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Inspection Certificate

Most buyers and their countries as well require an inspection certificate which attests the specifications of goods shipped. The inspection is normally performed by independent specialist. Sometimes expertise services are obtained from renowned independent inspecting organization such as SGS, Bureau Veritas, or Lloyds Registry. Depending upon the regulations of the importing country and/or the buyer’s requirements, inspection may cover wide range of areas i.e. verification of quality and quantity, export market price with global price, value for customs purposes, customs classification and import eligibility. The certificates issued by inspection companies are basically of two types:

  • Clean Report of Findings (CRF). This is a document required by the importing country. As per regulation, the importing country wants that the imports has to be inspected by independent inspecting organization prior to the shipment with regard to quantity, quality and price of the goods (Pre-Shipment Inspection – PSI).
  • Commercial certificate of Inspection: This Certificate is issued by an inspection agency acting as a neutral third party through assessing the actual condition of the quantity and quality cargo traded between a seller and a buyer. A commercial certificate of inspection is necessary to build up a long-term relation between buyers and sellers.

Inspections are important tools to reduce trade risks and avoid frauds and abuses of trade whatsoever. Since inspection involves a cost, it should be properly carried out by seller so that physical inspection of goods conforms with the specification/description as recorded in the letter of credit.

What are the specific areas that an inspection should cover?

  • Pre-shipment inspection is initiated by the inspection company either at the request of the seller or importing country. Such inspections are rarely qualitative but in fact are required in some countries. The physical inspection is normally undertaken within the customs territory for export of goods or in the exporter’s premises. Inspection of bulk cargoes is usually carried out at the time of loading. In some cases, it may be necessary for the inspection company to carry out inspections during production at the manufacturer’s premises.
  • The pre-shipment inspection will cover the verification of quality, quantity, price comparison with global standard, custom classification and value. Sellers need to be aware of the quality standards of the country to which they are exporting as most of the countries have their own quality standards. It is always recommended for the seller to know in advance what are the import regulations of the country to which he is exporting.
  • It should be noted that some countries strictly observe quality control for their import shipments. To comply this regulation, buyer insists seller to send samples of goods before shipment.
  • Quality requirements and standards along with all parameters should be clearly defined in the letter of credit, so that the seller can comply same without any problem.
  • The scope of services of the inspection company should be clearly defined. one could get the assistance of the inspection company in determining these services. This services vary according to the type & nature of goods being traded.
  • The most secured way to control the merchandise is to provide door-to-door inspection i.e. to follow the merchandise from the warehouse until is it loaded and again until it is unloaded to the final destination. This could be very expensive but would provide the best guarantee. However, in general inspection may be done either at the loading or unloading point.
  • Place of inspection can be set either in the country of origin (at the time of loading) or in the country of destination (at the time of unloading). Perishable goods, for instance, are verified on arrival to make sure about the condition of the quality of merchandise (e.g. fruits are verified on arrival point).
  • In the fruit and vegetables trade, as the condition of the goods is determined on arrival, so in most cases the inspection certificate is issued at the request of the exporter in order to protect his interest at destination.
  • Governments may require an inspection certificate of imported goods to make sure that the merchandise really exists and are in conformity with the sales contract and also with the price stipulated in the contract. This precaution is usually taken by the government to exercise control over foreign exchange, taxes and import duties.
  • It is important to verify the authenticity of the inspection certificate by calling the inspection company, if one has any doubt about any contents of the document. It is always advisable to receive the original copy of the inspection document
  • Another risk of fraud is likely to happen in a situation when the cargo is changed after inspection i.e the inspected cargo has not been delivered into the ship for loading.
  • The cost of pre-shipment inspection is usually borne by the Government of the importing country, but as per law of the land of some countries, it is also borne by the buyer. it can also be covered by the buyer since some countries require in their laws that the buyer must cover the cost of inspection. As to the cost of the commercial inspection certificate, it is covered by the buyer or the seller as per agreement.