in this article we provides you with information about PSI services which are provided by third party inspection agencies.

Pre-shipment Inspection has two major applications as below:

Pre-shipment Inspection

The first application is used by buyers and sellers and when the commodities funds are transferred through letter of credits (LC), in which buyers and sellers banks are involved.

Then the commodities will be inspected before shipment by the independent third party inspection companies to verify quality, quantity, packing, marking and loading.

Several documents must be delivered to the seller’s bank for receiving the purchase value, such as the bill of lading, certificate of origin, packing list and inspection certificate. the inspection certificate is a document that must be issued by Third Party Inspection Company and delivered to the seller. The seller will refer to its bank to receive the funds by delivering the Inspection certificate and other related documents. The placing of mandatory inspection requirements in the LC, depend on the buyer’s and seller’s decision and might be ignored by mutual agreement. The second application is used by the government to safeguard national financial interests such as the prevention of capital flight through over invoicing and customs duty evasion. The core service in the second application is goods price verification. The PSI companies have their own updated database for goods prices, and the prices which are declared by importers will be compared with the values in their database and will be reported to the governmental authorities.

In this case, the government’s main aim is to prevent slippage of customs revenue as a result of undervaluation or deliberate misclassification by traders of goods to be imported under low-duty headings.

The ITP details the quality part of the inspection scope. The inspection company will make an inspection in each stage of manufacturing and will issue an Inspection Visit Report (IVR).

The engineering company must issue and submit the packing and marking procedure to the manufacturer or ask for a draft of the packing and marking procedure from manufacturer for approval.

In both cases, the inspection company must make an inspection based on the approved packing and marking procedures.

Pre-Shipment Inspection – Second Application

 it might be necessary that the manufacturer’s proforma invoice to be approved by the pre-shipment inspection company (before issuing the purchase order by the engineering company) and make sure the price is not more than the value which is on the market.

Some government authorities try to avoid capital flight through this mechanism so safeguard national financial interest. Pre-shipment inspection companies also are used to avoid customs duty evasion. the engineering company  manufacturer’s local agent in the destination country is the importer and must submit a customs declaration document to clear the goods from customs. So a pre-shipment inspection company might be hired to make a price verification and determine custom duty.