PSI INDEPENDENT ENTITY

CONSIDERATIONS OF THE UNITED STATES REGARDING _JOB/VAL/5[1]

COMMUNICATION FROM the united states

The following communication dated 20 October 2025 is being circulated at the request of the delegation of the United States.

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1  INTRODUCTION

1.1.  The report of the 2023 Performance Audit (_WT/BFA/W/622/Rev.1) has given the Committee on Customs Valuation (Committee) the opportunity to focus anew on the Agreement on Preshipment Inspection and the Independent Review Procedures provided in Article 4. The WTO, the International Chamber of Commerce (ICC), and the International Federation of Inspection Agencies (IFIA, now the TIC Council) established the Independent Entity (IE) to implement Article 4. It was approved by the General Council in its Decision of 13 December 1995 (_WT/L/125/Rev.1). Independent Entity operations have not been updated since, and the funds deposited by TIC Council members into the Independent Entity Support Fund remain unused.

1.2.  At its meeting in May 2025[2], the Committee took note that Members wished to maintain the status quo of the Independent Entity Support Fund until progress is made on possibly updating the Independent Entity. The United States continues to support this position. This paper is intended to contribute to the Committee’s consideration of possible updates to the Independent Entity to make it a more relevant, accessible, streamlined and cost-effective process.

2  BACKGROUND

2.1.  Preshipment inspection (PSI) in relation to classification and valuation has been almost eliminated among WTO Members, as called for in Article 10.5 of the Agreement on Trade Facilitation. PSI continues, however; especially in relation to quality, conformity, and regulatory compliance. Many WTO Members are using PSI to ensure that goods comply with their domestic health and safety requirements before the goods are shipped. Members often seek to facilitate those inspections by using third-party conformity assessment bodies, such as TÜV, COTECNA, SGS, Bureau Veritas, and Intertek.

2.2.  The Agreement on Preshipment Inspection (PSI Agreement) establishes disciplines with respect to these inspections. Prior to the PSI Agreement, several countries banned PSI services from operating in their territories, effectively cutting off exports to countries that relied on PSI. The PSI Agreement helps Members avoid these types of conflicts today. Although much of the PSI Agreement covers price verification, many provisions apply to compliance-related verifications, including:

Art. 2.1 & 3.1: Non-Discrimination (for both User Members and Exporter Members)

Art. 2.2: Governmental Requirements

Art. 2.3: Site of Inspection

Art. 2.4: Standards

Art. 2.5–2.8 & 3.2: Transparency (for both User Members and Exporter Members)

Art. 2.9–2.13: Protection of Confidential Business Information

Art. 2.14: Conflicts of Interest

Art. 2.15–2.19: Delays

Art. 2.21: Appeals Procedures

Art. 3.3: Technical Assistance

Art. 4: Independent Review Procedures

Art. 5: Notifications

Art. 7: Consultations

Art. 8: Dispute Settlement

2.3.  These provisions work together to ensure PSI is fair for Members, exporters, and PSI service providers. The IE established pursuant to Article 4 is a unique mechanism to resolve PSI disputes in as little as eight working days. As the use of PSI continues, so does the potential for disagreements between exporters and inspection services. Although the IE has been little utilized until now, its potential to resolve such disagreements remains firm.

2.4.  As the audit report notes, the IE has only been used twice since it was established in 1996. However, that is not surprising given the terms of the agreement that established it. The IE procedures are impractical and expensive. An exporter must fill out a four-page application to initiate a review. The exporter must submit all documentation in this first application, because no further information can be submitted unless the panel requests it. Further, the exporter must know who to suggest as a potential panelist, and the exporter must deposit CHF 17,500, which is still a significant sum today. At the same time, under the 1996 agreement, the PSI service providers must each keep CHF 17,500 in the Independent Entity Support Fund just waiting for a dispute to arise. Finally, the 1996 procedures do not accommodate email, virtual meetings, or other modern modes of communication. None of these procedures are required by the terms of the PSI Agreement itself.

2.5.  Article 4 of the PSI Agreement sets out simple parameters: the IE must be administered by an organization representing exporters, an organization representing PSI service providers, and the WTO; the organizations must nominate experts to form review panels; the experts chosen for a review must be independent of the parties; the WTO expert is the Chair; the object of the review is to establish whether the parties have complied with the provisions of the PSI Agreement; decisions must be taken by majority vote and rendered in eight working days; and the panel shall apportion costs based on the merits.

3  PROPOSAL

3.1.  Ready updates could be made to the 1996 WTO-ICC-TIC Council agreement to make the IE more relevant, accessible, streamlined and cost-effective. For example, an updated IE could:

·_        Take advantage of modern-day technology, such as video conferencing;

·_        Eliminate costs for calls, faxing, mailing hardcopy documents, and travel expenses;

·_        Use the WTO website for more visibility;

·_        Allow inquiries to be submitted online;

·_        Inform a Member when a review is requested by an exporter in its territory;

·_        Allow Member delegations to assist those requesting or responding to a review;

·_        Place the burden of the cost of review on the applicant, unless the panel finds the respondent at fault;

·_        Streamline the panel selection process;

·_        Allow for submission of documentation throughout the course of the review;

·_        Destroy confidential information three months after the review ends; and

·_        Continually update the review process during the PSI triennial review.

4  NEXT STEPS

4.1.  Only three organizations can currently constitute an Independent Entity under the PSI Agreement and are the WTO, the ICC, and the TIC Council. During the informal meeting of the Committee on 13 February 2025[3], the TIC Council communicated that the IE is no longer of any relevance to its members, so there is no longer a need to maintain it. Based on the TIC Council’s stated position, and their critical role in forming the IE, in order to pursue an update of the 1996 agreement, the Committee would need to take action to ensure the continued involvement of the TIC Council – for example, by starting a working group with the TIC Council and the ICC to develop new IE procedures.

4.2.  Updating the IE is a practical, concrete step the Committee can take to demonstrate action and positive impact on trade with what should be a reasonable amount of effort.

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