RESTRICTEDWORLD TRADE
ORGANIZATIONG/PSI/WP/M/7
12 November 1998
(98-4487)
Working Party on Preshipment Inspection Original:  English
MINUTES OF THE MEETING OF 6 AND 8 OCTOBER 1998
Chairman:  Mr. Edward Brown (United Kingdom)
The agenda proposed for the meeting, contai ned in WTO/AIR/925, was adopted as follows:
Page
1. Exchange of views on the programme of work............................................................ 1
A.  Issue No. 1:  code of conduct/practice fo r PSI en tities ........................................... 4
B.  Issue No. 2:  a sta ndard inspecti on format.............................................................. 5
C.  Issue No. 3:  selective examination of shipments................................................... 5
D.  Issue No. 4:  a uditing of PS I entitie s....................................................................... 6
E.  Issue No. 5:  promotion of  competition amon g PSI en tities ................................... 6
F.  Issue No. 6:  fee st ructures for PSI entitie s.............................................................. 7
G.  Issue No. 7:  the use, to user Members, of building price databases ..................... 8
2. Trade faci litatio n ........................................................................................................... 9
3. Technical as sistance ...................................................................................................... 10
4. Exchange of views on the report of the Working Party to the General Council ........ 11
5. Other bus iness ............................................................................................................... 12
_________________
1. Exchange of views on the programme of work
1.1 The Chairman noted that the Working Party had had an interesting and informative informal
session earlier in the day.  The presentations heard had gone further toward clarifying some of the
issues in the work programme.  He noted that the Secretariat had compiled the views that had been
presented at the last meeting under each issue in document G/PSI/WP/W/18.  Additionally, a paper
had been received from the European Communities and was circulated in G/PSI/WP/W/19 which set
out their positions on the various topics.  He requested Members to present their views on these
issues, taking them in the order in which they were found in the agenda.  He added that it would beuseful if Members, in making their interventions, could keep in mind the main objective which was to
have an exchange of views on these issues with the aim of ultimately focusing thoughts into a
coherent report.  A consensus need not be found on each topic, but he considered it would be useful if
each Member could reflect on how their views might in some way relate to the Agreement on PSI.
Although the Working Party's mandate was to have an exchange of views on these issues, it would be
useful to the overall exercise if the Working Party could somehow tie the exchange of views to the
original mandate which was to conduct a review of the Agreement.G/PSI/WP/M/7
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1.2 The representative of Argentina noted that, at the last meeting, some Members had requested
his delegation to explain certain aspects of its experience with PSI.  Therefore, the Chairman of the
Executive Committee of his Government's PSI unit had come to explain to the Working Party various
aspects of the PSI programme without prejudice to future comments under other issues on theWorking Party's agenda.
1.3 The Chairman of Argentina's PSI Executive Committee explained that the Argentinian
programme had begun in December 1997.  The programme was initiated to control problems of non-
compliance in the external sector.  These problems had to be understood in the context of a crisis in
the customs administration in Argentina which was caused by a variety of reasons.  The Ministry of
Economy decided to put into practice a programme of customs modernization including severalinstruments one of which was the PSI programme.  The programme was implemented on a partial
basis, that is only consumption goods and automobiles were included as they were the riskiest imports
in terms of under-valuation and non-compliance.  At the same time, his Government decided to
implement the programme in such a way as to give  importers the opportunity to choose the company
which would conduct the preshipment inspection.  In this regard, six companies were qualified by theGovernment and were presently working in Argentina.  It was also decided that the programme would
be financed through private funds and not by importers and the cost of the programme would be a
percentage of declared value by importers.  From the beginning, it was decided that the programme
should have an auditing component to guarantee that companies were not going to compete on a
different basis given that no price was fixed for the service.  On this understanding, an internationaltender was conducted, and a company was selected which was now conducting auditing of the
programme in Argentina.
1.4 The expert presented some results of the programme after six months of operation.  The main
point was that the value of each kilogram of imports had increased on average around 25 to 30 percent, although some months had shown higher increases and some months lower increases.
Comparing the situation of goods subject to PSI and those not subject to PSI, in general the value per
kilogram for goods subject to PSI were much higher.  He also showed a comparison of those goods
that would have been covered by the PSI contract, but not subjected to PSI because they fell below the
threshold of US$ 3000.  The value per kilogram in this case was below values for 1997 and 1996
indicating that PSI behaved in Argentina as a deterrent to under-valuation.  He noted that the same
situation appeared when the rest of the goods were compared, i.e. commodities, capital goods orinputs.  His Government was confident that the PSI  system was working, although some adjustments
might take place.
1.5 Regarding auditing, his Government always was of the view that if there was no price
competition but only service competition, auditing would be necessary to guarantee that no companywas trying to get customers on an unfair basis.  The auditing system had been in place in Argentina
since last March.  His Government had a contract with a company and it was choosing randomly a
percentage of certificates each month with a mi nimum of 4 per cent and a maximum of 10 per cent.
The company issued a report every month and his Government noticed that, although it did not have
problems with the PSI system, the auditing company was helping in adjusting things such as tariff
classifications or the issuance of certificates.  Th e auditors' report was taken as an indicative element.
He noted that in Argentina, the PSI system was not replacing customs.  According to Argentinian law,
customs kept all its faculties given by law, meaning that PSI companies were working as a support to
customs.  This was important as his Government did not accept the view that PSI meant a sort of
privatization of customs.  Customs was an important part of the Argentinian system and had to play arole with means to reinforce it.  Finally, he adde d that the PSI system in Argentina included a system
of technology transfer which had been put into practice and which was expected to be completed once
the contract would be finished in two or three years.G/PSI/WP/M/7
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1.6 The representative of Colombia noted that Argentina applied the WTO Agreement on
Customs Valuation.  The concept of transaction value differed from the idea of price verification laid
down in Article 20 of the PSI Agreement.  He asked what the experience of Argentina was in terms of
price verification in transaction terms.
1.7 The expert from Argentina stated that the law in Argentina mandated customs to use the
transaction value.  His Government requested companies to value goods according to the transaction
value.  In addition, the contract with the auditing company specified the transaction value.  He did not
see any contradiction with the Agreement on Customs Valuation and, so far, PSI companies were
assessing prices of imports on the basis of transaction value.  The auditing company was assessing the
certificates from PSI companies on the basis of transaction value.  So far, there had been no problems.
1.8 The representative of the Philippines was interested in the presentation by Argentina because
of the novel approach to PSI.  She asked what had been the experience of importers and the
Government with the fact of having six companies to conduct PSI.  Did this system facilitate trade
and who paid for the inspection of the goods?
1.9 The representative of Argentina reiterated that the legislation establishing the PSI system in
Argentina stated that the system could be implemen ted with a maximum of eight companies.  So far
six companies had been qualified.  He considered that the experience had been quite positive.  Before
the system was implemented in Argentina, there were many voices against using PSI, some of which
came from the Congress.  There was considerable fe ar that one or two companies would dominate the
contract.  The fact of qualifying six companies showed that the Government wanted to promote fair
behaviour in external trade.  Importers were given the opportunity to choose whichever company they
wanted.  After almost one year of experience, he was convinced that Argentina had made the correct
decision.  He added that the Government was paying for the system through its budget.  Since August
95,000 certificates had been issued on 25 per cent of all imports (consumption products andautomobiles), and there were no more than 100 claims  against the system.  Most of the claims had
been discarded because in many cases they were not really claims but only issues of confusion.  There
had been no complaints so far that PSI companies were delaying the clearance of goods as some
special processes had been implemented for some goods demanding fast clearance, like food or
medical supplies.  He added that when the system was implemented in December, each week two or
three chambers in the Ministry were demanding that the system not be implemented.  Now the
Ministry had two or three chambers a week asking that there goods be covered by the system.Demands were coming from industry for including inputs and capital goods and other items which
were not considered risky.
1.10 The representative of the United States, noting that Argentina used increases in valuation as a
standard for judging success in its programme, asked whether this was the correct criterion for such
judgement.  He also noted that he was aware that  the costs of two PSI programmes approached two to
three times the budget of the customs administrations in these countries.  He asked whether, in
considering the Argentinian programme, consideration had been given to whether the money paid to
PSI companies would not have been better spent in customs modernization and reform.  Finally, he
asked whether any thought had been given to im plement a PSI programme which was more based on
random checks, similar to the auditing programme.
1.11 The expert from Argentina agreed that the success of a programme was not only measured by
increasing values.  However, another measure that was more subtle was the amount of resources
devoted to compliance.  When a programme was based on trying to capture those individuals thatwent outside of the law, this gave the right message to those who thought that they should stay in the
legal channels for doing business.  One needed a consistent system in which some importers would
not feel that they were complying but that others were getting away with illegalities.  Regarding the
second question, he stated that if money were put into an organization that was undergoing a crisis, itG/PSI/WP/M/7
Page 4
would be like putting money into a programme with no return on the investment.  Customs in
Argentina had been and was still undergoing a serious crisis.  The idea was to tackle the problem in
different ways.  Customs had to be modernized and reformed, but at the same time, other programmes
had to be put into practice to start correcting the problem of under-valuation and unfair competition to
domestic trade.  The programme was implemented with the condition that it should entail a transfer oftechnology; this was taking place.  Regarding the budget, the programme was costing about US$ 50
million a year and the customs budget was much higher than that.  His Government considered that it
was making good use of its money.  The ratio of PSI costs  to returns was 1 to 9 or 1 to 10.  Regarding
the third question, the auditing system was almost randomly managed.  The Government had the
possibility to suggest to the auditing company to deliberately analyse some cases, deviating from the
random nature.  Although whenever an auditing system is used, a random procedure is usually the
best way of proceeding.  His Government did not believe that a random procedure would be useful forPSI because the risky sector was already identified, i.e., that was consumption goods and automobiles.
1.12 The Chairman asked how long the Argentinian contract was and whether there was any clause
in which the Government could cut it short should customs be successful in sorting out the crisis in
the customs administration.
1.13 The expert from Argentina made a distinction between the PSI company and the auditing
company.  The former was hired for its services and not for a fixed period;  the latter was hired for a
period of two years.  The Government considered th at it would use PSI for at least two years but not
more than three years.
A.  Issue No. 1:  code of conduct/practice for PSI entities
1.14 The Chairman noted that IFIA had explained to the Working Party its Code of Conduct.  It
had also been said that the PSI Agreement itself presented a sort of Code of Conduct for PSI entities.
However, it had been pointed out that its enforcement might not be adequate.  He asked if delegations
considered that another Code of Conduct would be  necessary, and if the Swiss proposal for a model
contract would help in enforcing the Agreement.
1.15 The representative of the European Communities noted that its view on the Swiss proposal for
a model agreement had been included in its communication circulated in document G/PSI/WP/W/19.
He assumed that the Swiss delegation had presented a complete text of a model agreement in its
communication, since aspects such as confidentiality, scope and site of inspection, transparency,
confidentiality, etc. were included.  He asked nevertheless if this was a complete model agreement or
whether the Swiss delegation wanted to add any other components.  He stressed, however, that
preparation of a model agreement should not distract from the Working Party's primary and majorobjective which was the modernization of customs infrastructure in user Members.
1.16 The representative of Switzerland stated that her delegation considered its proposal to be a
complete model agreement.  Her delegation had made this proposal as a contribution to the work of
the Working Party and welcomed any additions or amendments that delegations may considernecessary.  The proposal should be seen as a flexible tool to improve the implementation of the PSI
Agreement.  This meant that it was also flexible to user Members and PSI entities to amend;  it was
not meant to be a take-it-or-leave-it proposition.
1.17 The Chairman suggested that the EC and the Swiss delegation discuss this matter bilaterally
and, if necessary, comments could be followed up in writing.
B.  Issue No. 2:  a standard inspection formatG/PSI/WP/M/7
Page 5
1.18 The Chairman noted that IFIA had proposed at the earlier informal meeting to standardise the
data-sheet for exporters which advised exporters of specific country requirements.  He asked if
Members considered this a worthwhile suggestion?  He also noted that IFIA was willing to explorewith the ICC further areas where standardization could be beneficial with a view to facilitating the
flow of trade.
1.19 The representative of the Philippines considered that the Working Party should encourage the
work that had been initiated by IFIA and the ICC.  This could be useful for future discussions in the
Working Party.
1.20 The representative of Colombia viewed a standardized data sheet favourably.  This format
could make PSI function better.
1.21 The Chairman noted that the Working Party could point out to the ICC and IFIA that
whatever ideas they formulated on standardiza tion should be based on the United Nations Layout
Key.
1.22 The representative of Australia agreed with the Philippines and Colombia and noted that this
was an idea in which her delegation was very interested.  In keeping an eye on developments between
ICC and IFIA on standardizing, the Working Party could also stay attuned to possibilities forstandardization in other areas.
1.23 The representative of New Zealand stated his delegation's support for this work which it
considered useful to avoid confusion amongst exporting countries.
1.24 The Chairman considered that the Working Party had made progress in bringing the ICC and
IFIA together to identify possible areas where standardization could be beneficial.   He requested that
these two organizations keep the Working Party actively informed as this was an important area
where all could gain.
C.  Issue No. 3:  selective examination of shipments
1.25 The Chairman recalled that at the informal meeting earlier, the Working Party had heard how
selective examination of shipments worked in practice and the benefits to customs from using such
practices.  He noted that IFIA had agreed in principle to the notion of selectivity.  He asked if
Members considered that the Working Party could make a recommendation to PSI entities and userMembers?
1.26 The representative of the Philippines informed the Working Party that her Government was
beginning to use selective preshipment inspection and advance clearance systems.
1.27 The representative of the United States considered this issue very important, as well as the
issue of standardization.  Both issues were highly relevant to the overall discussions on trade
facilitation.
1.28 The representative of Ecuador agreed that it was desirable to selectively examine shipments.
However, before making a formal recommendation, the Working Party would have to take into
account the fact that some Members may not yet be in a position to use selective examination.  There
were areas and sectors where such an approach could be not be applied.G/PSI/WP/M/7
Page 6
1.29 The representative of New Zealand noted his delegation's interest in this area.  The use of
risk assessment techniques in the examination of shipments was becoming a highly developed
practice.  His delegation considered that it could be increasingly applied to this area as well and,
therefore, welcomed the initiative that had been taken with IFIA.
1.30 The representative of Argentina considered that it would be difficult to have a harmonized
view with recommendations in this area because every user Member contracted with PSI for different
reasons.  It was up to Members to decide whether or not they would use selectivity or implement a
more gradual system of, for example, 100 per cent PSI and then decreasing gradually.  The only
recommendation that he could envisage would be that each country should manage selectivity
according to its needs.
1.31 The representative of Australia noted her delegation's interest in this area.  This should be
seen not only in the context of trade facilitation, but also in the context of technical assistance in view
of modernizing customs and capacity building.
1.32 The representative of Philippines supported the views expressed by the representatives of
Ecuador and Argentina that this item was probably beyond what PSI entities could be expected to do
because it was up to user Member governments to determine what they had to do.  If the user Member
governments, like in the case of the Philippines, had mandated PSI companies to conduct selective
examination of goods, than they could do it.  Without such a mandate the companies could not
conduct this activity.
D.  Issue No. 4:  auditing of PSI entities
1.33 The Chairman noted that, at the informal meeting, the Working Party had heard from the
representatives of SWIPCO how auditing worked in practice.  It would be important to bear in mind
that the recourse to auditing by some user Members was increasing.  At the last meeting, the Working
Party heard some clearly contrasting views on this issue.  He asked if it was within the remit of the
Working Party to make any observation or recommendation on the use of auditors, whilst it was not
originally foreseen in the Agreement?
1.34 The representative of Argentina stated that his Government's experience suggested that all
PSI systems should have an auditing component.  It  guaranteed transparency, that normal procedures
would be followed, and that the system was directed not against any particular body.
1.35 The representative of the European Communities considered that the information provided to
the Working Party was not sufficient.  His delegation saw much room for further reflection on this
item.  He did not consider the answers provided at the informal meeting by the representative of
SWIPCO entirely satisfactory.  However, he stressed that auditing practices had to be conducted in
such a way so as to avoid arbitrariness, undue delays and the use of fictitious prices.
1.36 The representative of the Philippines stated that her delegation's views on this issue had been
elaborated before.  While it did not have a problem with auditing, per se,  the service was relatively
new and most of the functions appeared similar to PSI entities; it seemed that one was checking
against the other.
E.  Issue No. 5:  promotion of competition among PSI entities
1.37 The Chairman believed that the Working Party could agree that promotion of competition was
a healthy concept.  However, the question arose as to whether this was an area where the Working
Party would like to make a statement or recomme ndation in its report to the General Council.  CouldG/PSI/WP/M/7
Page 7
the Working Party advise user Members that contracts with PSI entities should be tendered in a way
that provided for competition among PSI entities?
1.38 The representative of Korea had only received general information from exporters on this
issue rather than concrete examples.  According to exporters, in cases where a company could choose
from more than one entity, the general attitude of PSI companies was more cooperative and polite and
the cases of delays had decreased compared with the situations where only one entity was involved.
This could be explained by the different situations of each case.  Where an entity had monopolistic
power, it was difficult to complain to them directly or through other institutions due to the fact that
they would have to deal with the PSI entities again at a later time.  In this regard, competition would
be a very useful way to alleviate the difficulties of exporters.  He added that two types of competition
could exist:  one would allow exporters to choose among PSI entities;  and the other type would allowimporters to choose the entities.  His delegation would prefer the first type.  However, considering the
oligopolistic situation in the PSI industry, it would be difficult to take this approach.  Therefore, it
would be more appropriate to use the second type of competition.  Whilst competition was not the
only way to solve the problems with PSI entities, it was worthwhile to encourage Members to provide
for competition in their contracts to the extent possible.
1.39 The representative of New Zealand stated that in previous sessions, his delegation had
expressed support for enhanced competition between PSI entities.  His delegation recognized that,
given the structure of this market, it was not always possible to have multiple companies available in
all situations.  The Working Party should encourage in its conclusions that user Member governmentsprovide for competition among PSI entities.  At the exporting end, the provision of choice further
enhances the quality of the inspection.
1.40 The representative of the Philippines supported the idea of competition,. Hearing the
experience of Argentina was extremely useful.  At the June meeting of the Working Party, she had
requested hearing the experiences of exporters with the user Members that had contracts based on
multiple choice among companies.
F.  Issue No. 6:  fee structures for PSI entities
1.41 The Chairman recalled that the Working Party had heard from IFIA, at the informal meeting,
that they would support changing the fee basis to ad valorem  of the declared value, instead of the
value determined by the PSI company for all new contracts or renewals of existing contracts relating
to PSI for customs purposes.  The IFIA representative had also stated that in the Latin American
countries where there were several PSI companies operating, the fees were freely and competitively
negotiated between the importers and the PSI companies within maximum and minimum limits fixed
by the user governments.  The IFIA representative stated that these fees generally reflectedcommercially applicable rates and approximated the cost of the service and, therefore, in their
opinion, went towards meeting the requirements of Article VIII of GATT 1994 which was raised by
several Members at the last meeting.  He asked if Members had anything to say with regard to the two
systems, the one which IFIA said that it would support, and the one used by many Latin American
countries?
1.42 The representative of Peru noted that her country was one of the Latin American countries
which used a fee system for PSI entities based on ad valorem  of the declared value of goods.  Her
Government's experience had been fairly positive because it also used a system in which there was
competition amongst the PSI bodies.  Importers could choose which of the bodies they wished to usefor the inspection.  She concluded that the system  was working well in Peru and there had been no
complaints neither by importers nor by exporters.G/PSI/WP/M/7
Page 8
1.43 The representative of the European Communities stated that his delegation's position on this
item was contained in its communication.  However, he stressed that the IFIA proposal was an
improvement of past practice, i.e., that the ad valorem  fee structure should be based on the invoice
price and declared value by the exporter.  He furthermore stressed that fee costs should be borne by
user Governments and not by exporters.
1.44 The representative of Australia, although interested in IFIA's proposal, was also very
interested in the question of the practicability of flat fee structures and any studies behind this
concept.  Her delegation was also very interested in Peru's statement and, as the work continued, the
Working Party might consider whether there was a need to link this issue with the item on
competition.
G.  Issue No. 7:  the use, to user  Members, of building price databases
1.45 The Chairman referred to the discussion of this item at the previous meeting, in particular as
concerned the interpretation of Article 7 of the Customs Valuation Agreement where there was a
reference to price data-bases.  It was clear that many countries used such databases as a tool to assist
in their investigations of fraudulent customs declarations.  However, the issue here was whether the
transaction value could be rejected based on a value in a price data-base.  The Agreement seemed to
make clear that price data-bases should only be referred to after all the methods to determine value in
the Agreement were tried and could not be used.  It was then that price data-bases could serve asreferences to find the value using "reasonable means consistent with the principles and general
provisions of the Agreement and of Article VI of GATT 1994."  Provided then that such databases
were used in a WTO consistent manner, i.e., not to reject the transaction value but as one of many
means available to highlight possible inaccuracies, could the Working Party refuse to acknowledge
the good intent of countries that had proposed this item?
1.46 The United States delegate said that he was submitting a paper as a basis for discussion on
this issue at a following meeting.  In introducing the paper, he noted that much had been said at the
informal meeting on the use of information databases with regard to risk assessment and selectivity.
While his delegation supported the use of available information and the trend to move towards risk
assessment,  he had noted the statement by the WCO that risk indicators for targetting involved
factors that went far beyond price.  However, th e subject of his delegation's communication was the
use of price databases in conducting customs valuation.  His delegation was concerned with what
appeared to be a trend to use such reference prices to reject value.  Under the terms of Article 7 of the
Customs Valuation Agreement, there were explicit prohibitions regarding the use of certain types of
prices, and throughout the Agreement, there was an overall prohibition against the imposition of
arbitrary or fictitious prices which could result from the use of price databases.  His delegation alsohad fundamental questions regarding transparency. There was also a clear link between price
verification and customs valuation.
1.47 The representative of the European Communities supported the communication by the United
States which reflected the ideas that his delegation had expressed at the previous meeting.1.48 The representative of Colombia stated that his delegation considered this as an area where
technical assistance could be afforded to certain countries.  His delegation's position on the issue was
clearly reflected in the minutes of the last meeting so it was not necessary to repeat it.  He wished to
state, however, that he did not consider that database s would lead to fictitious prices, as feared by the
EC.  Although his delegation shared certain concerns, it considered databases a useful tool in terms of
reference prices.  At the same time databases should not, in any circumstances, be a reason for
rejection of the transaction value under the Customs Valuation Agreement.  His delegation found theG/PSI/WP/M/7
Page 9
United States paper interesting, and considered that it would be useful to continue discussing this item
at a later stage.
1.49 The Working Party took note of the statements made.
2. Trade facilitation
2.1 The Chairman stated that at its meeting of 5 June and 8 July 1998 the Council for Trade in
Goods decided that "its Chairman would invite the Chairpersons of the committees on Customs
Valuation, Import Licensing, Rules of Origin, Sanitary and Phytosanitary Measures, Technical
Barriers to Trade, the Chairperson of the Working Party on Preshipment Inspection and, as
appropriate, the Chairpersons of other subsidiary bodies of the CTG to propose an item "tradefacilitation" for inclusion in the agenda of their meetings."  Under this agenda item, these bodies
would address those aspects of trade facilitation which they regarded as being related to the respective
agreements with a view to introducing the result s of these discussions into the informal CTG
discussions on trade facilitation in March 1999.  He presumed that this meant that if the Working
Party would like to say anything on this matter, it should do so in the report to the General Council at
the end of the year, which in any case, would pass through the Council for Trade in Goods.
2.2 He added that the CTG had also agreed that the core agenda for trade facilitation would
constitute the following areas of activity:
(1) import and export procedures and requirements, including customs and border-
crossing problems;  overview of the Kyoto Convention and its current revision process -
September 1998;
(2) physical movement of consignments (transport and transit);  payments, insurance and
other financial requirements which affect the cross-border movement of goods in international
trade - December 1998;
(3) electronic facilities and their importance for facilitating international trade;  technical
co-operation and development issues relating to simplification of trade procedures;
consideration of WTO Agreements relating to, or  including provisions on, trade fac ilitation -
March 1999;  and
(4) evaluation of the exploratory and analytical work to assess the scope for WTO rules
in the area of trade facilitation - June 1999.
He believed that the Working Party's task was to reflect on whether any of these core issues related to
the issues it was discussing under the PSI work programme.  One obvious issue where there would
seem to be overlap was the issue of technical assistance.  Many practices that would facilitate trade,
particularly in the customs area, would also go towards reducing the need for PSI services in user
Members.  However, there were likely other areas of overlap.
2.3 The representative of Canada agreed that one area of overlap was technical assistance.  In
addition, there were direct links in a number of areas which his delegation wanted to explore.  Clearly
one of the underlying themes the Working Party would need to examine was that, as PSI was a
transitional measure, how it could be ensured that, as part of this transitional measure, customs
administrations were able to modernize.  He raised the issues of selectivity and risk assessment and ofstandardization as areas to which the Working Party may wish to return.
2.4 The representative of the European Communities stated that his delegation saw a clear link
between the use of PSI and the objective of simplifying trade procedures including import and exportG/PSI/WP/M/7
Page 10
requirements and customs procedures.  His delegation's recent submission to the CTG made a number
of specific proposals regarding reduction, simp lification and international harmonization of
documentation and data requirements for imports and exports, automation and use of information
technology for transfer of data, and modernization of customs procedures.  He added that this
submission and other proposals made by other Members envisaged the modernizing and streamliningof customs border procedures which might not be facilitated by PSI operations.  His delegation saw
merit in the widest possible adoption within a WTO framework of trade facilitation measures of the
kind his delegation and other Members had proposed .  Adoption of such measures would make it
easier for user Members to move away from PSI, having established clear alternatives rooted in
modern customs procedures which would increase efficiency, make better use of resources, improve
control and revenue collections and help trade flows.  Of course, technical assistance would be a key
element.  His delegation saw the need for more in-depth discussion of trade facilitation and PSI insubsequent meetings.  In any case, the informal March 1999 meeting of the CTG foresaw a discussion
of other WTO Agreements and his delegation was c onsidering preparing a submission on the subject.
2.5 The representative of New Zealand agreed with the comments by Canada and the EU.  He
added that a substantial part of the work already undertaken in the Working Party went to the heart of
some of the elements of trade facilitation, in particular issues such as the code of conduct, standard
inspection formats, and selective examination.  He considered that, in focusing on trade facilitation
specifically, the Working Party should look at those elements that had been highlighted in the
mandate from the CTG which may not have been gi ven sufficient attention, such as documentation
requirements and electronic exchanges of information.  He cautioned against overlapping thediscussions too much since the Working Party would make an important contribution to trade
facilitation by formulating recommendations under its work programme.
The meeting was suspended and resumed on 8 October 1998
2.6 The representative of Colombia noted that many countries appeared to adopt PSI in order to
improve their own customs procedures in the hope of facilitating trade.  In Colombia, not all goods
necessarily underwent PSI and the decision was left to importers in order to facilitate trade.  His
delegation considered that PSI was a tool which facilitated trade.
2.7 The Working Party took note of the statements made.
3. Technical assistance
3.1 The Chairman recalled that the report adopted by the General Council, in recommendation 9,
called on the Working Party to conduct "an assessment of technical assistance activities in accordance
with Article 3 of the Agreement, and draw upon the assessment of technical assistance activities under
consideration in the Committee on Customs Valuation and the integrated framework for trade-related
technical assistance endorsed by the WTO High-Lev el Meeting for Least Developed Countries".  It
further added that "technical assistance activities, which should be administered on a request basis,
could include areas such as tariff and customs administration reform;  simplification and modernizationof systems and procedures;  and the development of  an adequate legal, administrative, and physical
infrastructure".
3.2 He added that from the Working Party's discussion under the previous agenda item, it seemed
clear that the above topics would fall under the subj ect area of trade facilitation.  Therefore, efforts
towards achieving the objectives of facilitating trade through customs reform and modernization of
systems and procedures would also satisfy the techni cal assistance needs of user Members.  Other areas
such as customs valuation, rules of origin and adopting and enforcing international standards and
technical regulations under the Technical Barriers  to Trade Agreement were current WTO areas ofG/PSI/WP/M/7
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activity in which considerable technical assistance was on-going.  It seemed, however, that a marriage of
these latter areas and the new trade facilitation areas would provide the most effective assistance to user
Members who wished to phase out their PSI programmes and build national capacity to conduct these
services themselves.  He added that there was the other aspect of this issue which was contained in the
language of Article 3 of the PSI Agreement which stated, "exporter Members shall offer to provide to
user Members, if requested, technical assistance di rected towards the achievement of the objectives of
this Agreement on mutually agreed terms".  Article 3 further contained a footnote which said that such
assistance could be on a bilateral, plurilateral or mu ltilateral basis.  He asked Members for their views on
this item.  In particular, he was interested in he aring what Members considered could be incorporated
into the report of the General Council in terms of r ecommendations or statements of consideration for
the Council.
3.3 The representative of Australia stated that her de legation was particularly interested in this area
because of its concern that PSI remain a transitory  measure for capacity-building in customs services.
The kinds of activities noted by the Chairman, especially those that came under the High-Level Meeting
for LDCs and the information that had been alread y gathered in the Customs Valuation Committee, left
her delegation with some questions regarding what  the role of the Working Party could be.  Her
delegation would want to see the Working Party co me out with some proposals on technical assistance
because it was a necessary corollary to PSI use.  What form these proposals would take would require
further discussion.  She mentioned that her delegation w ould prefer an approach that tapped into or had
an input into other areas where there were already ad vanced moves on technical assistance.  Overall, the
Working Party could bring the dispersed threads of  technical assistance in these areas together.
3.4 The representative of Egypt stated his understandin g that it was agreed at the last meeting that,
in order to avoid duplication of t echnical assistance by organizations and Member countries and to know
what kind of technical assistance should be given, the Chairman woul d coordinate with the Chairs of
other Committees, like the Customs Valuation Committ ee.  Also, he understood that the Secretariat
would prepare a paper on the issue.  He asked what the progress of these initiatives were.
3.5 The Chairman noted the difficulty in defining  exactly how deep the Working Party could go in
discussing this issue in the remaining time as othe r items had been put on the agenda.  The Secretariat
could prepare any paper that the Working Party reque sted of it.  But the Working Party would have to
focus on some areas on which to request the Secretaria t to concentrate.  Otherwise, the Working Party
could receive so much information that it would not have time to consider it.  This touched on the next
item in the agenda where the Working Party could come back to this item, taking into consideration the
point made by Egypt.
4. Exchange of views on report of Working Party to General Council
4.1 The Chairman stated that he would like to he ar from Members their thoughts on the structure
and contents of the Working Party's report to the General Council.  His proposed preparing a draft of
this report for discussion at an informal meeting in about three weeks, that would reflect the views
expressed at this meeting on both its structure and contents.  This draft would be circulated
sufficiently in advance of the next meeting so that Members could come prepared to make any
comments.  Further meetings could then be arranged as necessary but it should be kept in mind that
the last meeting of the Council for Trade Goods before the General Council meeting was 30
November.  The last formal meeting for this year was scheduled for 11 November.
4.2 The representative of Australia said that her delegation considered that there were still some
key topics which the Working Party had not finished discussing, especially while the Working Party
was waiting for information which may assist in making recommendations.  These issues included fee
structures, possibilities for streamlining, and technical assistance.  The process that the Working Party
had embarked on, particularly the kind of information exchanged, had become increasingly useful.G/PSI/WP/M/7
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Members were getting a clearer idea of the complexi ties involved and of the areas where the Working
Party may be able to usefully recommend something and the areas which may be beyond its scope.
Her delegation would like more time beyond the end of the year to finish off the existing agenda.
While flexible in terms of time, her delegation would like a short extension of the Working Party to
finish off the topics on the existing agenda.
4.3 The representative of the European Communities supported the statement by Australia.  In
order to continue and conclude the discussions on technical assistance, trade facilitation, etc. and to
discuss the topics in more depth, a temporary extension of the life of the Working Party for a limited
period of time would be necessary.  She considered the Working Party could present a factual report
at the end of the year and a more elaborate report later with the issues described in greater depth.
4.4 The representative of Colombia said his delegation would not have any difficulty in extending
the life of the Working Party for a short period so as to conclude on those issues which were still
pending.  However, any such extension should not be longer than 1 or 2 meetings into the next year.
He was not sure, however, whether to set a deadline in terms of a date or in terms of numbers of
meetings.
4.5 The Working Party agreed to present a factual report to the General Council in which a short
extension of the life of the Working Party would be  requested.  This extension would not be for more
than one or two formal meetings in the new year.
5. Other business
5.1 The Working Party agreed to hold an informal meeting on 30 October to discuss a draft report
to the General Council which would be circulated in advance of this meeting.  The issue of technical
assistance would also be taken up then.  The next formal meeting would be held on 11 November1998.
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