Pre-Shipment Inspections, Certificates of Inspection
Pre-shipment inspection (PSI) is an important quality control method which gives suppliers an assurance that their products are ready to be sent to their respective destination market. Pre-shipment inspection helps to assess the quality and quantity of the merchandise, check the products for any defect, and to ensure that the products meet the safety requirements of the destination market. The pre-shipment inspection report is required to be submitted along with other trade documents at the time of export.
BRIEF LEGAL HISTORY
In order to promote exports of quality products, complying with the international standards, the Government of India in 1963 introduced the Quality Control and Pre-Shipment Inspection of items of export under one system, “Export (Quality Control and Pre-Shipment Inspection) Act.
The Government set up the Export Inspection Council (EIC) under Section 3 of the Export Act,1963 to monitor quality exports from India. This includes more than 1000 commodities categorized into various groups for a mandatory pre-shipment inspection. For eg. Food and Agriculture, Fishery, Minerals, Rubber Products, Ceramic Products etc. The Act empowers the Union government to notify the minimum standard for exports, usually international standards or standards of importing countries and to set up suitable machinery for inspection and quality control.
Currently EIC has set up 5 Export Inspection Agencies (EIA) at Mumbai, Kolkata, Cochin, Delhi, and Chennai. These EIA have a network of nearly 62 offices throughout the country, having specific areas under their jurisdiction. For eg. The EIA of Mumbai has jurisdiction over states of Maharashtra, Gujarat and Goa. In addition to this EIC also has 42 inspection agencies for minerals and iron ore 14 labs for testing food products. These agencies designate the products based on international norms namely ISO 17020 and ISO 17025.
METHODS OF QUALITY CONTROL AND PRE-SHIPMENT
- Consignment-Wise Inspection- Under this system, each consignment in packed condition is subjected to detailed inspection by the EIA. The inspection is carried on, on the basis of a statistical sampling plan. If the goods conform to the quality standards, an inspection certificate is issued. Generally small-scale manufacturers who are unable to afford their own facilities and personnel adopt this inspection procedure.
- In-process Quality Control- under this system, manufacturing/processing units which have a continuous processing system are given the option to become “export worthy” status units so that they get the inspection certificate based on their own declaration. These units are quality conscious and conduct thorough quality control at each and every step of the production, which includes raw materials, process control, product control and packaging control.
Export worthy Status units possess the required infrastructure facilities for manufacturing standard quality products. To secure recognition and approval as “export worthy” the respective unit has to submit an application to EIA.
- Self-Certification- this is based on the concept that the manufacturing unit which has an in-built responsibility for quality control, should have the privilege and liberty to certify their own product/export. This facility is extended to only those exporters who have a good reputation and goodwill in the market. These units have to fulfill stringent norms prescribed for product quality, have quality control laboratory and independent quality audit facility. These manufacturing units also have to pay a nominal yearly fee at the rate 0.1% of FOB value and maximum value of Rs. 1 lakh annually to the concerned EIA.
CERTIFICATE OF INSPECTION
Inspection Certificate, sometimes known as certificate of inspection or pre-shipment certificate is an important trade document issued by an independent trustable company which verifies whether or not the goods are in conformity with the terms stated on the sales contract. A certificate of inspection is required for the import of industrial equipment and perishable goods. It certifies that the goods meet the required standard in terms of quality, quantity import eligibility when it leaves the port of departure.
In some instances, buyers could not trust the seller’s production quality; they required an approved certificate before the goods were dispatched from the exporter’s factory. This illustrates the importance and function of an inspection certificate in an international transaction.
TYPES OF CERTIFICATES
- Commercial Inspection Certificates – this is approved by an independent company, which is trusted by both buyer and seller. The company checks whether the goods are in conformity with the sales contract and consequently issues a certificate.
- Official Inspection Certificate – in addition to the commercial inspection certificates, the customs office of some countries also request for an official inspection certificate. For eg. Bangladesh, Cambodia, Republic of Congo, Ethiopia, Iran, India, Indonesia all demand an official pre-shipment inspection certificate.
CERTIFICATIONS PROVIDED BY EIC
- Quality Certification for export goods by installing quality assurance procedures (In-process Quality Control and Self- Certification) in the export units and also through consignment-wise examination.
- Quality Certification for exportable food items by installing FSMS (Food Safety Management Systems) in the food units that comply with international guidelines.
- EIC also issues certificates like health and authenticity via multiple export schemes.
- Certificate of Origin is also issued to exporters through preferential tariff policies for products
SIGNIFICANCE OF CERTIFICATION BY EIC
Any exporter can utilize the services of the EIC and its network organizations for the mandatory inspection as mentioned under Section 6 of the Export (Quality Control and Inspection) Act 1963. While undertaking either the inspection or certification, the EIC considers one of the following reasons as the basis for its exercise.
- The requirement for the inspection or certification is mentioned in the notification itself.
- The requirement is defined by the international buyer.
- Inspection/ Certification is to be done as per the requirements of the importing country.
- It could also be done as per the national/international standards relevant to the product.
This document throws light on pre-shipment inspection and certification by EIC. The primary objective of EIC is to ensure that the products comply with the specifications and are in an acceptable condition before the shipment. This and all the other services provided by the EIC form a significant part in the export trade of the country. In order to promote export and achieve an important stature in the global market every country verifies and uses pre-shipment as a tool to mitigate losses and risks.
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