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PRE-SHIPMENT INSPECTION (PSI)
Pre-Shipment Inspection (PSI) is an economic
programme for the monitoring of imports into developing countries. It has a
positive impact on the national budget, terms of trade, balance of payments
and general economic development of the PSI participating country.
Pre-Shipment Inspection (PSI) is a service provided by independent inspection
companies to governments in Africa, Asia and Latin America since 1965. Today
some thirty countries worldwide avail themselves of the service provided. The
inherent nature of the service is an inspection in the country of supply of
the country's imports on behalf of the government of the importing country
prior to shipment.
The nature and scope of the inspection performed varies depending upon the
requirement of the user government. Initially the primary objective of PSI was
to protect the foreign exchange resources of the user government (which were
being illegally depleted by over-invoicing of exports) and the PSI consisted
of the verification of the quantity, quality and export market price of the
goods being exported. However, in recent years inspection companies have been
requested to extend the scope of their activities in order to enhance customs
revenue collection. Essentially this involves the inspection company verifying
the value for customs purposes, the accuracy of the tariff codes
classification and the calculation of the corresponding duties and taxes
payable.
Pre-Shipment inspection has been made mandatory for all importable goods
except those exempted by the government from the programme. By the decision of
National Board of Revenue of the People's Republic of Bangladesh, a mandatory
programme of preshipment inspection has been launched from February 15, 2000.
The contract was signed by the then Chairman of National Board of Revenue (NBR),
Ministry of Finance, Mr Abdul-Muyeed Chowdhury and Chairman and President of
BIVAC International / Bureau Veritas Group, Mr Gilles Minard on February 13,
2000. At present three agencies authorized by the government-Bureau Veritas (BIVAC),
ITS (Intertek Testing Services) and Inspectorate Griffith Limited-are
providing inspection and issuing certificate on all import goods coming from
three different blocks. Apart from this three affiliated organization, there
are 7-8 more organizations, namely OMIC (Bangladesh) Ltd., Road Star, Control
Union, Cargo Control, etc are also performing the same job for some companies.
The PSI rules require that PSI agents verify the Tax Identification Number
(TIN) and the VAT Registration Number (BIN) of the importer before processing
an import document. If this verification is effective, then there should be
improvements in VAT collections at the local level and income tax collections
because of PSI. Potentially, these taxes could be evaded in the post-import
stage before the introduction of PSI.
With the start of the mandatory PSI programme, the customs valuation regime in
Bangladesh changed from Normal Value- Tariff Value to the GATT Valuation Code
(GVC). Under GVC, the first step in the valuation process is the transaction
value stated in the invoice.
Merits of PSI Services
The countries which have adopted the PSI programmes are receiving the
following advantages:
Enhancement of Import Duty Revenue
Anti-dumping and population protection
GATT valuation code (GVC) compliance
Minimizing Foreign Exchange Expenditure
Detects Illegal Imports
Technical Assistance with Customs
Provision of Import Statistics
Protecting Indigenous Industry of PSI Country
Producing trade statistics
Deters capital flight
Trade facilitation
Selectivity
PSI Services Encompass
Pre-Shipment Inspection: Pre-shipment inspection of goods is carried out in
the country of supply to ensure that their quality and quantity meets with
contractual requirements.
Price Verification: Contractual prices are verified based upon the results of
physical inspection and the export prices in the country of supply in order to
prevent under valuation / over invoicing.
Classification Of Import Tariff Codes: The Import Tariff Code is assigned to
the goods as per the Customs Tariff Code Book the relevant PSI country. This
enables easy reference for calculation of dutiable taxes by the Customs.
Report Of Findings (ROF): A Report of Findings (ROF) is raised, summarizing
results of the Pre-shipment inspection, Price Verification and Import Tariff
Code Classification, and submitted to the Importer and/or Exporter.
3 Affiliated Companies And Their Respective Zone 1. BIVAC
Bivac International / Bureau Veritas Group carries out pre-shipment
inspection of goods imported into Bangladesh from 'Block C'.
List of the Block C Countries: American Samoa, Fiji (including
Pitcair), Japan, Korea D.P.R., Korea, Taiwan, Brunei, Indonesia, Kampuchea,
Kiribati, Laos, Afghanistan, Algeria, Armenia, Australia, Azerbaijan,
Bahrain, Benin, Cameroon, Chad, Egypt, Gambia, Ghana, Gibraltar, Guinea,
Iran, Iraq, Ivory Coast, Jordan, Kazakhstan, Kenya, Kirghizistan, Kuwait,
Lebanon, Liberia, Madagascar, Malawi, Maldives, Mali, Mauritius, Morocco,
Mozambique, Namibia, New Zealand, Niger, Nigeria, Oman, Pakistan, Qatar,
Saudi Arabia, South Africa, Sudan, Swaziland, Syria, Tanzania, Tajikistan,
Tunisia, Turkistan, United Arab Emirates, Uzbekistan, Vanuatu (New
Hebrides), Yemen, Congo D.R., Zambia, Zimbabwe, Antigua, Argentina, Bahamas,
Barbados, Belize, Bolivia, Brazil, Canada, Chile, Colombia, Cuba, Dominica,
Dominican Rep., Ecuador, Grenada, Guadeloupe, Guatemala, Mexico, Panama,
Paraguay, Peru, United States of America, US Virgin Islands, Uruguay,
Venezuela. The scope of services covers: Verification of the quality,
quantity, import eligibility, H.S. Code classification and valuation of the
goods prior to their shipment for import into Bangladesh.
2. INSPECTORATE
Inspectorate Griffith Ltd. has been appointed by the government as a pre
shipment inspection agency for countries under 'Block B' comprising 14
countries.
List of the Block B countries: India, Nepal, Bhutan, Sri-Lanka,
Myanmar, Singapore, Malaysia, Thailand, Philippines, Vietnam, Nauru, New
Caledonia, Papua New Guinea, and Solomon islands.
3. ITS
ITS (Intertek Testing Services) has been appointed by NBR of Bangladesh to
undertake a mandatory PSI programme to issue CRFs for imports from the
countries of 'Block A'. Allocation to the PSI companies is determined by the
country from where the goods are being shipped.
ITS operates pre shipment inspection programmes for numerous other
countries. These include Argentina, Ecuador, Ghana, Mozambique, Uzbekistan,
Uganda, Iran, Nigeria, Mexico, and Georgia. Its also manages the
international conformity certification programme for Saudi Arabia.
List of the Block A countries: China, Hong Kong, Macao, Mongolian
Republic, Albania, Austria, Belgium, Byelorussia, Bosnia, Bulgaria, Croatia,
Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany
Greece, Hungary, Iceland, Ireland, Italy, Latvia, Luxembourg, Malta,
Moldova, Netherlands, Netherlands Antilles, Norway, Poland, Portugal,
Romania, Russia, Slovak Republic, Slovenia, Spain, Sweden, Switzerland,
Turkey, U.K. Ukraine, Vatican City, Yugoslavia.
Goods exempt from Pre-Shipment Inspection:
Perishable goods including fresh fruit, live animal, living plants,
fish and meat.
Goods imported for export-oriented industries, imported under bonded
warehouse facilities.
Capital machineries imported for hundred percent export oriented
industry by submitting indemnity bond.
Goods imported as relief under the authority of government.
Goods imported by a diplomat or under the coverage of diplomatic
facility as per Vienna convention, 1961.
Machinery and equipment imported for the rehabilitation of deaf, dumb,
blind and physically and mentally handicapped persons.
Defence stores as described in the NBR memo No. 9(41) NBR/cus-IV/72/246
dated 10th April 1981.
Post parcel and commercial samples.
Art and artistic work, etc.
Key findings
1. From May 2000 onwards dutiable imports have been relatively flat hovering
around BDT16 billion per month. Increases in total imports were largely due
to duty-free imports, which recorded its highest level in September 2000 at
BDTT8.76 billion.
2. Comparing the collection ratios of the PSI period with pre-PSI period,
all collection rates show improvements indicating that PSI has successfully
arrested the decline in government revenue collections.
3. The most significant improvements are in the areas of supplementary
duties, local VAT and income tax.
4. In the first 3 months of PSI (April to June 2000), the most significant
improvements in collection came from VAT on imports, supplementary duties,
local VAT and income tax collections. Comparing the period of April to June
2000, to April to June 1999, overall collections increased by 3.8%.
5. Insofar as revenue targets in the first 3 months of the fiscal year are
concerned, collections are ahead of the target by BDT0.6118 billion. The
breakdown is as follows:
a. Import related revenues exceed the target by BDT0.8249 billion.
b. Local duties and taxes are short of the target by BDT0.1844 billion,
which is mainly due to the shortfall in local supplementary duties, which
missed the target by BDTo.5717 billion.
c. Income tax and other taxes missed the target by BDT0.0287 billion.
It appears the PSI programme was successful in meeting its first revenue
challenge of offsetting the fall in revenues caused by shifting to GVC from
normal value-Tariff Value. First quarter revenue statistics of FY 2000-01
show that revenue collections are ahead of the target mainly due to import
related revenues which is directly related to PSI. Thus, the PSI programme
is on track insofar as government revenue collections are concerned.
By Abu Sayed Khan
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