AnAssignment

on the

Topic- Quality Control & Pre-shipment Inspection

of

Subject- Export Documentation and Procedures

Submitted to: Submitted by:Mr. Jaikishan Nitika Raghav, Roll no. 47(lecturer) Anu Nain, Roll no. 16

6th SemesterMBA-5yr.

Institute of Management Studies Kurukshetra University, Kurukshetra

CONTENTSChapter No. Title

1. INTRODUCTION TO QUALITY CONTROL &

PRESHIPMENT INSPECTION

2. METHODS OF QUALITY CONTROL & PRESHIPMENT

INSPECTION

3. METHODS OF QUALITY CONTROL & PRESHIPMENT

INSPECTION

4. PROCEDURE FOR PRE-SHIPMENT INSPECTION

5. WHEN & BY WHOM PRE-SHIPMENT INSPECTION IS

DONE

CHAPTER 1

INTRODUCTION

TO

QUALITY CONTROL &

PRESHIPMENT

INSPECTION

QUALITY CONTROL & PRE-SHIPMENT

INSPECTION

An important aspect about the goods to be exported is compulsory quality control and

pre-shipment inspection. Quality control and pre-shipment inspection are prerequisite for

exporting goods. Under the Export (Quality Control and Inspection) Act, 1963, about

1000 commodities under the major group of: Food and Agriculture, Fishery, Minerals,

Organic Chemicals, Rubber Products, Refractories, Ceramic Products, Pesticides, Light

Engineering Steel Product, Jute Products, Coir and Coir Products, Footwear and

Footwear Products/Components are subject to compulsory pre-shipment inspection.

Sometimes overseas buyers lay their own standards/specifications which may or may not

be in consonance with the Indian standards. They may also insist upon inspection by their

own nominated agencies. These issues should be sorted out before confirmation of order.

Specific provision have also been made for compulsory inspection of textile goods.

Products having ISI Certification mark or Agmark are not required to be inspected by any

agency. These products do not fall within the purview of the export inspection agencies

network. The Customs Authorities allow shipment of such goods without inspection

certificate, provided they are otherwise satisfied that the goods carry ISI Certification

Mark or the Agmark. For other goods inspection can be made in the following manner:

Consignment to consignment inspection-under this scheme the application (in duplicate)

for inspection for goods has to be submitted well in advance, in the new prescribed form

‘intimation for inspection’, before the expected date of shipment of the consignment.

Inspection of the consignment is generally carried out either at the premises of the

exporter, provided adequate facilities exist therein for inspection, or at the port of

shipment.

After satisfying itself that the consignment of exportable goods meets the requirements

stipulated in the export contract/order, the inspection agency issues, generally within four

days of receipt of intimation for inspection, the necessary certificate of inspection to the

exporter in the prescribed proforma in five copies.

The certificate is issued in the standardised form which is aligned pre-shipment export

document. (Three copies for exporter, original copy for customs use, the second copy for

the use of the foreign buyer and the third copy for the exporter's use, fourth copy for Data

Bank, Export Inspection Council, New Delhi and the fifth copy is retained with the

agency for their own office record).

EXPORT (QUALITY CONTROL &

INSPECTION) ACT, 1963:

The Government of India had enacted export (quality control and inspection) act, 1963,

which came into force from January 1, 1964. The Government of India had set up export

inspection councils (EIC) to provide the sound development of the export trade through

quality control and pre shipment inspection. The Government has prescribed standard of

quality and inspection of various commodities meant for export.

The Export Inspection Council is responsible for the operation of this Act. Under the Act,

a large number of exportable commodities have been notified for compulsory pre-

shipment inspection. The quality control and inspection of various export products is

administered through a network of more than fifty offices located around major

production centres and ports of shipment. In addition, organizations may be recognized as

agencies for inspection and /or quality control. Recently, the government has exempted

agriculture and food products, fruit products and fish and fishery products from

compulsory pre-shipment inspections, provided that the exporter has a firm letter from

the overseas buyer stating that the overseas buyer does not require pre-shipment

inspection from official Indian inspection agencies.

The Government of India notified 1057 items under the compulsory quality control and

pre shipment inspection. These items related to the product group of

* Engineering products

* Chemical and allied products

* Food and agricultural products

* Jute and jute products

* Coir and coir products

* Footwear and footwear components

* Cashew

* Fish and fish products

Documents required for quality control

There are certain forms and documents that are necessary for quality control and pre-

shipment inspection. The following documents need to be submitted along with the

application:

(i) Particulars of the consignment intended to be exported

(ii) A crossed cheque/draft for the amount of requisite inspection fees or an Indian Postal

Order.

(iii) Copy of commercial invoice

(iv) Copy of Letter of Credit

(v) Details of packing specifications

(vi) Copy of the export order/contract, indicating inter alia the buyer’s requirement that

goods are strictly according to the prescribed specifications or as per samples

CHAPTER 2

METHODS OF

QUALITY CONTROL &

PRESHIPMENT

INSPECTION

METHODS OF QUALITY CONTROL &

PRE-SHIPMENT INSPECTION

EIC has recognized three systems of pre-shipment inspection, namely

* Consignment inspection

* In - process quality control

* self- certification scheme.

Consignment inspection

Under the Consignment wise inspection system, each export consignment is inspected

and tested by the recognized inspection agencies. The selection of the items is made on

the basis of statistical plan to satisfy conformity of the product with the prescribed

standard. After inspection, the recognizes inspection agency issue the pre shipment

inspection certificate to the exporter.

The exporter giving the detail of the shipment to the ispection agency along with the

following documents atleast 7 days in advance of the expected date of shipment/dispatch

should make application for pre shipment inspection.

* Copy of contact

* Detail of packing specification

* Commercial invoice giving evidence of the FOB valve

* Fee of inspection by check/Demand draft

The inspection fee is generally 0.4% of FOB value of shipment. the ispection agency

will depute an inspector to conduct the pre shipment inspection at the expoter factory or

warehouse.

After the satisfactory completion of the inspection a certificate of inspection is issued to

the exporter, which he has to submit to the export department of custom, for the clearance

of export cargo.

In - process quality control

Certain products like chemicals or engineering goods are subject to this control. The

inspection is done at various stages of production. The exporter has to get his unit

registered as "Export worthy" and keep record of processing and production. Under this

system, export is allowed on the basis of adequacy of IPQC and inspection measures

exercised by the manufacturing units themselves. Units approved under this system may

themselves issue the certificate of inspection, but only for the products for which they

have been granted IPQC facilities. However, these units have the option either to get the

certificate from the export inspection agencies (EIAs) or issue the same themselves.

In - process quality control units are issued pre shipment inspection certificate on request

by EIA. Such units have to submit a statement of certificate issued in respect of various

shipments during a months. the statement must be submitted by 15 day of the following

months. the inspection fee is 0.2% of FOB value of each consignment and is to be

remitted along with monthly statements.

In - self- certification scheme

Large manufacturing/exporters, export houses /trading houses are allowed the facility of

self-certification on the theory that the exporter himself is the best judge of the quality of

his products.

The industrial units having proven reputation and adequate testing facilities have to apply

to the Director (Inspection and Quality Control), Export Inspection Council of India, 11th

floor, Pragati Tower, 26 Rajendra Place, New Delhi-110 008. It grants a certificate valid

for a period of one year, to allow manufacturers of engineering products, chemical and

allied products and marine products. The approval of an industrial unit under this scheme

is notified in the Gazette of India and the exporter has to pay a lump sum fee to the export

inspection agencies depending upon his export turnover.

Discussion on Quality Control and preshipment inspection will be incomplete without

saying a few words about ISO 9000.

The International Organisation for Standardisation (ISO) is the specialised International

Agency in formulating the norms of Standardisation, Presently 91 Countries including

India are members of the national Standard Body Various Technical Committees were

formed who looked into and considered the different areas of specialisation and

formulated the International Standard.

The manufacturing units which have proven record of maintenance of quality are given

have record of maintenance of quality are given of self-certification so that they can issue

pre shipment inspection certificate themselves. The unit will be well equipped with

testing facilities. The unit indenting to avail of this facility should apply to the director

(inspection and quality control). The director, while considering the application, will

inspect the manufacturing unit for proper maintenance and testing facilities provided in

the units, these units are required to pay a fee at the rate of 0.1% of FOB value subject to

a minimum of Rs 2500 and maximum of Rs 1 lacks in 1 year and the recognition may be

extended if the manufacturing unit continues to fulfill the recognized norms.

CHAPTER 3

PROCEDURE FOR

PRE-SHIPMENT

INSPECTION

PROCEDURE FOR PRE-SHIPMENT

INSPECTION

Those exporters, who are approved under Self Certification and IPQC have to submit

their applications in a prescribed “intimation for inspection” form to the export agency.

The export inspection agency issues the inspection certificate on the basis of their

performance reports as submitted by the EIA’s officials during the checks at all levels of

production carried out by them. Spot checks may also be carried out whenever required.

However, not approved under Self Certification and IPQC systems are required to

undergo the following procedure:-

1. Application to EIA: - The exporter has to apply in the prescribed

`Intimation for Inspection’ form (in duplicate) to EIA at least 7 days before the

expected date of shipment alongwith the following documents:-

Copy of export contract;

Copy of letter of credit;

Details of packing specifications;

Commercial invoice giving evidence of FOB value of export consignment;

Crossed cheque/D.D. in favour of EIA towards inspection fees;

Declaration regarding importer’s technical specifications.

2. Deputation of inspector: - After getting the ‘Intimation for Inspection’,

the EIA deputes an inspector to conduct the pre-shipment inspection at the

exporter’s factory or warehouse. The exporter should keep goods ready for

inspection on the day and time allotted for inspection.

3. Inspection and testing: - The inspector conducts inspection randomly and

prepares the report to be submitted to EIA. The exporter is required to arrange for

facilities required for the inspection. Where such facilities are available,

inspection may be carried out at private independent laboratories.

4. Packing and sealing of goods: - If the inspector is satisfied with the

quality of goods, he issues order for packing of goods in his presence. After

packing, the consignment is marked and sealed with the official seal of the Export

Inspection Agency (EIA).

5. Submission of report to EIA and issue of inspection

certificate: - The report prepared by the inspector is submitted to the Deputy

Director of EIA. If the report is favourable, the Deputy Director of EIA issues an

inspection certificate in triplicate.

The original copy is required to be submitted to the Customs.

The duplicate copy is dispatched to the importer.

The triplicate copy to be retained by the exporter for his record.

6. Issue of rejection note: - If the report submitted by the inspector is not

favourable, the Deputy Director of EIA issues a rejection note.

7. Appeal against rejection note: - The exporter can file an appeal against

the rejection note within 10 days from the date of the receipt of such note. On

receiving the appeal, the EIA convenes a meeting of the Appellate Panel. The

panel reviews the inspection report and if necessary examines the consignment

again. The decision of the Appellate Panel is final and is binding on both the

parties, the exporter and the Export Inspection Agency.

CHAPTER 4

WHEN & BY WHOM

PRE-SHIPMENT

INSPECTION IS DONE

WHEN IS PRE-SHIPMENT INSPECTION

REQUIRED?

Pre-shipment inspections (PSI) are required when mandated by the government of the

importing country. Governments assert that pre-shipment inspections ensure that the

price charged by the exporter reflects the true value of the goods, prevent substandard

goods from entering their country, and mitigate attempts to avoid the payment of customs

duties.

The following countries currently require or request pre-shipment inspections:Angola,

Bangladesh, Benin, Burkina Faso, Burundi, Cambodia, Cameroon, Central African

Republic, Comoros, Republic of Congo (Brazzaville), Democratic Republic of Congo

(Kinshasa), Cote d’Ivoire, Ecuador, Ethiopia, Guinea, India (see note below), Indonesia

(see note below), Iran, Kenya (under review), Kuwait (see note below), Liberia,

Madagascar, Malawi, Mali, Mauritania, Mexico (see note below), Mozambique, Niger,

Senegal, Sierra Leone, Togo, Uzbekistan.

Most countries on the list above request inspections for shipments above a certain value.

However, in some instances inspections are necessary for all imported products,

regardless of value.

In some cases, a country may require PSIs only for certain types of goods. For example,

Kuwait requires PSI for regulated products valued at more than $3,000. Mexico requires

a PSI for a variety of goods such as shoes, textiles, steel, and bicycles only if they do not

qualify for NAFTA. Shipments to Saudi Arabia and Kuwait must contain a "certificate of

conformity" for a small number of products. Though not referred to as a pre-shipment

inspection, this certification verifies that the product conforms to the relevant standard by

testing and inspecting prior to shipment from the exporting county.PSI regulations

change often, and contracts for pre-shipment inspections are reviewed periodically.

WHO CONDUCTS THE PRE-SHIPMENT

INSPECTION AND WHO PAYS?

Pre-shipment inspections are typically performed by contracted private organizations. In

most cases, importers can select from a short list of these organizations when planning

inspections. However, sometimes one firm is appointed to carry out inspections for a

given country on an exclusive basis. The following is a list of the most widely used

private inspection companies:

Bivac/Bureau Veritas, Miami, FL

Tel: (305) 593-7878

http://www.bivac.com

Cotecna, Miami, FL

Tel: (305) 828-8141

http://www.cotecna.com

Intertek, Americas

Tel: (800) 967-5352

http://www.intertek-fts.com

SGS, Miami, FL

Tel: (305) 592-0410

http://www.gts.sgsamericas.com

Inspection costs are generally paid either by the importer or by the government of the

importing country. However, in some cases, the inspection agency may invoice the seller

in the event of supplementary inspection visits. The costs associated with presenting the

goods for inspection (such as unpacking, handling, testing, sampling, repackaging) are

the responsibility of the seller.

WHO IS RESPONSIBLE FOR ARRANGING

THE PRE-SHIPMENT INSPECTION

Although the importer is generally responsible for arranging the pre-shipment inspection,

the exporter must make the goods available for inspection in the country of origin. Delays

in the process can lead to problems with the shipment and/or increased costs for the

exporter. Therefore, it is in the best interest of exporters to work with their freight

forwarder to ensure that all information is accurate and is provided to the inspection

company immediately after notification of the requested inspection. Requirements for

pre-shipment inspections are sometimes spelled out in letters of credit or other

documents.

Generally, the inspection company starts the inspection process once it receives a copy of

the inspection order from the importing country. An inspection order states the value of

goods, the name and address of the importer and the exporter, the country of supply, and

the importer's declaration of customs code. The inspection company then contacts the

exporter to arrange an inspection site and time.