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15 March 1999

Wto working party adopts additional recommendations on preshipment inspection

The WTO Working Party on Preshipment Inspection completed its work on 12 March with the adoption of its final report to the General Council.

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In addition to recommendations in its 1997 report, the Working Party added the following:

- Governments must ensure that preshipment inspection (PSI) contracts are in conformity with the provisions of the WTO PSI Agreement, and encourage Members to consider following the model contract wherever possible;

- Governments should examine incorporating the principles of selectivity and risk assessment in their contracts;

- Governments who consider having their PSI programmes audited should be guided by principles contained in an annex to the report, or ensure that the principles in the Agreement such as non-discrimination and national treatment are respected; and

- Developed countries ensure that the developing countries receive the necessary assistance for domestic capacity building in order that the transition away from PSI can be made.

The Working Party further recommended that the future monitoring of the Agreement should be undertaken initially by the WTO Committee on Customs Valuation.

The Working Party Chairman, Mr. Edward Brown (United Kingdom), said that the positive spirit of cooperation between exporting and PSI-using Members had produced a good result. He added that inviting inputs from key players like the International Chamber of Commerce and the International Federation of Inspection Agencies had also contributed to the successful completion of the body's work.

Note to Editors:

Preshipment inspection is the practice of employing specialized private companies to check shipment details--essentially price, quantity and quality--of goods ordered overseas. Currently used by 34 developing country members of the WTO, 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 infrastructure.

The WTO PSI Agreement recognizes that GATT principles and obligations apply to the activities of PSI agencies mandated by governments. The obligations placed on governments which use PSI 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 the inspection agencies. The obligations of exporting members towards PSI-using countries include non-discrimination in the application of domestic laws and regulations, prompt publication of those laws and regulations and the provision of technical assistance when requested. An independent review procedure has been established to resolve disputes between an exporter and an inspection agency.

The Working Party was established by the General Council in November 1996 to review the Agreement. The complete text of the Working Party's final report (G/L/300) is available at the WTO Website (www.wto.org).