1. Report
on
Current State of Compliance by Cambodia
to
The WTO Agreement on Preshipment Inspection
November 2008
Prepared by Dr. Cheaseth Seng
Official
in
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 Content
Page
1. Introduction 2
2. Preshipment Inspection and Cambodia Customs Administration 2
3. Situation Analysis 3
4. Gap Analysis 7
5. Conclusion 10
6. Appendix 11
6.1 Prakas Regulation on PSI activities 11
6.2 WTO Agreement on Preshipment Inspection 23
Table 3.1: Summary of Headings and Indications of Fulfilment 8
Table 4.1 Gap Analysis on Conformance to API 8
2

3. Analysis Report on Cambodia compliance with WTO Agreement on
Preshipment Inspection
1. Introduction
This 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
Société Générale 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 Köhler (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; Köhler (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 Bank’s 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 Requirements
This 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 heading’s
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 origin’s 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 seller’s 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
5
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 seal
containers 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 API’s 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. Standards
This 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 Cambodia’s 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-á-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 heading’s 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 member’s
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 Information
This 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 provider’s 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 to
processes for which a paten is pending;
(b) unplublish technical data other than data necessary to demonstrate compliance with
technical 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 otherwise
possible for the entity to conduct inspection in question. In such cases, the entity shall only
request the information necessary for this purpose11.
The full extent of this heading’s 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 Interest
This 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 preshipment
inspection entities in question, including any entities in which the latter have a financial or
commercial interest or any entities which have 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 the exception of government entities contracting or
mandating the inspections;
10
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; Köhler (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
11
WTO 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. Delays
This 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 on
mutually agreed basis or PSI providers are prevented from doing so by the
exporter or by force majeure;
3) PSI providers need to issue a clean report of finding (CRF) or a written explanation
specifying the reasons for non-issuance of such report within five working days
after receipted of final documents and inspection;
4) PSI provider needs to carry out price and current exchange of the goods based on
the contract between importers and exporters and pro forma invoice when
requested by exporters; and the accepted price and exchange rate will be
withdrawn after completion of inspections;
5) In event of critical error in the CRF, the PSI provider is required to correct the error
and 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 can
demonstrate that their findings of unsatisfactory price are based on a verification process
which 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 Procedures
The 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
importer’s 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 Conformance
Government Requirements Full
Site of Inspection Partial
Standards Partial
Transparency None
Protection of Confidential Business None
Information
Conflict of Interest None
Delays Full
Price Verification None
Appeals Procedures Full
Derogation Full
4. Gap Analysis
This gap analysis is prepared according to World Bank’s guidelines on WTO Trade
Facilitation Negotiations Support Guide.
Table 4.1 Gap Analysis on Conformance to API
Proposal being Examined: Conformance to API
Element of Existing National Implementation Issues to be Considered
Legislation/Process
Benefits The full conformance to API provides several
benefits to the traders as well as the user
government. The traders receive benefits in terms
of reducing discrepancies of price verification and
quality verifications, confidential business
information is protected, and no conflict of interests
that lead to detrimental to their businesses. The
government would benefit in term of having PSI
activities fully under monitor of Customs officials,
reduce number of complain and disputes and
improve integrity of PSI providers in carrying out
their activities. The government also get benefit in
term of improving trade facilitation, which achieved
by reducing the needs for reinspection of quality
standards and price verification. Benefits also
receive in term of improve traders’ confident with
PSI services and thus boost trade to the country
Legal framework In order to fully conform with API, Prakas No. 599
needs 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 API’s Transparency heading.
4. Include a provision or provisions to deal with
protecting confidential business information. A
provision(s) that gives the effect of API’s
Protection of confidential business information
provisions would be sufficed.
5. Include a provision or provisions that give the
effect of API’s 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 API’s Delay
provisions.
Existing commitments This 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 isn’t 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 policy
10

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 work
together in setting up a timeframe to successfully
implement the change. For the tasks listed above a
reasonable 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 API’s 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 API’s essential
requirements, namely Government Requirements, Delays, Appeals Procedures and
Derogation. In addition, the Prakas is partially fulfilled API’s 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 PSI
Draft For Review – V06/03/06
KINGDOM OF CAMBODIA
Nation-Religion-King
Ministry of Economy and Finance
No. ____ Phnom Penh, ___ March 2006
PRAKAS
On the Implementation of the Pre-Shipment Inspection Service
Senior 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 DECIDED
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 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 Service
O t
n
Senior 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
SGS 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
- Documentation
KINGDOM OF CAMBODIA
Nation Religion King
Annex to the Prakas of the Ministry of Economy and Finance No 599 dated 31 August
2000.
REGULATION
On 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. INTERPRETATION
ARTICLE 1 – DEFINITIONS
1.1 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 a
Pre-shipment Inspection indicates the existence of any unrectified discrepancies
between the actual quantity or quality or both of the Goods and the Importers
specifications.
1.3 Customs Declaration means the import entry form completed by the importer based
on 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 the
exporter’s 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 only
inspected as declared in the exporter’s final or pro-forma invoice and
indicated in the Reports of Findings.
(c) Applicable for both (a) and (b) a minimum fee per intervention of USD210.00
shall be applied in all cases where the ad-valorem rate or the case of (b) the
tonnage 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 Inspection
Company by the importer as set out in Article 5.3
1.9 Inspection Company means the company, which has the duty to execute an
agreement with the Government granting such company the right to conduct pre-
shipment inspection services on behalf of the Royal Government of Cambodia.
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16. 1.10 Inspection Company Liaison Office means the liaison office established in the
Kingdom of Cambodia by the Inspection Company to co-ordinate Pre-shipment
Inspections.
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 of
the Government.
1.13 Pre-shipment Inspection means the inspection on quantity and quality of Goods
and related activities to be performed by the Inspection Company.
1.14 Price Verification means a verification of the price of the Goods in order to
determine:
(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 is
issued by the Inspection Company Liaison Office to the importer in connection
with 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
that
1.17 Security Label means the label affixed to one copy of the seller’s final settlement
invoice by the Inspection Company in respect of Goods for which an ROF is to be
issued 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.
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17. the effect of any material discrepancy is limited to incorrect classification of the
Goods (as per Tariff Nomenclature) the ROF shall nevertheless be issued.
SCOPE OF PRE-SHIPMENT INSPECTION
ARTICLE 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 to
foundations, charities and recognized humanitarian organization.
(j) Gift and supplies to diplomatic and consular missions and to agencies
depending from the United Nations Organization imported for their own
needs.
(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 for
export)
PROCEDURE
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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 RIA
The 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 Number
The 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 documentation
Any 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 information
The 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 GOODS
5.1 Pre-shipment Inspection
The 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 Tasks
The 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,
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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 provided
The 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 Facilities
The 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 Inspection
The Pre-shipment Inspection may be performed at the seller’s 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 Company
If 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 Company’s 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 Invoice
Upon 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, and
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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 PROCEDURES
6.1 Issue of ROF
When 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 and
forwarding one copy to the Inspection Company.
(c) The Inspection company – one copy received from the Bureau of Customs after
payment 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
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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 Label
For 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
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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 DISPUTES
ARTICLE 8 – DISPUTES
8.1 Discussions with the Inspection Company
Any importer may question or dispute the opinion of the Inspection Company relating to
that importer’s 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 importer’s 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 Final
The decision of the Working Committee should be made within a maximum period of one
month from the importer’s 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
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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 – SELLER’S 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 CREDIT
ARTICLE 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 importer’s bank along with all other shipping documents required for the
negotiation of payment.
NON-COMPLIANCE
ARTICLE 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,
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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 — Definitions
1. 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 or
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25. mandated by a Member to carry out preshipment inspection activities.(1)
Article 2: Obligations of User Members
Non-discrimination
1. 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 Requirements
2. 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 Inspection
3. 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.
Standards
4. 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.
Transparency
5. 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-à-vis the
inspection entities, and the appeals procedures set up under paragraph 21.
Additional procedural requirements or changes in existing procedures shall not be
25

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 Information
9. 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
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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 it
is not otherwise possible for the entity to conduct the inspection in
question. In such cases, the entity shall only request the information
necessary 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 Interest
14. 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 the
exception of the government entities contracting or mandating the
inspections;
(c) with divisions of preshipment inspection entities engaged in
activities other than those required to carry out the inspection
process.
Delays
15. 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 ensure
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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 Verification
20. 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 be
used, taking into account the relevant economic factors
pertaining to the country of importation and a country or
countries used for price comparison;
(ii) the preshipment inspection entity shall not rely upon the
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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 the
specific 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 entities
shall make appropriate allowances for the terms of the sales
contract and generally applicable adjusting factors pertaining to the
transaction; these factors shall include but not be limited to the
commercial level and quantity of the sale, delivery periods and
conditions, price escalation clauses, quality specifications, special
design features, special shipping or packing specifications, order
size, spot sales, seasonal influences, licence or other intellectual
property fees, and services rendered as part of the contract if these
are not customarily invoiced separately; they shall also include
certain elements relating to the exporter’s price, such as the
contractual relationship between the exporter and importer;
(d) the verification of transportation charges shall relate only to the
agreed price of the mode of transport in the country of exportation
as 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 goods
produced in such country;
(ii) the price of goods for export from a country other than the
country of exportation;
(iii) the cost of production;
(iv) arbitrary or fictitious prices or values.
Appeals Procedures
21. 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 with
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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 to
exporters’ grievances and shall render a decision as soon as possible
after receipt of the documentation referred to in subparagraph (b).
Derogation
22. 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 Members
Non-discrimination
1. Exporter Members shall ensure that their laws and regulations relating to
preshipment inspection activities are applied in a non-discriminatory manner.
Transparency
2. 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 Assistance
3. 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 Procedures
Members 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 may
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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 establish
a list of experts as follows:
(i) a section of members nominated by an organization
representing preshipment inspection entities;
(ii) a section of members nominated by an organization
representing exporters;
(iii) a section of independent trade experts, nominated by the
independent 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 a
dispute shall contact the independent entity referred to in
subparagraph (a) and request the formation of a panel. The
independent entity shall be responsible for establishing a panel.
This panel shall consist of three members. The members of the
panel shall be chosen so as to avoid unnecessary costs and delays.
The first member shall be chosen from section (i) of the above list
by the preshipment inspection entity concerned, provided that this
member is not affiliated to that entity. The second member shall be
chosen from section (ii) of the above list by the exporter concerned,
provided that this member is not affiliated to that exporter. The
third member shall be chosen from section (iii) of the above list by
the independent entity referred to in subparagraph (a). No
objections shall be made to any independent trade expert drawn
from section (iii) of the above list;
(d) the independent trade expert drawn from section (iii) of the above
list shall serve as the chairman of the panel. The independent trade
expert shall take the necessary decisions to ensure an expeditious
settlement of the dispute by the panel, for instance, whether the
facts of the case require the panelists to meet and, if so, where such
a meeting shall take place, taking into account the site of the
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32. inspection in question;
(e) if the parties to the dispute so agree, one independent trade expert
could be selected from section (iii) of the above list by the
independent entity referred to in subparagraph (a) to review the
dispute in question. This expert shall take the necessary decisions to
ensure an expeditious settlement of the dispute, for instance taking
into 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: Notification
Members 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: Review
At 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: Consultation
Members shall consult with other Members upon request with respect to any matter
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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 Settlement
Any 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 Provisions
1. 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.
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