RESTRICTEDWORLD TRADE
ORGANIZATIONG/PSI/WP/W/17
28 April 1998
(98-1702)
Working Party on Preshipment Inspection Original:  English
COMMUNICATION FROM THE UNITED STATES
The following communication has been received from the Permanent Mission of the
United States.
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In its report to the General Council dated 2 December 1997, the Working Party on
Preshipment Inspection recommended that the mandate of the Working Party be extended for oneyear to exchange views on a list of specific topics.  In the view of the United States, the submissions
on "National Experience" were very constructive and a useful tool for conducting work.  Members
may wish to consider similar submissions outlining "national experience" on selected topics that are
on the Working Party's agenda.
The United States is currently undertaking a review of the topics and the issues presented, and
expects to provide contributions on one or more of these topics in the near future.  In the interest,
however, of encouraging the initiation of a dialogue among Working Party participants on these
issues, the United States offers the following preliminary observations on each and poses questions
that participants might usefully consider in future discussions.
These observations and questions are not intended to prejudge how these issues may be
reflected in the contents of a Working Party report to the General Council at the end of 1998.
Code of Conduct/Practice for PSI Entities
The Delegation of Switzerland has already tabled a useful contribution in the form of a
"model agreement" between individual User Member governments and PSI entities.  This draft model
agreement incorporates a number of elements drawn from the WTO PSI Agreement and the 1997
Working Party Report.  In particular, the Swiss contribution appears to envision that such an
agreement could form an integral part of the contractual relationship between a User Member and PSIentity(ies).
Questions for Discussion :
- Would User Members find such a model agreem ent useful in facilitating implementation
of their obligations under the PSI Agreement by directly obligating PSI entities to
adhere to its provisions, as well as the immediate action items contained in the1997 Report?
- What type of monitoring and enforcement m echanisms might be available to ensure that
PSI entities fully implement the terms of such an agreement?
- Is this a subject area that presents a role for technical assistance?G/PSI/WP/W/17
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Standard Inspection Format
During 1997, the Working Party conducted preliminary discussions on the possibility of
developing a standard format for PSI inspections.  Some participants viewed such a format as a useful
tool for ensuring that PSI entities follow uniform practices in conducting inspection activities in all
Exporter Members, thereby enhancing transparency and predictability for exporters and importers.
Questions for Discussion :
- What might be the specific elements of a sta ndard inspection format?  Is there a role for
the ICC and IFIA in the development of such a format?
- If the Working Party developed a standard in spection format, how would it obtain the
agreement of all PSI entities to utilize it?  Through IFIA?  Individual contracts with
User Members?
Selective Examination of Shipments
Many customs administrations utilize risk assessment to limit the types of shipments that are
subjected to comprehensive inspection.  Typically this can relate to the value of shipments, the
category of products, and other factors that present varying degrees of risk for non-compliance.  To a
certain extent, some User Members have already incorporated the principle of risk assessment in their
PSI regime by designating that only certain types of shipments are subjected to PSI examination.Suggestions have been made that further exploration of the practice of "selectivity" would be
constructive.  By limiting the types of shipment s subject to PSI examination, User Members can
reduce their own administrative costs and costs borne by their importers in paying fees to PSI entities
- while maintaining compliance with legal requirements applicable to imported goods.
Questions for Discussion :
- Can the Working Group explore the specific benefits that can be gained by both User
Members and Exporter Members through broader adoption of the practice of selective
examination of shipments?
- What is the experience overall of customs administrations that utilize risk assessment
and selective examination with regard to compliance?
- In exploring the issue of selectivity of examination, could there be an opportunity for a
useful contribution by IFIA and the ICC?
- Given the natural extension of "selectivity " to basic functions undertaken by customs
administrations, is there a role for tech nical assistance in this subject area?
Auditing of PSI Entities
While many User Members maintain their own internal controls on the activities of PSI
entities, few currently utilize independent auditors to monitor these entities.  In the Working Partydiscussions of 1997, Ghana raised the issue in a written contribution and it came to light that
Argentina has recently contracted the services of an auditor with respect to its new PSI regime.  While
it may be intuitive that auditing can increase the accountability of PSI entities, many questions remain
on how auditing might apply to their activities.G/PSI/WP/W/17
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Questions for Discussion :
- What is the experience of those User Members who require independent auditing of
activities of  PSI entities?
- What types of auditors are equipped to conduct auditing of PSI entities?  How are such
audits carried out?
Promotion of Competition among PSI Entities
Some Members have suggested that the lack of competition among PSI entities is a factor in
non-transparent, arbitrary and discriminatory treatment of exporters and importers.  The market for
PSI services is dominated by a very small number of entities so that User Members have few choices
in contracting PSI services.  At least one User Me mber has sought to promote competition by signing
multiple contracts.
Questions for Discussion :
- What is the experience of those User Member s that have signed multiple contracts for
PSI services to be provided?  Is it possible to promote competition?
Fee Structures for PSI Entities
The 1997 Working Party Report provides that fee structure should not create incentives for
potential conflicts of interests.
Questions for Discussion :
- What options exist with regard to fee structures?
- What is the experience of User Members with regard to different types of fee
structures?
Price Data Bases
Some User Members have suggested that compilation of price data bases can help their
customs authorities undertake many of the activities currently contracted to PSI entities.  On the other
hand, some Exporter Members have expressed concern that use of price data bases can distort proper
valuation of shipments and is antithetical to conducting customs valuation in accordance with the
Agreement on Customs Valuation.
Questions for Discussion :
- What are the perceptions on the development and use of price data bases?
- Is this an area that is appropriate for coordination with the Committee on Customs
Valuation?
Technical Assistance Activities
Article 3:3 of the PSI Agreement requires Expo rter Members to provide User Members, upon
request, with technical assistance for achieving the objectives of the Agreement.G/PSI/WP/W/17
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Questions for Discussion :
- If User Members seek to transition themselv es away from the use of PSI, is technical
assistance best geared towards improving the operation of national customs
administrations?
- What methodologies and arrangements could be developed jointly by Exporter and User
Members in enhancing the operation of customs administrations and improving the
trade facilitation environment?
- Are there goals with regard to technical assistance under the PSI Agreement parallel to
those under the WTO Customs Valuation Agreement?
- How might technical assistance under the PSI Agreement be coordinated with the
initiative currently underway in the Cu stoms Valuation Committee to assess and
address the individual needs of Developing Country Members?
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