RESTRICTED
WORLD TRADE G/PSI/WP/W/4
2June1997
ORGANIZATION(97-2299)
Original: English Working Party onPreshipment Inspection
NATIONAL EXPERIENCE WITH THE AGREEMENT ONPRESHIPMENT INSPECTION
Submission bythePhilippines
Thefollowing communication, dated 29May1997, hasbeenreceived from thePermanent
Mission ofthePhilippines.
_______________
Background
ThePhilippine Government contracted theservices ofapreshipment inspection (PSI) company
toprovide theGovernment withinformation ofarecommendatory nature concerning thevaluation
andclassification ofgoods destined forthePhilippines inaccordance withourTariff andCustoms Code.
These services started onalimited basis in1987 andaglobal contract wasinstituted in1992.
Thedecision tocontract theservices ofaPSIcompany isanautonomous policy decision made
bytheGovernment. Ithasnothing todowiththerequirements ofanyinternational financial institutions
inorder tomeetrevenue collection targets.
Thecontract entered intobytheGovernment withthePSIcompany isimplemented through
theBureau ofCustoms (BOC) oftheDepartment ofFinance. Thecontract itselfwasawarded through
atender committee.
ATechnical Committee, composed ofinter-agency representatives, wasestablished toensure
compliance bythePSIcompany oftheterms ofitscontract withtheGovernment.
Price verification
(a) Method ofprice verification
Theproblem oftwoconceptually different methods ofprice verification doesnotexistinthe
Philippines since theGovernment applies onlyonemethod ofimport valuation.
Under theWTO Agreement onCustoms Valuation, thePhilippines committed toshifttothe
useoftransaction value (TV)within fiveyears from1January 1995. Thismeans thatby1January 2000
orearlier thePhilippines willbeusing theTVsystem ofimport valuation. Thisdecision wasnotified
totheWTO.
Intheinterim,thePhilippinesisusingthe"exportvalue"systembasedontheBrusselsDefinition
ofValue (BDV) which wasintroduced under theRepublic Act8181andmade effective inJulyof1988.
TheBDV makes useofthe"normal price", i.e.theprice which thegoods would fetch ontheopen
market between abuyer andseller, independent ofeachother.G/PSI/WP/W/4
Page2
ThePSIcompany informs bothexporters andimporters oftheapplicable method andbasis
ofcustomsvaluationthroughdisseminationoftheDataSheetforExportersandGuidelinesforExporters.
(b) Price verification forcustoms valuation andrevenue collection
ThePSIcompany islimited toproviding information onimport value andcustoms classification
totheBOC. Thisinformation isprovided onapershipment basisthrough issuance ofaClean Report
ofFinding. Theinformation, asearlier emphasised, isofarecommendatory nature, since theBOC
alone -being asovereign instrument oftheState-caneither ignore oragree withtheopinion expressed
bythePSIcompany. ThePSIcompany inthePhilippines isnot,andhasnever beeninvolved with
thecollection ofcustoms revenue inthePhilippines.
Confidentiality ofbusiness information
Asprovided initscontract, thePSIcompany hastaken allreasonable stepstoensure thatany
confidential business information thatisentrusted toitbybothexporters andimporters, aswellas
those ofother parties whomayhaveprovided information onthebusiness transaction, ismaintained.
Noconfidential business information isreleased toanythirdparty.
Thesteps taken bythePSIcompany toensure confidentiality are:
(i) arequirement thatallstaffentrusted toreceive confidential business information signan
undertaking nottodivulge suchinformation toanythirdparty;
(ii) storage inasecure location ofsuchinformation, andprovision ofnormal commercial security
conditions; and
(iii) awillingness toenterintospecific security agreements ifrequested byanentity providing any
information thatitconsiders confidential.
Non-discrimination
TheGovernment hastaken reasonable stepstoensure compliance withthenon-discrimination
principle byrequiring thePSIcompany tocarry outinspections uniformly asprovided inits"Guidelines
forExporters" which iswidely distributed.
Internal appeals procedures
Aninternal appeals procedure through theAppeals Committee (AP)hasbeenestablished to
review anddecide disagreements raised byimporters/exporters ortheBOC. Membership consists
oftheBOC, Central Bank, Bureau ofImport Services, Philippine Chamber ofCommerce andIndustry
andthePhilippine Federation ofIndustries. From timetotime, andasdeemed appropriate bythe
AP,thePSIcompany isinvited asanon-voting member. TheAPmeets twice aweek toreview cases.
Complainants ortheirdulyauthorized representatives areinvited tothemeeting topresent theircases.
Onaverage, theAPreceives 160cases forreview eachweek covering valuation andclassification of
goods. Cases areresolved onaverage within twotothree weeks.
While acaseispending before theAP,thegoods canbereleased fromcustoms totheimporter
upon payment ofduties based onthevaluation and/or classification presented bytheimporter, with
thebalance covered byapost-dated cheque, bond orbanker 'scheque.G/PSI/WP/W/4
Page3
Transparency
ThePSIcompany isobliged bythetermofitscontract topublish anddistribute theGFEand
DSFE. Thisinformation ismade available toallexporters uponrequest andisalsoaccessible through
theInternet. There isalsoreference tothese publications intheRequest forInformation formwhich
issenttoanyexporter prior toeachinspection.
ThePSIcompany alsostocks anddistributes the"Preshipment Inspection Independent Review
Procedures:GuidelinesforExporters",whichhavebeenpreparedjointlywiththeInternationalChamber
ofCommerce (ICC) andInternational Federation ofInspection Agencies (IFIA) incompliance with
theAgreement onPreshipment Inspection.
Delays
Under itscontract withtheGovernment, thePSIcompany isobliged toperform itsphysical
inspection ofgoods within fiveworking daysfromthereceipt ofawritten request. In1996, theaverage
timetaken toperform physical inspection was2.7working daysandCRFs were issued within 2.08
days, wellwithin therequirement oftheAgreement. Thisaverage ismonitored world-wide bythe
PSIcompany sincethereisarequirement toputallrelevant information inthePSIcompany 'scentralized
computer system.
These requirements havebeenputinplace soasnottodisrupt thenormal flowoftrade.
Operation oftheIndependent Review Entity (IRE)
There hasbeennorecourse totheIREbecause theGovernment hasitsowninternal appeals
procedures andhasestablished anAPandtheTechnical Committee onPSI,bothofwhich provide
avenues toaddress complaints ontheoperation ofthePSIcompany.
Conclusion
Finally thePSIcompany issubject toauditbytheGovernment regarding compliance withits
contractual obligations. Recently, nolessthanthelegislative branch diditsownauditandinnoinstance
hasthePSIcompany beenfound tohaveperformed below itscontractual obligations.
Based onourexperience, theservices ofthePSIcompany thatwehaveengaged haveserved
ourobjectives while atthesame timeensuring theGovernment 'scompliance withtheprovisions of
thePSIAgreement.