- 1. Report onCurrent State of Compliance by Cambodia toThe WTO
Agreement on Preshipment Inspection November 2008Prepared by Dr.
Cheaseth SengOfficialin Cabinet of H.E. Deputy Prime Minister,
Minister in charge of Council of Ministers Kingdom of Cambodia
Associate Dean, Faculty of Business and Economics Pannasatra
University of Cambodia
2. Table of ContentPage 1. Introduction 2 2. Preshipment
Inspection and Cambodia Customs Administration 2 3. Situation
Analysis 3 4. Gap Analysis 7 5. Conclusion 10 6. Appendix 116.1
Prakas Regulation on PSI activities116.2 WTO Agreement on
Preshipment Inspection23 Table 3.1: Summary of Headings and
Indications of Fulfilment8 Table 4.1 Gap Analysis on Conformance to
API82 3. Analysis Report on Cambodia compliance with WTO Agreement
on Preshipment Inspection 1. IntroductionThis report aims to bring
to knowledge the current state of compliance that Cambodia has to
the WTO Agreement on Preshipment Inspection (API). The report will
conduct a comprehensive legal analysis on Cambodia law on Customs,
including Prakas (regulation) and API. Similarities and differences
will be identified and, in turn, the level of compliance is
determined. The report also recommends change(s) if necessary to
make Cambodia law on Customs/Prakas to conform to API. In other
words, the report conducts situation and gap analysis on the
matters.2. Preshipment Inspection and Cambodia Customs
Administration Preshipment Inspection (PSI) is a service that
carries out inspection of goods at the country of origin before
shipment. The inspection includes but not limit to price
verification, quantity and quality check, tariff classification and
Customs valuation and import eligibility. Historically PSI was used
for foreign exchange control purposes and was employed by central
bank of the user country instead of Customs administration or
government1.There are only a handful of PSI providers in the
industry. The industry leaders are Socit Gnrale de Surveillance
(SGS) of Geneva, Bureau Veritas Group (BIVAC) of Paris, COTECNA of
Geneva, Intertek and Inspectorate of the US. Cambodia Customs
agency, the Customs and Excise Department (CED) is a department of
the Ministry of Economy and Finance (MEF). This ministerial
structure required any outsourcing to be contracted by the MEF
instead of CED. The MEF, on half of the Royal Government of
Cambodia (RGC) has contracted PSI providers to provide quality and
quantity check, determine country of origin, Customs classification
and valuations, assessment of duties and taxes and import
eligibility2. The first contract was awarded to SGS in 2000 and a
recently signed contract is given to BIVAC3.According to Naron
(2003) and Khler (2002) PSI services are used as an instrumental
part of CED Customs operations and its reform and modernisation
processes. PSI reports are used as base for Customs duty assessment
and streamlining trade facilitation4. Moreover, Article 4 of Prakas
No.599 (discuss in detail below) entrusts the CED the
responsibility to 1 Anson. J., O. Cadot., and M. Olarreaga (2006),
Tariff Evasion and Customs Corruption: Does Pre-shipment Inspection
Help?, Contributions to Economic Analysis and Policy, Vol. 5, No.
1, Article 33 (Electronic Journal) 2 BIVAC Contry Datasheet:
http://www.bureauveritas.com/wps/wcm/connect/f1c2a7004b5e3e6b858b8793f26b1a3d/CAMBODIA+Datasheet+
Rev2.pdf?MOD=AJPERES&CACHEID=f1c2a7004b5e3e6b858b8793f26b1a3d 3
Naron. H. C., (2003), Trade liberalisation: a Cambodian
perspective, Asia Pacific School of Economics and Government
Working Papers on World Trade Organisation; CED website: http 4
Naron. H. C., (2003), Trade liberalisation: a Cambodian
perspective, Asia Pacific School of Economics and Government
Working Papers on World Trade Organisation; Khler (2002), Cambodia-
Letter of Intent, Supplementary Memorandum of Economic and
Financial Policies, and Technical Memorandum of Understanding:
available on
http://www.imf.org/External/NP/LOI/2002/khm/01/index.htm 3 4.
administer the implementation and operations of PSI contracts.
Therefore, CED is the body responsible for PSI operation and in
turn makes the API directly affect the CED.3. Situation Analysis
The Cambodia law on Customs does not have any provision deals with
PSI5. The law provides the MEF the power to make Prakas on any
matters that not included in the law that affecting Customs
operations; ranging from reporting and temporary admission to PSI.
A Prakas is issued for every PSI contract. The Prakas details the
administrative and operational arrangements of PSI activities
between MEF/CED and PSI providers. For the purpose of this report,
Prakas No. 599, which dated on 31 August 2000, is used. The
situation analysis is carried out according World Banks guidelines
on WTO Trade Facilitation Negotiations Support Guide6.The API came
into force on the 20th September 1986 and addresses the
international trade problems associated with the use PSI7. API is
divided into two main sections with the first deals with user
Member obligations and the second deals with the obligations of the
Exporting Member. A user Member is a WTO Member that employs a
private company to conduct PSI services. In our case, Cambodia is
the user Member. The Exporting Member is the Member that the good
exported from. Since the focus is on Cambodia, the situation
analysis is conducted on whether Cambodia and the CED have
conformed to user member obligations. The obligations of the PSI
user Member are listed in Article 2 of the Agreement and comprise
of 10 headings and 22 provisions. The situation analysis is carried
on heading by heading basis as follow.1. Government
RequirementsThis heading required the user government to mandate
PSI activities and administrative arrangements into laws or
regulations and with regarding to paragraph 4 of Article III of
GATT 1994. The Kingdom of Cambodia is fully conformed to this
headings requirement. Prakas No.599 and Prakas March06 that issued
by the MEF/CED to regulate PSI activities and administrative
arrangements with SGS and BIVCA respectively act as the evidence of
this conformance.2. Site of Inspection This heading determines the
place that PSI activities can be carried out in the country of
origin. It directed that the inspection activities, including the
issuance of a Clean Report of Findings (ROF) and other reports, are
to be performed in a Customs territory of the country of origin or
in a Customs territory that the country of origins Customs, the PSI
providers and the exporters agree upon. These requirements are
partially conformed to by Cambodia. The Prakas provides where
preshipment inspection activities can place in provision 5.5 as
follow: The Pre-shipment Inspection may be performed at the sellers
premises or such otherappropriate place prior to the shipment of
the Goods to the Kingdom of Cambodia. TheInspection Company shall
be entitled to re-inspect Goods at any time during the course of5
Cambodia Law on Customs, available on:
http://www.customs.gov.kh/laws_files/CED%20laws%20En.pdf 6 World
Bank (2005), WTO Trade Facilitation Negotiations Support Guide,
March 2005, Prepared by Centre for Customs and Excise Studies,
University of Canberra 7 Agreement on Preshipment Inspection,
available on:
http://www.wto.int/english/docs_e/legal_e/21-psi_e.htm 4 5. supply
or delivery, prior to the shipment of the Goods to the Kingdom of
Cambodia and to sealcontainers as may be deemed necessary and
feasible by the Inspection Company8.The above provision provides
PSI providers and the exporters the power to decide where PIS
activities can take place. The place that PSI providers and the
exporters agree upon may not be a Customs territory. Thus,
provision 5.5 is different from APIs requirement as it omitted that
the specific requirement that inspection activities shall take
place in Customs territory or a place that Customs agreed upon.
Therefore, only partial conformance is made for this heading.3.
StandardsThis heading concerns with standards that used to
determine the quality and quantity of the goods being inspected.
The standards should be determined by both the exporters and
importers and in the absence of such agreement relevant,
international standards will be used.The requirements of this
heading are partially met by Cambodia. Prakas No. 599 does not
include any provision to deal with inspection standards. The
contractual agreement between MEF/CED and BIVAC- Country Data Sheet
does not include any inspection standard guidelines also9. The
exclusion of this provision is critical since MEF/CED required PSI
providers to carry out quality and quantity check on the goods to
be imported. Moreover, it provides PSI providers the discretion to
decide on applicable standards, which could be different from the
standards required by Cambodia quality control agency (CamControl).
In addition, since Cambodia is a member of International Standard
Organisation (ISO) any discrepancy in the standards used may cause
problem regard to Cambodias ISO agreements and obligations and a
reinspection of the goods may require. Nevertheless, an implicit
agreement on the standards of goods may be indicated in the sell
contract between the exporter and importer. Therefore, a full
detail clarification of the standards used for PSI activities is
needed.4. Transparency This heading is about transparency matters
of PSI activities. It dictates obligations to the user member and
PSI providers. The obligations of PSI providers are (1) on request,
provide laws and regulations regarding to PSI to the exporters, (2)
provide procedures and criteria used for PSI and for price and
current exchange-rate verification, (3) provide information on
exporters rights vis--vis the PSI providers, and (4) appeal
procedures. The user member on the other hand needs to ensure PSI
providers provide the information listed above to exporters in a
timely manner and shall promptly publish PSI regulations in a way
that other governments and the traders become acquainted with them.
This headings requirements are only partially fulfilled by
Cambodia. The Prakas deals mainly on the obligations of the
exporter/importer side of the PSI activities. It provides extended
details on what exporter/importer should comply with (Article 4 and
5) but no provision about to regulate PSI providers regarding to
providing information to exporters. On the user members
obligations, the MEF/CED has fulfilled its obligation of promptly
publish its PSI requirements.8 Prakas No.599 issued 2000, see
appendix 6.1 9 See footnote 2 5 6. The Prakas and other discussions
on PSI are presented on CED website and in many other trade
facilitation documents10.5. Protection of Confidential Business
InformationThis heading focuses on regulating PSI providers
regarding appropriate measures put in place to safeguard
confidential business information that provided by the
exporters/importers. The requirements in this heading are directed
to user member. The user member is obligated to (1) ensure that PSI
providers put in place necessary measures to safeguard confidential
business information, (2) communicate the measures put in place by
PSI provider, to extent that it is prejudice PSI providers business
and PSI activities and other companies, to the other WTO members,
(3) safeguard confidential business information provided by PSI
provider, and (4) ensuring that PSI providers do not request
exporters to provide the following information: (a) manufacturing
of data related to patented, licensed or undisclosed processes, or
toprocesses for which a paten is pending;(b) unplublish technical
data other than data necessary to demonstrate compliance
withtechnical regulations and standards;(c) internal pricing,
including manufacturing costs;(d) profit levels;(e) the terms of
contracts between exporters and their suppliers unless it is not
otherwisepossible for the entity to conduct inspection in question.
In such cases, the entity shall onlyrequest the information
necessary for this purpose11.The full extent of this headings
requirements is not been met by Cambodia. The Prakas on PSI does
not mention any provision protecting confidential business
information or how MEF/CED handles the information. As mention
above, the Prakas is mainly concerned on the traders side and
according provision 5.4 of Article 5 the traders need to provide
considerable amount of information to PSI providers without any
protection guaranteed. 6. Conflict of InterestThis heading is an
additional integrity provision, which deals with conflict of
interest between PSI providers and its associated entities that may
have detrimental effects on importers/exporters. The heading thus
provided that the PSI providers shall maintain procedures to avoid
conflict of interest regarding to the following situations: (a)
between preshipment inspection entities and any related entities of
the preshipmentinspection entities in question, including any
entities in which the latter have a financial orcommercial interest
or any entities which have financial interest in the
preshipmentinspection entities in question, and whose shipments the
preshipment inspection entitiesare to inspect;(b) between
preshipment inspection entities and any other entities, including
other entitiessubject to preshipment inspection, with the exception
of government entities contracting ormandating the inspections;
10Naron. H. C., (2003), Trade liberalisation: a Cambodian
perspective, Asia Pacific School of Economics and Government
Working Papers on World Trade Organisation; CED website: http;
Khler (2002), Cambodia- Letter of Intent, Supplementary Memorandum
of Economic and Financial Policies, and Technical Memorandum of
Understanding: available on
http://www.imf.org/External/NP/LOI/2002/khm/01/index.htm 11WTO
Agreement on Preshipment Inspection: see Appendix 6.2 6 7. (c) with
divisions of preshipment inspection entities engaged in activities
other than those required to carry out the inspection process.The
requirements of this heading are also not met by the Prakas. There
is any provision included in the Prakas to deal with conflict of
interest between PSI providers and their associated companies.7.
DelaysThis heading required the user member to ensure the
following:1) PSI provider shall avoid unreasonable delays in
inspection of shipments; 2) PSI provider shall carry out inspection
on the agreed date unless reschedule onmutually agreed basis or PSI
providers are prevented from doing so by theexporter or by force
majeure; 3) PSI providers need to issue a clean report of finding
(CRF) or a written explanationspecifying the reasons for
non-issuance of such report within five working daysafter receipted
of final documents and inspection; 4) PSI provider needs to carry
out price and current exchange of the goods based onthe contract
between importers and exporters and pro forma invoice whenrequested
by exporters; and the accepted price and exchange rate will
bewithdrawn after completion of inspections; 5) In event of
critical error in the CRF, the PSI provider is required to correct
the errorand forward the correct information to the appropriate
parties as soon as possible. Provision 4.2 and 4.5 of Prakas No.
599 provided upon receiving information and documentations from
importer in Cambodia, the PSI providers affiliate in Cambodia is
required to register inspection order and issue a register import
advice (RIA) to the importer within 24 hours. The RIA is than send
to the PSI providers affiliate at the country of export and the
affiliate is required to immediately contact the exporter.
Provision 5.1 required the exporter to contact PSI providers within
three working days and upon goods available for inspection, the PSI
providers will carry out urgent inspection without delay. These
provisions fulfilled requirements 1) and 2). Despite of these
fulfilments, the Prakas does not mention the urgency requirement in
issuing of CRF. Nevertheless, provision 6.1 required after
satisfactory completion of the inspection and other matters, PSI
providers need to issue CRF to the importer. This provides in an
effect meeting requirement 3). There is any provision to deal with
requirements 4) and 5); however it can be reasonably suggest that
the preliminary price verification and correction of errors would
be carried when required. Therefore, Prakas No. 599 fulfils the
requirements under this heading, but clarifications are needed
regarding requirement 3) to 5). 8. Price Verification 7 8. This
heading imposes obligation to the user member to provide guidelines
for PSI providers in conducting price verification. It directed
that the PSI providers: shall only reject a contract price agreed
between an exporter and an importer if they candemonstrate that
their findings of unsatisfactory price are based on a verification
processwhich is in conformity with the criteria se out in
subparagraphs (b) through (e) [of this heading].Paragraphs (b) to
(e) provide detail guidelines for reasonable price verification
process, which required PSI providers to consider factors such
economic, country and markets into consideration.The above
obligations are not met by Cambodia. The MEF/CED Prakas on PSI only
include price verification as one of the tasks set forth to the PSI
providers but not detail of how price verification should be
conducted. In other words no detail guidelines like those provided
in the heading. This opens to the PSI providers interpretation of
the methods to be employed. Problems of inconsistencies in price
verification may arise as the result and thus reducing traders
confidence with PSI services and hindering trade facilitation.
Casella (1989) provided there many complain and disputes against
PSI providers on the matter of arbitrarily adjust and reject
traders prices12.9. Appeals ProceduresThe heading required the user
member to mandate a regulation that requires the PSI providers to
have dispute resolution procedures to hear any dispute arises
associated with PSI activities. The PSI providers shall have an
office, which open during normal business hours, to consider and
render decisions on exporters appeals or grievances. The PSI
providers need to solve the disputes as soon as possible. The
requirements of this heading are fully met by Cambodia. Article 8
Disputes and 9 Working Committee of the Prakas details dispute
resolution procedures. It provided that importers have the rights
to question or dispute the opinion of the PSI providers relating to
importers goods by making a request in writing to PSI provider
affiliate in Cambodia. The PSI providers are required to solve the
matter within a week. If the importer does not satisfy with PSI
providers decision then appeal can be made to a government
established dispute resolution panel- the Working Committee. 10.
Derogation This heading required the user member to list,
exhaustively, goods, shipments that exempted from PSI. Moreover,
minimum value and any exceptional circumstances that lead to
exemption will need to be disclosed as well. These requirements are
met by the Prakas under Article 3.Table 3.1 provides a summary of
Cambodia current state of conformance to API. Table 3.1 Summary of
Headings and Indications of Fulfilment 12 Casella. M., (1989),
Pre-shipment Inspection Negotiations- GATT Update, Business
America, Oct. 1989, Available on:
http://findarticles.com/p/articles/mi_m1052/is_/ai_8043163,
Accessed on 25/10/2008 8 9. API Headings Degree of
ConformanceGovernment Requirements Full Site of Inspection Partial
StandardsPartial Transparency NoneProtection of Confidential
Business NoneInformation Conflict of Interest None Delays Full
Price Verification NoneAppeals ProceduresFullDerogationFull4. Gap
AnalysisThis gap analysis is prepared according to World Banks
guidelines on WTO Trade Facilitation Negotiations Support Guide.
Table 4.1 Gap Analysis on Conformance to APIProposal being
Examined: Conformance to API Element of Existing National
Implementation Issues to be Considered Legislation/Process Benefits
The full conformance to API provides severalbenefits to the traders
as well as the usergovernment. The traders receive benefits in
termsof reducing discrepancies of price verification andquality
verifications, confidential businessinformation is protected, and
no conflict of intereststhat lead to detrimental to their
businesses. Thegovernment would benefit in term of having
PSIactivities fully under monitor of Customs officials,reduce
number of complain and disputes andimprove integrity of PSI
providers in carrying outtheir activities. The government also get
benefit interm of improving trade facilitation, which achievedby
reducing the needs for reinspection of qualitystandards and price
verification. Benefits alsoreceive in term of improve traders
confident withPSI services and thus boost trade to the country
Legal frameworkIn order to fully conform with API, Prakas No.
599needs to be amended to include the followings:1. Include the
requirement that PSI activities must take place in a Customs
territory or a territory that agreed by Customs.2. Include clear
guidelines on standards used for quality and quantity verification.
Moreover, a clearly stated on quality agreed by importers and
exporters should be added. 9 10. 3. Include a transparency
provision(s) that gives the effect of APIs Transparency heading. 4.
Include a provision or provisions to deal with protecting
confidential business information. A provision(s) that gives the
effect of APIs Protection of confidential business information
provisions would be sufficed. 5. Include a provision or provisions
that give the effect of APIs conflict of interest provisions. 6.
Include a provision or provisions to deal with price verification
matters. 7. Lastly, amend provisions 4.2, 4.5 and 6.1 to clearly
state the requirements of APIs Delay provisions. Existing
commitmentsThis report is prepared base on Prakas No.599 that
issued in 2000. A recent Prakas, which issued in 2006, has similar
heading provisions to the Prakas No. 599. Notice that the annex to
this recent Prakas is not available through publicly mean.
Therefore, on the matter of existing commitment to update or amend
Prakas No. 599, the report suggests that there isnt any work in
progress on it. Administrative policy and procedure Once the Prakas
is amended, some administrative policies and procedures change are
required. First, there will be greater involvement between CED, PSI
providers and Importers in selecting place to conduct PSI
activities. Second, the MEF/CED needs to devise and enforce
policies that ensure that PSI providers provide necessary
information to the importers on a timely manner. Third, the MEF/
CED needs to cooperate with PSI providers in placing measures to
ensure confidential business information is safeguarded. Fourth,
conflict of interest measures between PSI providers and its
associates need to be determined and regulated. Lastly, price
verification guidelines need to be developed and abided by PSI
providers. Government coordination The move to full conformance
with API required little coordination with other ministries or
agency. The only agency concerned is the quality inspection agency
(Comcontrol). Thus, Camcontrol needs to be on board with the
setting of quality inspection standards. Resource requirements Some
financial supports may be required to implement the change; however
it is not a significant matter. The MEF/CED can make the legal
amendments required and publish the amended Prakas on its website
as it currently has and forward to Ministry of Commerce to
circulate to importers/exporters. The administrative and policy10
11. change required cooperation with PSI providers,thus sharing
resources may be warranted. Timeframe for implementation The
MEF/CED and the PSI providers need to worktogether in setting up a
timeframe to successfullyimplement the change. For the tasks listed
above areasonable timeframe of 2 years is suggested.The gap
analysis above indicated that the MEF/CED needs to work in
cooperation with the contracted PSI providers to fully compliance
with WTO Agreement on Preshipment Inspection (API). Changes in both
legal framework and administrative policy and procedure are
essential to fulfil APIs requirements. 5. Conclusion Preshipment
inspection is an instrumental part of Cambodia Customs operations.
The CED uses reports provided by PSI providers to assess dutiable
value and for other purposes. In its current state, the regulation
on PSI activities-Prakas No.599, fulfilled four APIs essential
requirements, namely Government Requirements, Delays, Appeals
Procedures and Derogation. In addition, the Prakas is partially
fulfilled APIs requirements on Site inspection and Standards.
Nevertheless, the Prakas left out some important requirements.
These deficiencies can be fulfilled by working together with the
contracted PSI providers. 6. Appendix 11 12. 6.1 Prakas Regulation
on PSIDraft For Review V06/03/06 KINGDOM OF CAMBODIA
Nation-Religion-KingMinistry of Economy and Finance No. ____ Phnom
Penh, ___ March 2006 PRAKAS On the Implementation of the
Pre-Shipment Inspection ServiceSenior Minister, Minister of Economy
and Finance- Having seen the Constitution of the Kingdom of
Cambodia; - Having seen Royal Decree NK/RKT/1198/69 dated 25
November 1998 on the appointment of the Prime Minister of the
Kingdom of Cambodia; - Having seen Royal Decree NK/RKT/1198/72
dated 30 November 1998 on the establishment of the Royal Government
of the Kingdom of Cambodia; - Having seen the Law on the
establishment and Function of the Council of Ministers which was
promulgated by Royal Kram No. 02 NS.94 dated 20 July 1994; - Having
seen the Law on the establishment of the Ministry of Economy and
Finance which was promulgated by Royal Kram NS. RKM. 0196/18 dated
24 January 1996; - Having seen the Agreement between the Royal
Government of Cambodia and BIVAC dated 28 February 2006 on the
Pre-Shipment Inspection (PSI); and - Having referred to the
necessity of the Ministry of Economy and Finance. HAS
DECIDEDArticle 1: Promulgate the Regulation on the Implementation
of the Pre-Shipment Inspection Service which appears as Appendix to
this Prakas.Article 2: The Regulation, which is the Appendix to
this Prakas, is the guidelines for the implementation of the
Agreement between the Royal Government of Cambodia and BIVAC on
Pre-Shipment Inspection dated 28 February 2006.Article 3: Companies
or persons who fail to apply for Pre-Shipment Inspection of goods,
except the exempt goods as referred to in Article 3 of Chapter 2 of
the Regulation, and have transported the goods into the Customs
territory of the Kingdom of Cambodia will be imposed a penalty in
the amount of 7% of the goods CIF value. In the case of necessity,
external assistance might be required for customs clearance of
goods which circumvented PSI.Article 4: Delegate of the Royal
Government in charge of Customs and Excise Department, Secretary
General, Director of Cabinet, Directors of relevant Departments of
the Ministry of Economy and Finance, must effectively implement
this Prakas from the date of signature. Senior Minister 12 13.
Minister of Economy and Finance (signature and seal) KEAT CHHON cc:
- The Council of Ministers - Cabinet of the Prime Minister Office -
General Secretariat of the Parliament - Ministry of Interior -
Ministry of Commerce - The Council for the Development of Cambodia
- Municipal and provincial authorities - Phnom Penh Chamber of
Commerce - BIVAC Liaison Office in Cambodia - Documentation
Unofficial Translation KINGDOM OF CAMBODIA Nation-Religion-King
Ministry of Economy and Finance No. 599 SHV.PRK Phnom Penh, 31
August 2000 PRAKAS On the Implementation of the Pre-Shipment
Inspection ServiceO t nSenior Minister, Minister of Economy and
Finance - Having seen the Constitution of the Kingdom of Cambodia;
- Having seen Royal Decree NK/RKT/1198/69 dated 25 November 1998 on
theappointment of the Prime Minister of the Kingdom of Cambodia; -
Having seen Royal Decree NK/RKT/1198/72 dated 30 November 1998 on
theestablishment of the Royal Government of the Kingdom of
Cambodia; - Having seen the Law on the establishment and Function
of the Council ofMinisters which was promulgated by Royal Kram No.
02 NS.94 dated 20 July1994; - Having seen the Law on the
establishment of the Ministry of Economy andFinance which was
promulgated by Royal Kram NS. RKM. 0196/18 dated 24January 1996; -
Having seen the Agreement between the Royal Government of Cambodia
andSGS dated 14 August 2000 on the Pre-Shipment Inspection (PSI); -
Having referred to the necessity of the Ministry of Economy and
Finance. HAS DECIDED 13 14. Article 1: Promulgate the Regulation on
the Implementation of the Pre-Shipment Inspection Service which
appears as Appendix to this Prakas.Article 2: The Regulation, which
is the Appendix to this Prakas, is the guidelines for the
implementation of the Agreement between the Royal Government of
Cambodia and SGS on Pre-Shipment Inspection dated 14 August
2000.Article 3: Companies or persons who fail to apply for
Pre-Shipment Inspection of goods, except the exempt goods as
referred to in Article 3 of Chapter 2 of the Regulation, and have
transported the goods into the Customs territory of the Kingdom of
Cambodia will be imposed by a penalty in the amount of 7% of the
goods CIF value. In the case of necessity, external assistance
might be required for customs clearance of goods circumvented
PSI.Article 4: Delegate of the Royal Government in charge of
Customs and Excise, Secretary General, Director of Cabinet,
Directors of relevant Departments of the Ministry of Economy and
Finance, must effectively implement this Prakas from the date of
signature.Senior Minister Minister of Economy and Finance
(signature and seal)KEAT CHHON cc:- The Council of Ministers -
Cabinet of the Prime Minister Office - General Secretariat of the
Parliament - Ministry of Interior - Ministry of Commerce - The
Council for the Development of Cambodia - Municipal and provincial
authorities - Phnom Penh Chamber of Commerce - SGS Liaison Office
in Cambodia - DocumentationKINGDOM OF CAMBODIANation Religion King
Annex to the Prakas of the Ministry of Economy and Finance No 599
dated 31 August 2000.REGULATIONOn the implementation of
Pre-shipment Inspection Services This regulation is made under the
authority of the Ministry of Economy and Finance to implement the
procedures for pre-shipment inspection of goods imported into the
Kingdom of Cambodia.14 15. INTERPRETATIONARTICLE 1 DEFINITIONS1.1
Bureau of Customs means the Bureau of Customs for the Kingdom of
Cambodia.1.2 Discrepancy Report means a report issued by the
Inspection Company whenever aPre-shipment Inspection indicates the
existence of any unrectified discrepanciesbetween the actual
quantity or quality or both of the Goods and the
Importersspecifications.1.3 Customs Declaration means the import
entry form completed by the importer basedon the information
contained in the ROF.1.4 Exempt Goods means the goods referred to
in Article 3 (3.1).1.5 Goods means goods and related services
(other than exempt goods) which are proposed to be imported into
the Kingdom of Cambodia and where the value of the shipment is FOB
United States Dollars Four Thousand (FOB $US4000.00) or greater and
includes partial shipments of goods and associated services with a
lesser value but where the aggregate value of all such partial
shipment is FOB United State Dollars Four Thousand (FOB $US
4000.00) or greater.1.6 Government means the Royal Government of
the Kingdom of Cambodia.1.7 Fees The fees for the provision of PSI
Services are:(a) 0.80% ad-valorem of the FOB value of the Goods
inspected as declared in theexporters final or pro-forma invoice
and indicated in the Reports of Findings,applicable for all Goods
with the exception of bulk petroleum products. (b) USD 0.30 per
metric tone applicable for bulk petroleum products onlyinspected as
declared in the exporters final or pro-forma invoice andindicated
in the Reports of Findings. (c) Applicable for both (a) and (b) a
minimum fee per intervention of USD210.00shall be applied in all
cases where the ad-valorem rate or the case of (b) thetonnage rate
would produce lesser than amount.SGS shall be entitled to its fees
regardless of whether, after an inspection of the Goods, the
exporter or importer does not provide the information of documents
necessary for the issuance of a ROF or, for any reason, does not
process with the shipment of the Goods.1.8 Importer Specification
means the specifications or, in the absence of specifications,the
description of the Goods, which have been communicated to the
InspectionCompany by the importer as set out in Article 5.31.9
Inspection Company means the company, which has the duty to execute
anagreement with the Government granting such company the right to
conduct pre-shipment inspection services on behalf of the Royal
Government of Cambodia.15 16. 1.10 Inspection Company Liaison
Office means the liaison office established in theKingdom of
Cambodia by the Inspection Company to co-ordinate
Pre-shipmentInspections.1.11 Ministry of Commerce means the
Ministry of Commerce of the Government.1.12 Ministry of Economy and
Finance means the Ministry of Economy and Finance ofthe
Government.1.13 Pre-shipment Inspection means the inspection on
quantity and quality of Goodsand related activities to be performed
by the Inspection Company.1.14 Price Verification means a
verification of the price of the Goods in order todetermine: (a)
Whether the amount invoiced by a seller in respect of those Goods
corresponds with prevailing export price for Goods in the country
of supply or, where applicable, international market prices, and if
these prices do not correspond, the extent of the variation.(b) The
value for duty purposes.1.15 RIA and Registered Import Advice means
the confirmation document which isissued by the Inspection Company
Liaison Office to the importer in connectionwith the application by
the importer for Pre-shipment Inspection.1.16 ROF means the report
of findings containing the result of the Pre-shipment Inspection
issued by the Inspection Company whenever the Pre-shipment
Inspection indicates:(a) that there are no discrepancies between
the Goods and the Importer Specification, or(b) any previously
identified material discrepancies between Goods and Importer
Specifications have been confirmed as acceptable by the importer
provided that1.17 Security Label means the label affixed to one
copy of the sellers final settlementinvoice by the Inspection
Company in respect of Goods for which an ROF is to beissued which
confirms that the Goods have been inspected.1.18 Tariff
Nomenclature means the Tariff Nomenclature of the Kingdom of
Cambodia.1.19 Total Value means the total contracted value of
Goods.1.20 References to a person include a body corporate,
partnership or other legal entity.1.21 References to Articles are
references to Articles of this regulation.1.22 Headings are
inserted for convenience and shall not affect the interpretation of
Regulation.16 17. the effect of any material discrepancy is limited
to incorrect classification of theGoods (as per Tariff
Nomenclature) the ROF shall nevertheless be issued.SCOPE OF
PRE-SHIPMENT INSPECTIONARTICLE 2 GOODS SUBJECT TO PRE-SHIPMENT
INSPECTION 2.1 Commencement This regulation shall apply to all
Goods other than Exempt Goods as specified in Article 1.4 shipped
to the Kingdom of Cambodia as from the 2.2 Registration All Goods
other than Exempt Goods as specified in Article 1.4 imported into
the Kingdom of Cambodia starting from the shall be registered with
the Inspection Company. 2.3 Inspection of Goods All Goods imported
into the Kingdom of Cambodia from the . shall be subject to
Pre-shipment Inspection by the Inspection Company in the relevant
country of supply prior to shipment to the Kingdom of Cambodia. 2.4
Transitional Importer may arrange shipment of Goods to the Kingdom
of Cambodia prior to without Pre-shipment Inspection provided the
relevant Bill of Lading or Airway Bill or other transport document
or title is dated prior to ARTICLE 3 GOODS EXEMPT FROM PRE-SHIPMENT
INSPECTION 3.1 The following goods shall be exempted from
Pre-shipment Inspection:(a) Precious stones, and precious
metals;(b) Object of arts,(c) Explosives and pyrotechnic
products,(d) Ammunition, weapons, implement of war(e) Live
animals,(f) Current newspapers and periodicals.(g) Household and
personal effects.(h) Parcel post or commercial samples.(i) Gifts
made by foreign governments or international organizations
tofoundations, charities and recognized humanitarian
organization.(j) Gift and supplies to diplomatic and consular
missions and to agenciesdepending from the United Nations
Organization imported for their ownneeds.(k) Grants in kind.(l)
Goods imported for government use under government order.(m) Scrap
metals.(n) Cigarettes(o) Temporarily admitted goods (temporary
import for inward processing forexport) PROCEDURE17 18. ARTICLE 4
GENERAL CONDITIONS 4.1 Copies of orders All importers shall provide
to the Inspection Company two copies of each order for every
purchase or importation of goods. The documents submitted shall
comprise an application to the Inspection Company completed by the
importer, attaching, where relevant, a copy of any official
document such as proforma invoices, purchase orders, contracts
showing contract specifications, transportation documents and
relevant import documents.4.2 Issue of RIAThe Inspection Company
Liaison Office shall register all such orders of Goods and issue a
RIA, which shall be released to the importer within 24 hours of
receipt of the documentation from the importer.4.3 Reference
NumberThe RIA shall contain a unique reference number, which shall
serve to identify the transaction and may be used for all
correspondence with the Inspection Company.4.4 Inadequate
documentationAny document supplied to the Inspection Company by an
importer which is incomplete, illegible or otherwise unclear shall
be returned to the importer for correction before a RIA will be
issued.4.5 Request for informationThe Inspection Company Liaison
Office shall transmit the RIA details to the office of the
Inspection Company or its affiliates in the county of supply of the
Goods which shall immediately send a request to the seller for the
supply of information regarding the Goods and arrange Pre-shipment
Inspection of the Goods.ARTICLE 5 PRE-SHIPMENT INSPECTION OF
GOODS5.1 Pre-shipment InspectionThe seller shall contact Inspection
Company to arrange a Pre-shipment Inspection at least three working
days prior to the Goods being available for such Pre-shipment
Inspection. The Inspection Company will carry out urgent inspection
without delay notwithstanding that less than three working days
notice is given by the seller.5.2 Required TasksThe Inspection
Company or its affiliate in the country of supply of the Goods
shall perform the following tasks in relation to the Goods using
all information at its disposal:(a) Pre-shipment Inspection, (b)
Price verification, 18 19. (c) Verification of the total value of
the Goods (d) Determination of the dutiable value of the Goods in
accordance with the Tariff Nomenclature, (e) Calculate duties and
taxes payable on the Goods in the Kingdom of Cambodia. 5.3
Documentation to be providedThe seller shall provide the Inspection
Company or its affiliate with copies of purchase orders, price
lists, letters of credit and all other documents, which the
Inspection Company may deem necessary for the purpose of the
Pre-shipment Inspection. 5.4 Provision of FacilitiesThe seller
shall provide the Inspection Company or its affiliate with all
necessary facilities as well as relevant testing certificates where
applicable to enable the Inspection Company to conduct the
Pre-shipment Inspection. The seller shall make the necessary
arrangements for handling, presentation, sampling and shop testing
of the Goods for the purpose of the Pre-shipment Inspection.5.5
Place of Pre-shipment InspectionThe Pre-shipment Inspection may be
performed at the sellers premises or such other appropriate place
prior to the shipment of the Goods to the Kingdom of Cambodia. The
Inspection Company shall be entitled to re-inspect Goods at any
time during the course of supply or delivery, prior to the shipment
of the Goods to the Kingdom of Cambodia and to seal containers as
may be deemed necessary and feasible by the Inspection Company.5.6
Repeated Visits by Inspection CompanyIf the seller arranges for a
Pre-shipment Inspection by the Inspection Company without having
prepared the Goods for inspection, or if the Goods have been
certified and are found not in accordance with the Importer
Specification, the Inspection Companys costs for repeated visits
and further Pre-shipment Inspection shall be payable by the seller.
5.7 Inability to Inspect If for any reason the Inspection Company
shall be unable to carry out any Pre-shipment Inspection, the
Inspection Company shall immediately notify the Director of Customs
in writing.5.7 Final Settlement InvoiceUpon satisfactory
Pre-shipment Inspection and Price Verification by the Inspection
Company or its affiliate, the seller shall submit a final invoice
and relevant information to the Inspection Company, which shall
include the following details:(a) description of the Goods, (b)
weight and volume, (c) mode of shipment, (d) port or airport of
loading (including any port of transhipment), (e) port or airport
of discharge, and19 20. (f) anticipated date of shipment to the
Kingdom of Cambodia 5.8 Price Verification restrictions In
countries where price comparison is subject to legal restrictions,
the Price Verification shall be performed within the existing
framework of the laws of those countries and all restrictions shall
be reported by the Inspection Company to the Government. ARTICLE 6
POST-INSPECTION AND CLEARANCE PROCEDURES6.1 Issue of ROFWhen a
Pre-shipment Inspection has been satisfactorily completed and final
invoices and relevant information have been presented by the
importer to the Inspection Company, the Inspection Company shall
issue a ROF to the importer. 6.2 Contents of a ROF (a) the nature
of Goods (b) the number or quantity of the Goods, (c) the quality
or actual specification or both of the Goods, (d) Price
Verification for the Goods, and (e) the appropriate customs
classification of the Goods in accordance with the Customs
tariff.6.3 Copies of ROF The ROF shall be produced in a set of one
original and five copies, which shall be distributed by the
Inspection Company to the importer (one original and three copies).
Upon clearance of the Goods through the Bureau of Customs, the ROF
shall be retained as follows:(a) importer one original, (b) Bureau
of Customs two copies after receiving three copies from the
importer andforwarding one copy to the Inspection Company. (c) The
Inspection company one copy received from the Bureau of Customs
afterpayment of duties and taxes by the importer, endorsed with
details of payment. 6.4 Discrepancy Report Where a Pre-shipment
Inspection has in any way not been satisfactorily completed, an ROF
shall not be issued by the Inspection Company, which instead shall
issue a Discrepancy Report which shall be distributed in accordance
with Article 6.3. 6.5 Correction of Discrepancies 20 21. If the
seller fails to correct discrepancies in a timely manner prior to
shipment of the Goods, the Inspection Company shall withhold the
ROF and shall clearly identify all uncertified discrepancies by
means of Discrepancy Report. If the necessary corrections are
effected by the seller after the issuance of the Discrepancy Report
but prior to the shipment of the Goods, the Inspection Company
shall then issue a ROF in replacement of the Discrepancy Report.6.6
Security LabelFor each shipment of Goods the seller shall receive
from the Inspection Company, the original copy of the final invoice
submitted to the Inspection Company, duly attested by the
Inspection Company by means of a Security Label confirming that the
Goods described in the invoice have been inspected and that an ROF
will be issued.6.7 Customs Declaration (CD)The importer shall use
the ROF as the basis for completion of the CD and the payment of
duties and taxes payable to the Bureau of Customs at the port of
entry into the Kingdom of Cambodia. In case there has been an
amendment to the Customs Tariff prior to clearance, the importer
must have his ROF amended accordingly by the Inspection Company.
6.8 Submission of CD The importer shall sign the CD which it has
prepared and present it to the Bureau of Customs with all required
supporting documentation and shall pay the applicable duties and
taxes specified in the CD. No Goods shall be cleared through the
Bureau of Customs without an original signed and completed CD being
presented with the corresponding ROF. 6.9 Notification to the
Inspection Company The Bureau of Customs shall supply details of
the Customs duties and taxes paid by the importer on the copy of
the ROF to be provided to the Inspection Company, pursuant to
Article 6.3 (c) and provide the Inspection Company with a legible
copy of the CD received by the Bureau of Customs pursuant to
Article 6.8.6.10 Submission of Documentation The Inspection Company
shall request sellers to submit copies of the final settlement
invoice, the Bill of Lading, Airway bill and other transport
documentation or title. Receipt of these documents from the seller
shall not be a pre-condition for the issuance by the Inspection
Company of a ROF. 6.11 Re-inspection of Goods The Inspection
Company or their designated agents and the Bureau of Customs shall
be entitled to jointly conduct a re-inspection of Goods upon
arrival in the Kingdom of Cambodia where a Discrepancy Report has
been issued or where there are grounds for a reasonable belief that
the Goods are not in conformity with the ROF or where a re-
inspection of the Goods is requested by the importer.INSPECTION
FEES 21 22. ARTICLE 7 FEES 7.1 Amount of Fees All goods other than
Exempt Goods as specified in Article 1.4 imported into the Kingdom
of Cambodia shall be subject to the Fees as described in Article
1.7. 7.2 Payment of Fees The Fees shall be payable to the Standard
Chartered Bank Phnom Penh 89, Norodom Boulevard, Sangkat Boeung
Raing, Khan Daun Penh (PSI Account number .) after RIA application
to Liaison Office of the Inspection Company for the purpose of
issuance of a RIA.7.3 Receipt to be issued Upon payment of the
Fees, the Standard Chartered Bank Phnom Penh shall issue a receipt
to the importer. The importer shall submit the receipt to the
Liaison Office of the Inspection Company with the import
documentation.RESOLUTION OF DISPUTESARTICLE 8 DISPUTES 8.1
Discussions with the Inspection Company Any importer may question
or dispute the opinion of the Inspection Company relating to that
importers Goods by making a request in writing to the Inspection
Company Liaison Office in Phnom Penh. If the matter is not resolved
to the satisfaction of the importer within one week of the
importers request, the importer may refer in writing the matter to
the Working Committee. 8.2 Release of Goods While the Working
Committee is reviewing a matter referred to it in writing by an
importer, the importer may apply to the Bureau of Customs to have
the Goods released against a surety bond which shall be fixed at
the sole discretion of the Bureau of Customs. ESTABLISHMENT OF
WORKING COMMITTEE ARTICLE 9 WORKING COMMITTEE 9.1 Establishment The
Ministry of Economy and Finance shall establish a Working Committee
to review any decision of the Inspection Company referred to it in
writing by an importer. The Working Committee shall comprise
representatives from the Ministry of Economy and Finance, the
Bureau of Customs, the Ministry of Commerce, the Council for the
Development of Cambodia and the private sector. 9.2 Chairman The
Working Committee chairman will be appointed by the Ministry of
Economy and Finance for an initial period of twelve (12) months and
subject to reappointment for further period of twelve (12) months
at the discretion of the Minister of Economy and Finance at the end
of that period. 9.3 Decisions FinalThe decision of the Working
Committee should be made within a maximum period of one month from
the importers application and shall be final and binding on the
Inspection Company and the importer and shall not be subject to
appeal.OBLIGATIONS OF IMPORTERS AND SELLERS 22 23. ARTICLE 10-
COMPLIANCE BY IMPORTER The issuance of a ROF is an evidence only
that a Pre-Shipment Inspection has been conducted. The issuance of
a ROF does not relieve the importer from its obligation to comply
with all laws, rules or regulations relating to the importation and
sale of Goods in the Kingdom of Cambodia.ARTICLE 11 SELLERS
OBLIGATIONS TO IMPORTER The Pre-Shipment Inspection conducted by
the Inspection Company shall not affect the rights of the buyer of
the Goods against the seller and shall not relieve the seller of
the goods of its contractual responsibilities to the importer of
the Goods.LETTER OF CREDITARTICLE 12 REQUIREMENT FOR LETTERS OF
CREDIT 12.1 Application If payment for Goods is to be made by
Letter of Credit, the letter of credit application submitted by the
importer shall contain a description of the Goods including,
without limitation, the type, quantity, quality and Total Value of
the Goods. 12.2 Payment by Letter of Credit For transactions
effected by Letter of Credit, payment shall only be made to seller
unless the original invoice in respect of the Goods is affixed with
a Security Label and is presented to the importers bank along with
all other shipping documents required for the negotiation of
payment. NON-COMPLIANCEARTICLE 13- PENALTIES After the ., any
person who fails to obtain Pre-Shipment Inspection of any Goods
other than Exempt Goods as specified in Article 1.4 which are
shipped to the Kingdom of Cambodia shall be subjected to severe
sanctions from the relevant Authorities. 6.2 WTO Agreement on
Preshipment Inspection Agreement on Preshipment Inspection
Members,23 24. Noting that Ministers on 20 September 1986 agreed
that the Uruguay Round of Multilateral Trade Negotiations shall aim
to bring about further liberalization and expansion of world trade,
strengthen the role of GATT and increase the responsiveness of the
GATT system to the evolving international economic environment;
Noting that a number of developing country Members have recourse to
preshipment inspection; Recognizing the need of developing
countries to do so for as long and in so far as it is necessary to
verify the quality, quantity or price of imported goods;Mindful
that such programmes must be carried out without giving rise to
unnecessary delays or unequal treatment; Noting that this
inspection is by definition carried out on the territory of
exporter Members;Recognizing the need to establish an agreed
international framework of rights and obligations of both user
Members and exporter Members; Recognizing that the principles and
obligations of GATT 1994 apply to those activities of preshipment
inspection entities that are mandated by governments that are
Members of the WTO;Recognizing that it is desirable to provide
transparency of the operation of preshipment inspection entities
and of laws and regulations relating to preshipment inspection;
Desiring to provide for the speedy, effective and equitable
resolution of disputes between exporters and preshipment inspection
entities arising under this Agreement; Hereby agree as follows:
Article 1: Coverage Definitions1.This Agreement shall apply to all
preshipment inspection activities carried out on the territory of
Members, whether such activities are contracted or mandated by the
government, or any government body, of a Member.2. The term user
Member means a Member of which the government or any government
body contracts for or mandates the use of preshipment inspection
activities.3.Preshipment inspection activities are all activities
relating to the verification of the quality, the quantity, the
price, including currency exchange rate and financial terms, and/or
the customs classification of goods to be exported to the territory
of the user Member.4. The term preshipment inspection entity is any
entity contracted or24 25. mandated by a Member to carry out
preshipment inspection activities.(1)Article 2: Obligations of User
MembersNon-discrimination1.User Members shall ensure that
preshipment inspection activities are carried out in a
non-discriminatory manner, and that the procedures and criteria
employed in the conduct of these activities are objective and are
applied on an equal basis to all exporters affected by such
activities. They shall ensure uniform performance of inspection by
all the inspectors of the preshipment inspection entities
contracted or mandated by them.Governmental Requirements2. User
Members shall ensure that in the course of preshipment inspection
activities relating to their laws, regulations and requirements,
the provisions of paragraph 4 of Article III of GATT 1994 are
respected to the extent that these are relevant.Site of
Inspection3.User Members shall ensure that all preshipment
inspection activities, including the issuance of a Clean Report of
Findings or a note of non-issuance, are performed in the customs
territory from which the goods are exported or, if the inspection
cannot be carried out in that customs territory given the complex
nature of the products involved, or if both parties agree, in the
customs territory in which the goods are
manufactured.Standards4.User Members shall ensure that quantity and
quality inspections are performed in accordance with the standards
defined by the seller and the buyer in the purchase agreement and
that, in the absence of such standards, relevant international
standards(2) apply.Transparency5.User Members shall ensure that
preshipment inspection activities are conducted in a transparent
manner.6.User Members shall ensure that, when initially contacted
by exporters, preshipment inspection entities provide to the
exporters a list of all the information which is necessary for the
exporters to comply with inspection requirements. The preshipment
inspection entities shall provide the actual information when so
requested by exporters. This information shall include a reference
to the laws and regulations of user Members relating to preshipment
inspection activities, and shall also include the procedures and
criteria used for inspection and for price and currency
exchange-rate verification purposes, the exporters rights vis--vis
the inspection entities, and the appeals procedures set up under
paragraph 21. Additional procedural requirements or changes in
existing procedures shall not be25 26. applied to a shipment unless
the exporter concerned is informed of these changes at the time the
inspection date is arranged. However, in emergency situations of
the types addressed by Articles XX and XXI of GATT 1994, such
additional requirements or changes may be applied to a shipment
before the exporter has been informed. This assistance shall not,
however, relieve exporters from their obligations in respect of
compliance with the import regulations of the user Members.7.User
Members shall ensure that the information referred to in paragraph
6 is made available to exporters in a convenient manner, and that
the preshipment inspection offices maintained by preshipment
inspection entities serve as information points where this
information is available.8.User Members shall publish promptly all
applicable laws and regulations relating to preshipment inspection
activities in such a manner as to enable other governments and
traders to become acquainted with them.Protection of Confidential
Business Information9.User Members shall ensure that preshipment
inspection entities treat all information received in the course of
the preshipment inspection as business confidential to the extent
that such information is not already published, generally available
to third parties, or otherwise in the public domain. User Members
shall ensure that preshipment inspection entities maintain
procedures to this end.10. User Members shall provide information
to Members on request on the measures they are taking to give
effect to paragraph 9. The provisions of this paragraph shall not
require any Member to disclose confidential information the
disclosure of which would jeopardize the effectiveness of the
preshipment inspection programmes or would prejudice the legitimate
commercial interest of particular enterprises, public or
private.11.User Members shall ensure that preshipment inspection
entities do not divulge confidential business information to any
third party, except that preshipment inspection entities may share
this information with the government entities that have contracted
or mandated them. User Members shall ensure that confidential
business information which they receive from preshipment inspection
entities contracted or mandated by them is adequately safeguarded.
Preshipment inspection entities shall share confidential business
information with the governments contracting or mandating them only
to the extent that such information is customarily required for
letters of credit or other forms of payment or for customs, import
licensing or exchange control purposes.12. User Members shall
ensure that preshipment inspection entities do not request
exporters to provide information regarding:(a) manufacturing data
related to patented, licensed or undisclosed processes, or to
processes for which a patent is pending;(b) unpublished technical
data other than data necessary to demonstrate 26 27. compliance
with technical regulations or standards; (c)internal pricing,
including manufacturing costs; (d) profit levels; (e)the terms of
contracts between exporters and their suppliers unless itis not
otherwise possible for the entity to conduct the inspection
inquestion. In such cases, the entity shall only request the
informationnecessary for this purpose.13.The information referred
to in paragraph 12, which preshipment inspection entities shall not
otherwise request, may be released voluntarily by the exporter to
illustrate a specific case.Conflicts of Interest14. User Members
shall ensure that preshipment inspection entities, bearing in mind
also the provisions on protection of confidential business
information in paragraphs 9 through 13, maintain procedures to
avoid conflicts of interest: (a)between preshipment inspection
entities and any related entities of the preshipment inspection
entities in question, including any entities in which the latter
have a financial or commercial interest or any entities which have
a financial interest in the preshipment inspection entities in
question, and whose shipments the preshipment inspection entities
are to inspect; (b) between preshipment inspection entities and any
other entities,including other entities subject to preshipment
inspection, with theexception of the government entities
contracting or mandating theinspections; (c)with divisions of
preshipment inspection entities engaged in activities other than
those required to carry out the inspection process.Delays15. User
Members shall ensure that preshipment inspection entities avoid
unreasonable delays in inspection of shipments. User Members shall
ensure that, once a preshipment inspection entity and an exporter
agree on an inspection date, the preshipment inspection entity
conducts the inspection on that date unless it is rescheduled on a
mutually agreed basis between the exporter and the preshipment
inspection entity, or the preshipment inspection entity is
prevented from doing so by the exporter or by force majeure.(3)16.
User Members shall ensure that, following receipt of the final
documents and completion of the inspection, preshipment inspection
entities, within five working days, either issue a Clean Report of
Findings or provide a detailed written explanation specifying the
reasons for non-issuance. User Members shall ensure27 28. that, in
the latter case, preshipment inspection entities give exporters the
opportunity to present their views in writing and, if exporters so
request, arrange for re- inspection at the earliest mutually
convenient date.17.User Members shall ensure that, whenever so
requested by the exporters, preshipment inspection entities
undertake, prior to the date of physical inspection, a preliminary
verification of price and, where applicable, of currency exchange
rate, on the basis of the contract between exporter and importer,
the pro forma invoice and, where applicable, the application for
import authorization. User Members shall ensure that a price or
currency exchange rate that has been accepted by a preshipment
inspection entity on the basis of such preliminary verification is
not withdrawn, providing the goods conform to the import
documentation and/or import licence. They shall ensure that, after
a preliminary verification has taken place, preshipment inspection
entities immediately inform exporters in writing either of their
acceptance or of their detailed reasons for non-acceptance of the
price and/or currency exchange rate.18. User Members shall ensure
that, in order to avoid delays in payment, preshipment inspection
entities send to exporters or to designated representatives of the
exporters a Clean Report of Findings as expeditiously as
possible.19. User Members shall ensure that, in the event of a
clerical error in the Clean Report of Findings, preshipment
inspection entities correct the error and forward the corrected
information to the appropriate parties as expeditiously as
possible.Price Verification20. User Members shall ensure that, in
order to prevent over- and under- invoicing and fraud, preshipment
inspection entities conduct price verification(4) according to the
following guidelines:(a) preshipment inspection entities shall only
reject a contract price agreed between an exporter and an importer
if they can demonstrate that their findings of an unsatisfactory
price are based on a verification process which is in conformity
with the criteria set out in subparagraphs (b) through (e);(b) the
preshipment inspection entity shall base its price comparison for
the verification of the export price on the price(s) of identical
or similar goods offered for export from the same country of
exportation at or about the same time, under competitive and
comparable conditions of sale, in conformity with customary
commercial practices and net of any applicable standard discounts.
Such comparison shall be based on the following: (i)only prices
providing a valid basis of comparison shall beused, taking into
account the relevant economic factorspertaining to the country of
importation and a country orcountries used for price comparison;
(ii) the preshipment inspection entity shall not rely upon the 28
29. price of goods offered for export to different countries of
importation to arbitrarily impose the lowest price upon the
shipment;(iii) the preshipment inspection entity shall take into
account thespecific elements listed in subparagraph (c);(iv)at any
stage in the process described above, the preshipment inspection
entity shall provide the exporter with an opportunity to explain
the price;(c)when conducting price verification, preshipment
inspection entitiesshall make appropriate allowances for the terms
of the salescontract and generally applicable adjusting factors
pertaining to thetransaction; these factors shall include but not
be limited to thecommercial level and quantity of the sale,
delivery periods andconditions, price escalation clauses, quality
specifications, specialdesign features, special shipping or packing
specifications, ordersize, spot sales, seasonal influences, licence
or other intellectualproperty fees, and services rendered as part
of the contract if theseare not customarily invoiced separately;
they shall also includecertain elements relating to the exporters
price, such as thecontractual relationship between the exporter and
importer;(d)the verification of transportation charges shall relate
only to theagreed price of the mode of transport in the country of
exportationas indicated in the sales contract;(e)the following
shall not be used for price verification purposes:(i) the selling
price in the country of importation of goodsproduced in such
country;(ii)the price of goods for export from a country other than
thecountry of exportation;(iii) the cost of
production;(iv)arbitrary or fictitious prices or values. Appeals
Procedures21. User Members shall ensure that preshipment inspection
entities establish procedures to receive, consider and render
decisions concerning grievances raised by exporters, and that
information concerning such procedures is made available to
exporters in accordance with the provisions of paragraphs 6 and 7.
User Members shall ensure that the procedures are developed and
maintained in accordance with29 30. the following guidelines:(a)
preshipment inspection entities shall designate one or more
officials who shall be available during normal business hours in
each city or port in which they maintain a preshipment inspection
administrative office to receive, consider and render decisions on
exporters appeals or grievances;(b) exporters shall provide in
writing to the designated official(s) the facts concerning the
specific transaction in question, the nature of the grievance and a
suggested solution;(c) the designated official(s) shall afford
sympathetic consideration toexporters grievances and shall render a
decision as soon as possibleafter receipt of the documentation
referred to in subparagraph (b).Derogation22.By derogation to the
provisions of Article 2, user Members shall provide that, with the
exception of part shipments, shipments whose value is less than a
minimum value applicable to such shipments as defined by the user
Member shall not be inspected, except in exceptional circumstances.
This minimum value shall form part of the information furnished to
exporters under the provisions of paragraph 6.Article 3:
Obligations of Exporter MembersNon-discrimination1. Exporter
Members shall ensure that their laws and regulations relating to
preshipment inspection activities are applied in a
non-discriminatory manner.Transparency2. Exporter Members shall
publish promptly all applicable laws and regulations relating to
preshipment inspection activities in such a manner as to enable
other governments and traders to become acquainted with
them.Technical Assistance3. Exporter Members shall offer to provide
to user Members, if requested, technical assistance directed
towards the achievement of the objectives of this Agreement on
mutually agreed terms.(5) Article 4: Independent Review
ProceduresMembers shall encourage preshipment inspection entities
and exporters mutually to resolve their disputes. However, two
working days after submission of the grievance in accordance with
the provisions of paragraph 21 of Article 2, either party may30 31.
refer the dispute to independent review. Members shall take such
reasonable measures as may be available to them to ensure that the
following procedures are established and maintained to this
end:(a)these procedures shall be administered by an independent
entity constituted jointly by an organization representing
preshipment inspection entities and an organization representing
exporters for the purposes of this Agreement;(b)the independent
entity referred to in subparagraph (a) shall establisha list of
experts as follows:(i) a section of members nominated by an
organizationrepresenting preshipment inspection entities;(ii)a
section of members nominated by an organizationrepresenting
exporters;(iii) a section of independent trade experts, nominated
by theindependent entity referred to in subparagraph (a).The
geographical distribution of the experts on this list shall be such
as to enable any disputes raised under these procedures to be dealt
with expeditiously. This list shall be drawn up within two months
of the entry into force of the WTO Agreement and shall be updated
annually. The list shall be publicly available. It shall be
notified to the Secretariat and circulated to all Members;(c)an
exporter or preshipment inspection entity wishing to raise adispute
shall contact the independent entity referred to insubparagraph (a)
and request the formation of a panel. Theindependent entity shall
be responsible for establishing a panel.This panel shall consist of
three members. The members of thepanel shall be chosen so as to
avoid unnecessary costs and delays.The first member shall be chosen
from section (i) of the above listby the preshipment inspection
entity concerned, provided that thismember is not affiliated to
that entity. The second member shall bechosen from section (ii) of
the above list by the exporter concerned,provided that this member
is not affiliated to that exporter. Thethird member shall be chosen
from section (iii) of the above list bythe independent entity
referred to in subparagraph (a). Noobjections shall be made to any
independent trade expert drawnfrom section (iii) of the above
list;(d)the independent trade expert drawn from section (iii) of
the abovelist shall serve as the chairman of the panel. The
independent tradeexpert shall take the necessary decisions to
ensure an expeditioussettlement of the dispute by the panel, for
instance, whether thefacts of the case require the panelists to
meet and, if so, where sucha meeting shall take place, taking into
account the site of the31 32. inspection in question;(e) if the
parties to the dispute so agree, one independent trade expertcould
be selected from section (iii) of the above list by theindependent
entity referred to in subparagraph (a) to review thedispute in
question. This expert shall take the necessary decisions toensure
an expeditious settlement of the dispute, for instance takinginto
account the site of the inspection in question;(f)the object of the
review shall be to establish whether, in the course of the
inspection in dispute, the parties to the dispute have complied
with the provisions of this Agreement. The procedures shall be
expeditious and provide the opportunity for both parties to present
their views in person or in writing;(g) decisions by a three-member
panel shall be taken by majority vote. The decision on the dispute
shall be rendered within eight working days of the request for
independent review and be communicated to the parties to the
dispute. This time-limit could be extended upon agreement by the
parties to the dispute. The panel or independent trade expert shall
apportion the costs, based on the merits of the case;(h) the
decision of the panel shall be binding upon the preshipment
inspection entity and the exporter which are parties to the
dispute. Article 5: NotificationMembers shall submit to the
Secretariat copies of the laws and regulations by which they put
this Agreement into force, as well as copies of any other laws and
regulations relating to preshipment inspection, when the WTO
Agreement enters into force with respect to the Member concerned.
No changes in the laws and regulations relating to preshipment
inspection shall be enforced before such changes have been
officially published. They shall be notified to the Secretariat
immediately after their publication. The Secretariat shall inform
the Members of the availability of this information. Article 6:
ReviewAt the end of the second year from the date of entry into
force of the WTO Agreement and every three years thereafter, the
Ministerial Conference shall review the provisions, implementation
and operation of this Agreement, taking into account the objectives
thereof and experience gained in its operation. As a result of such
review, the Ministerial Conference may amend the provisions of the
Agreement. Article 7: ConsultationMembers shall consult with other
Members upon request with respect to any matter32 33. affecting the
operation of this Agreement. In such cases, the provisions of
Article XXII of GATT 1994, as elaborated and applied by the Dispute
Settlement Understanding, are applicable to this Agreement. Article
8: Dispute SettlementAny disputes among Members regarding the
operation of this Agreement shall be subject to the provisions of
Article XXIII of GATT 1994, as elaborated and applied by the
Dispute Settlement Understanding.Article 9: Final
Provisions1.Members shall take the necessary measures for the
implementation of the present Agreement.2. Members shall ensure
that their laws and regulations shall not be contrary to the
provisions of this Agreement. 33