PRE-SHIPMENT CHECKS DECRIED AS SURTAX ON TRADE

PRE-SHIPMENT CHECKS DECRIED AS SURTAX ON TRADE

A top World Customs Organization official joined the growing outcry against private pre-shipment inspections, charging that they offer no solution to corrupt customs administrations and put a costly surtax on global trade.

Douglas Tweedle, WCO director for compliance and facilitation, said the pre-shipment system not only adds the equivalent of a 1 1/2 percent tariff rate on international trade, but also goes against the selectivity and risk approach popular with customs authorities looking at ways to slash the high clearance costs.The handling and clearance of goods is estimated by United Nations agencies to be in excess of $400 billion or around 7 percent of global trade.

Private companies are often called upon by national governments to carry out pre-shipment inspection, when local customs are inefficient, corrupt, or lack the technical infrastructure.

The companies verify prices, quantities and the quality of shipments before they leave the exporting nation. The information is then forwarded to customs in the destination country that uses it to determine the final value of duty.

A large number of developing nations in Africa, Asia, and Latin America use the services of PSI companies.

But in the past few years, exporters from the United States, the European Union and other rich countries have complained that PSI companies have been hindering the flow of goods. Delayed shipments, distorted prices of exported goods and sensitive product information leaked to potential competitors are among the most common complaints.

U.S. exporters claim the firms frequently inflate the price of a shipment, filling the coffers of the importing country through higher customs duties while pricing the exporter out of the local market.

''The exporters are getting royally screwed. It's a huge headache for this industry and others,'' said Bernard Brill, executive vice president of the Secondary Materials and Recycled Textiles Association.

In one case, an inspection company boosted the value of a shipment of used clothing accompanied by an invoice with an $8,000 to $9,000 declared value to $18,000 to $20,000, Mr. Brill said.

''The things they get away with are unbelievable . . . it's so flagrant,'' the head of one U.S. textile recycling company added.

EXPORTERS SHY AWAY

But so far, exporters have declined to bring their grievances to the global pre-shipment inspection body of the World Trade Organization.

They fear they would be blacklisted by inspection companies if they took such a step. Inspection companies could, for example, leave U.S. shipments sitting on the docks for longer than necessary before they are inspected.

Experts are seeking ways to enhance the WTO mechanism, last reformed in December, and are looking at ways to boost openness in pre-shipment inspection operations.

Michael Doran, chief executive of Sitpro, the United Kingdom's trade facilitation body, is also critical of PSIs and argued they make the trading process complicated and should not be seen as a permanent requirement.

''PSI is much more costly in terms of economies and efficiencies of using countries,'' he said.

SYSTEM 'OUT OF DATE'

Mr. Tweedle said the 1973 Kyoto Convention on the simplification and harmonization of customs procedures is ''out of date,'' has never been properly updated to take into account technological changes, has nearly 1500 reservations and has not been successful.

A set of proposals to overhaul the system will be put to the WCO by June 1999, and will include obligatory principle on transparency, consultation, an appeals mechanism, risk assessment, and no reservation in the main text, he said.

The WCO plans to reach out to the WTO and other international organizations, to make the revised convention ''binding and enforceable,'' Mr. Tweedle said.

The International Chamber of Commerce, a private business grouping, in a policy statement said it wants to see any reforms by the WCO result in a truly multilateral accord with high standards for customs procedures and practices.

Turning to individual proposals, Mr. Tweedle said that with nearly 50 percent of international trade in traditional sectors largely made up of movements among the same corporate or business entities, there is a need to look at new audit approvals and a selectivity approach to customs.

But he pointed out that, in many countries, the trade and customs ministries don't work as well as they should.