RESTRICTED
WORLD TRADE G/PSI/WP/M/2
9July1997
ORGANIZATION(97-2851)
Working Party onPreshipment Inspection
MINUTES OFTHE MEETING OF13JUNE 1997
Chairman: Mr.Chiedu Osakwe
Theagenda proposed forthemeeting, contained inWTO/AIR/604, wasadopted asfollows:
Page
1. "Issues forconsideration intheArticle 6review oftheAgreement onPreshipment
Inspection," textfrom theChairman (G/PSI/WP/W/2) .................. 2
2. National experiences withpreshipment inspection andwiththeimplementation of
theWTO Agreement onPreshipment Inspection (G/PSI/WP/W/3;
G/PSI/WP/W/4; G/PSI/WP/W/5; G/PSI/WP/W/6) ................... 9
3. Other business ........................................... 16
(a) Survey questionnaire from theChairman
(b) Dateofthenextmeeting
1. TheChairman welcomed Members tothissecond meeting oftheWorking Party. Herecalled
thattheWorking Party hadbeenestablished toconduct theArticle 6review oftheAgreement on
Preshipment Inspection (hereafter, "theAgreement"). Heinformed Members thaton14May1997,
hehadheldaninformal meeting oftheWorking Party tointroduce theChairman 'stext(which was
subsequently circulated asG/PSI/WP/W/2) which would bethesubject ofdiscussion under thefirst
agenda item ofthismeeting. Herecalled thatatthefirstmeeting oftheWorking Party, on
28February 1997, ithadbeen agreed thatMembers would submit, forcirculation, their national
experiences withpreshipment inspection (PSI) andwiththeAgreement; andthatachecklist ofissues
would beimportant toguide discussions. Some issues hadbeenraised atthefirstmeeting byMembers,
andthensubsequently ininformal contacts hehadhadwithindividual Members. Through April he
hadnotreceived anysubmissions. Hetherefore decided, onthebasis ofthediscussion atthefirst
meeting andonhisinformal consultations, toprepare onhisownresponsibility thechecklist ofissues
which wasthencirculated asaformal working document inG/PSI/WP/W/2. Regarding theformat
ofthedocument, heexplained thatforeachoftheissues, abackground, adefinition oftheproblem,
theviews expressed, andoptions forconsideration bytheWorking Party, weregiven. Hehadrequested
delegations, attheinformal meeting, tostudy thepaper andbeprepared todiscuss itatthismeeting.
Based onthediscussions, thepaper would berevised atalaterstage. Hetooknotethatattheinformal
meeting, theEuropean Community hadcommented thatitconsidered thatnotifications byMembers
oftheirregulations onPSI,pursuant totheAgreement, should alsobeincluded inthepaper.
2. Therepresentative ofthePhilippines stated thathisdelegation considered thepreparation of
theChairman 'stextpremature and,therefore, dissociated itself from it.G/PSI/WP/M/2
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3. TheChairman explained that,given thecircumstances thathehadoutlined above, andonhis
ownbestjudgement, heconsidered thattheWorking Party needed abasisonwhich topursue thereview
which itwasrequired tocarry outandonwhich itwastoreport recommendations totheGeneral Council
attheendof1997. TheWorking Party tooknoteofthePhilippines statement.
1. "Issues forconsideration intheArticle 6review oftheAgreement onPreshipment Inspection",
textfrom theChairman (G/PSI/WP/W/2)
1.1 Therepresentative ofColombia, noting thatthepurpose ofthedocument wastostimulate debate
andtoencourage delegations tomake submissions ofexperiences, stated thathisdelegation hadno
problem withthese intentions. However, hewasconcerned thatinseveral partsofthedocument there
wasreference to"consensus", "general agreement", and"broad support", etc.asifthere hadbeen
anin-depth discussion oftheissues. Theminutes ofthefirstmeeting oftheWorking Party stated the
scope ofdiscussions, which wereextremely preliminary. Heconsidered therefore, thatmany ofthese
phrases, overstepped whatactually happened atthefirstmeeting. Hisdelegation would havepreferred
thatthepaper beanon-paper providing afocus forfuture discussions. Thiscomment should be
considered tobevalid forthewhole discussion onthismatter.
1.2. TheChairman stated thathewould begrateful foranycomments ofapractical, andtangible
nature withregard tohistext. Hehaddistributed thetextsufficiently inadvance -sothatdelegations
could substantively comment onthepaper which willbesubject torevision.
1.3 Therepresentative ofPeruunderstood theChairman 'stextasdesigned toprovoke discussion
andtherefore aspreliminary. Itwould require balancing totakeintoaccount allperspectives. Once
national experiences hadbeendiscussed, hisdelegation assumed thatthetextwould berevised ora
newtextwould beissued.
1.4 TheChairman clarified thattheWorking Party'sreview wasproceeding onfourtracks: the
firstweretheon-goinginformalcontactshewasconductingwithdelegations;thesecondwasthenational
submissions; thethirdwasasurvey which hewould propose under theagenda item"Other business"
atthepresent meeting; andthefourth wastheChairman 'stextwhich presented issues toguide the
discussions. Hestressed thatheneeded input from Members onallofthese tracks.
1.5 Therepresentative ofSwitzerland welcomed thetextofissues asabasis forfuture work. He
considered thattheWorking Party wasfaced with alackoftransparency based oninadequate
notifications. Thisaffected theknowledge baseandhampered thereview process. Asanexample,
hisGovernment hadgranted 29mandates forinspection onbehalf offoreign governments, yetless
thanhalfhadnotified theirlegislation onPSItotheWTO. Second, inthe"options" portion ofthe
text,often thePSIcompanies were seenaspartoftheproblem andthere wasanattempt toshift
implementation responsibility tothem. Thisapproach could create problems since theWTO wasan
organization ofgovernments andneeded careful consideration. Hisdelegation hadembarked ona
thorough consultation process withexporters inallbranches ofindustry andofinspection agencies
active inSwitzerland. After thisprocess wascompleted, hisdelegation would communicate itsposition
inwriting.
1.6 Therepresentative ofGhana stated, preliminarily, thathisdelegation wasnotconvinced that
theChairman 'spaper wasbalanced interms ofuserandexporter Members 'views. There wasan
implied assumption inthetextthattheissues citedhadbeenopenly discussed inatransparent manner
astomerit thetypeofaction-oriented options andconclusions proposed. Hewasalsoconcerned that
thetextcontained several phrases suchas"widespread support", etc.andhisdelegation hadnotbeen
party toanyinformal consultations. Conclusions should notbedrawn before sufficient debate had
beenconducted ontheissues. Onspecific issues, hestated thatwhattheChairman 'stextdefined asG/PSI/WP/M/2
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problems regarding price verification ,were notnecessarily classified asproblems tohisdelegation.
Therefore,theoptionsproposedasthefirst-bestandsecond-bestoptionswerepremature.TheAgreement
contained clearprovisions todealwithprotection ofconfidential business information andterms used
inthedefinition oftheproblem wereneedlessly alarming. Thereview process should rather address
thenature andcircumstances ofthese claims inatransparent manner. Onnon-discrimination and
transparency ,hisdelegation hadnocause tobelieve thatthese werethreatened. HisGovernment had
always upheld theseprinciples andwasprepared tolookintoanybreaches. Hisdelegation considered
thatPSIwasimportant fortrade facilitation. Theissuance ofreports offindings alsohadaclear
time-scalerespectedbyPSIcompanies.Theproposalofoptionsthereforewasnotcleartohisdelegation.
OntheIndependent Entity (IE),hisdelegation considered thatitshould begiven timetobetested and
theclaim thatitwasinadequate caused concern tohisdelegation. Theexperience ofhisGovernment
showed thatithadnotbeenusedbecause oftheeffectiveness oftheprovisions intheAgreement which
allowed PSIcompanies toaddress anyqueries received fromoperators. Calls foritsdisestablishment
weretherefore unnecessary atthisstage. Hisdelegation waswaiting foraformal response fromhis
capital andwasnotinaposition toendorse theChairman 'stextasthebasisforthereview atthisstage.
1.7 Therepresentative ofIndia stated thattheChairman 'stextwasunder review inhiscapital and
hewould provide detailed comments atalaterstage. Heasked tobeassured thattheIEhadnotreceived
anycases. Regarding theestablishment ofaCommittee onPSI,hisdelegation wasgenerally averse
toestablishing newCommittees andsuggested discussing matters pertaining totheAgreement under
theMarket Access Committee, theCustoms Valuation Committee, oranother appropriate Committee
already established.
1.8 TheChairman confirmed thattheIEhadnotreceived anyapplications ofcasesuptothepresent.
Headded, fortheinformation oftheWorking Party, thathewasininformal contact withsome PSI
companies aswellaswiththeInternational Federation ofInspection Agencies (IFIA), inorder tocover
asmany people andwithasmany interests aspossible.
1.9 Therepresentative ofNigeria stated thathisdelegation considered theChairman 'stext
comprehensive andcovering allpoints ofviews. Itwould enable theWorking Party toproduce a
balanced document fortheresults ofthereview process. Heencouraged theChairman tocontinue
hison-going consultations toresolve anydifferences thatmight exist. Hisdelegation would comment
lateronthespecific issues.
1.10 Therepresentative oftheUnited States noted thattheWorking Party wasengaged ina
comprehensive taskthatwasmandated bytheAgreement relating toitsimplementation, operation and
effectiveness. With regard totheChairman 'stext,hisdelegation considered thatitwasaneffective
means bywhich theWorking Party could proceed. Astheprocess continued, "place-holders" would
benecessary toreflect thework accomplished andthisworking document served thatpurpose. He
considered thatthebalance ofthetextwould depend ontheMembers oftheWorking Party which
represented many interests. These interests hadtobereflected inthedocument. Heagreed with
Switzerland ontheabsence ofnotifications andheproposed thattheSecretariat distribute acompilation
onthestatus ofnotifications forthisWorking Party. Headded thatthePSIAgreement wasunique
inthat,toacertain extent, itwasthebehaviour ofprivate entities thatwasatissue, andyetthe
responsibility clearly laidwithWTO Members. TheWorking Party should beaware ofthispoint at
alltimes. Heconcluded thathisdelegation would provide apaper onitsnational experience, organized
along thestructure oftheissues identified intheChairman 'stext,atalatertime.
1.11 Therepresentative oftheEuropean Community, preliminarily, stated thatintheviewofhis
delegation theChairman 'stextcontained theissues thattheWorking Party needed toaddress. He
supported India'sdoubts ontheneedtoestablish aCommittee fortherevision. Itwascertainly necessary
tohaveon-going discussions, butitwasnotnecessary tocreate aCommittee. Heshared theviewsG/PSI/WP/M/2
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ofGhana regarding theIE,inthatitwastooearlytoconsider itsdisestablishment. However, hediffered
onthereasons whyitwasnotbeing used. These pertained toitsprocedures which weredifficult for
companies touseforanumber ofreasons, which theWorking Party might want todiscuss later.
Hesuggested thattheWorking Party firstseeifitcould findlessinstitutionalized ways ofresolving
possible conflicts, andonlythenseeiftheIEwasnecessary. Ontheparticular nature oftheAgreement
andspecifically onpriceverification ,heconsidered itimportant torecall thattheAgreement alsocovered
quantity andquality inspection. TheAgreement dealtwithprice verification byaprivate company
relating tothedealings between twoprivate parties, anexporter inonecountry andanimporter in
another. Theideawastoverify thatthere wasnounder- norover-invoicing andtoensure thatthere
wasnoundue outflow offoreign currency. Customs valuation wasaside-line issue eventhough it
had,inpractice, created problems. Customs valuation wasdifferent asitwasaState function and
PSIcompanies could notactsovereignly andcould notbegiven direct instructions. Themaximum
thatPSIcompanies should orcould dowastogivetechnical advice togovernments. Thisshould be
reflected inthefuture revision ofthetext. Heconcluded thatthere wasstrong interest onthepart
ofexporters andimporters thatState authorities remained incharge toensure conduct according to
theWTO rules. Finally, areference should bemade totechnical assistance ,which wasmentioned
inArticle 3oftheAgreement, sothatitwasunderstood thattheoverall objective wasnottopressure
buttoensure smooth conduct andtohavecustoms infullcontrol ofcustoms valuation.
1.12 Therepresentative ofKorea stated thatexporters inhiscountry faced similar problems toother
countries regarding PSI,including discriminatory application inprice inspection andconcerns over
thedisclosure ofconfidential business information. Inthisregard, Korea supported theChairman 's
textwhich highlighted thenecessity ofstrengthening orrevising provisions oftheAgreement onseveral
important issues. Hisdelegation didnotobject totheestablishment ofaPSICommittee, which would
monitor, onapermanent basis, problems intheoperation oftheAgreement. Hisdelegation proposed
someadditionalissuestobeconsideredbytheWorkingPartytoimprovetheoperationoftheAgreement.
First, hecitedthenecessity ofcompetition ininspection. When onlyoneinspection bodywasdesignated
ineachcountry orcontinent, therecould benegative side-effects involving theabuse ofamonopolistic
position. Inthisrespect, bydesignating amultiple number ofinspection bodies ineachcountry and
continentandbymutuallyrecognizingtheinspectionresultsamongbodies,unnecessarydisputesbetween
exporters andinspection bodies could beprevented. Furthermore, multiple inspection bodies would
promote thequality ofservice. Tothisend,theWorking Party should examine relevant measures
inorder torecommend concrete proposals.
1.13 Another issuewasimprovement andrationalization ofinspection methods. Once exports were
issued areport offindings afterthefirstinspection, itwould beawaste oftimeandmoney toconduct
further inspections ofsubsequent exports under identical conditions. Inaddition, problems hadarisen
duetothelackofinspection standards fornewtypes ofproducts. Therefore, theWorking Party would
needtoprepare reasonable inspection standards toeliminate redundant inspections under identical
conditions andtoconsider thecharacteristics ofnewanddifferent types ofproducts. Athirdissue
wasestablishment ofa"Code ofConduct forInspectors". Many problems withPSIinvolved the
inspectors themselves. Concerns included alackofexpertise andresponsibility onthepartofthe
inspectors, authoritarian andunkind attitudes oflocalinspectors, non-implementation ofinspections
onthepromised date,anddemands forbribes orother favours byinspectors. Inorder toresolve these
problems, hebelieved thattheWorking Party needed toconsider establishing aCode ofConduct for
inspectors.
1.14 Therepresentative ofJapan welcomed theChairman 'sclarification thatthereview process
would continue through November because inJapan adomestic process wascurrently under-way.
Preliminarily, hecommented ontheissueofpriceverification .Hisdelegation understood theconcern
identified intheChairman 'stextthatmultiple pricing systems should notbecome abarrier totrade.
However, further consultations were needed before introducing anewsetofguidelines forcustomsG/PSI/WP/M/2
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purposes because there were solid anddetailed provisions intheAgreement onCustoms Valuation.
Newguidelines could cause complexity andambiguity intherelationship between thetwoAgreements.
Considering theconfidentiality ofbusiness information ,hisdelegation shared theviewthatunjustified
disclosure which could result inunfair competition andbreakdown oftrustbetween exporters and
importers, should betightly controlled. However, further study wasalsoneeded astowhat would
bethebestwaytoachieve thisgoal.
1.15 HisdelegationsharedtheviewofSwitzerlandandtheUSregardingtransparency.SomeJapanese
exporters hadcomplained inresponse tohisGovernment inquiries thatsometimes lawsandregulations
ofexporting countries andusercountries wererevised without priorofficial notification and,insome
cases, theprovisions were ambiguous. Inaddition, theexporters complained thatthecriteria and
methodologies usedbyPSIcompanies changed without advance notice. Hisdelegation urged all
Members toabide bythetransparency provisions oftheAgreement. Itwould beworthwhile toestablish
astandard format forinspection requirements aswasproposed intheChairman 'stext. Concerning
theIE,hisdelegation wasunsure whynocases hadbeenfiled, andconsidered theexplanation inthe
Chairman 'stextplausible. However, since theIEwasoneofthemost important elements inthe
Agreement, itmight bepremature topropose itsdisestablishment atthisstage. Further study wasneeded
astowhyitwasnotfunctioning. Inconclusion, hisdelegation shared theviewofIndia andtheEC
thattheWorking Party wasatthereview stage anditwasnotclearwhatwerethetypes ofproblems
thatwould require constant monitoring andconsultation. Therefore, itmight beappropriate todiscuss
theestablishment ofaCommittee atalatertime.
1.16 Therepresentative ofAustralia stated thatherdelegation 'sdomestic process wasalsoon-going
andsohercomments were preliminary. Herdelegation considered theChairman 'stextthoughtful
andinsightful and,inappreciation ofthecontentiousness ofsome oftheoptions proposed, hoped that
discussions ofthetextwould advance consideration oftheissues. Thistypeofdebate wasimportant
anduseful asaninput intothereview process, theoutcome ofwhich would bebalanced andagreed
byallMembers. Herdelegation wasnoteager tocreate another committee intheWTO andalsobelieved
thisshould belooked atlater. OntheIE,shenoted thatitwasstillinitsearly stages. However
Australian exporters hadnoted some problems withitsuchasremoteness andcost. Herdelegation
would beopen toexamining other ways inwhich toproceed without necessarily leading to
disestablishment oftheIE.Shealsoendorsed theECremarks onincluding technical assistance in
thiswork, aswellastheconcern overtheappropriate rolesanddelegations ofstateauthorities, especially
withregard tocustoms valuation.
1.17. Therepresentative ofNewZealand considered theChairman 'stextuseful andexpected itto
evolve asthediscussion progressed. Generally, hisdelegation endorsed theremarks made by
Switzerland, theUnited States, theECandAustralia andwasinterested inthepoints raised byKorea
andJapan. Hisdelegation considered thatresponsibility forensuring thatPSIcompanies acted in
accordance withtheAgreement laidwiththeMembers oftheWTO. TheECmade animportant
distinctionbetweentheprovisionoftechnicaladviceinareassuchascustomsvaluation,andgovernments'
responsibilities thatactions weretaken consistent withinternational obligations. Hisdelegation agreed
thatthefirstoption under priceverification ,tooblige PSIentities tousethetransaction value consistent
withtheAgreement onCustoms Valuation, wasthefirstbestoption. However, thissometimes posed
problems ofassessment which ledgovernments toemploy PSIcompanies inthefirstplace. His
delegation wasuncertain oftheprocess bywhich non-discriminatory andfairtreatment under PSIcould
beachieved anditappeared more feasible torevise theexisting PSIAgreement tomake inconsistent
withtheAgreement onCustoms Valuation thantonegotiate afullsetofguidelines onpriceverification.
1.18 Onnon-discrimination ,Article 2.1wasclear inthattheresponsibility forensuring thatPSI
activities were carried outinanon-discriminatory manner rested withuserMembers andcould not
beabrogated. Thereference touncertainty regarding responsibility wasmisleading because therealG/PSI/WP/M/2
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problem wasthelackofcapacity ofuserMembers tomonitor theactivities ofcontracted PSIentities.
With regard tothefirstoption presented onthisissue, hisdelegation would needtoexamine further
establishing direct obligations onPSIentities toensure non-discriminatory application ofcriteria and
procedures. Apossible option could betodevelop guidelines toassist alluserMembers toestablish
standardized relationships withPSIentities. Theissue oftransparency again related totheroleof
governments withPSIentities. Apart fromthelegalimplications ofestablishing adirect legalobligation
onPSIentities, hisdelegation wasconcerned thatifuserMembers were contracting PSIentities to
perform certain functions, thenthoseentities should beanswerable directly touserMembers. However,
hisdelegation wasaware ofthelackofcapacity ofsome userMembers tomonitor theactivities of
PSIentities andacknowledged thatthePSIAgreement contained inadequate provisions toenable the
activities ofPSIentities tobescrutinized. Hisdelegation agreed thatmore experience wasneeded
withtheIE,butthere maybeother mechanisms foraddressing PSIproblems suchasusing particular
existing Committees. Hisdelegation alsodidnotseetheneedforestablishing acommittee onPSI,
although aforum would beneeded todiscuss anyon-going issues thatneeded tobeaddressed.
1.19 Therepresentative ofEgypt stated that,withregard toprice verification ,thebestwaytoavoid
anydifferences inverification andtoensure certainty andpredictability wastoadhere totheWTO
Agreement onCustoms Valuation taking intoconsideration thetransition period fordeveloping countries
contained therein. Asregards theprotection ofconfidential business information ,hisdelegation asked
ifthere wereanycases tobemade fordisclosure ofthisinformation. What would bethecriteria to
assess thedegree oflossandmaterial injury forcompensation? Concerning theissue of
non-discrimination ,theWorking Party onTrade andCompetition Policy could examine thepossible
effects ofnon-discriminatory application ofPSIprocedures. Hisdelegation would alsorecommend
totheCouncil onTrade inGoods toexamine therelationship between PSIandtrade facilitation with
regard toproposed uniform formats ofinspection criteria. Ontheoperation oftheIE,hisdelegation
believed thatitshould begiven sufficient timebefore considering anydisestablishment. Further, his
delegation believed thatitwaspremature todecide onestablishing acommittee onPSI.Hisdelegation
alsosupported theviews expressed bytheECtoaddress technical assistance which could helptoavoid
delays intheinspection process. Heconcluded thatthereview process should beenriched bynational
submissions, sothattheinterests ofallMembers would bereflected intheoutcome.
1.20 Therepresentative ofHong Kong saidthatasamajor exporter, Hong Kong wasagreeable
tomostoftheproposals intheChairman 'stextforimproving theimplementation oftheAgreement,
particularly interms oftransparency andnon-discrimination. Onprice verification ,thetwooptions
presented were acceptable tohisdelegation. But,owing tothefactthattheAgreement onCustoms
Valuation would onlybeimplemented inphases bymany developing countries, thesecond option of
elaborating aclearer andsimplified setofguidelines seemed tobemore practical inthenearfuture.
Whilehisdelegationsupported,inprinciple,strengtheningthecurrentdisciplineonprotectingconfidential
businessinformation,italsoattachedimportancetothenon-discriminationandtransparencyobligations.
HisdelegationdoubtedthefeasibilityofimposingdirectobligationsonPSIentities;asWTOAgreements
wereonlybindingongovernments,extendingsuchobligationsdirectlytonon-governmentalorganizations
would entail legal, institutional, enforcement, andothercomplications. Therefore, theoptions presented
inparttwoofthepaper required further consideration. Asregards theoptions suggested inpartsthree
andfouroftheChairman 'stext,hisdelegation could consider establishing standardized anduniform
formats asthiswould helpreduce thechances ofinconsistency anddiscriminatory treatments arising
from misunderstandings orlackofknowledge. However, further consideration ofimposing direct
obligations onPSIcompanies wasnecessary.
1.21 Hisdelegation sawtheestablishment ofon-site representation ofPSIcompanies asessentially
acommercial decision ofindividual PSIcompanies though benefits would beeaseofaccess, efficiency
andtradefacilitation.TheWorkingPartymayconsiderencouragingPSIentitiestoexplorethepossibility
ofentering intocooperative arrangements withtheircounterparts, orasthetextsuggested, establishingG/PSI/WP/M/2
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localfocalpoints toprovide relevant information. Hisdelegation alsoconsidered thatimproved means
ofcommunication made possible bymodern technology could, toacertain extent, alleviate theproblem.
AstheIEwasamechanism established under theAgreement, itcould notbedisestablished without
amending therelevant provisions oftheAgreement. Hesuggested thatitbemaintained toallow for
alonger andmore meaningful time-frame toassess itsadequacy andusefulness. Theother option
wastobring suchcases totheDispute Settlement Body (DSB). TheIEoffered aseparate andadditional
procedure forspeedy dispute resolution between theprivate parties onacase-specific basis, whereas
theDSBwasconcerned withtherights andobligations ofMembers under theWTO. TheDSBwould
notofferthesame kindofspeedy resolution andcompensation thatexporters would like,bearing in
mind that,inmost cases, theproblems arose from theoperation ofPSIentities rather thantheuser
Members. Finally, hisdelegation keptanopenmind onthepossibility ofestablishing aPSIcommittee
which would have thepractical function ofoverseeing theoperation andimplementation ofthe
Agreement. Given itspermanent nature, aswellasresources andother implications, thissuggestion
should becarefully examined.
1.22 Therepresentative ofPhilippines supported thestatement bytheUnited States thatabalanced
outcome tothereview would depend ontheMembers.
1.23 Therepresentative oftheUnited States endorsed thecomments bytheEC,particularly the
suggestion toinclude theissueoftechnical assistance. Hisdelegation didnotnecessarily endorse the
establishment ofaPSIcommittee ,butwanted theWorking Party toexplore theideaofensuring the
existence ofanon-going forum ofsome sort,asthiswasnecessary. Hisdelegation supported the
suggestions byKorea. Finally, hisdelegation wished toinclude intheWorking Party'sreview the
issue ofconflict ofinterest ,i.e.themethodologies ofhowPSIcompanies werepaidfortheirwork,
inparticular ifthecontract stipulated payment onanadvalorem basis. Hisdelegation would make
awritten submission, based ontheChairman 'stext,which would include thisissue. Henoted that
itwasimportant torecall thattheWorking Party wasengaged inaconstructive process toseekresolution
ofproblems.
1.24 Therepresentative ofColombia, onprice verification ,stated thathisdelegation believed that
therights ofcountries which hadinvoked thereservations under Article 20oftheAgreement onCustoms
Valuationshouldbemaintained.Henotedthatconfidentiality,non-discriminatoryapplicationofcriteria,
transparency, delays, on-site representation ofPSIcompanies, wereimportant issues andwereincluded
intheAgreement. Itwastheresponsibility oftheMembers toensure thatPSIcompanies respected
these provisions. Hisdelegation wasopen andflexible totackling theproblems raised bysome
delegations thatsome PSIcompanies were notabiding bytheprovisions oftheAgreement. His
delegation believed thattheIEshould bemaintained; itwaspremature toconsider itsdisestablishment.
1.25 Therepresentative ofSwitzerland stated thatprice verification wasoneofthemostsensitive
issues forwhich guidance should betaken from Article 1.3oftheAgreement which determined the
scope ofPSIactivities asquality, quantity andprice verification, including currency exchange rates
andfinancial terms, andforcustoms classification. Inaddition, Article 2.20anditsfootnote referred
toanother Annex I.AAgreement when itcame tocustoms valuation. Inother words, ordinary price
verification waslimited under thePSIAgreement toArticle 2.20. Thisdifference should beoutlined
intherevision oftheChairman 'stext. Switzerland allowed PSIcompanies tocarry outproduct
classification butviewed unfavourably customs valuation byPSIcompanies. There wasaneedfor
uniform rules. Itwasnotsatisfactory toallow fordifferent customs valuation systems, depending on
whether goods were subject toPSIornot. Hisdelegation wasfullyaware thatthismayinvolve a
needtochange theAgreement. Perhaps guidelines atanearlier stage could leadthewayforlater
improvements.G/PSI/WP/M/2
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1.26 Headded thatprotection ofconfidential business information wasenshrined inArticle 2.9to
2.12oftheAgreement which weresufficient. Hisdelegation didnotshare theviewoftheChairman 's
textonthisissue andstrongly objected totheoptions suggested intheChairman 'stext. Ifthere was
aproblem, itcould bethatPSIcompanies received requests fromuserMembers fordetails ofbusiness
information,beyondthescopeoftheAgreement.ThesoleresponsibilityforimplementingtheAgreement
rested withtheMembers. Oneideawhich deserved further consideration wastheelaboration ofa
model inspection agreement between auserMember andaPSIcompany which would contain allthe
provisions oftheAgreement. Hisdelegation strongly endorsed theideaofuniform measures. His
delegation could notconfirm nordisprove theview thatinspection criteria were applied ina
discriminatory manner, andthatuserMembers might beunable toensure non-discrimination under
theAgreement. Article 2.1oftheAgreement existed forthis.Hisdelegation didnotviewfavourably
thesuggestion thatuserMembers 'obligation beshifted toPSIcompanies. Ontheother hand, uniform
formats ofinspection criteria might beahelpful waytoaddress theproblem, ifitexisted. On
transparency ,Article 2.6oftheAgreement should beutilized, ifneedbe,bythePSIcompany but
Members should havethefirstobligation. Hisdelegation hadthesame viewwithregard totheissue
ofdelays .Hisdelegation viewed on-site representation asanecessary condition forthesmooth
implementation ofPSIcompanies 'activities. HisGovernment required allcompanies wishing tocarry
outactivities inSwitzerland tobeestablished inthecountry. Atthesame time, hisGovernment
understood theconcerns ofsmaller economies andexporters thatitmight bedifficult toimpose such
anobligation onallcompanies. Insuchcircumstances, hisdelegation wasopentoexploring theidea
ofestablishinglocalfocalpointstoprovideallrelevantinformationoninspectioncriteriaandprocedures.
Inmany instances, localchambers ofcommerce could playthisrole. Hisdelegation didnotseethe
non-utilization oftheIEasreason forimmediate action bytheWTO. Ofcourse, thisnewprocedure
wascostly, buthisdelegation wasnotconvinced thatnon-utilization wascaused bylackofprocedural
guidance bytheAgreement, noraprecedential value ofanydecision rendered. Immediate changes
were notneeded, suchasthose proposed among theoptions.
1.27 Therepresentative ofAustralia suggested that,withregard toprice verification ,there might
betoomuch focus, inthetext,ontheelements ofArticle 2.20(b) oftheAgreement. Itwasworth
looking again atArticle 2.20(a), amechanism already existing intheAgreement, which required that
PSIentities onlyreject acontract price iftheycould demonstrate thatitwasunsatisfactory based on
Article 2.20(b). Shewondered ifthephrasing ofthesecond point inthetextappeared toreverse the
onussomewhat. Sheadded thatcommercial realities made itdifficult fortheWorking Party todo
anything regarding on-site representation ,other thanencourage localfocalpoints. Shealsosupported
inclusion oftheissue ofconflict ofinterest; ithadbeenvoiced asaconcern byAustralian industry.
1.28 TheWorking Party tooknoteofthestatements made. TheChairman stated thattheWorking
Party would continue thisexchange ofviews atitsfuture meetings inSeptember andinNovember,
andininformal consultations thatheintended toconvene. Headded hissummary ofthediscussions
asfollows:
"TheWorkingParty,atitsmeetingof13June,consideredtheformalworkingdocument
proposed bytheChairman forthereview process under Article 6oftheAgreement onPSI.
Itwasunderstood thattheviews expressed byMembers werepreliminary, thatmore detailed
views would beoffered atmore formal andinformal meetings, andthatMembers thatdidn't
express views onthedocument would endeavour todosoafterreceipt ofinformation from
capitals. Inlightofpreliminary views expressed across arange ofissues identified, several
views were asfollows:
(a) there waswide-spread support thattransparency ofboththenotification ofdomestic
regulation andlawsbyMembers intheareaofPSIandtheprocedures andcriteria usedby
PSIoperators were important aspects ofthereview process. Members felttheneed forG/PSI/WP/M/2
Page9
strengthening transparency andfornotification byMembers oftheirdomestic regulations in
thisarea;
(b) theWorking Party wasdoubtful ontherationale fortheestablishment ofaCommittee
forPSI.Itwasfeltthatthisproposed option required amore detailed examination inthelatter
stages ofthereview process inorder toestablish itsnecessity;
(c) preliminary views were stated inconnection withincluding additional items onthe
Chairman 'schecklist toinclude technical assistance, asprovided under Article 3ofthe
Agreement aswellasother forms oftechnical assistance. Additional items suggested included
conflicts ofinterest andacodeofconduct forPSIoperators;
(d) theviewwasalsoexpressed thatitwaspremature toconsider thedisestablishment of
theIEandthatalternative options should beexplored;
(e) Members oftheWorking Party were doubtful about theestablishment ofadirect
obligation onPSIoperators forobligations thatshould beexecuted byMembers.
Itwasreaffirmed thatthese views were preliminary andthatthediscussions onthe
Chairman 'stextinG/PSI/WP/W/2 would continue".
1.29 TherepresentativeoftheEuropeanCommunityconsideredthatfurtherdiscussionsonestablishing
aCommittee onPSIwould beunlikely, butthatfurther reflection onthisissue could beonthe
appropriate manner ofcontinuing thedialogue.
1.30 TherepresentativesofPeru,Ghana,andthePhilippinesexpressedreservationsontheChairman's
summary, asthediscussions hadbeenofapreliminary nature.
2. National experiences withpreshipment inspection andwiththeimplementation oftheWTO
Agreement onPreshipment Inspection (G/PSI/WP/W/3; G/PSI/WP/W/4; G/PSI/WP/W/5;
G/PSI/WP/W/6)
TheChairman noted thattheWorking Party hadreceived fournational submissions under this
agenda item. Heurged allMembers tomake submissions ontheir national experience withthe
Agreement andwithPSIingeneral.
A. Ghana
2.2 Therepresentative ofGhana stated thathisGovernment hasrecorded some significant gains
under itsPSIarrangement. Henoted thatforeign exchange savings were US$32 million in1996,
representing anincrease of33percentover1995 savings. Healsonoted thatcustoms revenue had
increased byUS$110 million which represented a38percentincrease over1995 figures. Trade
facilitation andtheturnover inports hadincreased significantly. Headded thattechnical training was
alsobeing pursued and,inviewofthenotion thatPSIwasatemporary arrangement, hisGovernment
hadestablished astatistical data-bank relating toimports. Itcould beusedtofindquality products
atcompetitive prices. Nevertheless some problems prevailed intheimport sector. Exporters and
importers were stillarranging prices between themselves. Iftheconcern wastoaddress
misclassifications, under- andover-invoicing andillegal transfer offoreign exchange, priceverification
wascrucial tothePSIprogramme. HisGovernment continued toexperience transaction price-setting
between exporters andimporters, andtherefore whole-scale acceptance ofthetransaction value wouldG/PSI/WP/M/2
Page10
cause problems forhiscountry. ThiswaswhyhisGovernment wasoftheviewthatPSIshould be
strengthened -sothatuserMembers could raiseissue onquestionable prices when theneedarose.
2.3 Therepresentative oftheUnited States noted thathisdelegation wasconfused byasentence
inthethirdparagraph before theendoftheGhanian written submission which stated, "wedonotexpect
theAgreement onPreshipment Inspection toprescribe anydefinitions which maynotbeinconsonance
withGhana 'saccepted international obligations". Itseemed toimply thatperhaps theobligations within
theAgreement maynotbeaccepted international obligations. Therefore herequested anelaboration
ofthissentence. Secondly, heasked foraclarification ofthestatement which referred totheuseof
price information toobtain thebestprices forpurposes ofpurchasing products.
2.4 Therepresentative ofGhana stated that,withregard tothesecond point, hisdelegation was
talking about adatabase which could guide purchases. Onthefirstquestion, hesaidthatthere had
beenproposals during thefirstinformal meeting thatcountries should beobliged torevoke theirspecial
anddifferential treatment derogations under theCustoms Valuation Agreement. Heconsidered that
itwashiscountry 'sprerogative todecide itsstatus under thislatter Agreement. Itwasnotsuitable
forthePSIAgreement todictate customs valuation action.
2.5 Therepresentative ofNewZealand questioned theextent towhich grievances hadtobeverified;
thiswasaburden ofproof question. Anumber ofdelegations hadraised problems withtheAgreement,
including hisdelegation which haddonesoonthebasisofwhatitperceived asproblems withtheway
thatPSIhadbeenusedonproducts exported from hiscountry. Thishadtobeborninmind when
trying tocome toaconsensus, otherwise itwould beonecountry 'sviewagainst another. Forinstance,
intheareaofnon-discrimination, different pricing methodologies hadbeenusedbyanentity inNew
Zealand andAustralia which hadledtodifferent calculations ofcustoms value.
2.6 Therepresentative oftheUnited States sought further clarification onthematter oftheuse
ofprice information provided toPSIcompanies. InGhana, wasinformation provided onpricing to
PSIcompanies thenusedbytheGovernment ofGhana foranother purpose suchaspurchasing goods?
Wastheinformation thenusedtoobtain thebestprice inpurchases? Thisamounted toinformation
provided toPSIcompanies which wasthenusedforanaltogether different purpose.
2.7 Therepresentative ofGhana saidthattheexplanation wasnotexactly astheUnited States
described. HisGovernment hadadatabase forprices, andcustoms officials hadtheirownwayof
identifying quality goods.
B. Philippines
2.8 Therepresentative ofthePhilippines stated thathisnational submission hadbeencirculated
asG/PSI/WP/W/4. Inhiscountry 'sexperience, thefactthatthere hadbeennoapplication submitted
totheIEcould beexplained byhiscountry 'sowninternal appeals mechanism, available forexporters
aswellasforimporters. Even theCustoms Bureau could bring cases ifitbelieved thatvaluation and
classification findings ofaPSIcompany wereerroneous orinaccurate. Inallcases, when theimporter
brought anappeal, itsgoods would havealready beenreleased from customs withabond forany
outstanding debt. Thisavoided anydelays caused bytheappeal. Should theimporter bedissatisfied
withthefindings oftheappeals, therewereother legalremedies including judicial redress. Therefore,
itwasnotcorrect tosaythatArticle 4oftheAgreement wasnotbeing utilized. TheCustoms Bureau
ortheappeals mechanism hadthefinalsayonvaluation andclassification. Exporters andimporters
hadnothing tofear. Itshould beuptotheIEtodecide ifitwould receive complaints from trade
associations, butheconsidered itmorehelpful totheIEifcomplaints weredetailed andprovided specific
information. Onprice verification ,hisGovernment compelled PSIcompanies tooperate within the
existing Philippines customs valuation lawwhich by1January 2000 willbebased ontheWTOG/PSI/WP/M/2
Page11
Agreement onCustoms Valuation. PSIcompanies therefore hadnoleeway tousearbitrary orfictitious
prices. Secondly, prices established byPSIcompanies forvaluation wererecommendatory andcould
besustained orrejected bycustoms officials ortheappeals committee. Further, PSIcompanies were
obliged toinform exporters andimporters ofthevaluation methodology being usedinaccordance with
Article 2.6oftheAgreement. Heappreciated thedistinction being made between therights and
obligationsofMembersunderthePSIAgreementandundertheCustomsValuationAgreement.Footnote
4toArticle 2.20oftheAgreement recognized thisimportant distinction andgaveduerespect tothe
flexibility ofdeveloping countries afforded byArticle 20.1oftheCustoms Valuation Agreement.
2.9 Onconflict ofinterest ,heconsidered thatinspection feescould bebased either onthesellers
invoice value orthedutiable value ofthegoods. InthePhilippines, inspection feeswere setasan
ad-valorem value oftheinvoice value. Under thismethod, anuplift ofthedutiable value would not
increase thefeesofthePSIcompany, asfeeswerebased ontheexporters 'invoice. Regarding inspection
fees, thePhilippines wasimplementing thetransaction value method. Several measures regarding
transparency hadbeenundertaken byhisGovernment asrequired byArticle 2.8oftheAgreement:
PSIentities inthePhilippines wererequired topublish anddistribute theGuidelines forExporters (GFE)
andtheData-sheet forExporters (DSFE); exporters andimporters could alsoobtain theRequest for
Information form (RFI) orfindinformation ontheinternet; PSIentities distributed information on
"PSIIndependent Review Procedures: Guidelines forExporters."
2.10 Theissuance ofClean Reports ofFindings toexporters andimporters byPSIentities was,in
many cases, contractually defined andclearly indicated inthedocumentation available toexporters.
Insome cases, theCRFwasprovided directly totheimporter topermit customs clearance, astheCRF
wasneeded forthatpurpose only. Insuchcases, PSIentities would either issuetheexporter anadvice
confirming thattheCRFhadbeenissued orprovide acopyoftheCRF. AcopyoftheCRFwasalways
available toexporters upon request. Inmany cases where exporters andimporters wererelated, the
CRFwasmade available totheexporters bytheimporters. ThePhilippine Government hadundertaken
stepstoensure compliance withthenon-discrimination principle byrequiring PSIentities tocarry out
inspections asuniformly asprovided intheGuidelines forExporters (GFE). Moreover, theAgreement
established atwo-tier appeal process toaddress concerns overpossible discrimination, firstwiththe
internal appeal mechanisms intheindividual country, andsecondly withtheIE.Tohisdelegation 's
knowledge, PSIaffiliates throughout theworld wererequired toobserve thesame setofperformance
criteria regarding bothphysical inspection andCRF issuance. PSIhead offices monitored such
performance andreported periodically touser-governments. Inaddition, anAdHocCommittee on
Comprehensive Import Supervision under theDepartment ofFinance oversaw theworking ofPSI
contracts andtheperformance ofPSIentities. ThisAdHocCommittee wasofaninter-agency nature
andhadauthority tomake recommendations totheCentral Bank Monetary Board, which inturn,could
revise thescope ofPSIinthePhilippines. Henoted thatapparently norecorded complaint on
discrimination hadbeenlodged against PSIentities.
2.11 Withregard toprotection ofconfidential business information ,headded that,totheknowledge
ofhisdelegation, most PSIentities were members oftheIFIA PSICommittee andwere committed
notonlytotheAgreement butalsotocompliance withtheIFIA Code ofPractice which included
confidentiality. InthePhilippines, information received byPSIentities, which wasnotalready inthe
public domain, wasnotreleased toanythirdparty unless under explicit permission bytheexporter
orimporter. Henoted thatthere appeared tobenorecord ofanycomplaint regarding leakage or
disclosure ofconfidential business information. Heconcluded thathisdelegation wasinterested in
learning more about thespecific concerns ofMembers, sothatthese could beaddressed andresolved
byhisgovernment inaccordance withtheobligations andrights under theAgreement.
2.12 Therepresentative oftheUnited States sought clarification onseveral issues. First, thewritten
submission ofthePhilippines indicated thattheservices ofPSIentities hadnothing todowiththeG/PSI/WP/M/2
Page12
requirement ofanyinternational financial institution tomeet revenue collection targets. However,
hisdelegation wasaware ofinterviews inthePhilippine media withrepresentatives ofPSIcompanies
operating inthePhilippines thatindicated thatrevenue targets were relevant fortheemployment of
PSIservices. Also, anadvertisement inaPhilippine newspaper byaPSIcompany indicated thatmeeting
revenue collection targets wasanimportant purpose ofitsoperation. Theadvertisement stated that
thePSIcompany inquestion had"provided assistance tothePhilippines Bureau ofCustoms notonly
inachieving, butsurpassing itsrevenue targets." TheUnited States wished toreceive clarification
whether revenue targets were partoftheservices contracted from thePSIcompanies. Apparently,
thePSIcompanyintherespectiveadvertisementbelievedthatitscontracthadtodowithreachingrevenue
targets. Ifthiswasnotthecase, thePhilippine authorities should communicate tothePSIentity that
thisbelief wasnotcorrect. Hisdelegation expressed concern withthepresence ofPSIentities inthe
Appeals Committee which wasestablished toreview anddecide disagreements overcustoms valuation
matters. Hewondered howthispractice wasconsistent withthestatement thatPSIcompanies were
never involved withthecollection ofcustoms duties inthePhilippines.
2.13 Herequested further elaboration onthepurpose, operation, andformal procedures ofthe
Technical Committee mentioned bythePhilippines. Hewelcomed thestatement ofthePhilippines
thatCRFs were attimes issued directly toimporters andwere available toexporters upon request.
However, hisdelegation readArticle 2.16ofthePSIAgreement ascreating apresumption thatCRFs
would besubmitted directly totheexporter bythePSIcompanies. With regard tothestatement in
thePhilippines submission thatCRFs areissued within 2.08daysofthegoods undergoing inspection,
hestated thatreports fromUSexporters indicated thatitoftentookthreeormore weeks toobtain CRFs
fromthePSIentity. Further, United States exporters hadindicated that,onnumerous occasions, they
hadbeensubject touplifts ofprices thattheybelieved werearbitrary. Inaspecific case, anexporter
hadbeensubject tovarying uplifts oftheinvoice value ofhisgoods from 10to90%overabout an
8monthperiod,whileinvoicevalueshadneverchangedforthesetransactions.Theseupliftshadresulted
inthousands ofdollars inadditional duties. United States exporters hadalsodescribed situations where
exports from other members appeared toreceive faster performance ofPSIcompanies andmore
favourable treatment regarding price verification thanexports from theUnited States. Thisapparent
discriminatory treatment hadinsomeinstances resulted inunwarranted interference inattempts toutilize
market opportunities bythese exporters.
2.14 Therepresentative oftheRepublic ofKorea asked whether anymechanism forpunishment
orpenalty existed inthePhilippines incaseconfidential business information wasrevealed, inbreach
oftheobligations ofthePSIAgreement. Secondly, onthestatement thattheAppeals Committee received
aweekly average of160cases forreview, hesought clarification astowhat portion ofthese cases
wasbrought byimporters andexporters respectively.
2.15 Therepresentative ofthePhilippines, preliminarily responded that,while notbeing aware of
anybreaches ofconfidentiality inthePhilippines, inother usercountries where suchincidences had
occurred, theresponsible staffhadbeenadministratively charged. Also, recourse tocivilandcriminal
process maybesought insuchcases. With regard totheportion ofcases brought before theAppeals
Committee byexporters andimporters respectively, hebelieved thatalmost allcases were brought
byimporters. Inresponse totheissues raised bytheUnited States, hestated thatinternational institutions
didnotrequire thePhilippines tocontract PSIentities tohelpoutinrevenue collection. Anyreports
bythemedia indicating theopposite wereincorrect asPSIcompanies wereneither contracted toreach
revenuetargetsnortocollectcustomsrevenue.CustomsrevenuewascollectedbytheBureauofCustoms.
ThetaskofthePSIproviders wasrather tohelpinphysical andpriceverification ofthegoods imported.
PSIentities werepresent intheAppeals Committee asnon-voting members. They werepresent only
toprovide information, astheystood inthefrontline oftheverification process. OntheTechnical
Committee, further information would berequired fromthecapital. With regard tocases ofdelayed
issuances ofCRFs, theexperience ofthePhilippines showed thatinalmost allinstances theexporterG/PSI/WP/M/2
Page13
hadnotprovided thenecessary documentation. Without thisdocumentation, PSIcompanies could not
proceed. Onthespecific casementioned bytheUnited States concerning theuplift ofprices, he
requested detailed information inorder tofollow up.Concerning thealleged unfavourable treatment
ofUSexporters, hestated thattheUnited States wasthelargest exporter tothePhilippines. Thematter
would havetobereferred tohiscapital foraresponse tobepresented atasubsequent meeting.
C. Peru
2.16 Therepresentative ofPerustated thathiscountry hadstarted itsPSIsystem inMarch 1992.
Thesystem, which hadbeenadopted bygovernmental decision, hadthusbeeninpractice before the
Agreement wasconcluded. Inspection contracts weremandated bytheMultisectoral Sub-Commission.
Thereason fortheuseofPSIservices inPeruwastheprevention ofundervaluation ofimports. PSI
entities were responsible fordetermining thevalue ofthegoods which wasthenused forthe
determination ofthecustoms value. Inspection certificates tobeobtained intheportoforigin or
shipment weregenerally required forgoods withanf.o.b. invoice value ofoverUS$5,000 andgoods
which were covered bythecustoms system forimports orwarehousing storage.
2.17 Ontheissue ofprice verification ,heexplained that,under thePeruvian system, PSIentities
wereresponsible forcustoms valuation. Their taskwastodetermine quantity, quality andpriceofthe
goods toimplement thecustoms valuation rulesinPeru'snational legislation. AsPeruwasdelaying
application oftheprovisions oftheCustoms Valuation Agreement under Article 20ofthatAgreement,
PSIentities determined thecustoms value ofinspected goods under theusual method ofvaluation.
ThePeruvian valuation system wasrespecting theconditions oftheAgreement, andwasapplying,
asfaraspossible, thetransaction value. Headded thatPeruhadintroduced rules initsnational
legislation under which PSIentities wereinstructed tomaintain confidentiality ofbusiness information
provided bythose companies involved intrade. Theinformation obtained byPSIcompanies wasnot
passed ontoanyother body. Todate, Peruvian authorities hadnotbeennotified ofanyproblems
inthisrespect andunderstood, therefore, thatthisrulewasrespected inPeru.
2.18 ThePeruvian experience alsodidnotshow anysigns ofdiscrimination ofspecific countries
orusers. Asystematic procedure existed forverifying inspection certificates forpossible errors or
inconsistencies. Thenational customs supervisory board wasresponsible forensuring compliance with
theruleofnon-discrimination andaccountability ofPSIentities. Asfarastransparency wasconcerned,
allinformation necessary forfulfilment ofrequirements relating toinspection wasfully known to
importers asitwascontained inthenational legislation andwaspublished inPeru'sOfficial Journal.
Under therequirements ofthePSIAgreement, Peruhadnotified totheWTO allrulesandregulations
inconnection withPSI.Peruwassatisfied withthemeasures adopted inorder toensure transparency.
Examples werethenotification toimporters ofthelistofrequirements withrespect toinspection, the
publication ofdetailed guidelines forexporters andimporters andregulations onappeals. Information
ofrelevance wasdisseminated totheusers ofthesystem.
2.19 Ondelays ,thePeruvian representative pointed outthatnational regulations inhiscountry
provided fortheissuing ofaninspection certificate within 3working daysfollowing receipt ofthe
finaldocuments. Hestated thatthiswasashorter period thanthe5daysrequired byArticle 2.16
oftheAgreement andwasrespected strictly. Finally, heremarked thatnational importers hadrecourse
toanappeals system regarding questions ofcustoms aspects andoflevies tobepaid, aswellasnon-
customsissueswhichmaygiverisetodisagreementsbetweenimportersandPSIentities.AMultisectoral
Subcommission wasresponsible forconsidering anycomplaints between PSIbodies andimporters.
Intherequest forinspection byimporters, aclause wasincluded thatstipulated thatimporters agreed
tosettle anydifferences through theuseofnational mediation procedures. Insum,Peruwassatisfied
withthecurrent PSIsystem which wassuccessfully implemented.G/PSI/WP/M/2
Page14
2.20 Therepresentative oftheUnited States saidhewould follow upwithquestions atalatertime.
Hereiterated hisdelegation 'sconcern withtheinvolvement ofPSIcompanies incustoms valuation
activities.
2.21 Therepresentative oftheEuropean Communities shared theconcerns raised bytheUSand
reserved therighttorevert tocertain issues atalatermeeting.
2.22 Therepresentative ofArgentina asked whether under thePeruvian system theimporter was
theonlyparty responsible forthefunding oftheinspection services.
2.23 Therepresentative ofPerustated thatheunderstood thequestions raised tobeintheframework
ofunderstanding thevarious national experiences andnotforoverseeing theworkofPSIusercountries.
Hepointed outthatprice verification wasdonewithaviewtolevying duties. Asfarasthefunding
ofPSIoperations wasconcerned, importers weretheonlycontributors tothefunding ofPSIoperations.
Theywerepaying a1%feeofthedetermined value ofthegoods. Neither exporters northegovernment
were involved inthefunding ofthesystem.
2.24 Therepresentative ofNewZealand expressed hisinterest inobtaining moredetailed information
onthequestion ofthesystematic procedures forverifying inspection certification, andabout thekinds
ofprocedures thatthisentailed.
2.25 Therepresentative oftheUnited States emphasized thattheexercise ofreviewing national
experiences was,intheviewofhisdelegation, veryuseful. Hereiterated thatUSexporters werefacing
welldocumented problems, some ofwhich userMembers maynotalways beaware. Itwasthususeful
torelate thevarious national experiences totheprovisions oftheAgreement tounderstand howthe
Agreement wasimplemented andtoexplore avenues forresolving problems.
2.26 TherepresentativeofAustraliarequestedfurtherinformationonthePeruvianappealsprocedures,
specifically withregard toclauses within thecontracts referring tonational mediation services, and
theroleoftheMultisectoral Sub-Commission insuchmediation.
D. Colombia
2.27 Therepresentative ofColombia stated thatPSIforimports hadbeenintroduced inColombia
onlysince thesecond halfof1995. Hemade fourpoints. First, onlyspecific categories ofgoods
whichweresensitivetofraudandotherunfairtradepracticesweresubjecttomandatoryPSIinColombia.
Also, incaseanti-dumping orsafeguard measures were ineffect withregard tocertain goods, PSI
wasmandatory. PSIservices could alsobeusedbyimporters onavoluntary basisinorder tofacilitate
customs clearance. In1996, 26%ofColombian imports hadbeensubject toPSI. Secondly, inorder
tosetupoperations inColombia, PSIentities hadhadtoshow thattheyoperated atleast50offices
inatleastanequal number ofports from which Colombian imports were shipped, including inthe
following countries: China, Ecuador, theEuropean Union, Japan, Korea, Mexico, Panama, Peru,
Taiwan, United States andVenezuela. Thirdly, concerning thepromptness ofissuing Clean Reports
ofFindings ,hestated that,inorder toaddress grievances, theColombian Government hadenacted
adecree thatenabled theimporter toremove thegoods provided thathecould show thathehadrequested
acertificate 10daysbefore thegoods were shipped andthattheinspection entity hadnotissued a
certificate within the15daysfollowing therequest. Finally, asregards price verification ,Columbia
wasusingtheWTOvaluationsystemeventhoughithadinvokedthereservationasprovidedinArticle20
oftheAgreementonCustomsValuation.Thus,inColumbiathecustomsvalueofagoodwasdetermined
bythetransaction value oftheimported good. However, duetothedifferences ofthetransaction value
method fromthepriceverification criteria oftheAgreement, difficulties intheapplication ofcustomsG/PSI/WP/M/2
Page15
valuation hadoccurred. These difficulties hadbeennoted andwerebeing examined bytheColombian
Government.
2.28 Therepresentative oftheUnited States stated thatinhisopinion, there wasnoroleforPSI
entities inanti-dumping andsafeguard investigations.
2.29 Therepresentative ofArgentina sought information onthefinancing ofPSIentities under the
Colombian system.
2.30 Therepresentative ofNewZealand asked what proportion ofthe26%ofimports thathad
undergone PSIin1996resulted frommandatory PSIandwhatproportion occurred onavoluntary basis.
2.31 Therepresentative ofColombia replied thatanti-dumping orsafeguard investigations were
conducted bythecompetent authorities inColombia, andinformation onthegoods subjected to
anti-dumping orsafeguard measures wasmade available tothePSIcompanies. Onfinancing, hestated
thatimporters paidforthefinancing andthataceiling of1%ofthevalue ofthegoods inquestion
wasset.Heexplained that,in1996, goods subject toinspection, i.e.those subject tomandatory
inspection, were26%ofoverall imports. Obviously thefigure could varydepending onimport levels
ofthegoods inquestion.
2.32 Therepresentative ofEgypt informed theWorking Party thattheEgyptian General Authority
forSupply Commodities usedtheservices ofPSIcompanies toinspect wheat imports fromcountries
other thantheUnited States, Australia andCanada. Egypt could thusbeincluded inthelistofPSI
usercountries.HestatedthatmoreinformationontheexperienceswithPSIbyEgyptwouldbesubmitted
atalatermeeting.
2.33 TheChairman considered thatEgypt should beincluded inthelistofPSIusercountries.
2.34 Therepresentative ofNewZealand stated thathisdelegation wasinterested inlooking atways
toimprove theAgreement toensure thatconflicts ofinterest would beminimized inthefuture. In
thiscontext,henotedaparticularlyimportantcase:PSIentitieswithbusinessinterestsincertainproducts
andindustries should beexcluded from participating ininspections ofsuchproducts. Article 14of
thePSIAgreement should beamended totakeaccount ofsuchcases.
2.35 Therepresentative oftheUnited States presented further information onthenational experience
ofUSexporters withPSIcompanies asindicative ofgeneral problems withPSIentities. Heoutlined
some problems asaportion oftheoverall problems ofUSexporters thatUSofficials received every
day. Inonecase, amanufacturer stopped scheduling inspections atacertain facility because thePSI
inspector hadrepeatedly entered restricted areas. OnonesuchvisitthePSIinspector hadtoberemoved
from thepremises ofthemanufacturer, ashewasfound wandering intheproduction areaandwas
taking photographs oftheproduction lines. Future inspections hadtobescheduled atanother production
site.Inanother case, aPSIinspector hadfailed toarrive forthescheduled inspection, withtheresult
thattheshipment hadtobererouted toathirdcountry toaccomplish theinspection. Thegoods had
thentobetrucked totheirultimate destination, causing asignificant delay. Inanother instance, aPSI
inspector wasnotavailable ontheshipping date,eventhough therequest forinspection hadbeenmade
wellwithin therequired advance notification period. Inafourth case,aninspector hadasked acompany
which wasnotmaking ashipment foraprice listtosetabaseprice foranother shipment eventhough
thatshipment wasfrom adifferent company. Generally, many inspectors hadonlylittleorno
knowledge oftheproducts concerned. With oneinspector, ithadbeenalmost impossible toschedule
inspections atall.Inonecasewhere acompany hadoffered athreedaywindow forinspection despite
constraints onthecompany regarding demands ofloading capability, product arrival, container
availability, andshipping schedules, theinspector hadnotagreed totherequest forconducting theG/PSI/WP/M/2
Page16
inspection within thisthree dayperiod. Intheend,itappeared thattheshipper hadalways to
accommodate theschedule oftheinspector, which meant thattheplayer withtheleastflexibility had
toaccommodate theplayer withthemostflexibility. Hestated thatanother common problem related
tolanguage skills ofinspectors. Inmany cases, these wereonlyrudimentary, which ledtoincreased
misunderstandings andconfusion. Heconcluded thattheabove mentioned cases were notisolated
incidents, andhisdelegation would prepare asubmission summarizing cases.
2.36 TheChairmansuggestedthatthepresentationanddiscussionofnationalsubmissionsbeapriority
atthisandallsubsequent meetings oftheWorking Party. Hereconfirmed thepreliminary nature of
thecurrent discussion onthevarious national experiences. Pending issues would bereverted toat
alaterstage, ifnecessary withelaborations byexperts. Alistofthose issues raised thatrequired
clarification andofallquestions raised withregard tonational submissions would becirculated well
inadvance ofthenextmeeting oftheWorking Party. Further, allnational submissions would beput
together intooneWTO document andadded toasnewsubmissions were made.
3. Other business
A. Survey questionnaire from theChairman
3.1 TheChairman circulated asurvey questionnaire thatheproposed tosendtotheHeads of
Delegations ofallMembers. Hisintention wasthatthissurvey would beforwarded totheappropriate
individual orindividuals intheappropriate Ministry incapitals forcompletion. Heexplained thatthe
purpose ofthesurvey wastohaveclear, uniform andfactual basisonwhich toassess thePSIAgreement
anditsfunctioning. Given thelimited number ofnational experiences submitted andthedearth of
factual dataonthesubject ofPSI,itwasanattempt tocollect dataonthesubject. Although itwas
tobecompleted onavoluntary basis, henevertheless hoped thatallMembers would dosoinorder
tohaveascomprehensive asample aspossible. Hewould thenrequest theSecretariat tocompile this
factual datasothattheWorking Party hasauniform andfactual basisonwhich tocontinue itsreview.
3.2 TheWorking Party tooknoteoftheChairman 'sinitiative andagreed tocarry outthesurvey.
B. Dateofthenextmeeting
3.3 TheWorking Party agreed ontheitems tobeincluded intheagenda ofthenextmeeting. Item
onewould be"National Submissions", where newsubmissions could bepresented orelaborations on
submissions already discussed could becontinued. Thesecond itemwould be"Review andexamination
oftheresults ofthesurvey exercise", where responses tothesurvey/questionnaire would beconsidered
bytheWorking Party. Thethirditemwould bethe"Chairman 'sformal working document andrelated
papers", followed by"Other Business". Theitems would bediscussed firstinaninformal meeting
on23September, andthenintheformal meeting on24September 1997.