Page 123 - DMGT546_INTERNATIONAL_TRADE_PROCEDURE_AND_DOCUMENTATION

International Trade Procedures and Documentation

Notes additional costly steps for traders—and at worst, results in further costs and delays when
customs authorities duplicate control functions and question the findings of pre-shipment
inspectors. The extra cost is alleged to be especially burdensome for small exporting
firms.
Most evidence in this area is anecdotal, and not a single complaint has been lodged under
the World Trade Organization’s Pre-shipment Inspection Agreement. A plausible
explanation is that affected firms must file complaints as identifiable corporate entities,
which they may be reluctant to do for fear of jeopardizing commercial relationships.
On the other hand, the Indonesia Chamber of Commerce has argued that preshipment
inspection facilitated trade by speeding up the de-douanement (clearing of customs) process.
This is an area where further quantification of impact would be helpful. The ultimate
objective for customs should be a fully integrated export and import system based on a
single submission of minimal control data for all official purposes, backed by upgraded
information systems and technical staff trained in risk assessment and prevailing (see UN
1995). With recent advances in information technology, automation, Internet use and
electronic data interchange, and business practices such as risk management systems, such
an approach should be feasible for most countries if there is political will for change.
Overall, for preshipment inspection to make a positive contribution, it appears essential
to ensure:
Transparent procurement rules for the preshipment inspection contract.

Preshipment inspection values and classification are an integral part of import
documents.
Good use of provided services (with reconciliation by the ministry of finance as a
minimum).
Arbitration provisions to settle disputes swiftly without holding up goods.
Enhanced competition for service provision and fee setting (see below).
Options for Increased Competition

How can preshipment inspection services be made an effective transitional instrument for
improving revenue collection and facilitating trade?
Competition among Service Providers

A careful assessment is needed of the benefits and costs of parallel competition (split
contracts) and serial competition (bidding for a time-bound monopoly franchise, either at
the country level or within a certain area). With split contracts, the benefits of competition
need to be weighed against higher transactions costs and possibly perverse incentives.
With advances in information and control technology, the government’s transactions
costs in monitoring several suppliers and ensuring effective reconciliation need not be
significantly more burdensome. But split contracts can create conflicts of interest, because
importers may threaten to switch to another service provider if they are not assessed
sufficiently low duty payments. It would be useful to explore why so many Latin American
countries have adopted this model, and what other forms of parallel competition might
be conducive to increased competition.
For serial competition, the challenge is to design and supervise a bidding process that
awards contracts often enough to render the market contestable. With both contract options,
termination clauses are desirable for poor performance. It would also be desirable to
explore the commercial feasibility of allowing fuller price competition, where pricing
Contd...

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