Pre-shipment inspection (also preshipment inspection or PSI) is a part of supply chain management and an important quality control method for checking the quality of goods clients buy from suppliers.
PSI helps ensure that production complies with the governing specification, contract, or purchase order. A final random inspection (FRI) checks finished products, often when at least 80% of an order has been produced and export-packed. Samples are selected at random, according to standards and procedures.
Re-shipment acceptance sampling, involving inspection, and acceptance testing, may be agreed upon between a buyer, a supplier, and a bank, and it can be used to initiate payment under a letter of credit. A PSI can be performed at different stages before shipment, such as checking the total amount of goods and packing, controlling the quality or consistency of goods, checking of all documentation, as for example test reports, packaging list, or verification of compliance with standards of the destination country like ASME, CE mark and import duties.
There are three levels of defects in a pre-shipment inspection with each defect escalating into the next.
The inspection team covers the order and shipment. That is perhaps the most detailed of all the process and is when issues are most likely discovered. This step takes considerable time but importers consider it to be the de facto part of the inspection process.
Does the product work in its intended manner, which is important for electronics, toys, and the like.
UL, CE, BSI, CSA, FDA, etc. Are all parts of a safety check. It is of the best interest of the importer to be sure that all products meet the requirements, particularly for machinery and any product using electricity.
There are two types of PSI companies:
A higher form of the PSI is called expediting, in which the dates of delivery and the production are included in the control.
PSI increases burdens and costs in international trade and can be counter-productive for the country of importation and its traders.
Several countries are considering termination on the use of inspection companies' service, following upon WTO Agreement on Trade FacilitationArticle 10.5 Pre-shipment Inspection : 5.1. Members shall not require the use of pre-shipment inspections in relation to tariff classification and customs valuation.
In 1988, United Nations Economic Commission for Europe, Recommendation No.18 - Recommended Measure 8.2 “Discouragement of Pre-Shipment Inspection” was adopted. This was then adopted in 1999, in UNECE Recommendation No. 27, which "encourages using the WTO instrument regarding pre-shipment inspections (PSI) where such inspections are considered necessary as an interim measure, while discouraging the practice of PSI in general."[3]