Pre-shipment inspection
Encyclopedia
Pre-shipment inspection, also called preshipment inspection
or PSI, is an important and reliable quality control
method for checking goods' quality while clients buy from the suppliers.
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.
. A PSI can be performed at different stages:
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, that 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.
A higher form of the PSI is called expediting
, in this the dates of delivery and the production are controlled as well.
Some countries, like Botswana
, require PSIs for all goods entering the country in order to fight corruption. In these cases the PSI must be performed by the company designated by the country.
i president Benazir Bhutto
, Asif Ali Zardari
. Further irregularities were published about the contracts with Paraguay
and the Philippines
.
Inspection
An inspection is, most generally, an organized examination or formal evaluation exercise. In engineering activities inspection involves the measurements, tests, and gauges applied to certain characteristics in regard to an object or activity...
or PSI, is an important and reliable quality control
Quality control
Quality control, or QC for short, is a process by which entities review the quality of all factors involved in production. This approach places an emphasis on three aspects:...
method for checking goods' quality while clients buy from the suppliers.
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
Internet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
, this contains high risks because it is not a face-to-face transaction, and Internet phishing
Phishing
Phishing is a way of attempting to acquire information such as usernames, passwords, and credit card details by masquerading as a trustworthy entity in an electronic communication. Communications purporting to be from popular social web sites, auction sites, online payment processors or IT...
and fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
can corrupt it. Pre-shipment inspection can greatly avoid this risk and ensure clients get quality products from suppliers.
Process
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 creditLetter of credit
A standard, commercial letter of credit is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking....
. 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 (e.g. ASME or CE markCE markCE marking is a mandatory conformity mark for products placed on the market in the European Economic Area . With the CE marking on a product the manufacturer ensures that the product conforms with the essential requirements of the applicable EC directives...
)
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, that 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.
A higher form of the PSI is called expediting
Expediting
Expediting is a concept in purchasing and project management for securing the quality and timely delivery of goods and components.The procurement department or an external expediter controls the progress of manufacturing at the supplier concerning quality, packing, conformity with standards and set...
, in this the dates of delivery and the production are controlled as well.
Some countries, like Botswana
Botswana
Botswana, officially the Republic of Botswana , is a landlocked country located in Southern Africa. The citizens are referred to as "Batswana" . Formerly the British protectorate of Bechuanaland, Botswana adopted its new name after becoming independent within the Commonwealth on 30 September 1966...
, require PSIs for all goods entering the country in order to fight corruption. In these cases the PSI must be performed by the company designated by the country.
PSI and corruption charges
The Worldbank recommends pre-shipment inspections (PSI) as a means to fight corruption especially in developing countries. As SGS S.A. is one of the worldwide market leaders in PSI, it profits well from these means. Recent international charges show the companies involvement furthering corruption instead of fighting it due to the payment of millions of dollars to government members and their families. Most known is the payment to the then husband of PakistanPakistan
Pakistan , officially the Islamic Republic of Pakistan is a sovereign state in South Asia. It has a coastline along the Arabian Sea and the Gulf of Oman in the south and is bordered by Afghanistan and Iran in the west, India in the east and China in the far northeast. In the north, Tajikistan...
i president Benazir Bhutto
Benazir Bhutto
Benazir Bhutto was a democratic socialist who served as the 11th Prime Minister of Pakistan in two non-consecutive terms from 1988 until 1990 and 1993 until 1996....
, Asif Ali Zardari
Asif Ali Zardari
Asif Ali Zardari is the 11th and current President of Pakistan and the Co-Chairman of the ruling Pakistan Peoples Party . He is also the widower of Benazir Bhutto, who served two nonconsecutive terms as Prime Minister....
. Further irregularities were published about the contracts with Paraguay
Paraguay
Paraguay , officially the Republic of Paraguay , is a landlocked country in South America. It is bordered by Argentina to the south and southwest, Brazil to the east and northeast, and Bolivia to the northwest. Paraguay lies on both banks of the Paraguay River, which runs through the center of the...
and the Philippines
Philippines
The Philippines , officially known as the Republic of the Philippines , is a country in Southeast Asia in the western Pacific Ocean. To its north across the Luzon Strait lies Taiwan. West across the South China Sea sits Vietnam...
.