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Pre-shipment inspection, (also spelled preshipment inspection) or PSI, is a part of supply chain management and an important quality control method for checking the quality of goods clients buy from suppliers.
PSI ensures that production complies with specifications of the buyer and/or the terms of a purchase order or letter of credit. A final random inspection (FRI), checks finished products when at least 80% of an order has been produced and export-packed. Samples are selected at random, according to standards and procedures.
The pre-shipment inspection can be agreed upon between a buyer, a supplier, and a bank, and it can be used to initiate payment for a letter of credit. A PSI can be performed at different stages before shipment, such as checking the total amount of goods and packing, controlling the quality or consistency of goods, checking of all documentation, as for example test reports, packaging list, or verification of compliance with standards of the destination country like ASME, CE mark and import duties.
There are two types of PSI companies:
- Free-market companies which are privately owned, selling their services to the market. Risks involved might be, especially if it is a smaller company, that paid the company is paid by the manufacturer and working in its interest.
- State owned inspection companies: Only very few companies operating on the market are state-owned or partly state-owned. The shareholding of governmental institutions guarantees independence and objectivity.
A higher form of the PSI is called expediting, in which the dates of delivery and the production are included in the control.
Termination on the Pre-shipment Inspection requirement
PSI increases burdens and costs in international trade and can be counter-productive for the country of importation and its traders.
Several countries are considering termination on the use of inspection companies' service, following upon WTO Agreement on Trade Facilitation Article 10.5 Pre-shipment Inspection : 5.1. Members shall not require the use of pre-shipment inspections in relation to tariff classification and customs valuation.
In 1988, United Nations Economic Commission for Europe Recommendation No.18 - Recommended Measure 8.2 “Discouragement of Pre-Shipment Inspection”.
"Customs use of inspection companies" World Customs Organization, (2015)
- "General description of PSI in German export journal" (PDF). tuev-hessen.de. Retrieved 2010-08-27.