1

DISSERTATION PROJECT REPORT ON

“Pre-shipment Inspection of Goods for Export”

For The Partial Fulfillment Of Award Of

POST GRADUATE DIPLOMA IN BUSINESS MANAGEMENT

(Session 2008-2010)

Prepared By

RAMANAND ARORA

Under the guidance of

Prof. A.V.K. MURTHY

PGDM (BM) Entrepreneurship and Management Processes International

New Delhi – 74 July 2009

2

ACKNOWLEDGEMENT In the successful completion of this project, inspiration and guidance of many people

was involved. To all it is a mere form of acknowledgement but it would be demeaning

the status of this whole effort. This effort has the blessings and supervision of the

most eminent persons around me.

First of all I would like to thank EMPI Business School, New Delhi for giving me an

opportunity to work on this dissertation project.

I am very thankful to Dr. Ajitabh, Head, EMPI Knowledge Services. He introduced

the topic of this project to me and guided me at every step during the course of my

project and in making this project. He gave me precious feedback for improvement in

the project as and when required.

I would also like to convey special thanks to Prof. A.V.K. Murthy, EMPI Business

School, who was always there to help and support me throughout the project.

I would also like to thank Miss Ruhi Agarwal, Management Trainee, GVIC for

guiding and supporting me in conceptualizing the project report.

Last but not the least, I am greatly thankful to my teachers who imparted me the

knowledge and skills to make this project and were always there to help me when I

needed them.

Without the guidance and support of these personalities, this study would not have

been completed successfully. I would like to again express my deep regards and

thanks to all of them.

RAMANAND ARORA

3

DECLARATION

I hereby declare that the project on “Pre-shipment Inspection of Goods for Export” is

compiled by me under the guidance of Prof. A.V.K. Murthy. The conclusion and

findings in the project are based on the secondary data collected and my

understanding of the project work.

RAMANAND ARORA

4

TABLE OF CONTENTS

S. No. Topic Page No.

1

2

3

4

5

6

7

8

9

10

11

12

Executive Summary

Introduction

Inspection and Acceptance of Goods

Pre-shipment Inspection

• How it works

• Benefits

Role of Government in Pre-shipment Inspection

Role of WTO in Pre-shipment Inspection

• Uruguay Round

• Agreement on PSI

• Obligations of PSI using Countries

• Obligations of Exporting Countries

• Consideration of Complaints and Settlement of

Disputes

IFIA

• Introduction

• Quality Statement of IFIA

• Various Committees at IFIA

Companies Providing Pre-shipment Inspection

• Geo Chem Group

• SGS

• Asia Inspection

Pre-shipment Inspection Report

Conclusion

Bibliography

Annexure

5

6

6

6

8

8

9

10

10

10

10

12

12

13

13

14

16

17

20

21

23

24

5

EXECUTIVE SUMMARY This project titled “Pre-shipment Inspection of Goods for Export” gives an insight into the process and procedures involved in the inspection of goods that are to be exported before they are shipped to the importer. The topics covered under the project can basically be divided into three parts:

• The first part of the project explains the meaning of pre-shipment inspection, processes and procedures involved in it and the benefits of pre-shipment inspection.

• The second part of the project talks about the role of various regulatory bodies

and associations in pre-shipment inspection of goods.

• The third part of the project provides information about some of the companies who provide pre-shipment inspection services and an example of the report of pre-shipment inspection.

6

INTRODUCTION Since about the second half of the twentieth century importers have used the services of independent inspection companies to certify the quality and quantity of products they want to import. These inspections, which are conducted in most cases prior to shipment and in the country of exportation, assure the importer that the goods conform to the technical specifications and the quality standards laid down in the contract and that the quantities exported are accurate. The services of such inspection companies are utilized not only by private business firms, but also by State-owned enterprises and government departments. In fact, the regulations in many countries require goods procured by government departments to be inspected and certified for quality and quantity by independent and competent inspection companies. Since the mid-1960s, the governments of some developing countries have also been using the services of pre-shipment inspection (PSI) companies to inspect goods to be imported and to verify their prices, prior to shipment and in the exporting countries. Their basic purpose in doing so is to bring under control the under- or over-invoicing of imported goods and other unfair or improper practices. INSPECTION AND ACCEPTANCE OF GOODS Many times, export markets are far away and any discrepancies regarding products, replacement and repair can be very expensive and time consuming for the parties involved in the transaction. The exporter is expected to take special care to minimize the risk of goods being rejected. There can also be a defect liability claim by the importer for defective goods. Customer satisfaction is the key factor for any business to succeed. Quality assurance is essential to take any business to its pinnacle. Producing a perfect product is not possible all the time for any manufacturer but the basic steps should be taken by him to ensure acceptance of product by the buyer. Main steps in ensuring product acceptance by the buyer The importer of goods has to ensure that the goods being delivered to him are as per the standards and the quality and quantity of the goods should be adequate and according to the conditions mentioned in the contract. Therefore, to ensure the proper quantity and quality of goods, he undertakes the following two types of inspection:

• The importer should ensure that all the exported goods meet the quality and description specified in the contract.

• The making and packaging of the goods must be in order. • The delivery of goods is on time as specified in the contract.

PRE SHIPMENT INSPECTION Pre-shipment inspection, also called PSI, is an important and reliable quality control method for checking of goods’ quality when the importer is buying the goods from the exporter. In other words, we can say that a Pre-Shipment Inspection (PSI) is inspection of goods being exported prior to the shipment by a mandated Pre-Shipment Inspection (PSI) Agency. A PSI Agency carries out verification of quality, quantity, price (including currency exchange rate and financial terms) and customs

7

classification for the destination country and then issues a Certificate with these details. Also, the scope of a PSI Agency includes Packing & Marking and Supervision of Loading. For the shipment of industrial products, exporters and importers want to assure that products meet quality standards, as well as agreed technical specifications and quantity specified in the contract. Proof of compliance with these items demands the inspection by an independent inspection and verification company. Pre-shipment inspection (PSI) is the inspection of industrial goods being exported by an independent inspection company. This assures correctness to the agreed quality and quantity, and is conducted in most cases prior to shipment, and in the country of exportation. This inspection is conducted after the manufacturing of goods has been completed, meaning that the full or partial (random) inspection of the goods can be carried out to check for compliance within contractual specifications. After ordering a number of articles, the buyer lets a third party control the ordered goods before they are dispatched to him. Normally an independent inspection company is assigned with the task of the PSI, as it is in the interest of the buyer that somebody not connected with the deal in any way verifies the amount and quality. This way the buyer makes sure, he gets the goods he paid for. Although increasing numbers of clients would like to collect suppliers' information from the Internet, this contains high risks because it is not a face-to-face transaction, and Internet phishing and fraud can corrupt it. Pre-shipment inspection can greatly avoid this risk and ensure clients get quality products from suppliers. The pre-shipment inspection is normally agreed between a buyer, a supplier, and a bank, and it can be used to initiate payment for a letter of credit. A PSI can be performed at different stages:

• Checking the total amount of goods and packing • Controlling the quality and/or consistency of goods • Verifying compliance with the standards of the destination country

The first stage is often performed by the transport company, but for the latter two stages a proper inspection company is needed. Similarly, if between the buyer and seller money transfer via a letter of credit is agreed upon, it is necessary to assign a reputable inspection company. In case of the letter of credit, after inspection of the goods, an inspection certificate is sent to the bank issuing the letter of credit and the buyer, initiating the money transfer. Inspection companies are classified in two classes:

• Free-market companies: These are privately owned companies, which sell their services to the market. Danger with these might be, especially if it is a smaller company, which they might be paid as well by the manufacturer, thus working in his interest.

• State owned inspection companies: Only very few companies operating on the

market are state-owned or partly state-owned. The shareholding of governmental institutions guarantees the independence and objectivity.

8

In international trade most of the countries today require PSI. It is virtually impossible to get customs clearance in a "Member Country" for goods without PSI. The term "Member Country" here implies any country which is party to the World Trade Organization's (WTO) GATT and other Multilateral Trade Agreements and is defined as "a Member of which the government or any government body contracts for or mandates the use of pre-shipment inspection activities". How it works

• A physical inspection of goods before they are shipped, in the country of export, establishes the exact nature of the goods.

• The invoice and other documents are then scrutinised, and an accurate valuation, and Customs tariff code, are assigned.

• These are used, in conjunction with the client country's published duty rates, to calculate the correct duties and taxes payable.

• An PSI certificate is issued to the importer. This is used to substantiate the payment of full duty, prior to clearing the goods.

• The actual duty collected is compared with the Intertek certificates, and any shortages can be investigated and corrected.

Benefits

• Pre-Shipment Inspection (PSI) maximises duty collections. By undertaking duty assessment in the country of export, importers have no opportunity to pressurize customs to assign lower rates.

• Compliance with the WTO Agreement on Customs Valuation is now mandatory for World Trade Organisation members. Without PSI, countries introducing the agreement invariably experience a reduction in revenue collections. PSI ensures that the agreement is fully implemented as required by the WTO, and in a way that maintains duty revenue collections.

• Trade facilitation: inefficient Customs administrations and the failure of importers to comply with import procedures can both delay trade. A PSI certificate ensures rapid Customs clearance, by undertaking the necessary physical and documentary inspections before the consignment is dispatched.

• PSI deters capital flight in countries where exchange controls exist by preventing deliberately inflated invoicing. This can deplete foreign exchange reserves, which can also reduce the taxable income declared by multi-national companies.

• PSI significantly reduces the incidence of illegal imports, such as radioactive waste, by inspecting shipments in the country of export before dispatch.

9

• As a PSI programme takes effect, so a vast database of vital trade information

is created, which can be supplied to the Client Government in a variety of formats, as an aid to economic decision making and to induce confidence in donors

ROLE OF GOVERNMENT IN PRE-SHIPMENT INSPECTION The government of various countries made it a mandate for the importers to carry on pre-shipment inspection so that any unwanted/ hazardous or sub-standard goods do not enter the state. The reason for this is:

• To carry out physical inspection of the goods to be imported in order to ensure that they conform to the terms of the contract;

• To verify their prices; and • To ensure that they are classified by the exporter under the correct tariff

classification of the importing country. The physical inspection of goods is an integral part of the procedures adopted by PSI companies to ensure that the prices indicated by the exporter in the invoice reflect the true value of the goods and that there is no under- or over-invoicing. Such inspections assure importers that the goods they have ordered meet contractual specifications and quality standards, thereby reducing possibilities for dispute after the goods arrive at destination. These inspections also prevent the import of products that are considered harmful to health and therefore cannot be sold (e.g. banned chemicals and pharmaceu- tical products, substandard food products) in the exporting countries. Contracts for mandatory pre-shipment inspections can be grouped into two broad categories according to the purpose for which the services of PSI companies are employed. In the terminology used by PSI companies, these are foreign exchange contracts (forex) and customs contracts. The first is usually employed to designate contracts whose basic objective (and that of the government requiring them) is to prevent the flight of capital through over-invoicing. The second is used for contracts undertaken when the governments’ main aim is to prevent slippage of customs revenue as a result of undervaluation or deliberate misclassification by traders of goods to be imported under low-duty headings. Until about a few years ago, the predominant government objective was to prevent the overvaluation of imports. Traders tend to overvalue imports when the import trade and foreign exchange transactions are subject to restrictions. As a result of the steps which developing countries have taken to liberalize their trade and foreign exchange regimes, traders do not generally have at present any incentive to overvalue imported goods. The result has been that, the majority of the PSI contracts are now customs contracts; their main aim is to detect the undervaluation of imported goods, with a view to ensuring that revenue due is fully collected and to controlling customs-related corruption. While PSI services are mainly used for the pre-shipment inspection of imports, a few governments also utilize them to control the flight of capital through the undervaluation of exports.

10

ROLE OF WTO IN PRE-SHIPMENT INSPECTION Background The extension of PSI services to the mandatory verification of the prices agreed between importer and exporter was viewed with concern by business and industry, especially in some developed countries. They were particularly worried by the fact that they were asked to revise their prices downward when the PSI companies found contractual prices to be overvalued. They argued that the criteria used by PSI companies for price comparison was not always known to the exporters. The lack of transparency not only created uncertainty about the acceptability of prices negotiated with buyers but also put exporters in a disadvantageous position, as there were no procedures for appealing to independent bodies against the decisions of PSI companies. The delays in carrying out physical inspections and price verifications also delayed shipment, adding to the exporters’ costs. URUGUAY ROUND Agreement on PSI, Article 1 The Agreement on Pre-shipment Inspection, negotiated in the Uruguay Round, attempts to strike a balance between the concerns expressed by exporting enterprises in developed countries and the need to safeguard the essential interests of developing countries that consider PSI services useful. It clarifies hat its provisions apply only to pre-shipment activities carried out in exporting countries that are “contracted or mandated by the government”. Objective of Agreement The basic aim of the Agreement is to lay down a set of principles and rules which countries using PSI services and exporting countries have to follow in order to ensure that their activities do not cause barriers to trade. Obligations of PSI-using countries The obligations which the Agreement imposes on countries using PSI services aim at ensuring the reduction or elimination of the practical problems encountered by exporters as a result of delays by PSI companies in carrying out physical inspections and price verifications, the lack of transparency in the procedures they follow, and the treatment of confidential information. Towards this end, the Agreement contains provisions covering, inter alia:

• Protection of confidential business information, • Avoidance of unreasonable delays • The use of specific guidelines for conducting price verification.

The obligation on PSI using countries as stated in the agreement can be summarized as follows:

11

• Non-discrimination: Procedures and criteria should be applied on an equal basis to all exporters. There should be uniform performance of inspection by all inspectors. [Agreement on Pre-shipment Inspection, Article 2.1]

• National treatment: Countries using PSI services should not apply national

regulations in a manner that will result in less favourable treatment of the goods being inspected in comparison to the like domestic product. [Agreement on Pre-shipment Inspection, Article 2.2]

• Inspection site: Physical inspection should be carried out in the exporting

country and, only if this is not feasible, in the country of manufacture. [Agreement on Pre-shipment Inspection, Article 2.3]

• Standards: Quality and quantity inspections should be conducted according to

the standards agreed between buyer and seller or, in their absence, international standards. [Agreement on Pre-shipment Inspection, Article 2.4]

• Transparency: Transparency should be ensured by providing exporters with

information, inter alia, on the laws and regulations of user countries on PSI activities, and the procedures and criteria used for inspection. [Agreement on Pre-shipment Inspection, Article 2.5 to 2.8]

• Protection of confidential information: Confidential information should not be

divulged to third parties. [Agreement on Pre-shipment Inspection, Article 2.5 to 2.13]

• Delays: Unreasonable delays should be avoided. [Agreement on Pre-shipment

Inspection, Article 2.15 to 19]

• Pricing: The Agreement stipulates that in order to determine whether the export price reflects the correct value of the goods, PSI companies could compare this price with the prices of identical or similar goods offered for export from the same country of exportation: – to the country of importation, or – to other markets. However, where for price comparison purposes the prices charged for export to countries other than the country of importation are used, the economic and other factors that influence the prices charged to different countries should be taken into account. In other words, the rules recognize that firms often charge varying prices for different markets, taking into account demand and growth potential as well as factors such as per capita income and standards of living in these markets. An exporting firm may thus charge higher prices for its exports of, say, shirts to Europe than it does for exports to Africa. The Agreement stipulates that when third-country prices are used for price-comparison purposes, the factors responsible for variations in the prices charged to importers in different countries should be taken into account and PSI companies should not “arbitrarily impose the lowest price upon the shipment”. In addition, it states that PSI companies should make appropriate allowances for certain “applicable adjusting factors” in regard to the export price of the

12

goods being inspected and the prices of identical or similar goods being used for price comparison.

Obligations of Exporting Countries So far the discussion has centred on the obligation which the Agreement on PSI imposes on countries using PSI services with a view to ensuring that practices followed and actions taken by PSI companies do not cause barriers to trade. The Agreement also imposes certain obligations on countries which export to PSI-using countries. These are designated in the Agreement as ‘exporting countries’. The main obligations which the Agreement imposes on these countries are summarized below:

• Non-discrimination. Laws and regulations that may have been adopted to govern the operation of PSI services should be applied on a non-discriminatory basis.

• Transparency. All such laws and regulations should be published. The

Agreement visualizes the use of preshipment inspection by developing countries only on the short term. For the long term, the objective of these countries should be to reduce reliance on the use of PSI services to detect customs malpractices and fraud by gradually developing the technical capacities of their customs administrations to deal with such practices. To assist PSI-using countries in building up such capacities, the Agreement calls on exporting countries to provide them with technical assistance, with a view to gradually reducing their reliance on PSI services for verifying prices.

Consideration of complaints and settlement of disputes To facilitate the consideration of grievances, the Agreement establishes a three-tier mechanism. This is as follows:

• First, the Agreement calls on PSI entities to designate officials to whom exporters can appeal against the decisions of PSI entities.

• Second, it establishes an independent review entity (IE) to which both exporters

and PSI entities can submit grievances. The IE is constituted jointly by WTO, the International Chamber of Commerce (ICC, which represents the interests of exporters), and the International Federation of Inspection Agencies (IFIA, which represents the interests of PSI companies). WTO is responsible for the administration of the IE.

• Third, the Agreement recognizes the right of the governments of countries using

PSI services and of the exporting countries to invoke WTO dispute settlement procedures, if they consider that the rules of the Agreement are not being adhered to.

A complaint can be submitted to the IE by an exporting enterprise or by a PSI company. Once a complaint is filed, the IE is expected to appoint, with the agreement of the parties to the complaint, either a single trade expert or a three-member panel. Where a panel is constituted, one member is nominated by ICC, the second by IFIA

13

and the third, who should be a trade expert and who will act as chairman, by the IE itself. The panel is required to make a decision, by a majority vote, within eight working days from the filing of the dispute. Both parties to the dispute are required to make financial deposits to cover expenditures incurred by the panel. INTERNATIONAL FEDERATION OF INSPECTION ANGENCIES (IFIA) Introduction IFIA is the trade association for inspection agencies and other organisations that provide inspection, testing and certification services internationally. The promotion of integrity is one of the federation’s top priorities. IFIA was founded in 1982 and Members and Associate Members include the leading international inspection companies from around the world. They cover every field of inspection and related testing making IFIA's work and views truly representative of the profession. IFIA is a nonprofit making organisation. Its objectives are to review and, where possible, to improve the methods, standards, safety procedures and rules used and observed by Members for the benefit of Members and their clients. IFIA promotes cooperation between inspection agencies, laboratories and allied businesses throughout the world in order to:

• Develop and coordinate technical and professional standards, methods of inspection and testing, and codes of practice

• Improve efficiency and establish standard procedures • Develop methods of technical education and training • Represent the profession to Government Authorities and Trade Associations • Promote uniform interpretation of international conventions on safety and

cooperate in their implementation. Quality Statement of IFIA IFIA Members agree to uphold the highest standards of quality by:

• Applying appropriate technical and professional standards for all aspects of their work

• Implementing quality assurance programmes throughout their organisations

• Implementing appropriate methods of technical training and assessment

• Adhering to all applicable international safety conventions

• Adhering to all applicable IFIA Guidelines

14

Various Committees at IFIA IFIA has nine Sector Committees: Agricultural and Vegetable Oils Consumer and Industrial Products Food Industrial Services Metals and Minerals Petroleum and Petrochemical Government Services Systems Certification Trade Security IFIA has model Committee Rules which apply to the operation of each of these committees unless the committee has developed more specific Rules which have been approved by the IFIA Council. These Rules allow for the participation of representatives from each IFIA Member company. Normally all those Member companies active in the sector in question participate, and relevant IFIA Members stand ready to participate in those committees that are not currently active. IFIA Sector Committees are only active when the membership has identified an issue or issues that will benefit from collective activity. The Committees are responsible for the Chapters of the IFIA Guidelines in their area of activity. Non-members of IFIA may participate in the work of the Committees provided they have some interest in the respective sector of business and are invited by the Committee. As non-members, they are not entitled to vote. Pre-Shipment Inspection Companies/ Members of IFIA There are many pre-shipment inspection companies operating around the world and providing services in various fields for inspection. There are 37 companies in total who are a member of IFIA. These companies are named as follows:

1. Abeni Surveyors Ltd 2. Alfred H Knight International Ltd 3. AmSpec Services LLC 4. Baltic Control Ltd. Aarhus 5. Bureau Veritas SA 6. Camin Cargo Control 7. Cargo Inspections Group 8. Certispec Group 9. Coastal Gulf and International Inc (CGI) 10. Control Union International 11. Control Union World Group 12. Cotecna Inspection SA 13. CWM Survey and Inspection BV 14. Engineering Bureau Franke International 15. Frey Rearq Ltda 16. Geo-Chem Group (India Based)

15

17. Helmsman Quality & Technolog Services Co Ltd 18. Inspecta International Co 19. Inspectorate International Ltd 20. Incolab Services International NV 21. Inspekt RGH 22. Intertek Group Plc 23. Jugoinspekt Beograd 24. Maloney Commodity Services Inc 25. National Marine Consultants Inc 26. Oil Test Internacional Latin America 27. Overseas Merchandise Inspection Company Ltd 28. PT Superintending Co of Indonesia (SUCOFINDO) 29. Ravi Energie Inc 30. Saybolt International BV 31. Seatrans Consulting Ltd 32. SGS Société Générale de Surveillance SA 33. SOEX (ANO “SOYUZEXPERTIZA CCI RF”) 34. Stewart Group 35. TÜV Rheinland Group 36. Underwriters Laboratories Inc 37. Universal Inspectorate & Services Co Ltd

16

COMPANIES PROVIDING PRE-SHIPMENT INSPECTION SERVICES GEO-CHEM GROUP Out of these companies, Geo-Chem Group is an India based company, with operations in India, UAE, Singapore, Malasia and Sri Lanka. GEO-CHEM GROUP, founded in 1964, is an independent inspection and testing company, with regional head - quarters in Mumbai, Dubai and Singapore and is today one of the largest and reputable inspection and testing organizations in The Indian Subcontinent, The Middle East and South Asia. They are renowned as cargo inspectors and surveyors and have proven their expertise in Inspection, Survey and Testing of diverse export, import and locally traded cargo and commodities. An Independent, unbiased and quality driven inspection and testing company, Geo-Chem today has a strong presence in over 27 countries world-wide. Their services are available through a network of branch offices and associates, supported by an excellent infrastructure of ultramodern facilities, communication system and staff strength with vast exposure in the industry. The core activity of GEO-CHEM is Inspection, monitoring of trade and shipments and Testing and Certification of Raw Materials, Agricultural Products, Processed Food and Beverages, Tea and Coffee, Metals and Minerals, Ores, Organic and Inorganic Chemicals, Petroleum, Petro-Chemicals, Fertilizers, Dyes and Intermediates, Drugs and Pharmaceuticals, Engineering Goods, Consumer Goods, Industrial Equipment, Food and Dairy Products, Vegetable Oils and Fatty Acids, Waters, Environmental Assessment, Etc. In addition, specialized services are offered in import/export verification, Industrial and marine investigation for P & I Clubs and underwriters, loss minimization, stock management services, custodian and warehousing services, damage assessment of marine vessels and equipments, blending and introduction of additives/dye in marine liquid cargoes, pre-erection and post-erection inspection of machinery, plants and industrial equipment. Geo-chem’s branches and associates, are spread over 17 countries and have more than 2000 experienced and qualified personnel trained to serve our clients. The Clients are updated regularly by most modern means of communication, keeping in view their individual requirements and ensuring the protection of their interest. The company provides services basically in the following fields: • Inspection, Survey and Control including Insurance Surveys • Laboratory Testing Services • Loss Minimisation Services • Stock Management Services • Warehouse Control Services • Technical and quality related consultations Services

17

SGS GROUP SGS is the world’s leading inspection, verification, testing and certification company. Recognized as the global benchmark for quality and integrity, SGS employs 59,000 people and operate a network of more than 1,000 offices and laboratories around the world. SGS is constantly looking beyond customers’ and society’s expectations in order to deliver market leading services wherever they are needed. As the leader in providing specialized business solutions that improve quality, safety and productivity and reduce risk, SGS helps customers navigate an increasingly regulated world. Our independent services add significant value to SGS’s customers’ operations and ensure business sustainability. Vision SGS aim to be the most competitive and the most productive service organization in the world. Our core competencies in inspection, verification, testing and certification are being continuously improved to be best-in-class. They are at the heart of what SGS is. Our chosen markets will be solely determined by our ability to be the most competitive and to consistently deliver unequalled service to our customers all over the world. History Established in 1878, the company started by offering agricultural inspection services to grain traders in Europe. From those early beginnings, SGS grew in size and scope as SGS’s agricultural inspection services spread around the world. On 19 July 1919, the company adopted the name of Société Générale de Surveillance (today, known as SGS). During the mid-20th century, SGS began to diversify and started offering inspection, testing and verification services across a variety of sectors, including industrial, minerals and oil, gas and chemicals, among others. In 1981, the company SGSnt public. The current structure of SGS, consisting of 10 business segments operating across 10 geographical regions, was formed in 2001. From its beginnings in 1878 as a grain inspection house, SGS has steadily grown into its role as the industry leader. SGS has done this through continual improvement and innovation and through supporting SGS’s customers’ operations by reducing risk and improving productivity. Value SGS help customers all over the world operate in a more sustainable manner by improving quality and productivity, reducing risk, verifying compliance, and increasing speed to market. SGS’s range of services cover all industry sectors and touch the products and services that consumers around the world rely on countless times in their everyday lives. From the energy that powers the cars you drive and the homes you live in, from the food on your plates to the clothes on your back, from the quality of the air you breathe to the safety of the pharmaceuticals you take, SGS provides independent services that make a difference in people’s lives. At the end of

18

the day, SGS’s value lies in what its services make possible for its customers and, ultimately, for their consumers. Expertise and Activities Agricultural Services (AGRI) SGS help ensure the integrity of the food chain by providing services that cover all aspects of the agricultural industry, from helping customers manage crops from seed development and soil testing through to harvesting and moving product through the global supply chain to trade inspection at export or import. Serving all of the major players in the agricultural sector, SGS’s services reduce risk and ensure quality and improve productivity. Minerals Services (MIN) The services SGS provides range from quality and quantity inspection and testing for a vast array of commodities to advanced services, which optimize the recovery of metals in processing plants. SGS’s customers in this sector rely on us to provide them with expert services and advice, which help them gain competitive advantage while reducing risk. Oil, Gas and Chemicals Services (OGC) SGS help its customers protect and secure their businesses by delivering independent and accurate information through its global network of laboratories and experts. From exploration and production through midstream to consumption, SGS provide a wide range of services including blending, cargo treatment, sample management, logistics, and laboratory outsourcing, as well as tailored solutions that ensure product quality and increase flexibility for its customers. Life Science Services (LSS) SGS’s customers in the pharmaceutical and biopharmaceutical industry rely on us to provide them with outsourcing services on both the quality and safety of drug ingredients and the development process – from the early development stages until the commercialization of the finished product. SGS’s ClinicalTrials services and Quality Control testing activities help improve efficiency, reduce costs, and ensure the safety of pharmaceutical products. Consumer Testing Services (CTS) From textile to appliances, furniture, food, and electronics, SGS’s complete range of services ensure the quality and safety of every single kind of consumer product. Its customers in these distinct manufacturing industries rely on Its inspection and testing capabilities and laboratories to help them comply with the regulatory requirements governing their products, as well as to ensure the integrity of the inputs received from their suppliers and their suppliers’ suppliers.

19

Systems and Services Certification (SSC) High-performing business processes are at the heart of today’s economy. The audit and certification services SGS provide to a wide variety of customers allow them to enhance their business processes and get out in front of the issues affecting them. With Its services, they can deliver extra value, improve quality management and performance, minimize risk, and gain a real advantage over the competition. Industrial Services (IND) Serving customers in the energy, process and construction industries, SGS’s teams of engineers and technicians ensure that the quality and safety of products or installations meet applicable requirements, whether they are regulatory, voluntary or customer specific. SGS’s goal is to help to improve integrity, quality and efficiency, ensure safe and healthy working conditions as well as to minimize the environmental impact of industrial activities. Environmental Services (ENVI) SGS help governments and industry integrate environmental management into their operations by providing a comprehensive international network of laboratories and environmental experts who deliver analytical and data interpretation services at both global and local levels. Automotive Services (AUTO) SGS provide expert support for every participant in the automotive industry to improve performance and reduce risk. SGS’s services focus on the design, construction and operation of motor vehicle inspection solutions throughout the world. Governments, manufacturers and financing and insurance companies, as well as consumers, rely on SGS’s independent, accurate and secure solutions to limit damages, improve remarketing of used cars, and support road safety. Governments and Institutions Services (GIS) SGS support governments, institutions and partner organizations by applying valuable trade knowledge to verify trade information, set up electronic business processing and scanning operations, and assess efficiency and legal compliance in aid delivery schemes and forestry operations. SGS’s commitment is to sustain enforcement of regulations, economic growth, market visibility , and accountability for its customers.

20

ASIAINSPECTION AsiaInspection performs Quality Control throughout Asia for Importers around the globe. Asiainspection is a Quality Control company founded in Hong Kong in 1997 to provide Factory Audit and Product Inspection services in Asia. Mission : The mission of Asia Inspection is to be “Your Eyes in the Factory”™ ! AsiaInspection has 350+ experienced inspectors able to perform quality inspections and factory audits in any Asian factory within a minimum notice of 48 hours, providing detailed reports within the same day of the Inspection / Audit. Fast facts

• In 2008, more than 2500 clients from 100 countries worldwide have chosen AsiaInspection.

• First and unique Quality Control and Assurance company to offer Quality Asia Inspection services, from booking to approval / rejection, entirely from its website thanks to an integrated online tool.

• A virtual office allows customers to manage their Inspections from anywhere in the world, lowering cost and simplifying the process.

• A highly-skilled management team The management team in Shenzhen is composed of Western and local staff, combining local cultural roots with Western educational backgrounds and sensibility. AsiaInspection greatly benefits from this alliance between Western management style and solid knowledge of local markets and business practices. Although the company is not registered/member of IFIA i.e. International Federation of Inspecting Agencies, but it carries on the inspection process with duce care and follows all the standards required for the inspection. These can be seen in the demo report attached herewith as Annexure.

21

PRE-SHIPMENT INSPECTION REPORT A typical inspection report as per the example shown in the annexure may contain the following points:

• Product Description This is the first head on the first page of the report and shows the basic information of the product along with a picture on the side of the page. The product description includes product name, inspection location, inspection date, suppliers name etc. • Results The results of the report are shown under this head and this includes the result of the Specifications check, Tests, AQL i.e. Acceptable Quality Level and the Overall Inspection Result as either failed or passed.

• Important Remarks/ General Defects This heeding shows the main and important findings of the inspection as to what are the general defects if any found in the goods. It also includes the other remarks provided by the Inspection Agency as per the Inspection. • Inspection Standards This head shows the various inspection standards followed by the Inspection Company. This includes the type of inspection, sampling level, no. of samples inspected, etc. It also shows the name and photographs of the inspector and the supervisor involved in the inspection. • Quality Criteria This is the basic inspection, which is carried on the product. A detailed inspection is done on various aspects of the product to ascertain that the highest quality standards are met according to the standards set in the beginning of the inspection. The inspection for quality is done on the following parameters.

o Quantity o Color o Dimensions o Artworks o Packing and Packaging o Shipping Marks

• Tests and Special Requirements These are the special tests and requirements to inspect for the quality standards of the product. The results of these tests are also displayed side by side along with a photograph of the testing technique.

22

• Clients Important Instructions on Tests As the heading shows, this report also includes some special instruction on the tests performed by the inspectors. Therefore, the inspectors has to pay attention on the special instructions given by the client for conducting the test and show these in the report. • Sample Collection This heading shows the number of samples collected by the inspector either shipment samples of defected samples. • Defectives List After all the tests have been conducted, the report shows all the defects found in the test. These defects are shown along with the photograph of the inspection/ test. • Defectives List Summary This heading in the report shows the total number of defects found in the inspection tests, number of defects allowed and number of samples inspected. • Additional Pictures The additional pictures in the report are the copies of the QC files and the defective samples along with a picture of the sealed envelope of the sample. It also includes the copy of the “Factory Disclaimer” which includes the original signature of the factory manager accepting the Inspecting Agency’s conditions on shipment authorization and bribery issues.

23

CONCLUSION

To conclude, I would say that the regulatory bodies play a vital role in the import and

export of goods and services. The regulatory bodies may be the World Trade

Organisation, Government or the International Federation of Inspection Agencies.

The rules and regulations laid down by the WTO protects the interests of the

inporters, exporters as well as the PSI Agencies.

Although it is not mandatory for the Inspection Companies to be a member of the

International Federation of Inspecting Agencies (IFIA), but being a member of such

an institution is good for any inspection company. This is because this would increase

the reliability of that company in the market, as it has to follow the standards set by

the IFIA.

It is always in the interest of the importer as well as the exporter to get the goods

inspected by an independent agency so that any defect or discrepancies in the goods

may come to notice before the shipment of the goods or while still in the stage of

production. This would save the cost of the importer to return the goods back after

they have been shipped .

24

BIBLIOGRAPHY Websites

1. www.wto.org 2. www.ifia-federation.org 3. www.asiainspection.com 4. www.sgs.com 5. www.geochemgroup.com

25

ANNEXURE