELEASES

PRESS/47
1 May 1996

WTO Preshipment inspection body becomes operational

The WTO mechanism for settling disputes between exporters and preshipment inspection companies - the Independent Entity (IE) - became operational today (1 May). The IE is constituted jointly by the WTO, the International Chamber of Commerce (ICC) and the International Federation of Inspection Agencies (IFIA), and is administered by the WTO.

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The IE was established in December 1995 by the General Council pursuant to Article 4 of the WTO Agreement on Preshipment Inspection, which calls for an independent review procedure to resolve disputes between an exporter and a preshipment inspection (PSI) agency. The IE became operational following confirmation from the ICC and the IFIA that the necessary administrative and procedural requirements had been fulfilled - including the translation and distribution to their affiliates and contacts around the world of the relevant information and forms as well as the List of Experts for Independent Reviews.

IE's rules of procedure call for quick resolution of disputes. Once a complaint is filed, the IE appoints, depending upon the agreement of the parties, either a single independent trade expert or a three-member panel, selected from the List of Experts (one each from the sections nominated by the ICC and IFIA, respectively, and one from the section of independent trade experts). The panel is required to make a decision, by a majority vote, within eight working days from the filing of the dispute.

The full text of the General Council decision, including the annexes on the IE's rules of procedure and the application forms to be used in requesting an independent review, is available upon request from the WTO Secretariat.

Note to editors:

Preshipment inspection (PSI) is the government contracted or mandated employment of specialized private companies to verify shipment details - essentially price, quantity and quality - of goods ordered from overseas. Used currently by some 30 developing countries, mainly in Africa, the purpose is to safeguard national financial interests (prevention of capital flight and commercial fraud as well as customs duty evasion, for instance) and to compensate for inadequacies in administrative infrastructures.

The WTO PSI Agreement recognizes that GATT 1994 principles and obligations apply to the activities of preshipment inspection agencies mandated by governments. The obligations placed on PSI-user governments include non-discrimination, transparency, protection of confidential business information, avoidance of unreasonable delay, the use of specific guidelines for conducting price verification and the avoidance of conflicts of interest by PSI agencies. The obligations of exporting members towards PSI users include non-discrimination in the application of domestic laws and regulations and the provision of technical assistance where requested.

The Agreement provides for expeditious settlement of disputes through “an independent entity constituted jointly by an organization representing preshipment inspection entities and an organization representing exporters”. WTO Members have decided that these organizations would be the ICC and IFIA, respectively.

A party lodging a complaint in the IE would need to complete up an official form requesting an independent review, and both parties would be required to make initial financial deposits. The IE either appoints an independent trade expert or establishes a three-member panel, depending on the preference of the parties, to review the case. The PSI Agreement provides that

“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 writing.”

Decisions by the panel are taken by majority vote, and are rendered within eight working days of the request for independent review. These decisions would be binding on the parties to the dispute. The cost of the independent review would be apportioned based on the merits of the case by the panel or the independent trade expert.