RESTRICTED  WORLD TRADE  
ORGANIZATION  G/PSI/IE/R/1 
2 November 2005 
 
 (05-5143) 
Agreement on Preshipment Inspection 
Independent Entity  
 
 
 
INDEPENDENT REVIEW PROCEDURE 
(PSI/IE/2005/1) 
 
Decision of the Panel  
 
 
I. INTRODUCTION 
1. This decision has been taken pursuant to Article 4 of the Agreement on Preshipment 
Inspection and in accordance with the other texts governing the operation of the Independent Entity1, 
in connection with the request for an independe nt review submitted on 21 September 2005 by the 
company Alcatel CIT (hereinafter "Alcatel"), whose head office is at 12, rue de la Baume, F-75008 
Paris, relating to a dispute between it and the Soci été Générale de Surveillance -  SGS Holding France 
(hereinafter "SGS"), whose head office is at 191,  Avenue Aristide Briand, F-94237 Cachan Cedex. 
2. The Panel entrusted with taking this decision (hereinafter the "Panel") was established in 
accordance with paragraph 5.1 of the Rules of Proc edure for the Operation of Independent Reviews  
under Article 4 of the WTO Agreement on Preshipme nt Inspection.  It was composed as follows: 
 - Mr Pierre Begle, member proposed by the SGS from the list of experts designated by 
the International Federation of Inspection Agencies (IFIA)2; 
 - Mr Jean-Marie Salva, member proposed by  Alcatel from the list of experts designated 
by the International Chamber of Commerce (ICC); 
 - Mrs Laurence Boisson de Chazournes, Chai rperson appointed by the Administrator of 
the Independent Entity. 
3. The facts and the parties' arguments, as well as the stages of the procedure relevant to an 
understanding of the Panel's decision, are summarized in sections II and III of this report respectively.  
The admissibility of the request is addressed in sec tion IV.  The Panel's decision is contained in 
section V. 
II. SUMMARY OF THE RELEVANT FACTS AND MAIN ARGUMENTS OF THE 
PARTIES3 
4. As part of the expansion of its GSM networ k in Mauritania, in June 2004 the company 
Mauritel Mobiles (hereinafter "Mauritel Mobiles") issu ed an international invitation to tender for the 
supply, installation and initial ope ration of equipment for the radio component (BSS) of its mobile 
telephony network. 
                                                      
1 See document WT/L/125/Rev.1. 
2 See document G/PSI/IE/1/Rev.1. 
3 This summary is intentionally limited to the only facts and arguments deemed necessary for an 
understanding of the Panel's decision. G/PSI/IE/R/1 
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 5. The bids by the five bidders, including Alcatel, ranged from XXXXXXXXX to 
XXXXXXXX.  Mauritel Mobiles then began negotiations  with four bidders, including Alcatel, with a 
view to reaching agreement on a bid that corresponde d to its budget.  The amount of the bids was 
brought down to a price range of XXXXXXXXX to XXXXXXXXX. 
6. Mauritel Mobiles accepted the Alcatel bid for a total amount of XXXXXXX net of any levies, 
taxes or customs duties, and Alcatel gave Maurite l Mobiles a large discount.  A framework contract 
covering the three stages of installation (Phase 1 in 2004, Phase 2 in 2005 and Phase 3 in 2006) was signed on 13 December 2004 and included these discounts. 
7. When the material exported for the purpose of  carrying out Phase 1 was inspected, the SGS, 
to which Mauritania has given responsibility for presh ipment inspection, including technical opinions 
on the customs value, noted discounts of 100 per cent on some products invoiced.  The SGS 
concluded that the total discount amounted to some  91.4 per cent of the value of the equipment or 
70 per cent of the total value including equipment an d the amount of user fees.  The SGS considered 
that such a large discount raised doubts regarding the accuracy of the transaction value declared 
inasmuch as it differed from the usual commercia l practices with which the SGS was acquainted, 
particularly where international bidding procedures were involved.  Furthermore, the SGS considered 
that Alcatel had not provided any tangible element that could justify such a large discount. 
8. According to Alcatel, the discounts represented around 50 per cent of the amount to be paid 
for Phase 1, 59 per cent for Phase 2, and 65 per cen t for Phase 3.  These discounts had been given in 
the context of extremely keen interna tional competition.  XXXXXXXXX XXXXXXX XX 
XXXXXXX XXXXX XXX XX XXXXXXXXX XXX XX XXXXXX XX XXXX XX XX 
XXXXXXXXXXX XXXX XXXXXXXXX XXX XXXXX XX XXXXXX XX XXXXXXXXXX.  
According to Alcatel, the contract provided for an  overall discount for the three phases.  However, for 
reasons of internal financial administration and accounting, the discounts focused on a certain number 
of articles and services whereas they should have been distributed over the whole contract.  Nevertheless, that did not imply that some equipm ent and services had been provided free of charge. 
9. At the conclusion of the appeal procedure initiated by Alcatel pursuant to Article 2, 
paragraph 21, of the Agreement on Preshipment Insp ection, the SGS still asserted that Alcatel had not 
provided supporting documents that showed without any reasonable doubt that the total amount of the 
project minus the discounts was the price actually paid or payable.  While acknowledging the global 
nature of the discount, the SGS still had doubts on  the amount of the discounts declared and on the 
way they were presented and distributed, which raised  concerns regarding the real transaction value.  
Consequently, the SGS valued the products with  the discounts as indicated on the invoices and, 
therefore, reincorporated their value into the customs value. 
10. This is the SGS position which Alcatel is contestin g before the Panel.  The SGS, for its part, 
maintains that it is Alcatel's responsibility to pr esent it with sufficient evidence to remove the 
reasonable doubt that remains concerning the price paid or payable to Alcatel by Mauritel Mobiles. 
III. SUMMARY OF THE PROCEDURE BEFORE THE PANEL 
11. The request from Alcatel for an independent review was received by the Independent Entity 
on 23 September 2005 and transmitted to the SGS, which sent its reply on 29 September 2005.
4 
                                                      
4 Before this, on 14 September 2005 Alcatel had initiated an appeal procedure under Article 2, 
paragraph 21, of the Agreement on Pres hipment Inspection.  The appeal was rejected by the SGS in a letter sent 
to Alcatel on 28 September 2005  G/PSI/IE/R/1 
 Page 3 
 
 
 12. After having received the submissions from the parties and the advance deposits to cover the 
costs of the procedure5, the Independent Entity appointed the Panel.6 
13. After starting to examine the case, on 7 Octobe r 2005, the Panel sent written questions to the 
parties.  Replies from the parties were received on 10 October 2005.  
14. After considering the replies from the parties,  the Panel sent them a communication in which 
it noted the following: 
(a) In paragraph 5.1 of its reply dated 10 Octobe r, the SGS stated that "the submission of 
supporting documents concerning the actual execution of the contractual obligations concerning the payment could help to dissipate the doubts".  The Panel also noted that Alcatel CIT was prepared to "provi de any evidence concerning bank transfers 
made in implementation of the contract with Mauritel". 
(b) The SGS mentioned the option of cance lling the invoices that raised problems 
because of the commercial values minus discount s indicated thereon.  The Panel also 
noted that it appeared to be legally and technically feasible – and acceptable from the 
customs standpoint – to cancel an invoice and replace it by another provided that the 
terms of the contract were respected. 
(c) The SGS considered that an indication – going beyond a straightforward statement – 
regarding the planning and strategies adopted by Alcatel for its development on the Mauritanian market would provide some a ssurance that the "circumstances of the 
sale" were part of a planned and rational pr ocess.  Even if the information requested 
meant that Alcatel would have to transmit in ternal documents, the Panel noted that, in 
the past, the SGS had offered to guarant ee the confidentiality of the information 
provided.  The Panel also commented that the verification attestations sent to the Mauritanian authorities by the SGS did not contain details of any information provided by the exporter. 
15. According to the Panel, the foregoing elements i ndicated that an amicable settlement could be 
reached rapidly in this case.  Without seeking to prej udge the views of the parties, it in fact appeared 
that, if Alcatel provided the aforementioned inform ation, the SGS would be prepared to accept the 
transaction value declared by Alcatel.  Furthermore,  Alcatel appeared ready to provide proof of the 
transfers made relating to the contract with Mauritel. 
16. The Panel therefore suggested to the parties that , if they so wished, they should explore the 
possibility of reaching an understanding on the basi s of the aforementioned points.  The Panel was 
prepared to suspend the present procedure until Monday, 17 October, 6 p.m., in order to give the 
parties time to collect, transmit and consider the in formation required.  If, at that date, the parties 
informed the Panel that a solution had been f ound, the Panel would simply note the amicable 
settlement of the dispute in its report.  If, on the other hand, one or other of  the parties informed the 
Panel that no agreement could be reached, the Pane l would resume its work and take a decision. 
                                                     
 
5 Each party made an advance deposit of CHF 17,500, in accordance with paragraph 6.1 of the Rules of 
Procedure for the Operation of Independent Reviews under Article 4 of the WTO Agreement on Preshipment 
Inspection. 
6 At the request of the Administrator of the Independent Entity, the parties agreed that the Panel should 
be chaired by someone who was not on the list drawn up for this purpose because the persons on the list 
contacted were not available. G/PSI/IE/R/1 
Page 4  
 
 17. After the parties had accepted the Panel's proposal, the latter transmitted to them 
recommendations aimed at facilitating the amicable settlement of the dispute and offered its good 
offices in order to resolve any problems. 
18. On 14 October 2005, Alcatel transmitted ce rtain information to the SGS.  On 
17 October 2005, the SGS asked for additional in formation.  The additional information was 
transmitted by Alcatel on 17 and 18 October 2005.  In  the meantime, with the agreement of the 
parties, the Panel extended the suspension of the procedure until 19 October 2005, 12 p.m. 
19. On 19 October 2005, the SGS and Alcatel reached  a mutually acceptable solution on the basis 
of the information provided by Alcatel during the am icable settlement procedure initiated by the Panel 
and informed the latter accordingly. 
20. Based on the terms of the agreement communica ted by the parties in their exchange of 
electronic mail on 19 October 2005, the Panel confiden tially informed the parties of its decision on 
24 October 2005.  The non-confidential ve rsion was made public on 27 October 2005. 
IV. ADMISSIBILITY OF THE REQUEST FOR REVIEW 
21. The Panel notes that the request for an independe nt review in this case was made by Alcatel 
within the time-limits provided in paragraph 2.3 of the Rules of Procedure for the Operation of 
Independent Reviews under Article 4 of the WTO Agreement on Preshipment Inspection. 
22. The Panel notes that the SGS did not raise any objections regarding the admissibility of this 
request by Alcatel. 
23. Furthermore, the two parties deposited the am ounts required in accordance with the advance 
deposit tariff published by the Independent Entity intended to cover the cost of the Panel's 
examination of the request. 
24. The Panel therefore found that the request for an independent review made by Alcatel on 
21 September 2005 was admissible. 
V. DECISION OF THE PANEL 
25. In its electronic message to the parties on 11 Oc tober 2005, the Panel indicated that it would 
simply take note of the amicable settlement of the dispute if the parties reached an agreement.  On 
19 October 2005, the parties informed the Panel that they had reached a mutually acceptable solution.  
Nevertheless, Alcatel did not withdraw its request  for an independent review, as it could have done 
according to paragraph 11.1 of the Rules of Pro cedure for the Operation of Independent Reviews 
under Article 4 of the WTO Agreement on Preshipment  Inspection.  In an electronic message dated 
19 October 2005, Alcatel asked that the parties' agr eement be endorsed by the Panel and that the latter 
indicate to each party the action to be taken for the purpose of practical implementation of the Panel's 
decision.  In reply to this message, on 20 October 2005 in an electronic mail, the SGS indicated that it wished to uphold the position taken by the Panel in its communication to the parties dated 11 October.  
The SGS added that, in its view, the direct conc iliation procedure between the parties suggested by 
the Panel and accepted by Alcatel and the SGS coul d in no way be confused with the procedure 
before the Independent Entity, which had been suspended until Wednesday, 19 October. 
26. The Panel wishes to reaffirm its communicati on of 11 October, on the basis of which the 
parties agreed to seek an amicable settlement.  The Panel notes that the parties themselves had 
specified the elements of their agreement in their exchange of electronic mail on 19 October.  In  G/PSI/IE/R/1 
 Page 5 
 
 
 accordance with the indications given to the parties,  the Panel takes note of the terms of agreement as 
set out in the communications from the parties dated 19 October 2005. 
27. In particular, the Panel notes the following: 
(a) The information transmitted to the SGS by Alcatel CIT in connection with the 
amicable settlement procedure initiated on  11 October 2005, according to the SGS, 
removes the reasonable doubts that previously existed in the opinion of the SGS on 
the transaction value proposed by Alcatel CIT; 
(b) consequently, the SGS will accept the valu es defined contractually between Alcatel 
and Mauritel Mobiles as the legal basis for its determination of the customs import value; 
(c) accordingly, the SGS will amend its technical opinion sent to the Mauritanian 
Customs Administration; 
(d) the SGS will contact Mauritel Mobiles without delay in order to amend the 
verification attestations relating to the present procedure; 
(e) the SGS will transmit a copy of the revised verification attestations to Alcatel as soon 
as they are finalized; 
(f) Alcatel authorizes the SGS to give the Mauritanian Customs Administration copies of 
the bank statements concerning settlement of  the advance payment for Phase 1.  The 
SGS, however, undertakes to remove fro m these documents beforehand any 
information that does not pertain to the present case; 
(g) Alcatel authorizes the SGS to transmit to  the Mauritanian Customs copies of the 
documents attached to its letter of 18 October 2005 and numbered 1-7, with the 
exception of Annex 6 ( Minutes of Meetings ). 
28. The Panel, therefore, decides  that the points mentioned in  paragraphs 26 and 27 above 
constitute the amicable settlement reached by the par ties and that this amicable settlement terminates 
the dispute brought before the Independen t Entity by Alcatel on 21 September 2005. 
29. This decision is taken in accordance with the re levant provisions in the WTO Agreements on 
Preshipment Inspection and on Implementation of Ar ticle VII of the Genera l Agreement on Tariffs 
and Trade 1994. 
30. The Panel reminds the parties that, pursuant to Article 4, paragraph (h), of the WTO 
Agreement on Preshipment Inspection, this decision is binding upon the preshipment inspection entity and the exporter which are parties to the dispute. 
31. The Panel, therefore, recommends that the parti es, in good faith, continue to be diligent in 
implementing the terms of the amicable settleme nt mentioned in para graphs 26 and 27 above. 
32. Inasmuch as the parties have r eached a mutually satisfactory se ttlement of the dispute brought 
before the Panel, pursuant to paragraph 10.5 of  the Rules of Procedure for the Operation of 
Independent Reviews under Article 4 of the WTO Agreement on Preshipment Inspection, the Panel 
decides that the costs of the pro cedure should be shared equally between the two parties.  The same 
method will apply to the refund of any balance rema ining after deduction of the Independent Entity's 
costs in connection with the present procedure. G/PSI/IE/R/1 
Page 6  
 
  
Done at Geneva on 24 October 2005, in English, French and Spanish, the texts being equally 
authentic in the three languages.   
Laurence Boisson de Chazournes 
Chairperson 
   
Pierre Begle Jean-Marie Salva 
  
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